• Low Overall Cost of Doing Business

• Annual Operating Costs

• Low Wage Increases and Low Labor Costs

• Low Wage Increases and Low Labor Costs (cont’d)

• Competitive Corporate Taxes

• Competitive Corporate Taxes (cont’d)

• Low R&D Costs

• Low Energy Costs

• Low Energy Costs (cont’d)

• Low Construction Costs

• Low Land Costs

• Competitive Office Space Cost

Table of Contents

Low Overall Costs of Doing Business

• The overall cost of doing business is considerably lower in Canada than in other industrialized nations - about 57% that in the U.S. and 59% that in Germany.

* Index based on various business costs including: wages, costs for expatriate staff, air travel and subsistence, corporation taxes, perceived corruption levels, office and industrial rents, and road transport. Data for Japan is not available. Source: The Economist (EIU), January 24, 1998

Business Costs* — 1997

50.0

60.0

70.0

80.0

90.0

100.0

Germ

any

U.S.

Britain

Franc

eIta

ly

Canad

aIn

dex:

Mos

t exp

ensi

ve =

100

Annual Operating Costs

Source: KPMG 1999

5.255.45.55.65.75

7.257.37.35

7.77.8

8.48.58.6

$0 $2 $4 $6 $8 $10

LondonOttawa

MontréalVancouver

TorontoAtlantaDallas

ChicagoBoston

Jersey CitySanFrancisco

Los AngelesNew York

Cost in millions of dollars US

Annual Operating Costs Comparison by City

• The cost of maintaining a service centre in Canada’s major metropolitan areas is significantly less than in the U.S.

(Annual operating costs for a 100-person professional services organization based in the following city centres)

• Canada has the second lowest manufacturing wages in the G-7.

Cost of Labor — Manufacturing*

28.28

19.3718.2417.97

16.74 16.5515.47

Germ

any

Japa

nU.S

.

Franc

eIta

ly

Canad

aU.K

.

$U.S

. per

hou

r

Low Wage Increases and Low Labor Costs

*Figures are for 1997. Source: U.S. Bureau of Labor Statistics, 1998.

• A competitive labor market is keeping wage settlements down.

Occupational Wages — Knowledge Workers, 1998

Full-time, full-year wages* ($U.S. PPP**)

* Mean earnings are shown for Canada, median earnings for the U.S. Data has beenconverted to full-year assuming a 50-week work year.** Purchasing power paritySource: IC calculations based on Statistics Canada and U.S. National Science Foundation

Low Wage Increases and Low Labor Costs (cont’d)

Richard Peabody, PresidentHarris Farinon Canada

Our costs per engineer are roughly half of what they would be in the United States." combination of low salary and wage costs, as well as Canada's and Quebec's superb R&D tax treatment]

Engineers, Architects & Surveyors

Mathematicians & Computer Scientists

Natural Scientists

$49,400

$46,900

$41,400

$37,068

$34,710

$33,016

Competitive Corporate Taxes

• Canadian locations compare well in terms of corporate income taxes across North America.

Corporate Income Tax Rates* — 1998

G-7 Comparison

U.K.

Canada

Italy

U.S.

FranceJapan

Germany

25 30 35 40 45 50 55 60

%

* Combined federal, provincial (or state), and local income tax rates for large manufacturing and processing firms as of July 1, 1998.Source: KPMG Management Consulting, 1999

Competitive Corporate Taxes (cont’d)

• Furthermore, there is no restriction on the repatriation of profits.

* Combined federal, provincial (or state), and local income tax rates for large manufacturing and processing firms as of July 1, 1998.Source: KPMG Management Consulting, 1999

Province - State Comparison

NewfoundlandP.E.I.

QuebecSaskatchewan

WashingtonOntarioAlbertaTexas

ColoradoNova Scotia

British ColumbiaNorth Carolina

ManitobaNew Brunswick

CaliforniaNew Jersey

MassachusettsVermont

MinnesotaPennsylvania

25 30 35 40

%

Low R&D Costs

• Canada provides:

-a wide range of research support, technology transfer and market development;

-a strong capability in advanced technologies; and

-skilled personnel.

• Canada's R&D tax treatment is

very generous — immediate and full write-off for all expenditures in R&D capital equipment, and appreciable tax credits.

• Because of this, firms can significantly reduce R&D costs through direct investment or sub-contracting in Canada.

* Based on large manufacturing firms. Source: Conference Board of Canada (August 1999)

SaskatchewanManitoba

Nova ScotiaNew Brunswick

British ColumbiaQuebecOntario

NewfoundlandCalifornia

MassachusettsAlberta

MinnesotaNorth Carolina

New YorkIllinois

Oregon

ColoradoPrince Edward Island

Michigan0.40 0.45 0.50 0.55 0.60

$

Relative Competitiveness ofR&D Tax System*

After-tax Cost of $1 R&D Expenditure

Ohio

Low Energy Costs

*Source: KPMG Management Consulting, 1999

Annual Electricity Costs — 1998G-7 ComparisonIndex: U.S. = 100

+200

CanadaU.S.

U.K.

France

Germany

Italy

Japan

50 75 100 125 150 175

• Electricity costs for industrial users are significantly lower in Canada than in the U.S.

-According to a recent study, the annual electrical costs for an average manufacturer are 24% lower in Canada than in the U.S.*

*Source: KPMG Management Consulting, 1999

Low Energy Costs (cont’d)

• Canada has abundant oil, gas, coal and hydro-electric resources.

Source: KPMG Management Consulting, 1999

Jack Hartery, President and General ManagerStora Forest Industries Ltd.

Energy costs, particularly for fossils (fuels), are moderate here, compared with many parts of the world and particularly Europe where the price of gasoline is literally double that in Canada."

Province - State Comparison

Index: U.S. = 100

ManitobaBritish Columbia

SaskatchewanNewfoundland

Nova ScotiaAlberta

QuebecNew Brunswick

P.E.I.Ontario

WashingtonMinnesota

ColoradoNorth CarolinaMassachusetts

TexasPennsylvania

CaliforniaVermont

New Jersey0 25 50 75 100 125 150

Low Construction Costs

• Building construction costs in Canada are roughly 15% lower than those in the U.S. even after accounting for additional materials for climatic conditions.

Source: KPMG Management Consulting, 1999

Construction Costs — 1998G-7 ComparisonIndex: U.S. = 100

+600

CanadaFrance

ItalyU.S.U.K.

GermanyJapan

75 100 125 150 175 200

Province - State ComparisonIndex: U.S. = 100

125

SaskatchewanNew BrunswickNewfoundland

QuebecOntario

P.E.I.Texas

Nova ScotiaManitoba

British ColumbiaColorado

AlbertaWashington

CaliforniaNorth CarolinaPennsylvania

MinnesotaMassachusetts

VermontNew Jersey

50 75 100

Low Land CostsLand Costs — 1998

G-7 ComparisonIndex: U.S. = 100

Province - State Comparison

Source: KPMG Management Consulting, 1999

+2900

CanadaU.S.

FranceItalyU.K.

GermanyJapan

75 100 125 150 175

+600+300

• With the exception of Vancouver Island (British Columbia), land costs in Canada are generally preferable to those in the U.S. — on average, land costs are 6% lower in Canada than in the U.S.

Index: U.S. = 100New Brunswick

P.E.I.VermontQuebec

SaskatchewanPennsylvania

Nova ScotiaManitoba

NewfoundlandNorth Carolina

AlbertaOntario

ColoradoTexas

MinnesotaNew Jersey

British ColumbiaWashington

CaliforniaMassachusetts

0 50 100 150 200 250

Competitive Office Space Cost

160

132

120

112

73

60

41

37

29

29

25

22

17

0 50 100 150 200

Hong Kong

Tokyo

Beijing

London

Paris

Mexico City

Boston

New York

Toronto

Vancouver

Ottawa

Montreal

Calgary

Cost of Office Space in Selected Cities

Note: C$ price of Class A office space in prime downtown locationSource: Colliers Macaulay Nicols International Inc., 1996.

• Canadian Office space is available at highly competitive rates.

• Overall operating costs are significantly lower than most major international centres.