Canada 18-K Annual report (foreign governments)

Exhibit D

DESCRIPTION OF CANADA

TABLE OF CONTENTS

	Page
General Information		3
The Canadian Economy		6
External Trade		12
Balance of Payments		14
Foreign Exchange and International Reserves		16
Government Finances		17
Debt Record		30
Monetary and Banking System		31
Tables and Supplementary Information		36

Unless otherwise indicated, dollar amounts hereafter in this document are expressed in Canadian dollars. On December 16, 2004 the noon buying rate in New York City payable in Canadian dollars (“$”), as reported by the Federal Reserve Bank of New York, was $1.00 = $0.8089 United States dollars (“U.S.$”). See “Foreign Exchange and International Reserves”.

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Certain information contained in the Exhibit has been extracted or compiled from public official documents of Canada, which include statistical data subject to revision. Canada is sometimes referred to as the “Government of Canada” or the “Government” in this Exhibit.

CANADA

GENERAL INFORMATION

Area and Population

Canada is the second largest country in the world, with an area of 9,984,670 square kilometers of which about 891,163 square kilometers are covered by fresh water. The occupied farm land is about 7% and the productive forest land is about 25% of the total area. The population on July 1, 2004 was estimated to be 32 million. Approximately 64% of Canada’s population lives in metropolitan areas of which Toronto, Montreal and Vancouver are the largest. Most of Canada’s population lives within 325 kilometers of the United States border.

Form of Government

Canada is a federal state composed of ten provinces and three territories. In 1867, the United Kingdom Parliament adopted the British North America Act, which established the Canadian federation comprised of, at that time, the Provinces of Ontario, Québec, Nova Scotia and New Brunswick. Since then, six additional provinces (Manitoba, British Columbia, Prince Edward Island, Saskatchewan, Alberta and Newfoundland and Labrador), along with the Yukon Territory, the Northwest Territories and the new territory of Nunavut (which was carved out of the Northwest Territories on April 1, 1999), have become parts of Canada.

The British North America Act (which has been renamed the Constitution Act, 1867) gave the Parliament of Canada legislative power in relation to a number of matters including all matters not assigned exclusively to the legislatures of the provinces. These powers now include matters such as defense, the raising of money by any mode or system of taxation, the regulation of trade and commerce, the public debt, money and banking, interest, bills of exchange and promissory notes, navigation and shipping, extra-provincial transportation, aerial navigation and, with some exceptions, telecommunications. The provincial legislatures have exclusive jurisdiction in such areas as education, municipal institutions, property and civil rights, administration of justice, direct taxation for provincial purposes and other matters of purely provincial or local concern.

The executive power of the federal Government is vested in the Queen, represented by the Governor General, whose powers are exercised on the advice of the federal Cabinet, which is responsible to the House of Commons. The legislative branch at the federal level, Parliament, consists of the Crown, the Senate and the House of Commons. The Senate has 105 seats. There are 24 seats each for the Maritime Provinces, Québec, Ontario and Western Canada, 6 for Newfoundland and 1 each for the three territories. Senators are appointed by the Governor General on the advice of the federal Cabinet and hold office until age 75. The House of Commons has 308 members, elected by voters in single-member constituencies. The leader of the political party that gains the most seats in each general election is usually invited by the Governor General to be Prime Minister and to form the Government. The Prime Minister selects the members of the federal Cabinet from among the members of the House of Commons and the Senate (in practice almost entirely from the former). The House of Commons is elected for a period of five years, subject to earlier dissolution upon the recommendation of the Prime Minister or because of the Government’s defeat in the House of Commons on a vote of no confidence.

The most recent general election was held on June 28, 2004. As a result of that election the Liberal Party forms the Government. The distribution of seats in the House of Commons is as follows: the Liberal Party has 133 seats, the Conservative Party has 99 seats, the Bloc Québécois has 54 seats, and the New Democratic Party has 19 seats. There are 2 independent members and 1 vacant seat.

The executive power in each province is vested in the Lieutenant Governor, appointed by the Governor General on the advice of the federal Cabinet. The Lieutenant Governor’s powers are exercised on the advice of the provincial cabinet, which is responsible to the legislative assembly. Each provincial legislature is composed of a Lieutenant Governor and a legislative assembly made up of members elected for a period of five years. The practice of selecting the provincial premier and the provincial cabinet in each province follows that described for the federal level, as does dissolution of a legislature.

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The judicial branch of government in Canada is composed of an integrated set of courts created by federal and provincial law. At the federal level there are two principal courts, the Supreme Court of Canada which is the highest appeal court in Canada and the Federal Court of Canada which, among other things, deals with federal revenue laws and claims involving the Government. Judges of the two federally constituted courts and those of the provincial superior and county courts are appointed by the Governor General on the advice of the federal Cabinet and hold office during good behavior until age 70 or 75. Judges of the magistrates courts (commonly now known as provincial courts) are appointed by the provincial government and usually hold office until age 65 or 70.

Constitutional Reform

In April 1982, Her Majesty the Queen proclaimed the Constitution Act, 1982, terminating British legislative jurisdiction over Canada’s Constitution. The Constitution Act, 1982 provides that Canada’s Constitution may be amended pursuant to an amending formula contained therein and contains the Canadian Charter of Rights and Freedoms, including the linguistic rights of Canada’s two major language groups.

The government of Québec did not sign the constitutional agreement which led to the repatriation of the Canadian Constitution and the proclamation of the Constitution Act, 1982. Although Québec is legally bound by the Constitution Act, 1982, the government of Québec set out five conditions for accepting the legal legitimacy of the Act. Discussions on those principles led on April 30, 1987 at Meech Lake to a unanimous agreement by First Ministers on principles respecting each of Québec’s conditions.

A constitutional resolution to give effect to the Meech Lake Accord was adopted by Parliament and eight provinces before the deadline for ratification on June 23, 1990. In the absence of ratification by Newfoundland and Manitoba, the amendment was not adopted. In the wake of this event, the most extensive series of public consultations on constitutional matters ever to occur in Canada began through the work of both provincial and federal commissions and committees, among other things. Recommendations produced by this process were then assessed by a series of multilateral negotiations involving the federal, provincial and territorial governments and four national Aboriginal organizations, held from April to July 1992. Agreement was reached on a wide range of constitutional issues through the multilateral process which led to a First Ministers’ Conference held in Charlottetown in August 1992.

The Charlottetown Accord was an extensive package of reforms agreed upon by the federal, provincial and territorial governments and the four Aboriginal organizations. On October 26, 1992 Canadians were asked in a referendum if they agreed that the Constitution of Canada should be renewed on the basis of the Charlottetown agreement. A majority of Canadians in a majority of the provinces, including a majority in Québec and a majority of Status Indians living on reserves, declined to provide such a mandate. Consequently, governments set aside the constitutional issue and announced their intention to concentrate on social and economic initiatives that do not require constitutional change.

Québec

In September 1994, the Parti Québécois was elected, and its platform called for Québec’s accession to independence. On October 30, 1995, the government of Québec held a consultative referendum under provincial law, seeking a mandate to secede from Canada and proclaim Québec’s independence, after having made a formal offer of a new economic and political partnership between Québec and the rest of Canada. The government’s proposal was rejected by a vote of 50.6% against and 49.4% in favour, with a participation rate of 93%. While all sides accepted the 1995 referendum results, the Parti Québécois has not abandoned the goal of achieving independence for Québec.

In September 1996, the Government of Canada referred a series of legal questions to the Supreme Court of Canada with a view to clarifying, at both domestic and international law, whether the government of Québec has the right to secede from Canada unilaterally. On August 20, 1998, the Supreme Court rendered judgment, ruling that the government of Québec cannot, under either the Constitution of Canada or international law, legally effect the unilateral secession of Québec from Canada. The Supreme Court also stated that, if a clear majority of Québecers were to clearly and unambiguously express their will to secede, the federal and provincial governments in Canada would then have a constitutional obligation to

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enter into negotiations to address the potential act of secession as well as its possible terms should, in fact, secession proceed.

On June 29, 2000, the Government of Canada enacted a law to give effect to the requirement for clarity set out in the opinion of the Supreme Court. That law requires the House of Commons to assess, prior to any future referendum on the secession of a province, whether the referendum question made clear that the province would cease to be part of Canada and become an independent country. The law further requires that, after the vote itself, the House of Commons also assess whether there appeared to be a clear majority in support of the question. Only if both these conditions were met would the Government of Canada be authorized to enter into negotiations which might lead to the constitutional amendments required to effect secession.

In the provincial election of April 14, 2003, the federalist Québec Liberal Party was elected with a majority of 76 out of 125 seats in Québec’s National Assembly, as compared to 45 for the main opposition Parti Québécois, and 4 for the Action Démocratique du Québec party. The Québec Liberal Party obtained 45.9% of the votes cast, the Parti Québécois, 33.2% and the Action Démocratique du Québec, 18.2%.

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THE CANADIAN ECONOMY*

General

The following chart shows the distribution of real gross domestic product (“GDP”) at basic prices (1997 constant dollars) in 2003, which is indicative of the structure of the economy.

DISTRIBUTION OF REAL GROSS DOMESTIC PRODUCT AT BASIC PRICES⁽¹⁾

Percentage Distribution in 2003⁽²⁾

Source: Statistics Canada, Gross Domestic Product by Industry.

(1) GDP is a measure of production originating within the geographic boundaries of Canada, regardless of whether factors of production are Canadian or non-resident owned, whereas gross national product (“GNP”) measures the value of Canada’s total production of goods and services — that is, the earnings of all Canadian owned factors of production. Quantitatively, GDP is obtained from GNP by adding investment income paid to non-residents and deducting investment income received from non-residents. GDP at basic prices represents the value added by each of the factors of production and is equivalent to GDP at market prices less net taxes on products. These differences can cause discrepancies in levels and growth rates of GDP at basic prices on pages 6 and 7 at GDP market prices on pages 8 and 9.

(2) May not add to 100.0% due to rounding.

(3) The agriculture, forestry, fishing, hunting, mining and oil and gas extraction sectors include a service component.

The volume of industry and sector output in the following discussion provides “constant dollar” measures of the contribution of each industry to GDP at basic prices. The share of service-producing industries in real GDP was 68.9% in 2003 while the remaining 31.1% was attributed to goods-producing industries.

* Quarterly and semi-annual figures or changes are based upon seasonally adjusted data, except where otherwise indicated. All percentage changes are compounded at annual rates. For percentage changes over more than one year the method of computation includes growth over the entire period indicated. For percentage changes over less than one year the method of calculation utilizes observations for the period stated and the previous period of the same length. Unless otherwise specified, all growth rates on page 7 are calculated using real GDP at basic prices, 1997 chained dollars.

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The following table shows the composition of Canada’s real GDP at basic prices (1997 constant dollars) by sector in 1989 and over the 1999-2003 period.

REAL GROSS DOMESTIC PRODUCT AT BASIC PRICES BY INDUSTRY

		For the years ended December 31,
		2003		2002		2001		2000		1999		1989(2)		2003			1999			1989(2)
		(millions of 1997 dollars)												(percentage distribution)
Agriculture		$	14,643	$	12,928	$	13,702	$	15,876	$	16,667	$	11,510		1.4	%		1.9	%		1.6	%
Forestry, fishing and hunting			7,345		7,241		7,144		7,028		6,655		8,150		0.7			0.7			1.2
Mining and oil and gas extraction			37,493		35,204		35,650		35,459		34,399		26,944		3.7			3.8			3.8
Manufacturing			174,208		174,049		170,729		179,564		161,526		122,046		17.1			18.0			17.3
Construction			56,193		53,797		52,182		48,833		46,415		47,930		5.5			5.2			6.8
Utilities			25,780		26,338		25,678		26,502		26,409		22,815		2.5			2.9			3.2
Transportation and warehousing			47,694		47,503		46,803		45,765		43,604		33,011		4.7			4.9			4.7
Wholesale and retail trade			119,879		114,845		108,129		103,987		97,964		75,397		11.8			10.9			10.7
Finance, insurance, real estate and leasing			203,152		198,827		190,055		181,064		174,007		122,047		20.0			19.4			17.3
Public administration and defence			56,547		54,895		53,575		53,208		51,828		46,494		5.6			5.8			6.6
Community, business and personal services			273,035		267,097		257,835		248,740		237,103		186,547		26.9			26.4			26.5
	TOTAL (1)	$	1,015,969	$	992,724	$	961,482	$	946,026	$	896,577	$	703,946		100.0	%		100.0	%		100.0	%

Source: Statistics Canada, Input Output Division.

(1) May not add to total due to rounding.

(2) Data does not add to total due to rebasing.

The share of service-producing industries in real GDP at basic prices increased from 65.8% in 1989 to 68.9% in 2003. The fastest growing groups in this sector have been wholesale and retail trade and finance, insurance, real estate and leasing which grew at average compounded annual rates of 3.4% and 3.7% respectively, between 1989 and 2003, compared to an average annual growth rate of 2.6% for total real GDP (1997 constant dollars). The goods-producing sector constituted 31.1% of real GDP at basic prices in 2003, down from 34.0% in 1989. The decline was most evident in construction with its share declining from 6.8% in 1989 to 5.5% in 2003, and in utilities, where the share fell from 3.2% to 2.5%.

Real GDP growth was 5.6% in 1999 and 5.3% in 2000. Manufacturing output growth exceeded total output growth over this period, increasing by 8.3% in 1999 and by 9.9% in 2000. Total year-over-year GDP growth slowed in 2001 to 1.7%, rebounded in 2002 to 3.4%, and eased in 2003 to 2.2%, before advancing over 2004 to 2.3%, 3.2% and 3.7% in the first, second and third quarters respectively. After contracting by 4.0% in 2001, manufacturing output rebounded to grow at 2.4% in 2002, followed by a retreat to 0.1% growth in 2003. On a year-over-year basis, manufacturing output growth has since recovered in 2004 to 0.6%, 4.1%, and 6.6% in the first, second, and third quarters respectively.

The construction sector was the second largest goods-producing sector in Canada in 2003. Construction activity rose by 4.5% in 1999, 5.5% in 2000 and 6.9% in 2001, followed by a slowing in 2002 to 2.9%. Year-over-year output growth in this industry has since strengthened in 2003 to 4.4% and in the first quarter of 2004 to 4.8%, before moderating to 4.0% and 3.1% in the second and third quarters of 2004.

Output from mining and oil and gas extractions saw no growth in 1999, rose by 3.0% in 2000 and fell by 0.9% in 2001. Recovering to 0.6% in 2002 and 3.9% in 2003, output growth continued to strengthen on a year-over-year basis into the first and second quarters of 2004 to 4.6% and 5.5% respectively, before slowing to 0.8% in the third quarter.

Although the share of agricultural output in total real GDP in 2003 was 1.4%, agriculture is an important part of Canada’s economy and a significant contributor to foreign exchange earnings. Wheat is Canada’s principal agricultural crop and one of its largest export products by value. The wheat crop was 27.0 million tonnes in the 1999-2000 crop year and 26.5 million tonnes in the 2000-2001 crop year. Total wheat production fell to 20.6 million tonnes and 16.2 million tonnes in the 2001-2002 and 2002-2003 crop years respectively, followed by a rebound to 23.5 million tonnes in the 2003-2004 year. For the 2004-2005 year, Statistics Canada estimates wheat production to be 25.9 million tonnes.

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Gross Domestic Income and Expenditure*

Nominal GDP at market prices was about $1.2 trillion in 2003. Nominal GDP grew at 7.4% in 1999 and 9.6% in 2000, with growth tapering off to 2.9% in 2001 before regaining strength to 4.5% in 2002 and 5.3% in 2003. In 2004, nominal GDP growth was 3.4%, 6.5% and 7.3% in the first, second and third quarters respectively (year-over-year basis).

GROSS DOMESTIC INCOME AND EXPENDITURE

					First 3 quarters (10)				For the years ending December 31,
					2004		2003		2003		2002		2001		2000		1999
					(in millions of dollars)
INCOME
	Labor income (1)				$	635,359	$	611,344	$	613,718	$	592,692	$	570,008	$	545,204	$	502,726
	Corporate profits (2)					175,271		150,259		151,210		137,480		126,620		135,978		110,769
	Non-farm unincorporated business income					80,660		76,932		77,382		73,841		68,364		64,944		61,466
	Farm income					805		759		694		889		1,633		1,243		1,819
	Other net domestic income (3)					124,641		124,067		123,492		110,428		116,247		115,885		104,006
		Net domestic income				1,016,736		963,360		966,496		915,330		882,872		863,254		780,786
	Indirect taxes, capital consumption
		allowances and residual error				266,488		250,428		252,276		242,638		225,328		213,323		201,655
GROSS DOMESTIC INCOME					$	1,283,224	$	1,213,788	$	1,218,772	$	1,157,968	$	1,108,200	$	1,076,577	$	982,441
EXPENDITURE
	Consumer expenditure				$	718,152	$	686,501	$	688,707	$	657,302	$	622,903	$	596,009	$	560,884
	Government expenditure
		(goods & services):
	Federal (4)					50,472		48,059		48,422		44,795		42,500		41,412		37,641
	Provincial-municipal (5)					230,840		219,233		220,805		208,454		195,621		183,220		171,449
			Total government (6)			281,312		267,292		269,227		253,249		238,121		224,632		209,090
				of which current		248,577		235,895		237,711		223,677		211,115		200,084		186,054
				of which capital (7)		32,735		31,397		31,516		29,572		27,006		24,548		23,036
	Residential construction					83,128		72,272		73,757		65,829		55,140		48,572		45,100
	Business fixed investment:
		Non-residential construction				53,476		50,789		51,155		49,686		52,927		49,826		47,229
		Machinery and equipment				84,272		81,092		80,963		82,313		82,558		83,350		79,102
			Total			137,748		131,881		132,118		131,999		135,485		133,176		126,331
	Inventory accumulation:
		Business non-farm				2,467		6,513		6,119		1,094		-5,251		11,355		4,951
		Farm				853		1,336		1,543		-1,662		-1,019		150		39
			Total			3,320		7,849		7,662		-568		-6,270		11,505		4,990
	Exports (goods & services) (8)					493,688		464,732		461,596		479,358		483,053		490,688		424,258
	Imports (goods & services) (9)					-434,004		-415,840		-413,611		-428,248		-419,508		-428,754		-388,303
	Residual error of estimate					-120		-900		-684		-953		-724		749		91
GROSS DOMESTIC EXPENDITURE					$	1,283,224	$	1,213,788	$	1,218,772	$	1,157,968	$	1,108,200	$	1,076,577	$	982,441
GROSS DOMESTIC EXPENDITURE IN 1997 CHAIN-FISHER DOLLARS					$	1,121,797	$	1,093,681	$	1,096,359	$	1,074,621	$	1,038,845	$	1,020,488	$	969,750

Source: Statistics Canada, National Income and Expenditure Accounts.

(1) Includes military pay and allowances.

(2) Includes net interest and dividends paid to non-residents.

(3) Includes interest, miscellaneous investment income and government business enterprise profits before taxes, taxes less subsidies on factors of production and inventory valuation adjustment.

(4) Net spending (outlays minus sales) including gross capital formation and Canada Pension Plan.

(5) Net spending (outlays minus sales) including gross capital formation and Québec Pension Plan.

(6) Includes government inventories.

(7) Includes inventory accumulations at all levels of government.

(8) Excludes investment income received from non-residents.

(9) Excludes investment income paid to non-residents.

(10) Seasonally adjusted, annual rates.

*Year-over-year growth rates for nominal GDP at market prices are based on not seasonally adjusted data.

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Economic Developments*

Real output growth experienced gains of 5.5% in 1999 and 5.2% in 2000, before slowing to 1.8% in 2001, and rebounding to 3.4% in 2002. In 2003 real GDP growth eased to 2.0%, continued to slow to 1.6% in the first quarter of 2004, before regaining strength on a year-over-year basis to 2.8% and 3.3% in the second and third quarters respectively.

Real consumer spending rose by 3.8% in 1999, 4.0% in 2000, 2.7% in 2001, 3.4% in 2002 and 3.1% in 2003. Year-over-year growth in consumer spending remained robust at 3.5% in the first quarter, 3.2% in the second quarter and 2.9% in the third quarter of 2004. The personal savings rate was 3.2% in 2002 and 1.4% in 2003, falling to 0.6% in the first quarter of 2004, 0.5% in the second quarter and 0.0% in the third quarter of 2004.

Year-over-year growth in non-residential business fixed investment was 7.2% in 1999, 4.7% in 2000 and 0.7% in 2001. The strength in non-residential business investment in 1999 and 2000 was largely due to strong increases in machinery and equipment investment. Non-residential business fixed investment fell 4.0% in 2002, but rebounded with growth of 3.2% in 2003 and year-over-year growth of 5.5%, 5.6% and 3.9% in the first three quarters of 2004, respectively.

Housing starts have increased in recent years. Following a level of 150 thousand units in 1999, housing starts continued to rise to 152 thousand units, 163 thousand units, 205 thousand units and 218 thousand units in 2000, 2001, 2002, and 2003 respectively. In the first three quarters of 2004, the level of housing starts increased further to 226 thousand, 233 thousand and 238 thousand units respectively (at annual rates).

Government spending on current goods and services grew by 2.1% in 1999, 3.1% in 2000, 3.7% in 2001, 2.8% in 2002, and 3.8% in 2003. Year-over-year growth in government spending on goods and services for 2004 was 3.2% in the first quarter, 2.1% in the second quarter and 3.0% in the third quarter.

In current dollar terms, the trade balance on a balance of payments basis was $35.4 billion in 1999, $61.3 billion in 2000 and $62.8 billion in 2001. The surplus on the foreign trade balance slid to $50.3 billion and $47.3 billion in 2002 and 2003 respectively, and has since increased in 2004 to $52.4 billion, $64.9 billion and $58.9 billion (at annual rates) in the first, second and third quarters respectively. (See also “Balance of Payments”.)

* In this section all figures are reported in real terms and growth rates are calculated from chained 1997 dollars, seasonally adjusted at annual rates unless otherwise noted.

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Prices and Costs

The year-over-year increase in the GDP implicit price deflator was 1.7% in 1999, 4.2% in 2000, and 1.1%, 1.0% and 3.2% in 2001, 2002 and 2003 respectively. Year-over-year growth in the implicit price deflator was 1.7% for the first quarter of 2004, 3.6% in the second quarter and 3.9% in the third quarter.

The year-over-year increase in the consumer price index (“CPI”) has been moderate. It registered increases of 1.7% in 1999, 2.7% in 2000 and 2.6% in 2001. The increase in 2000 is largely attributable to a surge in energy prices, while the increase observed in 2001 was more broadly-based. CPI inflation dipped slightly to 2.2% in 2002 before rising again to 2.8% in 2003, and sliding to 0.9% in the first quarter of 2004 before rebounding to 2.2% and 2.0% in the second and third quarters respectively.*

PRICE DEVELOPMENTS

	G.D.P.		Consumer Price Index
	Implicit														Industrial
	Chain						Total				Total Excluding				Product
For the years	Price Index						Excluding				Food &		Shelter		Price
ended December 31,	(1)		Total		Food		Food		Energy		Energy		Services		Index
	(annual percentage changes)
1999		1.7		1.7		1.3		1.7		5.7		1.5		1.1		1.8
2000		4.2		2.7		1.4		3.1		16.2		1.5		2.1		4.3
2001		1.1		2.6		4.5		2.1		3.3		2.0		2.5		1.0
2002		1.0		2.2		2.6		2.1		–2.0		2.7		1.9		0.1
2003		3.2		2.8		1.7		3.0		7.9		2.6		2.7		–1.4
2003 Q4		2.2		1.7		1.9		1.7		1.6		1.8		2.7		–3.9
2004 Q1		1.7		0.9		1.1		0.8		–2.8		1.3		2.3		–2.0
2004 Q2		3.6		2.2		1.4		2.3		11.8		1.4		2.2		5.2
2004 Q3		3.9		2.0		2.5		1.8		7.5		1.3		2.5		5.2

Source: Statistics Canada, National Income and Expenditure Accounts; Consumer Prices and Price Indexes; Industry Price Indexes.

(1)  This implicit price index is based on seasonally adjusted data.

The average annual increase in new collective agreements (without cost of living clauses) involving 500 or more employees for all industries was 2.5% in 2003. Average wage gains (over the life of the contract) increased steadily between 1999 and 2001, before dipping in 2002. The average settlement was 2.2% in 1999, 2.5% in 2000, 3.2% in 2001, 2.8% in 2002 and 2.5% in 2003. Year-over-year, wage gains were 2.8% in the first quarter of 2004, 1.3% in the second quarter and 1.3% in the third quarter.

* Year-over-year growth rates for CPI are based on not seasonally adjusted data.

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Labor Market*

The following table shows labor market characteristics for the periods indicated.

LABOR MARKET CHARACTERISTICS(1)

(thousands of persons)

	Canada						Atlantic Provinces						Québec
For the years	Labor		Employ-		Unemploy-		Labor		Employ-		Unemploy-		Labor		Employ-		Unemploy-
ended December 31,	Force		ment		ment Rate		Force		ment		ment Rate		Force		ment		ment Rate
1999		15,721		14,531		7.6		1,136		1,003		11.7		3,702		3,357		9.3
2000		15,999		14,910		6.8		1,152		1,023		11.2		3,753		3,438		8.4
2001		16,246		15,077		7.2		1,172		1,035		11.7		3,807		3,475		8.7
2002		16,689		15,412		7.7		1,194		1,055		11.6		3,930		3,593		8.6
2003		17,047		15,746		7.6		1,205		1,067		11.4		4,017		3,650		9.1
2003 Q4		17,160		15,875		7.5		1,206		1,067		11.5		4,058		3,683		9.2
2004 Q1		17,190		15,917		7.4		1,217		1,081		11.2		4,039		3,683		8.8
2004 Q2		17,246		15,996		7.2		1,224		1,088		11.1		4,035		3,705		8.2
2004 Q3		17,284		16,050		7.1		1,227		1,095		10.8		4,049		3,717		8.2

	Ontario						Prairie Provinces						British Columbia
For the years	Labor		Employ-		Unemploy-		Labor		Employ-		Unemploy-		Labor		Employ-		Unemploy-
ended December 31,	Force		ment		ment Rate		Force		ment		ment Rate		Force		ment		ment Rate
1999		6,071		5,688		6.3		2,734		2,576		5.8		2,079		1,906		8.3
2000		6,228		5,872		5.7		2,766		2,628		5.0		2,100		1,949		7.2
2001		6,364		5,963		6.3		2,799		2,662		4.9		2,104		1,942		7.7
2002		6,532		6,068		7.1		2,877		2,723		5.4		2,158		1,973		8.5
2003		6,694		6,229		7.0		2,929		2,777		5.2		2,202		2,023		8.1
2003 Q4		6,723		6,267		6.8		2,951		2,800		5.1		2,221		2,058		7.4
2004 Q1		6,756		6,299		6.8		2,958		2,805		5.2		2,220		2,050		7.7
2004 Q2		6,794		6,325		6.9		2,964		2,822		4.8		2,228		2,057		7.7
2004 Q3		6,801		6,344		6.7		2,967		2,817		5.0		2,241		2,076		7.3

Source: Statistics Canada, The Labour Force.

(1) Unemployment levels are calculated using the difference between Labor Force and Employment for the quarters.

On a year-over-year basis, employment in recent years has averaged more than two percent growth, increasing by 2.8% and 2.6% respectively in 1999 and 2000, before slowing to 1.1% in 2001 and returning to 2.2% in 2002 and 2.2% in 2003. Growth in the labor force was not as strong, registering growth of 2.0%, 1.8% and 1.5% in 1999 through 2001 respectively with a rise to 2.7% in 2002 before moderating to 2.1% in 2003. Year-over-year employment growth in 2004 was 1.6% in the first quarter, 1.9% in the second quarter and 1.9% in the third quarter. Growth in the labor force was 1.5%, 1.3% and 1.1% respectively over the same period.

The unemployment rate fell from 7.6% in 1999 to 6.8% in 2000, followed by a rise back to 7.2% in 2001, 7.7% in 2002 and 7.6% in 2003. So far in 2004, the unemployment rate has declined from 7.4% in the first quarter to 7.2% and 7.1% in the second and third quarters respectively.

* Year-over-year growth rates for employment are based on not seasonally adjusted data.

11

EXTERNAL TRADE

Canada has continued to work towards implementing its trade goals of freer and more open markets based on internationally agreed rules and practices at multilateral, regional and bilateral levels.

At the multilateral level, Canada continues to be an active member of the World Trade Organization (“WTO”) and continues to fully participate in multilateral trade negotiations launched in Doha, Qatar in November 2001.

At the regional level, Canada is a member of the North American Free Trade Agreement (“NAFTA”) with both the United States and Mexico. Under NAFTA, as of January 1, 2003, virtually all tariffs for goods originating in Canada, the United States, and Mexico have been eliminated.

Canada currently has bilateral free trade agreements in place with the following countries: Chile, Costa Rica, and Israel.

Merchandise Trade

The following table sets forth the composition of Canadian trade for the periods indicated.

THE COMPOSITION OF CANADIAN MERCHANDISE TRADE

(Balance of Payments Basis)

		First 3 quarters (2)				For the years ended December 31,
		2004		2003		2003		2002		2001		2000		1999
		(in millions)
Value of Exports
	Wheat	$	2,863	$	1,948	$	2,809	$	3,071	$	3,807	$	3,609	$	3,356
	Other agricultural products		18,413		17,795		23,576		25,292		24,499		21,403		19,524
	Crude petroleum		18,728		15,481		20,644		18,551		15,370		19,166		11,017
	Natural gas		20,231		20,796		26,083		18,372		25,595		20,537		10,951
	Ores and metals		24,142		19,099		26,029		28,079		26,008		26,618		23,555
	Lumber		8,710		6,621		8,941		10,852		11,571		12,217		13,225
	Pulp and paper		9,859		9,529		12,529		13,262		15,300		16,860		13,668
	Other materials		58,599		52,561		70,133		70,126		72,764		71,102		60,124
	Motor vehicles		47,030		44,826		59,488		67,672		65,872		69,676		70,459
	Motor vehicle parts		20,916		20,905		27,886		29,004		26,655		28,210		26,833
	Machinery		14,445		14,426		18,909		20,300		19,995		19,571		17,179
	Other end products		68,085		66,185		86,880		94,470		98,865		105,678		85,483
	Special transactions		9,961		12,294		16,103		14,745		14,356		14,726		13,662
	TOTAL EXPORTS (1)	$	321,981	$	302,465	$	400,010	$	413,796	$	420,657	$	429,372	$	369,035
Value of Imports
	Edible products	$	14,873	$	15,243	$	20,129	$	20,432	$	19,086	$	17,389	$	16,552
	Crude petroleum		11,510		9,981		13,301		11,723		12,814		13,437		7,160
	Other crude materials		8,689		6,945		9,332		8,568		8,119		8,026		7,156
	Fabricated materials		54,895		50,389		66,586		69,547		69,420		69,871		62,412
	Motor vehicles		27,599		28,242		37,547		38,003		31,825		32,479		30,242
	Motor vehicle parts		30,477		29,565		38,813		43,463		40,753		44,954		45,692
	Machinery and equipment		77,983		74,395		98,237		105,848		112,525		122,913		108,247
	Other end products		35,353		34,814		46,259		46,444		42,923		40,115		37,000
	Special transactions		8,675		8,790		11,629		12,552		13,218		13,153		12,566
	TOTAL IMPORTS (1)	$	270,053	$	258,363	$	341,833	$	356,581	$	350,683	$	362,337	$	327,026

Source: Statistics Canada, Canadian International Merchandise Trade.

(1) May not add to total due to rounding.

(2) Seasonally adjusted.

12

Canada is one of the leading trading nations of the world. Canada’s exports have always reflected the country’s high endowment in natural resources. However, Canada has been diversifying its exports over time, relying less on commodities and more on finished goods. The value of commodity exports as a share of merchandise exports dropped from 69% in 1980 to 50.2% in the first three quarters of 2004. Over this period the increase in exports of finished goods was led by automotive and miscellaneous end products. Canada’s imports consist mostly of manufactured goods; the two main components are machinery and equipment and automotive products.

Canada and the United States are each other’s largest trading partners, reflecting the physical proximity of the two countries and their close economic and financial relationship. In 2003, trade with the United States accounted for 82.6% of the value of Canada’s merchandise exports and 70.2% of the value of Canada’s merchandise imports. According to the United States Department of Commerce, trade with Canada accounted for 23.8% of the United States’ exports and 17.6% of its imports in 2003.

GEOGRAPHICAL DISTRIBUTION OF CANADIAN MERCHANDISE TRADE

(Balance of Payments Basis)

		First 3 quarters						For the years ended December 31,
		2004			2003			2003			2002			2001			2000			1999
Exports (1)
	United States		81.6	%		82.9	%		82.6	%		83.9	%		83.7	%		83.6	%		83.8	%
	Japan		2.4			2.5			2.4			2.5			2.4			2.6			2.7
	United Kingdom		2.2			1.8			1.9			1.5			1.6			1.7			1.6
	European Union (2)		4.2			4.1			4.1			4.0			4.0			3.9			3.9
	Other		9.7			8.8			8.9			8.2			8.3			8.1			8.0
			100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Imports (1)
	United States		69.2	%		70.2	%		70.2	%		71.5	%		72.7	%		73.6	%		76.3	%
	Japan		2.8			3.2			3.1			3.3			3.0			3.2			3.2
	United Kingdom		2.6			2.6			2.6			2.9			3.4			3.4			2.4
	European Union (2)		7.4			7.7			7.6			7.3			6.6			5.8			6.3
	Other		18.0			16.4			16.5			15.1			14.3			14.0			11.8
			100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Source: Statistics Canada, Canadian International Merchandise Trade.

(1)	May not add to total due to rounding.
(2)	Excludes the United Kingdom. Includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, and Sweden.

The following table presents volume and price indices of Canada’s merchandise trade for the periods indicated.

MERCHANDISE TRADE INDICES

(Balance of Payments Basis)

		First 3 quarters				For the years ended December 31,
		2004		2003		2003		2002		2001		2000		1999
		(1997 = 100)
Indices of physical volume
	Exports		132.5		125.4		125.9		128.6		127.7		132.3		121.2
	Imports		132.7		122.8		123.8		119.7		118.0		125.0		115.1
Indices of prices
	Exports		106.9		106.0		104.8		106.0		108.5		107.0		100.3
	Imports		97.6		101.0		99.4		107.2		107.0		104.4		102.3
	Terms of trade (1)		109.5		105.0		105.4		98.9		101.4		102.4		98.1

Source: Statistics Canada, National Income and Expenditure Accounts.

(1) Index of price of exports divided by index of price of imports multiplied by 100.

13

BALANCE OF PAYMENTS

The following table presents the balance of international payments for the periods indicated.

CANADIAN BALANCE OF INTERNATIONAL PAYMENTS

					First 3 quarters(1)				For the years ended December 31,
					2004		2003		2003		2002		2001		2000		1999
					(in millions of dollars)
CURRENT ACCOUNT
	RECEIPTS
		Goods and services			$	368,853	$	347,339	$	459,974	$	477,694	$	481,383	$	489,090	$	422,670
			Goods			322,486		302,465		400,010		413,795		420,657		429,372		369,035
			Services			46,367		44,874		59,964		63,899		60,725		59,718		53,636
		Investment Income				29,592		23,631		32,700		31,185		25,866		36,755		32,905
		Current transfers				5,373		5,008		6,714		6,957		6,970		6,116		5,644
			Current account receipts			403,817		375,980		499,388		515,836		514,219		531,961		461,219
	PAYMENTS
		Goods and services				324,808		311,184		412,688		427,382		418,612		427,836		387,298
			Goods			269,934		258,363		341,833		356,581		350,682		362,337		327,026
			Services			54,875		52,819		70,855		70,801		67,930		65,500		60,272
		Investment Income				45,266		42,801		56,443		59,839		65,231		69,863		66,518
		Current transfers				5,016		4,839		6,440		5,951		5,373		4,992		4,834
			Current account payments			375,089		358,824		475,570		493,171		489,216		502,692		458,649
	BALANCES
		Goods and services				44,046		36,156		47,287		50,312		62,770		61,254		35,373
			Goods			52,553		44,102		58,177		57,214		69,975		67,036		42,009
			Services			-8,507		-7,945		-10,891		-6,903		-7,204		-5,782		-6,636
		Investment Income				-15,675		-19,170		-23,743		-28,653		-39,365		-33,109		-33,613
		Current transfers				357		170		274		1,006		1,598		1,124		810
			Current account balance			28,728		17,156		23,818		22,664		25,003		29,269		2,570
CAPITAL AND FINANCIAL ACCOUNT
	CAPITAL ACCOUNT					3,224		3,052		3,968		4,988		5,784		5,314		5,049
	FINANCIAL ACCOUNT					-20,994		-15,918		-24,694		-17,837		-21,163		-27,070		-17,531
	CANADIAN ASSETS, NET FLOWS
		Canadian direct investment abroad				-48,365		-10,932		-30,191		-41,472		-55,918		-66,352		-25,625
		Portfolio investment				-9,988		-7,365		-12,519		-25,087		-37,573		-63,927		-23,101
			Foreign bonds			-8,699		-6,170		-8,071		-6,229		-1,920		-3,963		-2,477
			Foreign stocks			-1,288		-1,196		-4,449		-18,858		-35,653		-59,965		-20,623
		Other investment				-11,230		-17,355		-25,401		-13,206		-20,251		-11,759		6,780
			Loans			-1,956		3,544		6,171		-8,182		-8,219		-5,126		2,680
			Deposits			-2,931		-14,029		-23,234		5,731		-2,172		3,973		10,592
			Official international reserves			-510		2,944		4,693		298		-3,353		-5,480		-8,818
			Other assets			-5,832		-9,814		-13,030		-11,053		-6,507		-5,125		2,326
			Total Canadian assets, net flows			-69,582		-35,652		-68,111		-79,765		-113,743		-142,039		-41,946
	CANADIAN LIABILITIES, NET FLOWS
		Foreign direct investment in Canada				11,265		10,049		9,222		33,026		42,561		99,198		36,762
		Portfolio investment				39,595		8,340		18,469		20,935		38,509		14,598		3,738
			Canadian bonds			13,074		3,052		7,000		18,684		41,733		-21,458		2,602
			Canadian stocks			29,589		7,704		12,931		-1,531		4,125		35,232		14,346
			Canadian money market			-3,067		-2,418		-1,461		3,782		-7,349		824		-13,209
		Other investment				-2,271		1,346		15,726		7,967		11,510		1,173		-16,086
			Loans			-2,112		-2,731		1,741		1,400		-6,493		3,396		6,641
			Deposits			2,290		8,133		18,265		13,568		23,716		-962		-24,103
			Other liabilities			-2,450		-4,058		-4,280		-7,001		-5,713		-1,261		1,377
			Total Canadian liabilities, net flows			48,588		19,734		43,417		61,928		92,580		114,969		24,415
				Total capital and financial account, net flows		-17,770		-12,866		-20,725		-12,850		-15,379		-21,756		-12,481
	Statistical discrepancy					-10,655		-3,526		-3,092		-9,815		-9,624		-7,514		9,912

Source: Statistics Canada, Canada’s Balance of International Payments

(1) Year-to-date (not annualized). Current account data are seasonally adjusted. Capital account data are not seasonally adjusted.

14

Canada’s current account balance improved from a surplus of $2.6 billion in 1999 to a surplus of $23.8 billion in 2003. The current account maintained an average surplus of $38.3 billion (seasonally adjusted, annualized level) in the first three quarters of 2004. Over the period since 1999, the three main components of the current account have evolved as follows:

(1)  The merchandise trade surplus increased from $42.0 billion in 1999 to $58.2 billion in 2003. In the first three quarters of 2004, the merchandise trade surplus averaged $70.1 billion (annualized level).

(2)  The service account deficit worsened from $6.6 billion in 1999 to $10.9 billion in 2003. The services deficit averaged $11.3 billion (annualized level) in the first three quarters of 2004.

(3)  The deficit on net investment income payments narrowed from $33.6 billion in 1999 to $23.7 billion in 2003. The investment income deficit averaged $20.9 billion in the first three quarters of 2004 (annualized level).

Low inflation and a depreciation of the Canadian dollar helped support the merchandise trade surplus in 2001. An uneven recovery in the United States provided limited stimulus to exports in 2002 and an appreciation of the Canadian dollar restrained gains in the surplus when growth in the United States shifted to a higher pace in 2003 and the first three quarters of 2004.

In 1999, the net outflow in the capital and financial account stood at $12.5 billion. Following that, Canada registered net outflows of $21.8 billion, $15.4 billion, $12.9 billion and $20.7 billion in 2000, 2001, 2002 and 2003 respectively. The net outflow in the first three quarters of 2004 averaged $23.7 billion (annualized level).

Various Canadian financial instruments were acquired by non-residents during the 1990s and early 2000s. Non-resident net purchases of Canadian bonds, stocks and money market instruments amounted to $3.7 billion in 1999. After rising to $38.5 billion in 2001, purchases of Canadian financial instruments decreased again to $20.9 billion in 2002 and $18.5 billion in 2003. The first three quarters of 2004 saw net purchases of Canadian bonds, stocks and money market instruments average $52.8 billion (annualized level).

Foreign direct investment in Canada rose from $36.8 billion in 1999 to $99.2 billion in 2000 before sliding to $42.6 billion in 2001, $33.0 billion in 2002 and $9.2 billion in 2003. Foreign direct investment in the first three quarters of 2004 averaged $15.0 billion (annualized level).

15

FOREIGN EXCHANGE AND INTERNATIONAL RESERVES

Since May 31, 1970 the Canadian dollar has been allowed to float so that the rate of exchange is determined by conditions of supply and demand in the market. During this period, the Canadian dollar has floated between a high of 104.43 U.S. cents that occurred in April 1974 and a low of 61.79 U.S. cents in January 2002. The dollar closed 2003 at 77.13 U.S. cents. In 2004 through November 30, trading has been in a range of 71.41 to 85.14 U.S. cents; the dollar closed at 84.32 U.S. cents on November 30, 2004.

EXCHANGE RATE FOR THE CANADIAN DOLLAR

			For the years ended December 31,
	2004 through
	November 30		2003	2002	2001	2000	1999	1998	1997	1996	1995	1994
	(in U.S. cents)
High		85.14	77.89	66.54	67.11	69.84	69.35	71.23	74.93	75.26	75.33	76.42
Low		71.41	63.38	61.79	62.30	63.97	64.62	63.11	69.45	72.12	70.09	70.97

Source: Bank of Canada.

Canada does not have foreign exchange controls. Foreign exchange operations conducted by the Bank of Canada on behalf of the Minister of Finance are directed toward the maintenance of orderly conditions in the foreign exchange market in Canada through the purchase or sale of United States dollars for Canadian dollars. The following table shows Canada’s official international reserves on the dates indicated.

CANADA’S OFFICIAL INTERNATIONAL RESERVES

			At December 31,
	At November 30,
	2004		2003		2002		2001		2000		1999		1998		1997		1996		1995		1994
	(in millions of U.S. dollars)
Total		34,066		36,268		37,169		34,248		32,424		28,646		23,427		17,969		20,578		15,227		12,475

Source: Department of Finance.

Canada’s official reserves at November 30, 2004 consisted of United States dollars in the amount of U.S.$14,108 million, U.S.$49 million in gold (valued at U.S.$453.40 per fine ounce), U.S.$3,334 million in the form of the reserve position in the International Monetary Fund (“IMF”), U.S.$912 million in Special Drawing Rights (“SDRs”) and U.S.$15,663 million in other convertible currencies.

Beginning in 1978 transactions relating to foreign currency debt undertaken for reserve management purposes have had an important effect on the level of official reserves. The Government maintains a U.S.$6,000 million standby credit facility with a group of foreign banks. Since August 31, 1986 no drawings have been outstanding on the standby credit facility. The “Canada Bills” program was launched in October 1986. Under this program U.S. dollar-denominated short-term notes are issued in the United States money market. There were U.S.$1,682 million of Canada Bills outstanding on September 30, 2004. The “Canada Notes” program was launched in March 1996. Canada Notes are interest-bearing marketable notes that mature not less than nine months from their date of issue. As of September 30, 2004, there was a total of U.S.$909 million equivalent of Canada Notes outstanding. A Euro Medium Term Note program was launched in March 1997. As of September 30, 2004, there was a total of U.S.$2,413 million equivalent of Euro Medium Term Notes outstanding. As of September 30, 2004, there was a total of U.S.$10,098 million equivalent of other marketable bonds, comprised of 6 global bond issues and 4 Petro Canada bond issues assumed by the Government of Canada on February 5, 2001, on the dissolution of Petro Canada Limited.

16

GOVERNMENT FINANCES

Introduction

The financial structure of the Government of Canada rests on a constitutional and statutory framework dating back to the British North America Act, 1867. That Act, which has been renamed the Constitution Act, 1867, gave constitutional foundation to the principles of financing that are basic to responsible government, while other necessary financial administrative machinery and procedures were established by subsequent legislation, most notably the Financial Administration Act. The proclamation in 1982 of the Constitution Act, 1982 terminated British legislative jurisdiction over Canada’s Constitution in accordance with an amending formula that permits amendment of the Constitution without resorting to the Parliament of the United Kingdom.

Within the confines of the Constitution, the authority of Parliament is supreme. Ultimate control of the public purse and the financial structure of the Government rests with Parliament. This is reflected in the fundamental principles that no tax shall be imposed and no money shall be spent without the authority of Parliament, and that expenditures shall be made only for the purposes authorized by Parliament.

Public money received by the Government is deposited in the Consolidated Revenue Fund of Canada. Withdrawals of public money out of the Consolidated Revenue Fund may not be made without the authority of Parliament.

The Government has two major sources of money: budgetary revenues and borrowing. The main sources of revenue are personal and corporate income taxes, employment insurance premiums, and excise taxes and duties. These revenues are authorized by specific acts passed by Parliament. The Government’s revenues also include net gains/losses from Crown corporations, such as the Bank of Canada and Canada Mortgage and Housing Corporation; foreign exchange revenues; and other revenues (primarily revenues from the sales of goods and services). The other major source of money to finance Government operations is borrowing. Borrowing limits are established by acts of Parliament. The main sources of borrowing are marketable bonds, treasury bills and Retail Debt.

Parliament authorizes the disbursement of moneys out of the Consolidated Revenue Fund by means of Appropriation Acts passed on an annual basis by Parliament and based on the Main Estimates submitted by the various departments. In addition to the Appropriation Acts, authority for payments may also be found in certain statutes which authorize certain payments out of the Consolidated Revenue Fund. Expenditures for public debt charges, social security payments and transfers to other levels of government are authorized in this way. Appropriations may also be made by the Governor in Council for urgent payments. Such appropriations may be made only when Parliament is not in session, and must be laid before Parliament during the subsequent session.

Information on the Government’s planned revenues and expenditures is presented to Parliament primarily in two documents: the Budget and the Main Estimates, which are both presented in the House of Commons. The Budget, which may be delivered at any time during the fiscal year, provides the occasion on which the Minister of Finance generally brings under review the whole financial position of the Government, present and prospective, and announces the Government’s plans and proposals. The Main Estimates are tabled (i.e., introduced) once each year and outline the Parliamentary authority, either existing or required, for disbursements. Supplementary Estimates may also be tabled during the year to provide authority for spending as the need arises.

The considerations for overall resource availability and demands for new policies and programs are reconciled through the establishment of a two year Fiscal Plan reflecting Government priorities. This Fiscal Plan, which is presented with the Budget, establishes an expenditure framework, in which the Cabinet establishes priorities. This ensures that expenditure decisions are made within the context of Government priorities and do not exceed the provision for such expenditures set out in the expenditure framework. The Government also releases an Economic and Fiscal Update in the fall for pre-budget consultation purposes.

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The reporting entity of the Government of Canada includes all departments, agencies, corporations and funds which are owned or controlled by the Government and which are accountable to Parliament. The financial activities of all departments, agencies, corporations and funds are consolidated in the Government’s financial statements, except for enterprise Crown corporations and other government business enterprises which are not dependent on the Government for financing their activities. For these corporations, the Government reports in its financial statements only the cost of its investment and an allowance for valuation which includes their annual net profits and losses. In addition, any amounts receivable from or payable to these corporations are reported.

The primary source of information on all actual financial transactions of the Government is the Public Accounts of Canada, which are required by the Financial Administration Act to be tabled in Parliament each year. The other chief accountability reports are the statements of budgetary and non-budgetary financial transactions and of the Government’s cash and debt position published monthly in The Fiscal Monitor and in the Annual Financial Report.

For the first time, the financial statements for fiscal 2002-03 were presented on the full accrual basis of accounting, replacing the modified accrual standard that had been used since the mid 1980s. The Government’s fiscal anchor remains the budgetary balance, which will now provide a more comprehensive and up-to-date picture of the financial situation. Prior to the shift to accrual accounting, there was no distinction between net debt and the accumulated deficit, or federal debt, so these terms were used interchangeably. Under full accrual accounting, this is no longer the case. Net debt is the Government’s net liabilities excluding the value of its non-financial assets. The federal debt takes into account the value of non-financial assets. The two indicators now represent different measures of the Government’s financial position. The Federal debt will now represent the accumulation of surpluses and deficits in the past and is the key measure of debt. Data from fiscal 1983-84 are not directly comparable with earlier years due to a break in the series following the introduction of full accrual accounting.

Fiscal Policy

The era of chronic deficits and rising debt began in the early 1970s when productivity and economic growth declined from the buoyant trend of prior decades. One effect of this fundamental shift that had taken place in the economy was to reduce the underlying rate of growth of tax revenues, while expenditure growth remained strong. Consequently, the divergence between expenditure and revenue trends produced an uninterrupted string of deficits until fiscal 1997-98.

The severity of the 1982 recession resulted in a sharp increase in the deficit in fiscal 1982-83, eventually peaking at $37.2 billion or 8.3% of GDP in fiscal 1984-85. During the middle to late 1980s, the Government instituted a number of measures to increase revenues and constrain the growth in expenditures. These measures, in conjunction with the sustained recovery from the 1982 recession, helped to lower the deficit by about half relative to GDP by fiscal 1989-90. Further progress was arrested by the onset of the recession in 1990, which proved to be much longer and more severe than expected. While the measures to control spending succeeded in preventing government expenditures from increasing substantially in response to the recession, the sluggish recovery and the lagged impact of the recession resulted in substantial declines in budgetary revenues. This caused the deficit to increase to $39.0 billion, or 5.6% of GDP, in fiscal 1992-93.

Since 1993, the Government’s fiscal objective has been to balance the budget. Implicit in this objective was the need to halt the rise in the debt-to-GDP ratio and to put it on a permanent downward track. On a full accrual basis of accounting, the budgetary balance went from a deficit of $38.5 billion, or 5.3% of GDP in fiscal 1993-94 to seven consecutive surpluses over the fiscal 1997-98 to fiscal 2003-04 period. The fiscal 2003-04 surplus was $9.1 billion, or 0.7% of GDP. As a percentage of GDP, program expenses declined from 15.7% in fiscal 1993-94 to 11.6% in fiscal 2003-04, and public debt charges fell from 5.5% in fiscal 1993-94 to 2.9% in fiscal 2003-04. Coupled with economic growth, the fiscal turnaround has also led to a fall in federal debt as a share of GDP of over 27 percentage points to 41.1% in fiscal 2003-04, from the peak of 68.4% in fiscal 1995-96. This is the eighth consecutive year in which the debt-to-GDP ratio has declined.

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This turnaround in federal finances underlined the soundness of the Government’s Debt Repayment Plan — basing budget plans on two-year rolling fiscal targets, economic planning projections based on the average of the private sector economic forecasts backed by fiscal prudence and fiscal forecasts backed by a Contingency Reserve and adopting policies which have engendered economic growth and job creation. Prudence is of two types — the Contingency Reserve and economic prudence. Prudence in budget planning has meant that budgetary balance targets have been consistently bettered in each and every year. The Contingency Reserve of $3.0 billion per year provides an extra measure of back-up against adverse errors in the economic forecast. Under the Debt Repayment Plan, the Contingency Reserve, if not needed, will be used to pay down the public debt. It is not a source of funds for new policy initiatives. Economic prudence provides an extra measure of back-up to ensure that the fiscal target is met. The economic prudence grows over time.

The budgetary deficit/surplus — the budgetary balance — is the most comprehensive measure of the Government’s fiscal results. It is presented on a full accrual basis of accounting, recording government assets and liabilities when they are earned or incurred, regardless of when the cash is received or paid. In addition, the budgetary balance includes only those activities over which the Government has legislative control. However, it is only one measure of the Government’s financial position.

Another important measure is financial source/requirement. Financial source/requirement measures the difference between cash coming in to the Government and cash going out. It differs from the budgetary balance in that it includes transactions in loans, investments and advances, federal employees’ pension accounts, other specified purpose accounts, foreign exchange activities, changes in other financial assets, liabilities and non-financial assets. These activities are included as part of non-budgetary transactions. The conversion from full accrual to cash accounting is also reflected in non-budgetary transactions. In contrast to the large financial requirements observed from the mid 1970s through the mid 1990s, financial surpluses have now been recorded in six of the past seven years. As a result, the Government has retired $38.6 billion of market debt since fiscal 1996-97. Market debt as a percentage of GDP has declined to 36.1% from the peak of 58.2% in fiscal 1995-96.

BUDGETARY BALANCE, FINANCIAL SOURCE/REQUIREMENT AND NET FINANCING ACTIVITIES

			For the years ended March 31,
			2004		2003		2002		2001		2000
			(in millions)
BUDGETARY TRANSACTIONS
	Revenues		$	198,547	$	190,232	$	183,676	$	194,120	$	176,067
	Program expenses			-153,695		-145,993		-137,006		-130,066		-119,538
		Operating surplus or deficit ( - )		44,852		44,239		46,670		64,054		56,529
	Public debt charges			-35,769		-37,270		-39,651		-43,892		-43,384
		Budgetary surplus or deficit ( - )		9,083		6,969		7,019		20,162		13,145
NON-BUDGETARY TRANSACTIONS
	Loans, investments and advances			-5,800		-2,192		16		-3,212		-587
	Pensions and other liabilities			2,611		346		-1,031		3,222		7,560
	Non-financial assets			-578		-878		-1,621		-1,512		-1,507
	Other transactions			-3,708		260		-2,944		1,419		-3,933
	Foreign exchange transactions			4,637		3,096		-1,776		-8,776		-6,826
		Total non-budgetary transactions		-2,838		632		-7,356		-8,859		-5,293
FINANCIAL SOURCE/REQUIREMENT				6,245		7,601		-337		11,303		7,852
UNMATURED DEBT TRANSACTIONS				-2,185		-2,475		-4,104		-10,013		-4,034
CHANGE IN CASH BALANCES				4,060		5,126		-4,441		1,290		3,818
CASH AT END OF YEAR			$	20,546	$	16,486	$	11,360	$	15,801	$	14,511

Source: Public Accounts of Canada, 2004.

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Budgetary Revenue

The Government reports revenue on an accrual basis in the period in which the event that gave rise to the revenue took place. Income tax revenue is recognized when the taxpayer has earned the income subject to tax. Personal income taxes accounted for about 47% and corporate income taxes accounted for about 14% of Government revenue in fiscal 2003-04.

Since 2001, the Canadian income tax system has comprised four tax brackets, 16%, 22%, 26% and 29%. For 2004, the tax thresholds, accounting for inflation indexing, are 16% for income up to $35,000, 22% for income between $35,001 and $70,000, 26% for income between $70,001 and $113,804 and 29% for income $113,805 and higher.

The 2004 Budget proposed to extend eligibility for the education tax credit, increase the Canada Education Savings Grant contribution limit, introduce a Canada Learning Bond for certain children born after 2003, improve the tax recognition of medical and disability related costs incurred by caregivers, introduce a disability supports deduction to assist persons with disabilities with employment and education related expenses and make employment income earned by military and police personnel serving in high-risk missions outside Canada tax free to prescribed limits.

The general federal corporate income tax rate in Canada in 2004 is 21%. The federal corporate tax rate is 12% for the first $250,000 of active business income earned by a Canadian controlled private corporation. Most corporations are also subject to a federal surtax equal to 4% of their federal income tax liability (computed without reference to the small business deduction and most tax credits). The large corporations tax is 0.2% of taxable capital employed in Canada in excess of $50 million. The 4% surtax may be credited against the large corporations tax liability. An additional capital tax (effectively a minimum tax since it is creditable against basic income tax) is levied on large financial institutions.

The 2004 Budget proposed to accelerate by one year, the increase in the small business deduction limit introduced in the 2003 Budget, to $300,000 by 2005. The 2003 Budget eliminated the federal large corporations tax over five years by increasing the threshold of capital to $50 million from $10 million for tax years ending after 2003 and phasing out the rate of tax over the period 2004 to 2008.

Prior to the February 2000 Budget, capital gains were taxed to individuals and corporations at three-quarters of the rate applicable to other income. The February 2000 Budget reduced this inclusion rate to two-thirds, effective February 28, 2000. The October 2000 Budget update reduced the rate further to one-half, effective October 18, 2000.

Beginning in 2003, the Government reduced taxation of resource income by phasing in over 5 years a rate reduction from 28% to 21%. Deductions are allowed for actual provincial and Crown royalties and mining taxes paid and the 25% resource allowance was eliminated. A new credit for qualifying mineral exploration expenditures was also introduced.

The Government imposes a broad based value-added tax, the Goods and Services Tax (“GST”), at a rate of 7% to most goods and services. The GST accounted for about 14% of Government revenue in fiscal 2003-04. Food for home consumption, prescription drugs, residential rents, sales of existing houses, educational services and health care services are generally not subject to the GST. Excise taxes and duties are imposed on selected goods, such as tobacco, alcoholic beverages and gasoline. The Government also imposes customs duties on a wide range of goods.

In addition, the Government obtains non-tax revenues in the form of returns on investment from a number of its Crown corporations. Receipts from sales of goods and services, fees and permits are other sources of revenue.

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The following table sets forth budgetary revenue for the years shown.

DETAILED STATEMENT OF TRANSACTIONS — BUDGETARY REVENUES

		For the years ended March 31,
		2004		2003		2002		2001		2000
		(in millions)
TAX REVENUES
	Personal income tax	$	92,957	$	89,530	$	86,972	$	92,662	$	85,070
	Corporate income tax		27,431		22,222		24,242		28,293		22,115
	Other income tax revenues		3,142		3,291		2,925		2,982		2,646
	Goods and services tax		28,286		28,248		25,292		24,759		23,121
	Energy taxes		4,952		4,935		4,848		4,792		4,757
	Customs import duties		2,887		3,278		3,040		2,784		2,105
	Other excise taxes and duties		5,240		4,896		3,953		3,434		3,315
	Total tax revenues		164,895		156,400		151,272		159,706		143,129
EMPLOYMENT INSURANCE PREMIUMS			17,546		17,870		17,637		18,655		18,628
OTHER REVENUES
	Crown corporation revenues		5,920		5,305		4,754		5,460		4,700
	Other program revenues		8,096		7,278		7,560		7,620		7,525
	Foreign exchange revenues		2,090		3,379		2,453		2,679		2,085
	Total other revenues		16,106		15,962		14,767		15,759		14,310
TOTAL BUDGETARY REVENUES		$	198,547	$	190,232	$	183,676	$	194,120	$	176,067

Source:  Public Accounts of Canada 2004.

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Budgetary Expenses

Budgetary expenses encompass the cost of servicing the public debt, the operating expenses of Government departments and agencies, grants and contributions to other levels of government, organizations and individuals, and subsidies. Under full accrual accounting, the cost of using capital assets is amortized over its estimated useful life.

Transfer payments includes a range of federal social spending programs designed to enhance the quality of life of Canadians, particularly those who have modest incomes or who are disadvantaged. It includes income support — most notably for the elderly and unemployed; transfers to the provinces for health, education and social assistance; and programs for aboriginal Canadians.

The following table sets forth budgetary expenses, including federal social spending, for the years shown.

DETAILED STATEMENT OF TRANSACTIONS — BUDGETARY EXPENSES

				For the years ended March 31,
				2004		2003		2002		2001		2000
				(in millions)
PROGRAM EXPENSES
	Transfer payments
		Old age security benefits, guaranteed income supplement and spouse’s allowance		$	26,902	$	25,692	$	24,641	$	23,668	$	22,856
		Other levels of Government
			Canada health and social transfer		22,341		21,100		17,300		13,500		14,891
			Fiscal arrangements		9,409		10,879		11,603		12,467		10,721
			Canada Assistance Plan		—		—		—		—		56
			Alternative payments for standing programs		-2,700		-2,321		-2,662		-2,460		-2,425
			Other		342		987		375		1,217		—
			Total other levels of Government		29,392		30,645		26,616		24,724		23,243
		Employment insurance benefits			15,058		14,496		13,726		11,444		11,301
		Canada child tax benefits			8,062		7,823		7,471		6,783		6,000
		Other transfer payments			22,964		19,987		18,321		21,075		17,984
			Total transfer payments		102,378		98,643		90,775		87,694		81,384
Other program expenses
	Crown corporation expenses				6,566		6,551		6,085		5,402		5,246
	National Defence				12,869		11,803		10,443		9,744		10,113
	All other departments and agencies				31,882		28,996		29,703		27,226		22,795
			Total other program expenses		51,317		47,350		46,231		42,372		38,154
			Total program expenses		153,695		145,993		137,006		130,066		119,538
PUBLIC DEBT CHARGES					35,769		37,270		39,651		43,892		43,384
TOTAL BUDGETARY EXPENSES				$	189,464	$	183,263	$	176,657	$	173,958	$	162,922

Source: Public Accounts of Canada 2004.

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Loans, Investments and Advances

The Government’s financial assets include loans and advances to, or investments in, its enterprise Crown corporations, other governments and other individuals and organizations.

Loans, investments and advances by the Government resulted in a net requirement of funds of $5.8 billion in fiscal 2003-04.

Pension and Other Liabilities

The Government acts as an insurer and/or administrator of a number of pension funds and annuities and deposit and trust accounts. These liabilities represent an important source of financing to the Government and are included in interest-bearing debt. The balance outstanding of these accounts amounted to $180.9 billion at March 31, 2004. The public sector pensions comprised 70.5% of the outstanding balance at March 31, 2004.

Canada Pension Plan. The Canada Pension Plan (the “Plan”) is a federal-provincial program for compulsory and contributory social insurance. It operates in all parts of Canada, except for Quebec which has a comparable program. The Government administers the Plan under joint control with the participating provinces. Until 1997, the Plan was financed on an essentially pay-as-you-go basis, which means that pensions and benefits were paid out of current contributions (with some interest earned by the Canada Pension Plan Investment Fund). In December 1997, the Government passed legislation to ensure that the Plan remains sustainable over the long term and to allow fuller funding. Changes included a more rapid increase in contribution rates, a new investment policy, as well as changes to calculations of, and eligibility criteria to, some benefits. Under the new investment policy which came into effect April 1, 1998, the Plan’s funds are prudently invested by an independent investment board in a diversified portfolio of securities, including equities, under generally the same rules that apply to other private and public pension funds.

Contributions are paid equally by employers and employees and self-employed workers pay the full amount. In 2003 the combined contribution rate increased to 9.9% and will now remain constant at this level. As administrator, the Government’s authority to spend is limited to the Plan’s net assets of $72.5 billion at March 31, 2004 ($57.3 billion at March 31, 2003). Of these assets, $29.5 billion was invested in securities issued or guaranteed by the provinces and Canada, $29.8 billion was transferred to the Canada Pension Plan Investment Board and $7.5 billion was a direct liability of the Government.

Public Sector Pensions. The Government is responsible for defined benefit pension plans covering substantially all of its full-time employees (including the Public Service, Canadian Forces, Royal Canadian Mounted Police and certain Crown corporations) as well as federally appointed judges and Members of Parliament. Pension benefits are generally calculated by reference to highest earnings for a specific period of time. They are related to years of service and are indexed to inflation. Until March 31, 2000, separate market invested funds were not set aside to provide for payment of these pension benefits. Beginning on April 1, 2000, new employer and employee contributions to the pension plans are transferred to the Public Sector Pension Investment Board. Its goal is to achieve maximum rates of return on investments without undue risk, while respecting the requirements and financial obligations of each of the public sector pension plans. At March 31, 2004 the net liability in respect of these accounts totalled $127.6 billion. This net liability is comprised of the accrued benefit obligation determined as of March 31, 2004, which amounted to $142.4 billion, less pension plan assets of $13.9 billion and unamortized pension adjustments of $0.9 billion. In fiscal 2003-04 the net liability to the public sector pensions increased by $1.9 billion.

Other Employee and Veteran Future Benefits. The Government also sponsors a variety of other future benefit plans from which employees and other former employees can benefit, during or after employment or upon retirement. The cost of these benefits can accrue either during the service life of employees or upon occurrence of an event giving rise to the liability under the terms of the plans. The Government is liable for future payments for the disability and other benefits paid to war veterans, as well as the

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Canadian Forces retired veterans and still-serving members, their beneficiaries and dependants. Other significant benefits for which the Government is liable include the health care and dental plans available to retired employees and their dependants, severance benefits, and workers’ compensation benefits. All these plans are unfunded. The health care and dental plans are contributory plans.

Non-Financial Assets

Non-financial assets include the net book value of the Government’s capital assets. Capital assets include land, buildings, works and infrastructure such as roads and bridges, machinery and equipment, ships, aircraft and other vehicles. Non-financial assets also include inventories and prepaid expenses. Non-financial assets increased by $0.6 billion to $54.8 billion in 2003-04 from $54.2 billion in 2002-03, due largely to building and vehicle acquisitions.

Other Transactions

This category includes tax receivables, other receivables, the provincial and territorial tax collection agreements account, tax payables and other liabilities. These transactions, due to their nature, are subject to wide fluctuations. They were a requirement of $3.7 billion in 2003-04, compared to a source of $0.2 billion in 2002-03.

Foreign Exchange Transactions

Foreign exchange transactions represent all transactions in international reserves held in the Exchange Fund Account (EFA). The objectives of the EFA are to provide general foreign currency liquidity for the Government and promote orderly conditions in the foreign exchange market. The EFA includes foreign currency investments, gold holdings and assets related to Canada’s commitment to the International Monetary Fund.

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DETAILED STATEMENT OF TRANSACTIONS — NON-BUDGETARY TRANSACTIONS, NON-FINANCIAL ASSETS AND FOREIGN EXCHANGE TRANSACTIONS

					For the years ended March 31,
					2004		2003		2002		2001		2000
					(in millions)
	LOANS, INVESTMENTS AND ADVANCES
	Enterprise Crown corporations and other government business enterprises
		Loans and advances
			Canada Mortgage and Housing Corporation		$	219	$	218	$	226	$	224	$	223
			Farm Credit Canada							578		226		236
			Other			-28		63		—		-38		58
						191		281		804		412		517
		Investments
			Share of annual profit			-3,711		-2,962		-2,482		-3,274		-2,562
			Dividends			1,907		1,881		2,078		1,990		1,792
			Capital			-64		-67		89		65		-27
						-1,868		-1,148		-315		-1,219		-797
				Total		-1,677		-867		489		-807		-280
	Other loans, investments and advances
		Portfolio investments				—		—		—		—		1
		National governments including developing countries				574		684		219		2		198
		International organizations				-74		327		453		313		-237
		Provincial and territorial governments				-2,459		-139		385		-963		-738
		Other				-2,500		-1,827		-1,624		-1,269		317
						-4,459		-955		-567		-1,917		-459
	Total loans, investments and advances					-6,136		-1,822		-78		-2,724		-739
		Allowance for valuation				336		-370		94		-488		152
	Total loans, investments and advances after allowance for valuation					-5,800		-2,192		16		-3,212		-587
PENSIONS AND OTHER LIABILITIES
		Public sector pensions				1,852		-1,213		-2,264		839		5,939
		Other employee and veteran future benefits				523		564		612		1,954		579
		Due to Canada Pension Plan				390		323		379		174		790
		Other liabilities				-154		672		242		255		252
			Total pensions and other liabilities			2,611		346		-1,031		3,222		7,560
NON-FINANCIAL ASSETS
		Tangible capital assets				-711		-1,310		-1,510		-1,360		-1,354
		Inventories				-21		325		153		-140		-141
		Prepaid expenses				154		107		-264		-12		-12
			Total non-financial assets			-578		-878		-1,621		-1,512		-1,507
OTHER TRANSACTIONS
		Tax receivables				-4,356		2,008		2,967		-5,251		-1,483
		Other receivables				121		325		-239		550		169
		Provincial and territorial tax collection agreements accounts				2,374		-934		-1,139		-824		-1,402
		Tax payables				-509		-735		1,254		3,221		966
		Other liabilities				-1,338		-404		-5,787		3,723		-2,183
	Total other transactions					-3,708		260		-2,944		1,419		-3,933
FOREIGN EXCHANGE TRANSACTIONS
		International reserves held in the Exchange Fund Account				3,602		3,818		-822		-9,215		-6,775
		International Monetary Fund — Subscriptions				757		-121		-7		-424		658
						4,359		3,697		-829		-9,639		-6,117
		Less: International Monetary Fund — Notes payable				-336		623		947		-835		634
		Special drawing rights allocations				58		-22		—		-28		75
						-278		601		947		-863		709
			Total foreign exchange transactions			4,637		3,096		-1,776		-8,776		-6,826
NET NON-BUDGETARY TRANSACTIONS					$	-2,838	$	632	$	-7,356	$	-8,859	$	-5,293

Source: Public Accounts of Canada 2004.

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Unmatured Debt

The Government’s unmatured debt represents financial obligations resulting from the sale of marketable bonds, treasury bills, Canada Savings Bonds, Canada Premium Bonds, Canada Investment Bonds, Canada Bills, and Canada Notes, as well as from non-marketable obligations issued to the Canada Pension Plan Investment Fund and obligations issued to Trustees in respect of health care initiatives.

Borrowing is one of the two major sources of money available to the Government to finance its operations. The increase in unmatured debt payable in Canadian currency has been broadly consistent with changes in financial requirements. The changes in unmatured debt payable in foreign currency have been associated with developments in foreign exchange markets and related requirements to supplement foreign exchange reserves through foreign borrowing.

UNMATURED DEBT

(Principal Amount Outstanding)

					At March 31,
			At
			Sept. 30,
			2004		2004		2003		2002		2001		2000
			(in millions)
CANADIAN CURRENCY
	Marketable bonds		$	266,178	$	276,022	$	286,290	$	292,910	$	293,879	$	293,250
	Treasury bills			113,800		113,400		104,600		94,200		88,700		99,850
	Canada Savings Bonds			13,703		14,038		16,084		18,928		21,410		23,876
	Canada Premium Bonds			7,346		7,286		6,500		5,092		4,204		3,023
	Canada Investment Bonds			8		7		—		—		—		—
	Obligations issued to Canada Pension Plan Investment Fund			3,337		3,351		3,369		3,386		3,403		3,427
	Obligations issued to Trustees in respect of Health Care Initiatives			65		76		2		5		70		126
		Total Canadian currency		404,437		414,180		416,845		414,521		411,666		423,552
FOREIGN CURRENCY (1)
	Canada Bills			2,121		3,364		2,603		3,355		7,228		6,008
	Canada Notes			1,147		1,257		1,244		1,202		1,580		1,053
	Euro Medium Term Note Program			3,044		3,170		3,215		2,933		3,417		4,038
	Other marketable bonds (2)			12,740		13,201		14,420		19,629		20,488		21,317
	Standby credit facilities			—		—		—		—		—		—
		Total foreign currency		19,052		20,992		21,482		27,119		32,713		32,416
TOTAL UNMATURED DEBT			$	423,489	$	435,172	$	438,327	$	441,640	$	444,379	$	455,968

Source: Bank of Canada, Public Accounts of Canada, Department of Finance.

(1) Foreign currency debt is converted to Canadian dollars using the following closing exchange rate levels:

	At		At March 31,
	Sept. 30,
	2004		2004		2003		2002		2001		2000
	(in millions)
United States Dollar		1.2616		1.3113		1.4678		1.5942		1.5763		1.4494
British Pound		2.2861		2.4201		2.3240		2.2716		2.2315		2.3089
Danish Krone		0.2107		0.2169		0.2158		0.1868		0.1852		0.1861
Japanese Yen		0.01147		0.01257		0.01244		0.01202		0.01249		0.0141
New Zealand Dollar		0.8548		0.8716		0.8142		0.7026		0.6370		0.7211
Euro		1.5690		1.6149		1.6037		1.3879		1.3837		1.3881
Greek Drachma		—		—		—		—		0.004070		0.004160
Hong Kong Dollar		—		—		—		—		0.202254		0.186669
Norwegian Krone		0.18798		0.19145		0.2018		0.1801		0.1718		0.1713

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(2) Excludes Canada Notes and Euro Medium Term Notes. Other globals foreign currency marketable bonds are comprised of the following amounts (before conversion to Canadian dollars):

	At		At March 31,
	Sept. 30,
	2004		2004		2003		2002		2001		2000
	(in millions)
United States Dollars		7,216		7,216		7,312		10,312		11,000		12,500
New Zealand Dollars		500		500		500		500		500		500
Euro		2,045		2,045		2,045		2,045		2,045		2,045

Marketable bonds are interest-bearing obligations available to all investors generally. In the period April 1, 2004 to September 30, 2004 the Government issued an aggregate of $19,049 million of marketable bonds in Canadian currency and redeemed $28,893 million (including $13,778 million in repurchased and cancelled bonds), for a net decrease of $9,845 million. Treasury bills are obligations issued at a discount with maturities generally of three months, six months and one year. In the period April 1, 2004 to September 30, 2004 the amount of treasury bills outstanding increased by $400 million. Canada Savings Bonds are offered to individual Canadian residents and differ from other bonds in that they can be redeemed prior to maturity at the option of the holder for the full face value, plus accrued interest. In the period April 1, 2004 to September 30, 2004 the amount of unmatured Canada Savings Bonds outstanding decreased by $335 million. The Canada Premium Bond is a retail investment and savings product introduced in 1998 that replaced the Canada Registered Retirement Savings Plan Bond (“Canada RRSP Bond”). It offers a higher interest rate compared to Canada Savings Bonds and is redeemable once a year, on the anniversary of the issue date and during the 30 days thereafter without penalty. In the period April 1, 2004 to September 30, 2004 the amount of unmatured Canada Premium Bonds outstanding increased by $60 million. Canada Investment Bonds were introduced on November 1, 2003. They are available through investment dealers only and offer a fixed rate for the full term to maturity. The Canada Investment Bonds carry a higher rate of interest than the Canada Savings Bonds or the Canada Premium Bonds over the equivalent priced period. They are non-cashable prior to maturity but are transferable to other eligible registration types. In the period April 1, 2004 to September 30, 2004, the amount of unmatured Canada Investment Bonds outstanding increased by $1 million. Obligations issued to Canada Pension Plan Investment Fund are non-marketable. Obligations issued to Trustees in respect of health care initiatives are non marketable. Canada Bills are short-term U.S. dollar-denominated unsecured obligations issued in the U.S. money market with a term to maturity of not more than 270 days. Canada Notes are usually U.S. dollar-denominated interest-bearing marketable notes that mature not less than nine months from their date of issue. The Euro Medium-Term Notes are medium-term notes issued outside the United States and Canada. Notes issued under this program can be denominated in a range of currencies and structured to meet investor demand. The other marketable bonds are comprised of 6 global bond issues and 4 Petro Canada bond issues assumed by the Government of Canada on February 5, 2001, on the dissolution of Petro Canada Limited in U.S. dollars and other foreign currencies.

In the mid 1990s, Canada implemented an Exchange Fund Account foreign currency swap program. Under these foreign exchange swaps, Canadian dollar liabilities are swapped into liabilities in foreign currencies, allowing Canada to raise foreign exchange reserves cost effectively. As of September 30, 2004, $14,237 million of Canadian dollars have been swapped for U.S.$9,863 million, $9,686 million of Canadian dollars have been swapped for Euro 6,970 million and $111 million Canadian dollars have been swapped for ¥8 billion.

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The average rates of interest paid on the unmatured debt outstanding by instrument are set out below.

AVERAGE RATES OF INTEREST

	At March 31,
	2004			2003			2002			2001			2000
Marketable bonds (1)		5.96	%		6.26	%		6.61	%		6.98	%		7.21	%
Treasury bills		2.52			3.04			2.64			5.31			5.31
Canada Savings Bonds		3.37			3.43			3.23			5.42			5.13
Non-marketable bonds and notes (2)		9.96			10.14			10.16			10.10			10.04
Canada Bills		0.92			1.12			1.75			5.10			5.87
Foreign currency notes		2.37			2.36			2.46			4.15			4.95
Total Unmatured Debt		4.91			5.32			5.56			6.11			6.15

Source: Public Accounts of Canada 2004.

(1) Excludes Canada Notes and Euro Medium-Term Notes, but includes other foreign currency marketable bonds.

(2) Includes the bonds for the Canada Pension Plan and obligations issued to trustees in respect of health care initiatives.

The following table shows the scheduled repayments in respect of principal and interest on the marketable bonds and notes outstanding at September 30, 2004.

SCHEDULE OF MARKETABLE DEBT REPAYMENTS

(in millions)

	Total Principal and Interest
			Foreign
	Canadian		Currency
For years ended	Currency		Debt
December 31,	Debt(1)		(1)(2)(3)(4)
2004	$	17,029	$	4,167
2005		44,472		2,537
2006		42,668		2,357
2007		29,515		900
2008		31,760		6,826
2009-2013		105,542		2,219
2014-2018		36,807		—
2019-2023		37,410		—
2024-2028		36,340		—
2029-2033		38,352		—
2034-2038		4,227		—

Source: Bank of Canada.

(1) Excludes the effect of interest rate swaps and cross currency swaps.

(2) Includes Canada Notes and other foreign currency marketable bonds and notes.

(3) Converted at U.S. $1.00 = $1.2616, Japanese Yen 1.00 = $0.01147, British Pound 1.00 = $2.2861, Danish Krone 1.00 = $0.2107, New Zealand $1.00 = $0.8548, Norwegian Krone 1.00 = $0.18798 and Euro 1.00 = $1.5690, the closing rates on September 30, 2004.

(4) Excludes principal and interest payments on U.S. $215,719,000 of Petro Canada bond issues assumed by the Government of Canada on February 5, 2001, on the dissolution of Petro Canada Limited.

Crown Corporations

Except for enterprise Crown corporations and other government business enterprises, which are reported under the modified equity basis of accounting, all Government organizations are consolidated in the financial statements. Only certain financial transactions between the Government and enterprise Crown corporations are recorded. All assets and liabilities of agent Crown corporations are, however, assets and liabilities of the Government.

The payment of all money borrowed by agent Crown corporations is a charge on and payable out of the Consolidated Revenue Fund. Such borrowings constitute unconditional obligations of the Government

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and are recorded as such in the accounts of Canada, net of borrowings expected to be repaid directly by these corporations. Borrowings expected to be repaid by enterprise Crown corporations and other government business enterprises amounted to $48,706 million as at March 31, 2004. The following table summarizes the unaudited financial information of consolidated and enterprise Crown corporations as at March 31, 2004.

FINANCIAL INFORMATION REGARDING CROWN CORPORATIONS

(in millions)

				Consolidated		Enterprise		Total
Assets
	Total assets			$	5,812	$	125,576	$	131,388
Liabilities
	Liabilities to other than Government
		Borrowings			—		50,711		50,711
		Other			2,011		56,219		58,230
					2,011		106,930		108,941
			Net assets	$	3,801	$	18,646	$	22,447
Financial interest of the Government
		Obligations to the Government		$	244	$	7,669	$	7,912
		Net equity of the Government			3,557		10,977		14,534
			Total financial interest	$	3,801	$	18,646	$	22,447
Contingent liabilities				$	113	$	2,801	$	2,914

Source: Public Accounts of Canada 2004.

Contingent Liabilities (with Respect to Guarantees by the Government)

The contingent liabilities of the Government, with respect to guarantees by the Government as at March 31, 2004 are summarized as follows.

CONTINGENT LIABILITIES (WITH RESPECT TO NET EXPOSURE UNDER GUARANTEES)

(in millions)

Guarantees by the Government
	Borrowings by enterprise Crown corporations which are agents of Her Majesty		$	44,295
	Borrowings by other than Crown corporations
		From agents		490
		From other than agents		2,933
		Other explicit loan guarantees		102
	Insurance programs of the Government			2,067
	Other explicit guarantees			6,996
		Total gross guarantees		56,883
		Less: allowance for losses		-2,770
Net exposure under guarantees			$	54,112

Source: Public Accounts of Canada 2004.

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Insurance Programs

Certain agent enterprise Crown corporations operate insurance programs. In the event that such corporations have insufficient funds to meet their obligations, the Government would provide the required financing through appropriations, either budgetary or non-budgetary.

The following table summarizes the unaudited information regarding such insurance programs as at March 31, 2004.

AGENT ENTERPRISE CROWN CORPORATIONS INSURANCE PROGRAMS

						5 year		Closing
						average		balance
		Insurance		Net		of net		of
		in force		claims (1)		claims		fund
		(in millions)
Canada Deposit Insurance Corporation		$	375,563	$	1	$	—	$	680
Canada Mortgage and Housing Corporation
	Mortgage Insurance Fund		234,891		172		232		2,425
	Mortgage-Backed Securities Guarantee Fund		64,879		—		—		130
Export Development Canada
	Export insurance contracts entered into on its own behalf		12,877		24		81		—

Source: Public Accounts of Canada 2004.

(1) Refers to the difference between claims and amounts received from sales of related assets and other recoveries.

DEBT RECORD

Canada has always paid the full face amount of the principal and interest on every direct obligation issued by it and every indirect obligation on which it has been required to implement its guarantee, promptly when due. During war, where such payment would have violated laws or regulations forbidding trading with the enemy, payment was made to a custodian of enemy property.

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MONETARY AND BANKING SYSTEM

Bank of Canada

The Bank of Canada (the “Bank”) was incorporated in 1934 under the Bank of Canada Act (in this sec-tion referred to as the “Act”) as Canada’s central bank. All of the capital stock of the Bank is owned by the Government. The Act gives the Bank the responsibility for the conduct of monetary policy and confers specific powers for discharging that responsibility.

The Bank has the sole right to issue notes for circulation in Canada. The Bank acts as the fiscal agent of the Government of Canada and in this role the Bank participates in the management of the public debt. Specifically, the Bank is responsible for handling the Government’s new market borrowings, administering its outstanding market debt, and making payments for interest and market debt redemption on its behalf.

The Bank may buy or sell various types of securities, including securities issued or guaranteed by Canada or any province, short-term securities issued by the United Kingdom, and treasury bills or other obligations of the United States. The Bank may buy and sell foreign currencies, SDRs issued by the IMF, coin, and gold and silver bullion. The Bank may open accounts with other central banks, at the Bank for International Settlements (“BIS”), and at commercial banks. The Bank may accept deposits from the Government or any of its corporations or agencies, any province, any chartered bank or any member of the Canadian Payments Association. The Bank pays interest to the Government on deposits held at the Bank and may pay interest to member institutions of the Canadian Payments Association on deposits accepted for certain specified purposes. It may also accept deposits from other central banks and official international financial organizations and may pay interest on such deposits. The Bank does not accept deposits from individuals nor does it compete with the chartered banks in the commercial banking field. The Bank is not required to maintain gold or foreign exchange reserves against its liabilities.

The Bank may, on the pledge of certain classes of securities or property, make loans or advances for periods not exceeding six months to chartered banks, and to any other members of the Canadian Payments Association. The Bank Rate is the minimum rate at which the Bank is prepared to make loans or advances. Although the Bank has the power to make loans or advances under certain conditions and for limited periods to the Government or any province, such loans are extremely rare and no such loans have been made in over 35 years.

The framework for the implementation of monetary policy by the Bank was changed considerably on two occasions during the 1990s, first as a result of the phased elimination of reserve requirements between June 1992 and July 1994, and second, with the introduction of a real-time large-value settlement system (the “Large Value Transfer System” or “LVTS”) in February 1999.

The central mechanisms through which the Bank currently implements monetary policy are the LVTS and a 50-basis-point operating band for the overnight interest rate adopted by the Bank in mid 1994. Currently, the Bank targets the level of excess settlement balances in the LVTS at a minimum of $50 million. Any participant in the LVTS with a deficit funds position should therefore be aware that there will be one or more participants with offsetting surplus positions that are potential counterparties for transactions at market rates. The Bank encourages these transactions by paying an interest rate on positive balances held overnight by LVTS participants at the lower limit of its operating band and charging an interest rate on overdraft loans to LVTS participants at the upper limit of the band (which is also the Bank Rate). Thus the overnight rate should stay within the operating band since participants are aware that they can earn at least the lower limit of the band on positive balances and need not pay more than the upper limit to cover shortfalls. Moreover, the Bank is prepared to enter into overnight buyback transactions to reinforce its target rate at the midpoint of the operating band. Through its influence on the interest rate for overnight funds, the Bank is able to influence other short-term interest rates, the exchange rate, aggregate demand and, ultimately, inflation.

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The Bank controls the level of LVTS settlement balances available to the financial system by adjusting the level of Government deposits held at financial institutions through twice-daily auctions of Government cash balances.

The Act provides for regular consultation between the Governor of the Bank and the Minister of Finance as well as for a formal procedure whereby, in the event of a disagreement between the Government and the Bank which cannot be resolved, the Government may issue a directive to the Bank as to the monetary policy that it is to follow. The directive must be in writing, in specific terms, applicable for a specified period and published forthwith. This provision in the Act makes it clear that the Government must take the ultimate responsibility for monetary policy, but the Bank is in no way relieved of its responsibility for monetary policy and its execution so long as a directive is not in effect. No directive has ever been issued.

The Payment Clearing and Settlement Act, 1996 gives the Bank formal responsibility for the regulatory oversight of major clearing and settlement systems. Specifically, the Bank will review all eligible systems and identify their potential to cause systemic risk. Systems with this potential are subject to designation under the Payment Clearing and Settlement Act, 1996. Designated systems will have to satisfy the Bank that they have appropriate risk-control mechanisms in place. The Bank may carry out examinations and, in situations where it is judged that systemic risk is being inadequately controlled, the Governor of the Bank may issue directives to a designated system.

The Payment Clearing and Settlement Act, 1996 also gives the Bank new powers to provide certain services. In particular, the Bank can provide a guarantee of settlement to the participants of designated systems.

Other Government Financial Institutions

Export Development Canada (“EDC”) was established on October 1, 1969 for the purpose of facilitating and developing trade between Canada and other countries. EDC is the successor to the Export Credits Insurance Corporation which commenced operations in 1944. Activities were originally limited to insuring Canadian exporters against nonpayments of credits extended to foreign buyers. To further enhance Canada’s growing export trade, EDC has introduced an export loans program, a foreign investment guarantees program and a surety risk protection insurance program. The Federal Business Development Bank was established in 1975 as the successor to the Industrial Development Bank which was established in 1944 as a subsidiary of the Bank of Canada. In 1995, the Federal Business Development Bank was continued as the Business Development Bank of Canada (“BDC”). The purpose of the BDC is to provide financial and management services to small and medium-sized businesses in Canada. The Canada Deposit Insurance Corporation, established in 1967, insures deposits payable in Canada and in Canadian currency at banks and other financial institutions up to $60,000 per depositor. Farm Credit Canada was established in 1959 to provide for the extension of long-term mortgage credit to farmers. The Canada Mortgage and Housing Corporation (formerly the Central Mortgage and Housing Corporation) was incorporated in 1945 to insure mortgage loans made by approved lenders and to make direct mortgage loans.

Chartered Banks

Canada’s banks are all federally incorporated and are regulated under the Bank Act. The Bank Act sets out the rules for the structure and operation of these institutions. It is the current practice in Canada to revise the Bank Act after intervals of approximately five years with the most recent revision taking place in 2001 (see Financial Sector Restructuring below). The Office of the Superintendent of Financial Institutions is the federal agency responsible for supervising banks.

Under the Bank Act, foreign banks are permitted to incorporate subsidiaries by letters patent. In June 1999, legislation was passed to allow foreign banks to establish specialized, commercially focused branches in Canada. Foreign banks can operate full service branches and lending branches. As at

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November 30, 2004, the banking system consisted of 19 domestic banks, 26 foreign bank subsidiaries, 18 full-service foreign bank branches and 5 foreign bank lending branches.

Financial Sector Restructuring

On June 14, 2001, Royal Assent was given to Bill C-8, An Act to establish the Financial Consumer Agency of Canada and to amend certain Acts in relation to financial institutions. Bill C-8, which amended various federal financial sector statutes, reformed Canada’s financial services sector, which includes domestic and foreign banks, trust companies, insurance companies, credit unions and other financial institutions.

Some of the key elements contained in Bill C-8, as well as the measures implemented by non-legislative means such as guidelines and statements of government policy that compliment the legislation, include: a new definition of widely held ownership for federal financial institutions that allows for strategic alliances and joint ventures with significant share exchanges; a new holding company regime which offers financial institutions the potential for greater structural flexibility; a bank merger review process with a formal mechanism for public input; broader access to the payments system to accommodate the entry of life insurance companies, securities dealers and money market mutual funds that meet certain criteria, including regulatory oversight and liquidity; and the creation of the Financial Consumer Agency of Canada to enforce the consumer-related provisions of the federal financial institution statutes.

Monetary Policy and Interest Rate Developments

The ultimate objective of Canadian monetary policy is to promote good overall economic performance through price stability.

In February 1991, the Government and the Bank of Canada (the “Bank”) jointly announced a series of targets for reducing total CPI inflation to the mid-point of a range of 1% to 3% by the end of 1995. This inflation-control target range has been extended a number of times. In May 2001 the 1% to 3% target range was extended to the end of 2006. Monetary policy will continue to aim at keeping future inflation at the 2% target mid-point of this range, both to maximize the likelihood that inflation stays within the target range and to increase the predictability of inflation over the longer term.

The policy instrument the Bank uses to influence monetary conditions is the overnight rate target, which is the mid-point of the Bank’s operating band for overnight financing. The Bank constantly reassesses the level of the overnight rate target necessary to achieve the inflation-control targets.

Since the Fall of 2000, the Bank has moved to fixed announcement dates for the overnight rate target to make monetary policy more effective. Fixed dates have reduced the uncertainty in financial markets associated with not knowing exactly when changes in the overnight rate target may be announced, and contributed to the improved functioning of financial markets. Fixed dates have provided a regular opportunity to emphasize the medium-term perspective of monetary policy and increased the Bank’s transparency, accountability and dialogue with the public.

During 2003, lower than expected GDP growth, an appreciation of the Canadian dollar, and stable inflation led the Bank of Canada to lower its projection for economic output in 2004. Against that backdrop, the Bank lowered its key policy rate by a total of 75 basis points, reducing it by 25 basis points on each of the first three fixed announcement dates of 2004, to bring it to 2 percent.

Over the course of the summer the Bank kept the overnight rate target unchanged as GDP growth improved, employment showed continued strength, and inflation remained below the Bank’s 2 percent target. In light of these developments the Bank felt the economy was operating closer to full capacity than it was previously and that core inflation would return to the 2 percent inflation target by the end of 2005.

At its September 8 Fixed Announcement Date (FAD) the Bank raised its key policy rate by 25 basis points to 2.25 percent. Canada’s economic growth in the first half of the year was somewhat stronger than the Bank had been expecting, and the Bank felt that the economy was operating close to its

33

production capacity. In order to avoid a buildup of inflationary pressures, monetary stimulus needed to be reduced, therefore the Bank decided to raise its target for the overnight rate. On the October 19 FAD, the Bank again raised its target for the overnight rate by 25 basis points to 2.50 percent. The Bank’s press release reiterated that the Canadian economy was operating near its production capacity, and that a reduction of monetary stimulus was required to keep inflation on target. At the December 7 FAD, the Bank left the overnight rate target unchanged citing a possible dampening effect on aggregate demand from the depreciation of the U.S. dollar against major floating currencies including the Canadian dollar.

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Membership in International Economic Organizations

As of December 31, 2003, Canada’s paid-up quota in the IMF is SDR 6,369.2 million. On December 31, 2003 one SDR equalled Cdn $1.92.

Canada also participates in the General Arrangements to Borrow (the ”GAB”) and the New Arrangements to Borrow (the “NAB”) which provide special financial resources to the IMF. Canada’s total commitment under the GAB and the NAB amount to SDR 1,396.0 million. As of December 31, 2003 there were no loans outstanding to the IMF under the GAB and the NAB.

Canada is also a member of the Organization for Economic Cooperation and Development, a party to the World Trade Organization and a shareholder (through the Bank of Canada) of the BIS. Canada’s participation in other international development institutions is summarized in the table below.

PARTICIPATION IN OTHER INTERNATIONAL DEVELOPMENT INSTITUTIONS

	At December 31, 2003
	Subscription				Cumulative Contributions
					to Special
	Total		Paid-in(1)		Development Funds(2)
					(in millions of
	(in millions of				U.S. dollars
	U.S. dollars)				unless otherwise
					indicated)
International Bank for Reconstruction and Development	$	5,403.8	$	334.9		—
International Development Association (“IDA”)		—		—		C$6,365.9
International Finance Corporation		81.3		81.3		—
Multilateral Investment Guarantee Agency		56.5		10.7		—
Asian Development Bank		2,994.0		153.2		1,096.5
Inter-American Development Bank		4,042.2		176.2		284.4
Caribbean Development Bank		62.7		13.7		120.9
African Development Bank		886.3		90.1		972.0
European Bank for Reconstruction and Development		856.6		224.9		—

Source: Department of Finance; Annual Reports of Regional Development Banks

(1) Balance of subscription payable only in the unlikely event that there is a call on the institution’s capital.

(2) Special Development Funds provide loans to the poorest countries on highly concessional terms. Cumulative contributions reflect encashments of existing notes. Canada also has additional future obligations for notes that have been issued and not yet encashed. Payments to concessional funds have been converted from Canadian into U.S. dollars and therefore reflect end-of-year exchange rates.

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TABLES AND SUPPLEMENTARY INFORMATION

The tables and supplementary information under the headings Unmatured Debt, Other Obligations (with Respect to Money Borrowed) and Supplementary Information have been provided by the Department of Finance and the Bank of Canada.

Unmatured Debt

All debt obligations listed below are direct obligations of the Government of Canada and constitute a charge on the Consolidated Revenue Fund of Canada.

(A) PAYABLE IN CANADA IN CANADIAN DOLLARS

MARKETABLE BONDS(1)

						Outstanding at
Maturity date		Coupon %		Issue date(s)	Series	September 30, 2004
Maturing in 2004-05
	2004 — Oct. 1		10 1/2	Oct. 1/79 and Dec. 15/87	J30	$	273,560,000
	Dec. 1		4 1/4	May 31/02 and Aug. 30/02	XL34		2,989,729,000
	Dec. 1		9	July 15/94 and Aug. 15/94 and Nov. 15/94 and Feb. 15/95	A75		7,484,024,000
	2005 — Mar. 1		12	Oct. 15/83 and Nov. 8/83 and Dec. 15/83 and Feb. 1/84 and Feb. 21/84 and Dec. 15/84	H9		496,195,000
							11,243,508,000
Maturing in 2005-06
	2005 — June 1		3 1/2	Nov. 29/02 and Feb. 3/03 and Mar. 7/03 and May 16/03	XP48		6,526,248,000
	Sept. 1		6	Nov. 15/99 and Feb. 15/00 and May 15/00 and Aug. 15/00	WY63		9,820,896,000
	Sept. 1		12 1/4	Aug. 1/83 and Sept. 1/83 and Sept. 27/83 and Apr. 10/85	H6		991,955,000
	Dec. 1		3	June 13/03 and Aug. 1/03 and Sept. 19/03	XR04		5,500,000,000
	Dec. 1		8 3/4	Apr. 3/95 and May 15/95 and Aug. 15/95 and Nov. 15/95	A79		6,373,468,000
	2006 — Mar. 1		12 1/2	Mar. 13/84 and Nov. 14/84 and Mar. 19/85	H18		266,514,000
							29,479,081,000
Maturing in 2006-07
	2006 — June 1		3	Dec. 19/03 and Feb. 13/04 and Mar. 12/04 and Apr. 26/04	XU33		7,537,765,000
	Sept. 1		5 3/4	Nov. 14/00 and Feb. 12/01 and June 4/01 and Aug. 20/01	XD18		9,171,584,000
	Oct. 1		14	June 1/84 and July 11/84 and Aug. 1/84	H26		769,902,000
	Dec. 1		3 1/4	May 28/04 and Aug. 9/04 and Sept. 17/04	XV16		6,000,000,000
	Dec. 1		7	Feb. 15/96 and Mar. 29/96 and May 15/96 and Aug. 15/96	VU50		5,866,645,000
	2007 — Mar. 1		13 3/4	June 19/84	H30		195,738,000
							29,541,634,000
Maturing in 2007-08
	2007 — June 1		7 1/4	Oct. 1/96 and Nov. 15/96 and Feb. 17/97 and May 15/97	WB60		7,029,817,000
	Sep. 1		4 1/2	Nov. 19/01 and Feb. 18/02 and May 21/02 and July 22/02 and Aug. 19/02	XJ87		10,400,000,000
	Oct. 1		13	Aug. 22/84 and Sept. 12/84	H36		472,931,000
	2008 — Mar. 1		12 3/4	Oct. 1/84 and Oct. 24/84	H41		578,665,000
							18,481,413,000
Maturing in 2008-09
	2008 — June 1		6	Aug. 15/97 and Nov. 17/97 and Feb. 16/98 and May 15/98	WH31		6,088,027,000
	June 1		10	Dec. 15/85 and Sept. 1/87 and Feb. 1/88 and Apr. 14/88 and June 1/88 and July 21/88 and Oct. 15/88 and Dec. 15/88 and Feb. 23/89 and June 1/89	H74		3,046,529,000
	Sept. 1		4 1/4	Nov. 18/02 and Dec. 23/02 and Feb. 24/03 and Mar. 31/03 and Apr. 29/03 and June 2/03 and July 21/03 and Sept. 2/03 and Oct. 14/03	XN99		11,400,000,000
	Oct. 1		11 3/4	Feb. 1/85 and May 1/85	H52		399,637,000
	2009 — Mar. 1		11 1/2	May 22/85	H58		144,655,000
							21,078,848,000

36

Unmatured Debt (Continued)

						Outstanding at
Maturity date		Coupon %		Issue date(s)	Series	September 30, 2004
Maturing in 2009-10
	2009 — June 1		5 1/2	Aug. 17/98 and Nov. 16/98 and Feb. 15/99 and May 17/99	WR13	$	8,299,892,000
	June 1		11	Oct. 1/85 and Oct. 23/85 and Oct. 15/87	H68		640,746,000
	Sept. 1		4 1/4	Dec. 1/03 and Jan. 26/04 and Feb. 23/04 and Apr. 13/04 and May 17/04 and July 26/04 and Aug. 30/04	XT69		9,800,000,000
	Oct. 1		10 3/4	June 12/85 and July 1/85 and Sept. 1/85 and Sept. 1/88	H63		258,903,000
	2010 — Mar. 1		9 3/4	Mar. 15/86	H79		83,434,000
							19,082,975,000
Maturing in 2010-11
	2010 — June 1		5 1/2	Aug. 3/99 and Nov. 1/99 and Feb. 1/00 and Mar. 20/00	WX80		9,015,139,000
	June 1		9 1/2	Apr. 10/86 and July 1/87 and July 1/89 and Aug. 10/89 and Oct. 1/89 and Dec. 15/89 and Feb. 1/90	H81		2,384,299,000
	Oct. 1		8 3/4	Apr. 28/86	H85		132,149,000
	2011 — Mar. 1		9	July 3/86 and Sept. 2/86 and Oct. 23/86 and Dec. 15/86 and May 1/87 and Mar. 15/88	H87		623,941,000
							12,155,528,000
Maturing in 2011-12
	2011 — June 1		6	May 1/00 and Aug. 1/00 and Oct. 30/00 and Jan. 29/01 and May 7/01 and July 30/01	XB51		13,550,415,000
	June 1		8 1/2	Feb. 19/87 and Mar. 15/87	H98		642,351,000
							14,192,766,000
Maturing in 2012-13
	2012 — June 1		5 1/4	Oct 29/01 and Feb. 11/02 and April 22/02 and June 25/02 and Aug. 6/02 and Sept. 30/02 and Oct. 15/02	XH22		11,600,000,000
Maturing in 2013-14
	2013 — June 1		5 1/4	Nov. 4/02 and Dec. 16/02 and Feb. 10/03 and Mar. 24/03 and May 12/03 and June 25/03 and Aug. 11/03 and Sept. 30/03	XM17		12,000,000,000
	2014 — Mar. 15		10 1/4	Mar. 15/89 and Mar. 30/89 and Mar. 15/90 and July 1/90 and Aug. 1/90 and Feb. 21/91	A23		1,552,804,000
							13,552,804,000
Maturing in 2014-15
	2014 — June 1		5	Oct. 20/03 and Dec. 15/03 and Feb. 9/04 and Mar. 22/04 and May 3/04 and June 22/04 and Aug. 16/04 and Sept. 28/04	XS86		10,867,437,000
Maturing in 2015-16
	2015 — June 1		11 1/4	May 1/90 and May 31/90 and Oct. 1/90 and Nov. 15/90	A34		483,005,000
Maturing in 2020-21
	2021 — Mar. 15		10 1/2	Dec. 15/90 and Jan. 9/91 and Feb. 1/91	A39		1,042,758,000
Maturing in 2021-22
	2021 — June 1		9 3/4	May 9/91 and June 1/91 and July 1/91 and Aug. 1/91 and Sept. 1/91 and Oct. 17/91	A43		905,394,000
	Dec. 1		4 1/4	Dec. 10/91 and Oct. 14/92 and May 1/93 and Dec. 1/93 and Feb. 22/94 and June 21/94 and Sept. 15/94 and Dec. 15/94 and Feb. 2/95 and May 8/95 and Aug. 4/95	L25		5,175,000,000	(2)
							6,080,394,000
Maturing in 2022-23
	2022 — June 1		9 1/4	Dec. 15/91 and Jan. 3/92 and May 15/92	A49		553,448,000
Maturing in 2023-24
	2023 — June 1		8	Aug. 17/92 and Feb. 1/93 and Apr. 1/93 and July 26/93 and Oct. 15/93 and Feb. 1/94 and May 2/94	A55		7,576,642,000
Maturing in 2025-26
	2025 — June 1		9	Aug. 2/94 and Nov. 1/94 and Feb. 1/95 and May 1/95 and Aug. 1/95 and Nov. 1/95 and Feb. 1/96	A76		8,270,578,000

37

Unmatured Debt (Continued)

						Outstanding at
Maturity date		Coupon %		Issue date(s)	Series	September 30, 2004
Maturing in 2026-27
	2026 — Dec. 1		4 1/4	Dec. 7/95 and Mar. 6/96 and June 6/96 and Sept. 6/96 and Dec. 6/96 and Mar. 12/97 and June 9/97 and Sept. 8/97 and Dec. 8/97 and Mar. 9/98 and June 8/98 and Sept. 8/98 and Dec. 7/98	VS05	$	5,250,000,000	(2)
Maturing in 2027-28
	2027 — June 1		8	May 1/96 and Aug. 1/96 and Nov. 1/96 and Feb. 3/97 and May 1/97 and Aug. 1/97 and Nov. 3/97	VW17		8,835,126,000
Maturing in 2029-30
	2029 — June 1		5 3/4	Feb. 2/98 and May 1/98 and Nov. 2/98 and May 3/99 and Oct. 15/99 and Apr. 24/00 and Oct. 16/00 and Apr. 23/01	WL43		13,850,000,000
Maturing in 2031-32
	2031 — Dec. 1		4	Mar. 8/99 and June 8/99 and Sept. 7/99 and Dec. 6/99 and Mar. 6/00 and June 5/00 and Sept. 5/00 and Dec. 11/00 and Mar. 5/01 and June 11/01 and Sept. 24/01 and Dec. 10/01 and Mar. 18/02 and June 10/02 and Sept. 16/02 and Dec. 9/02 and Mar. 17/03	WV25		5,800,000,000	(2)
Maturing in 2033-34
	2033 — June 1		5 3/4	Oct. 15/01 and Jan. 21/02 and Mar. 4/02 and May 6/02 and July 15/02 and Nov. 25/02 and Jan. 20/03 and Mar. 3/03 and Apr. 14/03 and July 14/03 and Aug. 25/03 and Nov. 10/03 and Jan. 19/04 and Mar. 1/04	XG49		13,410,295,000
Maturing in 2036-37
	2036 — Dec. 1		3	June 9/03 and Sept. 15/03 and Dec. 8/03 and Mar. 8/04 and June 7/04 and Sept. 7/04	XQ21		2,100,000,000	(2)
Maturing in 2037-38
	2037 — June 1		5	July 19/04 and Sept. 14/04	XW98		1,649,343,000
TOTAL MARKETABLE BONDS PAYABLE IN CANADIAN DOLLARS							266,177,583,000

TREASURY BILLS

Maturity date(s)	Yield %	Issue dates
Various maturity dates from Oct. 1, 2004 to Sept. 8, 2005	1.983 to 2.934	Various issue dates from Oct. 9, 2003 to Sept. 28, 2004	113,800,000,000

CANADA SAVINGS BONDS

				Annual
Series		Maturity date		Coupons %		Issue date
	S46		2013 — Nov. 1		1.75 – 7.50		1991 — Nov.  1	$	493,004,349
	S47		2004 — Nov. 1		1.75 – 7.50		1992 — Nov.  1		1,536,209,956
	S48		2005 — Nov. 1		1.75 – 7.50		1993 — Nov.  1		973,048,990
	S49		2006 — Nov. 1		1.75 – 7.50		1994 — Nov.  1		1,316,345,141
	S50		2007 — Nov. 1		1.75 – 6.75		1995 — Nov.  1		912,186,535
	S51		2008 — Nov. 1		3.00 – 8.75		1996 — Nov.  1		2,374,245,061
	S52		2007 — Nov. 1		3.41 – 6.50		1997 — Nov.  1		2,286,669,762
	S53		2007 — Dec. 1		3.50 – 6.50		1997 — Dec.  1		12,151,002
	S54		2008 — Nov. 1		1.75 – 4.85		1998 — Nov.  1		634,413,373
	S55		2008 — Dec. 1		1.55 – 4.85		1998 — Dec.  1		49,436,284
	S56		2009 — Jan. 1		1.35 – 4.85		1999 — Jan.  1		9,059,775
	S57		2009 — Feb. 1		1.35 – 4.60		1999 — Feb.  1		5,922,237
	S58		2009 — Mar. 1		1.30 – 4.75		1999 — Mar.  1		10,983,799
	S59		2009 — Apr. 1		1.30 – 4.75		1999 — Apr.  1		7,963,498
	S60		2009 — Nov. 1		1.75 – 4.85		1999 — Nov.  1		316,460,231
	S61		2009 — Dec. 1		1.55 – 4.85		1999 — Dec.  1		36,684,009
	S62		2010 — Jan. 1		1.35 – 4.85		2000 — Jan.  1		12,172,396

38

Unmatured Debt (Continued)

					Annual
Series			Maturity date		Coupons %		Issue date
	S63			2010 — Feb. 1		1.35 – 4.60		2000 — Feb.  1		8,638,121
	S64			2010 — Mar. 1		1.30 – 4.75		2000 — Mar.  1		14,703,318
	S65			2010 — Apr. 1		1.30 – 4.75		2000 — Apr.  1		17,901,263
	S66			2010 — Nov. 1		1.75 – 4.85		2000 — Nov.  1		325,724,805
	S67			2010 — Dec. 1		1.55 – 4.85		2000 — Dec.  1		25,828,677
	S68			2011 — Jan. 1		1.35 – 4.85		2001 — Jan.  1		12,884,621
	S69			2011 — Feb. 1		1.35 – 4.40		2001 — Feb.  1		11,461,132
	S70			2011 — Mar. 1		1.30 – 4.00		2001 — Mar.  1		10,564,675
	S71			2011 — Apr. 1		1.30 – 4.00		2001 — Apr.  1		7,122,711
	S72			2011 — Nov. 1		1.75 – 2.00		2001 — Nov.  1		461,619,018
	S73			2011 — Dec. 1		1.55 – 2.00		2001 — Dec.  1		25,567,633
	S74			2012 — Jan. 1		1.35 – 2.00		2002 — Jan.  1		5,992,216
	S75			2012 — Feb. 1		1.35 – 2.00		2002 — Feb.  1		5,305,310
	S76			2012 — Mar. 1		1.30 – 4.00		2002 — Mar.  1		18,273,199
	S77			2012 — Apr. 1		1.30 – 4.00		2002 — Apr.  1		12,982,901
	S78			2012 — Nov. 1		1.75 – 2.00		2002 — Nov.  1		659,064,841
	S79			2012 — Dec. 1		1.65 – 2.00		2002 — Dec.  1		38,981,792
	S80			2013 — Jan. 1		1.65 – 2.00		2003 — Jan.  1		13,287,780
	S81			2013 — Feb. 1		1.55 – 2.00		2003 — Feb.  1		9,698,837
	S82			2013 — Mar. 1		1.30 – 2.00		2003 — Mar.  1		19,732,114
	S83			2013 — Apr. 1		1.25 – 2.00		2003 — Apr.  1		18,279,495
	S84			2013 — Nov. 1		1.75 –		2003 — Nov.  1		944,789,162
	S85	��		2013 — Dec. 1		1.65 –		2003 — Dec.  1		21,909,720
	S86			2014 — Jan. 1		1.65 –		2004 — Jan.  1		6,613,969
	S87			2014 — Feb. 1		1.55 –		2004 — Feb.  1		4,130,241
	S88			2014 — Mar. 1		1.30 –		2004 — Mar.  1		8,843,841
	S89			2014 — Apr. 1		1.25 –		2004 — Apr.  1		6,285,178
									$	13,703,142,968	(3)

CANADA PREMIUM BONDS

				Annual
Series		Maturity date		Coupons %		Issue date
	P1		2007 — Mar. 1 or Apr.  1		2.75 – 8.50		1997 — Mar. 1 or Apr.  1	$	76,809,184
	P2		2008 — Mar. 1 or Apr.  1		2.00 – 4.75		1998 — Mar. 1 or Apr.  1		16,848,965
	P3		2008 — Nov. 1		2.30 – 5.00		1998 — Nov. 1		1,124,500,084
	P4		2008 — Dec. 1		2.00 – 4.50		1998 — Dec. 1		101,527,613
	P5		2009 — Jan. 1		2.00 – 4.50		1999 — Jan. 1		20,204,068
	P6		2009 — Feb. 1		2.00 – 4.75		1999 — Feb. 1		17,692,380
	P7		2009 — Mar. 1		2.00 – 6.00		1999 — Mar. 1		61,027,548
	P8		2009 — Apr. 1		2.00 – 6.00		1999 — Apr. 1		48,693,243
	P9		2009 — Nov. 1		2.50 – 6.00		1999 — Nov. 1		398,222,545
	P10		2009 — Dec. 1		2.50 – 6.00		1999 — Dec. 1		115,315,246
	P11		2010 — Jan. 1		2.50 – 6.00		2000 — Jan. 1		36,176,343
	P12		2010 — Feb. 1		2.50 – 6.00		2000 — Feb. 1		29,376,447
	P13		2010 — Mar. 1		2.50 – 6.25		2000 — Mar. 1		66,074,667
	P14		2010 — Apr. 1		2.50 – 6.25		2000 — Apr. 1		88,236,445
	P15		2010 — Nov. 1		2.45 – 5.90		2000 — Nov. 1		581,434,896
	P16		2010 — Dec. 1		2.35 – 5.90		2000 — Dec. 1		113,995,967
	P17		2011 — Jan. 1		2.35 – 5.90		2001 — Jan. 1		136,560,968
	P18		2011 — Feb. 1		2.25 – 5.75		2001 — Feb. 1		323,046,560
	P19		2011 — Mar. 1		2.25 – 4.55		2001 — Mar. 1		33,443,239
	P20		2011 — Apr. 1		2.00 – 4.55		2001 — Apr. 1		46,850,571
	P21		2011 — Nov. 1		2.30 – 4.00		2001 — Nov. 1		676,359,973
	P22		2011 — Dec. 1		2.00 – 4.00		2001 — Dec. 1		86,200,956
	P23		2012 — Jan. 1		2.00 – 3.50		2002 — Jan. 1		23,012,055
	P24		2012 — Feb. 1		2.00 – 3.50		2002 — Feb. 1		22,932,353
	P25		2012 — Mar. 1		2.00 – 6.00		2002 — Mar. 1		100,121,892
	P26		2012 — Apr. 1		2.00 – 6.00		2002 — Apr. 1		47,142,556

39

Unmatured Debt (Continued)

				Annual
Series		Maturity date		Coupons %		Issue date
	P27		2012 — Nov. 1		2.50 – 6.00		2002 — Nov. 1		1,165,946,178
	P28		2012 — Dec. 1		2.50 – 6.00		2002 — Dec. 1		231,591,454
	P29		2013 — Jan. 1		2.50 – 6.00		2003 — Jan. 1		89,867,466
	P30		2013 — Feb. 1		2.50 – 6.00		2003 — Feb. 1		15,398,853
	P33		2013 — Feb. 1		2.50 – 5.00		2003 — Feb. 1		32,695,950
	P31		2013 — Mar. 1		2.50 – 5.00		2003 — Mar. 1		65,176,811
	P32		2013 — Apr. 1		2.50 – 5.00		2003 — Apr. 1		55,338,312
	P34		2013 — Nov. 1		2.45 – 5.00		2003 — Nov. 1		869,675,378
	P35		2013 — Dec. 1		2.35 – 5.50		2003 — Dec. 1		186,102,110
	P36		2014 — Jan. 1		2.35 – 5.50		2004 — Jan. 1		62,590,526
	P37		2014 — Feb. 1		2.25 – 5.00		2004 — Feb. 1		52,929,323
	P38		2014 — Mar. 1		2.25 – 4.00		2004 — Mar. 1		77,231,416
	P39		2014 — Apr. 1		2.00 – 4.00		2004 — Apr. 1		49,767,077
								$	7,346,117,618	(4)

CANADA INVESTMENT BONDS

				Annual
Series		Maturity date		Coupons %		Issue date
	I01		2006 — Nov. 1		3.00		2003 — Nov. 1	$	2,952,500
	I02		2006 — Dec. 1		3.10		2003 — Dec. 1		1,276,800
	I03		2007 — Jan. 1		3.20		2004 — Jan. 1		311,200
	I04		2007 — Feb. 1		3.00		2004 — Feb. 1		1,593,700
	I05		2007 — Mar. 1		2.75		2004 — Mar. 1		329,600
	I06		2007 — Apr. 1		2.55		2004 — Apr. 1		1,166,700
								$	7,630,500	(5)

OBLIGATIONS ISSUED TO CANADA PENSION PLAN INVESTMENT FUND

			Outstanding at
Maturity date(s)	Coupon %	Issue date(s)	September 30, 2004
Various maturity dates from Oct. 1, 2004 to July 2, 2012	7.92 to 13.05	Various issue dates from Oct. 1, 1984 to Jul. 2, 1992 (long term)		3,337,198,600	(6)

OBLIGATIONS ISSUED TO TRUSTEES IN RESPECT OF HEALTH CARE INITIATIVES

Maturity date(s)	Coupon %	Issue date(s)
Various maturity dates from Mar. 31, 2006 to Mar. 31, 2007	3 month TB	Various issue dates from June 23, 2003 to May 18, 2004	64,982,550
TOTAL UNMATURED DEBT PAYABLE IN CANADIAN DOLLARS			404,436,655,236

40

Unmatured Debt (Continued)

(B) PAYABLE IN FOREIGN CURRENCY (1)(7)

CANADA BILLS

Maturity date	Yield %	Original issue amount		Issue dates
Various maturity dates	0.96 to		U.S. $1,681,505,000	Various issue dates
from Oct. 1, 2004	1.78			from Apr. 1, 2004
to Mar. 10, 2005				to Sept. 30, 2004	2,121,386,708

CANADA NOTES

Maturity date	Coupon %	Original issue amount		Issue date
2006 — Mar. 20	0.70		JPY 50,000,000,000	Mar. 22, 2001	573,500,000
2009 — Mar. 23	1.90		JPY 50,000,000,000	Mar. 23, 1999	573,500,000
Total					1,147,000,000

EURO MEDIUM TERM NOTES

Maturity date	Coupon %	Original issue amount			Issue date
2004 — Nov. 26	6 1/4		GBP 300,000,000	(8)	Mar. 26, 1998	685,830,000
Nov. 26	6 1/4		GBP 200,000,000	(8)	Oct. 30, 1998	457,220,000
Nov. 30	5.4		NOK 700,000,000	(8)	Mar. 22, 1999	131,586,000
Dec. 22	5 3/4		DKK 500,000,000	(8)	Dec. 22, 1997	105,345,000
2007 — Nov. 19	4		U.S. $ 30,000,000		Nov. 19, 1997	37,848,000
2008 — Jan. 31	3.30 (9)		JPY 5,000,000,000	(8)	July 30, 1997	57,350,000
2009 — Apr. 28	4 1/2		EUR 609,796,069	(10)	Nov. 12, 1998	956,770,032
Apr. 28	4 1/2		EUR 390,203,931	(11)	Mar. 30, 1999	612,229,968
Total						3,044,179,000

OTHER MARKETABLE BONDS PAYABLE IN FOREIGN CURRENCIES

		Original amount at			Issue or
Maturity date	Coupon %	issue or assumption			assumption date
2004 — Nov. 30	6 3/8		U.S. $2,000,000,000		Nov. 30, 1999		2,523,200,000
2005 — July 21	6 3/8		U.S. $1,500,000,000		July 21, 1995		1,892,400,000
2006 — Aug. 28	6 3/4		U.S. $1,000,000,000		Aug. 28, 1996		1,261,600,000
2007 — Oct. 3	6 5/8		N.Z. $ 500,000,000	(8)	Oct. 3, 1997		427,400,000
2008 — July 7	4 7/8		EUR   2,045,167,525	(12	) July 7, 1998		3,208,867,846
Nov. 5	5 1/4		U.S. $2,500,000,000		Nov. 5, 1998		3,154,000,000
2010 — Jan. 15	8.60		U.S. $ 157,895,000	(13)	Feb. 5, 2001		199,200,332
2016 — Dec. 15	8 1/4		U.S. $  38,244,000	(13)	Feb. 5, 2001		48,248,630
2018 — June 30	9.70		U.S. $  16,080,000	(13)	Feb. 5, 2001		20,286,528
2019 — June 1	8.80		U.S. $   3,500,000	(13)	Feb. 5, 2001		4,415,600
Total							12,739,618,936
BANK LOANS PAYABLE IN U.S. DOLLARS							—	(14)
TOTAL UNMATURED DEBT PAYABLE IN FOREIGN CURRENCY							19,052,184,644
TOTAL UNMATURED DEBT						$	423,488,839,880

41

Unmatured Debt (Continued)

(C) CROSS CURRENCY SWAPS

For the cross currency swaps listed below, the Government’s Canadian dollar liability has been swapped into a U.S. dollar liability.

	Canadian dollar liability			U.S. dollar liability
Maturity date	Coupon %	Notional amount		Basis	Notional amount
2004 — Oct. 1	4.8386	$	112,800,000	3 month LIBOR		U.S.$ 75,000,000
Oct. 1	5.3459		76,330,000	3 month LIBOR		50,000,000
Oct. 1	5.9790		74,200,000	3 month LIBOR		55,100,000
Oct. 1	6.0620		162,000,000	3 month LIBOR		110,500,000
Nov. 23	3 month BA		154,900,000	3 month LIBOR		100,000,000
2005 — Mar. 1	4.9280		98,254,000	3 month LIBOR		65,000,000
Mar. 1	5.2069		359,500,000	3 month LIBOR		250,000,000
Mar. 1	5.2230		354,250,000	Fixed		250,000,000
Sept. 1	5.4072		151,580,000	3 month LIBOR		100,000,000
Nov. 23	3 month BA		232,350,000	3 month LIBOR		150,000,000
Dec. 1	4.6570		76,900,000	3 month LIBOR		50,000,000
Dec. 1	4.8175		77,125,000	3 month LIBOR		50,000,000
Dec. 1	4.84177		75,725,000	3 month LIBOR		50,000,000
Dec. 1	6.4980		70,400,000	3 month LIBOR		54,050,000
Dec. 1	7.5800		681,350,000	Fixed		500,000,000
2006 — Mar. 1	4.7815		74,685,000	3 month LIBOR		50,000,000
Mar. 1	5.9720		70,560,000	3 month LIBOR		53,975,000
Oct. 1	4.8488		76,525,000	3 month LIBOR		50,000,000
Oct. 1	4.8801		75,460,000	3 month LIBOR		50,000,000
Oct. 30	3 month BA		384,375,000	3 month LIBOR		250,000,000
Nov. 23	3 month BA		232,350,000	3 month LIBOR		150,000,000
Dec. 1	6.0750		74,125,000	3 month LIBOR		54,950,000
2007 — June 1	3.7471		101,887,500	3 month LIBOR		75,000,000
June 1	3.797		103,177,500	Fixed		75,000,000
June 1	5.5270		354,375,000	3 month LIBOR		250,000,000
June 1	5.5694		355,875,000	3 month LIBOR		250,000,000
June 1	5.7790		357,000,000	3 month LIBOR		250,000,000
2008 — Mar. 1	3.5944		68,100,000	3 month LIBOR		50,000,000
��       Mar. 1	4.0957		68,875,000	3 month LIBOR		50,000,000
Mar. 1	4.5130		79,175,000	Fixed		50,000,000
Mar. 1	5.1792		142,100,000	3 month LIBOR		100,000,000
Mar. 1	5.1950		71,065,000	Fixed		50,000,000
Mar. 1	5.3090		106,425,000	3 month LIBOR		75,000,000
Mar. 1	5.41945		76,125,000	3 month LIBOR		50,000,000
Mar. 1	5.5119		282,860,000	Fixed		200,000,000
June 1	5.3050		146,900,000	3 month LIBOR		100,000,000
June 1	5.3109		145,500,000	3 month LIBOR		100,000,000
June 1	5.3180		145,250,000	3 month LIBOR		100,000,000
June 1	5.3420		74,900,000	3 month LIBOR		50,000,000
June 1	5.3460		149,430,000	3 month LIBOR		100,000,000
June 1	5.3468		74,345,000	3 month LIBOR		50,000,000
June 1	5.42238		75,110,000	3 month LIBOR		50,000,000
June 1	5.5570		355,475,000	3 month LIBOR		250,000,000
Sept. 30	3 month BA		75,565,000	3 month LIBOR		50,000,000
Oct. 1	5.1680		77,400,000	3 month LIBOR		50,000,000
Oct. 1	5.2440		105,189,000	3 month LIBOR		70,000,000
Oct. 1	5.3505		106,015,000	3 month LIBOR		70,000,000
2009 — Mar. 1	4.7840		107,380,000	3 month LIBOR		70,000,000
Mar. 1	4.8300		100,197,500	3 month LIBOR		65,000,000
Mar. 1	4.8780		114,360,000	3 month LIBOR		75,000,000
Mar. 1	4.9630		76,570,000	3 month LIBOR		50,000,000
Mar. 1	5.0034		75,725,000	3 month LIBOR		50,000,000
Mar. 1	5.1167		75,000,000	3 month LIBOR		50,000,000
Mar. 1	5.1462		149,300,000	3 month LIBOR		100,000,000
Mar. 1	5.3230		114,150,000	3 month LIBOR		75,000,000
June 1	4.8260		108,010,000	3 month LIBOR		70,000,000
June 1	4.8867		74,685,000	3 month LIBOR		50,000,000
June 1	4.9380		150,130,000	3 month LIBOR		100,000,000
June 1	5.0040		103,656,000	3 month LIBOR		70,000,000
June 1	5.0270		148,180,000	3 month LIBOR		100,000,000
June 1	5.0275		76,175,000	3 month LIBOR		50,000,000
June 1	5.0390		96,720,000	3 month LIBOR		65,000,000
Oct. 1	5.3750		116,572,500	Fixed		75,000,000
Oct. 1	5.6700		115,000,000	3 month LIBOR		80,685,000
Oct. 1	5.6800		118,300,000	3 month LIBOR		80,662,500
Oct. 1	6.0838		113,190,000	3 month LIBOR		82,935,000
Oct. 1	6.1410		103,774,000	3 month LIBOR		70,421,000
2010 — June 1	3.9350		65,775,000	3 month LIBOR		50,000,000
Oct. 1	4.4950		79,230,000	Fixed		50,000,000

42

Unmatured Debt (Continued)

	Canadian dollar liability			U.S. dollar liability
Maturity date	Coupon %	Notional amount		Basis	Notional amount
2011 — Mar. 1	4.6400	$	78,670,000	Fixed		U.S.$ 50,000,000
Mar. 1	5.0090		78,375,000	Fixed		50,000,000
Mar. 1	5.4000		115,072,500	Fixed		75,000,000
Mar. 1	5.4300		114,750,000	Fixed		75,000,000
Mar. 1	5.5860		116,632,500	Fixed		75,000,000
June 1	4.4445		99,750,000	Fixed		75,000,000
June 1	4.4527		99,375,000	Fixed		75,000,000
June 1	4.4659		68,450,000	3 month LIBOR		50,000,000
June 1	4.5279		68,940,000	Fixed		50,000,000
June 1	4.6112		101,400,000	Fixed		75,000,000
Jun. 1	4.6430		78,670,000	Fixed		50,000,000
Jun. 1	4.6600		79,010,000	Fixed		50,000,000
Jun. 1	4.6980		78,950,000	Fixed		50,000,000
Jun. 1	4.8045		79,440,000	Fixed		50,000,000
Jun. 1	4.9430		77,875,000	Fixed		50,000,000
Jun. 1	5.0339		77,815,000	Fixed		50,000,000
Jun. 1	5.0670		78,775,000	Fixed		50,000,000
Jun. 1	5.4000		114,990,000	Fixed		75,000,000
2012 — June 1	4.3370		133,900,000	3 month LIBOR		100,000,000
June 1	4.3697		96,525,000	Fixed		75,000,000
June 1	4.5936		99,600,000	Fixed		75,000,000
June 1	4.6314		68,625,000	Fixed		50,000,000
June 1	4.6402		102,787,500	3 month LIBOR		75,000,000
Jun. 1	4.6770		68,300,000	Fixed		50,000,000
June 1	4.8198		100,897,500	3 month LIBOR		75,000,000
Jun. 1	4.9090		78,445,000	Fixed		50,000,000
Jun. 1	4.9872		79,500,000	Fixed		50,000,000
Jun. 1	5.0863		78,745,000	Fixed		50,000,000
Jun. 1	5.1110		78,540,000	Fixed		50,000,000
Jun. 1	5.4980		76,650,000	Fixed		50,000,000
2013 — June 1	4.5100		33,437,500	3 month LIBOR		25,000,000
June 1	4.5340		33,375,000	3 month LIBOR		25,000,000
June 1	4.5480		98,662,500	Fixed		75,000,000
June 1	4.5938		103,050,000	Fixed		75,000,000
June 1	4.6810		102,150,000	Fixed		75,000,000
June 1	4.7850		104,250,000	3 month LIBOR		75,000,000
2014 — Mar. 15	4.6365		103,170,000	Fixed		75,000,000
Mar. 15	4.6615		100,650,000	Fixed		75,000,000
Mar. 15	4.7329		101,962,500	Fixed		75,000,000
Mar. 15	4.8547		69,425,000	3 month LIBOR		50,000,000
Mar. 15	4.8973		69,925,000	3 month LIBOR		50,000,000
June 1	4.5586		65,200,000	Fixed		50,000,000
June 1	4.5768		65,725,000	Fixed		50,000,000
June 1	4.6020		96,862,500	Fixed		75,000,000
June 1	4.6262		97,500,000	Fixed		75,000,000
June 1	4.6437		97,627,500	Fixed		75,000,000
June 1	4.7055		98,730,000	Fixed		75,000,000
June 1	4.7375		99,300,000	Fixed		75,000,000
June 1	4.7540		65,200,000	3 month LIBOR		50,000,000
June 1	4.7943		99,150,000	3 month LIBOR		75,000,000
June 1	4.9805		136,240,000	Fixed		100,000,000
Total		$	14,236,990,500			U.S.$ 9,863,278,500

43

Unmatured Debt (Continued)

For the cross currency swaps listed below, the Government’s Canadian dollar liability has been swapped into a euro liability.

	Canadian dollar liability			Euro liability
Maturity date	Coupon %	Notional amount		Basis	Notional amount
2004 — Oct. 1	5.9390	$	77,070,000	Fixed		EUR 50,000,000
Dec. 1	3.6240		104,205,000	Fixed		75,000,000
Dec. 1	5.1470		65,864,750	Fixed		50,000,000
2005 — Mar. 1	4.9610		67,140,000	Fixed		50,000,000
Sep. 1	3.8720		106,631,400	Fixed		75,000,000
Sep. 1	3.9140		104,812,463	Fixed		75,000,000
Sep. 1	3.9654		103,929,804	Fixed		75,000,000
Sep. 1	4.0720		104,293,970	Fixed		75,000,000
Sep. 1	4.5467		70,412,860	Fixed		50,000,000
Sep. 1	4.6760		105,142,500	Fixed		75,000,000
Sep. 1	5.1747		70,400,000	Fixed		50,000,000
Sep. 1	5.2000		41,590,000	Fixed		30,000,000
Sep. 1	5.2120		42,375,000	Fixed		30,000,000
Sep. 1	5.2250		71,043,000	Fixed		50,000,000
Dec. 1	3.7883		71,463,500	Fixed		50,000,000
Dec. 1	3.8449		70,998,100	Fixed		50,000,000
Dec. 1	3.8898		71,051,904	Fixed		50,000,000
Dec. 1	4.0250		106,346,250	Fixed		75,000,000
Dec. 1	4.0420		105,468,460	Fixed		75,000,000
Dec. 1	4.1370		70,242,650	Fixed		50,000,000
Dec. 1	4.1765		70,303,500	Fixed		50,000,000
Dec. 1	4.2534		70,665,750	Fixed		50,000,000
Dec. 1	4.9268		70,892,550	Fixed		50,000,000
Dec. 1	4.9278		70,585,050	Fixed		50,000,000
Dec. 1	5.0032		69,665,632	Fixed		50,000,000
Dec. 1	5.0894		68,975,000	Fixed		50,000,000
Dec. 1	5.1580		97,621,400	Fixed		75,000,000
Dec. 1	5.1807		67,853,463	Fixed		50,000,000
Dec. 1	5.2270		68,622,400	Fixed		50,000,000
Dec. 1	5.2750		68,107,950	Fixed		50,000,000
Dec. 1	6.1160		70,700,000	Fixed		50,000,000
Dec. 1	6.1200		70,540,697	Fixed		50,000,000
Dec. 1	6.5110		70,642,880	Fixed		50,000,000
2006 — Mar. 1	4.1535		104,773,669	Fixed		75,000,000
Mar. 1	4.6089		104,089,766	Fixed		75,000,000
Mar. 1	4.7300		69,841,200	Fixed		50,000,000
Mar. 1	4.8742		70,039,500	Fixed		50,000,000
Mar. 1	6.0900		71,420,545	Fixed		50,000,000
Sep. 1	4.5620		68,470,420	Fixed		50,000,000
Oct. 1	5.6159		80,125,000	Fixed		50,000,000
Dec. 1	4.9590		104,114,790	Fixed		75,000,000
Dec. 1	5.2907		68,118,000	Fixed		50,000,000
Dec. 1	5.3000		98,634,500	Fixed		75,000,000
Dec. 1	5.4229		67,818,901	Fixed		50,000,000
2007 — Mar. 1	5.2200		35,572,500	Fixed		25,000,000
Jun. 1	5.7577		63,610,000	Fixed		50,000,000
Jun. 1	6.4088		150,000,000	Fixed		100,000,000
Jun. 1	6.4100		74,697,930	Fixed		50,000,000
Jun. 1	6.4200		75,044,970	Fixed		50,000,000
Oct. 1	5.2447		35,187,500	Fixed		25,000,000
Oct. 1	5.4840		67,000,000	Fixed		50,000,000
Oct. 1	6.4390		71,874,000	Fixed		50,000,000
Oct. 1	6.4650		71,449,303	Fixed		50,000,000
2008 — Mar. 1	4.6600		70,300,000	Fixed		50,000,000
Mar. 1	5.6864		95,211,700	Fixed		75,000,000
Jun. 1	4.6210		70,124,600	Fixed		50,000,000
Jun. 1	4.8389		69,608,000	Fixed		50,000,000
Jun. 1	5.3511		69,331,875	Fixed		50,000,000
Jun. 1	5.4375		67,952,500	Fixed		50,000,000
Oct. 1	4.9488		70,492,000	Fixed		50,000,000
Oct. 1	5.1823		68,913,188	Fixed		50,000,000
Oct. 1	5.4112		98,121,700	Fixed		75,000,000
Oct. 1	5.7360		95,861,400	Fixed		75,000,000

44

Unmatured Debt (Continued)

	Canadian dollar liability			Euro liability
Maturity date	Coupon %	Notional amount		Basis	Notional amount
2009 — Mar. 1	5.2880	$	69,911,985	Fixed		EUR 50,000,000
Mar. 1	5.2900		105,513,549	Fixed		75,000,000
Jun. 1	4.7729		106,008,000	Fixed		75,000,000
Jun. 1	4.9441		104,018,700	Fixed		75,000,000
Jun. 1	5.0140		72,437,000	Fixed		50,000,000
Jun. 1	5.1117		105,251,400	Fixed		75,000,000
Jun. 1	5.3488		69,936,274	Fixed		50,000,000
Jun. 1	5.4246		105,251,250	Fixed		75,000,000
Jun. 1	5.5324		98,002,100	Fixed		75,000,000
Jun. 1	5.8425		67,671,000	Fixed		50,000,000
Oct. 1	4.9457		72,035,800	Fixed		50,000,000
Oct. 1	4.9670		104,429,625	Fixed		75,000,000
Oct. 1	5.0490		70,056,125	Fixed		50,000,000
Oct. 1	5.0527		72,121,000	Fixed		50,000,000
Oct. 1	5.2030		70,107,600	Fixed		50,000,000
Oct. 1	5.3900		70,007,000	Fixed		50,000,000
Oct. 1	5.3905		69,155,575	Fixed		50,000,000
Oct. 1	5.4034		68,216,160	Fixed		50,000,000
Oct. 1	5.4145		68,935,000	Fixed		50,000,000
Oct. 1	5.5120		97,072,500	Fixed		75,000,000
Oct. 1	5.7305		67,866,100	Fixed		50,000,000
Oct. 1	5.7694		66,770,496	Fixed		50,000,000
Oct. 1	5.7695		65,293,000	Fixed		50,000,000
Oct. 1	6.0855		151,000,260	Fixed		100,000,000
Oct. 1	6.1353		74,000,000	Fixed		50,000,000
2010 — Mar. 1	5.1270		103,585,913	Fixed		75,000,000
Mar. 1	5.7810		67,067,000	Fixed		50,000,000
Mar. 1	5.7870		66,280,375	Fixed		50,000,000
Mar. 1	5.8147		67,374,000	Fixed		50,000,000
Mar. 1	6.0720		69,800,000	Fixed		50,000,000
Jun. 1	5.0857		72,154,700	Fixed		50,000,000
Jun. 1	5.0985		71,962,000	Fixed		50,000,000
Jun. 1	5.1230		69,797,000	Fixed		50,000,000
Jun. 1	5.1480		69,922,000	Fixed		50,000,000
Jun. 1	5.2008		70,162,500	Fixed		50,000,000
Jun. 1	5.3390		69,452,000	Fixed		50,000,000
Jun. 1	5.3946		70,668,100	Fixed		50,000,000
Jun. 1	5.6452		65,190,000	Fixed		50,000,000
Jun. 1	5.7470		67,202,550	Fixed		50,000,000
Jun. 1	5.7630		66,600,000	Fixed		50,000,000
Jun. 1	5.8348		66,000,000	Fixed		50,000,000
Jun. 1	5.8400		66,149,000	Fixed		50,000,000
Jun. 1	5.8970		42,380,100	Fixed		30,000,000
Jun. 1	5.95387		56,539,560	Fixed		40,000,000
Jun. 1	5.9570		69,236,750	Fixed		50,000,000
Jun. 1	5.9716		69,145,000	Fixed		50,000,000
Jun. 1	6.2250		68,250,000	Fixed		50,000,000
Jun. 1	6.2560		68,100,000	Fixed		50,000,000
Oct. 1	5.1360		70,478,000	Fixed		50,000,000
Oct. 1	5.2390		71,805,000	Fixed		50,000,000
Oct. 1	5.2657		103,876,125	Fixed		75,000,000
Oct. 1	5.2810		103,462,328	Fixed		75,000,000
Oct. 1	5.3320		71,512,500	Fixed		50,000,000
Oct. 1	5.3910		67,200,000	Fixed		50,000,000
Oct. 1	5.5186		104,770,421	Fixed		75,000,000
Oct. 1	5.7011		52,407,000	Fixed		40,000,000
Oct. 1	5.7260		98,520,000	Fixed		75,000,000
2011 — Jun. 1	5.1020		105,164,970	Fixed		75,000,000
Jun. 1	5.3696		69,535,700	Fixed		50,000,000
Jun. 1	5.4906		69,340,800	Fixed		50,000,000
2012 — June 1	5.6030		70,615,000	Fixed		50,000,000
June 1	5.6740		70,101,870	Fixed		50,000,000
Total		$	9,686,333,100			EUR 6,970,000,000

45

Unmatured Debt (Continued)

For the cross currency swap listed below, the Government’s Canadian dollar liability has been swapped into a yen liability.

	Canadian dollar liability			Yen liability
Maturity date	Coupon %	Notional amount		Basis	Notional amount
2010 — Jun. 1	5.8350	$	110,900,000	6 month LIBOR	¥	8,000,000,000
Total		$	110,900,000		¥	8,000,000,000

NOTES:

(1)	Non-callable except as otherwise noted.
(2)	Real Return Bonds bear interest adjusted in relation to the CPI for Canada. At maturity, a final payment equal to the sum of inflation compensation from the original issue date to maturity and principal will be made. All amounts shown for these issues are real amounts and do not include the inflation compensation accrued to date.

(3) Canada Savings Bonds offer minimum guaranteed annual interest rates and are non-callable, non-assignable and non-transferable. Canada Savings Bonds are redeemable on demand at any time with accrued interest. Issues are available in compound interest or regular interest form.

(4) Canada Premium Bonds are non-callable, non-assignable and non-transferable. Canada Premium Bonds are redeemable once a year on the anniversary date and during the 30 days thereafter without penalty. Issues are available in compound interest or regular interest form.

(5) Canada Investment Bonds are available in a non-certificated form through authorized investment dealers only. They offer a fixed rate of interest for the full term to maturity, are non-cashable prior to maturity but are transferable to other eligible registration types. Issues are available in compound interest or regular interest form.

(6) Obligations are non-negotiable, non-assignable and non-transferable. Term to maturity is 20 years, or such lesser period as may from time to time be fixed by the Minister of Finance on the recommendation of the Office of the Superintendent of Financial Institutions. Obligations are redeemable in whole or in part before maturity only at the option of the Minister of Finance; Obligations bear interest payable semi-annually at the rate fixed by the Minister of Finance, and are issued in accordance with terms and conditions set forth in an agreement (all in accordance with Section 111 of the Canada Pension Plan Act).

(7) Converted at U.S. $1.00 = $1.2616, Japanese Yen 1.00 = $0.01147, British Pound 1.00 = $2.2861, Danish Krone 1.00 = $0.2107, New Zealand $1.00 = $0.8548, Norwegian Krone 1.00 = $0.18798, and Euro 1.00 = $1.5690, the closing rates on September 30, 2004.

(8) These fixed-rate notes or bonds were swapped into U.S. dollar floating rate debt based on the 3-month London Inter-bank Offered Rate (LIBOR).

(9) Although the principal is denominated in Japanese Yen, the coupon is payable in Australian Dollars.

(10) Original issue of French Francs 4,000,000,000 was redenominated into Euro 609,796,068.95 on April 28, 1999.

(11) This issue is a reopening of a previous issue and as a result, both issues are fully fungible.

(12) Original issue of Deutsche Marks 4,000,000,000 was redenominated into Euro 2,045,167,524.78 on February 19, 1999.

(13) Assumed by the Government of Canada on February 5, 2001, on the dissolution of Petro Canada Limited.

(14) Since August 31, 1986 no drawings have been outstanding on the standby credit facility with Canadian chartered banks and since May 31, 1986 no drawings have been outstanding on the standby credit facility with United States and other foreign banks.

Other Obligations (with Respect to Money Borrowed)

DIRECT OBLIGATIONS (1)

The borrowings listed below are direct obligations of agent enterprise Crown corporations which are agents of Canada and as such constitute direct obligations of the Government of Canada and are a charge on and payable out of the Consolidated Revenue Fund of Canada.

46

BORROWINGS BY AGENT ENTERPRISE CROWN CORPORATIONS

	Outstanding at March 31, 2004
	Canadian		Foreign
	dollar		currency		Total
	borrowings		borrowings		borrowings
	(in millions)
Business Development Bank of Canada	$	5,233.5	$	2,069.0	$	7,302.4
Canada Mortgage and Housing Corporation		8,351.2		2,090.0		10,441.2
Canada Post Corporation		108.1		—		108.1
Canadian Dairy Commission (Marketing)		0.9		—		0.9
Canadian Wheat Board (2)		—		11.9		11.9
Export Development Canada		7,251.9		9,926.0		17,177.9
Farm Credit Canada		8,533.6		675.5		9,209.1
Freshwater Fish Marketing Corporation		17.6		5.5		23.1
Royal Canadian Mint		20.7		—		20.7
Total	$	29,517.5	$	14,777.9	$	44,295.4

Source: Public Accounts of Canada 2004.

(1) The payment of all money borrowed by agent Crown corporations is a charge on and payable out of the Consolidated Revenue Fund. Such borrowings constitute unconditional obligations of the Government and are recorded as such in the accounts of Canada, net of borrowings expected to be repaid directly by these corporations. In practice, with few exceptions, all borrowings have been repaid by the agent Crown corporations.

(2) Effective December 31, 1998 the Canadian Wheat Board ceased to be an agent Crown corporation under the Financial Administration Act. Borrowing transactions prior to December 31, 1998 are reported here.

47

CONTINGENT LIABILITIES

				At March 31, 2004
				(in millions)
GUARANTEES BY THE GOVERNMENT
Borrowing by enterprise Crown corporations which are agents of Her Majesty				$	44,295
Borrowings by other than enterprise Crown corporations
	From agents
		Loans to Indians by the Canada Mortgage and Housing Corporation and Farm Credit Canada for on-reserve housing			490
	From other than agents
		Guarantee programs of the Government
			Canada Student Loans Act		444
			Small Businesses Loans Act		970
			Farm Improvement Loans Act and Farm Improvement and Marketing Cooperatives Loans Act		242
			Atlantic Enterprise Program		—
			Advance Payments for Crops Act		221
			Enterprise Development Program		—
			Fisheries Improvement Loans Act		—
			Loans to Indians by approved lenders for on-reserve housing		800
			Financial obligations incurred by air carriers regarding purchase of The de Havilland Aircraft of Canada, Limited DHC-7 and DHC-8 aircraft		243
			Aboriginal Economic Program		10
			Indian economic development		1
			Time Air (1982) Ltd.		—
					2,933
		Other explicit loan guarantees
			Loans with respect to the Hibernia Development Project Act		64
			Loans to NewGrade Energy Inc. to finance construction of a heavy oil upgrader		38
					102
Insurance programs of the government
		Insurance against accidents at nuclear installations under the Nuclear Liability Act			584
		Accounts administered for the Government by the Export Development Corporation — Insurance and related guarantees			1,483
					2,067
Other explicit guarantees
		Guarantees under the Prairie Grain Advance Payments Act			218
		Guarantees under the Spring Credit Advance Program			4
		Guarantees under the Agricultural Marketing Programs Act			18
		Guarantees under Section 19 of the Canadian Wheat Board Act			6,140
		Guarantees to holders of mortgages insured by the Mortgage Insurance Company of Canada and GE Capital Mortgage Insurance Company (Canada)			616
					6,996
TOTAL GROSS GUARANTEES					56,883
	Less: allowance for losses				2,770
NET EXPOSURE UNDER GUARANTEES				$	54,112

Source: Public Accounts of Canada 2004.

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Supplementary Information

MARKETABLE BONDS (DOMESTIC)

From October 1, 2004 through November 30, 2004 Government of Canada domestic marketable bonds outstanding increased by $2,986 million to $269,164 million. New issues and retirements during this period are detailed below.

	Issue details
Issue or maturity date	Coupon %		Maturity date		Amount		Maturity
October 1, 2004		10 1/2		—		—		273,560,000
October 12, 2004		4 1/4		Sept. 1, 2009		300,000,000		—
October 18, 2004		4 1/2		June 1, 2015		2,100,000,000		—
November 8, 2004		5		June 1, 2037		300,000,000		—
November 22, 2004		4		Sept. 1, 2010		2,100,000,000		—

From October 1, 2004 through November 30, 2004, four repurchase operations were held and the following bonds were purchased by the Government. Repurchased bonds are typically cancelled shortly after their settlement.

					Amount
Repurchase settlement date	Coupon %		Maturity date		Repurchased
October 7, 2004		4 1/4		December 1, 2004		130,000,000
		6		September 1, 2005		253,000,000
		12 1/4		September 1, 2005		3,610,000
					$	386,610,000
October 12, 2004		6		June 1, 2008		116,209,000
		11 3/4		October 1, 2008		4,090,000
		11 1/2		March 1, 2009		5,000,000
		10 3/4		October 1, 2009		2,187,000
		9 1/2		June 1, 2010		150,000,000
					$	277,486,000
October 18, 2004		10 1/4		March 15, 2014		149,950,000
		10 1/2		March 15, 2021		37,462,000
		9 3/4		June 1, 2021		78,643,000
		8		June 1, 2023		85,000,000
		9		June 1, 2025		40,000,000
		8		June 1, 2027		8,945,000
					$	400,000,000
October 21, 2004		4 1/4		December 1, 2004		476,000,000
					$	476,000,000

CANADA SAVINGS BONDS

Series 90 issued on November 1, 2004 has a guaranteed minimum interest rate of 1.50% for the year beginning November 1, 2004. Rates for the remaining years to maturity will be announced at a future date.

The maturity date on CSB Series 47 (issue date November 1, 1992) has been extended to November 1, 2014 and has a guaranteed minimum interest rate of 1.50% for the year beginning November 1, 2004. Rates for the remaining years to maturity will be announced at a future date.

CANADA PREMIUM BONDS

Series 40 issued on November 1, 2004 has a guaranteed interest rate of 1.85% for the year beginning November 1, 2004, 2.45% for the year beginning November 1, 2005 and 3.40% for the year beginning November 1, 2006. Rates for the remaining years to maturity will be announced at a future date.

49

CANADA INVESTMENT BONDS

The Canada Investment Bond, piloted through investment dealers in 2003-2004, has been discontinued this year.

TREASURY BILLS

From October 1, 2004 through November 30, 2004 treasury bills outstanding increased by $6,450 million to $120,250 million.

CANADA BILLS

From October 1, 2004 through November 30, 2004 Canada Bills outstanding decreased by U.S.$128,377,000 to U.S.$1,553,128,000.

CROSS CURRENCY SWAPS

From October 1, 2004 through November 30, 2004, domestic liabilities of $189,135,000 were swapped into liabilities of U.S.$150,000,000.

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