Quebec 18-K Annual report (foreign governments)

EXHIBIT 99.1

DESCRIPTION

This description of Québec is dated as of July 5, 2007 and appears as Exhibit 99.1

to Québec’s Annual Report on Form 18-K to

the U.S. Securities and Exchange Commission for the fiscal year ended

March 31, 2007.

The delivery of this document at any time does not imply that the information is correct as of any time subsequent to its date. This document (other than as part of a prospectus contained in a registration statement filed under the U.S. Securities Act of 1933) does not constitute an offer to sell or the solicitation of an offer to buy any securities of Québec.

Table of Contents

	Page
Foreign Exchange	2
Summary	3
Québec	6
Overview	6
Constitutional Framework	6
Government	7
Native Peoples	7
Economy	9
Economic Developments in 2006	9
Economic Structure	11
Free Trade Agreements	16
Government Finances	17
Financial Administration	17
2006-2007 Preliminary Results	19
2007-2008 Budget	19
Consolidated Revenue Fund Revenue	21
Consolidated Revenue Fund Expenditure	24
Government Employees and Collective Unions	25

	Page
Consolidated Non-Budgetary Transactions	26
Government Enterprises and Agencies	29
Enterprises included in the Government’s reporting entity	31
Agencies whose reporting entity is included in the Government’s reporting entity	34
Agencies which conduct fiduciary transactions that are not included in the Government’s reporting entity	35
Public Sector Debt	36
Government Debt	37
Guaranteed Debt	39
Funded Debt of the Municipal Sector and Other Institutions	40
Government's Commitments	41
Where You Can Find More Information	42
Forward-Looking Statements	43
Supplementary Information	44

Foreign Exchange

Canada maintains a floating exchange rate for the Canadian dollar in order to permit the rate to be determined by market forces without intervention except as required to maintain orderly conditions. Annual average noon spot exchange rates for the major foreign currencies in which debt of Québec is denominated, expressed in Canadian dollars, are shown below.

Foreign Currency	2003	2004	2005	2006	2007(1)
United States Dollar	$ 1.4015	$ 1.3015	$ 1.2116	$ 1.1341	$ 1.1349
Japanese Yen	0.0121	0.0120	0.0110	0.0098	0.0095
Swiss Franc	1.0418	1.0473	0.9746	0.9050	0.9244
Pound Sterling	2.2883	2.3842	2.2067	2.0886	2.2360
New Zealand Dollar	0.8139	0.8636	0.8542	0.7368	0.8148
Mexican Pesos	0.1301	0.1154	0.1112	0.1041	0.1036
Australian Dollar	0.9105	0.9582	0.9243	0.8543	0.9172
Euro	1.5826	1.6169	1.5090	1.4237	1.5082

⁽¹⁾  Monthly average through the end of June 2007.

Source: Bank of Canada.

In this document, unless otherwise specified or the context otherwise requires, all dollar amounts are expressed in Canadian dollars. The fiscal year of Québec ends March 31. “Fiscal 2007” and “2006-2007” refer to the fiscal year ended March 31, 2007, and, unless otherwise indicated, “2006” means the calendar year ended December 31, 2006. Other fiscal and calendar years are referred to in a corresponding manner. Any discrepancies between the amounts listed and their totals in the tables included in this document are due to rounding.

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Summary

The information below is qualified in its entirety by the detailed information provided elsewhere in this document.

Economy
	2002	2003	2004	2005	2006
	(dollar amounts in millions)
GDP at current market prices	$241,448	$250,626	$262,988	$273,588	$284,158
% change – GDP in chained 1997 dollars (1)	2.4%	1.3%	2.7%	2.2%	1.7%
Personal income	$199,482	$208,284	$217,514	$226,141	$235,886
Capital expenditures	$40,743	$43,485	$49,767	$49,470	$50,968
International exports of goods	$68,454	$64,191	$68,476	$71,026	$73,169
Population at July 1 (in thousands)	7,446	7,495	7,549	7,598	7,652
Unemployment rate	8.6%	9.1%	8.5%	8.3%	8.0%
Consumer Price Index - % change	2.0%	2.5%	2.0%	2.3%	1.7%
Average exchange rate (US$ per C$)	0.64	0.71	0.77	0.83	0.88

Consolidated Financial Transactions (2)
		Fiscal year ending March 31
		2004	2005	2006	Preliminary   Results 2007	Budget   Forecast   2008 (2)
		(dollar amounts in millions)
Consolidated Revenue Fund:
Own-source revenue (3) (4)		$42,278	$44,381	$45,743	$49,290	$47,953
Federal transfers (5)	��	9,370	9,229	9,969	11,015	13,174
Total revenue		51,648	53,610	55,712	60,305	61,127
Program spending		(45,339)	(47,656)	(49,229)	(51,769)	(53,913)
Debt service		(6,655)	(6,853)	(6,875)	(6,967)	(7,244)
Total expenditure		(51,994)	(54,509)	(56,104)	(58,736)	(61,157)
Additional deposit in the Generations Fund		—	—	—	(500)	(200)
Allocation to the budgetary reserve		—	—	—	(1,300)	—
Use of part of the budgetary reserve		—	—	—	—	200
Net results of Consolidated Revenue Fund		(346)	(899)	(392)	(231)	(30)
Net results of consolidated organizations		346	235	429	260	30
Exceptional losses of the SGF (4)		(358)	—	—	—	—
Consolidated budgetary balance for the purposes of the Balanced Budget Act		(358)	(664)	37	29	0
Net results of the Generations Fund (6)		—	—	—	578	653
Consolidated budgetary balance (7)		(358)	(664)	37	607	653
Consolidated non-budgetary transactions		(1,108)	246	(246)	(1,585)	(1,091)
Consolidated net financial requirements		$(1,466)	$(418)	$(209)	$(978)	$(438)

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Funded Debt of Public Sector
	As of March 31
	2003	2004	2005	2006	Preliminary   Results   2007
	(dollar amounts in millions)
Government Funded Debt
Borrowings – Government	$71,206	$72,411	$77,923	$81,995	$91,388
Borrowings – to finance Government Enterprises	3,965	3,202	3,234	2,646	2,814
Borrowings – to finance Municipal Bodies	2,874	2,802	2,799	2,604	2,499
Government Guaranteed Debt (8)	40,680	40,013	40,600	41,947	43,772
Municipal Sector Debt	13,463	14,317	14,239	15,669	16,408
Other Institutions	5,394	5,136	4,696	4,040	3,455
Public Sector Funded Debt (9)	$137,582	$137,881	$143,491	$148,901	$160,336
Per capita ($)	$18,477	$18,396	$19,008	$19,597	$20,953
As a percentage of (10)
GDP	57.0%	55.0%	54.6%	54.4%	56.4%
Personal income	69.0%	66.2%	66.0%	65.8%	68.0%

⁽¹⁾ Adjusted for the effects of inflation in the currency from year to year.

⁽²⁾ The categories set forth reflect the presentation of the 2007-2008 Budget (as amended by the Ministerial Statement as of June 1, 2007).

⁽³⁾ In December 2003, the Government decided to separate the insurance mission of the Société de l’assurance automobile du Québec (“SAAQ”) from its other mandates. Accordingly, funds collected for this mission now constitute a trust separate from the amounts collected for other activities. Legislation was enacted by the National Assembly in December 2004 that provided for the transfer of the insurance mission patrimony as of December 31, 2003 to a trust fund, the Fonds d’assurance automobile du Québec, on January 1, 2004. In return, the trust fund assumed almost all of the SAAQ’s liabilities as of December 31, 2003. Since this trust fund is not included in the Government’s reporting entity, the Government wrote off its negative investment of $412 million in the SAAQ on January 1, 2004. The net impact of this change was to increase revenue by $160 million, given the SAAQ’s $252 million deficit for the period from April 1, 2003 to December 31, 2003.

⁽⁴⁾ In Fiscal 2004, provincial own-source revenue excludes the exceptional losses of the Société générale de financement du Québec (“SGF”).

⁽⁵⁾ Federal transfers are presented on a cash basis until Fiscal 2005 and on an accrual basis thereafter.

⁽⁶⁾ The Generations Fund was created in June 2006 by the adoption of the Act to reduce the debt and establish the Generations Fund and is a separate entity from the Consolidated Revenue Fund. This law establishes the fund as a permanent tool for reducing the debt burden. In addition, it stipulates that the monies accumulated in the Generations Fund are dedicated exclusively to repaying the debt.

⁽⁷⁾ The Consolidated budgetary balance for Fiscal 2005 includes a budgetary surplus of $9 million before a provision of $673 million for pay equity charged to program spending. With this provision, which covers the period from November 21, 2001 to March 31, 2005, the budgetary deficit amounts to $664 million.

⁽⁸⁾ Represents mainly debt of Hydro-Québec.

⁽⁹⁾ Canadian dollar equivalent on the dates indicated for loans in foreign currencies after currency swap agreements and foreign exchange forward contracts.

⁽¹⁰⁾ Percentages are based on the prior calendar year’s GDP and Personal Income.

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5

Québec

Overview

Québec is the largest by area of the ten provinces in Canada (1,541,000 square kilometers or 594,860 square miles, representing 15.4% of the geographical area of Canada) and the second largest by population (7.7 million, representing 23.4% of the population of Canada, as of January 2007).

Québec has a modern, developed economy, in which the service sector contributed 71.8%, the manufacturing industry 20.1%, the construction industry 5.8% and the primary sector 2.3% of real GDP at basic prices in chained 1997 dollars in 2006. The leading manufacturing industries in Québec are primary metal products (including aluminum smelting), transportation equipment products (including aircraft and motor vehicles and associated parts), petroleum and coal products, food products, chemical products, paper products and fabricated metal products. Québec also has significant hydroelectric resources, generating 30% of the electricity produced in Canada in 2006.

Montréal and Ville de Québec, the capital of Québec, are the centers of economic activity. Montréal is one of the main industrial, commercial and financial centers of North America and is Canada’s second largest urban area as measured by population. Montréal is also Canada’s largest port, situated on the St. Lawrence River, which provides access to the Atlantic Ocean and the inland navigation system of the Great Lakes.

French is the official language of Québec and is spoken by approximately 95% of its population.

Constitutional Framework

Canada is a federation of ten provinces and three federal territories, with a constitutional division of responsibilities between the federal and provincial governments as set out in The Constitution Acts, 1867 to 1982 (the “Constitution”).

Under the Constitution, each provincial government has exclusive authority to raise revenue through direct taxation within its territorial limits. Each provincial government also has exclusive authority to regulate education, health, social services, property and civil rights, natural resources, municipal institutions and, generally, to regulate all other matters of a purely local or private nature in its province, and to regulate and raise revenue from the exploration, development, conservation and management of natural resources.

The federal parliament is empowered to raise revenue by any method or system of taxation and generally has authority over matters or subjects not assigned exclusively to the provinces. It has exclusive authority over the regulation of trade and commerce, currency and coinage, banks and banking, national defense, naturalization and aliens, postal services, navigation and shipping, and bills of exchange, interest and bankruptcy.

The Constitution Act, 1982 (the “Constitution Act”), enacted by the parliament of the United Kingdom, provides, among other things, that amendments to the Constitution be effected in Canada according to an amending formula. The Constitution Act also includes various modifications to the Constitution. The Constitution Act came into effect in 1982 notwithstanding the opposition of the National Assembly of Québec (the “National Assembly”) and the government of Québec (the “Government”) to certain clauses relating to provincial jurisdiction and the terms of the amending formula.

Since 1982, the federal and provincial governments have attempted to remedy this situation by signing two constitutional accords, neither of which was ratified. The first, signed in 1987 but not ratified by the legislative assemblies of two provinces, included a proposal to recognize Québec as a distinct society within Canada. The second, dated 1992, which was also signed by the federal territories and the national associations of native peoples, was rejected by a majority of voters in six provinces, including Québec.

On September 7, 1995, the Government, then formed by the Parti Québécois, which has as one of its principal objectives the sovereignty of Québec, presented a Bill entitled An Act respecting the future of Québec in the National Assembly. This act included, among other things, provisions authorizing the National Assembly to proclaim the sovereignty of Québec following a formal offer to the Government of Canada of a treaty of economic and political partnership. This act was to be enacted only after a favorable vote in a referendum. Such a referendum was held on October 30, 1995. The result was 49.4% in favor of this act and 50.6% against.

In 1996, the federal government, by way of a reference to the Supreme Court of Canada (the “Supreme Court”), asked the court to determine the legal position, both under Canadian constitutional law and public international law, of a unilateral secession of Québec from Canada. The reference before the Supreme Court was heard without Québec’s participation in the hearing. On August 20, 1998, the Supreme Court decided, among other things, that under the Constitution, Québec may not secede unilaterally from Canada without negotiation with the other participants in the Canadian Confederation within the existing constitutional framework; Québec does not have the right under international law to secede unilaterally from

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Canada; nonetheless, the clear repudiation by the people of Québec of the existing constitutional order and the clear expression of the desire to pursue secession would confer legitimacy on demands for secession, and place an obligation on the other provinces and the federal government to acknowledge and respect that expression of democratic will by entering into negotiations and conducting these negotiations in accordance with constitutional principles, including federalism, democracy, constitutionalism, the rule of law, and the protection of minorities; and Québec would have to negotiate in accordance with these constitutional principles. The Supreme Court recognized, however, that should Québec, having negotiated in conformity with constitutional principles and values, face unreasonable intransigence on the part of other participants at the federal or provincial level, Québec would be more likely to be recognized than if it did not itself act according to constitutional principles in the negotiation process.

The Parti Québécois formed the Government from September 1994 to April 2003. The Québec Liberal Party, a federalist party, won the general election in April 2003 and formed the Government. It was re-elected as a minority government in March 2007. With regard to the constitutional issue, the Québec Liberal Party pursues a policy which emphasizes the values of Canadian federalism. In particular, its platform is focused on strengthening Québec’s place within the federation, on forming new alliances with the other provinces, and on promoting intergovernmental cooperation.

Government

Legislative power in Québec is exercised by the Parliament of Québec, which is comprised of the Lieutenant-Governor, who is appointed by the Governor General in Council of Canada, and the National Assembly. The National Assembly consists of 125 members elected by popular vote from single member districts. According to constitutional practice, the leader of the party with the largest number of elected members becomes Prime Minister and forms the Government.

Executive power in Québec is vested in the Lieutenant-Governor acting with, or on the recommendation of, the Conseil exécutif, which consists of the Prime Minister and the Cabinet (Conseil des ministres). The Conseil exécutif is accountable to the National Assembly.

The current National Assembly consists of 48 members of the Québec Liberal Party, 41 members of the Action Démocratique du Québec and 36 members of the Parti Québécois. Members are elected for a term of five years, subject to earlier dissolution of the National Assembly by the Lieutenant-Governor upon the recommendation of the Prime Minister or following the Government’s defeat on a vote of no confidence. The mandate of the current Government extends through the next election, which must be called no later than March 2012.

Native Peoples

Since the implementation of the 1975 James Bay and Northern Québec Agreement (the “Agreement”) with the Crees, the Naskapis and the Inuits, Québec has been negotiating with representatives of various other native groups for the settlement of their land claims over the territories covered by the Agreement. Negotiations to resolve these issues are currently underway with the Innus and Atikamekw nations. Under the Civil Code of Québec enacted on January 1, 1994, these rights of action could be extinguished by a ten-year legal prescription. On December 30, 2003, representatives of the Innus, Atikamekw and Algonquin nations (the “Plaintiffs”) filed seven legal actions against, amongst others, the Attorney-General of Canada and the Attorney-General of Québec seeking a judicial recognition of their aboriginal rights and title over certain areas of land in Québec that are partially covered by the Agreement, thus interrupting the impending legal prescription of their claims. Plaintiffs allege that their ancestral rights and title over these territories were not extinguished by the Agreement and seek damages and compensation for the unlawful use and exploitation of these lands in an aggregate amount of approximately $3 billion (subject to further increase by the Plaintiffs). The Plaintiffs also seek various orders including rendering of accounts and revenue sharing from the use and management of the lands, notably in respect of the hydro-electric facilities and the forestry operations located on these lands.

Since January 2004, in order to allow for a negotiated settlement of this issue, the Government has signed agreements with respect to four of the seven legal actions whereby the Government agreed to extend the legal prescription for another ten-year period in exchange for the withdrawal of these claims. As for the three remaining claims, agreements have been reached to suspend the Innu community of Uashat’s claim through May 2009 and to suspend the Opitciwan Atikamekw’s action until April 26, 2009. Accordingly, the only claim pending before the courts with respect to the territory covered by the Agreement is the one instituted in 2003 by the Innu nation of Betsiamites (the “Betsiamites”) in the case Betsiamites v. Attorney General of Québec and Attorney General of Canada (“Betsiamites II”), which is further detailed below.

The Betsiamites currently have three active lawsuits involving damages against the Attorney General of Québec. In the first case, instituted in 1998 (Pessamit v. A.G. of Québec, A.G. Canada and Hydro-Québec, or “Betsiamites I”), the Betsiamites are seeking a declaratory judgment awarding them damages, recognizing their aboriginal title and ancestral rights over their traditional territory in the North Shore region (excluding lands covered by the Agreement) and condemning Québec to pay $500 million for damages caused by the construction of a number of hydro-electric facilities. They are also seeking that

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Hydro-Québec be ordered to remit to them part of the revenues earned from the electrical power generated by these facilities. In January 2000, this action was suspended. On November 17, 2006, the Betsiamites amended their action, raising their claim from $500 million to $10.8 billion in damages for breach of ancestral rights and loss of revenue, which they claim has been illegally collected by the Crown. They are also claiming that Hydro-Québec should make ongoing payments of $657 million per year as compensation.

In the Betsiamites II case, initiated in December 2003, the Betsiamites are asking the Court that certain provisions of the federal and Québec laws implementing the Agreement be declared void, on the grounds that these laws breached their ancestral rights and unilaterally extinguished these rights on the territory covered by the Agreement. This is the only case that is still pending before the courts relating to the territory covered by the Agreement. In this case, the Betsiamites are claiming full enjoyment of their ancestral rights over this territory and $75 million in damages for loss of such enjoyment since the signature of the Agreement. In a subsidiary claim, they are seeking $250 million in compensation in the event the court rule that their rights were extinguished by the said federal and provincial laws.

In the third case, instituted in December 2005 (Betsiamites v. A.G. of Québec, A.G. of Canada and 27 forest companies, or “Betsiamites IV”), the Betsiamites filed a petition covering the part of their traditional territory (50,000 km² out of 138,000 km²) that has been developed by the forest industry since the mid-19th century. This new petition involves all of the forest companies that are parties to at least one timber supply and forest management agreement (“TSFMA”) on the traditional territory of the Betsiamites. The Betsiamites are seeking declaratory rulings to the effect that they hold title and ancestral rights over their traditional territory, that forest development of this territory was authorized illegally, that the Government did not and does not have the right to collect revenue from this development and that the Forest Act cannot be applied to the traditional territory of the Betsiamites. Accordingly, they are claiming $1 billion in damages against the Attorney General of Québec and the Attorney General of Canada for loss of enjoyment of their ancestral rights and $2 billion against the Attorney General of Québec for loss of their right to develop the forest resource themselves. On September 30, 2006, the Betsiamites amended their petition and added a demand that the Attorney General of Québec and a forest company, Kruger, be condemned to pay $50 million in damages for their logging activities on the Île René-Levasseur.

In summary, the Attorney General of Québec is currently party to three pending suits for damages before the courts in which the Betsiamites claim a total compensation of approximately $14 billion for various alleged breaches regarding hydro-electricity (Betsiamites I: $11 billion), on the territory covered by the Agreement (Betsiamites II: $75 million in the principal ruling and $250 million in the subsidiary ruling), and regarding forestry (Betsiamites III: $3.1 billion). These three cases are at various stages of progress and should be resolved either through negotiation or rulings by the courts.

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Economy

Economic Developments in 2006

Canada.  Gross domestic product (“GDP”) adjusted for inflation in chained 1997 dollars (“real GDP”), as published in the Provincial Economic Accounts on April 25, 2007, increased at a rate of 2.7% in 2006, compared with a rate of 2.9% in 2005. This growth was mainly attributable to consumer spending and non-residential investment. Final domestic demand increased by 4.5% in 2006, compared to 4.3% in 2005. International exports increased by 1.3% in volume and by 1.1% in value in 2006 compared with increases of 2.1% and 5.1%, respectively, in 2005. International imports increased by 5.2% in volume and by 4.2% in value in 2006 compared with increases of 7.1% and 6.1%, respectively, in 2005.

Real consumer spending increased by 4.1% in 2006, compared to a 3.9% increase in 2005. Non-residential investment increased by 9.2% in 2006, due in particular to a 10.7% increase in construction. Residential investment increased by 2.4% in 2006, due in part to a 0.8% increase in housing starts. Government investment increased by 6.6% in 2006. Government expenditure on goods and services increased by 3.4% in 2006.

The Consumer Price Index (“CPI”) increased by 2.0% in 2006. Overall employment rose 1.9% in 2006, while the unemployment rate decreased to 6.3% from 6.8% in 2005.

Québec.  Real GDP growth as published in the Provincial Economic Accounts on April 25, 2007 was 1.7% in 2006, compared to 2.2% in 2005. Final domestic demand increased by 2.9% in real terms, compared to 2.6% in 2005. Real consumer spending increased by 3.0% in 2006, compared to an increase of 3.3% in 2005. The value of non-residential investment increased by 4.5% in 2006, with an 8.9% increase in the public sector and a 1.2% increase in the private sector. The value of residential investment increased by 0.3% in 2006. International exports increased by 2.6% in volume and by 3.9% in value in 2006, compared with increases of 5.1% and 4.9%, respectively, in 2005. International imports increased by 5.9% in volume and by 5.9% in value in 2006, compared with increases of 9.0% and 8.7%, respectively, in 2005.

The CPI increased by 1.7% in 2006. Overall employment rose 1.3% in 2006, while the unemployment rate decreased to 8.0% from 8.3% in 2005.

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Table 1

Main Economic Indicators of Québec (1)
	2002	2003	2004	2005	2006	Compound Annual   Rate of Growth   2001-2006
	(dollar amounts in millions, except for per capita amounts)
GDP
At current market prices	$241,448	$250,626	$262,988	$273,588	$284,158
	4.2%	3.8%	4.9%	4.0%	3.9%	4.2%
In chained 1997 dollars	$223,832	$226,831	$232,944	$237,981	$242,039
	2.4%	1.3%	2.7%	2.2%	1.7%	2.1%
Per capita	$30,062	$30,266	$30,859	$31,322	$31,633
	1.7%	0.7%	2.0%	1.5%	1.0%	1.4%
Personal income	$199,482	$208,284	$217,514	$226,141	$235,886
	2.6%	4.4%	4.4%	4.0%	4.3%	3.9%
Per capita	$26,791	$27,791	$28,815	$29,764	$30,829
	1.9%	3.7%	3.7%	3.3%	3.6%	3.2%
Capital expenditures	$40,743	$43,485	$49,767	$49,470	$50,968
	8.5%	6.7%	14.4%	-0.6%	3.0%	6.3%
Value of manufacturers’ shipments	$133,625	$133,832	$135,517	$137,042	$141,082
	1.3%	0.2%	1.3%	1.1%	2.9%	1.3%
Retail trade	$72,099	$75,326	$78,518	$83,074	$87,085
	6.1%	4.5%	4.2%	5.8%	4.8%	5.1%
	(in thousands of persons)
Population (at July 1)	7,446	7,495	7,549	7,598	7,652
	0.7% ��	0.7%	0.7%	0.7%	0.7%	0.7%
Labor force	3,908	3,993	4,024	4,053	4,094
	3.6%	2.2%	0.8%	0.7%	1.0%	1.7%
Employment	3,570	3,629	3,681	3,717	3,765
	3.8%	1.6%	1.4%	1.0%	1.3%	1.8%
Unemployment rate (level in percentage)	8.6%	9.1%	8.5%	8.3%	8.0%
	(2002 = 100)
CPI	100.0	102.5	104.5	106.9	108.7
	2.0%	2.5%	2.0%	2.3%	1.7%	2.1%

⁽¹⁾    Unless otherwise indicated, percentages are percentage changes from the previous year.

Source: Statistics Canada.

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Economic Structure

In 2006, Québec accounted for 20.7% of Canada’s real GDP. The service sector accounted for 71.8% of Québec’s real GDP, compared with 25.9% for the secondary sector and 2.3% for the primary sector. Québec’s economy is influenced by developments in the economies of its major trading partners, especially the United States, which is Québec’s largest export market. In 2006, the value of exports (including to other Canadian provinces) represented 53.3% of Québec’s GDP.

The following table shows the contribution of each sector to real GDP, which includes net taxes (taxes less subsidies) paid on factors of production. GDP is a measure of value added (the total value of goods delivered and services rendered less the cost of materials and supplies, fuel and electricity).

Table 2

Real Gross Domestic Product by Sector at Basic Prices in Chained 1997 Dollars(1)
					% of Total 2005			% of Total 2006
	2002	2003	2004	2005	Québec	Canada	2006	Québec	Canada
	(dollar amounts in millions)
Primary Sector:
Agriculture, forestry, fishing and hunting	$4,008	$4,011	$4,292	$4,332	2.0%	2.4%	$4,170	1.8%	2.3%
Mining and oil and gas extraction	1,380	1,376	1,328	1,100	0.5	3.7	1,045	0.5	3.6
	5,388	5,387	5,621	5,432	2.5	6.1	5,215	2.3	5.9
Secondary Sector:
Manufacturing	46,151	45,322	45,364	45,542	20.5	16.5	45,442	20.1	15.8
Construction	10,783	11,230	12,447	12,641	5.7	6.0	12,973	5.8	6.3
	56,933	56,553	57,811	58,183	26.2	22.5	58,415	25.9	22.1
Service Sector:
Community, business and personal services	48,029	49,476	50,456	51,370	23.2	22.1	52,387	23.2	22.2
Finance, insurance and real estate	35,091	35,770	37,127	38,382	17.3	20.1	39,561	17.5	20.4
Wholesale and retail trade	23,703	24,546	25,544	26,749	12.0	12.1	27,836	12.3	12.5
Governmental services	13,377	13,432	13,763	13,715	6.2	5.6	14,051	6.2	5.6
Information and cultural services	9,365	9,321	9,432	9,783	4.4	4.1	10,015	4.5	4.1
Transportation and warehousing	9,143	9,116	9,419	9,623	4.3	4.8	9,777	4.3	4.8
Other utility services	8,008	8,272	8,206	8,533	3.8	2.6	8,474	3.8	2.5
	146,636	149,929	153,928	158,125	71.3	71.4	162,099	71.8	72.0
Real GDP	$208,957	$211,869	$217,360	$221,740	100.0%	100.0%	$225,729	100.0%	100.0%

⁽¹⁾   North American Industrial Classification System (NAICS) in chained 1997 dollars. For the chained 1997 dollars, the aggregate amounts are not equal to the sums of their     components.

Source: Statistics Canada.

Primary Sector. In 2006, the primary sector, which includes agriculture, forestry, fishing and hunting, and mining and oil and gas extraction, contributed 2.3% of real GDP and accounted for 2.8% of employment in Québec. Québec’s forests, covering 1,140,000 square kilometers or 440,000 square miles, are among its most important natural resources. Québec’s logging operations were estimated to have produced approximately 1.2 billion cubic feet of timber in 2006, generating revenue of $2.1 billion from sales to domestic and foreign customers.

In mining and oil and gas extraction, which represented 20% of the primary sector in 2006, production is concentrated mainly in iron ore, nickel, gold, stone, cement, zinc and copper. In 2006, the value of mineral production amounted to $4.7 billion.

Secondary Sector. In 2006, the secondary sector, which consists of the manufacturing and construction industries, contributed 25.9% of real GDP and accounted for 20.4% of employment in Québec. In terms of real GDP, the construction industry recorded a 2.6% increase in 2006 over 2005, despite a 6.0% reduction in housing starts. Real GDP in manufacturing decreased by only 0.2% in 2006 despite a 5.6% employment decrease in that industry. The total value of manufacturers’ shipments increased by 2.9% to $141.1 billion in 2006, representing 24% of total Canadian shipments. The value of shipments of primary metals increased by 26.5% in 2006, due to a strong world demand. Durable goods accounted for 53.1% of manufacturers’ shipments and 56.5% of manufacturing employment. The leading manufacturing industries in Québec are primary metal products (including aluminum smelting), transportation equipment products (including aircraft and motor vehicles and associated parts), petroleum and coal products, food products, chemical products, paper products and fabricated metal products. As a result of its competitive advantage in low-cost electricity production, Québec is one of the world’s leading producers of aluminum.

11

Table 3

Value of Manufacturers’ Shipments (1)
	2002	2003	2004	2005	% of Total 2005	2006	% of Total 2006
	(dollar amounts in millions)
Primary metals	$13,740	$13,060	$14,859	$15,388	11.2%	$19,460	13.8%
Transportation equipment	15,692	14,879	14,084	15,762	11.5	16,028	11.4
Petroleum and coal	7,085	8,064	9,918	13,598	9.9	14,791	10.5
Food	14,549	15,360	15,138	14,270	10.4	14,642	10.4
Chemicals	8,343	9,027	9,432	9,957	7.3	10,696	7.6
Paper	11,444	10,655	10,680	10,803	7.9	10,679	7.6
Fabricated metals	6,769	6,868	7,075	7,031	5.1	6,933	4.9
Wood	8,868	8,847	9,498	8,080	5.9	6,877	4.9
Plastics and rubber	5,930	6,257	6,182	6,217	4.5	6,108	4.3
Machinery	5,209	5,333	5,361	5,119	3.7	5,314	3.8
Computers and electronics	6,843	6,669	6,367	5,893	4.3	5,137	3.6
Electrical equipment, appliances and components	3,339	3,262	3,299	3,432	2.5	3,773	2.7
Other	25,811	25,552	23,623	21,492	15.7	20,644	14.6
	$133,625	$133,832	$135,517	$137,042	100.0%	$141,082	100.0%

⁽¹⁾     North American Industrial Classification System (NAICS).

Source: Statistics Canada.

Service Sector. The service sector includes a wide range of activities such as community, business and personal services, finance, insurance and real estate, wholesale and retail trade, governmental services, information and cultural services, transportation and warehousing, and other utility services. In 2006, the service sector contributed 71.8% of real GDP and accounted for 76.8% of employment in Québec.

In terms of real GDP, increases in the service sector in 2006 occurred in wholesale and retail trade (4.1%), finance, insurance and real estate (3.1%), information and cultural services (2.4%), governmental services (2.4%), community, business and personal services (2.0%) and transportation and warehousing (1.6%). A 0.7% decrease was recorded in other utility services.

Due to Québec’s large territory, transportation facilities are essential to the development of its economy. Water transportation is provided mainly through the St. Lawrence River Seaway. Approximately 24% of all international tonnage handled in Canadian ports in 2004 (the most recent year for which information is available) passed through Québec’s shipping facilities. Highway, rail and air transportation systems service the populated areas, with higher concentrations in the metropolitan areas of Montréal and Ville de Québec.

The financial sector includes large Canadian and foreign financial institutions, Québec’s cooperative institutions and Government financial intermediary enterprises and fiduciary agencies (particularly the Caisse de dépôt et placement du Québec).

Capital Expenditures. In 2006, the value of capital expenditures by the private and public sectors increased by 3.0% in Québec. Total capital expenditures increased as a result of a 4.5% increase in non-residential investment and of a 0.3% increase in residential investment. Concerning non-residential investment, increases were 8.9% in the public sector and 1.2% in the private sector.

The increase in non-residential investment resulted in large part from increases in mining and oil and gas extraction (14.1%), information, cultural and other utilities (8.8%), finance, insurance and real estate operators (7.4%), business services, accommodation and other services (6.7%), wholesale and retail trade (5.5%), governmental, educational, health and social services (4.4%), construction (0.9%) and transportation and warehousing (0.8%). These increases were partially offset by decreases in manufacturing (-5.3%) and in agriculture, forestry, fishing and hunting (-3.0%).

12

Table 4

Private and Public Sectors Capital Expenditures in Québec (1)
	2002	2003	2004	2005	% of Total 2005	2006	% of Total 2006
	(dollar amounts in millions)
Non-residential Investment:
Governmental, educational, health and social services	$6,340	$6,436	$6,959	$7,735	15.6%	$8,079	15.8%
Finance, insurance and real estate operators	4,856	4,788	6,170	5,969	12.1	6,412	12.6
Information, cultural and other utilities	4,245	4,607	5,977	5,787	11.7	6,298	12.4
Manufacturing	4,490	5,081	4,713	4,124	8.3	3,905	7.7
Wholesale and retail trade	2,207	2,247	2,351	2,384	4.8	2,514	4.9
Business services, accommodation and other services	2,113	2,221	2,103	2,065	4.2	2,203	4.3
Transportation and warehousing	1,865	1,549	1,821	1,808	3.7	1,823	3.6
Construction	853	945	1,086	1,104	2.2	1,114	2.2
Mining and oil and gas extraction	559	534	635	724	1.5	826	1.6
Agriculture, forestry, fishing and hunting	971	768	716	692	1.4	671	1.3
	$28,499	$29,176	$32,531	$32,392	65.5%	$33,845	66.4%
Residential Investment	12,244	14,309	17,236	17,078	34.5	17,123	33.6
	$40,743	$43,485	$49,767	$49,470	100.0%	$50,968	100.0%
Private sector	$31,040	$33,422	$38,553	$37,463	75.7%	$37,899	74.4%
Public sector	9,703	10,063	11,214	12,007	24.3	13,069	25.6
	$40,743	$43,485	$49,767	$49,470	100.0%	$50,968	100.0%

⁽¹⁾    North American Industrial Classification System (NAICS).

Source: Statistics Canada.

Exports and Imports.  In 2006, Québec’s exports of goods and services totaled $151.5 billion, of which $95.5 billion (63.1%) were international exports and $56.0 billion (36.9%) were inter-provincial exports. Québec’s international exports represented 18.2% of Canada’s total exports. Québec’s imports of goods and services totaled $159.9 billion, of which $101.3 billion (63.4%) were international imports and $58.6 billion (36.6%) were inter-provincial imports. Québec’s international imports represented 20.8% of Canada’s total imports. In 2006, Québec’s external sector (as defined under the Provincial Economic Accounts of Statistics Canada) registered an overall deficit of $8.4 billion, a net result of a deficit of $5.8 billion on international trade and a deficit of $2.6 billion on inter-provincial trade. In 2005, Québec registered an overall deficit of $8.4 billion, a net result of a deficit of $3.7 billion on international trade and a deficit of $4.7 billion on inter-provincial trade. The deficit in 2006 reflects mainly the impact of a strong Canadian dollar on international trade and a surge in oil prices. A strong Canadian dollar resulted in lower Canadian dollar prices for export goods that are normally traded in U.S. dollars, which put downward pressure on the value of exports. The value of imports was boosted by a strong domestic economy and a surge in oil prices. Imports, excluding crude oil, were also stimulated by a decline in Canadian dollar prices of imports resulting from a strong Canadian dollar.

International exports of goods originating from Québec, calculated by the Institut de la statistique du Québec from data on Canada’s total exports of goods, were $73.2 billion for 2006, compared with $71.0 billion for 2005, representing an increase of 3.0%. Increases occurred in 2006 in the value of exports of copper and alloys (86.1%), aluminum and alloys (33.8%), scientific equipment (23.7%), motor vehicles and associated parts (12.0%), chemical products (5.8%), machinery (1.9%) and newsprint and printing paper (1.5%). These increases were partially offset by decreases in the value of exports of electronic products (-20.3%), lumber and wood products (-15.2%), tools and other equipment (-6.4%) and aircraft and associated parts (-5.6%), mainly due to lower Canadian dollar prices received for these goods that are normally quoted in U.S. dollars.

13

The United States is Québec’s principal international export market, accounting for 77.6% of the international exports of goods in 2006.

Table 5

Québec’s International Exports of Goods
	2002	2003	2004	2005	% of Total 2005	2006	% of Total 2006
	(dollar amounts in millions)
Aircraft and associated parts	$10,428	$10,960	$9,373	$9,563	13.5%	$9,028	12.3%
Aluminum and alloys	5,266	5,194	5,254	5,888	8.3	7,879	10.8
Newsprint and printing paper	3,975	3,652	3,839	4,055	5.7	4,114	5.6
Electronic products	4,639	4,336	4,903	4,894	6.9	3,902	5.3
Lumber and wood products	3,474	3,175	3,991	3,615	5.1	3,064	4.2
Chemical products	2,045	1,850	2,606	2,892	4.1	3,059	4.2
Copper and alloys	727	631	1,196	1,504	2.1	2,799	3.8
Machinery	1,990	2,095	2,291	2,485	3.5	2,533	3.5
Motor vehicles and associated parts	2,965	1,917	1,944	2,091	2.9	2,341	3.2
Tools and other equipment	2,429	2,255	2,327	2,266	3.2	2,122	2.9
Scientific equipment	1,326	1,029	1,193	1,354	1.9	1,675	2.3
Other goods	29,190	27,096	29,558	30,417	42.8	30,653	41.9
Total	$68,454	$64,191	$68,476	$71,026	100.0%	$73,169	100.0%

Source: Institut de la statistique du Québec.

Table 6

Québec’s International Imports of Goods
	2002	2003	2004	2005	% of Total 2005	2006	% of Total 2006
	(dollar amounts in millions)
Mineral fuels, mineral oils, bituminous substances and mineral waxes	$8,302	$9,759	$11,207	$16,947	21.9%	$18,302	22.7%
Motor vehicles, trailers, bicycles, mortorcycles and other similar vehicles	10,650	10,366	10,354	10,669	13.8	11,278	14.0
Nuclear reactors, boilers, machinery and mechanical appliances	8,563	8,075	8,573	9,252	12.0	8,934	11.1
Electrical or electronic machinery and equipment	7,325	6,963	7,714	7,928	10.3	7,217	8.9
Pharmaceutical products	1,678	2,586	2,170	2,264	2.9	2,698	3.3
Aircrafts and spacecrafts	2,177	1,799	1,886	2,140	2.8	2,173	2.7
Inorganic chemicals and compounds of precious metals and radioactive elements	1,272	1,262	1,287	1,568	2.0	1,947	2.4
Plastics and articles thereof	1,480	1,419	1,544	1,675	2.2	1,719	2.1
Optical, medical, photographic, scientific and technical	1,762	1,699	1,777	1,608	2.1	1,662	2.1
Copper and articles thereof	249	414	845	1,174	1.5	1,434	1.8
Organic chemicals (including vitamins, alkaloids and antibiotics)	1,387	1,344	1,555	1,583	2.1	1,396	1.7
Other goods	18,653	18,195	20,097	20,407	26.4	21,997	27.2
Total	$63,499	$63,881	$68,476	$77,216	100.0%	$80,757	100.0%

Source: Institut de la statistique du Québec.

14

Table 7

Selected Trade Indicators for Québec
	2002	2003	2004	2005	2006
		(millions of dollars unless otherwise indicated)
Exports of Goods and Services	141,507	134,737	138,441	144,045	151,489
Exports to other countries	92,929	84,893	87,633	91,945	95,522
Exports of goods to other countries	80,441	72,553	75,131	79,260	82,584
Exports of services to other countries	12,488	12,340	12,502	12,685	12,938
Exports to other provinces	48,578	49,844	50,808	52,100	55,967
Exports of goods to other provinces	30,531	31,190	31,442	31,885	34,122
Exports od services to other provinces	18,047	18,654	19,366	20,215	21,845
Ratio of Exports to Nominal GDP	58.6%	53.8%	5.,6%	52.7%	53.3%
Imports of Goods and Services	137,307	136,940	143,333	152,447	159,901
Imports from other countries	87,078	84,365	87,991	95,688	101,310
Imports of goods from other countries	75,926	73,130	76,547	84,242	88,997
Imports of services from other countries	11,152	11,235	11,444	11,446	12,313
Imports from other provinces	50,229	52,575	55,342	56,759	58,591
Imports of goods from other provinces	29,089	30,685	32,103	32,373	32,520
Imports of services from other provinces	21,140	21,890	23,239	24,386	26,071
Source: Statistics Canada, Provincial Economic Accounts

Labor Force. In 2006, the labor force was estimated at 4.1 million persons, an increase of 1.0% from 2005. The labor force participation rate for 2006 was estimated at 65.5% in Québec, compared with 67.2% in Canada. Total employment increased by 1.3% in 2006 in Québec, compared with an increase of 1.9% in Canada. The unemployment rate in Québec decreased from 8.3% in 2005 to 8.0% in 2006, compared with a decrease from 6.8% to 6.3% in Canada for the same period.

Energy. Of the total energy consumed in Québec in 2004 (the most recent year for which information is available), energy derived from oil accounted for 38.8 %, electricity for 38.6 %, natural gas for 12.3 %, biomass for 9.3 % and coal for 1.0 %.

Québec generates approximately one-third of all electricity produced in Canada and is one of the largest producers of hydroelectricity in the world. In 2006, more than 96 % of all electricity produced in Québec was from hydroelectric installations. More than 43,600 megawatts (“MW”) of hydroelectric capacity (including the capacity of independent producers and the firm capacity currently available from Churchill Falls (Labrador) Corporation Limited) have been or are in the process of being developed. Of the total electricity produced in Québec in 2006, 9.0 % was exported to the United States and to other Canadian provinces, compared with 8.5 % in 2005.

15

Free Trade Agreements

Canada is a member of the World Trade Organization (“WTO”) and has also signed other trade agreements in order to promote commerce with economic partners. In 1989, the United States and Canada entered into a free trade agreement (“FTA”), which has led to the gradual elimination of tariffs on goods and services between the two countries and to the liberalization of trade in several sectors including the energy sector. The FTA provides for a binding binational review of domestic determinations in antidumping and countervailing duty cases and for binational arbitration of disputes between Canada and the United States as to either’s compliance with the FTA or with the rules of the WTO. In 1994, Canada, the United States and Mexico signed a similar free trade agreement, the North American Free Trade Agreement (“NAFTA”), which resulted, with a few exceptions, in the gradual elimination by 2003 of tariffs on goods and services among Canada, the United States and Mexico. In April 1998, negotiations were undertaken between countries of the Americas (North, Central and South) to reach a new trade agreement by January 1, 2005 (Free Trade Area of the Americas or “FTAA”). Although the January 1, 2005 deadline has expired, negotiations for the FTAA are continuing. In other bilateral initiatives, Canada entered into similar free trade agreements in 1997 with Chile and Israel, in 2000 with Costa Rica and in 2007 with Norway, Switzerland, Iceland and Liechtenstein.

Softwood Dispute.  In April 2001, a coalition of American lumber producers and various labor unions filed a petition with the U.S. Department of Commerce (“DoC”) and the U.S. International Trade Commission (“ITC”) alleging that softwood lumber imports from Canada were subsidized by the federal and provincial governments. As a result, in early 2002, the DoC and the ITC established countervailing duties (“CVD”) and antidumping duties (“AD”) on softwood lumber imports. The Government and the federal government have consistently denied these allegations, and the federal government and the Canadian lumber industry challenged the U.S. measures under NAFTA and WTO agreements. A NAFTA panel and a WTO panel have issued various rulings in connection with these challenges, to which DoC and ITC have responded. Over this period, the rates of CVD and AD have changed several times, and the combined rates have varied from 10.8% to 27.22%. On December 6, 2005, as a result of an administrative review, the combined rate dropped to 10.8%, representing a CVD rate of 8.7% and an AD rate of 2.1%. The U.S. government and Canada subsequently entered into a Softwood Lumber Agreement that came into effect on October 12, 2006 (“SLA”).

Under the terms of the SLA 2006, Canadian lumber exports from provinces covered by the dispute are subject to an export charge only (Option A) or an export charge plus volume restraint (Option B) if the prevailing monthly price of lumber (as defined in the SLA 2006) drops below US$355 per thousand board feet. The total volume of permitted exports, which takes into account anticipated demand in the United States, is allocated to the concerned provinces. Provincial quotas are calculated on the basis of the share of lumber exports over the period from April 1, 2001 to December 31, 2005.

Québec’s choice of Option B involves:

• no charge and no volume restraint, if the price of lumber is over US$355;

• a 2.5 % export charge and Québec’s volume cannot exceed a share of 34% of Expected U.S. Consumption for the month, if the price of lumber is between US$336 and US$355;

• a 3 % export charge and Québec’s volume cannot exceed a share of 32% of Expected U.S. Consumption for the month, if the price of lumber is between US$316 and US$335;

• a 5 % export charge and Québec’s volume cannot exceed a share of 30% of Expected U.S. Consumption for the month, if the price of lumber is US$315 or below.

Since July 2006, the reference price index (Random Lengths Framing Lumber Composite) has been below US$315.

• The United States revoked retroactively AD and CVD duties for Softwood Lumber products from Canada as of May 22, 2002. Following the revocation, duties collected of US$ 5.6 billion were refunded to Canada.

However, under a mechanism agreed in the SLA 2006, US$1.0 billion was returned to the United States to be spent as follows:

— US$500 million to go to the members of the U.S. Coalition for Fair Lumber Imports;

— US$450 million to be spent in the United States on jointly agreed Canada-United States initiatives; and

— US$50 million will go to an initiative benefiting the North American lumber market.

Unless terminated by either party after two years, the SLA 2006 is to remain in force for 7 years and may be renewed for an additional 2 year period.

On March 30, 2007, the United States requested formal consultations under the dispute settlement mechanism of SLA 2006. These consultations cover several matters including Canada’s application of export charges and volume restraints as well as certain federal and provincial assistance programs to the lumber industry.

16

Government Finances

Financial Administration

The Minister of Finance is responsible for the general administration of the Government’s finances. The Financial Administration Act, the Balanced Budget Act and the Act to establish a budgetary surplus reserve fund govern the management of public monies of Québec and the Public Administration Act governs the management of financial, human, physical and information resources of the Administration. Since January 2007, the Minister of Finance also manages the Generations Fund. This fund was established in June 2006 pursuant to the Act to reduce the debt and establish the Generations Fund, in order to reduce the Government’s debt burden. The Conseil exécutif issues Orders in Council that authorize the Minister of Finance to enter into financial contracts, including those related to borrowings by the Government. The Conseil du trésor determines the accounting policies. The accounts of the Government are kept on a modified accrual basis. The fiscal year of the Government ends March 31. The Auditor General is responsible for the auditing of the consolidated financial statements of the Government and reporting annually to the National Assembly. In his report included in the Public Accounts attached as Exhibit 99.8 of the 18-K/A dated October 30, 2006, the Auditor General stated that he conducted his audit of the consolidated financial statements of the Government for the year ending March 31, 2006 in accordance with Canadian generally accepted auditing standards, except for certain limitations mentioned in such report. All revenues and monies over which the Parliament has power of appropriation form the Consolidated Revenue Fund of Québec. The Budget and appropriations from the Consolidated Revenue Fund and consolidated organizations are published at the beginning of each fiscal year.

Transactions are classified as “budgetary”, “non-budgetary” or “financing”:

• budgetary transactions include:

With respect to the Consolidated Revenue Fund:

– revenue consisting of taxes, duties and permits, net results from Government enterprises ⁽¹⁾, transfers from the federal government and miscellaneous sources; and

– expenditure consisting of operating expenditures for goods and services which include, among other things, transfer payments, remuneration and debt service.

With respect to consolidated organizations ⁽²⁾:

– the net result of their self-generated revenues less their expenditures offset by transfers from the Consolidated Revenue Fund.

• non-budgetary transactions include changes in the balances of investments, loans and advances made by the Government, particularly to its own enterprises, changes in net fixed assets made by the Government, changes in the retirement plans liability and changes in other accounts.

• financing transactions include changes in cash position, changes in net borrowings, changes in the retirement plans sinking fund and changes in the Generations Fund.

The Balanced Budget Act is designed to ensure that over time and on a cumulative basis the Government maintains budgetary balance. Any sum lacking for meeting the budgetary balance or surplus objectives determined by the Act (an “overrun”) of less than $1 billion in a fiscal year must be offset by the Government in the next fiscal year. If an overrun exceeding $1 billion stems from any of the exceptional circumstances defined in the Act, the Government may exceed the deficit objective for more than one year, but must offset the overrun over a maximum period of five years. If the Government achieves an accumulated surplus, it may then incur overruns to the extent of that accumulated surplus. However, if the Government is operating under an offsetting financial plan, it must apply any surplus to offset any already recorded or anticipated overruns.

Under the Act to establish a budgetary surplus reserve fund, a surplus may be appropriated to a budgetary reserve fund that may be used for capital projects or projects of defined duration or for other projects approved by the Government for a public interest purpose. The amounts paid into the reserve remain under full Government control.

For Fiscal 2004, a balanced budget was achieved, prior to the consideration of exceptional losses of $358 million of the SGF. For Fiscal 2005, a deficit of $664 million was incurred. Notwithstanding the overruns in Fiscals 2004 and 2005, the Government remains in compliance with the Balanced Budget Act as a result of the accumulated surpluses achieved through the end of Fiscal 2003. In Fiscal 2006, the consolidated budgetary balance for the purposes of the Balanced Budget Act was a surplus of $37 million and the preliminary results for Fiscal 2007 represent a surplus of $29 million. The 2007-2008 Budget provides for a balanced budget to be maintained for Fiscal 2008.

⁽¹⁾ A Government enterprise is a separate legal entity that has the authority to enter into contracts in its own name and to go before a court. Its main activity is the sale of goods or the delivery of services to individuals or to organizations not included in the Government’s reporting entity.

⁽²⁾ Consolidated organizations are those entities required to report to the National Assembly for the management of their operations and for the use of their financial resources. They include organizations and special funds that pursue objectives complementary to governmental programs but exclude Government enterprises. From an administrative and accounting point of view, consolidated organizations are under the direct control of the Government and form entities distinct from the Consolidated Revenue Fund.

17

The following table summarizes the consolidated financial transactions of the Government for the three years ended March 31, 2006, the preliminary results for Fiscal 2007 and the budget forecast for Fiscal 2008.

Table 8

Summary of Consolidated Financial Transactions (1)
	Year ending March 31
	2004	2005	2006	Preliminary   Results 2007	Budget   Forecast   2008 (1)
	(dollar amounts in millions)
Budgetary transactions of the Consolidated Revenue Fund
Own-source revenue (2) (3)	$42,278	$44,381	$45,743	$49,290	$47,953
Federal transfers (4)	9,370	9,229	9,969	11,015	13,174
Total revenue	51,648	53,610	55,712	60,305	61,127
Program spending	(45,339)	(47,656)	(49,229)	(51,769)	(53,913)
Debt service	(6,655)	(6,853)	(6,875)	(6,967)	(7,244)
Total expenditure	(51,994)	(54,509)	(56,104)	(58,736)	(61,157)
Additional deposit in the Generations Fund	—	—	—	(500)	(200)
Allocation to the budgetary reserve	—	—	—	(1,300)	—
Use of part of the budgetary reserve	—	—	—	—	200
Net results of Consolidated Revenue Fund	(346)	(899)	(392)	(231)	(30)
Net results of consolidated organizations	346	235	429	260	30
Exceptional losses of the SGF (3)	(358)	—	—	—	—
Consolidated budgetary balance for the purposes of the Balanced Budget Act	(358)	(664)	37	29	0
Net results of Generations Fund(5)	—	—	—	578	653
Consolidated budgetary balance (6)	(358)	(664)	37	607	653
Consolidated non-budgetary transactions
Investments, loans and advances	(1,125)	(979)	(1,182)	(2,165)	(1,527)
Fixed Assets	(1,019)	(1,083)	(1,166)	(1,394)	(1,980)
Retirement plans	2,219	2,134	2,310	2,418	2,129
Other accounts (7)	(1,183)	174	(208)	(444)	287
Consolidated non-budgetary requirements	(1,108)	246	(246)	(1,585)	(1,091)
Consolidated net financial requirements	$(1,466)	$(418)	$(209)	$(978)	$(438)
Consolidated financing transactions
Change in cash position (8)	2,316	(831)	49	(3,428)	6,069
Net borrowings (9)	1,514	5,378	4,390	9,424	(102)
Retirement plans sinking fund (10)	(2,364)	(4,129)	(4,230)	(4,440)	(4,876)
Generations Fund (5)	—	—	—	(578)	(653)
Total consolidated financing transactions	$1,466	$418	$209	$978	$438

⁽¹⁾ The categories set forth reflect the presentation of the 2007-2008 Budget (as amended by the Ministerial Statement as of June 1, 2007).

⁽²⁾ In December 2003, the Government decided to separate the insurance mission of the Société de l’assurance automobile du Québec (“SAAQ”) from its other mandates. Accordingly, funds collected for this mission now constitute a trust separate from the amounts collected for other activities. Legislation was enacted by the National Assembly in December 2004 that provided for the transfer of the insurance mission patrimony as of December 31, 2003 to a trust fund, the Fonds d’assurance automobile du Québec, on January 1, 2004. In return, the trust fund assumed almost all of the SAAQ’s liabilities as of December 31, 2003. Since this trust fund is not included in the Government’s reporting entity, the Government wrote off its negative investment of $412 million in the SAAQ on January 1, 2004. The net impact of this change was to increase revenue by $160 million, given the SAAQ’s $252 million deficit for the period from April 1, 2003 to December 31, 2003.

⁽³⁾ In Fiscal 2004, provincial own-source revenue excludes the exceptional losses of the Société générale de financement du Québec (“SGF”).

⁽⁴⁾ Federal transfers are presented on a cash basis until Fiscal 2005 and on an accrual basis thereafter.

⁽⁵⁾ The Generations Fund was created in June 2006 by the adoption of the Act to reduce the debt and establish the Generations Fund and is a separate entity from the Consolidated Revenue Fund. This law establishes the fund as a permanent tool for reducing the debt burden. In addition, it stipulates that the monies accumulated in the Generations Fund are dedicated exclusively to repaying the debt.

⁽⁶⁾ The Consolidated budgetary balance for Fiscal 2005 includes a budgetary surplus of $9 million before a provision of $673 million for pay equity charged to program spending. With this provision, which covers the period from November 21, 2001 to March 31, 2005, the budgetary deficit amounts to $664 million.

⁽⁷⁾ Reflects year-to-year changes in accounts payable and receivable, cash on hand and outstanding bank deposits and checks.

⁽⁸⁾ A positive number indicates a net decrease in cash.

⁽⁹⁾ Represents mainly new borrowings of $7,546 million, $12,404 million, $11,569 million, $15,207 million and $5,930 million for each of Fiscal 2004 through 2008, respectively, less repayment of borrowings.

⁽¹⁰⁾ This sinking fund receives amounts to be used to cover retirement benefits payable by the Government under the public and parapublic sector retirement plans. (see “Consolidated Non-Budgetary Transactions Relating to Retirement Plans”).

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2006-2007 Preliminary Results

Preliminary results for the Government’s financial transactions in Fiscal 2007 indicate that a balanced budget was achieved.

The revenue of the Consolidated Revenue Fund for Fiscal 2007 is expected to be $2,404 million higher than forecast in the 2006-2007 Budget. Excluding Government enterprises, the upward adjustment to own-source revenue amounts to $714 million. This adjustment reflects mainly the higher-than-expected revenue from personal income tax and corporate taxes partly offset by decreases in contributions to the Health Services Fund and revenue from consumption taxes. The profits of Government enterprises were revised upward by $1,471 million, notably because of the additional profits of $1,543 million earned by Hydro-Québec, of which $944 million derive from the sale of its interests in certain enterprises. For federal transfers, the $219 million increase is due primarily to additional equalization revenues of $185 million stemming from the federal budget of May 2006. Expenditure of the Consolidated Revenue Fund was revised upward by $658 million compared with the forecasts of the 2006-2007 Budget. The level of program spending (expenditures excluding debt service) set for Fiscal 2007 was revised upward by $896 million. This increase is mainly due to the increase of $248 million in the allowance for doubtful accounts regarding tax collection, $242 million as a result of spreading the pay equity settlement over seven payments rather than eight and $210 million in additional spending for health and social services. The debt service was revised downward by $238 million primarily because medium- and long-term interest rates were lower than anticipated and the Canadian dollar was stronger than expected versus the yen and the U.S. dollar.

The net results of consolidated organizations amount to $260 million, an increase of $83 million compared with the results forecast in the 2006-2007 Budget.

The net results of the Generations Fund for Fiscal 2007 are expected to be $578 million. The $504 million increase is due primarily to an additional deposit by the Government of $500 million from the gain arising from Hydro-Québec’s sale of its interest in Transelec Chile.

2007-2008 Budget

The Government’s financial framework is based on the maintenance of a balanced budget, as required by the Balanced Budget Act. The Government expects net financial requirements of $438 million in 2007-2008. The net financial requirements of consolidated organizations amount to $1,591 million while net financial surpluses are budgeted to be $500 million for the Consolidated Revenue Fund and $653 million for the Generations Fund.

In 2007-2008, total revenue of the Consolidated Revenue Fund is forecast to be $61,127 million, an increase of 1.4% compared with the preliminary results for 2006-2007. Excluding Government enterprises, own-source revenue is budgeted at $43,328 million, a 0.6% growth compared with 2006-2007. For personal income tax, the most important source of revenue, a slight decrease of 0.5% is expected. The progression in income subject to tax will be more than offset by the impact of the fiscal measures announced in the 2007-2008 Budget and previous budgets and by the non-recurrence of revenue from the retroactive adjustments paid in regard to pay equity and the distribution of source deductions in 2006-2007 in respect of previous years. The profits of Government enterprises are budgeted at $4,625 million, a decrease of 25.8% mainly due to reduced profitability (to a more normal level) at Hydro-Québec in 2006-2007. Nearly 79% of total revenue comes from own-source revenue. Federal transfers are expected to increase by 19.6% ($13,174 million). This increase is due mainly to the changes to federal transfers announced in the March 2007 federal budget, notably the reform of the equalization program.

The Government’s expenditure is expected to total $61,157 million in Fiscal 2008, 4.1% higher than the preliminary results of Fiscal 2007. Program spending will increase by 4.1% to $53,913 million. The growth in program spending is allocated mainly to the health and social services sector and the education sector. The ratio of the Government’s program spending to GDP is budgeted to decrease to 18.2% in 2007-2008. Total debt service is expected to increase by 4.0% to $7,244 million, and this change can be explained mainly by the anticipated decline in the value of the Canadian dollar in relation to the various currencies that make up the debt, and by the anticipated increase in interest rates. The portion of consolidated revenue allocated to consolidated debt service is budgeted to represent 11.9% in 2007-2008, a decline from 13.7% in 2002-2003.

The consolidated organizations are budgeted to provide net results of $30 million in 2007-2008, a decrease of $230 million compared with net results recorded in 2006-2007 due mainly to unfavorable conditions in the agriculture and agri-food sectors, generating increased pressure on the cost of protection programs of La Financière agricole du Québec.

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The projections in the 2007-2008 Budget reflect the following assumptions regarding the economy of Québec for 2007.

Table 9

Economic Assumptions included in the 2007-2008 Budget for the Year 2007
	Percentage Change       over 2006
GDP:
At current market prices	4.2
In chained 1997 dollars	1.8
Personal income	5.2
Business non-residential capital expenditures (1997 prices)	4.0
Consumer expenditures	3.1
Labor force	1.1
Employment	1.3
	Average Rate
Unemployment rate	7.8

Source:	Ministère des Finances du Québec.
Note:	Economic assumptions, such as those included in the table above in this report and in all amendments to this report, are developed by Québec for and are a necessary part of the budget process. Actual results may differ materially from these assumptions.

20

Consolidated Revenue Fund Revenue

The following table shows own-source revenue and federal transfers by source for the Consolidated Revenue Fund.

Table 10

Consolidated Revenue Fund Revenue
	Year ending March 31
	2004	2005	2006	Preliminary Results 2007	Budget Forecast 2008	% of Total 2008
	(dollar amounts in millions)
Own-source revenue
Income and property taxes
Personal income tax	$15,715	$16,324	$16,449	$18,136	$18,045	29.5%
Contributions to the Health Services Fund	4,649	4,874	5,047	5,075	5,408	8.9
Corporate taxes	3,892	4,253	4,786	4,796	4,729	7.7
	24,256	25,451	26,282	28,007	28,182	46.1
Consumption taxes
Retail sales	8,658	9,241	9,614	9,818	10,020	16.4
Fuel	1,685	1,711	1,657	1,680	1,701	2.8
Tobacco	889	901	752	668	649	1.1
Alcoholic beverages	409	403	415	422	438	0.7
	11,641	12,256	12,438	12,588	12,808	21.0
Duties and permits
Motor vehicles	707	713	725	746	758	1.2
Natural resources	108	238	210	70	(46)	(0.1)
Other	206	209	203	179	179	0.3
	1,021	1,160	1,138	995	891	1.4
Miscellaneous
Sales of goods and services	399	371	383	396	391	0.6
Interest	317	355	463	583	578	0.9
Fines, forfeitures and recoveries	471	442	485	492	478	0.8
	1,187	1,168	1,331	1,471	1,447	2.3
Revenue from government enterprises (1) (2)
Société des alcools du Québec	571	546	657	710	745	1.2
Loto-Québec	1,393	1,511	1,537	1,391	1,329	2.2
Hydro-Québec	2,049	2,140	2,323	4,043	2,545	4.2
Other (3)	160	149	37	85	6	—
	4,173	4,346	4,554	6,229	4,625	7.6
Total own-source revenue (1)	42,278	44,381	45,743	49,290	47,953	78.4
Federal transfers (4) (5)
Equalization	4,065	5,221	4,798	5,539	7,160	11.7
Canada Health and Social Transfer	4,266	—	—	—	—	—
Health transfers	—	2,422	3,185	3,649	3,698	6.1
Transfers for post-secondary education and other social programs	—	926	1,034	1,070	1,371	2.2
Other programs	1,039	660	952	757	945	1.6
Total federal transfers	9,370	9,229	9,969	11,015	13,174	21.6
Total revenue	$51,648	$53,610	$55,712	$60,305	$61,127	100.0%

⁽¹⁾ In Fiscal 2004, revenue from Government enterprises excluded the exceptional losses of the Société générale de financement du Québec (“SGF” ).

⁽²⁾ Includes the dividends declared and the changes in surpluses or deficits accumulated by Government enterprises, which are consolidated with a corresponding revaluation of the investment held by the Government. The declared dividends were $3,029 million, $3,406 million, $3,320 million and $4,443 million for each of Fiscal 2004 through 2007, respectively, and are budgeted to be $3,446 million for Fiscal 2008.

⁽³⁾ In December 2003, the Government decided to separate the insurance mission of the Société de l’Assurance automobile du Québec (“SAAQ”) from its other mandates. Accordingly, funds collected for this mission now constitute a trust separate from its other mandates. Legislation was enacted by the National Assembly in December 2004 that provided for the transfer of the insurance mission patrimony as of December 31, 2003 to a trust fund, the Fonds d’assurance automobile du Québec, on January 1, 2004. In return, the trust fund assumed almost all of the SAAQ’s liabilities as at December 31, 2003. Since this social trust is not included in the Government’s reporting entity, the Government wrote off its negative investment of $412 million in the SAAQ on January 1, 2004. The net impact of this change was to increase revenue by $160 million, considering the SAAQ’s $252 million deficit for the period from April 1, 2003 to December 31, 2003.

⁽⁴⁾ The 2005-2006 Budget adopted a new way of presenting the Government’s federal transfer revenues. Changes were made to the list of programs to reflect the federal government’s restructuring of major transfer programs starting in 2004-2005. The federal government divided the Canada Health and Social Transfer (“CHST”) into two different programs in 2004-2005. Revenues from these two programs are entered as “Health Transfers” and “Transfers for post-secondary education and other social programs.” The total of these two items corresponds to the old item “CHST.”

⁽⁵⁾ Federal transfers are presented on a cash basis until Fiscal 2005 and on an accrual basis thereafter.

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Taxes. The Government and the federal government share the power to levy personal income taxes in Québec. The Government levies and collects its own personal income tax at rates ranging from 16% to 24% in three brackets.

In Québec, businesses are subject to a tax on profits, a tax on payroll and a tax on capital. A tax rate of 9.9% is applied to the profits of corporations. This general rate will increase to 11.4% in 2008 and to 11.9% in 2009. However, as of June 1, 2007, the rate will be 11.9% for financial institutions and oil companies. Small and medium-size enterprises (“SME”) are taxed at a reduced rate of 8% on the first $400,000 of profits. In addition, since the budget of February 20, 2007, the tax rate on investment income has been reduced from 16.25% to 9.9%, i.e., the general tax rate that currently applies.

The tax on capital is 0.49% for 2007 (0.525% in 2006). The May 24, 2007 budget announced a plan for the elimination of the tax on capital for all companies as of January 1, 2011. The rate will be reduced gradually on January 1 of each year. It will be 0.36% in 2008, 0.24% in 2009, 0.12% in 2010 and 0% as of 2011. The rate applicable to financial institutions is double the general rate and will be reduced proportionately over the same period. The basic exemption on paid-up capital applicable to SMEs remains at $1 million. A partial exemption applies for companies whose paid-up capital is greater than $1 million but less than $4 million.

To further encourage investments in the manufacturing sector, other measures have been introduced by Québec in the 2007-2008 Budget. The capital tax credit rate on new investments has been increased from 5% to 10% and its application has been extended until January 1, 2011. Under this measure, businesses in the manufacturing sector that make new investments in manufacturing and processing equipment will see their capital tax eliminated immediately. In addition, companies that make new investments in manufacturing and processing equipment can reduce their income tax through an increase in the rate of capital cost allowance for this type of asset. An increase in the rate of capital cost allowance applies to investments aimed at buildings, computer hardware and certain other assets.

A payroll tax is applied to finance the Health Services Fund. The tax rate is 2.7% for payrolls under $1 million. The rate increases proportionally from 2.7% to 4.26% for payrolls between $1 million and $5 million. For payrolls over $5 million, the tax rate is 4.26%.

Québec’s corporate tax system provides incentives for the development of the new economy (tax credits in research and development), encourages investment (partial tax holiday: ten years for manufacturing SMEs in remote resource regions) and supports secondary and tertiary processing activities in resource-based regions (including Abitibi-Témiscamingue, Bas-Saint-Laurent, Côte-Nord, Gaspésie-Îles-de-la-Madeleine, Mauricie, Nord-du-Québec and Saguenay-Lac-Saint-Jean).

The Québec Sales Tax (“QST”) is a multi-stage value-added tax that applies uniformly at each stage of the production and marketing of goods and services. A mechanism provides refunds of the tax paid on inputs at various stages of production in order to avoid double taxation. For large businesses, refunds of QST are not allowed on energy (unless used to produce movable property), telecommunications, road vehicles, fuel and meals and entertainment. The QST rate is set at 7.5%.

On June 30, 2003, the Grand Chief of the Assembly of First Nations of Québec and Labrador filed a motion in the Québec Superior Court for authorization to file a class action on behalf of all status Indians (except for James Bay Crees) who have paid Québec fuel tax since July 1, 1973 (the date on which this tax came into force) on purchases of fuel on a reserve in Québec. The Court authorized this class action in May 2007 but the class action has not been filed yet. Québec fuel tax legislation requires status Indians to pay the fuel tax embedded in the price of fuel at the pump but allows them to claim a rebate of the tax paid from the Québec Ministry of Revenue. The class action alleges that many status Indians failed to file a rebate claim for the fuel tax they paid and that the rebate system is not valid as the tax should not have been paid in the first place in view of the federal Indian Act, which exempts from taxes the property of a status Indian when it is located on a reserve. The amounts the class action could potentially involve have not yet been ascertained. The Grand Chief of the Assembly of First Nations of Québec and Labrador, and the Minister responsible for Aboriginal Affairs have publicly indicated their preference for a negotiated settlement of this issue.

Federal Transfers. Equalization revenues amount to more than half of the federal transfers. Equalization is designed to enable provincial governments to offer reasonably comparable levels of public services without having to impose unduly high taxation. In its March 2007 budget, the federal government announced a thorough reform of the equalization program on the basis of the recommendations made by the Expert Panel on Equalization and Territorial Formula Financing. Compared with the March 2006 budget, equalization revenues have been revised upward by $1.6 billion in 2007-2008 and close to $1.9 billion in 2008-2009.

The federal government contributes to the financing of provincial health programs by means of the Canada Health Transfer (“CHT”) and to post-secondary education and income security programs by means of the Canada Social Transfer (“CST”). The federal government divided the Canada Health and Social Transfer (“CHST”) into two different programs in

22

2004-2005. Revenues from these two programs are entered as “Health Transfers” and “Transfers for post-secondary education and other social programs.” The total of these two items corresponds to the old item “CHST.”

In its March 2007 budget, the federal government announced that the CST will be allocated, as of 2007-2008, on a purely per capita basis. The prior formula, which is being replaced, took into account the value of the tax points transferred to the provinces in 1977.

To implement this change without penalizing any province, the federal government decided to increase the cash transfers to the two provinces (Ontario and Alberta) that received less than the others because of the higher value of their tax points. Thus, Québec’s federal transfer revenues are not affected negatively by this change.

The federal government has undertaken to do the same thing for the CHT as of 2014-2015, once the health agreement signed by the First Ministers in September 2004 expires, also without penalizing any province.

In its March 2007 budget, the federal government also announced, for Canada as a whole, an increase in the CST of $1,050 million in 2008-2009, including $800 million for post-secondary education and $250 million for day-care centers. The federal government also announced that the CST for the provinces would be indexed by 3% per year as of 2009-2010. The CHT for the provinces is currently indexed by 6% per year.

Other federal transfers generally represent cost-sharing agreements for different provincial programs that relate to, among other things, the labor market, immigration and education.

23

Consolidated Revenue Fund Expenditure

The following table shows program spending and debt service (by mission) for the Consolidated Revenue Fund.

Table 11

Consolidated Revenue Fund Expenditure

	Year ending March 31
	2004	2005	2006	Preliminary Results 2007	Budget     Forecast     2008	% of Total 2008
	(dollar amounts in millions)
Economy and environment:
Transportation	$1,545	$1,634	$1,776	$1,943	$2,075	3.4%
Employment	816	817	815	839	800	1.3
Agriculture, fisheries and food	661	661	658	693	703	1.2
Environment	642	571	596	586	643	1.1
Other	1,706	1,687	1,937	1,928	2,095	3.4
	5,370	5,370	5,782	5,989	6,316	10.4
Education and culture:
Educational institutions	10,914	11,220	11,567	12,014	12,670	20.7
Culture and communications	512	526	536	592	617	1.0
Teachers pension plan	659	654	714	737	755	1.2
Other	129	120	115	124	111	0.2
	12,214	12,520	12,932	13,467	14,153	23.1
Health and social services:
Health and social services (1)	14,149	15,346	15,817	16,794	17,713	29.0
Régie de l’assurance-maladie du Québec (2)	4,877	5,236	5,346	5,648	6,136	10.0
	19,026	20,582	21,163	22,442	23,849	39.0
Support for individuals and families:
Income security	3,379	3,293	3,223	3,246	3,326	5.5
Other	1,669	1,735	1,836	1,942	2,020	3.3
	5,048	5,028	5,059	5,188	5,346	8.8
Administration and justice:
Public security	933	941	942	987	992	1.6
Revenue (3)	745	932	1,022	1,071	926	1.5
Municipal affairs	623	765	802	859	762	1.3
Justice	393	419	428	436	426	0.7
Retirement and insurance plans	325	304	300	347	326	0.5
Other (4)	662	795	799	983	1,046	1.7
	3,681	4,156	4,293	4,683	4,478	7.3
Anticipated lapsed appropriations	—	—	—	—	(150)	(0.3)
Deferred appropriations in 2008-2009	—	—	—	—	(79)	(0.1)
	—	—	—	—	(229)	(0.4)
Total program spending	45,339	47,656	49,229	51,769	53,913	88.2
Debt service:
Direct debt service	3,913	4,066	4,044	4,324	4,923	8.0
Interest ascribed to the retirement plans	2,742	2,787	2,831	2,643	2,321	3.8
Total debt service	6,655	6,853	6,875	6,967	7,244	11.8
Total expenditure	$51,994	$54,509	$56,104	$58,736	$61,157	100.0%

⁽¹⁾ Includes provisions for the cost of accrued benefits due from the Government for retirement plans.

⁽²⁾ Québec’s health insurance plan.

⁽³⁾   Ministry responsible for the administration of most of Québec’s tax laws and tax collection.

⁽⁴⁾ The amounts set aside for pay equity were reclassified to the respective missions in fiscal 2005, 2006 and 2007.

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Economy and Environment.  Expenditures are budgeted to increase by 5.5% in Fiscal 2008 from the preceding fiscal year. The rise in expenditures is primarily due to an increase in the debt service related to road infrastructure, following increased investments in the road system.

Transportation expenditures include payments to public transportation agencies, primarily in the form of support for the Montréal subway system, and expenditures for highway maintenance.

The Agriculture, Fisheries and Food program includes expenditures in the agricultural sector to assist farm production.

Expenditures categorized as “Environment” include mainly debt service for the water purification program and all expenditures related to sustainable development of the environment, environmental protection, conservation and development of wildlife and natural heritage.

A significant portion of the remaining economic programs is intended to promote and create employment. The Government’s fiscal policies with respect to job creation involve various measures, including investment tax credits designed to increase research and development in Québec and thereby indirectly create new jobs.

Education and Culture.  Expenditures are budgeted to increase by 5.1% in Fiscal 2008 from the preceding fiscal year. This increase will primarily serve to maintain the quality of services, through funding of structural expenditure growth in the educational systems. Expenditures in Fiscal 2007 for preschool, primary and secondary education, for college education and for university education are budgeted at $7,764 million, $1,677 million and $2,581 million, respectively.

Health and Social Services.  Expenditures are budgeted to increase by 6.3% in Fiscal 2008 from the preceding fiscal year. The budget increase will in particular fund growth in program costs, including health system costs and the impact of pay equity.

Support for Individuals and Families.  Expenditures are budgeted to increase by 3.0% in Fiscal 2008 from the preceding fiscal year. Support programs include income security for households lacking means of subsistence, funding for day-care services for children and legal assistance.

Administration and Justice.  Expenditures are budgeted to decrease by 0.4% in Fiscal 2008 from the preceding fiscal year. These expenditures include programs for civil protection, compensation of real estate taxes paid to municipalities on behalf of hospitals, schools and Government buildings and tax administration.

Debt service.  Expenditures are budgeted to increase by 4.0% in Fiscal 2008 from the preceding fiscal year. Direct debt service and interest on retirement plans are the two components of this category. The anticipated increase is due mainly to the projected decline in the value of the Canadian dollar in relation to the various currencies that make up the debt, and by the projected increase in interest rates.

Government Employees and Collective Unions

In Fiscal 2007, budgeted expenditures for salaries and wages cover more than 408,000 full-time equivalent employees who are either civil servants or school or hospital employees (of which 6% are not subject to collective bargaining agreements). These budgeted expenditures amount to $30 billion in Fiscal 2007.

On June 30, 2003, most of the collective agreements of the Government’s employees as well as contracts with its non-unionized employees expired. On June 18, 2004, the Government tabled an offer with respect to salaries to all unions represented. This offer called for compensation to increase by 12.6% from Fiscal 2005 through Fiscal 2010, including any further compensation which might arise from changes to the pay equity plan, described below.

From June 18, 2004 until December 15, 2005, the Government negotiated with union representatives as to working conditions and salaries under the various collective bargaining agreements. On December 15, 2005, the National Assembly adopted the Act respecting the Working Conditions in the Public Sector, which sets the working conditions and salaries for most of the Government employees covered by yet unrenewed collective agreements. In accordance with the Government’s budgetary framework, the act provides for a salary increase of 2% annually for Fiscal 2006 through Fiscal 2009.

On January 9, 2004, the Superior Court of Québec invalidated Chapter IX of the Pay Equity Act, which exempted from the application of this act any pay relativity plan completed prior to November 21, 1996. This decision rendered inoperative the pay equity plan previously implemented by the Government for public sector employees. Following the Court’s decision, the Government has revised its pay equity plan retroactively to November 2001. Pursuant to an agreement reached on June 20, 2006 and the decision of the Pay Equity Commission to allow the pay equity corrections to be spread out over a period of seven years, the Government has already accounted for $1.9 billion to cover pay equity costs for Fiscal 2002 through Fiscal 2006. Also, wage expenditures for pay equity will gradually rise to $825 million by Fiscal 2009.

25

Consolidated Non-Budgetary Transactions

The following table shows the distribution of the consolidated non-budgetary transactions.

Table 12

Consolidated Non-Budgetary Transactions

	Year ending March 31
	2004	2005	2006	Preliminary Results 2007	Budget   Forecast   2008
	(dollar amounts in millions)
Investments, loans and advances
Consolidated Revenue Fund
Government enterprises
Shares and investments	$274	$77	$27	(10)	(10)
Change in the equity value of investments (1)	(786)	(940)	(1,234)	(1,786)	(1,179)
Loans and advances	—	—	(45)	(50)	(97)
Total Government enterprises	(512)	(863)	(1,252)	(1,846)	(1,286)
Other	24	71	(231)	102	(99)
	(488)	(792)	(1,483)	(1,744)	(1,385)
Consolidated organizations	(637)	(187)	301	(421)	(142)
Total investments, loans and advances	(1,125)	(979)	(1,182)	(2,165)	(1,527)
Fixed assets
Consolidated Revenue Fund
Net investments	(159)	(178)	(160)	(314)	(349)
Depreciation	200	217	215	228	236
	41	39	55	(86)	(113)
Consolidated organizations	(1,060)	(1,122)	(1,221)	(1,308)	(1,867)
Total fixed assets	(1,019)	(1,083)	(1,166)	(1,394)	(1,980)
Retirement plans (2)
Contributions	5,373	5,412	5,827	5,951	6,028
Benefits and other payments	(3,154)	(3,278)	(3,517)	(3,533)	(3,899)
Total retirement plans	2,219	2,134	2,310	2,418	2,129
Other accounts
Consolidated Revenue Fund	(1,220)	56	(364)	(614)	(101)
Consolidated organizations	37	118	156	170	388
Total other accounts	(1,183)	174	(208)	(444)	287
Total consolidated non-budgetary transactions	$(1,108)	$246	$(246)	$(1,585)	$(1,091)

⁽¹⁾ Change in accumulated surpluses or deficits (i.e., change in net income (loss) after declared dividends to the Government).

⁽²⁾ See “Retirement Plans”.

Investments, Loans and Advances.  Investments, Loans and Advances represent capital contributions, loans or advances made to Government enterprises and agencies, municipalities, private corporations and individuals. Investments represent mainly equity transactions by the Government in its enterprises and also reflect the Government’s share in profits and losses of enterprises in which the Government holds capital stock. Loans and Advances are repayable to the Government, although not all repayment schedules have been set (see “Government Enterprises and Agencies”).

26

Fixed Assets.  The Government records fixed assets and depreciates them over their useful life. Fixed assets consist of acquisitions and dispositions and the cost of depreciation of the recorded value of these fixed assets.

Retirement Plans.  Retirement plans include transactions relating to the public sector retirement plans administered by the Government. The Government and Public Employees Retirement Plan (Régime de retraite des employés du gouvernement et des organismes publics or “RREGOP”) was established by the Government in 1973 for civil servants, teachers and employees in health and social services who opted to join the plan and all those who were hired after June 30, 1973. The Pension Plan for Management Personnel (Régime de retraite du personnel d’encadrement or “RRPE”) covers management and comparable personnel since January 1, 2001. Until then, those employees had participated in the RREGOP. RREGOP and RRPE cover 511,150 employees and other plans cover 12,628 employees as of December 31, 2006.

The Government accounts for its contributions (including those for current services and interest on the actuarial obligation for the plans) as a budgetary expenditure. This expenditure takes the form of provisions and is not generally a cash expenditure in the year. Accordingly, the impact of these contributions is to increase the budgetary deficit without affecting net financial requirements, since they are offset by an equal amount in non-budgetary transactions. The portion of benefits and other payments that are the responsibility of the Government are a claim on, and are payable out of, the Consolidated Revenue Fund.

In Fiscal 1994, the Government created the retirement plans sinking fund (“RPSF”) managed by the Caisse de dépôt et placement du Québec, which consists of a cash reserve that may eventually be used for paying the retirement benefits of public sector employees. In December 1999, the Government announced that it would accelerate its deposits to the RPSF to ensure that by 2020 the sums accumulated in this fund would be equal to 70% of the Government’s actuarial obligations, as shown in the Public accounts, through that date with respect to the retirement plans of public sector employees.

On December 19, 2001, several associations of executives participating in public and parapublic retirement plans filed a motion for a declaratory judgement asking the Québec Superior Court to declare that (i) the Government, in its financial statements, does not acknowledge the totality of its financial obligations as an employer pursuant to the Act respecting the Government and Public Employees Retirement Plan, (ii) the Government, in its financial statements, does not correctly record the amount of its financial commitments regarding the share of the cost of the RREGOP and that of the Pension Plan of Peace Officers in Correctional Services (Régime de retraite des agents de la paix en services correctionnels or “RRAPSC”), and (iii) the Government’s share of the cost in the funding of these plans creates a financial obligation for the Government as an employer, the value of which corresponds to the fund the Government would have accumulated had it paid its contributions since 1973 on the same basis used to determine the participants’ fund. On May 14, 2004, the petitioners amended this motion to withdraw the first two issues described above, retaining only the last issue.

On July 15, 2004, the Québec Superior Court rendered its decision on the motion for declaratory judgment concluding that (i) the Government adequately disclosed its financial commitments in accordance with the Guidelines of the Canadian Institute of Chartered Accountants regarding the share of the cost of the RREGOP, the RRPE and the RRAPSC, and (ii) the Government does not have an obligation, arising from the share of the cost of funding these plans, to apply the same actuarial basis as the one used to fund the participants’ pension account. The Court further concluded that, from the evidence adduced at bar, the pension patrimony of each participant did not suffer, at any time, any harm from the use of another actuarial basis. On August 13, 2004, the plaintiffs filed an appeal with the Québec Court of Appeal.

On April 7, 2006, various union organizations representing participants in the RREGOP filed a motion for a declaratory judgement with the Québec Superior Court to determine that (i) the RREGOP fund is constituted of the participants’ payroll contributions and contributions by the Government, (ii) the RREGOP fund constitutes a patrimony distinct from the Government, and (iii) the Government has a commitment in regards to the sharing of the cost of the RREGOP whose value corresponds to the fund it would have constituted had it paid its contributions since 1973 on the same bases as those used to determine the participants’ funds.

The appeal filed on August 13, 2004, regarding the first above-mentioned motion, will not be heard until the decision on the motion filed on April 7, 2006 is rendered.

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Table 13

Consolidated Non-Budgetary Transactions Relating to Retirement Plans

	Year ending March 31
	2004	2005	2006	Preliminary Results 2007	Budget Forecast 2008
	(dollar amounts in millions)
Contributions by the Government as employer
Cost of credited service (1)	$1,392	$1,370	$1,310	$1,429	$1,397
Amortization of actuarial losses	226	226	372	380	379
Total Government contributions	1,618	1,596	1,682	1,809	1,776
Contributions by independent employers and participants	151	102	84	59	55
Benefits, repayment and administration expenses	(3,154)	(3,278)	(3,517)	(3,533)	(3,899)
Interest on actuarial obligation (2)	3,604	3,714	4,061	4,083	4,197
Total retirement plans (3)	$2,219	$2,134	$2,310	$2,418	$2,129

⁽¹⁾ The Government covers costs at a rate of 50% for years of service since July 1, 1982 for the RREGOP and since January 1, 2001 for RRPE. For most of the other plans, the Government covers the difference between the cost of each plan and the contributions paid by participants (cost-balance pension plans). For years of service accumulated as of January 1, 2000, pension benefits will be adjusted based on the higher result from the following two calculations: inflation less 3% or half the inflation rate. Previously, pension benefits for years of service accumulated between 1982 and 1999 inclusive were adjusted by the inflation rate less 3%. Benefits for years of service accumulated before 1982 were adjusted by the inflation rate.

⁽²⁾ Excludes impact of the income from the retirement plans sinking fund of $862 million, $927 million, $1,230 million and $1,440 million for each of Fiscal 2004 through 2007, respectively. The income for Fiscal 2008 is expected to be $1,876 million.

⁽³⁾ The retirement plans liability, excluding the retirement plans sinking fund estimated at $27.0 billion, is estimated at $59.6 billion for Fiscal 2007, consisting of $37.1 billion in respect of RREGOP and RRPE and $22.5 billion in respect of the other public sector plans. These liabilities are estimated in accordance with the method recommended by the Public Sector Accounting and Auditing Board of the Canadian Institute of Chartered Accountants (“CICA”) regarding the accounting of public sector pension plans.

Other Accounts.  The transactions related to other non-budgetary accounts reflect year-to-year changes in accounts payable and receivable, cash on hand and outstanding bank deposits and checks. These accounts normally fluctuate according to the overall volume of financial transactions. They may be subject to significant variations from year to year, however, since they depend on the coordination of collection and disbursement transactions.

Table 14

Québec’s Financial Assets and Liabilities

	Fiscal year ending March 31
	2005		2006
		(dollar amounts in millions)
Financial Assets (1)	$	39,258	40 355
Liabilities (2)	$	138,300	145 038
Government Guaranteed Debt (3)	$	40,600	41 947

⁽¹⁾ Financial assets include short-term investments, accounts receivable, investment in Government enterprises, long-term investments, deferred expenses related to debts, advances to the health and social services, education networks and Government enterprises and sinking funds relating to borrowings.

Short-term investments, which include Treasury bills, notes, deposit certificates, banker’s acceptances, bonds and other similar instruments amounted to, as at March 31, 2006, $2.93 billion compared to $2.97 billion as at March 31, 2005.

⁽²⁾ Liabilities are comprised of bank overdraft, accounts payable and accrued expenses, deferred revenue, pension plans, direct debt, debt to finance the health and social services, education networks, Government enterprises and the work of municipal bodies, and allowance relating to sinking funds.

⁽³⁾ See “Public Sector Debt - Guaranteed Debt”.

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Government Enterprises and Agencies

Government enterprises and agencies can be divided into three categories: enterprises included in the Government’s reporting entity, agencies whose reporting entity is included in the Government’s reporting entity and agencies which conduct fiduciary transactions that are not included in the Government’s reporting entity.

Most of the enterprises included in the Government’s reporting entity are stock companies that are owned exclusively by the Government and operate on a commercial basis. The Government may guarantee the debt of some of these enterprises. Some of them pay dividends to the Government. Société des alcools du Québec and Loto-Québec transfer as dividends all of their net earnings to the Government. Hydro-Québec generally pays half of its earnings in dividends.

Agencies whose reporting entity is included in the Government’s reporting entity are budgetary corporations whose expenditures are funded in part or in whole through funds appropriated by the National Assembly. These enterprises may benefit from loans and advances from the Government. The debt service of some of these corporations may be guaranteed in part by the Government.

Agencies that conduct fiduciary transactions play an important economic role in Québec. As an investment manager, Caisse de dépôt et placement du Québec invests funds on behalf of public retirement plans, insurance plans and other public enterprises.

The Government emphasizes the strategic role of its enterprises and agencies by initiating investment projects that are profitable and creating jobs in partnership with the private sector.

The Government manages an extensive portfolio of assets through Government enterprises. Those assets may be sold to the private sector when the timing is deemed appropriate.

Table 15

Major Enterprises and Agencies

	Area of Activity
Enterprises included in the Government’s reporting entity
Corporation d’hébergement du Québec (“CHQ”)	Construction, development and management of health care buildings
Financement-Québec	Financing public sector organizations
Hydro-Québec	Energy production and distribution
Immobilière-SHQ	Development and management of public housing
Loto-Québec	Gaming
Société des alcools du Québec (“SAQ”)	Wholesale and retail sale of alcoholic beverages
Société générale de financement du Québec (“SGF”)	Economic development (Industrial sector)
Sociétés Innovatech (Grand Montréal, Québec et     Chaudière-Appalaches, Sud du Québec, Régions ressources)	Venture Capital (High technology sector)
Agencies whose reporting entity is included in the Government’s reporting entity
Investissement Québec	Economic development (SME-high technology and SME-industrial sectors)
Société immobilière du Québec (“SIQ”)	Construction, development and management of public buildings
Société québécoise d’assainissement des eaux (“SQAE”)	Water purification
Agencies which conduct fiduciary transactions that are not included in the Government’s reporting entity
Caisse de dépôt et placement du Québec (“Caisse”)	Investment management
Commission administrative des régimes de retraite et d’assurances (“CARRA”)	Public sector pension funds management
Régie des rentes du Québec (“RRQ”)	Pension funds management

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The following table shows total Government investment in and guaranteed debt of certain Government enterprises as well as certain financial information as of the latest fiscal year for which this information is publicly available.

Table 16

Financial Information on Certain Government Enterprises and Agencies Included in the Government’s Reporting Entity⁽¹⁾

	Share Capital	Loans and Advances (2)	Accumulated Surplus (Deficit)	Total Government Investment (3)	Debt Guaranteed by the Government	Assets	Revenue	Net Income (Loss) (4)
	(dollar amounts in millions)
Enterprises included in the Government’s reporting entity:
Financement-Québec (03-31-2006)	$10	$1,011	$67	$1,088	$9,527	$11,186	$14	$14
Hydro-Québec (12-31-2006)	4,374	7	14,466	18,847	33,798	63,248	11,161	3,741
Immobilière-SHQ (12-31-2006)	14	-	48	62	-	2,091	201	12
Loto-Québec (03-31-2007)	-	-	135	135	-	1, 078	3, 799	1, 468
SAQ (03-25-2007)	30	-	7	37	-	573	2,364	710
SGF (12-31-2006)	2,173	-	(274)	1,899	-	2,529	1,453	75
Sociétés Innovatech (03-31-2006)	467	-	(355)	112	-	121	18	(9)
	$7,068	$1,018	$14,094	$22,180	$43,325	$80,826	$19,010	$6,011
Agencies whose reporting entity is included in the Government’s reporting entity:
Investissement Québec (03-31-2007)	33	-	476	509	2, 610	4, 511	198	54
SIQ (03-31-2007)	80	-	93	173	208	1, 734	621	4
SQAE (03-31-2006)	-	-	-	-	2,674	2,806	167	-
	$113	-	$569	$682	$5,492	$9,051	$986	$58
Total	$7,181	$1,018	$14,663	$22,862	$48,817	$89,877	$19,996	$6,069

⁽¹⁾ All financial information is as of the fiscal year-end indicated for each enterprise or for the fiscal year then ended.

⁽²⁾ Does not include loans from the Financing Fund. (The Financing Fund offers financing services only to consolidated organizations and other Government enterprises.)

⁽³⁾ Total Government Investment is the sum of Share Capital, Loans and Advances and Accumulated Surplus (Deficit). (See discussion of individual enterprises below).

⁽⁴⁾ In the case of agencies whose reporting entity is included in the Government’s reporting entity, Net Income (Loss) figures include, as revenue, financial assistance from the Government for operating purposes.

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Enterprises included in the Government’s reporting entity

Corporation d’hébergement du Québec (“CHQ”). CHQ provides financing for capital investments in the health and social services network and coordinates and controls the construction projects and budgets of most of the network’s buildings. As of March 31, 2006, CHQ had total assets of $ 4.2 billion, including $1.9 billion in real estate.

Financement-Québec. Financement-Québec, a separate financing authority, was formed in 1999 to offer financial services, including loans to non-consolidated organizations, consisting mainly of educational institutions and health and social services establishments. In addition, municipal and other organizations designated by the Government may also be eligible for such financing.

As of March 31, 2007, preliminary funded debt for borrowings of Financement-Québec on financial markets in its own name, with the guarantee of the Government, amounted to $11,056 million, at nominal value.

Hydro-Québec. Hydro-Québec operates one of the two largest systems in Canada for the generation and distribution of electric power. Hydro-Québec supplies virtually all electric power distributed in Québec.

Under the Hydro-Québec Act, the objectives of Hydro-Québec are to supply power and to pursue endeavors in energy-related research and promotion, energy conversion and conservation, and any field connected with or related to power or energy. The Hydro-Québec Act provides that Hydro-Québec shall estimate the energy needs of Québec and the means of meeting them within the scope of the Government’s energy policies. Under the Hydro-Québec Act, the Government is entitled to declare a dividend from Hydro-Québec when certain financial criteria are met. The Government received a dividend of $2.342 billion from Hydro-Québec in Fiscal 2006, compared with $1.126 billion in Fiscal 2005.

As of December 31, 2006, the Government’s equity in Hydro-Québec totaled $18.8 billion. At this date, Hydro-Québec operated 55 hydroelectric plants with a combined installed capacity of 32,973 MW, 28 thermal plants totaling 1,665 MW, one nuclear plant with a capacity of 675 MW, one wind farm with a capacity of 2 MW, had access to 4,765 MW of the generation of the Churchill Falls (Labrador) Corporation Limited power plant and also purchased all the output from six privately-owned wind farms with a total installed capacity of 320 MW. Furthermore, 1,206 MW are available under various agreements with other independent suppliers. Hydro-Québec maintains more than 20,000 miles of transmission lines.

Table 17

Hydro-Québec’s Operations

	Year ended December 31
	2002		2003		2004		2005		2006
	(dollars in millions)
Total electricity sales (terawatthours)		212.8		182.9		180.3		184.5		181.8
Total revenue from electricity sales	$	11,578	$	9,923	$	10,006	$	10,585	$	10,551
Revenue from electricity sales outside Québec	$	3,466	$	1,345	$	1,084	$	1,464	$	1,149
Capital investments affecting cash – consolidated	$	2,256	$	2,694	$	2,217	$	3,399	$	1,469
Net income – consolidated (1)(2)	$	1,585	$	1,938	$	2,435	$	2,252	$	3,741
Interest coverage (3)		1.63		1.73		1.79		2.00		2.06
Capitalization ratio (1)(4)(5)		26.2%		29.8%		32.8%		34.2%		36.1%
Debt guaranteed by Government (at end of period)	$	37,272	$	33,298	$	31,784	$	32,413	$	33,798

⁽¹⁾ In 2004, financial statements for the years 2002 and 2003 were restated as a result of the retroactive application of a new Canadian accounting standard on asset retirement obligations, which required the recognition and measurement of liabilities for legal obligations associated with the retirement of an asset.

⁽²⁾ Net income originally reported for the years 2002 and 2003 was $1,526 million and $1,931 million, respectively.

⁽³⁾ Sum of operating income and net investment income divided by gross interest expense.

⁽⁴⁾ The capitalization ratio originally reported for the years 2002 and 2003 was 26.2% and 29.9%, respectively.

⁽⁵⁾ Shareholder’s equity divided by the sum of shareholder’s equity, long-term debt, perpetual debt, short-term borrowings and current portion of long-term debt, less swaps and sinking funds.

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Certain aspects of the activities of Hydro-Québec and those of natural gas distributors in Québec are subject to the jurisdiction of the Régie de l’Énergie (the “Energy Board”) which was established by the Act respecting the Régie de l’énergie (the “Energy Board Act”) enacted in December 1996. The Energy Board consists of seven members appointed by the Government and is charged with reconciling the public interest, consumer protection and the fair treatment of the electric power carrier and of distributors. The Energy Board Act was amended in December 2006 to grant the Energy Board new powers regarding energy efficiency programs and actions as well as mandatory reliability standards.

Under the Energy Board Act, Hydro-Québec has been granted exclusive rights for the distribution of electric power throughout Québec, excluding the territories served by distributors operating a municipal or private electric system as of May 13, 1997. The Energy Board has the authority to: fix, or modify, after holding public hearings, Hydro-Québec’s rates and conditions for the transmission and distribution of electric power; approve its electric power supply plan; designate a reliability coordinator for Québec and adopt the standards of reliability proposed by the designated reliability coordinator; authorize its transmission and distribution investment projects; approve its distribution commercial programs; and rule upon complaints from customers concerning rates or service.

Hydro-Québec’s 2006-2010 Strategic Plan (the “Strategic Plan”) assumes that Québec sales will grow by 13.2 TWh between 2005 and 2014, which takes into account the annual energy savings target of 8 TWh by 2015 as proposed in the Québec Energy Strategy 2006–2015. Sales to industrial customers are expected to increase by 6.1 TWh, the smelting and refining industry accounting for 3.8 TWh of this increase. The remaining expected increase in industrial sales would arise from growing industrial output. Sales to residential customers are expected to rise by 4.9 TWh, supported primarily by the home-building sector.

The Strategic Plan requires its division Hydro-Québec Distribution to ensure adequate supply to meet the energy requirements of the Québec market. The main supply of Hydro-Québec Distribution is guaranteed heritage pool electricity. Guaranteed heritage pool electricity is electricity that corresponds to the net annual consumption of Québec markets, up to 165 TWh per year, for which the average fixed price set at 2.79 cents per kWh. Additional power will continue to be obtained through calls for tenders. Furthermore, Hydro-Québec Distribution will continue to offer its customers rates that are among the lowest in North America.

The Strategic Plan restates the three conditions for undertaking new projects: they must be profitable under market conditions, environmentally acceptable and well received by local communities. Between 2006 and 2014, Hydro-Québec Production intends to increase its annual generating capacity by 15.8 TWh as follows: new facilities that are currently under construction for a total capacity of 6.1 TWh; the refurbishing of some existing facilities that will add about 1 TWh to the existing generating capacity; and the Eastmain-1-A/Sarcelle/Rupert project that will add 8.5 TWh and has been approved by the regulators.

Hydro-Québec TransÉnergie will continue to develop its transmission system to maintain service reliability and quality while meeting growing power transmission needs. Furthermore, investments will be made to keep up with consumption growth in Québec, integrate new hydroelectric and wind power generation capacity, replace equipment and incorporate more efficient technologies. Among these investments, the division plans to build a new 1,250 MW interconnection with the province of Ontario.

On December 30, 2003, representatives of the Innus of Takuikan Uashat Mak Mani-Utenam instituted an action against the Attorney-General of Canada, the Attorney-General of Québec and Hydro-Québec seeking judicial recognition of their aboriginal rights and of their unextinguished Indian title over certain areas of land in Québec. Plaintiffs, who claim not to be parties to the 1975 James Bay and Northern Québec Agreement (the “Agreement”), allege that the Agreement and certain federal and provincial laws are illegal, inoperative, unconstitutional and not binding upon the plaintiffs. The plaintiffs seek various orders, including rendering of accounts and revenue sharing for the unlawful use and management of the lands, notably in respect of hydroelectric facilities on these lands, and awarding damages from Canada, Québec and Hydro-Québec, jointly and severally, in an amount of up to $1.5 billion (subject to further increase by the plaintiffs). In June 2005, as requested by the parties, the Québec Superior Court suspended the legal action for five years. Negotiations are ongoing between the governments and the Innus.

In November 2006, the Innus of Pessamit re-activated an action that was filed in 1998 against the Attorney-General of Canada, the Attorney-General of Québec and Hydro-Québec seeking judicial recognition of their aboriginal rights and title over certain areas of land in Québec where Hydro-Québec’s Manicouagan-Outardes hydroelectric facilities are located. The Innus intend to seek various orders including an award of damages against Canada, Québec and Hydro-Québec, jointly and severally, in an amount of $11 billion. Québec and Hydro-Québec intend to contest this claim ( see “Native Peoples”).

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Immobilière-SHQ. This corporation builds, owns and maintains low-rental housing in Québec. Immobilière-SHQ is authorized to finance its capital requirements in the capital markets under Government of Canada loan insurance programs. As of December 31, 2006, Immobilière-SHQ had total assets of $2.1 billion, including $400 million in mortgages and $1.6 billion in real estate.

Loto-Québec. Loto-Québec operates and administers lottery systems and gaming facilities, including casinos, a video lottery network and on-line products in the bingo industry. Its lottery products are sold at more than 9, 600 points of sale. Loto-Québec currently operates three Government-owned casinos in Montréal, Charlevoix and Gatineau. Its video lottery network is comprised of video lottery terminals located in approximately 2,905 establishments. Loto-Québec pays all of its net earnings to the Government as dividends after payment of specified-purpose accounts amounting to $77 million for Fiscal 2007. In Fiscal 2007, the Government received a dividend of $1,391 million from Loto-Québec, compared with $1,537 million in Fiscal 2006. The 2007-2008 Budget anticipates dividends from Loto-Québec of $1,329 million for Fiscal 2008.

On August 2, 2002, a class action was instituted against Loto-Québec in the Québec Superior Court on behalf of people who, since 1993, claim to have become compulsive players using the video poker terminals operated by Loto-Québec in public locations. This class action alleges that Loto-Québec bears some responsibility for these people becoming compulsive players and seeks damages from Loto-Québec in an amount of approximately $700 million. The trial has been set for September 2008. Loto-Québec intends to contest this class action to the fullest extent.

Société des alcools du Québec (“SAQ”). The SAQ sells alcoholic beverages and pays all of its net earnings to the Government as a dividend. The SAQ paid a dividend of $710 million during Fiscal 2007, compared with $657 million for the 2006 fiscal year. The 2007-2008 Budget forecasts a dividend of $745 million for Fiscal 2008.

Société générale de financement du Québec (“SGF”). SGF is a holding company that has interests in industrial and commercial enterprises. Its mission is to carry out, working with private partners, projects that will contribute to promote Québec’s overall economic development, improve its productivity and bolster its competitiveness. Its activities mainly concern the industrial sector but also the agri-food, high-technology and health sectors.

In 2006, the SGF earned net profits of $75 million. This is an improvement of $5 million compared to 2005 and the second successive year of profits following four straight years of losses.

Société nationale de l’amiante (“SNA”). SNA ceased operations in Fiscal 1993.

In 1982, SNA acquired newly issued capital stock of Mines SNA Inc. (“Mines SNA”) and thereby gained control over Mines SNA, which held a controlling interest in Asbestos Corporation Limited (“ACL”). Minority shareholders of ACL instituted class actions against the Government and SNA, in Québec and Ontario, seeking damages as well as an order to force SNA to make a follow-up offer for the publicly held shares of ACL. In Québec, the class action is now closed following the final decision of the Québec Court of Appeal rejecting the action and the Supreme Court having rejected the request for permission to appeal on July 5, 1990. In Ontario, a case that had not advanced since the class action suit was filed in 1988, was recently reactivated before the Superior Court of Justice. Québec and SNA opposed the application in preliminary arguments and in a decision handed down on October 6, 2006, the Superior Court of Justice dismissed the lawsuit on the grounds of excessive delay and abusive process. The minority shareholders have appealed this ruling.

Claims for a follow-up offer have also been filed with the securities commissions of Québec and Ontario. In Québec, the Autorité des marchés financiers (the “Québec Commission”) rejected the claim on the basis of lack of jurisdiction. In a judgment rendered on April 22, 1999, the Court of Appeal of Québec referred the case to the Québec Commission for investigation and hearings. In a decision rendered on June 13, 2003, the Québec Commission denied the minority shareholders’ claim, concluding that there is no evidence showing that the Government or SNA had failed to respect any provision of the Securities Act of Québec. This decision was appealed by the minority shareholders before the Court of Québec. In its judgment rendered on May 9, 2005 the Court of Québec confirmed the decision of the Québec Commission and rejected the appeal. Since no appeal of the Court of Québec decision has been filed within the prescribed time period, the decision of the Court of Québec is now final.

In July 1994, the Ontario Securities Commission rejected the claim for a follow-up offer in Ontario, finding that the remedies requested by the minority shareholders of ACL under the Ontario Securities Act should be denied. In August 1994, this decision was appealed by the minority shareholders before the Divisional Court of Ontario. On May 2, 1997, the Divisional Court ruled that the Government had three months to buy out minority shareholders in ACL. The Ontario Court of Appeal, on February 18, 1999, and the Supreme Court of Canada, on June 7, 2001, set aside the decision of the Divisional Court and restored the decision of the Ontario Securities Commission.

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In September 1992, Mines SNA sold all of its ACL shares, and SNA transferred all of ACL’s debt owed to it, to Société Minière Mazarin (“Mazarin”). In June 1995, the minority shareholders of ACL filed a motion with the Québec Superior Court requesting that the court, as a remedy to the alleged oppression resulting from this sale and transfer to Mazarin, impose an arrangement whereby ACL would purchase all the shares sold by Mines SNA and the debt transferred to Mazarin for the same amount, and under the same payment conditions as agreed to among SNA, Mines SNA and Mazarin. The hearing for the motion has been suspended by the court since February 1996 until final judgment is rendered in the proceedings before both the Québec and the Ontario securities commissions. No date is presently set for the hearing of the motion.

Sociétés Innovatech. There are four Innovatech corporations (Innovatech du Grand Montréal, Innovatech Régions ressources, Innovatech du sud du Québec and Innovatech Québec et Chaudière-Appalaches). They are venture capital corporations that fund technology innovations at the start-up or technical research stage in their respective territories. As at March 31, 2006, the total assets of the four Innovatech corporations amounted to $112 million.

On April 6, 2004, the Government announced that these corporations would be restructured. The Government intended to use the assets of these corporations to attract private capital. To do so, it intended to privatize Innovatech du Grand Montréal and convert the three others into mixed public-private capital corporations.

On March 17, 2005, the Government sold the investment portfolio of Innovatech du Grand Montréal to a subsidiary of Coller Capital, which undertook to honor the corporations’s commitments and invest in local technology companies.

In July 2005, the Government entered into a limited partnership contract with Capital régional et coopératif Desjardins concerning Innovatech Régions ressources. A new limited partnership, Desjardins-Innovatech L.P. (“Desjardins-Innovatech”), was formed. This entity was then 53% held by Capital régional et coopératif Desjardins and 47% by the Government. Desjardins Capital de risque Inc. manages Desjardins-Innovatech. The Government’s share corresponded to the value of the Innovatech Régions ressources’ portfolio that was transferred to Desjardins-Innovatech. The agreement with Capital régional et coopératif Desjardins has led to the injection of $30 million of new capital.

In 2006, the Government and Desjardins agreed to broaden the mission of Desjardins-Innovatech and the main limited partner, Capital régional et coopératif Desjardins, reinvested $20 million (November 2, 2006). The limited partnership’s share is currently held as follows: 34% for the Government and 66% for Capital régional et coopératif Desjardins.

Concerning the two other corporations (Innovatech Québec et Chaudière-Appalaches and Innovatech du sud du Québec), the Government is still working to convert them into mixed public-private capital corporations.

Agencies whose reporting entity is included in the Government’s reporting entity

Investissement Québec. This Government enterprise participates in the financing of investments in Québec. As of March 31, 2007, outstanding loans and guarantees under Investissement Québec’s various programs totaled $3.0 billion. Investissement Québec has $202 million in budgetary funding available for Fiscal 2008 to stimulate private investment in Québec.

In the 2004-2005 Budget Speech, the Government announced the creation of the Regional Economic Intervention Fund (“FIER”) to support the creation of regional investment funds, in particular by matching funds invested by the private sector. The Government’s initial investment of $210 million was increased on two occasions; it rose to $288 million for Fiscal 2006, and was increased by another $30 million to $318 million for Fiscal 2007. In addition, the recent 2007-2008 Budget announced the implementation of a “FIER-Premières nations” in which the Government will invest up to $15 million. The Government’s total participation in the “FIER” program will thus amount to $333 million. This fund is administered by Investissement Québec.

Société immobilière du Québec (“SIQ”). SIQ owns and maintains most Government buildings. Subsequent to the severe rainstorms that led to flooding of the Saguenay region in July 1996, a number of legal actions, including class actions, were launched against SIQ and the Government. All such actions were contested and two class actions, one entered on behalf of residents of the Chicoutimi-Jonquière region and the other on behalf of lakeside residents of Lac Kénogami, were settled, reducing the total initial exposure resulting from such claims from $120 million to approximately $70 million. SIQ and the Government intend to fully contest all of these actions. As at December 4, 2002, SIQ transferred all the dams it owned to the Government. The Government will assume all damages and costs that might arise from theses claims. As of March 31, 2007, SIQ had total assets of $1.7 billion.

34

Société québécoise d’assainissement des eaux (“SQAE”). The SQAE historically provided municipalities with management and financing services for water purification and sewage treatment projects. It also carried out studies on waterworks and sewer systems. The SQAE’s revenues consisted of fees charged in relation to the costs of the projects and studies. The SQAE was authorized to fund only projects over which it exercises control. Today, the SQAE’s activities are focused on managing its debt service and closing, within the allocated budgets, the remaining active projects as part of Québec’s water treatment program. A municipality assumes an average of 14% of the total cost of a project, funded over 20 years, and the Government covers the rest. The SQAE is authorized to fund these capital requirements on municipal water treatment projects representing investments of $3.8 billion. As at March 31, 2006, total commitments relating to the repayment of the principal of the debt amounted to $2.7 billion.

On December 14, 2006, amendments were made to the Act respecting the Société québécoise d’assainissement des eaux to transfer the administration of the SQAE’s affairs to a person designated by the Minister of Municipal Affairs and the Regions.

Agencies which conduct fiduciary transactions that are not included in the Government’s reporting entity

Caisse de dépôt et placement du Québec (“Caisse”). The Caisse invests the funds entrusted to it by several public pension plans, insurance plans and various public bodies. As of December 31, 2006, the net assets of the Caisse (at market value) totaled $143.5 billion. The main depositors and their respective assets on deposit (at market value) were as follows: CARRA, $52.0 billion; RRQ, $32.7 billion; Retirement Plan Sinking Fund, $26.8 billion, Commission de la construction du Québec, $11.1 billion, Commission de la santé et sécurité du travail, $10.7 billion and SAAQ, $8.2 billion.

As stated by law, the mission of the Caisse is to receive monies on deposit as provided by law and manage them with a view of achieving optimal return on capital within the framework of depositors’ investment policies while at the same time contributing to Québec’s economic development. The Caisse invests its depositors’ funds in various asset classes, including fixed income, equities, hedge funds, commodity financial instruments, private equity, infrastructures, real estate and real estate debt. The Caisse is permitted, subject to certain exceptions, to invest in up to 30% of the common shares of any corporation or invest up to 5% of its total assets in shares of any corporation.

As of December 31, 2006, the Caisse’s investments were distributed as follows: 36.0% in bonds, 30.7% in equity and convertible securities, 16.5% in deposits and short-term investments and 12.6% in real estate holdings and mortgages. Investments by the Caisse in bonds of the Government of Canada, of the Québec’s public sector, other Canadian provinces, municipalities and other Canadian bodies totaled $43.7 billion (at market value).

The Caisse’s constituting statutes establish the mission and governance rules, particularly the composition and functioning of the board of directors and the criteria for selecting its members. In this regard, at least two-thirds of the members of the board of directors, including the chair, must meet independence requirements.

The Caisse’s constituting statutes provide for the creation of three committees by the board of directors — an audit committee, a governance and ethics committee and a human resources committee —and defines the role of each. It also establishes that the offices of chair of the board and president and chief executive officer are to be two separate functions. It requires that the Caisse adopt an investment policy for each specialized portfolio it holds and provides rules of ethics for the Caisse, its officers and employees, and its wholly-owned subsidiaries.

Commission administrative des régimes de retraite et d’assurances (“CARRA”). CARRA administers RREGOP and RRPE, the Teachers Pension Plan, the Civil Service Superannuation Plan and other public sector retirement plans. As of December 31, 2006, assets in these plans, deposited with the Caisse, are estimated at $52.0 billion (at market value).

Régie des rentes du Québec (“RRQ”). RRQ administers the Régime de rentes du Québec, a universal pension plan (the “Québec Pension Plan”). The cost of the plan, including all administrative costs, is covered by contributions from employers, employees and self-employed individuals. As of March 31, 2007, RRQ entrusted $33.2 billion of funds to the Caisse (at market value). The contribution rate for the Québec Pension Plan was set at 9.9% for 2003 and subsequent years. The contribution rate of the Québec Pension Plan is the same as the one established for the Canada Pension Plan.

35

Public Sector Debt

Public sector debt includes debt incurred and guaranteed by the Government and debt of public institutions under Government jurisdiction, including local administrations. Public sector debt consists of funded and unfunded debt. Unfunded debt includes indebtedness for a maturity of one year or less.

The following table shows information on the funded debt, net of sinking fund balances, of the Québec public sector which includes the funded debt of the Government (including the debt of consolidated organizations), debt guaranteed by the Government, debt of the municipal sector and debt of other institutions as of the dates indicated. In a number of these instances, notably that of Hydro-Québec, debt service is provided by operating revenues and other internally generated sources rather than from taxes. As of March 31, 2006 and March 31, 2007, funded debt of the public sector, net of sinking fund balances, was estimated to amount to $148.9 billion and $160.3 billion, respectively, of which 6.9 % and 7.0 % was held by the Caisse.

Table 18

Funded Debt of Public Sector (net of sinking fund balances)

	As of March 31
	2003	2004	2005	2006	Preliminary   Results 2007
	(dollar amounts in millions) (1)
Government Funded Debt
Borrowings – Government	$71,206	$72,411	$77,923	$81,995	$91,388
Borrowings – to finance Government Enterprises	3,965	3,202	3,234	2,646	2,814
Borrowings – to finance Municipal Bodies	2,874	2,802	2,799	2,604	2,499
Government Guaranteed Debt (2)	40,680	40,013	40,600	41,947	43,772
Municipal Sector Debt	13,463	14,317	14,239	15,669	16,408
Other Institutions	5,394	5,136	4,696	4,040	3,455
Public Sector Funded Debt (3)	$137,582	$137,881	$143,491	$148,901	$160,336
Per capita ($)	$18,477	$18,396	$19,008	$19,597	$20,953
As a percentage of (4)
GDP	57.0%	55.0%	54.6%	54.4%	56.4%
Personal income	69.0%	66.2%	66.0%	65.8%	68.0%

⁽¹⁾ Canadian dollar equivalent at the dates indicated for loans in foreign currencies after taking into account currency swap agreements and foreign exchange forward contracts.

⁽²⁾ Represents mainly debt of Hydro-Québec.

⁽³⁾ Includes debt covered by the Government’s commitments (see “Government’s Commitments”).

⁽⁴⁾ Percentages are based upon the prior calendar year’s GDP and Personal income.

36

Government Debt

Government debt consists of funded and unfunded debt. Unfunded debt includes indebtedness with a maturity of one year or less. As of March 31, 2006, unfunded debt of the Government was $8.2 billion consisting of Treasury Bills for $3.3 billion (including $1.2 billion for Borrowings – to finance Government enterprises and Borrowings – to finance Municipal Bodies) plus $4.9 billion representing the excess of short-term liabilities over short-term assets. On March 31, 2007, unfunded debt of the Government was estimated, on a preliminary basis, at $5.5 billion consisting of Treasury Bills for $3.3 billion (including $1.2 billion for Borrowings – to finance Government enterprises and Borrowings – to finance Municipal Bodies) plus $2.2 billion representing the excess of short-term liabilities over short-term assets.

Table 19

Government Funded Debt

	As of March 31
	2003	2004	2005	2006	Preliminary     Results 2007	Average Interest Rate 2007	Average Term to Maturity 2007
	(dollar amounts in millions) (1)					(%)	(years)
Borrowings – Government
Payable in Canadian Dollars:
Debentures and Other Loans	$57,083	$59,309	$65,457	$70,987	$81,320	5.5	13.1
Savings Products	3,447	3,901	4,290	4,580	4,879	4.6	-
Payable in Foreign Currencies:
United States Dollars	3,334	4,183	2,696	1,853	1,076	12.7	16.3
Japanese Yen	8,389	4,267	4,470	2,849	2,082	4.1	8.9
Swiss Francs	2,507	4,238	4,492	5,622	3,104	2.3	7.5
Pounds Sterling	-	(3)	(3)	(2)	(2)	-	7.9
Euros	-	(21)	-	(22)	3,144	5.1	8.8
Funded Debt	$74,760	$75,874	$81,402	$85,867	$95,603
Less: Sinking Funds (2)	3,554	3,463	3,479	3,872	4,215
Net Borrowings – Government (3)	$71,206	$72,411	$77,923	$81,995	$91,388	5.4	12.0
Borrowings - to finance Government Enterprises
Payable in Canadian Dollars:
Debentures and Other Loans	$3,965	$3,202	$3,234	$2,646	$2,814	6.9	12.4
Borrowings – to finance Government Enterprises (3)	$3,965	$3,202	$3,234	$2,646	$2,814
Borrowings - to finance Municipal Bodies
Payable in Canadian Dollars:
Debentures and Other Loans	$2,874	$2,802	$2,799	$2,604	$2,499	5.6	4.8
Borrowings – to finance Municipal Bodies (3)	$2,874	$2,802	$2,799	$2,604	$2,499

⁽¹⁾ Canadian dollar equivalent at the dates indicated for loans in foreign currencies after taking into account currency swap agreements and foreign exchange forward contracts.

⁽²⁾ Consists of funds withdrawn annually from the Consolidated Revenue Fund. Foreign securities held in sinking funds are valued at the Canadian dollar equivalent at the dates indicated.

⁽³⁾ Subsequent to March 31, 2007, the Government has issued or agreed to issue debentures and other funded indebtedness which total approximately $1.6 billion. The Government currently has credit agreements with various banks and financial institutions for a total of U.S.$3.5 billion.

37

The following table shows the maturities of the Government’s funded debt outstanding as of March 31, 2007, net of a sinking fund balance of $4,215 million ($3,872 million as of March 31, 2006) valued at exchange rates at that date. It also takes into account future required contributions to sinking funds for all outstanding loans and debentures.

Table 20

Maturities of Government Funded Debt for Borrowings - Government

Fiscal Year Payable	Canadian     Dollars	U.S. Dollars	Japanese   Yen	Swiss         Francs	Pounds   Sterling	Euros	Total     2006-2007	Total     2005-2006
	(dollar amounts in millions) (1)
Year 1	$7,727	$(653)	$(500)	$(54)	$-	$(587)	$5,933	$4,711
Year 2	5,581	22	-	2	-	-	5,605	5,256
Year 3	6,613	21	(1)	1	-	1	6,635	5,350
Year 4	5,352	19	39	-	-	-	5,410	6,516
Year 5	6,293	319	433	-	(2)	(6)	7,037	5,513
1 – 5 years	31,566	(272)	(29)	(51)	(2)	(592)	30,620	27,346
6 – 10 years	23,018	94	1,674	2,685	-	3,661	31,132	27,272
11 – 15 years	2,839	448	241	470	-	75	4,073	5,819
16 – 20 years	7,856	(354)	196	-	-	-	7,698	5,227
21 – 25 years	3,862	282	-	-	-	-	4,144	7,356
26 – 59 years	13,537	184	-	-	-	-	13,721	8,975
	$82,678	$382	$2,082	$3,104	$(2)	$3,144	$91,388	$81,995

⁽¹⁾ Amounts denominated in foreign currencies are shown at the Canadian dollar equivalent at March 31, 2007, after taking into account currency swap agreements and foreign exchange forward contracts, including unrealized currency gains of $1,106 million which will be amortized over the remaining term of this debt.

The information relating to debt retirement set out above includes amounts to be withdrawn annually from the Consolidated Revenue Fund for the creation of sinking funds for the redemption of debentures of the Government in connection with contractual obligations incurred in certain debt issues. On March 31, 2006, the amount set aside for sinking fund purposes was $132 million and, at that date, the aggregate value of sinking funds was $3,872 million, of which $3,518 million was invested in debentures issued or guaranteed by the Government. For the year ended March 31, 2007, the amount set aside for sinking fund purposes was $131 million and, at that date, the aggregate value of sinking funds was $4,215 million, of which $3,163 million was invested in debentures issued or guaranteed by the Government.

Table 21

Maturities of Government Funded Debt for Borrowings - to finance Government Enterprises

Fiscal Year Payable	Canadian Dollars	Total 2006-2007	Total 2005-2006
	(dollar amounts in millions) (1)
Year 1	$530	$530	$3
Year 2	5	5	532
Year 3	544	544	5
Year 4	98	98	548
Year 5	71	71	101
1 – 5 years	1,248	1,248	1,189
6 – 10 years	244	244	230
11 – 15 years	-	-	-
16 – 20 years	510	510	394
21 – 25 years	59	59	60
26 – 30 years	753	753	773
	$2,814	$2,814	$2,646

⁽¹⁾ After taking into account currency swap agreements and foreign exchange forward contracts.

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Table 22

Maturities of Government Funded Debt for Borrowings - to finance Municipal Bodies

Fiscal Year Payable	Canadian Dollars	Total 2006-2007	Total 2005-2006
	(dollar amounts in millions) (1)
Year 1	$321	$321	$399
Year 2	110	110	322
Year 3	298	298	110
Year 4	340	340	296
Year 5	-	-	341
1 – 5 years	1,069	1,069	1,468
6 – 10 years	1,430	1,430	1,136
	$2,499	$2,499	$2,604

⁽¹⁾ After taking into account currency swap agreements and foreign exchange forward contracts.

Guaranteed Debt

The following table summarizes funded debt guaranteed by the Government (net of sinking fund balances).

Table 23

Guaranteed Funded Debt (net of sinking fund balances)

	As of March 31
	2003	2004	2005	2006	Preliminary     Results 2007	Average Interest Rate 2007	Average Term to Maturity 2007
	(dollar amounts in millions) (1)					(%)	(years)
Hydro-Québec	$35,639	$34,348	$33,032	$32,367	$32,674	7.4	17.6
Financement-Québec	5,033	5,659	7,564	9,579	11,098	4.7	5.6
Commission municipale du Québec	8	6	4	1	-
	$40,680	$40,013	$40,600	$41,947	$43,772

⁽¹⁾ Canadian dollar equivalent at dates indicated for loans in foreign currencies issues after taking into account currency exchange agreements and foreign exchange forward contracts.

As of March 31, 2007, unfunded debt guaranteed by the Government, on a preliminary basis, amounted to $3,615 million, including $3,139 million borrowed from financial institutions under a student loan program and $476 million of short-term debt of Hydro-Québec.

39

Funded Debt of the Municipal Sector and Other Institutions

The funded debt of the Québec public sector also includes indebtedness of public institutions under the Government’s jurisdiction. These institutions include the municipal sector (municipal corporations, urban communities and transportation commissions), educational institutions (school corporations, universities and colleges), health and social services establishments and other Government enterprises (Government agencies, boards and commissions).

The following table shows information on the funded debt of these institutions, net of debt held or guaranteed by the Government, as of the dates indicated.

Table 24

Funded Debt of the Municipal Sector and Other Institutions

	As of March 31
	2003	2004	2005	2006	Preliminary Results 2007
	(dollar amounts in millions) (1)
Municipal Sector	$13,463	$14,317	$14,239	$15,669	$16,408
Educational Institutions	3,417	3,189	2,724	2,300	1,873
Other Government Enterprises	1,777	1,713	1,742	1,571	1,432
Health and Social Services Establishments	200	234	230	169	150
	$18,857	$19,453	$18,935	$19,709	$19,863

⁽¹⁾ Canadian dollar equivalent at the dates indicated for loans in foreign currencies after taking into account currency exchange agreements and foreign exchange forward contracts. The amounts shown do not include loans from borrowings made by the Government on behalf of these entities.

The funded debt of these institutions consists mainly of the funded debt of the municipal sector which benefits from a large degree of autonomy since approximately 95% of the total revenue is derived from local sources. The relative magnitude of capital investment and borrowing by local governments in Québec is attributable, to a large extent, to the responsibilities assumed by Québec municipal corporations with respect to major projects related to the development of new residential and industrial areas. Approximately one-third of the debt of municipal corporations and urban communities has been incurred for these projects which in several other parts of Canada are financed directly by the private sector. The Ministère des Affaires municipales et des Régions supervises and controls the borrowings of all Québec municipal corporations and urban communities.

In 2005 (the most recent year for which information is available), local sector expenditure including school corporations totaled $21.1 billion, representing 29.1% of consolidated expenditure of the Québec public sector. The net accumulated surplus from current operations of Québec municipal corporations, including reserves, increased from $1,013.4 million in 2004 to $1,014.8 million in 2005. Net long-term debt of the municipal sector supported by local taxpayers increased from $11.9 billion as of December 31, 2004 to $12.9 billion as of December 31, 2005. This debt, as a percentage of real estate valuation, decreased from 3.3% in 2004 to 3.1% in 2005.

40

Government’s Commitments

The following table shows information on the Government’s commitments for the repayment of the principal on borrowings made for capital expenditures by the educational institutions and health and social services establishments as well as by the municipal sector. The amounts for Fiscal 2007 are not yet publicly available.

Table 25

Government’s Commitments ⁽¹⁾

	As of March 31
	2003	2004	2005	2006
	(dollar amounts in millions) (2)
Educational Institutions	$8,081	$8,086	$8,845	$9,408
Health and Social Services Establishments	3,926	4,002	4,165	4,411
Municipal Sector	2,678	2,756	2,786	2,874
Others Beneficiaries	483	520	711	872
	$15,168	$15,364	$16,507	$17,565

⁽¹⁾ Including commitments to repay loans from borrowings made by the Government on behalf of these entities. The debt covered by these commitments is included in the Funded Debt of Public Sector (see “Funded Debt of Public Sector”).

⁽²⁾ Canadian dollar equivalent at the dates indicated for loans in foreign currencies after taking into account currency swap agreements and foreign exchange forward contracts.

41

Where You Can Find More Information

This document appears as an exhibit to the annual report of Québec on Form 18-K for the fiscal year ended March 31, 2007 filed with the U.S. Securities and Exchange Commission (the “Commission”) on EDGAR through the Commission Internet web site at http://www.sec.gov. Additional information with respect to Québec is available in the annual report or in other exhibits or amendments to the annual report. You may read and copy any document Québec files with the Commission at the Commission’s public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the Commission’s toll free number at 1-800-SEC-0330 if you need further information about the operation of the Commission’s public reference room. In addition, you may request a copy of these filings at no cost from Ministère des Finances du Québec, Direction du financement des organismes publics et documentation financière, 12 rue Saint-Louis, Québec, Québec, G1R 5L3, Canada. This document is also available on the Ministère des Finances Internet web site at http://www.finances.gouv.qc.ca. This web site is an inactive textual reference only and any information available on this web site shall not be deemed to form a part of this document or the annual report to which it appears as an exhibit.

42

Forward-Looking Statements

Various statements made throughout this document are forward looking and contain information about financial results. The words “forecast”, “preliminary estimate”, “preliminary results” and similar expressions identify forward-looking statements. You are cautioned that any such forward-looking statements are not guarantees of future performance. Forward-looking statements involve risks and uncertainties, and actual results may differ materially from those in the forward-looking statements as a result of various factors. You are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date of this document. We undertake no obligation to publicly release the result of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

43

Supplementary Information

The following tables indicate present or future characteristics of the funded debt of Borrowings-Government, Borrowings-to finance Government Enterprises and Borrowings-to finance Municipal Bodies outstanding as of March 31, 2007. Previous characteristics are not indicated.

Table 26

Borrowings-Government, Borrowings-to finance Government Enterprises and Borrowings-to finance Municipal Bodies outstanding as of March 31, 2007

Maturity Date	Issue Date(1)	Interest Payment Date(s)	Coupon (%)	Canadian Dollars		CUSIP Number or ISIN Code	References
				Nominal Value	Book Value
A)        Payable in Canadian Dollars
2007-10-01	1997-02-25	04-01 & 10-01	6.50	3,075,200,000	3,078,216,981	CA748148QC07
2009-04-01	1988-01-07	04-01 & 10-01	11.00	1,377,800,000	1,407,966,978	CA748148KG74	SFP (1):1989-04-01
2009-06-01	1999-01-15	06-01 & 12-01	5.50	2,498,000,000	2,473,044,780	CA748148QP10
2010-06-28	1989-06-28	06-28 & 12-28	10.00	570,000,000	577,635,791	CA748148KK86	SFP (1):1990-06-28
2010-12-01	2000-08-01	06-01 & 12-01	6.25	2,631,100,000	2,645,411,291	CA748148QU05
2011-03-28	1991-03-28	03-28 & 09-28	10.75	75,000,000	74,831,259	CA748148NR03	SFP (1):1992-03-28
2011-09-02	1986-09-02	03-02 & 09-02	9.50	439,700,000	447,604,959	CA748148KC60	SFP (2):1997-09-02
2012-02-10	1987-02-10	02-10 & 08-10	9.00	179,300,000	180,733,587	CA748148KE27	SFP (1):1988-02-10
2012-06-04	1987-06-04	06-04 & 12-04	10.50	200,000,000	199,268,424	CA748148LQ48
2012-10-01	2002-04-08	04-01 & 10-01	6.00	2,121,500,000	2,143,978,908	CA748148BG75
2012-10-09	1987-10-09	04-09 & 10-09	11.875	100,000,000	99,956,212	CA748148MJ95
2013-10-01	2003-07-21	04-01 & 10-01	5.25	2,152,000,000	2,176,019,785	CA748148RK14
2013-12-01	2003-01-15	06-01 & 12-01	3.30	765,151,239	766,821,751	CA748148RH84	Real Return Bonds. Yields linked to the CPI for Canada.
2014-06-01	1989-06-01	06-01 & 12-01	10.50	125,000,000	124,568,095	CA748148KJ14	SFP (1):1990-06-01
2014-12-01	2004-08-03	06-01 & 12-01	5.50	2,500,000,000	2,583,009,329	CA748148RN52
2015-07-27	1990-07-27	01-27 & 07-27	11.00	50,000,000	49,715,340	CA748148KN26	SFP (1):1991-07-27
2015-12-01	2005-06-03	06-01 & 12-01	5.00	2,500,000,000	2,593,294,381	CA748148RP01
2021-12-01	2001-02-13	06-01 & 12-01	4.50	577,073,101	694,466,581	CA748148QY2	Real Return Bonds. Yields linked to the CPI for Canada.
2023-01-16	1993-03-04	01-16 & 07-16	9.375	2,202,200,000	2,280,831,154	CA748148NX70	SFP (1):1994-01-16
2023-03-30	1992-12-29	03-30 & 09-30	9.50	375,000,000	372,743,381	CA748148PA59
2026-04-01	1996-07-19	04-01 & 10-01	8.50	2,176,100,000	2,406,206,940	CA748148PZ01	SFP (1):1997-04-01
2026-12-01	1998-02-27	06-01 & 12-01	4.50	884,407,347	913,460,348	CA748148QG11	Real Return Bonds. Yields linked to the CPI for Canada.
2029-10-01	1998-05-01	04-01 & 10-01	6.00	2,737,300,000	2,668,125,331	CA748148QJ59	SFP (1):1999-10-01
2031-12-01	2001-02-13	06-01 & 12-01	4.25	771,654,147	1,019,072,456	CA748148QZ9	Real Return Bonds. Yields linked to the CPI for Canada.
2031-12-01	2002-11-13	06-01 & 12-01	3.441	75,071,061	75,070,238	CA748148RF29	Real Return Bonds. Yields linked to the CPI for Canada.
2032-06-01	2000-06-27	06-01 & 12-01	6.25	4,200,200,000	4,135,162,900	CA748148QT3
2036-12-01	2003-07-28	06-01 & 12-01	5.75	4,082,900,000	4,238,229,078	CA748148RL9
Medium-Term Notes
2007-06-09	1997-06-09	9 of each month	6.50	11,000,000	10,996,473	CA74814ZBM47
2007-06-28	2001-02-20	06-28	10.00	40,000,000	40,352,307	CA74814ZCN1
2007-06-30	1997-06-10	03-30 & 06-30 & 09-30 & 12-30	6.90	152,020,000	152,049,699	CA74814ZBN20
2007-11-29	2002-11-29	11-29	4.50	300,000,000	299,960,785	XS0158067024
2008-04-01	1998-02-13	04-01 & 10-01	5.85	50,000,000	49,995,120	CA74814ZBQ50
2008-04-01	1998-02-17	04-01 & 10-01	5.75	85,000,000	84,908,104	CA74814ZBR34
2008-06-06	2003-06-06	06-06 & 09-06 & 12-06 & 03-06	Floating	837,300,000	837,300,000	CA74814ZCV3

44

Maturity Date	Issue Date(1)	Interest Payment Date(s)	Coupon (%)	Canadian Dollars		CUSIP Number or ISIN Code	References
				Nominal Value	Book Value
2008-12-15	1997-03-10	06-15 & 12-15	6.98	5,000,000	5,000,000	CA74814ZBK80
2009-02-04	2002-02-04	02-04 & 08-04	Floating	110,000,000	110,000,000	XS0142660629	CAD-BA (3 months) + 0.30%
2009-04-01	1995-02-24	04-01 & 10-01	14.00	20,000,000	20,980,842	CA74814ZAM55
2009-04-01	1998-06-12	04-01 & 10-01	5.55	50,000,000	49,923,235	CA74814ZBU62
2009-04-01	1998-06-18	04-01 & 10-01	5.45	65,000,000	64,888,030	CA74814ZBX02
2009-04-01	1998-06-19	04-01 & 10-01	5.55	76,000,000	75,960,746	CA74814ZBW29
2009-04-01	2004-10-01	04-01 & 10-01	3.50	668,000	664,093	CA74814ZDB63
2009-08-17	2004-02-17	08-17 & 02-17	3.149	276,016,819	275,155,217	CA74814ZCZ41
2010-06-01	2000-06-01	06-01 & 12-01	6.75	25,000,000	25,033,075	CA74814ZCH4
2010-07-09	2003-07-09	07-09	4.25	500,000,000	498,900,369	XS0171362089
2011-04-01	2003-09-16	04-01 & 10-01	4.80	90,000,000	91,709,461	CA74814ZCY75	Exchangeable option on April 1, 2011 for Note maturing April 1, 2026 (6.40%) subject to prior notice from March 3, 2011 to March 11, 2011.
2011-04-28	2004-04-28	04-28	4.50	200,000,000	199,107,878	XS0190878081
2011-05-16	2006-02-21	05-16 & 08-16 & 11-16 & 02-16	Floating	1,200,000,000	1,200,000,000	CA74814ZDD20
2011-08-06	2004-08-06	08-06 & 11-06 & 02-06 & 05-06	Floating	1,300,000,000	1,300,810,135	CA74814ZDA80	CDOR (3 months) + 0.075%
2013-02-04	2005-02-04	02-04	4.375	400,000,000	397,875,094	XS0211709844
2013-12-10	2006-12-21	03-10 & 06-10 & 09-10 & 12-10	Floating	1,282,000,000	1,282,434,296	CA74814ZDQ33	CAD-BA (3 months) - 0.01%
2014-05-10	2004-05-10	02-10 & 05-10 & 08-10 & 11-10	Floating	250,000,000	250,000,000	XS0192344280	CAD-BA (3 months) + 0.085%
2014-06-03	2004-07-26	06-03	5.125	250,000,000	247,336,902	XS0197261935
2014-06-30	2004-12-06	12-30 & 03-30 & 06-30 & 09-30	Floating	250,000,000	250,000,000	XS0207384487	CAD-BA (3 months) + 0.12%
2014-07-16	1995-09-05	01-16 & 07-16	9.05	10,000,000	9,990,561	CA74814ZAY93
2015-05-18	2005-05-18	05-18	4.65	100,000,000	99,792,641	XS0219854659
2015-06-30	1995-04-03	06-30 & 12-30	9.65	4,664,000	4,690,540	CA74814ZAP86
2016-06-30	1995-04-03	06-30 & 12-30	9.65	7,739,000	7,786,831	CA74814ZAQ69
2016-10-11	2006-10-11	10-11 & 01-11 & 04-11 & 07-11	Floating	200,000,000	200,000,000	XS0270863060	CAD-BA (3 months) + 0.03%
2016-12-01	2006-01-30	06-01 & 12-01	4.50	3,000,000,000	2,955,729,156	CA74814ZDH34
2017-05-14	2006-12-14	02-14 & 05-14 & 08-14 & 11-14	Floating	200,000,000	200,000,000	XS0279291172	CAD-BA (3 months) + 0.07%
2017-06-30	1995-04-03	06-30 & 12-30	9.65	7,744,000	7,795,360	CA74814ZAR43
2017-12-01	2007-01-29	06-01 & 12-01	4.50	1,000,000,000	995,851,531	CA74814ZDR16
2020-12-01	2004-12-07	06-01 & 12-01	5.00	100,000,000	98,391,666	CA74814ZDC47
2023-03-30	1995-08-09	03-30 & 09-30	9.50	194,500,000	197,386,322	CA74814ZAX11
2025-06-01	2004-12-08	06-01 & 12-01	5.35	497,000,000	514,272,770	CA74814ZDE03
2026-04-01	2002-06-25	04-01 & 10-01	4.00	170,000,000	170,002,082	CA74814ZCU53
2026-04-01	1996-12-27	04-01 & 10-01	8.50	100,000,000	106,564,299	CA74814ZBH5	SFP (1): 1997-04-01
2026-04-01	1999-01-12	04-01 & 10-01	8.50	90,000,000	112,139,315	CA74814ZCA9
2026-04-01	2003-07-22	04-01 & 10-01	5.50	74,332,000	73,515,862	CA74814ZCX9
2028-04-01	1999-02-19	04-01 & 10-01	6.10	5,000,000	5,003,830	CA74814ZCD3
2035-04-01	1995-04-13	04-01 & 10-01	-	100,000,000	9,286,806	CA74814ZAT09	Others (1)
2035-04-01	1995-04-11	04-01 & 10-01	-	150,000,000	11,548,365	CA74814ZAS26	From 1999-04-01 to 2006-10-01: $2,000,000 each Interest Payment Date
2035-04-01	1995-01-31	04-01	-	150,000,000	39,207,074	CA74814ZAH60	Others (2)
2035-04-01	1997-12-15	04-01 & 10-01	6.50	300,000,000	296,288,721	CA74814ZBP7
2035-04-01	1999-02-02	-	-	456,000,000	124,973,968	CA74814ZCB72	Zero-coupon Note
2038-12-01	2006-08-29	06-01 & 12-01	5.00	1,500,000,000	1,566,183,173	CA74814ZDK62
2039-10-01	1999-02-05	-	-	525,000,000	122,731,304	CA74814ZCC5

45

Maturity Date	Issue Date(1)	Interest Payment Date(s)	Coupon (%)		Canadian Dollars			CUSIP Number or ISIN Code	References
					Nominal Value		Book Value
2040-04-01	2000-05-25	-	-		463,000,000		481,157,892	CA74814ZCJ0	Others (12)
2043-07-08	2003-07-08	01-08 & 07-08	5.60		80,000,000		80,370,750	CA74814ZCW1
2051-09-21	2006-11-23	09-21 & 03-21	5.00		420,000,000		453,297,011	CA74814ZDN02
2056-12-01	2006-04-07	06-01 & 12-01	Various		1,500,000,000		1,487,436,577	CA74814ZDJ99
2062-09-21	2006-11-23	09-21 & 03-21	6.70		150,000,000		214,319,990	CA74814ZDP59
2065-09-21	2006-09-21	09-21 & 03-21	6.35		915,000,000		1,209,050,875	CA74814ZDM29
Savings Products
Savings Bonds
2007-2016		06-01	3.25-8.50		663,994,007		663,994,007		Put (3)
Other Savings Products
2007-2017		Various	Various		4,215,051,414		4,215,051,414
Receiver General of Canada
2007-2032	1987-2007	02-01 & 08-01	4.61-11.33		95,747,049		95,747,049		Put (4)
Assumed Debt
2013-2017	1963-1967		5.125/5.75		16,486,890		16,486,890		Payable in semi-annual installments, including principal and interest
Immigrant Investor Program
2007-2012	2002-2007	-	3.47-5.46		2,674,000,000		2,405,361,157
Société immobilière du Québec
2013-03-28	1988-03-28	03-28 & 09-28	10.10		59,427,570		59,427,570
2014-06-16	1989-06-16	06-16 & 12-16	10.50		150,000,000		150,000,000
Société québécoise d’assainissement des eaux
2014-07-31	1989-07-31	01-31 & 07-31	10.20		50,000,000		50,000,000
Other Consolidated Organizations
Various	Various	Various	Various		7,269,000		7,269,000
					67,668,616,644		67,764,890,478
Adjustments relating to swap agreements					23,747,979,407		23,747,979,407
Total-Payable in Canadian Dollars				$	91,416,596,051	$	91,512,869,885

46

Maturity Date	Issue Date(1)	Interest Payment Date(s)	Coupon (%)	Foreign Currency Units					Equivalent in Canadian Dollars	CUSIP Number or ISIN Code	References
				Nominal Value			Book Value
B)        Payable in foreign currency
Payable in United States Dollars
2009-02-15	1999-02-18	02-15 & 08-15	5.75		1,000,000,000			999,477,637	1,152,297,768	US748148QQ90
2009-07-17	2002-07-17	07-17 & 01-17	5.00		750,000,000			748,521,500	862,970,437	US748148BW2
2011-01-22	2001-01-22	01-22 & 07-22	6.125		1,000,000,000			996,709,495	1,149,106,377	US748148QX42
2014-05-05	2004-05-05	05-05 & 11-05	4.875		1,000,000,000			994,592,390	1,146,665,565	US748148RM77
2015-05-26	2005-05-26	05-26 & 11-26	4.60		1,000,000,000			999,288,364	1,152,079,555	US748148RQ8
2016-03-01	2006-03-01	03-01 & 09-01	5.00		1,250,000,000			1,241,767,824	1,431,634,125	US748148RR64
2016-04-01	1986-04-01	04-01	9.00		250,000,000			249,611,738	287,777,373	LU002143534
2016-11-14	2006-11-14	05-14 & 11-14	5.125		1,500,000,000			1,494,195,709	1,722,658,233	US748148RS4
2023-07-15	1993-07-15	01-15 & 07-15	7.50		1,000,000,000			998,290,929	1,150,929,612	US748148PB31	SFP (1):1994-07-15
2024-02-09	1994-02-09	02-09 & 08-09	7.125		1,000,000,000			997,070,921	1,149,523,064	US748148PD96	SFP (1):2004-02-09
2026-12-01	1986-12-01	06-01 & 12-01	8.625		300,000,000			299,400,560	345,178,906	US748148KA05	SFP (2):1987-12-01 then SFP (1):1997-12-01
2029-09-15	1999-09-24	03-15 & 09-15	7.50		1,500,000,000			1,494,882,133	1,723,449,612	US748148QR73	Global Issue
Medium-Term Notes
2007-10-15	1994-01-13	04-15 & 10-15	6.65		5,000,000			5,000,000	5,764,500	CA74814ZAA12
2007-10-15	1994-07-20	04-15 & 10-15	8.35		4,000,000			3,999,764	4,611,328	CA74814ZAC77
2007-10-15	1994-11-15	04-15 & 10-15	8.35		4,500,000			4,491,565	5,178,325	CA74814ZAD56
2008-02-25	1998-02-25	02-25	6.18		25,000,000			25,000,000	28,822,500	XS0084745248
2013-02-07	2003-02-07	02-07 & 08-07	Floating		50,000,000			50,000,000	57,645,000	-	USD-LIBOR-LIBO (6 months) + 0.20%
2016-08-31	2006-08-31	08-31 & last day of February	5.30		100,000,000			99,754,999	115,007,539	CA74814ZDL46
2018-08-07	1998-08-07	02-07 & 08-07	5.88		250,000,000			250,000,000	288,225,000	XS0089070485	Option (1)
2019-06-01	2006-01-30	06-01 & 12-01	4.937		5,000,000			5,000,000	5,764,500	CA74814ZDF77
2020-12-01	2006-01-30	06-01 & 12-01	4.962		5,000,000			5,000,000	5,764,500	CA74814ZDG50
2026-01-30	1996-01-30	01-30 & 07-30	6.35		150,000,000			149,968,063	172,898,180	US74815HBZ47	Put (2): January 30, 2006, 2008, 2011, 2016 & 2021
2026-02-27	1996-02-29	02-27 & 08-27	7.14		99,770,000			99,770,000	115,024,833	US74815HCB69	Put��(2): 2006-02-27 & 2016-02-27.
2026-03-02	1996-02-29	03-02 & 09-02	7.485		150,000,000			150,000,000	172,935,000	US74815HCA86
2026-03-06	1996-03-06	03-06 & 09-06	7.365		99,850,000			99,850,000	115,117,065	US74815HCC43
2026-03-10	1996-03-08	03-10 & 09-10	7.035		50,000,000			50,000,000	57,645,000	US74815HCD26	Put (2): 2008-03-10.
2026-04-09	1996-04-09	04-09 & 10-09	7.38		100,000,000			100,000,000	115,290,000	US74815HCE09
2026-04-15	1996-04-11	04-15 & 10-15	6.86		50,000,000			50,000,000	57,645,000	US74815HCG56	Put (2): 2006-04-17, 2016-04-15 & 2021-04-15. If first Put not exercised, Coupon: 7.50%.
2026-04-15	1996-04-11	04-15 & 10-15	6.89		50,000,000			50,000,000	57,645,000	US74815HCF73	Put (2): 2006-04-17. If not exercised, Coupon: 7.50%.
2026-07-22	1996-07-22	01-22 & 07-22	7.295		99,975,000			99,975,000	115,261,177	US74815HCJ95	Put (5): 2006-07-22
2035-11-17	2005-11-17	05-07 & 11-17	5.40		75,000,000			74,777,968	86,211,518	US74815HCP5
2036-07-22	1996-07-22	01-22 & 07-22	7.22		160,000,000			160,000,000	184,464,000	US74815HCH30	Put (2): 2006-07-22 & 2016-07-22. If first Put not exercised, Coupon: 7.97%.
					13,083,095,000			13,046,396,559	15,041,190,592
Adjustments relating to swap agreements					(12,114,843,335	)		(12,113,385,512)	(13,965,522,156)
Total-Payable in United States Dollars				U.S.$	968,251,665		U.S.$	933,011,047	1,075,668,436

47

Maturity Date	Issue Date(1)	Interest Payment Date(s)	Coupon (%)	Foreign Currency Units				Equivalent in Canadian Dollars	CUSIP Number or ISIN Code	References
				Nominal Value		Book Value
Payable in Japanese Yen
2007-11-13	1997-11-12	11-12	2.29		6,000,000,000		6,000,000,000	58,835,987	-
2009-09-29	1997-07-29	03-29 & 09-29	3.00		100,000,000,000		99,938,374,397	979,995,491	-
2013-05-09	2001-05-09	05-09 & 11-09	1.60		50,000,000,000		49,780,251,865	488,145,046	XS0129013305
2017-02-15	2007-02-15	02-15 & 08-15	1.92		5,000,000,000		5,000,000,000	49,029,989
Medium Term Notes
2007-11-27	1997-11-27	11-27	2.80		1,000,000,000		1,000,654,137	9,812,414	XS0082133561	Interest payable in U.S.$ (U.S.$ 224,989.00 per year)
2007-12-10	1997-12-10	12-10	2.72		500,000,000		500,000,000	4,903,000	XS0082326793	Interest payable in U.S.$ (U.S.$ 110,121.45 per year)
2007-12-10	1997-12-10	06-10 & 12-10	Floating		1,000,000,000		1,000,000,000	9,806,000	XS0082875542	Others (3)
2007-12-10	1997-12-10	06-10 & 12-10	Floating		1,000,000,000		999,923,422	9,805,249	XS0082400358	Others (3)
2008-03-25	1998-02-12	03-25	2.62		1,200,000,000		1,196,867,872	11,736,486	XS0084194181	Interest payable in U.S.$ (U.S.$ 250,717.20 per year)
2009-07-28	1994-07-28	07-28	5.00		3,000,000,000		2,995,566,359	29,374,517	XS0052005807
2009-11-01	1994-11-01	11-01	4.91		3,000,000,000		2,980,408,353	29,225,878	XS0053818869
2010-07-27	1995-07-27	07-27	3.60		2,000,000,000		2,000,000,000	19,612,000	XS0058830240	From 2000-07-27: 4.50% and interest payable in DM (¥61.31 per DM)
2011-02-15	1996-02-15	02-15	3.95		1,000,000,000		999,327,298	9,799,401	XS0063445000
2011-02-28	1996-02-28	02-28	4.00		1,000,000,000		998,804,807	9,794,278	XS0064288662
2011-06-06	1996-06-06	06-06 & 12-06	4.06		5,000,000,000		5,000,000,000	49,029,990	XS0066914044
2011-06-20	1996-06-20	06-20	4.00		2,000,000,000		1,997,079,731	19,583,360	XS0067164235
2011-09-26	1996-09-26	03-26 & at Maturity	3.875		10,000,000,000		10,000,000,000	98,059,979	XS0069518131
2011-09-26	1996-09-26	03-26 & at Maturity	3.85		10,000,000,000		10,000,000,000	98,059,979	XS0069585163
2011-09-26	1996-09-26	03-26 & 09-26	Floating		500,000,000		500,000,000	4,903,000	XS0069576253	Others (4)
2011-10-17	1996-10-17	10-17	3.67		500,000,000		499,843,504	4,901,464	XS0070388524
2011-10-21	1996-10-21	10-21	3.66		1,000,000,000		999,215,304	9,798,303	XS0070488662
2011-10-24	1996-10-24	10-24	3.645		2,000,000,000		1,996,146,815	19,574,212	XS0070488407
2011-10-24	1996-10-24	10-24	3.70		500,000,000		499,685,626	4,899,916	XS0070579890
2011-10-28	1996-10-28	03-25 & at Maturity	5.00		10,000,000,000		9,963,445,866	97,701,550	XS0070404073	Interest payable in $A ($A5,618,000 per year and $A3,323,983 at Maturity)
2011-10-28	1996-10-28	10-28	3.65		5,000,000,000		4,987,370,841	48,906,148	XS0070690143
2011-12-19	1996-12-19	12-19	3.31		7,700,000,000		7,684,992,303	75,359,018	XS0071934839
2012-03-20	1997-02-20	03-20	3.44		30,000,000,000		30,000,000,000	294,179,937	XS0073282906
2012-09-25	1997-09-25	03-25 & at Maturity	3.00		11,000,000,000		10,997,938,817	107,845,765	XS0080441396
2012-09-29	1997-09-29	03-29 & at Maturity	3.00		10,000,000,000		10,000,000,000	98,059,979	XS0082098143
2014-07-07	1994-07-07	01-07 & 07-07	5.50		30,000,000,000		29,988,822,044	294,070,326	XS0051759412
2015-02-02	1995-02-02	02-02	5.60		6,000,000,000		6,000,000,000	58,835,987	XS0055430374
2016-02-15	1996-02-15	02-15	4.23		1,000,000,000		998,304,760	9,789,374	XS0063440035
2016-06-27	1996-07-10	06-27 & 12-27	4.305		8,000,000,000		8,000,000,000	78,447,983	XS0067851310
2016-07-11	1996-07-11	01-11 & 07-11	4.50		5,000,000,000		5,035,031,294	49,373,506	XS0067208974
2016-09-26	1996-09-26	03-26 & at Maturity	4.125		5,000,000,000		5,000,000,000	49,029,990	XS0069585320
2016-10-24	1996-10-24	10-24	4.00		500,000,000		498,784,229	4,891,077	XS0070580047
2016-10-28	1996-10-28	03-22 & at Maturity	4.00		5,000,000,000		4,989,290,788	48,924,975	XS0070775647
2016-11-07	1996-11-07	05-07 & 11-05	3.95		9,600,000,000		9,589,698,830	94,036,567	XS0070684252

48

Maturity Date	Issue Date(1)	Interest Payment Date(s)	Coupon (%)	Foreign Currency Units				Equivalent in Canadian Dollars	CUSIP Number or ISIN Code	References
				Nominal Value			Book Value
2016-11-14	1996-11-14	11-14	3.80		20,000,000,000		19,847,014,563	194,619,783	XS0070920243
2016-11-21	1996-11-21	11-21	4.00		1,000,000,000		1,000,000,000	9,805,998	XS0071482599
2016-11-29	1996-11-29	11-29	3.75		1,000,000,000		1,000,000,000	9,805,998	XS0071205248
2016-12-16	1996-11-22	12-16	3.96		1,000,000,000		1,000,000,000	9,805,998	XS0071476864
2016-12-19	1996-12-19	12-19	4.90		2,000,000,000		2,000,000,000	19,612,000	XS0071771512	Interest payable in $A ($A1,072,210 per year)
2016-12-19	1996-12-18	12-19	3.82		5,000,000,000		5,000,000,000	49,029,990	XS0071823925
2016-12-19	1996-12-18	12-19	3.76		3,000,000,000		3,000,000,000	29,417,994	XS0071934755
2016-12-19	1996-12-19	12-19	3.80		5,000,000,000		5,000,000,000	49,029,990	XS0072031106
2016-12-19	1996-12-24	12-19	3.80		5,000,000,000		4,992,838,186	48,959,761	XS0072105157
2017-01-09	1997-01-09	01-09	4.70		3,000,000,000		2,994,846,085	29,367,461	XS0072223604	Interest payable in U.S.$ (U.S.$1,252,218 per year)
2017-01-23	1997-01-23	01-23	3.71		5,000,000,000		4,939,903,943	48,440,688	XS0073055328
2017-02-28	1997-02-28	02-28	3.74		4,000,000,000		4,000,000,000	39,223,992	XS0074014779
2017-07-24	1997-07-24	07-24	3.50		5,000,000,000		4,981,467,250	48,848,258	XS0078225884
2017-07-28	1997-07-28	07-28	3.50		3,000,000,000		2,992,772,001	29,347,116	XS0078671236
2017-07-30	1997-07-30	07-30	3.45		1,000,000,000		993,858,571	9,745,775	XS0078670857
2017-08-11	1997-07-24	02-11 & 08-11	3.526		1,300,000,000		1,300,000,000	12,747,797	XS0078704003
2017-10-25	1996-10-25	04-25 & 10-25	4.02		6,000,000,000		6,000,000,000	58,835,989	XS0070689996
2017-10-30	1996-10-30	04-30 & 10-30	3.97		1,700,000,000		1,697,392,264	16,644,625	US74815HCK68
2017-10-31	1997-10-30	10-31	3.01		5,000,000,000		5,000,000,000	49,029,990	XS0081272048
2018-10-30	1996-10-30	04-30 & 10-30	3.97		1,700,000,000		1,697,278,969	16,643,514	US74815HCL42
2023-12-13	1993-12-13	06-13 & 12-13	5.00		20,000,000,000		20,000,000,000	196,120,000	XS0047845960	Call (3): 2008-12-13
					450,700,000,000		450,053,201,094	4,413,220,838
Adjustments relating to swap agreements					(237,700,000,000)		(237,700,000,000)	(2,330,886,200)
Total-Payable in Japanese Yen				¥	213,000,000,000	¥	212,353,201,094	2,082,334,638
Payable in Swiss Francs
2008-09-17	1998-03-17	09-17	3.50		500,000,000		502,305,431	477,575,401	CH0008535814
Medium Term Notes
2015-10-05	2005-10-05	10-05	2.25		500,000,000		499,188,092	474,611,538	CH0022651902
2017-06-21	2006-12-21	06-21	2.625		500,000,000		494,673,125	470,318,857	CH0027984514
					1,500,000,000		1,496,166,648	1,422,505,796
Adjustments relating to swap agreements					1,768,212,500		1,768,212,500	1,681,216,445
Total-Payable in Swiss Francs				SF	3,268,212,500	SF	3,264,379,148	3,103,722,241

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Maturity Date	Issue Date(1)	Interest Payment Date(s)	Coupon (%)	Foreign Currency Units				Equivalent in Canadian Dollars	CUSIP Number or ISIN Code	References
				Nominal Value			Book Value
Payable in Australian Dollars
Medium-Term Notes
2009-02-18	2004-02-18	02-18 & 08-18	6.00		200,000,000		200,000,000	186,862,032	AU0000QBCHD0
2015-07-15	2005-07-15	01-15 & 07-15	5.75		450,000,000		446,906,868	417,549,628	AU0000QBCHE8
					650,000,000		646,906,868	604,411,660
Adjustments relating to swap agreements					(650,000,000)		(646,777,602)	(604,284,313)
Total-Payable in Australian Dollars				$A	-	$A	129,266	127,347
Payable in Pounds Sterling
2011-11-04	1996-11-04	11-04	8.625		150,000,000		149,354,401	338,991,810	XS0070614473
2020-03-15	1984-02-15	03-15 & 09-15	12.25		50,000,000		49,602,251	112,582,935	-
					200,000,000		198,956,652	451,574,745
Adjustments relating to swap agreements					(200,000,000)		(200,000,000)	(453,940,000)
Total-Payable in Pounds Sterling				£	-	£	(1,043,348)	(2,365,255)
Payable in Mexican Pesos
Medium-Term Notes
2016-01-19	2006-01-31	Payable every 182 days after August 1st, 2006	8.27		1,500,000,000		1,500,000,000	156,679,110	XS0242849486
					1,500,000,000		1,500,000,000	156,679,110
Adjustments relating to swap agreements					(1,500,000,000)		(1,500,000,000)	(156,600,000)
Total-Payable in Mexican Pesos				MXN	-	MXN	-	79,110

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Maturity Date	Issue Date(1)	Interest Payment Date(s)	Coupon (%)	Foreign Currency Units				Equivalent in Canadian Dollars	CUSIP Number or ISIN Code	References
				Nominal Value			Book Value
Payable in New Zealand Dollars
2015-11-09	2005-11-09	05-09 & 11-09	6.75		300,000,000		298,889,110	246,622,530	C4108FAC0
					300,000,000		298,889,110	246,622,530
Adjustments relating to swap agreements					(300,000,000)		(298,842,180)	(246,574,683)
Total-Payable in New Zealand Dollars				NZ$	-	NZ$	46,930	47,847
Payable in Hong Kong Dollars
2012-02-02	2007-02-02	02-02 & 05-02 & 08-02 & 11-02	4.30		750,000,000		750,000,000	110,678,400	XS0285533070
					750,000,000		750,000,000	110,678,400
Adjustments relating to swap agreements					(750,000,000)		(750,000,000)	(110,660,250)
Total-Payable in Hong Kong Dollars				HK$	-	HK$	-	18,150

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Maturity Date	Issue Date(1)	Interest Payment Date(s)	Coupon (%)		Foreign Currency Units				Equivalent in Canadian Dollars	CUSIP Number or ISIN Code	References
					Nominal Value		Book Value
Payable in Euro
2007-12-27	2001-02-27	12-27	5.125		150,000,000		150,306,514		231,738,550	XS124566034	Others (8)
2008-02-27	1998-02-27	02-27	5.40		25,564,594		25,564,594		39,414,805	-	Others (8)
2009-01-04	1998-08-18	01-04	5.125		639,114,852		638,705,010		984,738,248	DE0002493202	Others (10)
2011-06-21	2001-06-21	06-21	5.625		1,500,000,000		1,496,447,509		2,307,182,620	XS0131273012
2013-02-27	2003-02-27	02-27	4.25		1,000,000,000		995,987,341		1,535,586,560	XS0163254062
Medium-Term Notes
2007-06-11	1997-06-01	06-11 & 12-11	Floating		130,379,430		130,357,282		200,984,856	-	DEM-LIBOR-BBA (6 months) + 0.15%
2007-07-23	1997-07-23	01-23 & 04-23 & 07-23 & 10- 23	Floating		25,564,594		25,559,980		39,408,377	XS0078612651	DEM-LIBOR-BBA (3 months) + 0.125%
2007-09-20	1996-09-20	09-20	6.875		304,898,034		305,003,532		470,246,263	XS0069512522
2007-10-23	1997-10-23	10-23	Floating		45,734,705		45,734,705		70,513,768	FR0000490260	Others (6)
2007-12-18	1997-12-18	12-15	Floating		8,436,316		8,436,316		13,007,112	XS0082839233	Others (5)
2007-12-31	1997-12-31	12-31	Floating		76,224,509		76,224,509		117,522,947	XS0082822692	Others (7)
2008-03-03	1998-03-03	03-03 & 06-03 & 09-03 & 12- 03	Floating		102,258,376		102,228,035		157,615,184	XS0084606804	DEM-LIBOR-BBA (3 months) + 0.175%
2008-03-03	1998-03-03	03-03 & 09-03	Floating		10,225,838		10,225,837		15,766,196	-	DEM-LIBOR-BBA (6 months) + 0.22%
2008-03-25	1998-03-25	03-25 & 06-25 & 09-25 & 12- 25	Floating		25,564,594		25,564,594		39,415,492	-	DEM-LIBOR-BBA (3 months) +0.25%
2008-11-20	1998-11-20	05-20 & 11-20	Floating		25,564,594		25,559,691		39,407,932	-	Others (8)
2010-02-05	1998-02-05	02-05	5.50		304,898,000		305,308,029		470,715,727	XS0083986660	Others (11)
2015-02-10	2005-02-10	02-10	3.625		1,500,000,000		1,491,547,436		2,299,627,818	XS0212274046
2016-06-20	2005-10-20	06-20	3.375		1,500,000,000		1,486,270,988		2,291,492,733	XS0233031326
2017-01-22	1996-11-29	01-22	7.08		51,129,188		50,893,641		78,466,451	XS0071659949
2018-04-03	2006-04-03	04-03	4.22		100,000,000		100,000,000		154,180,000	XS0248732264
2019-01-11	1999-01-11	01-11	4/5/6/7.10		22,000,000		21,922,262		33,799,744	XS0092871242	Others (9)
					7,547,557,624		7,517,847,805		11,590,831,383
Adjustments relating to swap agreements					(5,478,057,624)		(5,478,411,167)		(8,446,614,338)
Total-Payable in Euro				€	2,069,500,000	€	2,039,436,638		3,144,217,045
Total-Payable in foreign currencies									9,403,849,559
Total - Funded Debt of Borrowings-Government, Borrowings-to finance Government Enterprises and Borrowings-to finance Municipal Bodies								$	100,916,719,444

⁽¹⁾ If more than one issue date, the date of the first issue is indicated.

In case of disparity between the terms and conditions of each issue and this table, the terms and conditions of each issue will prevail.

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References

Sinking Fund Provisions (“SFP”):

⁽¹⁾ As an invested sinking fund, Québec has agreed to withdraw from the Consolidated Revenue Fund, each year from the date indicated, a sum equal to at least 1% of the principal amount of the issue then outstanding. The issue is not redeemable for sinking fund purposes.

⁽²⁾ As an invested sinking fund, Québec has agreed to withdraw from the Consolidated Revenue Fund, each year from the date indicated, a sum equal to at least 2% of the principal amount of the issue then outstanding. The issue is not redeemable for sinking fund purposes.

Callable (“Call”):

⁽¹⁾ Redeemable prior to maturity at the option of Québec in whole or in part, from the date indicated and on any subsequent Interest Payment Date at par upon prior notice.

⁽²⁾ Redeemable prior to maturity at the option of Québec in whole only, at any time from the date indicated at par upon prior notice.

⁽³⁾ Redeemable prior to maturity at the option of Québec in whole only, from the date indicated and annually thereafter at various decreasing price of the nominal amount.

Puttable (“Put”):

⁽¹⁾ Redeemable prior to maturity at the option of the holder in whole only, on the date indicated at par upon prior notice.

⁽²⁾ Redeemable prior to maturity at the option of the holder in whole or in part, on the date indicated at par upon prior notice.

⁽³⁾ Payable at par at the option of the holder at any time prior to maturity.

⁽⁴⁾ Held and callable in whole or in part, at par at the option of the Minister of Finance of Canada on six months notice subject to the requirements of the Canada Pension Plan.

⁽⁵⁾ Redeemable prior to Maturity at the option of the holder in whole or in part, from the date indicated and on any subsequent Interest Payment Date at par upon prior notice.

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Option

⁽¹⁾ The Holder may exercise its option on August 2, 2008 to postpone the Maturity Date to August 7, 2018 and to increase the Coupon to 6.54% from 2008-08-07.

Others

⁽¹⁾ $2,000,000 for each Interest Payment Date from 1999-04-01 to 2000-10-01 and from 2004-10-01 to 2007-10-01 (with the exception of 2006-04-01: $4,000,000).

⁽²⁾ $6,000,000 annually for 1998-04-01 & 1999-04-01; $5,000,000 annually from 2000-04-01 to 2004-04-01; $35,000,000 for 2005-04-01; $5,000,000 for 2006-04-01; $55,000,000 for 2026-04-01 and $110,000,000 annually for 2034-04-01 & 2035-04-01.

⁽³⁾ The Coupon is determined as follows: [JPY Swap Rate 10 years as per Telerate Page 17143] – [0.49*JPY-LIBOR-BBA (6 months)].

⁽⁴⁾ The Coupon is determined as follows: [(12.70% divided by 87.50) X JPY/$A rate of exchange five Business Days {London, Sydney and Tokyo} before each Interest Payment Date] – 6.20%. Minimum Rate: 0.00%.

⁽⁵⁾ For the years 1, 3, 5, 7 and 9, the Coupon is 7.00%. For the years 2, 4, 6, 8 and 10, the Coupon will be determined as follows: 15.00%-[2*DEM-LIBOR-BBA(12 months)].

⁽⁶⁾ The Coupon is determined as follows:{[1 + CNO TEC 10 – 1.12%]^0.25 – 1} and will be payable every three months (01-23, 04-23, 07-23 and 10-23).

⁽⁷⁾ The Coupon is determined as follows: {[1 + CNO TEC 10 – 0.73%]^0.25 – 1} and will be payable every three months (03-31, 06-30, 09-30 and 12-31).

⁽⁸⁾ Bank loan redenominated (simple redenomination) as of January 1, 1999 on the basis of 1 DM = 1.95583 Euro.

⁽⁹⁾ The Coupon will be 4.00% for the first five years, 5.00% for the years 6 to 10, 6.00% for the years 11 to 15, and 7.10% for the next years.

⁽¹⁰⁾ Notes redenominated (simple redenomination) as of January 4, 2000 on the basis of 1 DM = 1.95583 Euro.

⁽¹¹⁾ Euro-MTN redenominated (simple redenomination) as of February 5, 2000 on the basis of 1 FF = 6.55957 Euro.

⁽¹²⁾ Interest of 80% payable half-yearly from April 1, 2030 to maturity date.

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