Bombardier Inc.

800 Rene-Levesque Blvd. West, Montreal, Quebec, Canada H3B 1Y8

TEL: (514) 861-9481

Chairman: Laurent Beaudoin

ANOTHER OUTSTANDING YEAR

Fiscal 1999-2000 was another outstanding year for Bombardier. The Corporation posted record revenues and profits, met its commitment to grow earnings per share by 30% or more, in line with its announced target, and enhanced its position as a global leader in each of the major business segments in which it competes.

　Consolidated revenues for fiscal 1999-2000 increased by 18% to $13.6 billion. Net income, before taking into account unusual items, also increased substantially, climbing by 36% to$752.4 million, which translated into an increase in earnings per share (EPS) of 32% after unusual items. Due to strong markets for its products, Bombardier's order backlog stood at a record$27.2 billion at January 31, 2000.

　

　At the beginning of last year, Robert E. Brown was named President and CEO while Laurent Beaudoin continued to oversee the long-term orientation of the Corporation as Chairman of the Board and of the Executive Committee. The organization has continued to expand and prosper, building on the legacy of its strong past to ensure a solid future.

　This excellent performance kept the Corporation firmly on track to meet its goal of doubling sales during the five-year period ending in fiscal 2003-2004. As well, we have set ourselves a new target to double sales again over the next five years, through fiscal 2004-2005.

　We have also made good progress towards the goal we set last year of raising the Earnings Before Tax (EBT) margin to 11%over the same period. The EBT margin, before unusual items, increased from 7.2% to 8.3% for the latest year, and we fully expect to achieve our 10%margin target for fiscal 2002. Indeed, we are sufficiently confident of making continued improvement that we have raised the bar in terms of our rolling EBT targets for the next five years. The EBT margin of 10% originally targeted for fiscal 2004 has been advanced to fiscal 2002, and we have established a new target of 11% for fiscal 2004.

　Based on strategic plans for each of our groups, we have set earnings per share growth targets in excess of 30% for each of the fiscal years ending January 31, 2001 and 2002.

　

Growth and profits remain top strategic priorities. Diversification is also a high priority, as we constantly strive to improve the balance between Bombardier's various activities and to ensure that expansion in each of the business sectors, keeps pace with expansion of the Corporation in general. Over the years, the benefits of diversification have been clearly demonstrated at Bombardier. For example, profits from the recreational products segment and the cash flow from transportation helped to support large investments in aerospace in the 1990s.

　Diversification is already well established with the transportation, recreational products and financial services segments accounting for 40% of overall revenues while revenues from the aerospace segment, which account for the balance, are generated from three distinct markets, each with its own business cycle:

　In terms of future growth, we intend to continue to concentrate on opportunities that are either directly related or complementary to Bombardier's existing core businesses. At the same time, we will divest of businesses--such as our former 50% equity stake in Shorts Missile Systems Limited--which no longer fit with the Corporation's long-term strategic focus.

　

The performance of Bombardier Aerospace during the 1999-2000 fiscal year was particularly noteworthy. The Corporation has made substantial investments in recent years to build a leadership position in the regional aircraft and business jet sectors, and we are now seeing these investments bear fruit. In the regional aircraft segment, Bombardier is the only manufacturer to offer a full line of jets and turboprops. We are the first to market with a 70-seat regional jet, as we were with our pioneering 50-passenger CRJ100 and 200 Series aircraft. As well, we are also considering the launch of a new 90-seat regional jet, a derivative of our CRJ700 aircraft. We ended the latest fiscal year with a solid backlog of 435 regional aircraft on firm order, up 35% from a year earlier.

　This positive momentum has carried over into the new fiscal year, with the announcement in March 2000 of several substantial sales agreements. These include orders for 44 CRJ200 and Q300 series aircraft from Spain's Air Nostrum and letters of intent providing for 94 firm orders for CRJ200 and CRJ700 aircraft from Delta Connection, Inc. When finalized, the Delta order, valued at$2.9 billion, will represent the single largest sale of regional aircraft in history and will also include options for 406 aircraft. In view of this strong market demand and large backlog, we are implementing plans to increase the CRJ 100/200 production rate from 100 aircraft this year to 135 next year and to 150 in fiscal 2003.

　Another noteworthy development, subsequent to year-end, was a major victory at the World Trade Organization (WTO), in the long-running dispute concerning Canada's challenge of Brazil's ProEx program and its unfair subsidization of Embraer's regional jet aircraft. The WTO ruling should make for a more level playing field in the regional aircraft market in the future.

　During fiscal 2000, Bombardier Aerospace became the world's largest manufacturer of business aircraft in terms of revenues. It achieved another milestone with the deliveries of completed Global Express aircraft.

　

　Bombardier Transportation also earned a market leadership position during the past year. It took over the number one ranking worldwide in the passenger railcar segment. while further strengthening its leadership in the North American market through a number of key contracts, including an order from the Long Island Railroad for 226 commuter cars plus options for over 800 cars.

　In Europe, Bombardier Transportation acted decisively to address new market realities, which include privatization in the United Kingdom, industry overcapacity in Germany and increased competitive bidding on a transnational basis. By rightsizing our European operations, primarily in Germany--which entailed a restructuring charge of $118 million during the third and fourth quarters of the year--we aim to establish a base for profitability in Europe similar to what we have achieved in North America.

　

Here again, we met our primary goal for fiscal 1999-2000, which was to complete the first phase of the turnaround and see Bombardier Recreational Products back on the path to profitability. Despite a decline in revenues attributable to lower sales of personal watercraft and snowmobiles, the group managed to generate a modest pre-tax profit for fiscal 2000, compared with a loss the year before.

　Our goal now is to further improve performance, growing both top and bottom lines so that Bombardier Recreational Products can resume its role as a clear market leader and major contributor to Bombardier's overall success. We are putting particular emphasis on improving our position in the fast-growing ATV market, which we see as one of the keys to the group's future growth.

　In the snowmobile market, Bombardier Recreational Products is close to regaining the number one spot in market share. In personal watercraft, we are already number one in sales and a leader in terms of new technology designed to address environmental and safety issues.

　

Bombardier Capital continues to evolve into a diversified finance, asset-management and service company, increasingly focused on areas we know well and which help leverage the know-how of other Bombardier groups. As part of our strategic planning and budget review, we recently reassessed all of our loan portfolios and made the decision to sell or wind down a number of portfolios for lack of fit with our long-term orientation. The group also has a new President and Chief Operating Officer, Pierre Lortie, formerly President and COO of Bombardier International.

　

Bombardier International has been active in seeking out opportunities for the Corporation's products, technologies and competencies in non-traditional market sectors, and accelerating its penetration of geographic markets outside of North America and Western Europe. A case in point is the formation of Bombardier Sifang Power(Qingdao) Transportation Ltd. --a joint venture between Bombardier Transportation, China's Sifang Locomotive & Rolling Stock Works and Canadian-owned Power Pacific Corporation--which is currently launching operations in China and has landed a breakthrough order to design and manufacture 300 modern intercity railway cars for the Chinese government's Ministry of Railways.

　

The Corporation has a very specific goal of achieving operational excellence in all its spheres of activity. We are focusing our efforts on several different key drivers including best-cost sourcing programs, comprehensive risk management, and performance-based incentives at all levels of management, as well as widespread application of the increased know-how and learning that is derived from successfully handling larger and larger volumes of business.

　Central to the attainment of operational excellence is Six Sigma, the continuous improvement program first implemented at Bombardier Aerospace in 1997 and since rolled out across Bombardier Recreational Products and Bombardier Transportation. Bombardier Capital will join this year. Six Sigma provides us with a means of achieving the highest level of customerdefined quality at the lowest cost. As a result, we have steadily increased the resources devoted to the program, which now encompasses 350 full-time employees and some 12,000 employees who have been involved in training sessions. Net cash savings of $89 million were generated in fiscal 2000 and we are well on the way to exceeding our initial target of $400 million a year in cost savings by fiscal 2004. As we have now passed the initial stages of implementation, our focus will be on our engineering and manufacturing processes as well as the improvement of products and services for our customers.

　

Looking ahead to the balance of fiscal 2001 and beyond, the prospects for our business are generally favourable. The economy in North America remains robust and the situation in Europe and Asia has improved. Based on this generally positive economic scenario, and on our record backlog of $27.2 billion, we have maintained our growth targets for the year in terms of revenue and earnings.

　

　The business aircraft market is buoyant, fueled to a considerable extent by our successful fractional ownership program. The record orders outlined earlier attest to the robust health of the regional aircraft market. The positive outlook for Bombardier Transportation is based on markets which continue to offer good growth potential for the next few years. The North American market is particularly buoyant, while Asia offers good prospects for turnkey projects. As well, the generally favourable economic outlook for major markets augurs well for sales of our recreational products.

　We have met our overall goals for 1999-2000. Our revenue, EBT margin and EPS growth targets have been met. The growth and momentum in aerospace have been maintained. The first phase of the Bombardier Recreational Products turnaround has been achieved. Action has been taken in Bombardier Transportation and Bombardier Capital to improve their performance in the future. Six Sigma is now being implemented aggressively across the organization.

　Building on these successes, we have set high targets and intend to meet them. We will also continue to develop our people, to strive to improve the diversification of our businesses and to sell assets that do not fit with our long-term orientation. These initiatives will allow us to provide strong return to shareholders and position ourselves for sustained long-term profitable growth. In the end, it is the 56,000-plus people who work for Bombardier in plants and offices around the world who ultimately enable us to achieve market leadership, reach our financial targets and create added value for our shareholders. We take pride in having a strong management team and a first-rate, highly trained workforce. We continue to make the development of our people a top priority to ensure the level of expertise and commitment required to sustain profitable growth.

　We would like to take this opportunity to thank Bombardier employees worldwide for their hard work and commitment, which are so instrumental to our success. We also wish to extend our gratitude to fellow members of the Board of Directors for their wise counsel and unstinting support.

　

On behalf of the Board of Directors,

　

Montreal, Canada May 18, 2000