Karl W. Smith, Vice President, Finance  and Chief Financial Officer, Fortis Inc. The following material should be read in conjunction with  the Consolidated Financial Statements and Notes to the Consolidated Financial Statements included in the 2001 Annual Report. The Consolidated Financial Statements have been prepared in accordance with Canadian generally accepted accounting principles. Fortis Inc. (“the Corporation”) includes forward-looking statements in this material. By their very nature, forward-looking statements are based on underlying assumptions and are subject to certain risks and uncertainties that may cause  actual results to vary from plans, objectives and estimates. Such events include, but are not limited to, general economic, market and business conditions, regulatory developments, weather and competition. Fortis Inc. cautions readers that should certain risks or uncertainties materialize, or should  underlying assumptions prove incorrect, actual results may  vary significantly from those expected.  The Fortis Group of Companies is comprised of Newfoundland Power Inc. (“Newfoundland Power”), Maritime Electric Company, Limited (“Maritime Electric”), FortisUS Energy Corporation (“FortisUS Energy”), Belize Electric Company Limited (“BECOL”), Belize Electricity Limited (“Belize Electricity”), Canadian Niagara Power Company, Limited (“Canadian Niagara Power”) and Fortis Properties Corporation (“Fortis Properties”). Each company operates as an autonomous unit, assumes profit and loss responsibility and is accountable for its own resource allocation. The Corporation holds a 20 per cent interest in Caribbean Utilities Company, Ltd. (“Caribbean Utilities”) and accounts for this investment on the cost basis of accounting including in its results only dividend income. Financing: The Corporation successfully negotiated  a US$62 million short-term credit facility to finance the acquisition of BECOL. This deal represents the first time that Fortis secured US dollar borrowings. The short-term facility has been partially refinanced through the issue  of US$45 million in long-term debt from a syndicate of international lenders. This financing demonstrates the confidence of the lending community in the operations  of BECOL and in the growth opportunities of the country of Belize. Belize Electricity also issued $15.6 million in  Investment: In support of its long-term growth strategy, Fortis invested $252.5 million in acquisitions and capital expenditures in 2001. Cash Flow from Operations: Cash flow from operations, before working capital adjustments, was $120.7 million in 2001 compared to $79.9 million in 2000.  Revenue Growth: Revenue growth continued to be strong in 2001, increasing 8.3 per cent to $628.3 million from $580.2 million in 2000. Asset Growth: Total assets grew 9.5 per cent to $1.62 billion at year-end 2001 compared to $1.48 billion at  year-end 2000.  Return on Average Common Shareholders’ Equity: Return on average common shareholders’ equity increased to 12.4 per cent from 9.7 per cent in 2000. Dividends: Dividends paid increased to $1.87 per common share in 2001 from $1.84 in 2000. Dividends per common share have increased annually since the inception of Fortis in 1987. The Corporation’s dividend payout ratio declined to 52.1 per cent in 2001 compared to 67.6 per cent in 2000 and 80.8 per cent in 1999. Earnings Growth: Fortis achieved record results in 2001 as earnings grew 45.1 per cent to $53.4 million from $36.8 million in 2000. Earnings per common share grew to $3.59 from $2.72 in 2000.  Overview Management Discussion & Analysis 28 FORTIS Inc. 2OO1 Annual Report TSE:FTS