Week in Review

1
Week in Review

• Monday, October 17, 2005

2
Ottawa expected to change policy on Income Trusts

• Government announced it would no longer provide
  advance tax rulings for companies contemplating
  becoming income trusts
• Attempt to slow the recent boom in this market
  causing huge uncertainty
• Two Main issues with Income Trusts
• Avoid Taxes (estimated loss of 300MM/ year in
  tax rev)
• Discourages reinvestment in companies

3
Canada and Softwood Lumber Debate

• Canada won yet another panel on the softwood
  lumber dispute stating that US is in violation of
  NAFTA
• Canadian lumber exporters have paid 5 billion in
  punitive duties since 2002
• Suggested Canada will seek out China and India as
  a trading partner to replace the United States
• Resources belong to the provinces
• U.S. reopen talks on drilling in the Arctic
  National Wildlife Refuge in Alaska something
  Canada is opposed to
• In Conclusion Everybodys mad at everybody

4
Study Reveals Ottawas Economic Initiatives
Hinder Canadas Progress

• No kidding
• Programs like such as unemployment insurance and
  interprovincial equalization, not only hinder our
  economic competitiveness but also have failed to
  spur much economic growth in have-not provinces
• Nobody is winning!
• Investment in areas such as infrastructure,
  education and innovation have declined in
  relation to social spending

5
Study Recommends . . .

• Overhaul the way Ottawa transfers from rich to
  poor
• Develop a long-term approach for dealing with
  greater-than-expected surpluses
• Overhaul the employment insurance program so that
  it acts more like insurance against the loss of
  work, instead of providing support for
  ineffective employers

6

• Company Specific News

7
Delphi filing Drags Down GM Shares

• Delphi Corp, GMs largest parts supplier and
  former subsidiary, filed for bankruptcy
• Foreshadow GMs demise?
• Both face same problems with unionized workforce
  that refuses the pay-cuts necessary to make the
  business profitable
• GM must cover the pension and retirement benefits
  of about 30,000 workers who transferred from GM -
  estimate 5BN liability
• SP downgraded 284-billion (U.S.) debt to junk
  bond status

8
More Trouble in the Auto Sector . . .

• Auto parts maker, Dana Corp will restate its
  profits to fix improper accounting and will
  withdraw its profit forecast for 2005
• Stock tumbled 34 on announcement
• Last month the stock tumbled 23 when they
  announced they were cutting their profit forecast
• Cited soaring energy and steel costs for cutting
  in half its profit outlook for this year.

9
Good News on Monday . . . .

• General Motors and the United Auto Workers
  reached a tentative pact to cut health-care costs
  by about 15 billion
• The company will need to cut 25,000 or more
  manufacturing jobs
• Stock jumped 2.11 to 30.09 today
• GM posted a 1.6 billion deficit for the third
  quarter

10
Nortel Announces New CEO

• Motorola Inc. executive Mike Zafirovski was named
  the new president and CEO of Nortel
• Finally someone with a strong Telcom background
• Replaced Bill Owens, a former admiral in the
  navy, who was brought in 1.5 years ago
• Zafirovski has 30 years of experience at GE and
  Motorola Inc., most recently as president and
  chief operating officer of Motorola from 2002 to
  2005
• Shares traded up 5.1 in early trading on news

11
Samsung Fined in Price Fixing Probe

• Samsung, the world's largest maker of memory
  chips for computers and other gadgets, will pay a
  300 million fine to settle accusations it
  secretly conspired with industry rivals to fix
  prices
• Samsung's guilty plea caps a three-year
  investigation by the Justice Department
• Two of Samsung's leading rivals earlier paid
  fines totaling 345 million

12
RIM . . . Screwed ?

• Could face 1 billion patent liability with
  Blackberry
• 550 million more than it had budgeted for
• Faces a court order halting BlackBerry service in
  the U.S. if it can't get the verdict thrown out
• More than 70 of the company's 1.35 billion in
  annual revenue comes from the U.S
• Set to announce partnership with No. 1 hardware
  rival, Palm to tie its BlackBerry Connect service
  to Palm's Versamail application on the Treo 650
• Marks the transition from a hardware to a
  predominantly software provider

13
Inco Makes Bid for Falconbridge

• Inco offered C12.5 billion for rival Canadian
  mining company Falconbridge Ltd. to create the
  world's largest nickel producer.
• If merger goes through, 45 of the world's nickel
  output in the hands of the top two producers --
  the new Inco-Falconbridge firm and Norilsk
• Analyst predict rising prices in the long term
• Might have to sell assets in keeping with
  competition laws
• Job losses are expected to be minimal

14
Favourable Court Ruling for Cigarette Makers

• US Supreme Court ruled against allowing the
  government to pursue a 280 million racketeering
  penalty against tobacco firms.
• Ruling sent shares of tobacco companies surging,
  with Phillip Morris USA parent Altria Group Inc.
  rising 4.30 to 74.96, and rival Reynolds
  American Inc. adding 5.06 to 83.80

15

• Economic News

16

• Bank of Canada expected to raise rates on Tuesday
  to 3 to fend off inflation
• Crude-oil futures rose more than 1 a barrel
  Monday on concerns that a tropical storm in the
  Caribbean could grow into a hurricane and
  threaten Gulf of Mexico oil facilities
• Light crude is at 64.36 a barrel