Key Market Facts

August 31, 2002

Level YTD Indices     S&P 500 916.07 -20.21% DJIA 8663.50 -13.55% S&P/TSX 6611.95 -14.00% Currencies / Commodities CAD / US 1.5531 -2.49% US / EURO 0.9847 9.85% Gold $US 313.90 12.51% Crude Oil $US 28.98 46.07% Natural Gas $US 3.296 28.25% Interest Rates Canadian Bank Rate 3.00% 33.33% Canadian Prime Rate 4.50% 20.00% Fed Funds Rate 1.75% nil Us Prime Rate 4.75% nil

All clients holding variable BC savings bonds should consider redeeming these bonds on October 15, 2002. There are a couple of reasons why I believe this should be done. In the past I was able to offer you a secondary market on these bonds between the provinces redemption dates of October 15th and April 15th and the firm would purchase them at par (100) no matter when you wanted to trade them. That was a service unique to the old firm and I am not able to guarantee that the price you receive in the secondary market (between redemption dates) will be at least equal to par. As a result you do not have the liquidity that you did before with this security.

The second reason is that I do not expect short term interest rates to increase very quickly given the continued weakness in the US market and therefore the coupon rate on these bonds will remain low. Depending on your time frame and risk tolerance levels there are alternative investments available that may provide you with an overall higher return. To follow are some of the options you may wish to consider and why you would do so.

1. Redeem variable BC savings bonds and invest the proceeds in three to five year fixed term bonds for a guaranteed yield to maturity.
   
2. Redeem variable BC savings bonds and purchase some income trust units to increase the overall return on your portfolio. I would recommend Arc Energy Trust, Canadian Oil Sands, Westshore Terminals Income Fund, KOCH Pipelines Canada and Davis & Henderson.
   
3. Redeem variable BC savings bonds and do a combination of 1 and 2.
   

For some clients it may be appropriate to hold onto these variable bonds. I would do so only if the total amount of bonds that you own is less than 30,000 AND you will not require the funds before April 15, 2003. If you own less than 30,000 and you believe you may need the money within the next 6 months I would redeem them now and put the proceeds into a liquid money market fund, commission free. The minimum transaction amount at RBC Dominion Securities for a treasury bills is 30,000 and for a bankers acceptances 50,000.

Please contact me at 604 257-7055 to discuss which option would be most suitable for you. The deadline for getting your redemption request in is October 4, 2002

Trading Instructions in EMAILs, Faxes and on Voicemail
Although email has become the fastest and easiest way to disseminate information to you and I use it whenever I can, we were all reminded last week by our Compliance Department that although we can discuss and relay transaction requests via email or fax I am also required to verbally confirm all transactions with you before they can be placed. This is to protect you in the event that someone emails or faxes me a request on your behalf without your authorization. Due to the issue of timeliness, trading instructions left on my voicemail will not be executed until verbally confirmed. Thank you.

Money Market Update

Although the announcement of the pending retirement of Jean Chrétien pushed short-term interest rates up and strengthened marginally the Canadian dollar in mid August, this reaction was short lived given the persistent weakness in the US markets.

Year to date we have seen a 25 basis point decrease and three 25 basis point increases in the Bank of Canada rate with no corresponding change in the US. This has helped strengthen the Canadian dollar from 0.6278 to 0.6439. My expectation is that without a change in the US Federal Reserve bias or an increase in the Fed Funds rate we will not see any additional increases in Canada this year. The Bank of Canada has three additional opportunities in 2002 to change rates. The interest rate policy announcement dates are September 4th, October 16th and December 2nd.

There is little likelihood that the Federal Reserve Board will make any changes to the US Fed Funds rate for the balance of 2002. The FOMC meeting dates are September 24, November 6, and December 10th.

Seminar Requests

Some of you have shown interest in a number of the seminar topics listed in my previous newsletter. For those of you that have not had the opportunity to call or send me an email please do so and let me know which topics interest you.

Mixed Economic Picture and Lack of Confidence Leads
to Continued Market Jitters but Creates Opportunities

Although August was less volatile than July, the markets still experienced a significant amount of volatility. As historically September and October do not tend to be very good months for equities I expect much of the same in the very near term. However, despite the doom and gloom that has been reported to us for the past 18-24 months, the economic picture appears to be improving ever so slightly.

The decline in US consumer confidence came to a halt in August, US industrial production increased 2.9% year to date, inflation is steady at approximately 1.5%, real interest rates remain low and unemployment in the US is steady. All these factors add up to an economy that is not worsening but is positioning itself for increased growth. The rate of growth will not be at levels seen in the mid to late 90s; instead it will be closer to the long-term historical averages of 6-8%. Steady, sustainable growth, coupled with a corporate sector that aspires to appear to investors as being as forthcoming as possible, will result in a much more stable period for growth both in corporate earnings and in equity prices over the next 3-5 years.

At this time, as always, selecting well-managed businesses with a strong financial and market position, is the best way of achieving strong returns over the long run.

Did You Know?

In general, the transition from Peterson Findlay Capital Inc. to RBC Dominion Securities went quite smoothly; however, there was a bit of confusion with the mail out of the client documentation requests that took place while I was away for two days in early August. Although many of the documents requested from you are required, there are a number of them that are not, specifically the internal KYC forms and personal guarantee forms for corporations. Jas Salh and Meenal Chauhan, both work with me and in their well-intended enthusiasm of helping me complete all the required documentation by September 30th they did not anticipate the clients’ reaction to all of that paperwork. I apologize for any inconvenience this may have caused you and encourage those of you that have not to please call me directly at 604 257 7055 so that we can set up a time to go over
these documents together.

RBC Dominion Securities Inc. is a member company under RBC Investments. The information contained herein has been obtained from sources believed to be reliable at the time obtained but neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers can guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities. This report is furnished on the basis and understanding that neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers is to be under any responsibility or liability whatsoever in respect thereof. The inventories of RBC Dominion Securities Inc. may from time to time include securities mentioned herein. RBC Dominion Securities Inc. and Royal Bank of Canada are separate corporate entities which are affiliated. Investment Advisors are employees of RBC Dominion Securities Inc. Member CIPF. ?Trademark of Royal Bank of Canada. RBC Investments is a registered trademark of Royal Bank of Canada. Used under licence.©Copyright 2003. All rights reserved

RBC Dominion Securities Inc. and its affiliates may have an investment banking or other relationship with some or all of the issuers menioned herein and may trade in any of the securities mentioned herein either for their own account or the accounts of their customers. RBC Dominion Securities Inc. and its affiliates also may issue options on securities mentioned herein and may trade in options issued by others. Accordingly, RBC Dominion Securities Inc. or its affiliates may at any time have a long or short position in any such security or option thereon.

Insurance products are offered through RBC DS Financial Services Inc and RBC DS Financial Services (Ontario) Inc. (« companies ») The companies and RBC Dominion Securities Inc. are member companies under RBC Investments and are separate corporate entities which are affiliated. When discussing and selling life insurance products, Investment Advisors are acting as Insurance Representatives of RBC DS Financial Services Inc or RBC DS Financial Services (Ontario) Inc.