Key Market Facts

October 31, 2002

Level YTD Indices     S&P 500 885.76 -22.85% DJIA 8397.03 -16.21% S&P/TSX 6248.79 -18.72% Currencies / Commodities CAD / US 1.5585 -2.15% US / EURO 0.9900 10.44% Gold $US 318.40 14.12% Crude Oil $US 27.22 37.20% Natural Gas $US 4.156 61.71% 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

This is a question commonly asked when the market bounces off of what appears to be have been a double bottom and one that is virtually impossible to answer with any certainty. We all know that there isn’t a bell that rings when we reach a bottom. That would make it much too easy! There are however a number of reasons why I believe that now is the time to selectively start accumulating some core companies to add to your equity portfolios.

As mentioned in the August issue of “Markets @ A Glance” it was expected that September and October would not be good months for equities, a time to remain on the sidelines as history has a way of consistently repeating itself. As we came out of October the equities markets picked up and day-to-day volatility declined. The Bears believe that we are in a bear trap and that the market will retrace all of its recent gains and fall even further. I however believe that now is the time to be selectively buying some good businesses.

I do not believe we will see a double dip recession in the US, instead, a continued slow economic recovery coupled with a slower overall rate of real earnings growth than we experienced in the 90’s. In many cases I do not believe we will see the lows achieved in either July or September for certain stocks however that does not mean that we have missed the boat as there are some good businesses out there for clients to consider.

I selected the stocks in the table below based primarily on the amount of cash available in the companies. I then looked at cash flow per share, total debt to capital, return on capital and the price to earnings ratios. Dividend yield is provided simply for your information as these stocks are chosen for their long-term capital growth potential, not income. This is not the universe of securities that I believe you should hold in your portfolio; rather it is the group I am considering for purchases in the near term. The bolded securities, in my opinion, are currently best positioned for the economic growth period that we will experience over the next five years.

The other securities listed in the table are still well positioned however I am currently cautious, as there may be something that concerns me about them in the short term. If you have any questions about your specific portfolio please contact me directly at 604 257-7055.

* Recommended as a Buy
** Return on Shareholders Equity
Source: Value Line Investment Survey

Don’t Forget! November 7th Estate Planning Seminar

For those of you that have not already called us to sign up, please do not forget the Estate Planning Seminars being hosted on Thursday November 7, 2002 at either 1:30 or 4:30pm. The seminar will take approximately 1 hour and will be located in our 31st floor boardroom at 666 Burrard Street.

Our guest speaker will be Bruce Hirtle, C.F.P., CLU, CH.F.C., of RBC Dominion Securities Financial Services Inc.

By planning for tomorrow today, you can retain more of your assets, protect your estate and leave a lasting legacy for your family. Young or old, wealthy or middle class, an estate plan can reduce the taxes and expenses of an estate, simplify and speed the transition of assets to the next generation, ensure that beneficiaries are protected and that the people you have chosen receive your assets.

We encourage you to bring your spouse or a family member that may be instrumental in assisting you with your plan. Please RSVP to either myself at 604 257-7055 or my associate Jas Salh at 604 257-7359.

US Estate Taxes – Who Pays and Who Doesn’t

It seems that in Canada we are always commenting on how much tax we have to pay on an ongoing basis for what seems to be fewer and fewer services, an justly so, however one tax that we don’t hear too much about are US Estate taxes and how they can effect Canadian citizens that are residents of Canada.

If you are a non-resident, non-citizen and non-green card holder of the US your estate may still be responsible for paying US Estate taxes if you own any U.S. situs (or located) assets in your personal name. This would include 1) US real estate, 2) assets of a trade or business conducted within the US, 3) shares in US corporations whether held in an account in Canada or outside Canada (including your RSP or RIF), 4) bonds debentures and other indebtedness of US citizens and residents unless they are specifically exempt, 5) Tangible property in the US (i.e. cars, art etc.), 6) US pension plans.

In general, these taxes affect only those individuals described above that have worldwide assets in excess of $1,200,000 US and US assets in excess of $60,000. However, if you are concerned as to whether or not your estate would be responsible for paying US estate taxes please contact your personal accountant or call me at 604 257-7055 for further information.

Did You Know?

Do you know the difference between an Enduring Power of Attorney and a Representation Agreement? What are they used for and when are they useful? An Enduring Power of Attorney is a document in which one person (the grantor) authorizes another person (the attorney) to manage the grantor’s property on behalf of the grantor even in the event that the grantor loses their mental capacity. In its broadest form, the attorney has the power to make both financial and legal decisions on behalf of the grantor. However the power of attorney does not give the attorney the right to make medical or healthcare related decisions on behalf of the grantor.

This is important to know if family members have different views on how loved ones should be cared for or treated in the event that they lose their own capacity to make decisions. With a Representation Agreement an individual can outline their preferences with respect to medical and healthcare issues therefore removing any uncertainty in the decision making process. Your lawyer would be your definitive source of information for any formal questions you may have on this topics or for further information please call me at 604 257-7055.

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.