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Transport and logistics group TNT Ltd said on Wednesday it was well placed for quite strong profit growth in the current 1996/97 year, but would continue to look at selling its currently unprofitable non-core assets. "We haven't got any numbers, but it should be quite strong relative to the position we're starting from," TNT Managing Director David Mortimer said of prospective profit growth, in an interview with Reuters. Mortimer said the non-core activities that slowed down TNT's earnings in 1995/96 were its general freight business in Australia and its Brazilian operations. "We've dealt with the LCL (Less Than Container Load) business -- that's been closed and we've sold Brazil," he said. "What's the saying...when in doubt shoot it or fix it." TNT would also look to sell other unprofitable non-core businesses, Mortimer said. "We've got other non-core activities and to the extent that they don't perform then they will be vulnerable to sale," he said. One of those non core activities is TNT's 50 percent interest in airliner leasing firm, Ansett Worldwide. News Corp Ltd owns the other half. Mortimer said he had consistently said that Ansett Worldwide's capital base needed to be restructured to give it cheaper access to capital so it could compete properly. "In its present structure, it's difficult for it to be optimised for News and TNT ownership because it needs access to capital at an effective rate," he said. News and TNT continued to look at ways of restructuring Ansett Worldwide's capital base before selling it, he said. Ansett's GD Express operation based in Europe had turned around in the last year and was now going well, Mortimer said. He said the just completed sale plans for Ansett Airlines Mortimer said in the longer term, TNT aimed to get double digit revenue and earnings growth. "Overall we'd like to do good double digit (revenue and earnings) growth, but we can't guarantee any of that," he said. TNT's share price closed up three cents at A$1.47. -- Sydney Newsroom 61-2 373-1800

Stock-feed producer Ridley Corp Ltd forecast on Wednesday that slow demand and margin pressures would produce a flat first half year profit, but that a grain price slump would help boost profits for the full 1996/97 year. "All things considered we expect overall company after tax earnings to be in line with those of last year for the first half," Ridley Chairman John Keniry told the group's annual meeting. Strong pasture growth in some areas which had significantly cut demand for stockfeed, along with margin pressures from high wheat prices earlier the year had combined to push Australian stockfood earnings lower in the first quarter of the year to June 30, 1997. First quarter earnings from Ridley's AgriProducts division had been below both budget forecast and last year's results, Keniry said. Keniry said Ridley expected another good result from its Canadian stock food supplier, Feed-rite, to offset the falls from Australia's AgriProducts in the first half. "For the first quarter Feed-Rite's earnings before interest and tax have exceeded by a comfortable margin both budget and last year," Keniry said. But he said a sharp slump in grain prices, one of Ridley's key inputs, could boost margins again in Australia later in the year if prices stayed down. "When we look to the full year, we must recognise a very rapid decline in the past month or so in grain prices, and the somewhat unpredicatble impact on both us and our customers of these changes," Keniry said. "Nevertheless on a full year basis, a cautious approach would be to say that we presently expect to come in slightly ahead of last year," he said. Ridley said last month it expected continued profit growth and was optimistic of achieving another record performance in the 1996/97 year to June 30. It reported an operating profit of A$36.27 million million in 1995/96, up 14.3 percent on the previous year and hard on the heels of three to four years of significant profit rises. Later, Ridley managing director Gary Busenshut reiterated the flat immediate outlook but more buoyant longer term prospects for the year. "As we harvest between October and January, we're going to see some improvement in margins," he said. Busenshut said Ridley also continued to focus on further acquisitions both in Australia and in North America, particularly now that its A$98 million takeover bid for Australian malster Joe White Maltings Ltd looked unlikely to succeed. The A$5.44 per share offer was rejected by Joe White and Ridley has said it would not increase the offer before it closes on November 8. Ridley now has about 18 percent of Joe White. Ridley would continue to look at potential malting acquisitions in Australia and stock-feed milling operations in North America, Busenshuts said. He said Ridley had had discussions with potential feed-milling targets in North America and could carry out an acquisition worth about A$100 million by the end of the March quarter of 1997 if it decided to. Ridley's shares closed up one cent at A$1.70. -- Sydney Newsroom 61-2 9373-1812

Almost 300 students and workers from the islands of Kiribati were adrift in the central Pacific on Wednesday aboard a crowded charter ship crippled by a fire, officials said. The 1,000-tonne MV Maasmond appealed for help on Tuesday night after losing power through the fire in the engine room. It was found by a Royal New Zealand Airforce Orion rescue plane drifting about 800 kms (500 miles) east of the Kiribati island of Tarawa with 290 passengers on board. "The Orion located it this afternoon and was told via radio that it's in no immediate distress and has enough food and water for five days," Airforce Squadron Leader Ron Irons told Reuters from the RNZAF's base in Nandi, Fiji. "It has partially restored its electric power, but it has no wasy to start its engine," Irons said. An electrical fire in a switchboard in the engine room shut down the ship's electrical systems late on Tuesday, leaving the converted freighter without power and still two days sailing from the nearest land. The ship's charterer, Kiribati businessman Waysang Kumkee, said the MV Maasmond's insurers would pay for another ship to tow it back to Tarawa. The 64.5-metre (210 foot) Maasmond was chartered to carry 290 passengers, mostly Kiribati students and workers, and 400 tonnes of cargo to Christmas Island from Tarawa, Kumkee said. A tugboat was likely to take two days to reach the stricken ship and another two days to tow it back to Tarawa, he said, adding the passengers had plenty of food and water to last the four days. "It's not a problem. If they run out they can easily borrow some of the cargo," Kumkee told Reuters by telephone from Tarawa, one of a group of coral atolls about 5,000 kms (3,000 miles) north-east of Sydney. The cargo included rice and tinned food. None of the passengers or crew had been injured in the fire and the only problem on board was likely to be boredom given the ship's video players were out of action. "With no videos, they'll be a bit bored," Kumkee said. Most of the passengers were sitting or sleeping under canvas on blankets on the deck, he said. They would be reduced to playing cards and their guitars until their rescue, he added. The MV Maasmond is registered in Kingstown in St Vincent and Grenadines, according to the Lloyds List, and has had engine trouble in the past. In 1992, it underwent engine repairs for ten weeks after encountering cyclones on a cruise through the Pacific.

Rupert Murdoch's News Corp Ltd is likely to benefit from the planned US$20 billion merger of MCI Communications Corp and British Telecommunications Plc , Australian media analysts said on Monday. They said News, which already has a wide-ranging partnership with MCI, would strengthen its global media interests on the coat-tails of the creation of the world's second largest telecommunications group. "It means they'll be in bed with a bigger more powerful global telephony group," one senior Sydney media analyst said. Analysts also said the BT-MCI merger would stabilise New Corp's partnership with MCI, which had seemed increasingly strained in recent months. "It seems that MCI and News haven't been getting on lately, whereas News and BT have been getting on a lot better," said the senior Sydney analyst. The prospect of MCI selling its nine percent stake in News Corp over the next year had suppressed News Corp's shares in the last month. "There was a view that MCI wasn't real happy with it (the partership) and may sell out, but now nothing's going to happen for 12 months at least," said another Sydney analyst. "The implications for News are quite positive," the analyst said. A Melbourne analyst said some in the market were a bit worried that MCI was preparing to to sell down their stake over the next 12 months. "The fact that BT may combine with MCI reduces that risk for now at least," the analyst said. MCI and News Corp announced a broad alliance in May 1995, under which MCI bought a nine percent stake in News for US$1.35 billion and acquired an option to increase that stake up to 13.5 percent. They agreed, amoug other things, to jointly set up an American satelite television operation -- ASkyB. But progress with ASkyB has been slow and other smaller joint ventures have failed to fire. However, the Australian analysts said they would remain somewhat cautious given bearish comments on Sunday by MCI. MCI announced that it would cut its stake in ASkyB to 20 percent from 50 percent. Analysts said this was not surprising as News Corp and MCI had said recently they wanted new partners in the venture. But MCI Chief Executive Bert Roberts also told Reuters on Sunday that no major new launches were expected from the venture with News Corp and that MCI would sell to News a US$700 million satellite license if it could. He also said MCI was unlikely to take up its option to increase its stake in News, a comment seen by analysts as symptomatic of Roberts' increasing unhappiness with the deal. Analysts also said there was the potential for a regulatory block to links between News, its 40 percent owned BSkyB Plc and BT. "There's an outside risk that British regulatory bodies could try and block the News-BSkyB-BT side of it," said another BT analyst. Other analysts said the dilution involved, with BT owning nine percent of a 40 percent stake in BSkyB, would assuage regulatory concerns. The likely election of a British Labour government also reduced that risk. "They're banking on (Labour leader) Tony Blair winning government and deregulating cross media rules in the United Kingdom," said another Sydney analyst. However another analyst pointed to the recent banning by British regulator Oftel of a joint marketing campaign between BT and BSkyB as a sign of the rocky road ahead for News and BT. -- Sydney Newsroom 61-2 9373-1812

An official inquiry into Australia's financial system said on Thursday it would look at recommending a relaxation of rules that currently stop big bank mergers and takeovers by foreign banks. The inquiry, which was established by the conservative government after its March election, outlined various options for reform in a wide-ranging discussion paper and was careful not to state its own preferences. But it noted majority industry support for abolishing the rules stopping mergers and foreign bank takeovers and said it preferred an anti-monopolies system which treated the banking sector the same way as every other sector. Until now the government has had the final say on bank mergers, rather than just the anti-monopolies watchdog. Analysts said the tone of the discussion paper reinforced widespread expectations that the inquiry's final report would recommend allowing bank mergers and new foreign investment. "It hasn't changed perceptions that ultimately the inquiry will make recommendations that allow the ACCC (Australian Competition and Consumer Commission) to permit bank mergers which haven't been permitted before," said ABN AMRO Hoare Govett Banking analyst Michael Pulman. Shares in the big banks seen vulnerable to takeover have rallied since the beginning of the year in expectation that a conservative government would allow the mergers. Possible takeover targets include the Australia and New Zealand Banking Group Ltd and Westpac Banking Corp. The National Australia Bank Ltd, Australia's largest and most profitable bank, is seen as the main predator. A policy set by the former Labor government and known as the 'six pillars' policy has stopped mergers or foreign takeovers of Australia's four largest banks and its two largest insurance and superannuation groups. The conservative coalition government has said this policy would remain in place until it has considered the Wallis inquiry's recommendations, due to be delivered by the end of March 1997. The inquiry, headed by prominent businessman Stan Wallis, said in its 415 page paper any reforms should increase the efficiency of Australia's banks to compete globally. It also said new technology would transform the sector. Big banks such as the National Australia Bank have used the same reasoning when lobbying for relaxed merger rules. These banks have said big bank mergers are necessary to compete globally and new technology such as the Internet and global competition meant such mergers would not cut competition. "The Inquiry sees as its key goal the identification of means to increase the efficiency of the Australian financial system, without compromising its safety and peformance," the paper said. Increased efficiency was needed to complete globally, to obtain the benefits of new technology and to increase investment returns, the paper said. It said it would consider, "better accommodating financial conglomerates," and, "relaxing some of the ownership restrictions on financial institutuions". The inquiry said it was also wanted any reforms to increase competition and asked in that context "whether there are any public policy grounds for restrictions on foreign acquisitions in the banking or insurance industries?" -- Sydney Newsroom 61-2 9373-1812

Australian investment and property group Lend Lease Corp and Thailand's Modern Home Co announced on Tuesday they would build a markets complex in Northern Bangkok that would be Asia's largest. "The 160 hectare, A$1 billion (US$778 million) project aims to create a new industrial commercial and residential hub in northern Bangkok, anchored around what is currently being established as Asia's largest single agricultural produce and export market," Lend Lease and Modern Home said in a joint venture announcement. "The joint venture brings together the local experience of Modern Home and Lend Lease's international resources and financial strength," they said. Stage one of the project, which was 60 percent complete and projected to cost A$700 million, was already processing 15,000 tonnes of produce a day and had parking for 25,000 vehicles. The complex, known as the Thai Markets project, would be located on the main northern road from Bangkok and be about 20 km from the airport. "Located in a key location in North Bangkok, the Thai Market has been conceived to tap into the high growth agricultural and industrial sectors as Thailand emerges as the 'food bowl of Asia'," the statement said. The complex would eventually include food processing facilities so produce from surrounding areas could be packaged and processed for export. The second and third stages, which would cost A$300 million, would include factories, retail outlets and homes to service the complex. "There will also be a major discount retail and wholesale distribution facilities and shophouses," they said. Lend Lease's Asian unit, based in Singapore, would contribute up to A$100 million to the joint venture for a 10 percent stake initially, with that percentage changing as the stages progressed. The project is expected to take four years to complete. A Lend Lease spokeswoman said she could not say how the percentage would change. Modern Home chief executive Thanom Angkanawatana said the joint venture was a key step for his company. "Lend Lease brings extensive experience, management skills and capital. Their international perspective will significantly strengthen the project and position future stages for the next upturn in the economy," Angkanawatana said in the statement. "Completion of the adjacent Thammasart University and Asian Games complexes as well as continuing infrastructure investment in the area by the Thai government is expected to further benefit the project," the two partners said. The state-owned Bank for Agriculture and Agricultural Cooperatives (BAAC) is backing the project and the Thai Ministry of Commerce also supports it, the Lend Lease spokeswoman said. "The current success of the market project show, that it has strong fundamentals and makes it a good opportunity for Lend Lease," Lend Lease Asia managing director Richard Clarke said. The announcement of the Thai joint venture is part of Lend Lease's widespread push into Asian property development. Lend Lease announced on Monday it had formed a 50-50 joint venture with privately-owned U.S. firm Oakwood International Ltd to manage about 10,000 serviced apartments around Asia, including in Bangkok. Lend Lease said it would initially contribute US$15 million for the management entity and would then seek additional capital. (A$1 = US$0.7780)

Global media group News Corp Ltd must report a sharply higher second quarter profit on Thursday or it will fail to achieve its 20 percent growth target for the 1996/97 year, analysts said. News Corp is expected to report a second quarter net profit before abnormals of between A$450 million (US$344.25 million) and A$490 million, taking first half net profits to between A$735 million and A$775 million. This compares with A$285 million in the first quarter and would be up 17 percent from the A$663 million posted in the first half of 1995/96. Analysts said strong receipts from the box-office hit alien movie "Independence Day" and firm U.S. television revenue would be the driving factors in the stronger result. They said the market was demanding News put out a strong second quarter figure after a series of below-expectation results. The analysts said the extent of any fall in the price of News Corp shares would depend on how far earnings fell short of expectations but they did not quantify any expected drop. News' first half must be around 15 to 20 percent better if Rupert Murdoch's group is to achieve its August 1996 forecast of a 20 percent improvement in profits in 1996/97 from the A$1.26 billion achieved in 1995/96. "They are going to have to get a move on in this quarter if they're going to achieve that 20 percent," said one senior analyst on Tuesday. "If they can't get a decent rise for the quarter, people are going to panic," the analyst told Reuters. Analysts said they expected revenues from Australian newspapers and magazines and the Ansett airline operation to remain weak in the second quarter. First Pacific analyst Lachlan Drummond said he expected "Independence Day" revenues to be the major factor in the stronger result. "Television is also one area where there's room for some upside," Drummond said. He is forecasting A$474 million for the second quarter. Analysts also said a good result was likely because News was due to give a big presentation to analysts and investors on February 24 in Los Angeles and would be reluctant to disappoint them before that. "That's got everyone believing that they won't have a bad result," Drummond said. The market would also watch the results commentary closely for a repeat of the 20 percent growth forecast. Executive chairman and founder Rupert Murdoch repeated the forecast in October last year at the group's annual meeting in Adelaide. But analysts said company officials had been reluctant to repeat the forecast since then. News Corp shares ended one cent higher at A$6.75 on Tuesday (A$1=US$0.76)

Westpac Banking Corp Ltd is expected to report on Tuesday that its net profit growth was reined back to a slower 10 percent in the 1995/96 year by an increasingly competitive home loan sector and a slower economy. Analysts said the main focus in the results would be on how that increased competition and recent sharp cuts in home lending margins would hit Westpac's profits in 1996/97. "You're really only going to have a full impact for the year ending September 1997," Morgan Stanley banking analyst John Hobson said of the sliding home loan margins. "There'll start to be a moderating influence (on profits) which intensifies throughout 1997," he said. "You'll see fairly cautious statements being made at the briefing." The median forecast in BZW's BARCEPs analyst survey is for a net profit before abnormals for the year to September 30, 1996 of A$1.12 billion, up about 10 percent from A$1.02 billion in 1994/95. This compares with a 44 percent rise between 1993/94 and 1994/95.

Australia's second-largest bank, Westpac Banking Corp Ltd, announced a 19.5 percent rise in net profit for the 1995/96 year on Tuesday, but warned that fierce competition would flatten profits in the year ahead. "Everywhere you look and in every market we're in there's a lot of margin pressure," Westpac managing director Bob Joss told a news conference after the profit announcement. "It will be tough to make a rise," he said when asked if profits for the year to September 30, 1997, would be flat. Westpac reported net profit of A$1.132 billion (US$890 million) for the year to September 30, 1996, up 19.5 percent on 1994/95. But this disguised a flat profit in the second half of the year and was boosted by a sharp drop in bad debt charges. Joss said competition from non-bank mortgage originators in the housing loan sector was a key factor pressuring margins. Mortgage originators such as Aussie Home Loans and RAMS Home Loans, who have snared 10 percent of the mortgage market from big banks like Westpac over the last two years by offering cut price home loans. Their entry into the market has dragged the big banks' home loan margins down from over 300 basis points last year to just over 200 points now. Joss said Westpac would look to boost its own mortgage origination programme to help compete against the non-banks and support its margins. Westpac has already launched one issue of securitised mortgages worth A$340 million, the first of the major banks to do so. Joss said Westpac planned to multiply the size of such issues in the current year. "The real key for us will be to try to manage our balance sheet, have more assets off balance sheets, more securitising of lower margin assets," he said. "We just did one near the tail end of the (1995/96) year, A$340 million, so we would expect to see quite a bit more in the year ahead," Joss said. Even then, Westpac would struggle to maintain its margins and would have to cut costs and increase efficiency to compensate. The bearish earnings comments and the detail of the result saw Westpac's share price close down 15 cents at A$7.05, despite the result being almost exactly the average of analysts' forecasts. Westpac is the second major bank to forecast flat profits in the year ahead because of increased competition. The Commonwealth Bank of Australia since May has been forecasting flat profits over the next year. These more sober forecasts signify the end of two to three years of sharp profit rises for the major banks as they recovered from hefty loan losses in the early 1990s and capitalised on a strong economy. A smaller New South Wales-based bank, St George Bank Ltd, echoed this new more subdued outlook for profits in its annual results also announced on Tuesday. St George reported net profit of A$148.3 million for the 1995/96 year, a rise of 9.4 percent. St George managing director Jim Sweeney said margin pressure meant it would be a challenge to improve profits in the first half of the current year. (A$1 = US$0.7880)

Rupert Murdoch's global media group News Corp Ltd reported a lower than expected first half profit on Thursday, but later told analysts it remained confident of a 20 percent profit boost for the full year. News said strong earnings from the hit alien movie Independence Day and buoyant U.K. newspaper sales helped drive up net profits before abnormals 10.3 percent to A$731 million. But this was below analysts' expectations of a pre-abnormals net profit for the half of A$735 million to A$775 million. "Everyone's a bit disappointed," said one senior Sydney analyst who asked not to be named. Andrew Sekely, the head of equities at broker Intersuisse, described the result as moderate. "It certainly wasn't a startingly good result. The market has made its judgment," he said. News' shares fell 16 cents to A$6.60 in the hours after the result. "It's about A$20 million less than what the market would have liked and to still reach that (20 percent profit growth) outlook, it's got to make up the difference in the second half," the Sydney analyst said. News had said in August last year when it posted a A$1.26 billion net profit for the year to June 30, 1996 that it expected strong movie and television revenues to increase profits by at least 20 percent in 1996/97. Murdoch repeated the forecast in October, but the group has been publicly tight-lipped about it since then and its first quarter results were also lower than expected. However News reassured the analysts in a teleconference briefing after the first half result, saying that it was still on track for the 20 percent profit growth. The profit forecast was not in the formal release. "They did say that they're still on track for the 20 percent growth," another Sydney media analyst said after the morning teleconference briefing between company officials and U.S. and Australian analysts. Analysts said News Corp officials were bullish about catching up in the second half and had pointed to the continued strong outlook for movies, U.S. television and newspapers. Operating income from News' Fox Filmed Entertainment unit surged to A$202 million for the first half from A$84 million a year earlier, due largely to Independence Day. "U.S. results were led by Fox Filmed Entertainment which posted a 154 percent gain in operating profits reflecting the continued success of Independence Day," News Corp said. Analysts said the re-release of Star Wars, among others, would help further boost movie revenues in the second half. "It's pure profit in the second half, whereas they had costs to write off in the first half," said another analyst. Strong revenues from News' Fox television network and its Fox stations would also help second half profits. "They did very well over the Super Bowl and they've got a new hit with King of the Hill," said an analyst. U.K. newspapers would again perform well in the second half, analysts said. British newspaper profits rose 18 percent in the first half, with gains in circulation revenues at The Sun, the Times and The Sunday Times. "All of the company's newspapers have maintained their dominant position in each of their respective markets, despite cover price increases instituted during the quarter at both The Sun and The Times," News said. News said losses at its burgeoning Asian satellite broadcaster Star TV were in line with expectations but no figures were released. -- Sydney Newsroom 61-2 373-1800

News Corp Ltd chairman and chief executive Rupert Murdoch, visiting Australia for News' annual meeting next week, says his global media group remains on track to boost profits by 20 percent in 1996/97. Murdoch, in a newspaper interview published on Friday, also ruled out any potential News Corp bid for Australian newspaper publisher John Fairfax Holdings Ltd and said Kerry Packer's Publishing and Broadcasting Ltd had repeatedly tried to sell its 15 percent Fairfax stake in the last year. News Corp owns about five percent of Fairfax. Rejoining his recent feud with CNN owner Ted Turner and Time Warner, Murdoch also said he was confident his law suit against the two would succeed. Turner said on Thursday that Murdoch's lawsuit to block the merger of Turner Broadcasting System Inc and Time Warner was a "frivolous piece of junk." Murdoch said he was confident he would win the legal action launched last week to block the Turner merger with Time Warner. "We've got a good stoush (fight) there," Murdoch said. "We'll win through there. How or where I don't know but we'll just keep the pressure on," he said. Murdoch repeated News' bullish outlook for profits. "If the American economy holds where it is and the British one does, yes certainly (the 20 percent rise is attainable)," he told News Corp's Courier Mail newspaper in Brisbane. "But it is still early days to be saying that," the newspaper quoted Murdoch as saying. News Corp said after its 1995/96 results in late August that a 20 percent profit rise in the year to June 30, 1997 was very attainable. News posted a A$1.02 billion net profit in 1995/96. Murdoch then said the government's investigation of the current cross-media rules, which stop the dual ownership of newspapers and television stations in the same city, would benefit Packer. Murdoch predicted the cross-media restrictions would be removed, but that foreign ownership rules would stay. "So it will leave things open for him (Packer) and not for us," Murdoch said. The rules currently stop Packer's Publishing and Broadcasting Ltd from increasing its 15 percent holding in Fairfax while it owns the top-rating Nine Network. They also stop Murdoch's News from increasing its 15 percent stake in the Seven Network Ltd while it owns News Ltd newspaper publishing change. Foreign ownership rules stop News from increasing its five percent stake in Fairfax. Asked what he expected to emerge from the government's investigation into the cross-media rules, Murdoch said: "I think whatever Mr Packer wants. He seems to have very close influence with certain ministers in this government." Murdoch would not name the ministers. However Packer was unlikely to push for a higher Fairfax stake at the moment, Murdoch said. "I don't want to buy Fairfax. I don't believe Mr (Kerry) Packer wants to buy Fairfax," he said. "To my knowledge he (Packer) has three times tried to sell his shares within the last 12 months. He'd like to influence and have the power of Fairfax but he's too shrewd to be paying for Fairfax at today's price." Fairfax is 25 percent owned by Conrad Black's Hollinger International Inc, which is majority owned by Hollinger Inc. Murdoch also criticised the conservative government of Australian prime minister John Howard for not implementing decisive changes to boost the economy. "If you're going to make radical changes, you'd better make them in the first year," Murdoch said of the government, which defeated the Labor government in the election on March 2. "I think they've been slow to do that and not appearing as radical a government as I would have hoped," he said. -- Sydney Newsroom 61-2 373-1800

Electronic payment systems company Intellect Holdings Ltd said on Tuesday its bid for Internet software firm Techway Ltd would allow it to launch a product for making secure payments on the Internet. Intellect, which helped pioneer EFTPOS (Electronic Funds Transfer Point of Sale) technology and systems in Australia, wanted to export Techway's software in conjunction with its own secure electronic payments systems, Intellect executive chairman Ross Leighton told Reuters. Intellect already sold its EFTPOS hardware and software to 20 banks outside Australia and to five or six large banks in Europe, all of whom were investigating its use with the Internet. "All banks are looking for greater service and lower costs and the internet is the way to do that," Leighton said in an interview. Finding a user-friendly and secure way of making payments and money transfers on the internet has become something of a holy grail for programmers. Secure payments systems are seen dramatically increasing the volume of financial transactions made on the net, which are already growing strongly. Techway's Web Australia unit built the software currently being used for internet banking by Advance Bank Ltd, which is merging with St George Bank Ltd. Intellect announced late on Monday it would make a takeover offer for Techway Ltd in a counter-bid to a previous offer by Nova Pacific Capital Ltd. Intellect said it will offer one of its shares for every 2-1/2 Techway shares. The bid values Techway at A$4.9 million. Techway, who had already signed a distribution agreement with Intellect, has recommended shareholders accept the bid. Leighton said the success of Techway's software on the Advance Bank site was a key factor in Intellect's decision to launch a takeover bid. Advance's Internet banking site is Australia's most successful and has been consistently rated amoung the world's top ten internet banking sites by The Money Pages, an Internet magazine that rates internet sites. Advance Bank spokesman David Brown said the Techway-designed site had 10,000 regular customers who used the site for about 10,000 transactions a week. The site was picking up 150 new customers a week and each internet transaction cost the bank less than 10 cents, while an over the counter transaction cost about A$2.50, he said. "The collaboration between Techway and Advance was a key for Advance getting the jump on our competitors," Brown said. Intellect's Leighton said Techway's headstart in Australia meant it had a good chance of becoming the industry standard for Internet transactions in Australia. "It has the ability to become a defacto standard in Australia," Leighton said. The marriage of Techway's secure transaction software and Intellect's EFTPOS hardware and systems would help accelerate the trend of convergence evident in recent years between debit cards, credit cards and EFTPOS, he said. "As these different payments come together, you'll then see they'll be able to be more economically utilised over the Internet." Intellect's share price closed down three cents at 95 cents on Tuesday, giving it a market capitalisation of A$48.19 million. Techway's shares closed up 5.5 cents at 37 cents. -- Sydney Newsroom 61-2 9373-1800

Australia-based transport, logistics and security group Brambles Industries Ltd said it was actively considering acquisitions in United States, Europe and Asia in the current year. Brambles chief executive John Fletcher told Reuters in an interview that Brambles would only look at acquisitions in areas where it had Australian experience. "You should anticipate some acquisition work in the Northern Hemisphere, but in businesses we already operate in here," he said. "Anything new we'll do on home turf," he said. Fletcher repeated that Brambles was looking at participating in the privatisation of Australia's airports being carried out before June next year. Fletcher said the vehicle for airport investment would be Bramble's joint venture company, Australian Airport Services, formed with property and financial services company, Lend Lease Corp Ltd. Brambles would look at acquisitions in the Northern Hemisphere in the industrial services, waste management, equipment rentals and records management areas. Earlier Brambles reported a 120.2 percent jump in net profit to A$215.1 million for the year to June 30, 1996. Before abnormals, the net profit rose 15.8 percent to A$214.8 million, at the upper end of analysts' expectations of A$208 million to A$214 million. Fletcher said the result would have been a bit ahead of brokers' expectations. "It's a marginally pleasant result rather than a huge shock," he said. Strong growth in earnings from Brambles CHEP pallet business in the United States helped boost the results. Fletcher said the Australian economy, which provides the bulk of Bramble's earnings, remained flat and was expected to remain so for some time. "We haven't got an expectation that we will get too much help from this economy ... for at least another six months," he said. The U.S. economy remained strong while Europe and Britain were flat, he said. "But all in all we've got enough things going to see another (profit) increase for this year," he said. Profits from Brambles overseas operations grew at twice the rate of those from local economies and this trend was likely to continue. This continued overseas growth would however affect the allocation of franking credits on dividends. "The continuing growth expected in overseas earnings meant that the company would need to reduce moderately the level of franking of dividends declared on 1996/97 earnings," Fletcher said in an earlier statement. Recipients of franked dividends receive tax credits for Australian company tax already paid by the companies involved. Brambles posted a 35 cents per share fully franked final dividend for 1995/96, up from a 33 cents per share final dividend in 1994/95. The total dividend rose to 69 cents per share from 65 cents. Earnings per share rose to 97.6 cents from 84.8 cents. Brambles' shares were down five cents at A$18.80 at 3.40 p.m. (0540 GMT). -- Sydney Newsroom 61-2 373-1800

News Corp Ltd's unveiling on Tuesday of plans to run its finances more conservatively were welcomed by analysts who have sometimes been critical of News' previous big debt and equity issues. Rupert Murdoch, the chief executive and chairman of the global media group, told the company's annual meeting in Adelaide that News now had over US$2.5 billion of cash in the bank after a bond issue last week and planned to keep it there. "We know that we have to be not only viable and profitable, but also that we should stay strong and liquid," Murdoch said. Murdoch then said News Corp's multi-billion dollar plans to create huge pay television networks in the United States, Asia, Japan, Latin America and Australia would be financed from cash flow. He also said News Corp needed to keep its liquidity up to finance new acquisitions. "We have outlined these plans to show you where we are and where we plan to go. As far as possible, we will finance them out of current cash flow to maintain liquidity so that we will be ready to take new opportunities as they arise," he said. Analysts said the comments indicated a more conservative financial strategy, constrasting with the big acquisitions, investments and big debt and equity issues of the past. The analysts said the market, which has sometimes been critical of the big deals and the big calls on the market, would welcome the comments. News Corp's issue of preference shares earlier this year to fund the US$2.48 billion buy out of New World Communications upset many and triggered a slump in the price of the preference shares. "It's slightly more conservative and the market will like it," said Macquarie Equities media analyst Alex Pollak of Murdoch's latest approach. "The market is absolutely paranoid that they'll go out and spend A$1.5 billion on something that they will not like," Pollak said. "Anything with more money spent on the big picture stuff, they're not going to like much," he said, adding the market wanted News to concentrate on ploughing money into its existing pay television networks in the United States. Analysts said Murdoch's comments about keeping the US$2.5 billion in the bank and financing projects from cashflows indicated any acquisitions would be small by Murdoch standards. "That imposes a huge financial discipline on the company which would hearten the market immensely," said a Sydney media analyst. "If he can keep to those comments then it's most certainly a big plus," he said. News Corp shares closed 14 cents or 1.9 percent lower at A$7.20 after Murdoch said the first quarter was not up to earlier expectations of a 20 percent profit rise in 1996/97. But he said News remained on track for that 20 percent rise. "If they can't meet their expectations in the first quarter when the strong revenues from 'Independence Day' are coming, then what hope do they have for the full year," one analyst said. The hit movie was made by News Corp's Twentieth Century Fox subsidiary. "His comments about the first quarter were weaker than what people were anticipating and it looks like U.S. television was one are of disappointment," another analyst said. -- Sydney Newsroom 61-2 373-1800

Dairy and fruit juice group National Foods Ltd said on Tuesday its reforms announced in July were now almost fully completed and the group was poised for above-budget profit growth in the next six to nine months. "It's almost fully implemented," outgoing National Foods managing director Graham Reaney told Reuters in an interview. "The real benefits start to emerge as people become more familiar with the new structures and clearly there'll be gains over the next six to nine months," Reaney said. Earlier on Tuesday National Foods posted a 17.3 percent higher operating profit before tax of A$37.6 million for the year to June 30. Its net profit rose to A$15.05 million from A$10.77 million after an abnormal loss of A$7.89 million. Net profit before abnormals rose to A$22.7 million from A$19.2 million, against analysts' expectations of about A$23 million. National Foods said in announcing its results, earnings for July and August were ahead of budget and comfortably ahead of last year. Reaney repeated that this meant that 1996/97 profits were likely to be higher than in 1995/96, but he would not say how much higher. "But its clearly going in the right direction." The reforms had created a more efficient distribution system for chilled foods, increasing sales coverage for National Foods' products, Reaney said. "It's a combination of cost reduction and enhanced distribution, and looking at our beverage division, our flavoured milks are performing particularly strongly," he said. "There are a number of areas that starting to perform a lot better for us." Reaney said the sale of non-core assets had also been completed and the company was now focused on extracting profit growth from existing assets. "We would consider all businesses that we have today as core businesses," he said, adding, however, that he could not rule out future acquisitions. "But the first objective to make those assets that we currently own work better, produce more profit, more cash flow." Singapore's Camerlin Pte Ltd has about eight percent of National Foods and Hong Kong's Mingly Corp has about 10.4 percent of the company. Reaney said he would not comment on shareholders' intentions or actions or whether either of the Asian-based investors planned any takeover or had brought on any board room reshuffle. He said he had resigned the managing director's position having worked for the company for five years. "Five to seven years is a normal period for a chief executive and quite genuinely I do have other things to do," he said. "I'm quite relaxed and if it wasn't an amicable arrangement I wouldn't be staying on as a non-executive director," he said on his last day in the job. Reaney's replacement, Max Ould, was chief executive of Peters Foods until April and presided over the transfer of operations from Pacific Dunlop Ltd to Nestle Australia. National Foods' shares closed up three cents at A$1.41. -- Sydney Newsroom 61-2 373-1800

National Mutual Holdings Ltd managing director Geoff Tomlinson said on Thursday that strong investment markets meant group earnings for the 1996/97 year were likely to be in line with the July prospectus forecasts. "It's been a very kind year. I can't think of when the markets have been more conducive to our type of business," Tomlinson told Reuters in an interview. He said he could not give a formal forecast of the profit result for the just completed year to September 30 but an examination of the assumptions in National Mutual's share offer document would show the forecasts were likely to be met. "You can go back and look at the investment assumptions in the share offer document and compare them with where we were at the end of September and we were in the fortunate position where most of the markets finished in line with predictions," he said. "That would give you some underlying view that it's likely that our performance will be in line with that projection." National Mutual forecast in its offer document a consolidated net profit after tax of A$198 million for the year ending September 30, up from A$115.5 million in 1994/95. The assumptions underlying the forecast included an Australian 90 day bill rate of 7.5 percent as at September 30, a 10-year bond rate of 8.75 percent at September 30 and a U.S. 10 year bond rate of 6.50 percent as at September 30. The offer document, issued before National Mutual demutualised and listed on the Australian Stock Exchange last month, said its profit was not significantly sensitive to its stock market assumptions.

Water filtration company Memtec Ltd is confident the failure of its planned US$280 million takeover bid for U.S. medical filtration company Gelman Sciences Inc will not affect earnings or its U.S. expansion plans. Memtec chairman Denis Hanley told Reuters in a telephone interview from the United States that a compensation clause in the original takeover deal negotiated with Gelman meant it would not affect Memtec's earnings in the year to June 30, 1997. "There were clauses in the contract that compensated us for our effort," Hanley said. "It will have no impact on our normal earnings," he said. In July, Gelman said it had agreed to be taken over by the NASDAQ-listed Memtec, which offered 1.05 Memtec American Depositary Receipts (ADRS) for each Gelman share. The offer than valued each Gelman share at about US$35 a share, but Memtec's share price fell after the July announcement and the agreement included a clause allowing Gelman to renegotiate or terminate the deal if Memtec's share price fell below US$30. On Monday, Gelman agreed to a takeover bid by fellow filtration company Pall Corp, which valued Gelman's shares at US$33 per share and effectively trumped Memtec's bid. Memtec then said on Tuesday it would not increase its bid and that the original merger agreement had been terminated. Hanley said he and Memtec's management had spent months preparing for the Gelman takeover and organising a roadshow promoting the bid, but that Memtec had been compensated for the costs involved. He said Memtec's likely growth in the United States this year would not be affected by failure of the deal. "This year the growth we'll probably see will still be better than 50 percent without this deal," he said. Memtec remained on the lookout for expansion opportunities in the United States, particularly in the medical filtration sector. "We see many ways of getting into the medical market there," he said, adding however that he could not be specific about how Memtec would increase its presence. Gelman makes microfiltration products for laboratories, healthcare, environmental monitoring, high-technology process industries and other uses. The end of the Gelman deal has pleased shareholders however, with Memtec's shares jumping A$3.50 to A$41.50 by Wednesday's close from its A$35 level on Monday. Memtec had been around A$42.50 in mid-July. -- Sydney Newsroom 61-2 9373-1812

World-wide Australian transport group TNT Ltd reported another annual profit slump on Wednesday, but promised the sale of its troubled airline and other reforms would produce strong profit growth in current year. "We haven't got any numbers, but it should be quite strong relative to the position we're starting from," TNT managing director David Mortimer said of prospective profit growth, in an interview with Reuters. TNT's net profit for the year to June 30 fell to A$9.84 million (US$7.79 million) from A$40.01 million in 1994/95 and A$105.05 million in 1993/94. Mortimer said a sharp drop profits from Australia's Ansett Airlines, 50 percent owned by TNT, and losses from its Brazilian operations and local general freight business offset good revenue growth in TNT's core operations. He said profits from these core activities of domestic and international time sensitive freight and logistics had grown 48.7 percent to A$165.3 million in 1995/96. TNT had moved to excise these loss-making units and focus on profitable core activities, he said. "We've dealt with the (Australian) LCL (Less Than Container Load) business -- that's been closed, and we've sold Brazil," he said. "What's the saying ... when in doubt shoot it or fix it." TNT would also look to sell other unprofitable non-core businesses, Mortimer said. "We've got other non-core activities and to the extent that they don't perform then they will be vulnerable to sale," he said. "The inconsistency in our results has come from these fringe activities ... it's that volatility around the earnings base that says we have to concentrate on core activities and get out of the non-core 'riff-raff' if you like," he said. TNT announced earlier this week the finalisation of plans to sell its stake in Ansett to Air New Zealand Ltd for cash receipts of A$325 million. The other 50 percent of Ansett is owned by Rupert Murdoch's News Corp Ltd. TNT's remaining non-core activities include an airline leasing company jointly owned with News Corp, some shipping operations between New Zealand and Australia, a mono-rail in Sydney and some information technology assets. Mortimer would not single out any as potential immediate sale prospects, but said they were vulnerable while they were not making profits. He said the airline leasing firm, Ansett Worldwide, needed to have its capital base restructured before it could be sold. Shareholders however took the profit slump in their stride, having actually forecast a slight loss, rather than a slight profit. Net profit before abnormals, but after preference dividends, fell to A$0.6 million from A$38.48 million in 1994/95. Analysts had expected a pre-abnormal, post preferences loss of between A$4 million and A$22 million. TNT's shares closed up three cents at A$1.47. -- Sydney Newsroom 61-2 373-1800

Media magnate Rupert Murdoch said on Tuesday the first quarter performance of his global media group, The News Corp Ltd, had been below expectations, but that he was still confident of a 20 percent profit rise in 1996/97. "I am on record as saying that we expect a 20 percent increase in profit for the year," Murdoch told a packed News Corp annual meeting in Adelaide. "We still expect that and are still aiming for that during the coming year. However, I should say that the first quarter may not be quite up to those expectatations, but we will certainly be striving to make up any shortfall," he said. In the 1995/96 year ended June 30, News Corp's net profit slipped to A$1.02 billion from A$1.37 billion in 1994/95. He said revenues at the Fox U.S. television business had begun 1996/97 slowly because of of the Atlanta Olympic Games, the rights to which were held by a rival network. Australian newspaper revenues would be flat in 1996/97, he said. However, News Corp's British newspapers were doing extremely well, with circulation at The Sunday Times climbing with little promotion while advertising in Britain was booming. Murdoch, News Corp's chief executive and chairman, also announced the group now had US$2.5 billion in cash in the bank after recent U.S. bond issues and would leave it there. He also said that News now planned to fund future expansion from cash flow where possible. "We know that we have to be not only viable and profitable, but also that we should stay strong and liquid," Murdoch said. "As far as possible, we will finance them (News' expansion plans) out of current cash flow to maintain liquidity so that we will be ready to take new opportunities as they arise," he said. News has often funded its aggressive growth in pay television and other media through either hefty debt or equity issues, which have sometimes met shareholder resistance. Murdoch also announced that News planned to float its British based digital media technology company, Digital Media Services, within the next two to three weeks and would sell 20 percent of the company. Digital Media Services, a combination of News Data Comm and Digi-Media Vision Ltd, would operate in Britain and Israel and produce technology for digital television. He also later said News' Asian satellite pay television operation, STAR TV, was performing well. -- Sydney newsroom 61-2 9373-1800

Gaming and electronics group AWA Ltd said on Wednesday it wanted to buy up to 75 percent of the New South Wales government-owned betting agency, the Totalisator Agency Board (TAB), later this year. AWA managing director John Rouse told Reuters in an interview that the company was looking at the option of a major recapitalisation to fund such an acquisition, which has been estimated to be worth around A$750 million. "It's clear that AWA has a strong interest in participating in the privatisation of the TAB," Rouse said. He said the racing industry and AWA were looking closely at the model used to privatise the Victorian TAB, where the industry bought a 25 percent stake and 75 percent was privatised through Tabcorp Holdings Ltd. AWA was considering the option of a major capital raising to fund the outright purchase of a 75 percent stake through a government trade sale, with an offer of a portion of the stake to the public later on. "You could have a situation where initially the capital raising is funded by financial institutions and maybe AWA's existing shareholder base, but within a period a portion of what has been acquired would be floated on a broader basis to the public," Rouse said. The Labor government in New South Wales has yet to say publicly whether it would privatise the TAB, but is expected to announce within several months a plan to sell it either through a public float or a trade sale. Bidders however wanted the government to give some concrete assurances about the tax and licensing regime a privatisated TAB would face. "It's important that the parameters in terms of tax and licensing are cast in concrete for some reasonable time," Rouse said. AWA was aware of a desire within government and the wider public that the public be offered shares in any privatised NSW TAB at some stage, he added. "We would be prepared to make commitments to the government that we would float it later on," he said. Rouse said there was a feeling within government and the racing industry that a trade sale would be preferable to a float. "There are those that are close to this issue in government saying if New South Wales wants to deal with this matter quickly, if the racing industry wants to establish its financial arrangements sooner rather than later and the government doesn't want the costs of a public float, than a tender needs to be the preferred approach," he said. AWA's share price closed down two cents at 91 cents on Wednesday. -- Sydney Newsroom 61-2 373-1800

Australia's largest retailer, Coles Myer Ltd, forecast a rejuvenation in its profit outlook at its annual meeting on Tuesday but failed to stop shareholders launching into a six-hour tirade aimed at Coles' directors. The prime target was former executive chairman Solomon Lew, who was re-elected as a director with the help of proxy votes after the floor of the meeting overwhelmingly rejected his re-election. Coles Chairman Nobby Clark, who was jeered when he tried to cut short debate on Lew's re-election, said Coles was seeing something of a rejuvenation in its businesses. "We're on the edge of something pretty good," Clark told the annual meeting. "We do have an upside and I'm confident we can do better for you," he said. "First quarter performance is running above expectations and we hope that can continue," he said, adding that provided Christmas trading was reasonable, Coles Myer's bottom line results should improve in 1996/97.

Media magnate Rupert Murdoch said on Tuesday that the first quarter performance of his global media group, The News Corp Ltd, had been below expectations, but that he was still confident of a 20 percent profit rise in 1996/97. "I am on record as saying that we expect a 20 percent increase in profit for the year," Murdoch told a packed News Corp annual meeting in Adelaide. "We still expect that and are still aiming for that during the coming year. However, I should say that the first quarter may not be quite up to those expectatations, but we will certainly be striving to make up any shortfall," he said. In the 1995/96 year ended June 30, News Corp's net profit slipped to A$1.02 billion (US$806 million) from A$1.37 billion in 1994/95. He said revenues at the Fox U.S. television business had begun 1996/97 slowly because of of the Atlanta Olympic Games, the rights to which were held by a rival network. Australian newspaper revenues would be flat in 1996/97, he said. However, News Corp's British newspapers were doing extremely well, with circulation at The Sunday Times climbing with little promotion while advertising in Britain was booming. Murdoch, News Corp's chief executive and chairman, also announced the group now had US$2.5 billion in cash in the bank after recent U.S. bond issues and would leave it there. He also said that News now planned to fund future expansion from cash flow where possible. "We know that we have to be not only viable and profitable, but also that we should stay strong and liquid," Murdoch said. "As far as possible, we will finance them (News' expansion plans) out of current cash flow to maintain liquidity so that we will be ready to take new opportunities as they arise," he said. News has often funded its aggressive growth in pay television and other media through either hefty debt or equity issues, which have sometimes met shareholder resistance. Murdoch also announced that News planned to float its British based digital media technology company, Digital Media Services, within the next two to three weeks and would sell 20 percent of the company. Digital Media Services, a combination of News Data Comm and Digi-Media Vision Ltd, would operate in Britain and Israel and produce technology for digital television. He also later said News' Asian satellite pay television operation, STAR TV, was performing well. A$1 = US$0.79

Australian investment and property group Lend Lease Corp and Thailand's Modern Home Co announced on Tuesday they would build a markets complex in Northern Bangkok that would be Asia's largest. "The 160 hectare, A$1 billion (US$778 million) project aims to create a new industrial commercial and residential hub in northern Bangkok, anchored around what is currently being established as Asia's largest single agricultural produce and export market," Lend Lease and Modern Home said in a joint venture announcement. "The joint venture brings together the local experience of Modern Home and Lend Lease's international resources and financial strength," they said. Stage one of the project, which was 60 percent complete and projected to cost A$700 million, was already processing 15,000 tonnes of produce a day and had parking for 25,000 vehicles. The complex, known as the Thai Markets project, would be located on the main northern road from Bangkok and be about 20 km from the airport. "Located in a key location in North Bangkok, the Thai Market has been conceived to tap into the high growth agricultural and industrial sectors as Thailand emerges as the 'food bowl of Asia'," the said. The complex would eventually include food processing facilities so produce from surrounding areas could be packaged and processed for export. The second and third stages, which would cost A$300 million, would include factories, retail outlets and homes to service the complex. "There will also be a major discount retail and wholesale distribution facilities and shophouses," they said. Lend Lease's Asian unit, based in Singapore, would contribute up to A$100 million to the joint venture for a 10 percent stake initially, with that percentage changing as the stages progressed. The project is expected to take four years to complete. A Lend Lease spokeswoman said she could not say how the percentage would change. Modern Home chief executive Thanom Angkanawatana said the joint venture was a key step for his company. "Lend Lease brings extensive experience, management skills and capital. Their international perspective will significantly strengthen the project and position future stages for the next upturn in the economy," Angkanawatana said in the joint statement. "Completion of the adjacent Thammasart University and Asian Games complexes as well as continuing infrastructure investment in the area by the Thai government is expected to further benefit the project," the two partners said. The state-owned Bank for Agriculture and Agricultural Cooperatives (BAAC) is backing the project and the Thai Ministry of Commerce also supports it, the Lend Lease spokeswoman said. "The current success of the market project show, that it has strong fundamentals and makes it a good opportunity for Lend Lease," Lend Lease Asia managing director Richard Clarke said. The announcement of the Thai joint venture is part of Lend Lease's widespread push into Asian property development. Lend Lease announced on Monday it had formed a 50/50 joint venture with privately-owned U.S. firm Oakwood International Ltd to manage about 10,000 serviced apartments around Asia, including in Bangkok. Lend Lease said it would initially contribute US$15 million for the management entity and would then seek additional capital. -- Sydney Newsroom 61-2 9373-1800

World-wide Australian transport group TNT Ltd reported another annual profit slump on Wednesday, but promised the sale of its troubled airline and other reforms would produce strong profit growth in current year. "We haven't got any numbers, but it should be quite strong relative to the position we're starting from," TNT managing director David Mortimer said of prospective profit growth, in an interview with Reuters. TNT's net profit for the year to June 30 fell to A$9.84 million (US$7.79 million) from A$40.01 million in 1994/95 and A$105.05 million in 1993/94. Mortimer said a sharp drop profits from Australia's Ansett Airlines, 50 percent owned by TNT, and losses from its Brazilian operations and local general freight business offset good revenue growth in TNT's core operations. He said profits from these core activities of domestic and international time-sensitive freight and logistics had grown 48.7 percent to A$165.3 million in 1995/96. TNT had moved to excise these loss-making units and focus on profitable core activities, he said. "We've dealt with the (Australian) LCL (Less Than Container Load) business -- that's been closed, and we've sold Brazil," he said. "What's the saying ... when in doubt shoot it or fix it." TNT would also look to sell other unprofitable, non-core businesses, Mortimer said. "We've got other non-core activities and to the extent that they don't perform, then they will be vulnerable to sale "The inconsistency in our results has come from these fringe activities...it's that volatility around the earnings base that says we have to concentrate on core activities and get out of the non-core 'riff-raff,' if you like," he said. Earlier this week TNT announced the finalisation of plans to sell its stake in Ansett to Air New Zealand Ltd for cash receipts of A$325 million. The other 50 percent of Ansett is owned by Rupert Murdoch's News Corp Ltd. TNT's remaining non-core activities include an airline leasing company jointly owned with News Corp, some shipping operations between New Zealand and Australia, a mono-rail in Sydney and some information technology assets. Mortimer would not single out any of these as potential immediate sale prospects, but said they were vulnerable while they were not making profits. He said the airline leasing firm, Ansett Worldwide, needed to have its capital base restructured before it could be sold. Shareholders, however, took the profit slump in their stride, having actually forecast a slight loss rather than a slight profit. Net profit before abnormals, but after preference dividends, fell to A$0.6 million from A$38.48 million in 1994/95. Analysts had expected a pre-abnormal, post preferences loss of between A$4 million and A$22 million. TNT's shares closed up three cents at A$1.47. (A$1 = US$0.7920)

Australia-based transport equipment hire and logistics firm, Brambles Industries Ltd, reported a 15.8 percent profit lift for the 1995/96 year on Friday despite flat Australian and European economies. Surging profits from Brambles' U.S. and European CHEP pallet hire joint venture with Britain's GKN Plc compensated for otherwise slow growth from Australia, the company said. "The continuing improvement in our performance reflects, in part, the successful retionalisation of our wholly owned businesses and strong growth from our CHEP joint ventures," Brambles Chief Executive John Fletcher said. "CHEP USA, in particular, continues to justify our confidence in its long term growth prospects in the region," he said in Bramble's profit statements. Brambles' net profit rose to A$215.1 million (US$169.9 million) for the year to June 30, 1997 from A$97.7 million in 1994/95, but the previous year's result was undermined by a large abnormal loss. Pre-abnormal profits for 1995/96 rose 15.8 percent to A$214.8 million, at the top end of analysts' expectations. Pre-tax profits rose 13 percent and 30 percent from Europe and the United States respectively, while Australian profits rose eight percent. "Overseas profits grew at twice the rate in Australia and the trend is likely to continue," Fletcher said. "In particular we expect further contributions from CHEP in Europe and North America," he said. Fletcher later told Reuters this strong peformance from Bramble's non-Australian operations had encouraged it to actively look at further acquisitions outside Australia. "You should anticipate some acquisition work in the Northern Hemisphere, but in businesses we already operate in here," he said, referring to areas like transport equipment rentals and records managements. Looking ahead, he said strong contributions from the United States and Europe should continue to offset soft Australian conditions and help produce profit growth. "We haven't got an expectation that we will get too much help from this economy ... for at least another six months," he said. "But all in all we've got enough things going to see another (profit) increase for this year," he added. The result generally pleased analysts, who also pointed to the strong U.S. pallet operations as the main bullish note. "CHEP USA is the outstanding area," said Macquarie Equities analyst Ian Myles. "As long as they're saying positive things about CHEP in the USA then they'll be alright and there's a reasonable amount of momentum there," another Sydney transport analyst said. Brambles' shares closed up five cents at A$18.90 against a soft market overall. -- Sydney Newsroom 61-2 373-1800

Global media group News Corp Ltd must report a sharply stronger second quarter profit this Thursday or it will fail to achieve its 20 percent growth target for the 1996/97 year, analysts said. News Corp is expected to report a second quarter net profit before abnormals of between A$450 million and A$490 million, taking first half net profits to between A$735 million and A$775 million. This compares with A$285 million in the first quarter and would be up 17 percent from the A$663 million posted in the first half of 1995/96. Analysts said strong receipts from the box-office hit "Independence Day" and firm U.S. television revenue would be the driving factors in the stronger result. They said the market was demanding that News put out a strong second quarter figure after a series of below-expectation results. News' first half must be around 15 to 20 percent better if Rupert Murdoch's group is to achieve its August 1996 forecast of a 20 percent improvement in profits in 1996/97 from the A$1.26 billion achieved in 1995/96. "They are going to have to get a move on in this quarter if they're going to achieve that 20 percent," said one senior News Corp analyst. "If they can't get a decent rise for the quarter, people are going to panic," the analyst said. Analysts said they expected revenues from Australian newspapers and magazines and the Ansett airline operation to remain weak in the second quarter. First Pacific analyst Lachlan Drummond said he expected Independence Day revenues to be the major factor in the stronger result. "Television is also one area where there's room for some upside," Drummond said. He is forecasting A$474 million for the second quarter. Analysts also said a good result was likely because News was due to give a big presentation to analysts and investors on February 24 in Los Angeles and would be reluctant to disappoint them immediately before that. "That's got everyone believing that they won't have a bad result," Drummond said. The market would also watch the results commentary closely for a repeat of the 20 percent growth forecast. Executive chairman and founder Rupert Murdoch repeated the forecast in October last year at the group's annual meeting in Adelaide. But analysts said company officials had been reluctant to repeat the forecast since then. -- Sydney Newsroom 61-2 373-1800

Australia's second largest bank, Westpac Banking Corp Ltd, announced a 19.5 percent rise in net profit for the 1995/96 year on Tuesday, but warned that fierce competition would flatten profits in the year ahead. "Everywhere you look and in every market we're in there's a lot of margin pressure," Westpac Managing Director Bob Joss told a news conference after the profit announcement. "It will be tough to make a rise," he said when asked if profits for the year to September 30, 1997 would be flat. Westpac reported a net profit of A$1.132 billion for the year to September 30, 1996, up 19.5 percent on 1994/95, but this disguised a flat profit in the second half and was boosted by a sharp drop in bad debt charges for year. Bad debt charges fell to A$121 million in 1995/96, down sharply from A$330 million in 1994/95, a fall which Westpac said contributed about A$200 million to the 12 percent rise in pre-tax and abnormals profit to A$1.389 billion. Joss said competition from non-bank mortgage originators in the housing loan sector was a key factor pressuring margins. Mortgage originators such as Aussie Home Loans and RAMS have taken over 10 percent of the mortgage market from the big banks including Westpac over the last two years, dragging home loan margins down from over 300 basis points to just over 200 points. Joss said Westpac would look to boost its own mortgage origination programme to help compete against the non-banks and support its margins. Westpac has already launched one issue of securitised mortgages worth A$340 million, the first of the major banks to do so. Joss said Westpac planned to multiply the size of such issues in the current year. "The real key for us will be to try to manage our balance sheet, have more assets off balance sheets, more securitising of lower margin assets," he said. "We just did one near the tail end of the (1995/96) year, A$340 million, so we would expect to see quite a bit more in the year ahead," Joss said. When asked how much more than A$340 million, he said: "Multiples of A$340 million." Even then, Westpac would struggle to maintain its margin. Westpac reported in its accounts for the year that the group's net margin had fallen to 370 basis points over the whole 1995/96 year, down from 380 basis points over 1994/95. Joss said the fall was already apparent towards the end of the year to September. "At the tail end of the year, it's actually less than what you would have seen for the year," Joss said. He acknowledged Westpac would find it difficult to keep that margin from falling from 370 points. Given the margin pressure, Westpac would continue to focus on increasing transaction and other fees to compensate. "In such an environment, maintenance of overall net earnings growth will depend increasingly on attaining improvements in fee income generation, particularly non lending-related fees and on improved efficiency of operations," Joss said in an earlier statement. He told the news conference he would like to see Westpac's efficiency ratio, which measures expenses to income, fall below 60 percent from the 62.6 percent evident in 1995/96. This ratio worsened during the year from 60.6 percent in 1994/95, due largely to the costs of acquiring and restructuring the Western Australian-based Challenge Bank and Trust Bank of New Zealand. Joss said rationalisations throughout Westpac over the next two years would help to lower costs, improve efficiency and therefore compensate somewhat for the slimmer margins. The bearish comments from Joss helped Westpac close 15 cents lower at A$7.05. -- Bernard Hickey -- Sydney Newsroom 61-2 9373-1812

The Commmonwealth Bank of Australia (CBA) warned again on Tuesday of a subdued profit outlook for the current 1996/97 year and beyond, citing a competitive housing market, falling margins and higher wage costs. CBA chairman Tim Besley told shareholders at the bank's annual meeting that nothing in the first three months of the year had changed earlier forecasts of flat profits in the current year to June 30, 1997. "We are now three months into the financial year and nothing has changed to prompt the bank to revise this assessment," Besley said in his chairman's address. "1996/97 is shaping up to be every bit as challenging as we envisaged," he said. "The home loan market remains intensely competitive." Commonwealth Bank reported a net profit of A$1.12 billion in 1995/96, up from A$983 million in 1994/95, and said when it released its results in August that it expected earnings to be flat in 1996/97. Besley said CBA's directors aimed to maintain the ratio of dividends per share to earnings per share at around 80 percent in 1996/97. However, Besley also said later at the meeting that banking industry profits could fall over the long run and that CBA would have to work hard to ensure its profit falls were less than those of other banks. "We have to be sure that ours (profits) come down by as little as any of the others," Besley said in answer to a shareholder's question. Besley later told reporters banking industry profits would be under pressure in the future. "The industry will be under pressure of falling profits unless, just like in any other industry, it pays great attention to its costs and gets very efficient," he said. "There's no suggestion that (the CBA's) profits would fall off this year," he said, adding that it was the bank's objective to increase profits in 1997/98. CBA Managing Director David Murray also played down Besley's earlier comments. "I read that comment to mean a fall in the growth rate in profits," he said. When asked if he too aimed for a rebound from the flat 1996/97 to profit growth in 1997/98, Murray said: "Yes. It means marketing better and containing our costs." But he said it was too early to be specific about a possible profit rise in 1997/98. Murray however also told the annual meeting that cost control would be difficult. He said CBA had restricted wages growth to four percent in the two years before the most recently negotiated enterprise bargaining agreements. "That (four percent over two years) is clearly not sustainable with the inflation rate and wage expectations where they are but we continue to bargain hard on that front." CBA's share price closed down 11 cents at A$11.90, having earlier fallen to A$11.80 on the bearish comments from the annual meeting. "It's all on this talk of no earnings growth and wages pressure," one Melbourne broker said before the late session bounce. Murray and Besley also repeated their view that official interest rates were more likely to be cut than raised before the end of the year. -- Sydney Newsroom 61-2 373-1800

Australia and New Zealand Banking Group Ltd (ANZ) took the unusual step on Monday of categorically denying a newspaper report which said it was investigating a A$24 billion merger with Britain's Standard Chartered Plc. "ANZ advises that it is not investigating or discussing a merger with Standard Chartered Bank," ANZ said in a statement to the Australian Stock Exchange just before the start of trade. "Whilst we do not normally comment on rumours and speculation regarding mergers and acquisitions the very specific nature of the article requires this definite denial," the ANZ said in a statement. Earlier, an ANZ spokesman had told Reuters that the report was in the category of market speculation and would not be commented on. In its Monday edition, the Australian Financial Review reported that the two banks had engaged Goldman Sachs and Swiss Bank Corp to conduct a feasibility study into a merger "along the lines of the RTZ-CRA stock stapling". RTZ Corp Plc and CRA Ltd merged to become a dual-listed company and the world's biggest mining group in December last year. "Such an alliance would make ANZ almost takeover-proof in Australia, preserving the relative independence of one of the two major banks considered most likely takeover targets after the Wallis inquiry into the financial system," the Financial Review said. "There are no cross-shareholdings between ANZ and Standard Chartered and the issue of 'senior partner' in a stock stapling would be expected to be significant as would government and regulatory approval of the deal," the paper said, adding that KPMG had been employed to carry out due diligence on the deal. The bank's surprisingly specific denial came after analysts said ANZ's share price could drop sharply on the report. The analysts said the merger as outlined in the report was unlikely to include much if any takeover premium for shareholders, meaning the premium of up to 10 percent built into the current share price would be stripped out. "People are saying 'What's in it for shareholders?'," BNP Equities banking analyst Linda Lyon said. "If a merger like that looks like coming off, then the price will come off," Lyon said. "The sort of deal we're talking about doesn't include any sort of takeover premium for shareholders," said a senior Sydney banking analyst. "People have been buying ANZ above its true value in expectation NAB (National Australia Bank Ltd ) will launch a takeover post-Wallis," the analyst said. "My guess is that the immediate reaction would be negative," he said, adding he saw ANZ's true price at around A$6.50. But after the denial, ANZ's share price rose with the rest of the market. It was up two cents at A$7.18 at 12.50 p.m. (0150 GMT). Analysts said such a merger could however also bring out a potential rival takeover bidder such as HSBC Holdings Plc. -- Sydney Newsroom 61-2 9373-1812

Rupert Murdoch predicted he would win his legal battle with Ted Turner and Time Warner Inc. and said his global media company, News Corp. Ltd., was on track to boost profits 20 percent this year. In remarks published in News Corp.'s Courier Mail newspaper in Brisbane, Murdoch also was quoted as saying that he did not want to buy out Australia's other major newspaper publisher, John Fairfax Holdings Ltd. News Corp. publishes major tabloid newspapers in Sydney and Melbourne, the Courier Mail and The Australian, also owns about 5 percent of Fairfax. Discussing his recent feud with CNN founder Ted Turner and Time Warner, Murdoch said he was confident News Corp. would win its lawsuit against the $6.7 billion merger of Turner Broadcasting System Inc. and New York-based Time Warner, which was completed on Thursday after shareholders of both companies approved the deal. "We've got a good stoush (fight) there," Murdoch said. "We'll win through there. How or where I don't know but we'll just keep the pressure on," he said. Turner said on Thursday that Murdoch's lawsuit to block the merger of Turner Broadcasting and Time Warner, which creates the world's biggest media company, was a "frivolous piece of junk." Murdoch and Turner have fought a pitched battle in recent months over the merger. At issue is whether Time Warner, the United States' second-largest cable operator, will carry Murdoch's new all-news channel that will compete with CNN. News Corp. is seeking $1 billion in damages from Time Warner and Turner, saying their decision not to carry News Corp.'s 24-hour Fox News Service showed they were stifling competition. "They promised me very firmly we'd have 9 million subscribers and when the day came to sign the document, they weren't there," Murdoch said in the interview, referring to Time Warner's decision not to carry the new channel. Turner was forced to apologise last week for comparing Murdoch to Adolf Hitler, while Murdoch has described CNN as liberal and his executives have said Turner was monopolistic. Murdoch also confirmed his bullish outlook for News Corp.'s profits. "If the American economy holds where it is and the British one does, yes certainly," a 20 percent rise in profits is attainable, he told the Courier Mail. "But it is still early days to be saying that." News Corp. said after releasing its results in late August that a 20 percent profit rise in the year to June 30, 1997 was attainable. News earned A$1.02 billion ($790 million) net profit in fiscal 1996. Murdoch also said he had no plans to buy out John Fairfax Holdings, which publishes broadsheet newspapers in Sydney and Melbourne and is News Corp.'s major competitor in newspaper market. He said Australian-based rival media owner Kerry Packer was also unlikely to bid for Fairfax any time soon. "I don't want to buy Fairfax. I don't believe Mr. (Kerry) Packer wants to buy Fairfax," he was quoted as saying. "To my knowledge he (Packer) has three times tried to sell his shares within the last 12 months. He'd like to influence and have the power of Fairfax but he's too shrewd to be paying for Fairfax at today's price." Canada's Conrad Black, whose Hollinger International Inc. owns 25 percent of Fairfax and who has expressed a desire to take control of the group, expressed surprise at Murdoch's comments. "(Murdoch's statement) is fairly humorous. It's a bit rich given the fact that he never stops telling me how much he would like to own Fairfax," Black said by telephone Friday. "I cannot obviously comment on what the others are doing or what Rupert's motives are. The fact is that he regularly expresses to me considerable hypothetical interest in Fairfax," he said. Hollinger International owns the Chicago Sun-Times, daily and weekly publications in the United States and the Jerusalem Post.

Australian-based insurer QBE Insurance Group Ltd said on Tuesday that profit growth was likely to surge into the high teens for the full 1996/97 year after only a slight increase in its first quarter profit. "I'm confident that it will be in the teens, and with a bit of luck it will probably be in the high teens," QBE managing director John Cloney told reporters after the group's annual meeting when asked about profit growth for the full year. Earlier QBE reported a first quarter net profit of A$28.5 million, up just slightly from A$28.0 million a year earlier. QBE's full year net profit rose 15.1 percent to A$123.3 million in 1995/96 ended June 30. Analysts said the first quarter result may have been disappointing, partly due to costs linked to the installation of a new computer system, but the bullish comments were a welcome tonic. "We're still very happy to see around 15 percent profit growth per annum," said First Pacific insurance analyst Greg Galton. QBE's share price responded in kind, rising 15 cents to A$6.70 in early Tuesday afternoon trade after Cloney's comments. Cloney also said that QBE expected reduced expense ratios over 1996/97 because of improved productivity linked to the new computer systems. QBE should also achieve its target of double digit premium growth from existing lines and lower acquisition costs, he said. He also said he saw a continuation of the trend of previous years of increased dividends, but that the franking rate was likely to be reduced to about 50 percent as previously foreshadowed. Cloney said QBE's A$70 million acquisition of the British reinsurance assets of Allstate Insurance Co announced in September would also boost profits in 1996/97. "That will give us in excess of 15 percent return (on equity invested) in this fiscal year," he said. Referring to this strong rate of return from this latest acquisition, Cloney said QBE continued to be on the look-out for similarly profitable acquisitions. "We are on the lookout all the time, and there are a couple of things that may come to pass," Cloney said, adding however that he could not be more specific. But he said Australia was less likely to be a happy hunting ground for QBE because other competitors and banks were prepared to bid high prices and push down rates of return. "They're the sort of hurdle rates we set," he said, referring to the 15 percent-plus return likely from Allstate. "Because we're already earning 17 percent (return on shareholders funds) we're not in the position to spend up large and say we'll get a pay back in three or four years, because it will dilute our overall earnings," he said. "So far as Australia is concerned, to acquire at the sort of hurdle rates of return we're looking for is a little difficult because I think there are more people interested in what's available here than overseas." Cloney also ruled out any bank acquisitions. "QBE ought to be allowed to buy a bank if it wishes to do so but it is my own personal view and, I believe the view of the board, that we will not be doing that," he said. -- Bernard Hickey -- Sydney Newsroom 61-2 9373-1812

Airline giant British Airways Plc (BA) is unlikely to hike its airfares by the full three percent agreed to last week by the world's airlines, BA chairman Sir Colin Marshall said on Monday. The world's airlines, desperate to hold up their profits in the face of a 40-percent surge in fuel prices this year, said in Geneva last week through the International Air Transport Association (IATA) that they proposed to raise passenger fares by three percent. Marshall told reporters after a luncheon address in Sydney that BA was not as badly affected as some other airlines because of the strength of sterling against the U.S. dollar. "You also have to bear in mind that the impact for individual carriers does depend on exchange rates in that all aviation fuel is priced in U.S. dollar terms," he said. "So one has to watch what is happening to your own currency versus the U.S. dollar to see what the overall impact will be for a company," he said. When asked if the recent strength in sterling meant BA would therefore not pass on the full three percent agreed to in Geneva, he said: "I think that's quite likely." He said BA had increased its prices by only about one percent before the Geneva resolution because of the strong currency. "The pound has been relatively strong against the dollar and that's why we only applied about a one-percent increase in price." IATA, which has 251 member airlines, said in Geneva the proposed increase, which is subject to government approvals, would apply to fares from December 15. Marshall said the extent to which the three percent increase was applied depended on each individual carrier and how fuel prices changed through the northern hemisphere's winter. Many European carriers are pushing for a concerted move to lift ticket prices by up to three per cent, but Asian and North American carriers were believed to be reluctant to do so. BA reported earlier this month that despite strong traffic growth and greater productivity its first half operating profits were down 2.1 per cent compared with last year. Part of the drop, it said, was due to the extra US$84 million it had had to pay for fuel. Meanwhile, Marshall said he was confident the European Union would not thwart BA's plan to form an alliance with American Airlines, although he acknowleged it would take the two a long time to jump the various regulatory hurdles in front of them. "I'm not worried about it because I don't think that that is likely to happen," Marshall said of a possible EU block. On Friday the European Commission (EC) said it had formally asked BA for details of the planned alliance. A report that the EC had said the alliance did not appear to be in the best interests of consumers pushed BA's shares lower earlier on Friday. "There are so many precedents for similar events that have been allowed to go into effect, that to me it would be quite wrong if the European Union reached that conclusion," he said. "I think things are all moving in the right direction, but it's just very slow," Marshall said of the regulatory process.

Australian-based metals recycler Simsmetal Ltd on Friday painted a bleak picture for world scrap metal prices over the year ahead and said this meant the group's net profit for 1996/97 would be lower than in 1995/96. But it said it remained confident it could take advantage of a recovery in world markets when it came and was currently in talks to buy a large British scrap metal business. Simsmetal managing director John Crabb told the annual meeting that scrap prices had softened dramatically to their lowest levels in almost four years over the last two months. "Until there is an improvement in the major economies of Europe and Asia and the resulting increase in demand for metals, we expect trading conditions to remain very difficult with volumes, margins and earnings below our expectations," Crabb said. He later told reporters profits for the year to June 30, 1997 would be below the A$46.7 million posted in 1995/96 -- a result that was itself 23 percent down on a year ago. "It will be lower for the full year," Crabb said. Simsmetal had previously only said it saw difficult conditions prevalent in the first quarter of 1996/97 continuing into the second quarter, with second quarter profits falling. In mid-October, Simsmetal announced its net profit for the first quarter of 1996/97 fell 34 percent to A$8.28 million. Crabb said the world construction markets which used the long steel produced by electric furnaces supplied by Simsmetal remained weak and had no immediate prospect of improvement. "Our view is that we should start to see some improvement (in ferrous metals prices) towards the end of calendar 1997, we may see it in the middle (of calendar 1997)," he said. "We can't see too much on the horizon at this time," he said. Crabb also said Simsmetal was in talks to buy a large British business in the same area as Simsmetal, but he said he could not give any more details as he was bound by confidentiality agreements. "It's in the U.K. For us it will be quite large," he said. "We still need to balance our portfolio there, so that we've got a good broad coverage," he said. "We'll use either some cash or our unusued borrowing lines. We've got no problems funding it." He said Simsmetal had ended the first quarter with about A$62 million cash on hand. "I guess we'd only be using 55-60 percent of our borrowing capacity at the moment." Simsmetal had total non-current borrowings of A$54.11 million as at June 30, 1996, giving a total warchest for possible acquisitions of about A$115 million. Earlier in the annual meeting, Crabb said that any closure of the Broken Hill Pty Co Pty Ltd's Newcastle steel plant would not affect Simsmetals operations. Crabb said Simsmetal supplies most of its products to BHP's Sydney mini-mill and its Port Kembla plant, south of Sydney. "Maybe it will make life easier for us because we will be able to buy more scrap," Crabb said, responding to a shareholders question. Simsmetal's shares were up one cent at A$6.89 at 2.40 p.m. (0340 GMT). -- Sydney Newsroom 61-2 9373-1812

An official inquiry into Australia's financial system said on Thursday it would look at recommending a relaxation of rules that currently stop big bank mergers and local bank takeovers by foreign banks. The inquiry, which was established by the conservative government after its March election, outlined various options for reform in a wide-ranging discussion paper and was careful not to state its own preferences. But it noted majority industry support for abolishing the rules stopping mergers and foreign bank takeovers and said it preferred an anti-monopolies system which treated the banking sector the same way as every other sector. Until now the government has had the final say on bank mergers, rather than just the anti-monopolies watchdog. Analysts said the tone of the discussion paper reinforced widespread expectations that the inquiry's final report would recommend allowing bank mergers and new foreign investment. "It hasn't changed perceptions that ultimately the inquiry will make recommendations that allow the ACCC (Australian Competition and Consumer Commission) to permit bank mergers which haven't been permitted before," said ABN AMRO Hoare Govett Banking analyst Michael Pulman. Shares in the big banks seen vulnerable to takeover have rallied since the beginning of the year in expectation that a conservative Australian government would allow the mergers. Those seen as possible takeover targets include the Australia and New Zealand Banking Group Ltd and Westpac Banking Corp Ltd. The National Australia Bank Ltd, Australia's largest and most profitable bank, is seen as the main predator. A policy set by the former Labor government and known as the "six pillars" policy has stopped mergers or foreign takeovers of Australia's four largest banks and its two largest insurance and superannuation groups. The current conservative Liberal-National coalition government has said this policy would remain in place until it has considered the Wallis inquiry's recommendations, due to be delivered by the end of March 1997. The inquiry, headed by prominent businessman Stan Wallis, said in its 415-page paper that any reforms should increase the efficiency of Australia's banks to compete globally. It also said new technology would transform the sector. Big banks such as the National Australia Bank have used the same reasoning when lobbying for relaxed merger rules. These banks have said big bank mergers are necessary to compete globally and new technology such as the Internet and global competition meant such mergers would not cut competition. "The inquiry sees as its key goal the identification of means to increase the efficiency of the Australian financial system, without compromising its safety and peformance," the paper said. Increased efficiency was needed to compete globally, to obtain the benefits of new technology and to increase investment returns, the paper said. It said it would consider, "better accomodating financial conglomerates" and "relaxing some of the ownership restrictions on financial institutuions?" The inquiry said it also wanted any reforms to increase competition and asked in that context "whether there are any public policy grounds for restrictions on foreign acquisitions in the banking or insurance industries?"

Australia-based transport equipment hire and logistics firm, Brambles Industries Ltd, reported a 15.8 percent profit lift for the 1995/96 year on Friday, despite flat Australian and European economies. Surging profits from Brambles' U.S. and European CHEP pallet hire joint venture with Britain's GKN Plc compensated for otherwise slow growth from Australia, the company said. "The continuing improvement in our performance reflects, in part, the successful rationalisation of our wholly owned businesses and strong growth from our CHEP joint ventures," Brambles Chief Executive John Fletcher said. "CHEP USA, in particular, continues to justify our confidence in its long-term growth prospects in the region," he said in Brambles' profit statement. Brambles' net profit rose 120.2 percent to A$215.1 million (US$169.9 million) for the year to June 30 from A$97.7 million in 1994/95. The previous year's result was undermined by an abnormal loss of $112.3 million. Stripping away abnormals, profit for 1995/96 rose 15.8 percent to A$214.8 million, at the top end of analysts' expectations. Pre-tax profits rose 13 percent and 30 percent from Europe and the United States respectively, while Australian profits rose eight percent. "Overseas profits grew at twice the rate in Australia and the trend is likely to continue," Fletcher said. "In particular we expect further contributions from CHEP in Europe and North America," he said. Fletcher later told Reuters this strong performance from Brambles' non-Australian operations had encouraged it to actively look at further acquisitions outside Australia. "You should anticipate some acquisition work in the Northern Hemisphere, but in businesses we already operate in here," he said, referring to areas like transport equipment rentals and records managements. Looking ahead, he said strong contributions from the United States and Europe should continue to offset soft Australian conditions and help produce profit growth. "We haven't got an expectation that we will get too much help from this economy...for at least another six months," he said. "But all in all we've got enough things going to see another (profit) increase for this year," he said. The result generally pleased analysts, who also pointed to the strong U.S. pallet operations as the main bullish note. "CHEP USA is the outstanding area," said Macquarie Equities analyst Ian Myles. "As long as they're saying positive things about CHEP in the USA then they'll be alright and there's a reasonable amount of momentum there," another Sydney transport analyst said. Brambles' shares closed up five cents at A$18.90 against a soft market overall. (A$=US$0.79)

Rupert Murdoch's News Corp Ltd is likely to benefit from the planned US$20 billion merger of MCI Communications Corp and British Telecommunications Plc, Australian media analysts said on Monday. News Corp, which already has a wide-ranging partnership with MCI, would strengthen its global media interests on the coat-tails of the creation of the world's second largest telecommunications group, the analysts said. "It means they'll be in bed with a bigger, more powerful global telephony group," one senior Sydney media analyst said. Analysts also said the BT-MCI merger would stabilise New Corp's partnership with MCI, which had seemed increasingly strained in recent months. "It seems that MCI and News haven't been getting on lately, whereas News and BT have been getting on a lot better," said the Sydney analyst. The prospect of MCI selling its nine percent stake in News Corp over the next year had suppressed News Corp's shares last month. "There was a view that MCI wasn't real happy with it (the partnership) and may sell out, but now nothing's going to happen for 12 months at least," said another Sydney analyst. "The implications for News are quite positive." A Melbourne analyst said some in the market were a bit worried that MCI was preparing to sell down its stake over the next 12 months. "The fact that BT may combine with MCI reduces that risk for now at least," one analyst said. MCI and News Corp announced a broad alliance in May 1995, under which MCI bought a nine percent stake in News for US$1.35 billion and acquired an option to increase that stake to 13.5 percent. They agreed, among other things, to jointly set up an American satellite television operation -- ASkyB. But progress with ASkyB has been slow and other smaller joint ventures have failed to fire. Australian analysts said they would remain cautious towards ASkyB, given bearish comments on Sunday by MCI. MCI announced that it would cut its stake in ASkyB to 20 percent from 50 percent. Analysts said this was not surprising as News Corp and MCI had said recently they wanted new partners in the venture. MCI Chief Executive Bert Roberts told Reuters on Sunday that no major new launches were expected from the venture with News Corp and that MCI wanted to sell a US$700 million satellite license to News. He also said MCI was unlikely to take up its option to increase its stake in News, a comment seen by analysts as symptomatic of Roberts' increasing unhappiness with the deal. Analysts also warned there was a potential regulatory block to links between News, its 40 percent owned BSkyB Plc, and BT. "There's an outside risk that British regulatory bodies could try and block the News-BSkyB-BT side of it," said a BT analyst. Other analysts said the dilution involved, with BT owning nine percent of a 40 percent stake in BSkyB, would assuage regulatory concerns. The likely election of a British Labour government also reduced that risk. "They're banking on (Labour leader) Tony Blair winning government and deregulating cross media rules in the United Kingdom," said another Sydney analyst. However, another analyst pointed to the recent banning by British regulator Oftel of a joint marketing campaign between BT and BSkyB as a sign of the rocky road ahead for News and BT. -- Sydney Newsroom 61-2 9373-1812

Rupert Murdoch on Tuesday reported that News Corp Ltd had performed below expectations in the first quarter, but he said the global media group was still on track for a 20-percent profit rise this year. Murdoch, the chairman and chief executive of News Corp, also unveiled a more conservative approach to financing new acquisitions. "I am on record as saying that we expect a 20-percent increase in profit for the year," Murdoch told a packed News Corp annual meeting in Adelaide. "We still expect that and are still aiming for that during the coming year. However, I should say that the first quarter may not be quite up to those expectatations, but we will certainly be striving to make up any shortfall," Murdoch said. Analysts viewed the comments as disappointing and said they were now more sceptical about the 20-percent profit pledge. "If they can't meet expectations in the first quarter, when they have those strong revenues from Independence Day, then what hope do they have of getting 20 percent in the full year?" asked one Sydney-based media analyst referring to a hit Hollywood movie made by News Corp's Fox studio. Traders on the Australian share market did not like the first quarter comment either, selling the shares 14 cents or almost two percent lower to close at A$7.20, while the broader Australian equity market closed at a new record high. In the 1995/96 year ended June 30, News Corp's net profit slipped to A$1.02 billion ($806 million) from A$1.37 billion in 1994/95. Murdoch said revenues at the Fox U.S. television business had begun 1996/97 slowly because of of the Atlanta Olympic Games, the rights to which were held by a rival network. Australian newspaper revenues would be flat in 1996/97, said Murdoch. But he remained buoyant about News' British operations, saying the advertising market there was booming and the partly-owned BSkyB pay television operators was growing strongly. Murdoch then unveiled a more cautious strategy for financing future expansion. "As far as possible, we will finance them (News' expansion plans) out of current cash flow to maintain liquidity so that we will be ready to take new opportunities as they arise," he said. News has often funded its aggressive growth in pay television and other media through either hefty debt or equity issues, which have sometimes met shareholder resistance. It almost collapsed under a debt mountain in the early 1990s. Analysts said the comments indicated a more conservative approach towards acquisitions and their financing and would be welcomed by the market. "It imposes a huge financial discipline on the company which would hearten people immensely," said another analyst. Murdoch also announced that News planned to float its British-based digital media technology company, Digital Media Services, within the next two to three weeks and would sell 20 percent of the company. Digital Media Services, a combination of News Data Comm and Digi-Media Vision Ltd, would operate in Britain and Israel and produce technology for digital television. News Corp traditionally holds its annual meetings here in Adelaide, the South Australia city where Rupert Murdoch's father Keith founded the beginnings of the News Corp empire. (A$1 = $0.79)

Australasian food group Goodman Fielder Ltd is expected to report a slightly higher annual net profit before abnormals early on Thursday, as firmer margins in some areas are seen largely offset by higher grain costs. "I'll be looking for some margin growth, but also there's been some strong raw materials cost increases," one Sydney analyst said, adding he was forecasting a pre-abnormals net profit of just under A$100 million. The median forecast in BZW Australia's Barceps survey of analysts was for a A$100.0 million pre-abnormals net profit for the year to June 30, 1996. Forecasts ranged from A$97.0 million to A$102.3 million, compared with the A$97.3 million profit posted in 1994/95. "There'll be a big impact from the grain prices in the second half and going into the first half of this (1996/97 year)," another Sydney analyst said, estimating extra grain costs of about A$60 million. But analysts expected the cost of grain, a major input in Goodman's breadmaking and chicken operations, would ease back later in calendar 1996. The higher grain costs were likely to have been offset somewhat in the second half of 1995/96 by lower packaging and palm oil costs, some analysts said. Profit expectations are in a tight band in part because of Goodman's own comments about the result in early August. Goodman chief executive David Hearn said then that the pre-abnormal profit would be around A$100 million. "We're saying that there will be a small increase in pre-abnormal profit in the 0-5 percent range from last year and since we made A$97 million last year, zero to five means somewhere between A$97 and A$102 million," Hearn said. Goodman then also announced it would post abnormal losses of up to A$75 million in 1995/96, including a revaluation of its loss-making poultry operations. This would produce a net profit after abnormals of around A$25 million, Hearn said then. Analysts said however most of the interest would be centred on Goodman's strategic plans for recovery from its profit slump of recent years. Goodman Fielder shares closed down a cent at A$1.31 on Wednesday. -- Sydney Newsroom 61-2 373-1800

Rupert Murdoch's News Corp on Thursday reported a lower than expected profit for the first half of 1996/97, but later told analysts it remained confident of a 20 percent profit boost for the full year. Strong earnings from the hit movie Independence Day and buoyant British newspaper sales helped drive net profits before abnormals 10.3 percent higher to A$731 million (US$555 million). But the result was below analyst forecasts of a pre-abnormals profit of A$735 million to A$775 million. "Everyone's a bit disappointed," said a Sydney analyst. Andrew Sekely, the head of equities at broker Intersuisse, said: "It certainly wasn't a startingly good result. The market has made its judgement". News' shares fell 16 cents to A$6.60 after the result, but closed in Australia at A$6.76. "It's about A$20 million less than what the market would have liked and to still reach that (20 percent profit growth) outlook, it's got to make up the difference in the second half," the Sydney analyst said. News Corp had said in August last year when it posted a A$1.26 billion net profit for the year to June 30, 1996 that it expected strong movie and television revenues to increase profits by at least 20 percent in 1996/97. News Corp told analysts in a teleconference briefing on Thursday after the first half result that it still expected 20 percent profit growth for 1996/97. "They did say that they're still on track for the 20 percent growth," another Sydney media analyst said after the briefing between company officials and U.S. and Australian analysts. Analysts said News Corp officials were bullish about catching up in the second half and had pointed to a strong outlook for movies and U.S. television and newspapers. Operating income from News' Fox Filmed Entertainment unit surged to A$202 million for the first half of 1996/97 from A$84 million a year earlier, due largely to Independence Day. Analysts said the re-release of Star Wars and other films would help further boost movie revenues in the second half. British newspaper profits rose 18 percent in the first half, with gains in circulation revenues at The Sun, The Times and The Sunday Times, News Corp said. "All of the company's newspapers have maintained their dominant position in each of their respective markets, despite cover price increases instituted during the quarter at both The Sun and The Times," the company said. Analysts said British newspapers would again perform well in the second half. In contrast, Australian newspapers posted only a slight increase in profit in the first half reflecting a slow economy. While News Corp said losses at its burgeoning Asian satellite broadcaster Star TV in the first half were in line with expectations. (A$=US$0.76)

The Reserve Bank of Australia's (RBA) rate cut on Wednesday is expected to further squeeze bank margins as competition has forced them to pass this cut on to their mortgage customers sooner than usual. The major banks have previously delayed passing on the effect of official rate cuts to their variable rate home loan customers by around seven weeks. They would, however, often begin lowering variable and fixed deposit rates immediately, providing a temporary widening of their margins. Wednesday's rate cut has seen the major banks shorten this delay in passing on the rate cut to about five and half weeks. Analysts and some of the banks said increasing competition from non-bank mortgage lenders and the regional banks had been the major factor in this contraction. They also said they expected this gap to narrow further when further official rate cuts are made next year. "The implication is a bit more pressure on margins," said ABN AMRO Hoare Govett banking analyst Michael Pulman. "This all about competition," he said. "These competitive forces will end up contracting it down further, possibly down to 30 days," said Aussie Home Loans managing director John Symond. Aussie, the biggest of the non-bank lenders funded by mortgage origination, said on Wednesday it would cut its variable rate to 7.49 percent from 7.99 percent from January 28 for existing customers, a gap of 48 days after December 11. At the time of the last official rate cut on November 6, Aussie planned a gap of 46 days, which was lower than most of the banks. In response to Aussie and competition from regional banks like St George Bank Ltd, the large banks have cut back this delay. National Australia Bank Ltd said it would cut its variable mortgage rate to 8.25 percent from 8.75 percent from January 23 for existing borrowers, a gap of 43 days. After the last official rate cut NAB's gap was 54 days. In line with this trend, Westpac Banking Corp's gap has dropped to 37 days from 41 days and Commonwealth Bank of Australia's gap has dropped to 48 days from 54. The Australia and New Zealand Banking Group Ltd has yet to announce any cut in variable mortage rates in response to the RBA's cut in the official cash rate to 6.0 percent from 6.5 percent. The biggest move in the gap came from St George, which reduced the time it would pass on the rate cut for its major variable rate product to 20 days from 55 days. St George has even said existing customers of its no frills variable rate product would receive the cut from December 18, a week away. This product provides 20 percent of its portfolio. Overall the average gap for the banks who have cut their mortgage rates has dropped to 40 days after this rate cut from 49 after the November 6 cut, which was also by 50 basis points. There may, however,be a limit to how much further this gap can fall, analysts and the banks said. A new regulatory code on credit specifies customers must be given 30 days notice whenever their interest rates are changed, creating an artificial barrier both up and down. "I think 30 days will about see it out," said Aussie's Symond. Analysts said the banks may try other tactics to cushion the effect of this reduction in the gap, but that it would still further reduce already-bruised margins. "It will have an effect on margins," said BNP Equities' banking analyst Linda Lyon. "They'll do all sorts of other things to cushion the effect. They'll be trying to reduce their deposit rates as far and as fast as they can," said ABN AMRO's Mike Pulman. "But there's obviously a bit of a squeeze there, particularly for those banks most exposed to the housing sector," Pulman said. CBA is seen as the most exposed with about 34 percent of its assets in home loans, with Westpac next on 25 percent and NAB and ANZ on about 17 percent. The big bank's margins on home loans have already declined this year from about three percent in June to about 2.25 percent now. -- Sydney Newsroom 61-2 9373-1812

Australia's wealthy baby-boomers are disillusioned with service provided by banks and believe loyalty is not rewarded, a survey released on Monday found. Those approaching retirement were also unhappy with the performance of their superannuation funds and were looking to move elsewhere wherever possible, the survey by forecaster BIS Shrapnel has found. "Australia's affuent boomers -- the demographic group owning the largest share of private wealth -- are distrustful of the performance and motivations of financial institutions, and yearn for a return to the days when customer loyalty was rewarded," BIS Shrapnel said in the survey titled "Financial Services for the Affluent Boomers." Those surveyed had assets worth over A$150,000, excluding the family home. The survey of 128 people aged over 45 in 14 seperate focus groups around Australia found they sought more individual treatment by knowledgable staff. "In particular those approaching retirement are more likely to equate good service with personal service and contact," BIS Shrapnel survey project leader Geoff Ludowyke said. "They want to develop a relationship with one particular person within their banking branch," he said. The survey found that Commonwealth Bank of Australia (CBA) was the least liked of all the banks, Ludowyke said. Respondents found the CBA slower, more unfriendly, more impersonal and less modern than the other banks, he said. Westpac Banking Corp Ltd was seen as the next least-liked bank while the ANZ Banking Group Ltd and the National Bank Ltd were seen in another group in-between CBA and the credit unions, which were the most favourably received. Former building societies like St George Bank Ltd and Advance Bank Ltd, which are in the process of merging, were seen as similar to the credit unions. "Among the major banks with the most negative comments were the Commonwealth and Westpac," Ludowyke told Reuters. "ANZ and NAB were in the next group while the credit unions were in another group out front," he said. The survey also found that rich baby-boomers did not believe that swapping pension funds would improve their returns. "They intend to move away from superannuation," Ludowyke said. Law changes were also generating anxiety about superannuation, he said. "Affluent boomers expect governments to continue to change the rules in a way that will benefit governments rather than contributors," he said. The survey also found that banks were perceived as greedy. "Reports of huge profits compound the resentment to bank fees and banks are believed to be primarily concerned with looking after their shareholders rather than their customers," the report said. "Affluent boomers are particularly annoyed by new charges for ATM and EFTPOS usage." Ludowyke said BIS Schrapnel would approach the big financial institutions for funding for a more comprehensive survey of 800 people face to face on attitudes towards the financial institutions. -- Sydney Newsroom 61-2 373-1800

Gold miner Niugini Mining Ltd, which owns 17.15 percent of the shares in Papua New Guinea's Lihir Gold Ltd, said on Monday it was looking at ways of giving those Lihir shares back to its shareholders. "We're looking at the possibility of returning the Lihir shareholding to shareholders and when that can be done," Nuigini Mining chief executive Ian Goudie told Reuters. Goudie said a straight forward return of the shares to shareholders could not approved until late 1998 given the Lihir mine's current debt arrangements. But Nuigini was also looking at other structures through which the shares could be returned before then, he said. He said the Lihir share return was just one of several possible ways of unlocking the true value of the Lihir stake, which was not reflected in Niugini's current share price. "The whole purpose is to unlock this mismatch," he said. Niugini's assets could viewed in two parts -- the Lihir stake and other smaller mining assets, he said. "If the two parts were to be separated they would appear to have more value to shareholders."

The Brunei Investment Agency (BIA) on Tuesday bought a 13.4 percent stake in Macquarie Bank Ltd, removing the links between one of Australia's top four investment banks and its British founder. Macquarie said in a stock exchange statement just after the start of morning trading that the Brunei government-owned agency paid Lloyds TSB Plc A$151.7 million (US$122.8 million) for the stake. The purchase by the agency's Brunei Investment and Commercial Bank (BICB) from Lloyds' Hill Samuel & Co unit makes it the largest individual shareholder in Macquarie. Macquarie Bank managing director Allan Moss said the bank had developed a good relationship with BIA and its senior management over the months it had taken to arrange the deal. "We are delighted that they have become associated with the bank as a major shareholder, and we are confident that BICB will prove to be a constructive and long term investor in Macquarie," Moss said. The purchase ends Hill Samuel's 27-year direct involvement in the Australian investment banking sector. Hill Samuel set up what is now known as Macquarie Bank in 1969 before selling down its stake to 30 percent in 1985 and then down to 15 percent in 1993. Since then Macquarie, which now has 1,800 staff, has listed on the Australian Stock Exchange and is now one of Australia's top 100 companies. It has offices throughout Australasia and in China, Singapore, Malaysia, London, Munich, New York, Hong Kong, Indonesia and South Africa. Its asset base stood at A$5.17 billion on March 31, the end of its financial year. Macquarie also has more than A$20 billion in assets under management and has operations in corporate finance, sharebroking and in commodities, debt and foreign exchange trading. It posted net profits of A$93.2 million in 1995/96. Macquarie Equities ranks amoung the top four brokers in terms of turnover on the Australian Stock Exchange and had the biggest inflow of retail funds for management in the year to June 30, 1996. Macquarie chairman David Clarke told a news conference he was confident that BICB was a stable shareholder. "By and large you only read announcements of them buying things and investing in things you don't read about them selling out of things," Clarke said. The sale of the Hill Samuel stake appears to remove from the market a convenient bridgehead for a takeover bid from another Australian bank. Australia's conservative government is currently reconsidering financial regulations governing bank takeovers. A report by the government-sponsored Wallis inquiry due in March next year is widely expected to trigger a series of bank takeovers. ($A = US0.81 cents)

Appliance and building products manufacturer Email Ltd reported a lower half year net profit and dividend on Monday but forecast that recent restructuring and a seasonal lift would boost profits in the second half. Email said the environment for industrial activities remained difficult and recent economic forecasts had deferred the timing of an upturn in building sector. "Nevertheless, the significant improvements in the company's pre-tax operating profits flowing from restructuring across the past 12 months, are expected to continue in the second half," the company said in a statement accompanying half year results. "As well there should be the normal seasonal lift in sales and margins, leading to a second half profit well ahead of the first half," it said. Earlier Email reported a pre-abnormal net profit of A$27.26 million for the first half to September 30, up from A$24.83 million the previous corresponding half a year earlier. Net profit however fell to A$23.85 million from A$26.61 million the previous year, due largely to abnormal losses of A$3.41 million incurred in restructuring and reducing overheads. Email also cut its interim dividend to eight cents from 11.5 a year earlier, saying it had realigned dividends to reflect the stronger second half year in the light of continuing uncertainty about the economy. Email Managing Director John Hanna later told Reuters Email expected pre-tax profits for the second half of the 1996/97 year would also be above those in the second half of 1995/96. "We are expecting in the second half that we would have pre-tax operating profits higher than last year," Hanna said. "We should also have the second half seasonal lift." He said Email was pleased that it achieved profit growth in its building products and major appliances divisions despite lower sales. Analysts said the result was within expectations and was largely unsurprising, even with the dividend cut. "It's still a high payout ratio," said one Sydney analyst said of the dividend, noting that the final dividend was likely to be maintained. Email's share price was unchanged at A$3.55 at 1.10 p.m. (0210 GMT) on light volumes. Hanna said there could begin to be an upturn in the housing industry at the beginning of 1997, but that this would take some time to flow through to Email's business because its products were installed late in the building process. "If it (the upturn) was early 1997, then it (the resulting flow-on) would be in mid-1997," he said. But this flow-on effect would then have an immediate effect on Email's bottom line because of the recent restructuring which had reduced overheads. "As there's an upturn, we should get that immediately and a lot of that will go to the bottom line immediately," Hanna said. He also said Email may increase its 20 percent stake in British electricity meter maker Ampy Automation Digilog Ltd. "There may be an opportunity to lift that stake in the future," Hanna said. He said Email remained on the lookout for further acquisitions. "They (any further acquisitions) would have to be in existing core areas ... but I don't think we have anything directly in line at the moment," he said. -- Bernard Hickey 61-2 9373-1812

An inquiry into Australia's financial system has left open the option of mergers among Australia's big banks and takeovers of local banks by foreign banks in an interim discussion paper released on Wednesday. The inquiry, established by the government and headed by prominent businessman Stan Wallis, outlined various options for reform and was careful not to state its own preferences. But it said the key aim of any reforms should be increasing the efficiency of Australia's banks to compete globally and that new technology would transform the sector. Big banks such as the National Australia Bank Ltd have used the same reasoning lobbying for relaxed merger rules. The banks have said big bank mergers are necessary to compete globally and new technology such as the Internet and global competition meant such mergers would not cut competition. Policy set by the former Labor government has stopped mergers or foreign takeovers of Australia's four largest banks and its two largest insurance and superannuation groups. The current conservative coalition government has said this so-called "six pillars" policy will remain in place until it has considered the Wallis inquiry's recommendations, due to be delivered by the end of March 1997. "The Inquiry sees as its key goal the identification of means to increase the efficiency of the Australian financial system, without compromising its safety and peformance," the paper said. Increased efficiency was needed to complete globally, to obtain the benefits of new technology and to increase investment returns, the paper said. It asked if competition and innovation could be stimulated by widening access to traditional banking activities through: * "Allowing direct non-bank access to the payments settlement system" * Better accomodating financial conglomerates * Allowing an increased range of institutions to provide a wider array of financial services, or * relaxing some of the ownership restrictions on financial institutuions ?" The inquiry said it was also wanted any reforms to increase competition and asked in that context "whether there are any public policy grounds for restrictions on foreign acquisitions in the banking or insurance industries?" In discussing the details of how bank mergers might be approved, the inquiry said there was widespread consensus that banks should be subject to the same competition rules as other industries. Currently any bank merger must be approved by the government through the Treasurer and by the Australian Competition and Consumer Commission (ACCC). This dual approval process does not apply in other industries. "In undertaking its assessment, the Inquiry notes its preference...for all sectors of the economy to be subject to a uniform set of competitionpolicy laws unless there is something sepcial which justifies different treatment," the paper said. The Inquiry said it would consider the following options for merger approvals, including; * keeping the current system of dual approval * having the Treasurer accept the ACCC's decision, or * narrowing powers over mergers in banking and insurance law It said there would be no need for a 'six pillars' policy if the Treasurers powers were removed or if he agreed not to excercise them. "There was almost unanimous support that the 'six pillars' policy should be abolished," the paper said. -- Sydney Newsroom 61-2 9373-1812

Rupert Murdoch's News Corp on Thursday reported a lower than expected profit for the first half of 1996/97, but later told analysts it remained confident of a 20 percent profit boost for the full year. Strong earnings from the hit movie Independence Day and buoyant British newspaper sales helped drive net profits before abnormals 10.3 percent higher to A$731 million (US$561 million). Abnormal losses of A$41 million cut final first half profits down to A$690 million from A$702 million a year earlier. But the result was below analyst forecasts of a pre-abnormals profit of A$735 million to A$775 million. "Everyone's a bit disappointed," said a Sydney analyst. Andrew Sekely, the head of equities at broker Intersuisse, described the result as moderate. "It certainly wasn't a startingly good result. The market has made its judgement," Sekely said. News' shares fell 16 cents to A$6.60 after the result, but closed in Australia at A$6.76. "It's about A$20 million less than what the market would have liked and to still reach that (20 percent profit growth) outlook, it's got to make up the difference in the second half," the Sydney analyst said. News Corp had said in August last year when it posted a A$1.26 billion net profit for the year to June 30, 1996 that it expected strong movie and television revenues to increase profits by at least 20 percent in 1996/97. Murdoch repeated the forecast in October, but the group has been publicly tight-lipped about it since then and its first quarter results were also lower than expected. However, News Corp reassured the analysts in a teleconference briefing after the first half result, saying that it still expected 20 percent profit growth for 1996/97. "They did say that they're still on track for the 20 percent growth," another Sydney media analyst said after the briefing between company officials and U.S. and Australian analysts. Analysts said News Corp officials were bullish about catching up in the second half and had pointed to a strong outlook for movies and U.S. television and newspapers. Operating income from News' Fox Filmed Entertainment unit surged to A$202 million for the first half of 1996/97 from A$84 million a year earlier, due largely to Independence Day. Analysts said the re-release of Star Wars and other films would help further boost movie revenues in the second half. Sharply lower television profits in the first half because of lower ratings from News' Fox television network and higher programming costs surprised analysts. But analysts expect a rebound in revenues from Fox television in the second half due to a successful Super Bowl broadcast and the new hit animated comedy King of the Hill. British newspaper profits rose 18 percent in the first half, with gains in circulation revenues at The Sun, the Times and The Sunday Times, News Corp said. "All of the company's newspapers have maintained their dominant position in each of their respective markets, despite cover price increases instituted during the quarter at both The Sun and The Times," the company said. Analysts said British newspapers would again perform well in the second half. "Regardless of what's happening with volumes and prices, which are looking quite good, the relative position on paper prices is improving," said First Pacific media analyst Lachlan Drummond. In contrast, Australian newspapers posted only a slight increase in prodit in the first half reflecting a slow economy. While News Corp said losses at its burgeoning Asian satellite broadcaster Star TV in the first half were in line with expectations. (A$=US$0.76)

World yeast and spices giant Burns Philp & Co Ltd announced a hefty loss for the 1995/96 year on Wednesday after taking some heavy hits in a vicious U.S. price war and Asian expansion. Burns Philp, the western world's largest fresh bakers' yeast maker and second largest spice maker, posted a net loss of A$61.8 million (US$48.8 million) for the year to June 30. This came after abnormal losses of A$136.6 million, due largely to rationalisation of its U.S. operations and other costs linked to a spice price war with the world's largest spice maker, McCormick & Co Inc of the United States. Burns Philp managing director Ian Clack said the tussle for market share in the United States appeared to have abated, but the cost of paying supermarkets for premium shelf space during the two-year war had to be written off. The writing off of these costs, known as slotting contracts, made up A$33.9 million of the abnormal losses. "Recent slotting contracts have been negotiated with improved margins, indicating that market conditions are returning to a more acceptable level," Clack said. He said Burns Philp had increased its U.S. spices market share by one percentage point to 16 percent after the war while McCormick's share had risen 1.5 points to 34 percent. Other U.S. spice makers lost market share, he said. Burns Philp has 16 percent of the western world's yeast market and seven percent of its spice market. Costs incurred during an Asian expansion also boosted Burns Philp's losses. "The result was also affected by the cost of expanding our presence in Asia together with plant upgrade costs in China and India," Clack said. The result surprised brokers and analysts, who had expected large abnormal losses but were disappointed by a lower pre-abnormals net profit as well. Net profit before abnormal items fell to A$74.8 million, down from the A$104.1 million posted in 1994/95 and down on most analysts' forecasts of about A$80 million. Burns Philp's decision not to post a final dividend also upset investors. "A woeful result and passing their dividend hasn't helped," said Jim Tredenick, senior dealer at broking house Nevitts Ltd. Burns Philp's share price closed down 10 cents at A$1.95. Analysts also said there may be more abnormal losses to come, particularly in the value of intangibles like goodwill. "It was a bad result...the issue is whether or not they've completely taken the knife to intangible valuations, that's the area where there could be some further writedowns," one Sydney analyst said. "They didn't take much off the intangibles. That (the A$30.7 million of intangible writedowns) hardly made a dent in it," another Sydney analyst said. Clack said the company had taken the most conservative measure of intangible values it could and did not expect any more abnormal losses in the current year. He said an earnings turnaround was possible in 1996/97. "In most markets we are seeing some improvement in the first two months of the year. There's been an improvement in demand, particularly in the North American markets." (A$1 = 79 U.S. cents)

Rupert Murdoch on Tuesday reported that News Corp Ltd had performed below expectations in the first quarter, but he said the global media group was still on track for a 20-percent profit rise this year. Murdoch, the chairman and chief executive of News Corp, also unveiled a more conservative approach to financing new acquisitions. "I am on record as saying that we expect a 20-percent increase in profit for the year," Murdoch told a packed News Corp annual meeting in Adelaide. "We still expect that and are still aiming for that during the coming year. However, I should say that the first quarter may not be quite up to those expectatations, but we will certainly be striving to make up any shortfall," Murdoch said. Analysts viewed the comments as disappointing and said they were now more sceptical about the 20-percent profit pledge. "If they can't meet expectations in the first quarter, when they have those strong revenues from Independence Day, then what hope do they have of getting 20 percent in the full year?" asked one Sydney-based media analyst referring to a hit Hollywood movie made by News Corp's Fox studio. Traders on the Australian share market did not like the first quarter comment either, selling the shares 14 cents or almost two percent lower to close at A$7.20, while the broader Australian equity market closed at a new record high. In the 1995/96 year ended June 30, News Corp's net profit slipped to A$1.02 billion ($806 million) from A$1.37 billion in 1994/95. Murdoch said revenues at the Fox U.S. television business had begun 1996/97 slowly because of of the Atlanta Olympic Games, the rights to which were held by a rival network. Australian newspaper revenues would be flat in 1996/97, said Murdoch. But he remained buoyant about News' British operations, saying the advertising market there was booming and the partly-owned BSkyB pay television operators was growing strongly. Murdoch then unveiled a more cautious strategy for financing future expansion. "As far as possible, we will finance them (News' expansion plans) out of current cash flow to maintain liquidity so that we will be ready to take new opportunities as they arise," he said. News has often funded its aggressive growth in pay television and other media through either hefty debt or equity issues, which have sometimes met shareholder resistance. It almost collapsed under a debt mountain in the early 1990s. Analysts said the comments indicated a more conservative approach towards acquisitions and their financing and would be welcomed by the market. "It imposes a huge financial discipline on the company which would hearten people immensely," said another analyst. (A$1 = $0.79)

Rupert Murdoch on Tuesday reported that News Corp. Ltd. had performed below expectations in the first quarter, but he said the global media group was still on track for a 20 percent profit rise this year. Murdoch, the chairman and chief executive of News Corp., also unveiled a more conservative approach to financing new acquisitions. "I am on record as saying that we expect a 20 percent increase in profit for the year," Murdoch told a packed News Corp. annual meeting in Adelaide. "We still expect that and are still aiming for that during the coming year. However, I should say that the first quarter may not be quite up to those expectatations, but we will certainly be striving to make up any shortfall," Murdoch said. Analysts viewed the comments as disappointing and said they were now more sceptical about the 20 percent profit pledge. "If they can't meet expectations in the first quarter, when they have those strong revenues from 'Independence Day," then what hope do they have of getting 20 percent in the full year?" asked one Sydney-based media analyst referring to a hit Hollywood movie made by News Corp's Fox studio. Traders on the Australian share market did not like the first quarter comment either, selling the shares 14 cents or almost two percent lower to close at A$7.20 ($5.69), while the broader Australian stock market closed at a record high. In the 1995/96 year ended June 30, News Corp's net profit slipped to A$1.02 billion ($806 million) from A$1.37 billion in 1994/95 ($1.08 billion). Murdoch said revenues at the Fox U.S. television business had begun 1996/97 slowly because of of the Atlanta Olympic Games, the rights to which were held by a rival network. Australian newspaper revenues would be flat in 1996/97, said Murdoch. But he remained buoyant about News' British operations, saying the advertising market there was booming and the partly-owned BSkyB pay television operation was growing strongly. Murdoch then unveiled a more cautious strategy for financing future expansion. "As far as possible, we will finance them (News' expansion plans) out of current cash flow to maintain liquidity so that we will be ready to take new opportunities as they arise," he said. News has often funded its aggressive growth in pay television and other media through either hefty debt or equity issues, which have sometimes met shareholder resistance. It almost collapsed under a debt mountain in the early 1990s.

Rupert Murdoch predicted in a newspaper interview on Friday that his global media group News Corp Ltd was on track to boost profits 20 percent this year and would win its legal battle with Ted Turner and Time Warner. Murdoch, visiting Australia for News' annual meeting next Tuesday, also told News' Courier Mail newspaper in Brisbane that he did not want to buy out Australia's other major newspaper publisher, John Fairfax Holdings Ltd. News, which publishes the major tabloid newspapers in Sydney and Melbourne as well as the Courier Mail and The Australian, also owns about five percent of Fairfax. Rejoining his recent feud with CNN owner Ted Turner and Time Warner, Murdoch said he was confident News would win its law suit launched last week against Turner and Time Warner over their proposed merger. "We've got a good stoush (fight) there," Murdoch said. "We'll win through there. How or where I don't know but we'll just keep the pressure on," he said. Turner said on Thursday that Murdoch's lawsuit to block the merger of Turner Broadcasting System Inc and Time Warner was a "frivolous piece of junk." Murdoch and Turner have fought a pitched business battle in recent months over Turner's plans to merge his Cable News Network (CNN) with Time Warner, creating the world's largest media group. At issue is whether Time Warner, the United States' second largest cable operator, will carry Murdoch's soon-to-be launched competitor to CNN. News Corp is claiming US$1 billion in damages from Time Warner and Turner, saying their decision not to carry News' 24-hour Fox News Service showed they were stifling competition. "They promised me very firmly we'd have nine million subscribers and when the day came to sign the document, they weren't there," Murdoch said of the Time Warner decision. Turner was forced to apologise last week for comparing Murdoch to Adolf Hitler, while Murdoch has described CNN as liberal and his executives have said Turner was monopolistic. Murdoch also reaffirmed News' bullish outlook for profits. "If the American economy holds where it is and the British one does, yes certainly (the 20 percent rise is attainable)," he told the Courier Mail. "But it is still early days to be saying that," the newspaper quoted Murdoch as saying. News said after its 1995/96 results in late August that a 20-percent profit rise in the year to June 30, 1997 was very attainable. News posted a A$1.02 billion (US$790 million) net profit in 1995/96. But it did not repeat the 20-percent forecast in its annual report last month, creating some doubt about the outlook. Murdoch also said he had no plans to buy out John Fairfax Holdings, which publishes the major broadsheet newspapers in Sydney and Melbourne and is News' major competitor in newspapers. But he said Australian-based rival mogul Kerry Packer was also unlikely to bid for Fairfax any time soon if current goverment restrictions were lifted. "I don't want to buy Fairfax. I don't believe Mr (Kerry) Packer wants to buy Fairfax," he said. "To my knowledge he (Packer) has three times tried to sell his shares within the last 12 months. He'd like to influence and have the power of Fairfax but he's too shrewd to be paying for Fairfax at today's price." Murdoch also criticised the conservative government of Australian prime minister John Howard for not implementing radical economic reforms immediately. (A$1 = US$0.79)

Shares in Canadian brewing and sports firm Molson Cos. Ltd. sank on Monday after its Molson Breweries unit lost the rights to brew Coors Light, Canada's top-selling light beer, in a dispute with Adolph Coors Co.. Investors pounded Molson's stock after an arbitration panel ruled late Friday that Molson reliquished its right to brew and sell Coors products in April 1993 when Miller Brewing Co. acquired a stake in the Canadian brewer. Molson class A stock closed down C$0.75 at C$20.15 on the Toronto Stock Exchange after earlier sinking to C$19.50, just shy of its 52-week low. "It was a pretty severe ruling and I think it surprised Molson, surprised Coors and, frankly, surprised the street," said Mike Palmer, an analyst with Loewen, Ondaatje, McCutcheon Ltd. The panel said Molson breached its licensing agreement with Coors by allowing Miller, a unit of Philip Morris Cos. Inc., to buy a 20 percent stake without Coors' consent. Molson Breweries is also owned 40 percent each by Molson Cos and Australia's Foster's Brewing Group Ltd.. The panel ordered Molson to pay Coors all the profits it earned from selling Coors beer since 1993, an amount that has yet to be determined. Coors brands produced by Molson -- Coors Light and Original Coors -- account for 8 percent of its sales volume. Coors Light is the dominant light beer in Canada, commanding a 5 to 5.5 percent share of the beer market. Analysts said Molson can ill afford to lose a profitable brand as it battles rival Labatt Brewing Co. Ltd. in a domestic beer market that has been flat for several years. "You start losing volume and it has a significant impact on your profits. It's very important to Molson to negotiate a deal with Coors," said Palmer. While Molson officials said they are willing to negotiate a new licensing agreement, Coors was keeping its options open. "What we need to do is go through the panel's ruling and understand all of the aspects of the ruling and then analyze what our options are," said Coors spokesman Jon Goldman. He declined to outline Coors' options for the Canadian market. But analysts speculated that Coors could cut a richer deal with Molson, ship product directly to Canada or buy a local brewer to produce Coors in Canada. "The easiest option is to negotiate a deal with Molson. They've had a big win here so it's time to kiss and make up," said Palmer. If there is a new deal, Coors will likely seek more control over its brands and higher royalties from Molson, said Barry Joslin, Molson's vice-president of corporate affairs. If Molson cannot negotiate a new licensing agreement, Joslin said the brewer would consider its options, including launching a new light brand.

Royal Bank of Canada, the country's largest bank, rolled up a record annual profit Wednesday and surprised shareholders with a dividend hike. The Toronto-based bank said net income jumped to C$1.43 billion ($1.05 billion) in the year ended Oct. 31, from C$1.26 billion ($931 million) in 1995. Royal Bank also boosted its quarterly dividend by C3 cents (2 cents) to C37 cents (27 cents) a share, the third increase in the past 15 months. It was the third Canadian bank to raise its dividend recently. Royal Bank was the fourth of Canada's Big Six banks to post a third straight year of record profits. Results from Canadian Imperial Bank of Commerce and National Bank of Canada, which are due on Thursday, were expected to push the group's earnings past the C$6 billion level ($4.4 billion), up from last year's record C$5.2 billion ($3.8 billion). "We're announcing strong results ... and this dividend increase is evidence of our commitment to rewarding shareholders and enhancing shareholder value," Royal Bank Chairman John Cleghorn said in a statement. Higher asset volumes, lower credit losses and strong performances from wealth management and investment banking fattened Royal Bank's bottom line. The bank's brokerage arm, RBC Dominion Securities Ltd., turned in a record year due to strong financial markets. Royal Bank's credit quality also continued to improve. The provision for credit losses fell C$140 million ($103 million) to C$440 million ($325 million) in 1996 and was expected to fall more in 1997. Royal Bank continues to seek an acquisition in the United States, but soaring stock prices have made it very expensive. "Indeed in some sectors of wealth management, some of the asking prices have gone right out of sight," Cleghorn told reporters during a conference call. Royal Bank's fourth-quarter earnings were slightly better than analysts' estimates. Earnings rose to C$1.09 (80 cents) a share in the quarter from C90 cents (66 cents) in the same period in 1995. The consensus forecast from analysts was about C$1.04 (77 cents) a share. Royal Bank's dividend increase surprised some analysts who expected the bank to wait until early next year. The bank is in the middle of a massive share buyback that analysts said had become expensive due to the recent surge in Canadian bank stocks. "It (the dividend hike) is rather surprising. Maybe they won't be going as far with the buyback and this is compensation," said Roy Palmer, a banking analyst with investment dealer TD Securities Inc. But Cleghorn said the bank will continue with its buyback of up to 10 percent of its common stock. "We have not indicated any upside price to analysts or the press and we are continuing with our buyback programme," he told reporters. Despite the strong results, Royal Bank's stock fell along with a sagging Toronto Stock Exchange Wednesday. The bank's shares closed down C65 cents (48 cents) to C$48.25 ($35.68). In New York, Royal Bank's stock fell 62.5 cents to close at $35.625.

Veronika Hirsch, the flamboyant Canadian stock picker hired recently to spearhead Fidelity Investments' drive to dominate the Canadian market, has been removed from her fund as she is probed by Canadian regulators. The dramatic move -- just three months after Canada's so-called "Fund Diva" joined the mutual fund giant -- is a blow to Fidelity's expansion efforts in Canada, analysts said. Hirsch, who was unavailable to comment, is embroiled in a controversy over personal trades she made before joining Fidelity, the world's biggest mutual fund company. Her investments earlier this year in a small Vancouver company, Oliver Gold Corp., grabbed headlines and attracted the attention of the British Columbia Securities Commission. Late Wednesday, Fidelity ousted Hirsch from her portfolio and said her status was "under discussion." Fidelity also took the unprecedented step of offering clients their money back without penalty. The fund has grown to C$190 million ($143 million) in assets since it was launched amid much fanfare on Sept. 23. Fidelity's head office in Boston declined to comment and referred all calls to its Canadian subsidiary. "We acknowledge that it is highly unusual for a fund to change portfolio managers so quickly after its launch. This fee recovery programme is a proactive and voluntary response on our part to maintain investors' goodwill," Fidelity Canada spokesman Chethan Lakshman told Reuters. Fidelity vigorously defended Hirsch when the controversy first broke several weeks ago. But it cancelled a 27-city road show last week when regulators contacted Hirsch. At issue is her purchase of 65,000 special warrants of Oliver Gold through a private placement while she was a fund manager with AGF Management Ltd. in Toronto. Hirsch paid C$1.53 ($1.15) per warrant, according to filings with the British Columbia Securities Commission and reported by Stockwatch, a Canadian investment publication. Shortly afterward, Hirsch's AGF Growth & Income Fund bought 295,000 special warrants at more than double that price. Analysts said regulators are expected to review whether the trades constitute "front running", a practice whereby a fund manager tries to profit personally by buying securities he or she intends to buy later for the fund. Another related issue is whether Hirsch, a resident of Ontario, used an address in British Columbia to buy the Oliver Gold shares, which were only offered to B.C. residents. Lakshman contended the controversy has not damaged Fidelity's reputation or expansion plans in Canada. But analysts saw the publicity as damaging as Fidelity gears up for the critical year-end sale of retirement savings plans. "They look kind of foolish being the ones associated with this situation. I don't think it helps their bid to become the dominant player in Canada by any stretch of the imagination," one industry analyst said. The Hirsch case comes as Canadians are pouring billions of dollars into mutual funds. Over the last six years, investment has jumped seven-fold to C$180 billion ($136 billion). Fidelity wants a bigger share of the Canadian market, where it ranks ninth with C$7 billion ($5.2 billion) in assets, behind leader Investors Group, with C$22 billion ($16 million). To quarterback its effort in Canada, Fidelity poached Hirsch, a high-profile stock picker with AGF, for a rumoured C$2 million ($1.5 million) signing bonus in August. Her meteoric rise to celebrity status began when she joined AGF in October 1995 after a successful but low-profile stint at Prudential Insurance Co. of America. A multi-million advertising campaign put Hirsch's face on television screens across the country. She soon rivalled celebrity stock guru Frank Mersch at Altamira Management Ltd. as the country's best-known fund manager. When Hirsch jumped to Fidelity, her blood-red nails and leather outfits appeared an uncomfortable fit with Fidelity's ultra-conservative culture, but the hiring was considered a major coup within the industry. At the time, Fidelity Canada President Kevin Kelly said: "Veronika is one of the country's top equity managers with an outstanding track record and reputation." Kelly was unavailable for comment on Thursday. Industry critics argue that the Hirsch case raises key questions about the fiduciary responsibility of fund managers to their clients. It also highlights the jumble of standards governing the personal investing of Canadian money managers. Altamira has tough rules restricting managers from investing in open-ended mutual funds, short-term government bonds and treasury bills after a controversy involving one of its fund managers. But some industry observers say the entire industry should adopt tougher U.S. guidelines.

Canada's big six banks, which have long ruled the country's street corners with their vast branch networks, face a challenge to their dominance by the Internet and the rise of new "virtual banks." Telephone and computer banking, debit cards and automated teller machines (ATMs) are rapidly transforming Canada's old-style bricks-and-mortar banking system. New technology has eliminated the need for costly branch networks and lured offshore rivals to jump into Canada's $66.5 billion consumer banking market. "Virtual banks have the potential to send our branch networks the way of the passenger train -- much loved, but seldom used," said Bank of Montreal chairman Matthew Barrett in a speech to Toronto's business community. BIG BANKS PREPARE TO MEET THE CHALLENGE The big banks, which dominate regular banking, trust and brokerages in Canada, are marshalling their forces against this cyber-onslaught. Royal Bank of Canada, Canadian Imperial Bank of Commerce, Bank of Montreal, Bank of Nova Scotia, Toronto-Dominion Bank and National Bank of Canada are spending millions of dollars to develop new distribution channels and upgrade branches. ING Groep N.V., with nearly $260 billion in assets, is by far the biggest electronic challenger. The Dutch financial services giant dwarfs Royal Bank, the country's biggest financial institution with assets of $147 billion. ING, already a player in Canada's insurance market, plans to offer a wide range of electronic banking services through a new subsidiary, ING Trust Co. of Canada, based in Toronto. ING is keeping a low profile until its application for a trust licence is approved, but bank officials are confident of success where others have failed. In recent years, several foreign banks abandoned Canada because of its restrictive banking laws and stiffer than expected competition from the big domestic banks. "It would be fair to say that we will be competing on several fronts. It won't be hard to offer better service," said Jim Kelly, vice-president of marketing for ING's Canadian operations. ING WILL DRAW ON ITS EUROPEAN EXPERIENCE He said ING will draw on its extensive experience in electronic banking in Europe. Analysts have said ING can use Canada to fine tune its virtual bank before offering similar services in the larger U.S. market. But Kelly said there are no plans yet to take ING's virtual bank south of the border. "To say we're definitely going to the U.S. would be wrong. To say that we would look at it and see if there is a market opportunity, yes, of course we would," he said. Also eyeing Canada's consumer banking market is Citibank Canada, a unit of U.S. giant Citicorp, which is joining with Canadian fund manager AGF Management Ltd., to create a virtual trust company. The venture is Citibank's second foray into Canadian consumer banking after abandoning a bid to establish a traditional branch system in the 1980s. Charles Stuart, country manager of Citibank's consumer banking operations in Canada, said the joint venture gives the bank access to AGF's customer base. Citibank plans to offer customers a full-service banking package, including credit cards, access to ATM service and telephone banking. "We're not locked into the costs of a bricks-and-mortar structure. So we can serve them through technology and that enables us to price ourselves very competitively," he said. The Citibank/AGF venture could set a pattern for other foreign banks seeking to enter Canada with an established customer base, Stuart said. BIG BANKS UNDER PRESSURE FROM LOCAL RIVALS The Big Six banks are pressured by local rivals as well. Last month, Vancouver City Savings Credit Union, the country's biggest credit union with $3.6 billion in assets, applied to open a nationwide branchless bank early next year. While cyber competitors are poised to invade the retail market, Canada's major banks are also on the move. The banks spent a record $1.7 billion on new technology in 1995 and that is expected to reach $1.9 billion by 1998, according to a report by accounting firm Ernst & Young. Much of the money is being poured into alternative delivery channels such as point-of-sale credit and debit cards, ATMs, telephone and computer banking. Cards account for more than a third of all payment transactions in Canada, up from 25 percent a year ago. Telephone and computer transactions are climbing as well. Traditional bank transactions are seen falling to 21 percent in 1998 from 38 percent last year. Among Canadian banks, Royal Bank is the top player in telephone banking with more than 800,000 subscribers. Bank officials expect 40 percent of their eight million customers to be using alternative channels in five years. Last month, Royal Bank joined 14 other North American banks to set up a computer banking network with computer giant IBM in early 1997. All the banks are struggling to decide the future of their branch networks, but CIBC has taken the first steps to overhaul its 1,400 branches. In a recent pilot project, CIBC employed greeters to guide customers to ATMs for their basic banking needs. Bank tellers were retrained to advise customers on such products as mutual funds, loans and mortgages. Billing it as the bank branch of the future, CIBC said transaction costs had fallen dramatically, while customer lineups were much thinner. But by using these low-cost channels, customers will expect a break on service fees, which many consumers complain are too high, Ernst & Young said. Bank of Nova Scotia has taken the acquisition route to boost its Internet services. It recently bought a 10 percent stake in iSTAR Internet Inc., an Internet solutions firm, to help develop new channels and services for the bank.

The Montreal Canadiens, the most storied franchise in the National Hockey League, were engulfed in sale rumours Friday, which drew a fierce denial from its owner, Molson Cos. Ltd. Canadian newspapers reported that a consortium led by former Canadiens general manager and Hall of Famer Serge Savard was assembling a bid for the team, winner of a record 24 Stanley Cup championships since 1916. Citing unidentified sources, Toronto's Globe and Mail newspaper reported that talks with Molson had been under way for several days. "Don't take this story lightly. There's a very good chance that it could happen," wrote sports columnist Marty York, quoting a source at Molson. Rejean Tremblay, a columnist for the Montreal newspaper La Presse, reported similar rumours. Molson is the sole owner of the Canadiens and their new arena, the $150 million Molson Centre. It also owns 40 percent of Canada's biggest brewer, Molson Breweries. "The company has not approached anyone on this subject and no one has approached us. Neither the hockey club nor the Molson Centre are for sale," Molson Chief Executive Norman Seagram said in a statement. Analysts speculated that the Canadiens and the arena could fetch up to $300 million. Savard, who played for Montreal from 1967-1981 and was fired last season after 13 years as the team's general manager, was unavailable for comment on Friday. Selling the Canadiens would be a dramatic about-face for Molson. The company said four months ago the club was a key part of its heritage. "At the Molson companies, we have two legacy assets, Molson Breweries and the Montreal Canadiens," Seagram told shareholders at the annual meeting in June. Sports plays a huge role in selling beer in Canada and the Molson name is intertwined with Canadiens hockey. Aside from putting its name on a new arena, Molson Breweries is a major sponsor of NHL television broadcasts in Canada. The Molson family sold the club in 1971 to Peter Bronfman, whose cousins control the Seagram beverage empire. Molson Cos. reacquired the team in 1978. Analysts said there had been no hint from Molson that it was interested in selling the club or arena.

Three Canadian financial institutions on Tuesday launched North America's first city-wide, reusable "smart" card designed to replace cash in retail transactions. The Exact card will be tested under a pilot programme operated by Bank of Montreal, Toronto-Dominion Bank and Canada Trust, a unit of CT Financial Services Inc. The project will be in Kingston, Ontario, city of about 100,000 people located 168 miles (270 km) northeast of Toronto. About 600 Kingston merchants -- including convenience stores, gas stations and fast food outlets -- signed up with the test project. The consortium is advertising Exact as an alternative to cash, credit and debit cards. Canadians currently spend between C$40 billion ($29 billion) and C$60 billion ($44 billion) using small coins and bills. "With Exact you don't have to carry as many small bills and coins, and you'll always have the exact change required to make fast, convenient purchases," said Ron Hodge, vice president of card and direct services for TD Bank. Canadians are among the biggest users of plastic cards in the world. They carry an estimated 46.2 million debt and credit cards, while use of these cards has jumped 43 percent in the past year, according to a recent industry survey. "Technology is rapidly changing the face of money, providing faster, easier and more secure transactions. This is only the beginning," said Tim Hockey, vice president of core banking services for Canada Trust. Exact will be followed in early 1997 by a community-wide test of Mondex, a rival "smart" card system developed in Britain. Exact is based on smart card technology developed by Belgium-based Banksys. Royal Bank of Canada and Canadian Imperial Bank of Commerce will roll out their Mondex system in Guelph, a city of about 100,000 people 50 miles (80 kms) west of Toronto. Both systems are similar in that they involve storing money on a computer chip embedded within a card. When a customer uses the card to make a purchase, the value is subtracted from the card. Customers simply insert their card in the merchant's special, hand-held purchase terminal. The merchant enters the purchase price and the customer presses the "OK" button. The electronic value of the sale is collected in the purchase terminal and transferred via telephone modem to the merchant's bank account at the end of the day. Exact users can load, or electronically transfer cash from bank account to the card, up to C$200 ($147) from terminals in the Kingston branches of Bank of Montreal, TD Bank and Canada Trust. Load terminals will also be located in shopping malls, student campuses and selected stores. The card will initally be offered at no charge. But after an introductory period, each financial institution will set a fee for its own customers.

Profits at Canada's six big banks topped C$6 billion ($4.4 billion) in 1996, smashing last year's C$5.2 billion ($3.8 billion) record as Canadian Imperial Bank of Commerce and National Bank of Canada wrapped up the earnings season on Thursday. The six banks each reported a double-digit jump in net income for a combined profit of C$6.26 billion ($4.6 billion) in fiscal 1996 ended Oct. 31. But a third straight year of record profits came amid growing public anger over perceived high service charges and credit card rates, and tight lending policies. Bank officials defended the group's performance, saying that millions of Canadians owned bank shares through mutual funds and pension plans. Shareholders of four of the six banks were rewarded with healthy dividend hikes this year. "Our activities mean jobs, investment, tax revenue, dividend payments and foreign income for Canada's economy," CIBC chairman Al Flood said after the bank reported a 35 percent jump in net income on Thursday. CIBC, Canada's second-largest bank, said net income climbed to C$1.36 billion ($1 billion) in fiscal 1996 from C$1.01 billion ($743 million) in 1995. CIBC also boosted its quarterly dividend by C5 cents (3.6 cents) to C50 cents (37 cents), the second increase in 1996. Bank of Nova Scotia, Toronto-Dominion Bank and Royal Bank of Canada previously raised their payouts as well. Royal Bank, Canada's largest bank, reported the highest corporate profit in Canadian history on Wednesday, with 1996 net income rising 13 percent to C$1.43 billion ($1.05 billion). Bank of Nova Scotia and Bank of Montreal cracked the billion-dollar barrier this year, joining CIBC and Royal Bank, which crossed the threshold in 1995 and 1994 respectively. National Bank, the smallest of the big six, posted a 30 percent jump in net income to C$318 million ($234 million) this year. The banks attributed their performances to lower credit losses and healthy commercial and personal banking. Investment banking, brokerage and mutual fund businesses also enjoyed a banner year as financial markets soared in 1996. Earnings at CIBC's Wood Gundy Inc. investment arm skyrocketed 122 percent to C$528 million ($389 million) in 1996. The group's earnings and dividend hikes were in line or slightly better than analysts' forecasts. "It was good news and a fairly good outlook for 1997 in terms of earnings and dividends," said Hugh Brown, a banking analyst with investment dealer Nesbitt Burns Inc. Brown said he now had a more positive outlook for bank earnings in 1997, saying Big Six profits may grow between 9 and 10 percent next year, up from previous growth forecasts of about 7 percent. Bank stocks, which have led the Toronto Stock Exchange to new heights since September, fell on Thursday in tandem with the rest of the market. CIBC led the decline, dropping C$2.25 ($1.65) to C$57.25 ($42) in late trading.

U.S. mutual fund giant Fidelity Investments said on Saturday that Canadian regulators were investigating trades made by Veronika Hirsch, the star manager of their new Canadian equity fund. Hirsch's 27-city road show to promote Fidelity's True North fund has been postponed as a result of the regulatory review, said a spokesman for the Boston-based mutual fund company. The tour was scheduled to begin on Monday. "Veronika Hirsch ... was recently contacted by a regulatory agency about her personal investments before she joined Fidelity," Chethan Lakshman, a spokesman for Fidelity's Canadian subsidiary, Fidelity Investments Canada Ltd., said in a telephone interview. "At this time it is appropriate to postpone the tour and we're hopeful that the regulatory review of her trading activity will result in a favourable conclusion," Lakshman said. He did not identify the regulator, but Canadian newspapers reported on Saturday that the British Columbia Securities Commission was looking into the matter. Lakshman said Hirsch was not available for interviews and he was unsure of her whereabouts. The controversy is over Hirsch's investments in a Vancouver-based exploration firm, Oliver Gold Corp., earlier this year while she was a high-profile fund manager with AGF Management Ltd. in Toronto. Hirsch, a flamboyant stock picker compared to her sedate peers in Canada's mutual fund industry, was hired by Fidelity with much fanfare in August after only 10 months at AGF. Fidelity is conducting its own review of Hirsch's actions before she joined the company. During her brief stint at AGF, Hirsch bought 65,000 special warrants of Oliver Gold for herself through a private placement in April, according to statements filed with the British Columbia Securities Commission and reported by Vancouver-based Canada Stockwatch, a newsletter which tracks Canadian stocks. Hirsch paid C$1.53 ($1.14) per warrant. A short time later, the AGF Growth & Income Fund managed by Hirsch bought 295,000 special warrants, according to the filings with the B.C. commission. The AGF fund paid over double the price, C$3.60 ($2.69) per warrant, paid by Hirsch. Another related issue is whether Hirsch used a false address in British Columbia to buy the Oliver Gold shares. Canadian newspapers have reported that the home address of a Vancouver stock analyst and institutional salesman was used. Hirsch is a resident of Ontario and the Oliver Gold stock was only available to British Columbia residents. AGF chief executive officer Warren Goldring has said Hirsch broke company rules by failing to report her personal investment in Oliver Gold. He added Hirsch could have been fired if AGF had known about the trades. The controversy swirling around Hirsch has dominated the business pages of Canadian newspapers, but Lakshman said the publicity has not hurt Fidelity's efforts to build a higher profile in Canadian equities management. "We have had a lot of great responses to the (True North) fund. It has been well-received and has grown to more than C$150 million ($112 million)," Lakshman said.

Shivering icewine enthusiasts, battered by icy winds, headed into a snow-covered vineyard on a recent night to harvest one of the world's rarest wines. Although Germany discovered the luscious dessert wine in the late 18th century, Canada is the world's largest producer of icewine -- capturing many international awards and helping shed an industry reputation for screw-top plonk that neither amuses nor has any pretentions. If you can find it, this "liquid gold" can cost up to C$200 ($150) a bottle in icewine-crazy Japan -- four times the price in Canada. Japan is by far the biggest export market, but China and South Korea are also developing a taste for it. But on this cold winter night a cup of piping hot coffee could fetch a better price than any chilled wine. "It's cold, hard work. You're outside in the dark picking frozen grapes and wondering why you're not asleep like normal people," Greg Berti, general manager of Hillebrand Estates Winery, said on a recent midnight tour of Hillebrand's icewine fields. Most of the Canadian vintage comes from the Niagara wine region where 24 wineries produced 29,700 gallons (112,500 liters) in 1995. That is up 57 percent from 1994 but paltry compared to the eight million gallons (30 million liters) of regular wine produced yearly in Ontario, Canada's most populous province. Some California wineries produce sweet wines but they are shunned by icewine purists because the grapes are artificially frozen. "Their wine is interesting, but it's not in the same league as icewine," Berti said. IT MAY BE RARE BUT IT TASTES LIKE PEACHES Although Niagara wineries say their products are unique in taste, icewine is generally amber or golden in colour with a full-flavored taste similar to honey, apricots or peaches. It is thicker than regular wine, with an alcohol content of about 10 percent, compared to 40 percent for a cognac or brandy. Canada exports icewine to Germany, Denmark, Hong Kong, Switzerland, Taiwan, the United Kingdom and the United States. China and Korea are also emerging markets. But the biggest buyers are Japanese tourists who flock to the Niagara region by the busload -- snapping up several bottles of icewine after a visit to nearby Niagara Falls. Hillebrand sells about 75 percent of its icewine to Japanese who tour its winery. "Their image of Canada is Banff, Anne of Green Gables and Niagara Falls, and icewine fits in with that image," Berti said. Last summer, a group of 74 Japanese race horse owners descended on another Niagara winery and drove off with more than $10,000 worth of icewine. "They came into the winery, sampled, bought and were back in their bus in 45 minutes," recalled Debi Pratt, director of public relations for Inniskillin Wines Inc. ALMOST AS HARD TO PRODUCE AS GOLD It takes every grape from an entire vine to yield enough juice to make one bottle of icewine -- 10 times the amount used to make regular wines. Many grapes are lost to hungry birds, hail or harsh winter winds before they are picked. But Canada has plenty of what is needed most to make icewine -- consistently cold weather. The grapes -- hardy Vidal or Riesling varieties -- must be picked off the vine when temperatures are well below freezing. Most wineries set aside part of their vineyards in October when the regular wine harvest ends. By mid-December or early January the shriveled grapes have turned a brownish hue and pickers are on call, waiting for the right weather. Berti said Mother Nature has sometimes forced crews to pick on Christmas Eve or New Year's Eve -- although that did not happen this year. "The wind is the biggest problem. Every hour or half hour we take a break for hot coffee and donuts," Gregory Synos, a six-year veteran of the icewine harvest, said. The grapes are sorted and rushed to the winery where presses work into the night. The juice then goes through several weeks of fermentation, followed by a few months of ageing in oak barrels to smooth out the acidity and tanins in immature icewine. Although Hillebrand has tried to modernise the process by using special presses and protective netting for the grapes, Berti conceded: "There is nothing efficent about it. You have to get into the fields when the getting is good."

Bank of Nova Scotia, Canada's fourth largest bank, joined a once exclusive club on Wednesday, reporting its first C$1 billion annual profit. The Toronto-based bank said net income jumped 22 percent to C$1.069 billion in the year ended October 31. It also rewarded shareholders with a C$0.03 increase in its quarterly dividend to C$0.37 a share, its second dividend hike of 1996. "Scotiabank's financial results exceeded our targets once again in 1996," chairman and chief executive Peter Godsoe said in a statement. Scotiabank was the fourth of Canada's Big Six banks to break the C$1 billion threshold. Bank of Montreal posted a record C$1.17 billion profit on Tuesday when it kicked off the Canadian banking group's year-end reporting season. Canadian Imperial Bank of Commerce joined the club last year, following Royal Bank of Canada in 1994. Godsoe said all of Scotiabank's main business lines contributed to its record performance, including personal, corporate and investment banking. Improved credit quality also contributed to the bank's bottom line. Return on equity, a key measure of profitability, rose to 15.8 percent in 1996 from 14.2 percent last year. The bank's fourth-quarter earnings were slightly better than the average of analysts' estimates. Earnings rose to C$1.08 a share in the three months ended October 31 from C$0.88 in the same period in 1995. The consensus forecast from analysts was C$1.05 or C$1.06 a share. "They are strong and probably surprising," one industry analyst said. Other analysts said the results were in line with their expectations. Susan Cohen, an analyst with Deacon Capital Corp, had forecast C$1.08 per share in the fourth quarter. "They were right in line," Cohen said, adding that the bank's loan losses and the dividend increase were expected. Scotiabank stock rose 0.30 to 46.15 in mid-afternoon turnover of 402,000 shares on the Toronto Stock Exchange. Among other financial highlights: * Net interest income rose 15 percent to C$3.58 billion in 1996, due mostly to strong growth in earning assets across all business lines. The bank also posted securities gains of C$129 million in 1996, versus gains of C$38 million in 1995. The cost of funding impaired loans also fell due to lower interest rates and a drop in the level of impaired loans. * Other income jumped 14 percent to C$1.78 billion in 1996. The bank attributed the increase to stronger revenues from electronic and card services and higher loan fees. With financial markets enjoying a prolonged rally in 1996, the bank's full service and discount brokerage operations posted a 50 percent jump in revenues. * Non-interest expenses grew by 13 percent to C$3.22 billion, due mostly to performance related compensation and higher business volumes. * Net impaired loans fell 49 percent to C$743 million in 1996. Net impaired loans as a percentage of total loans and acceptances improved to 0.7 percent, their lowest since 1989. * Provision for credit losses dropped to C$380 million in 1996, down from C$560 million last year. The bank's general provision remained at C$325 million. -- Reuters Toronto Bureau (416) 941-8100

Stock in Canada's big banks tumbled on the Toronto Stock Exchange on Tuesday after a Canadian brokerage cut its recommendations on the high-flying bank group. CIBC Wood Gundy, a unit of Canadian Imperial Bank of Commerce, cut its ratings on four of the so-called Big Six banks. Montreal-based National Bank of Canada, the smallest of the six major banks, received the only buy recommendation. "We are lowering our recommendations on the group of Canadian bank stocks, moving from three buys to only one buy," said CIBC Wood Gundy analyst Mark Maxwell. Canadian bank stocks have soared to all-time highs in recent months, with Toronto's bank index up 46 percent in 1996. But the group's valuation multiples are now averaging 1.7 times book value -- closing the gap between Canadian bank stocks and their U.S. counterparts, Maxwell said in a report to institutional investors. Toronto's financial services group plummeted 145 points, or 2.7 percent, in heavy trading on Tuesday. Bank of Montreal, which Maxwell reduced to hold from accumulate, fell C$1.55 ($1.16) to C$42.15 ($31.63) on 1.5 million shares. Bank of Nova Scotia dropped C$1.85 ($1.38) to C$44.50 ($33.39) on 995,000 shares after Maxwell recommended investors reduce their Scotiabank holdings. Royal Bank of Canada, which was cut to accumulate from buy, surrendered C$1.30 ($0.75) to C$46 ($34.52) on 2.9 million shares. Canada's biggest bank is the group's valuation leader with a multiple of 2.0 times book value, Maxwell said. CIBC dropped C$1.70 ($1.27) to C$57.25 ($43) on 700,000 shares. Maxwell did not assign a ranking to CIBC. Toronto-Dominion Bank sank C$1.15 (86 cents) to C$33.40 ($25) on volume of 1.3 million shares after it was lowered to accumulate from buy. "Of the five largest banks, our top pick would remain TD (Toronto-Dominion), since it is most likely to continue to exercise its share repurchase programme, even at current multiples, reflecting its superior capital strength," Maxwell said. National Bank of Canada fell 55 cents Canadian (41 cents) to C$13.35 ($10) on 1.05 million shares despite having the only buy recommendation of the group. But some stock strategists remained bullish on Canadian banks. They said the group was still popular among foreign investors seeking to jump into the Canadian market, lured by interest rates at 40-year lows and a recovering economy. "Foreigners are attracted to Canadian investments and one of the best areas they can participate in is the banking sector," said Ira Katzin, an investment advisor with RBC Dominion Securities.

The Montreal Canadiens, the most storied franchise in the National Hockey League, were engulfed in sale rumors on Friday, which drew a fierce denial from its owner, Molson Cos. Ltd.. Canadian newspapers reported that a consortium led by former Canadiens all-star defenseman Serge Savard was assembling a bid for the Canadiens, who have won 24 Stanley Cup championships since 1916. Citing unidentified sources, Toronto's Globe and Mail newspaper reported that Savard headed the group and that talks with Molson had been under way for several days. "Don't take this story lightly. There's a very good chance that it could happen," wrote sports columnist Marty York, quoting a source at Molson. Rejean Tremblay, a columnist for the Montreal newspaper La Presse, reported similar rumors. Molson is the sole owner of the Canadiens and the new C$200 million ($150 million) Molson Centre arena in which the club plays. It also owns 40 percent of Canada's biggest brewer Molson Breweries. "The company has not approached anyone on this subject and no one has approached us. Neither the hockey club nor the Molson Centre are for sale," Molson Chief Executive Norman Seagram said in a statement. Analysts speculated that the Canadiens and the arena could fetch up to C$400 million ($300 million). Savard, a Hall of Famer who played with Montreal from 1967-1981, was fired by the Canadiens last year after 13 years as general manager. Now a wealthy real estate executive in Montreal, Savard was unavailable for comment on Friday. "I would think that if anything is going on there, the initiative is being taken by the potential buyer rather than the seller," Bill Chisholm, an analyst with Deacon Capital Corp. said in a telephone interview. Selling the Canadiens would be a dramatic about-face for Molson. The company said four months ago the club was a key part of its heritage. "At the Molson companies, we have two legacy assets, Molson Breweries and the Montreal Canadiens," Seagram told shareholders at the annual meeting in June. Sports plays a huge role in selling beer in Canada and the Molson name is intertwined with Canadiens hockey. Aside from putting its name on a new arena, Molson Breweries is a major sponsor of NHL television broadcasts in Canada. The Molson family sold the club in 1971 to Peter Bronfman, whose cousins control the Seagram beverage empire. Molson Cos. reacquired the team in 1978. Analysts said here had been no hint from Molson that it was interested in selling the club or arena.

Profits at Canada's six big banks topped C$6 billion ($4.4 billion) in 1996, smashing last year's C$5.2 billion ($3.8 billion) record as Canadian Imperial Bank of Commerce and National Bank of Canada wrapped up the earnings season on Thursday. The six banks each reported a double-digit jump in net income for a combined profit of C$6.26 billion ($4.6 billion) in fiscal 1996 ended Oct. 31. But a third straight year of record profits came amid growing public anger over perceived high service charges and credit card rates, and tight lending policies. Bank officials defended the group's performance, saying that millions of Canadians owned bank shares through mutual funds and pension plans. Shareholders of four of the six banks were rewarded with healthy dividend hikes this year. "Our activities mean jobs, investment, tax revenue, dividend payments and foreign income for Canada's economy," CIBC chairman Al Flood said after the bank reported a 35 percent jump in net income on Thursday. CIBC, Canada's second-largest bank, said net income climbed to C$1.36 billion ($1 billion) in fiscal 1996 from C$1.01 billion ($743 million) in 1995. CIBC also boosted its quarterly dividend by C5 cents (3.6 cents) to C50 cents (37 cents), the second increase in 1996. Bank of Nova Scotia, Toronto-Dominion Bank and Royal Bank of Canada previously raised their payouts as well. Royal Bank, Canada's largest bank, reported the highest corporate profit in Canadian history on Wednesday, with 1996 net income rising 13 percent to C$1.43 billion ($1.05 billion). Bank of Nova Scotia and Bank of Montreal cracked the billion-dollar barrier this year, joining CIBC and Royal Bank, which crossed the threshold in 1995 and 1994 respectively. National Bank, the smallest of the big six, posted a 30 percent jump in net income to C$318 million ($234 million) this year. The banks attributed their performances to lower credit losses and healthy commercial and personal banking. Investment banking, brokerage and mutual fund businesses also enjoyed a banner year as financial markets soared in 1996. Earnings at CIBC's Wood Gundy Inc. investment arm skyrocketed 122 percent to C$528 million ($389 million) in 1996. The group's earnings and dividend hikes were in line or slightly better than analysts' forecasts. "It was good news and a fairly good outlook for 1997 in terms of earnings and dividends," said Hugh Brown, a banking analyst with investment dealer Nesbitt Burns Inc. Brown said he now had a more positive outlook for bank earnings in 1997, saying Big Six profits may grow between 9 and 10 percent next year, up from previous growth forecasts of about 7 percent. Bank stocks, which have led the Toronto Stock Exchange to new heights since September, fell on Thursday in tandem with the rest of the market. CIBC led the decline, dropping C$2.50 ($1.84) to close at C$57 ($42) in brisk trading.

Toronto-Dominion Bank extended the run of record Canadian bank profits on Thursday with a 15 percent jump in 1996 earnings and a dividend hike for its shareholders. Canada's fifth largest bank said net income climbed to C$914 million in the year ended October 31 from C$794 million in 1995. Bank of Montreal and Bank of Nova Scotia earlier this week posted record full-year earnings. The strong results prompted TD Bank to boost its quarterly dividend by C$0.03 to C$0.28 a share. Bank of Nova Scotia raised its dividend by C$0.03 a share to C$0.37 a share on Wednesday. TD Bank said its performance reflected strong growth in other income, with significant gains in investment banking, brokerage and mutual fund businesses. The bank's loan loss provision also sank to its lowest level in more than a decade. "With a solid financial performance and progress in developing our businesses, TD had a positive impact on the Canadian economy in 1996," chairman and chief executive Richard Thomson said in a statement. Return on equity, a key measure of profitability, rose to 15.4 percent in 1996 from 14.3 percent last year. The bank's fourth-quarter earnings were in line with analysts' estimates. Earnings rose to C$0.79 a share in the fourth quarter ended October 31 from C$0.71 a share in the same period in 1995. The consensus analysts' forecast was for C$0.79 a share in the fourth quarter. "They were dead on expectations. The dividend increase was also expected," said Hugh Brown, an analyst with Nesbitt Burns Inc. Analysts said the revised loan loss provision was a surprise. The bank cut its 1996 provision to C$152 million from a previous third-quarter estimate of C$170 million and from C$180 million in 1995. Net impaired loans in the fourth quarter fell C$95 million to C$344 million. "This decline was largely due to improvement in real estate loans to corporate borrowers," the bank said. Net impaired loans as a percentage of total loans and acceptances dropped to 0.4 percent at year end. TD stock was up 0.80 to 37.65 on turnover of 821,000 shares on the Toronto Stock Exchange. TD hit a 52-week high of 38.10 earlier in the session. TD president Charles Baillie said Canada's low interest rates should boost consumer confidence and economic activity in 1997. That in turn was expected to increase demand for the bank's investment products. "With the acceleration of growth in investment banking, brokerage, mutual funds, investment management and electronic banking services, TD is positioned to perform well in this environment," said Baillie. -- Reuters Toronto Bureau (416) 941-8100

Royal Bank of Canada and Canadian Imperial Bank of Commerce, Canada's two largest banks, wrapped up the industry's third-quarter profit parade on Thursday with sharply higher earnings. Royal Bank of Canada, the country's biggest bank, said income climbed 12 percent to C$358 million ($261 million) in the three months ended July 31. CIBC, Canada's second largest bank, reported a 24 percent jump in income to C$336 million ($245 million). CIBC's earnings per share of C$1.50 ($1.09) beat analysts' forecasts of around C$1.43 ($1.04) a share. Royal Bank reported a C$1.02 ($0.74) per share profit, in line with analysts' expectations. The results capped a strong quarter for the six major banks and put them on track for a third straight year of record annual profits. The group rang up a combined profit of C$5.17 billion ($3.7 billion) in the fiscal year ended Oct. 31. Soaring bank profits have sparked hostility from Canadian consumers who complain about high service fees and tight lending policies. In a bid to soften that criticism, the banks have taken to highlighting their tax bills and job creation efforts. For example, CIBC said it paid out more than C$0.50 ($0.36) in taxes for every dollar earned so far this year. The group's public relations efforts may get easier next year when analysts predict earnings growth will start to tail off. In the third quarter, CIBC and Royal Bank gained from stronger loan volumes, higher brokerage and fee revenues and improving credit quality. "Our solid performance this quarter reflects the continued strong contribution from our core businesses," CIBC chairman and chief executive officer Al Flood said in a statement. The bank's return on equity, a key measure of profitability, was 16.6 percent in the third quarter, up from 13.7 in the same quarter last year. Flood said CIBC's personal and commercial bank continued its strong performance this year. Recent strategic moves at CIBC's brokerage unit, CIBC Wood Gundy, are also paying off wth new financial products and high-yield debt adding to the bank's bottom line. Stronger revenues from underwriting, capital markets and foreign exchange pushed non-interest income up 17 percent to C$691 million ($504 million) in the third quarter. Net interest income was up slightly to C$1.1 billion ($800 million) in the third quarter. At Royal Bank, higher revenues from capital market, mutual fund and trading businesses pushed other income up 13 percent to C$757 million ($552 million). Net interest income climbed three percent to C$1.1 billion ($800 million), due mostly to higher asset volumes, lower impaired loans and proceeds from the sale of bonds. "This quarter was marked by higher growth in residential mortgages and other loans, continued improvement in credit quality and stronger performances from a number of fee-based businesses," said Royal Bank chairman John Cleghorn. Royal Bank's return on equity was 17.2 percent compared to 16.4 percent in the third quarter of 1995. Despite the strong performance, shares in both banks finished weaker on the Toronto Stock Exchange. Canadian Imperial Bank of Commerce fell C$0.30 ($0.22) to C$45.15 ($32.80), while Royal Bank lost C$0.20 ($0.14) to close at C$34.20 ($25).

Canada unveiled plans on Friday to lift restrictions on foreign banks in a bid to spur competition in a sector dominated by six big domestic banks. Draft legislation allowing foreign banks to open branches in Canada will be ready before the end of 1997. But a possible federal election may delay the passage of the bill in Canada's parliament until next year, said Doug Peters, secretary of state for financial institutions. "Branching will encourage new banks to enter the Canadian marketplace and allow existing foreign banks greater opportunity to compete," Peters said in a statement. He told reporters that the government needed time to develop branching rules, including a tax regime. Foreign bankers have complained that Canada lagged behind its Group of Seven trading partners in opening up its banking sector to foreign competition. Current rules require foreign banks to operate separately capitalized subsidiaries in Canada. The higher cost of operating a subsidiary, rather than a branch, has driven several foreign banks out of the country. Last year a federal "white paper" on financial reforms introduced only minor changes to foreign bank rules, but parliament subsequently issued reports urging freer access to Canada's markets for foreign banks. The number of foreign banks operating in Canada has dropped to 43 from a peak of about 60 in the 1980s. The legislation has not been written yet, but a freer market would make Canada more attractive, said Alfred Buhler, chairman of Bank of America Canada, a unit of BankAmerica Corp. "It will slow the erosion and may reverse that trend. I think a number of banks who are not currently operating in Canada will take another hard look," Buhler said. Canada's big six domestic banks already dominate regular banking, trusts and brokerages. But they are being challenged by the Internet and the rise of new "virtual banks." Dutch financial services giant ING Groep N.V. is set to launch a telephone banking operation in Canada early next year and has earmarked an initial investment of $50 million for direct marketing of a range of savings and loans products. Citicorp and Wells Fargo and Co. are also planning banking services aimed at Canadian consumers and small businesses. Canadian bankers have said they would welcome more foreign competition as long as it is on a level playing field. "We have absolutely no concerns about being able to compete successfully. There is a need to ensure that regulations -- tax, capital adequacy, corporate governance policies and so on -- are reasonably balanced," Bank of Nova Scotia chairman Peter Godsoe said recently. Canadian bankers complained that their foreign rivals did not pay the same capital taxes in Canada as domestic banks. They also argued that virtual banks would not create new jobs in Canada, although critics noted that Canadian banks had shed staff recently in a move to electronic banking services. Royal Bank of Canada, the country's biggest bank with more than $150 billion in assets, supports granting more access to foreign banks if rules barring Canadian banks from getting bigger are lifted. Royal Bank and its counterparts have seen their international rankings slip sharply in recent years. They argue domestic bank mergers may be necessary if Canada is to remain competitive internationally. Federal laws discourage bank mergers by limiting investors to a minimum 10 percent stake in a Canadian bank. A government task force plans to study these and other competition issues this year.

A furry hedgehog, idyllic sunsets and the meaner streets of Budapest seem unlikely moneyspinners, but such images are crowding Canada's airwaves as the annual mutual fund season kicks into gear. Armed with high-powered ad campaigns, eager fund sellers are vying for the billions of dollars Canadians will pour into registered retirement savings plans (RRSPs). With interest rates at 40-year lows and stocks at stratospheric heights, investors are expected to shun interest-bearing investments for higher yielding mutual funds before the March 1 deadline for RRSP contributions. "We're in the thick of it right now and it's going to get busier and busier toward the end of the (RRSP) season," said John Wiltshire, vice-president of marketing for Investors Group, Canada's top fund company with C$25 billion ($18 billion) in assets. TAX BENEFIT IS A DRAW Canada introduced RRSPs in the late 1950s to allow people without registered pension plans to save for retirement. Investors can deduct the amount from their taxes for the previous year's income. Besides being a tax benefit, RRSPs have become more popular as traditional pension benefits are scaled back. Canadians have more than C$211 billion ($156 billion) stashed in mutual funds, an eight-fold increase from 1990. An estimated C$23 billion ($17 billion) will be added to the pot this year. Fund companies also expect a big chunk of the C$250 billion ($186 billion) currently invested in guaranteed investment certificates and term deposits to shift into funds. In what has become an annual rite of the Canadian winter, fund sellers flood the airwaves with promotions, hype and gimmicks to lure RRSP dollars. But, unlike the United States, Canadian broadcast rules prohibit companies from making performance claims on television or radio. "That's why you get fuzzy advertising. They talk about lifestyle and emphasise branding," said John Kaszel, director of research for Investment Funds Institute of Canada, a lobby group representing 40 fund companies. Soft-sell ads feature happy people in tranquil settings with simple messages such as "We're here to get you there," or "quietly creating wealth." NEXT GENERATION THE TARGET Some firms are targeting the next generation of investors. GT Global, a member of Liechtenstein Global Trust, launched a Kid's Kit in December to teach youngsters about mutual funds. When a parent opens a minimum C$500 ($370) account, his child gets a stuffed "Henry the Hedgehog" toy, a certificate and a colourful book explaining "Henry's Mysterious Gift." "This is a chance to give a gift to your kids that is tangible and gets them into the habit of investing," said CT Global President Joe Canavan. Other ads feature smartly tailored people using words such as "discipline" and "performance" to trumpet their firm's investment strategy. Spectrum United Mutual Funds' gritty commercials highlight its team of tough global fund managers, including one who scored a big success investing in a Budapest security company. To add levity to the RRSP season, Bank of Montreal's campaign pricked the balloons of so-called "experts", but there was little information on the bank's own funds. Critics complain that Canada's advertising rules insult investors' intelligence. "Mutual fund regulators are convinced that mutual fund investors are ignorant dolts who need to be protected from themselves and the industry. The result, as far as radio and television are concerned, is a multimillion dollar river of non-information," Toronto Globe and Mail columnist Terence Corcoran wrote recently. SCANDALS MAY MEAN TIGHTER CONTROLS But regulators are unlikely to relax their grip on the industry. In fact, the rules could tighten after recent scandals such as the Veronika Hirsch affair. Hirsch was a star stock picker hired last summer to spearhead Boston-based Fidelity Investments' drive to dominate the Canadian market. But she was removed from her portfolio in November amid a controversy over personal trades she made before joining the world's biggest mutual fund company. Fidelity also offered clients their money back without penalty. "We were pleased that the number of people who did take advantage of it was less than our expectation," said spokesman Chethan Lakshman, but he did not give any numbers. Hirsch's True North Equity Fund is now under a less flamboyant manager and has accumulated C$211 million ($156 million) in assets since its launch last September. Hirsch's status was under discussion, Lakshman said, but a separation package was rumoured to be under negotiation. FALLOUT PROMPTS GUIDELINES REVIEW The fallout from the Hirsch affair prompted a review of the industry's guidlines for fund managers. "It has opened up some concerns, but those are being addressed. Now we are seeing whether more should be done," Kaszel said. While analysts said it was difficult to assess the damage to the industry's credibility, the Hirsch affair changed how companies sell their product. Brash campaigns built around high-profile stock pickers are out and the "team" is in, analysts said. Canada's Big Six banks are also heavy advertisers this year as they strive to become bigger players in a industry dominated by independents. Three banks are now among the top 10 firms, with Royal Bank of Canada number three behind Investors Group amd Trimark Investment Management Inc. The banks were allowed to enter the mutual fund business in 1987 and now account for 29 percent of the industry's assets. Fund management fees have helped propel bank profits to record highs in recent years.

Canada's six biggest banks are poised for a further round of buoyant profits when they begin reporting third-quarter earnings on Tuesday. An improved interest rate picture, higher investment banking and dealing revenues and better loan quality are expected to drive profits in the third quarter ended July 31. On average, earnings for the so-called Big Six are expected to be 15 percent to 20 percent higher than the third quarter of last year, analysts said. "I would expect more sectors of the banks to be more profitable than they were in the corresponding quarter of last year," Roy Palmer, an analyst with TD Securities, said in a telephone interview. Bank of Montreal and Bank of Nova Scotia, Canada's third and fourth largest banks respectively, kick off the earnings parade on Tuesday. Canada's fifth-biggest bank, Toronto-Dominion Bank, and the smallest, National Bank of Canada, report on Thursday. The country's top two banks, Royal Bank of Canada and Canadian Imperial Bank of Commerce, are scheduled to deliver their results on Thursday, September 5. Despite a recent downturn in financial markets, analysts said securities earnings should be stronger than last year. Canada's brokerage industry is dominated by subsidiaries of the countries major banks. The banks are also expected to benefit from lower loan losses as the industry continues to rebound from disastrous loans in commercial real estate, which collapsed in the late 1980s. Despite the correction in stocks earlier this summer, bank stocks have remained strong performers. Lower Canadian interest rates have helped push bank stock prices to all-time highs on the Toronto Stock Exchange. "I think that if the combination of strong profitability couples up with lower interest rates, then it probably will set the backdrop for higher share prices," said Susan Cohen, an analyst with Deacon Capital Corp. Analysts said they do not expect any of the banks to raise their dividends during the reporting period. But the string of record bank profits are expected to yield dividend hikes at the end of the fiscal year. The big banks are on track for a third straight year if record annual profits. The group rang up a combined profit of C$5.17 billion in fiscal 1995 ended October 31, up from C$4.25 billion a year earlier. As for 1997, Palmer said he expects a modest increase in profits. "Investment banking is a cyclical business. It may tail off a bit, but there is no sign of a recession yet, so I would think we could get modestly higher earnings next year," he said. Bank of Montreal is expected to report a third-quarter profit of C$0.97 per share, up from C$0.93 per share a year ago, according to figures supplied by the International Brokers Estimates Service. Scotiabank's earnings are seen climbing to C$1 per share in the third quarter, up from C$0.86 a share. Toronto-Dominion Bank is expected to post a C$0.72 per share profit, up slightly from C$0.71 per share in the third quarter of 1995. National Bank's third quarter earnings are forecast to rise to C$0.41 per share from C$0.33 a share a year earlier. CIBC's third quarter results are pegged at C$1.42 a share compared to last year's C$1.13 per share. Royal Bank of Canada is seen improving to C$0.96 a share in the third quarter, up from C$0.88 per share a year earlier. -- Reuters Toronto Bureau (416) 941-8100

Protesters hit Toronto streets on Friday, paralysing rush-hour subway trains and closing businesses in Canada's biggest city to protest deep budget cuts by Ontario's Conservative government. Underground subway and bus service ground to a halt in this city of 2.2 million people, forcing about one million commuters to walk, drive or cycle to work or stay home. "They're picketing all over the place, so we've postponed service," said Marilyn Bolton, a spokeswoman for the Toronto Transit Commission. Unionized workers, civil servants and social activists also descended on government offices and factories on this first day of the so-called "Days of Protest." But picketers failed to disrupt commuter trains from Toronto's bedroom communities or interrupt service at Pearson Airport, the country's busiest. The Toronto Stock Exchange had expected protesters to disrupt trading, but Canada's biggest stock market opened as usual. At least one brokerage firm flew traders to its Montreal office to work, while other brokers slept in hotel rooms or in their offices overnight. The stock exchange has been targeted for a major rally later in the day. The protesters are furious with Premier Mike Harris' plans to cut spending by C$8 billion ($5.9 billion) to wipe out a huge deficit by the turn of the century. Since sweeping to power in 1995 promising a right-wing revolution in Canada's most populous province, the Conservatives have revamped labour laws, slashed welfare payments, introduced workfare and announced plans to close hospitals and trim education budgets. "These cuts that Harris made are hurting the workers. This is part of the polarisation that is happening in Ontario. The anger is going to grow and grow," Sid Ryan, president of the Ontario division of the Canadian Union of Public Employees, told picketers outside a government building. But Harris, who has been dubbed "Newt of the North" in reference to Republican U.S. House Speaker Newt Gingrich, has vowed the protests will not stall his "Common Sense Revolution." Despite the opposition to his government, the Conservatives' popularity continues to hold around 50 percent in opinion polls. Protesters waved placards and temporarily blocked cars from entering government parking lots, but Toronto police said there were no major incidents of violence. One man was charged with a weapons offence after allegedly threatening pickets with a baseball bat outside a bus garage. There also were skirmishes outside a postal station. Many commuters took the delays in stride. "I see the protesters have a point, but I think it's going to inconvenience a lot of people who don't have any other choice," said John Ivarey. Several major manufacturers cancelled day shifts. De Havilland Inc., a unit of transportation firm Bombardier Inc., said 6,200 employees at its Toronto aircraft plant will be off the job Friday. The protest will not affect General Motors Corp.'s Canadian unit, which is getting back to work after a nearly three-week strike ended earlier this week.

Canada's six biggest banks are poised for a further round of buoyant profits when they begin reporting third-quarter earnings Tuesday, setting the stage for a third consecutive record year, analysts said. An improved interest rate picture, higher investment banking and dealing revenues and better loan quality are expected to drive profits in the third quarter ended July 31. On average, earnings for the so-called Big Six are expected to be 15 percent to 20 percent higher than the third quarter of last year, analysts said. "I would expect more sectors of the banks to be more profitable than they were in the corresponding quarter of last year," said Roy Palmer, an analyst with TD Securities. Bank of Montreal and Bank of Nova Scotia, Canada's third- and fourth-largest banks, respectively, kick off the earnings parade on Tuesday. Canada's fifth-biggest bank, Toronto-Dominion Bank, and the smallest, National Bank of Canada, report on Thursday. The country's top two banks, Royal Bank of Canada and Canadian Imperial Bank of Commerce, are scheduled to deliver their results Sept. 5. Despite a recent downturn in financial markets, analysts said securities earnings should be stronger than last year. Canada's brokerage industry is dominated by subsidiaries of the countries major banks. The banks are also expected to benefit from lower loan losses as the industry continues to rebound from disastrous loans in commercial real estate, which collapsed in the late 1980's. Despite the correction in stocks earlier this summer, bank stocks have remained strong performers. Lower Canadian interest rates have helped push bank stock prices to all-time highs on the Toronto Stock Exchange. "I think that if the combination of strong profitability couples up with lower interest rates, then it probably will set the backdrop for higher share prices," said Susan Cohen, an analyst with Deacon Capital Corp. Analysts said they do not expect any of the banks to raise their dividends during the reporting period. But the string of record bank profits are expected to yield dividend hikes at the end of the fiscal year. The big banks are on track for a third straight year of record annual profits. The group rang up a combined profit of C$5.17 billion in fiscal 1995 ended Oct. 31, up from C$4.25 billion a year earlier. As for 1997, Palmer said he expects a modest increase in profits. "Investment banking is a cyclical business. It may tail off a bit, but there is no sign of a recession yet, so I would think we could get modestly higher earnings next year," he said. Bank of Montreal is expected to report a third-quarter profit of 97 cents Canadian (70.8 cents) per share, up from 93 cents Canadian (67.9 cents) per share a year ago, according to figures supplied by the International Brokers Estimates Service. Scotiabank's earnings are seen climbing to C$1 (73 cents) per share in the third quarter, up from 86 cents Canadian (62.8 cents) a share. Toronto-Dominion Bank is expected to post a 72 cents Canadian (52.5 cents) per share profit, up slightly from 71 cents Canadian (51.8 cents) per share in the third quarter of 1995. National Bank's third quarter earnings are forecast to rise to 41 cents Canadian (29.9 cents) per share from 33 cents (24.1 cents) Canadian a share a year earlier. CIBC's third quarter results are pegged at C$1.42 ($1.04) a share compared to last year's C$1.13 ($82 cents) per share. Royal Bank of Canada is seen improving to 96 cents Canadian (70 cents) a share in the third quarter, up from 88 cents Canadian (64.2 cents) per share a year earlier.

U.S. mutual fund giant Fidelity Investments said on Saturday that Canadian regulators were investigating trades made by Veronika Hirsch, the star manager of their new Canadian equity fund. Hirsch's 27-city road show to promote Fidelity's True North fund has been postponed as a result of the regulatory review, said a spokesman for the Boston-based mutual fund company. The tour was scheduled to begin on Monday. "Veronika Hirsch ... was recently contacted by a regulatory agency about her personal investments before she joined Fidelity," Chethan Lakshman, a spokesman for Fidelity's Canadian subsidiary, Fidelity Investments Canada Ltd., said in a telephone interview. "At this time it is appropriate to postpone the tour and we're hopeful that the regulatory review of her trading activity will result in a favorable conclusion," Lakshman said. He did not identify the regulator, but Canadian newspapers reported on Saturday that the British Columbia Securities Commission was looking into the matter. Lakshman said Hirsch was not available for interviews and he was unsure of her whereabouts. The controversy is over Hirsch's investments in a Vancouver-based exploration firm, Oliver Gold Corp., earlier this year while she was a high-profile fund manager with AGF Management Ltd. in Toronto. Hirsch, a flamboyant stock picker compared to her sedate peers in Canada's mutual fund industry, was hired by Fidelity with much fanfare in August after only 10 months at AGF. Fidelity is conducting its own review of Hirsch's actions before she joined the company. During her brief stint at AGF, Hirsch bought 65,000 special warrants of Oliver Gold for herself through a private placement in April, according to statements filed with the British Columbia Securities Commission and reported by Vancouver-based Canada Stockwatch, a newsletter which tracks Canadian stocks. Hirsch paid C$1.53 ($1.14) per warrant. A short time later, the AGF Growth & Income Fund managed by Hirsch bought 295,000 special warrants, according to the filings with the B.C. commission. The AGF fund paid over double the price, C$3.60 ($2.69) per warrant, paid by Hirsch. Another related issue is whether Hirsch used a false address in British Columbia to buy the Oliver Gold shares. Canadian newspapers have reported that the home address of a Vancouver stock analyst and institutional salesman was used. Hirsch is a resident of Ontario and the Oliver Gold stock was only available to British Columbia residents. AGF chief executive officer Warren Goldring has said Hirsch broke company rules by failing to report her personal investment in Oliver Gold. He added Hirsch could have been fired if AGF had known about the trades. The controversy swirling around Hirsch has dominated the business pages of Canadian newspapers, but Lakshman said the publicity has not hurt Fidelity's efforts to build a higher profile in Canadian equities management. "We have had a lot of great responses to the (True North) fund. It has been well-received and has grown to more than C$150 million ($112 million)," Lakshman said.

Far from the hoopla of the U.S. presidential race, Jack Kemp's youngest son, Jimmy, has been tossing footballs on Canada's windswept prairie and relishing his relative anonymity. To football fans in this small western Canada city, Kemp is better known as the quarterback of their beloved Saskatchewan Roughriders than the son of the American Republican vice-presidential candidate. "It's nice to have your own identity. Up here I'm a Roughriders quarterback and not Jack Kemp's son. I'm proud of my dad, but it's great to be in Canada," Kemp, 25, told Reuters during a recent interview at a local sports pub. The well-mannered, cherub-faced Kemp is finishing his third year in the Canadian Football League. He was traded to the Regina team last August after stints with the Montreal Alouettes and the now-defunct San Antonio Texans and Sacramento Gold Miners. As the Nov. 5 election nears, Kemp said he does not get too bothered about his high-profile father. The local press has pretty much left that part of his life private. "Kemp Just a Normal Guy," the Regina Leader-Post newspaper said in a story about the young quarterback when he arrived in town. Before going to Saskatchewan, Kemp joined his family at the Republican convention in San Diego and pondered quitting football to work on his dad's campaign. But the elder Kemp, a former American Football League quarterback who tried out for the CFL's Calgary Stampeders in 1958, urged his son to continue playing. "We prayed and talked about it and my dad wanted me to take this opportunity that has been given to me," said Kemp, who has since enjoyed some success with Saskatchewan. A back-up when he arrived in Regina, Kemp was forced into the spotlight after the club's other quarterbacks fell to injuries. Kemp had the best game of his career this month, passing for three touchdowns in a come-from-behind win against Hamilton. But the team struggled this year and failed to make the playoffs. "I think I'm good enough to start in this league. I don't think I'm a great quarterback right now, but I need to play more and go through a training camp," he said. Jack Kemp has kept a close eye on his son's football career. He flew to Canada three times this season when Jimmy played for Montreal and they talk frequently about football over the telephone. "He's incredibly encouraging. Even to the point that it gets on my nerves sometimes because he is a very proud father and he thinks anything that I do is great," the younger Kemp said. Despite living on the Canadian prairies, Kemp keeps tabs on his father's campaign. He watched the vice presdential debate on CNN and catches the programme "This Week With David Brinkley" before a Sunday game. He said he did not have much faith in opinion polls that show the Bob Dole/Jack Kemp ticket lagging far behind the Democratic team of President Bill Clinton and Vice President Al Gore. "I think people can change their minds easily and I think the support for Clinton is soft. I guess it doesn't look good, but I think they've got a chance," Kemp said. Kemp does not plan to follow his father into politics, but he does not rule out getting involved at the local level. "I'm not sure my dad was interested in politics when he was 25. My brother (Jeff) is probably more of a politican than I am, but I do care about the issues," he said.

Ontario Finance Minister Ernie Eves, buoyed by a stronger economy and an improving deficit outlook, said on Thursday his budget-paring knife would not cut as deep this year. "I would say that the majority of the cost-cutting exercise this government has to do is behind us," Eves told reporters after delivering a fiscal update for the third quarter ended December 31. Ontario's 1996/97 deficit is now pegged at C$7.67 billion for the year ending March 31, down C$508 million from Eves' original budget forecast. Ontario is Canada's most populous province and industrial powerhouse. Barely four months ago, Ontario's ruling Conservatives said a further C$3 billion in spending cuts would be needed to balance the budget by the turn of the century. Since sweeping to power in 1995 promising a "Common Sense Revolution", the Conservatives have identified about C$8 billion in cuts through the end of the decade. With the economy now improving, Eves said: "I don't feel that I am now driven to find C$3 billion in more savings." Canadian Imperial Bank of Commerce has predicted Ontario's economy would pick up steam this year despite government cutbacks. The economy was forecast to grow 3.1 percent this year and 2.3 percent in 1998, compared to 1.7 percent in 1996. But Eves said the province's deficit fight was far from over and he was still seeking "cost efficiencies" for the upcoming 1997/98 budget this spring. "I don't want anybody to think we don't have a problem. We still have a C$7.7 billion problem on annualized basis in the province of Ontario," he said. Government revenues grew faster than projected in the third quarter, up almost C$1.2 billion to C$47.8 billion for the year. Most of the increase was due to higher than expected personal, corporate and retail sales tax revenues resulting from a stronger economy, Eves said. He said the government's controversial 30 percent tax cut had helped boost consumer confidence in Ontario. About half of the tax reduction has been implemented, with the remaining 15 percent due by 1999. Eves said he had not ruled out speeding up that timetable, but that the government had a lot on its plate. Last month, the Conservatives unveiled sweeping reforms that would fundamentally alter the roles of provincial and local governments in everything from health care and social spending to road maintenance and sewage. The most controversial move is a proposed merger of Toronto, Canada's biggest city, and five surrounding municipalities, which has drawn fierce opposition from some local politicians and businesses. CIBC said the provincial government would better its fiscal targets after downloading services such as welfare and transit to municipalities. Toronto is a potential loser under the plan because it has a large share of the province's welfare cases. Eves said the government would push forward with its plans and on Thursday he doubled the government's restructuring fund to C$1.8 billion. "I think people realize we can't operate in 1997 the way we operated in 1957 in the province of Ontario. There is a transition and that transition costs money," he said.

Canada's financial markets gave an approving nod to Finance Minister Paul Martin's stay-the-course 1997/98 budget on Tuesday, with some analysts expecting a modest rally on Wednesday. In what is expected to be an election year, the Liberal government said it will maintain pressure on the deficit while offering minor tax cuts and new spending. Economists said Martin's assumptions on interest rates and economic growth were prudent and should enable the government to beat its fiscal targets. "What you're going to see tomorrow? A flow of funds into the Canadian dollar briefly, quite possibly the bond market, quite possibly the stock market," said Bob Boaz, director of research for HSBC James Capel Canada Inc. But analysts predicted the markets would settle down quickly as most of the budget details were widely expected. "There was no big news in this budget. But he (Martin) didn't relax his fiscal resolve and that will be well received by the markets," said John Anania, an economist at Royal Bank of Canada, the country's biggest bank. The budget had little immediate impact on the Canadian dollar, but currency traders said they expect the unit to strengthen overnight on Martin's favorable deficit targets. Martin predicted the deficit for 1996/97 would be no more that C$19 billion, compared to a projected C$24.3 billion. The deficit is seen falling to C$17 billion in 1997/98. In early evening trading, the Canadian dollar firmed slightly to C$1.3534 (US$0.7388) from closing levels at C$1.3546 (US$0.7382). "We expect the Canadian dollar to appreciate overnight as a result of the positive budget," said John Nicholson, managing director of Scotia Capital Markets. Canadian bonds strengthened shortly after the budget's release as the market welcomed news of only modest new spending initatives. Some bond analysts expressed concern that Martin did not set a target for balancing the country's books, but overall they expected a neutral reaction to the budget on Wednesday. "He's made some extremely conservative assumptions, we believe, with interest rates and growth that lead us to conclude he will continue to outperform his own targets," said Hank Cunningham, director of fixed income with First Marathon Securities. The budget is expected to be well received on Canada's biggest stock market on Wednesday, after the Toronto Stock Exchange enjoyed record gains on Tuesday, analysts said. Before the budget's release, the TSE's key 300 index posted its ninth record close of 1997, up 20 points to 6238.22. Trading was heavy with turnover of 138.4 million shares worth C$2.52 billion, the TSE's second highest value ever. Martin did not impose new corporate, personal or excise tax increases, but the government did extend a special capital tax on Canada's big banks for another year.

Canada's cash-strapped public broadcaster, the CBC, cut almost 1,000 jobs on Wednesday in an overhaul that might eventually include on-air fund-raising drives and corporate sponsorships. The Canadian Broadcasting Corp. -- faced with a C$414 million ($304 million) reduction in government subsidies -- told 996 employees that they would be laid off. The layoff notices were part of a plan announced in September to scrap 2,400 jobs through layoffs, voluntary departures and the elimination of vacant positions. The CBC also set a target of 800 job cuts in 1998. "Without doubt, the next few months will be tough. However, we have some sense that on the financial front the worst may be over," Jim Byrd, vice-president of CBC English television, said in a letter to employees. The CBC, which provides television and radio services in English and French, previously announced other measures to pare more than a third from its C$1.4 billion ($1.02 billion) budget by 1998. The Canadian government contributed almost two-thirds of the CBC budget in the past, but the government's huge budget deficit forced deep cuts in funding for the CBC. CBC unions said the job cuts would result in an inferior product for Canadian taxpayers. "There's shock. There's anger. These are people with hundreds of years of experience who will walk out the door and never come back again," said Dan Oldfield, a spokesman for the Canadian Media Guild, which represents 3,000 CBC workers. On Monday, the CBC said Radio Canada International -- Canada's voice to the world -- would close next March due to a lack of government funding. To offset shrinking federal subsidies, CBC President Perrin Beatty said earlier this week that the broadcaster may use on-air fund-raising drives and corporate sponsorships. Beatty recently visited the New York-based U.S. public television network PBS, which holds fund-raising campaigns and receives millions of dollars from Canadian viewers. "It's something that is under discussion as we speak," said CBC spoksman Tom Curzon, adding that the CBC board had not made a final decision. To boost revenues and ratings, the CBC relied on popular U.S. television shows and major sporting events in recent years. But some CBC purists complained that the broadcaster had forsaken its mandate to promote and protect Canada's identity from the U.S. cultural behemoth. In September, Beatty said CBC would return to its Canadian roots by eliminating U.S. shows from prime time and day-time schedules by 1998. Canadians will also see more advertisements on the CBC, including commercials for the first time on its flagship evening news show, the National.

The Toronto Stock Exchange's key 300 Index reached its 50th record close of 1996 on Thursday and broke the 5600 barrier for the first time. The TSE 300 Composite Index rose 8.01 points to close at 5598.82, surpassing a streak of 45 record finishes in 1987. The Index also breached the 5600 barrier, setting an intraday high of 5601.88. "It's just another record in a string of more to come. This won't be the last," said Fred Ketchen, senior vice-president and director of equity trading for ScotiaMcLeod Inc, a unit of Bank of Nova Scotia. Toronto's record-setting run was led by banking, communications, conglomerates and technology issues. Of the TSE's 14 sub-groups, 10 finished higher. The rally was restrained by 162-point loss in golds. Trading was brisk with 113.8 million shares exchanging hands for a value of C$1.6 billion ($1.2 billion). Advancing stocks outnumbered declines 538 to 434 with 294 issues unchanged. Traditionally, October has been a scary month for investors who remember the massive crash of 1987. "This is the time when everything is supposed to fall apart, but it has been a rather strong month," Ketchen said. * Bank of Nova Scotia and Royal Bank of Canada set all-time highs as the bank group continued their climb since summer. Scotiabank closed up 0.45 at 42.25 after reaching a 52-week high of 42.40. Royal Bank added 0.60 to close at 44.30 after hitting a 52-week peak of 44.40. * Among weak gold issues, Barrick Gold Corp fell 0.50 to 35.10 on 1.5 million shares. COMEX gold futures slumped for a second straight session on Thursday. * Molson Cos Ltd jumped 0.40 to 20.50 after its brewing unit, Molson Breweries, reached an interim deal with U.S. beermaker Adolph Coors Co on the sale of Coors beer in Canada. An arbitration panel two weeks ago ruled that Molson Breweries breached its licensing deal by allowing Miller Brewing Co., a unit of Philip Morris Cos Inc, to buy a 20 percent stake without Coors' consent in 1993.

The Canadian Football League is set to hold what many fear may be its last Grey Cup championship on Sunday after a chaotic, money-losing season. The championship between the Toronto Argonauts -- led by former Boston College star quarterback Doug Flutie -- and the Edmonton Eskimos, is the 84th league title game. But some wonder if there will be a Grey Cup next year. Despite returning to its Canadian roots this year after a failed U.S. expansion, the CFL is dripping red ink. All but one of its nine clubs will lose money, due to small crowds and cash bailouts to keep teams in Ottawa, Montreal and Vancouver afloat during the 1996 season. The 120-year-old Ottawa Rough Riders franchise folded earlier this month at the end of the regular season. So precarious are the league's finances that the cash-strapped Eskimos could not afford to fly players' wives to the Grey Cup game in Hamilton, Ontario, 42 miles (68 km) southwest of Toronto. "The LAST Grey Cup?" asked the Toronto Star, Canada's biggest newspaper, in a front page story on Friday. Some say the CFL needs the bigger and richer National Football League to survive. CFL Commissioner Larry Smith said he is interested in "building a relationship" with the NFL, but that the CFL will not become a Triple A minor league. "I have no interest in a farm system. If we could have some developmental relationships like we've done in the past with guys like Warren Moon and Joe Theismann, then that would be great," Smith said in a telephone interview. Moon and Theismann were star CFL quarterbacks in the 1970s and 1980s before jumping to the NFL. "What we have been doing is exploring some ideas on ways we could possibly work together. But we have not reached an agreement on anything at this point," said Greg Aiello, director of communications for the NFL. CFL purists fear closer ties with the NFL would threaten the distinctiveness of Canadian-style football. Canada's game closely resembles the U.S. brand, but there are a few key differences. The playing field is longer and wider. Canadian teams get only three downs instead of four to gain 10 yards and keep possession of the ball. There are 12 players a side compared to 11, and single points are awarded for missed field goals not run out of the end zone. Football writer and former CFL player Frank Cosentino said the NFL could help pay the salaries of developing players, but that closer ties could alienate the CFL's remaining followers. But fans already appear to have turned off the CFL. Average attendance slipped to 22,095 this year from 24,400 in 1995, despite a slick new "Radically Canadian" marketing campaign trumpeting the league's Canadian heritage. In major markets such as Toronto and Vancouver, the league is considered second-rate. A 1995 pre-season NFL game between the Dallas Cowboys and Buffalo Bills in Toronto drew about 60,000 fans. This year, the Argonauts, despite the league's best record of 15-3, averaged just 20,400 fans. Unless there is a late surge in ticket sales, the Grey Cup game will fall short of a sell-out. "The way it looks now we may have about 36,000. We have capacity for about 40,000," organiser Matthew Moreland said on Friday. It is a far cry from the 1950s and 1960s when the CFL attracted huge crowds and players such as Ron Lancaster, Joe Kapp, Angelo Mosca and Sam Etcheverry were household names. Players now rarely stay long enough to become known by fans. Poor marketing has also left the CFL far behind other sports in the race for the public's entertainment dollars. In a bid to save the league, Smith has proposed a restructuring plan to cut costs. All clubs have until January to secure enough season-ticket sales to operate next year. Smith is confident there will be eight teams next year, but he said the CFL was prepared to operate with fewer. There will likely be no football in Ottawa, next year after the league revoked the franchise in Canada's capital from Chicago businessman Horn Chen. The future is also cloudy for the Montreal Alouettes -- who won the Grey Cup last year as the Baltimore Stallions, but lured few fans this season -- and the British Columbia Lions, who are in receivership.

Veronika Hirsch, a flamboyant Canadian stock picker whose high-profile move to Fidelity Investments was marred by controversy, parted with the Boston-based fund company on Tuesday. "We've concluded the discussions and Fidelity wishes Ms. Hirsch well in her future endeavours," Fidelity spokesman Chethan Lakshman said in a telephone interview. Hirsch was a star fund manager hired last summer to spearhead Fidelity's drive to dominate the Canadian market. But Canada's so-called "Fund Diva" was removed from her portfolio in November amid a controversy over personal trades she made before joining the world's biggest mutual fund company. Lakshman did not give details of the agreement with Hirsch, who has kept a low profile since her investments in a small Vancouver company, Oliver Gold Corp., grabbed headlines and the attention of regulators last November. Hirsch's lawyer, Tom Lockwood, said on Tuesday that she is weighing her options, including offers to go on the lecture circuit or write a book. "There's private money management prospects and there are mutual fund prospects. There have been a number of approaches made and she's considering what she will do next," he said. At issue was Hirsch's purchase of 65,000 special warrants of Oliver Gold through a private placement while she was a fund manager with AGF Management Ltd. in Toronto. Shortly after the warrant purchase, Hirsch's AGF Growth & Income Fund bought 295,000 special warrants of Oliver Gold at more than double the price paid by Hirsch, according to filings with the British Columbia Securities Commission and reported by Stockwatch, a Canadian investment publication. Fidelity removed Hirsch from her True North Equity Fund last November after Canadian securities regulators confirmed her personal investments were under investigation. The dramatic move came barely three months after Fidelity poached Hirsch from AGF to lead its expansion drive in Canada where it ranks ninth with C$8.2 billion ($6.1 billion) in assets. Canadians have more than C$211 billion ($156 billion) stashed in mutual funds, an eight-fold increase from 1990. An estimated C$23 billion ($17 billion) will be added to the pot this year, analysts forecast. While at AGF, Hirch was the focus of a multi-million dollar advertising campaign which made her Canada's top celebrity fund manager. When Hirsch jumped to Fidelity, her leather outfits and blood-red nails appeared an uncomfortable fit with Fidelity's ultra-conservative culture, but the hiring was considered a major coup within the industry. Hirsch's old True North fund is now under a less flamboyant manager and has accumulated C$280 million ($208 million) in assets since its launch last September. While analysts have said it is difficult to assess the damage to Fidelity's expansion drive, the Hirsch affair has changed how fund companies sell their product. Brash campaigns built around high-profile stock pickers are out and the "team" is in, analysts said.

Shares in Canadian brewing and sports firm Molson Cos. Ltd. sank on Monday after its Molson Breweries unit lost the rights to brew Coors Light, Canada's top-selling light beer, in a dispute with Adolph Coors Co.. Investors pounded Molson's stock after an arbitration panel ruled late Friday that Molson reliquished its right to brew and sell Coors products in April 1993 when Miller Brewing Co. acquired a stake in the Canadian brewer. Molson class A stock closed down C$0.75 at C$20.15 on the Toronto Stock Exchange after earlier sinking to C$19.50, just shy of its 52-week low. "It was a pretty severe ruling and I think it surprised Molson, surprised Coors and, frankly, surprised the street," said Mike Palmer, an analyst with Loewen, Ondaatje, McCutcheon Ltd. The panel said Molson breached its licensing agreement with Coors by allowing Miller, a unit of Philip Morris Cos. Inc., to buy a 20 percent stake without Coors' consent. Molson Breweries is also owned 40 percent each by Molson Cos and Australia's Foster's Brewing Group Ltd.. The panel ordered Molson to pay Coors all the profits it earned from selling Coors beer since 1993, an amount that has yet to be determined. Coors brands produced by Molson -- Coors Light and Original Coors -- account for 8 percent of its sales volume. Coors Light is the dominant light beer in Canada, commanding a 5 to 5.5 percent share of the beer market. Analysts said Molson can ill afford to lose a profitable brand as it battles rival Labatt Brewing Co. Ltd. in a domestic beer market that has been flat for several years. "You start losing volume and it has a significant impact on your profits. It's very important to Molson to negotiate a deal with Coors," said Palmer. While Molson officials said they are willing to negotiate a new licensing agreement, Coors was keeping its options open. "What we need to do is go through the panel's ruling and understand all of the aspects of the ruling and then analyse what our options are," said Coors spokesman Jon Goldman. He declined to outline Coors' options for the Canadian market. But analysts speculated that Coors could cut a richer deal with Molson, ship product directly to Canada or buy a local brewer to produce Coors in Canada. "The easiest option is to negotiate a deal with Molson. They've had a big win here so it's time to kiss and make up," said Palmer. If there is a new deal, Coors will likely seek more control over its brands and higher royalties from Molson, said Barry Joslin, Molson's vice-president of corporate affairs. If Molson cannot negotiate a new licensing agreement, Joslin said the brewer would consider its options, including launching a new light brand.

Two major shareholders in Canada's Altamira Management Ltd. have set a mid-December deadline to resume their court action to block a C$660 million takeover bid by Manufacturers Life Insurance Co. Ltd. if negotiations to settle the dispute fail. "The preference is to resolve this as quickly as possible," said Rick Leckner, a spokesman for Almiria Capital Corp. which owns 30.5 percent of Altamira. "If it has to come to that (a court battle) -- sad as it may be -- it still has to be considered. But the ideal solution is a negotiated one," he said in a telephone interview. Toronto-based Manulife, Canada's biggest insurance company, has offered C$32 a share for Altamira, the country's 12-largest mutual fund company. The battle for Altamira took a surprising twist on Wednesday when U.S. investment firm T.A. Associates Inc. launched a rival C$38 a share, or C$767 million, bid for the Canadian mutual fund company. Manulife already owns 30.5 percent of Altamira and has the support of a group of 40 Altamira fund managers who are shareholders of Altamira. But the bid is opposed as too low by Montreal-based Almiria and a group led by Altamira Chairman Ron Meade which holds about 11 percent of Altamira. The lawsuit launched by Almiria and Meade's group Tuesday was scheduled to proceed Wednesday in an Ontario court. But the feuding parties agreed to try and negotiate a settlement. Leckner said on Thursday that those talks have not yet begun. The court action is set to resume on December 18. T.A. Associates is one of the largest private equity investors in the United States. "We believe that our proposed transaction serves the purposes of all of the parties, and, more importantly, is in the long-term best interests of the unitholders of the Altamira funds," Andrews McLane, T.A. Associates' manager director, said in a letter to Altamira shareholders on Wednesday. He said the offer was made on behalf of private equity partnerships managed by the Boston firm and other institutional investors. Under the terms of the offer, Manulife would have to agree to release the group of employee shareholders from a promise to tender their shares to its offer. "We do not believe that this highly tentative proposal justifies any delay in implementation of the transaction we have agreed upon," Manulife said in a statement on Wednesday. Altamira manages Canada's biggest no-load mutual fund with about C$6.2 billion in mutual fund assets. Manulife is the country's largest insurance company with about C$50 billion in assets. -- Reuters Toronto Bureau (416) 941-8100

Bank of Montreal, Canada's third biggest bank, said Tuesday annual profits soared past C$1 billion ($750 million) as it kicked off the fourth-quarter earnings reporting season for the country's largest banks. The Toronto-based bank, which has operations in Canada, the United States and Mexico, said net income jumped 18.4 percent to C$1.17 billion ($873 million) in the year ended Oct. 31. The bank's return on equity, a key measure of profitability, rose to 17 percent from 15.4 percent last year. "These results represent the seventh consecutive year of record earnings and the seventh consecutive year return on equity was over 14 percent," Chairman Matthew Barrett said in a statement. Bank of Montreal is the third bank to break through the C$1 billion threshold in recent years, following the Royal Bank of Canada and Canadian Imperial Bank of Commerce. The bank attributed the record earnings to higher fees, volume growth in Canada and the United States and the impact of acquiring a 16 percent stake in Mexico's Grupo Financiero Bancomer SA de CV. About 47 percent of the Bank of Montreal's total income came from operations outside of Canada in fiscal 1996. Net income from its U.S. operations, where the bank owns Chicago-based Harris Bankcorp Inc., rose 6 percent to C$390 million ($291 million). Earnings from Mexico rose 4 percent to C$57 million ($42 million). Other international businesses contributed C$102 million ($76 million) to the bank's bottom line, up 1 percent from 1995. Speaking to reporters, Barrett said the bank should meet or exceed 10 percent growth in annual earnings per share going forward. "There is sufficient counter cyclicality built into the range of businesses and range of geographies that we're operating in now that we continue to feel that we would be able to maintain that 10 percent EPS growth or better in the years ahead," Barrett said. The bank's earnings were generally in line with estimates. Fourth quarter earnings rose to C$1.04 (77 cents) a share from 93 cents (69 cents) in the same period in 1995. "They were a little weaker than what I was looking for, but pretty much in line for intents and purposes," said Kevin Choquette, an analyst with Levesque Beaubien Geoffrion Inc. Choquette had forecast fourth quarter earnings of C$1.06 (79 cents) a share. Improved credit quality also contributed to the bank's strong performance. It's provision for credit losses fell to C$225 million ($168 million) in 1996 from C$275 million ($205 million) in 1995. Barrett told reporters that the bank will plan for a credit loss provision of C$275 million in 1997. "We'll stick with that until we are six months into the year and see how the credit cycle shakes out," he said. Bank of Montreal's stock closed down C$0.45 (33 cents) to C$44.20 (33 cents) in heavy turnover of 1.5 million shares on the Toronto Stock Exchange. The recent rally in Canadian bank stocks pushed Bank of Montreal's return on investment up 42.4 percent in 1996, compared to a 24-percent gain last year. Despite today's weakness in Bank of Montreal shares, the TSE's banks and trusts index climbed 14 points to a new high of 6164.60.

Royal Bank of Canada, Canada's biggest bank, rolled up a record annual profit Wednesday and surprised shareholders with a dividend hike. The Toronto-based bank said net income jumped to C$1.43 billion ($1.05 billion) in the year ended Oct. 31, up from C$1.26 billion ($931 million) in 1995. Royal Bank also boosted its quarterly dividend by C3 cents (2 cents) to C37 cents (27 cents) a share -- the third increase in the past 15 months. It was the third Canadian bank to raise its dividend in the current earnings reporting season. Royal Bank was the fourth of Canada's Big Six banks to post a third straight year of record profits. Results from Canadian Imperial Bank of Commerce and National Bank of Canada, which are due Thursday, were expected to push the group's earnings past the C$6 billion level ($4.4 billion), up from last year's record C$5.2 billion ($3.8 billion). "We're announcing strong results ... and this dividend increase is evidence of our commitment to rewarding shareholders and enhancing shareholder value," Royal Bank Chairman John Cleghorn said in a statement. Higher asset volumes, lower credit losses and strong performances from wealth management and investment banking fattened Royal Bank's bottom line. The bank's brokerage arm, RBC Dominion Securities Ltd., turned in a record year due to strong financial markets. Royal Bank's credit quality also continued to improve. The provision for credit losses fell C$140 million ($103 million) to C$440 million ($325 million) in 1996 and was expected to fall more in 1997. Return on equity, a key measure of profitability, rose 1 percentage point to 17.6 percent in 1996. Royal Bank's fourth-quarter earnings were slightly better than the average of analysts' estimates. Earnings rose to C$1.09 (80 cents) a share in the fourth quarter from C90 cents (66 cents) in the same period in 1995. The consensus forecast from analysts was about C$1.04 (77 cents) a share. Royal Bank's dividend increase surprised some analysts who expected the bank to wait until early next year. The bank is in the middle of a massive share buyback that analysts said had become expensive due to the recent surge in Canadian bank stocks. "It (the dividend hike) is rather surprising. Maybe they won't be going as far with the buyback and this is compensation," said Roy Palmer, a banking analyst with investment dealer TD Securities Inc. Despite the buoyant results, Royal Bank's stock fell along with a sagging Toronto Stock Exchange Wednesday. The bank's shares were off C65 cents (48 cents) at C$48.25 ($35.68) in late trading.

Protesters hit Toronto streets on Friday, paralyzing rush-hour subway trains and closing businesses in Canada's biggest city to protest deep budget cuts by Ontario's Conservative government. Underground subway and bus service ground to a halt in this city of 2.2 million people, forcing about one million commuters to walk, drive or cycle to work or stay home. "They're picketing all over the place, so we've postponed service," Marilyn Bolton, a spokesperson for the Toronto Transit Commission said in a telephone interview. Unionized workers, civil servants and social activists also descended on government offices and factories on this first day of the so-called "Days of Protest." But picketers failed to disrupt commuter trains from Toronto's bedroom communities or interrupt service at Pearson Airport, the country's busiest airport. The Toronto Stock Exchange had expected protesters to disrupt trading, but Canada's biggest stock market opened as usual. At least one brokerage firm flew traders to its Montreal office to work today, while other brokers slept in hotel rooms or in their offices overnight. The stock exchange has been targeted for a major rally later today. The protesters are furious with Premier Mike Harris' plans to cut spending by C$8 billion ($5.9 billion) to wipe out a huge deficit by the turn of the century. Since sweeping to power in 1995 promising a right-wing revolution in Canada's most populous province, the Conservatives have revamped labor laws, slashed welfare payments, introduced workfare and announced plans to close hospitals and trim education budgets. "These cuts that Harris made are hurting the workers. This is part of the polarization that is happening in Ontario. The anger is going to grow and grow," Sid Ryan, president of the Ontario division of the Canadian Union of Public Employees, told picketers outside a government building. But Harris, who has been dubbed "Newt of the North" in reference to Republican U.S. House Speaker Newt Gingrich, has vowed the protests will not stall his "Common Sense Revolution." Despite the opposition to his government, the Conservatives' popularity continues to hold around 50 percent in opinion polls. Protesters waved placards and temporarily blocked cars from entering government parking lots, but Toronto police said there were no major incidents of violence. One man was charged with a weapons offence after allegedly threatening pickets with a baseball bat outside a bus garage. There also were skirmishes outside a postal station. Many commuters took the delays in stride. "I see the protesters have a point, but I think it's going to inconvenience a lot of people who don't have any other choice," said John Ivarey. Meanwhile, several major manufacturers canceled day shifts. De Havilland Inc., a unit of transportation firm Bombardier Inc., said 6,200 employees at its Toronto aircraft plant will be off the job Friday. The protest will not affect General Motors Corp.'s Canadian unit, which is getting back to work after a nearly three-week strike ended earlier this week.

The battle for Canada's Altamira Management Ltd. took a surprising twist on Wednesday when U.S. investment firm T.A. Associates Inc. launched a rival C$767 million ($572 million) bid for Canada's 12th-largest mutual fund company. Boston-based T.A. Associates said it is offering C$38 ($28) per share for Altamira, which is also the target of a C$32 ($24) a share bid from Manufacturers Life Insurance Co. Ltd. of Toronto. The competing offer came as two major Altamira shareholders prepared to go to court to block Manulife's C$660 million ($492 million) takeover bid for Altamira. The legal action was postponed on Wednesday after the feuding parties agreed to try to negotiate a settlement. The shareholders, who together control 41.5 percent of Altamira, have said Manufacturers Life's offer is too low and that they were negotiating with another potential bidder. T.A. Associates, which emerged as the mystery bidder Wednesday, is one of the largest private equity investors in the United States. "We believe that our proposed transaction serves the purposes of all of the parties, and, more importantly, is in the long-term best interests of the unitholders of the Altamira funds," Andrews McLane, T.A. Associates' manager director, said in a letter to Altamira shareholders. He said the offer was made on behalf of private equity partnerships managed by the Boston firm and other institutional investors. Under the terms of the offer, Manulife would have to agree to release a group of employee shareholders from a promise to tender their shares to its offer. Manulife already owns 30.5 percent of Altamira and has the support of a group of 40 Altamira fund managers and employees. "We do not believe that this highly tentative proposal justifies any delay in implementation of the transaction we have agreed upon," Manulife said in a statement. The bid is fiercely opposed by Montreal-based Almiria Capital Corp., which owns another 30.5 percent slice of Altamira, and a group led by Altamira Chairman Ron Meade. The lawsuit launched by Almiria and the management group Tuesday was scheduled to proceed Wednesday in an Ontario court. But the court action was postponed after a last-minute accord by all parties to try to negotiate a settlement. "The parties reached an agreement to proceed as quickly as possible to a final determination of the issues and all parties intend that Altamira will continue its business in the ordinary course," a joint statement said. Manulife spokesperson Nancy Evans said there was no connection between the agreement and the appearance of T.A. Associates' rival offer for Altamira. Altamira manages Canada's biggest no-load mutual fund with about C$6.2 billion ($4.6 billion) in mutual fund assets. Manulife is the country's largest insurance company with about C$50 billion ($37 billion) in assets.

Toronto stocks soared to new heights on Wednesday, powered by a rally in bank shares as foreign investors stampeded into Canada's financial markets, lured by falling interest rates and a recovering Canadian economy. Shares in Canada's big six banks hit 52-week highs on the Toronto Stock Exchange, propelling the country's biggest stock market to its 53rd record close of 1996. The Canadian dollar has also surged this week, hitting its strongest level since October 30, 1995. Declining interest rates, low inflation and falling budget deficits have combined to make Canada the flavor of the month, economists said. "Overall, foreign investors have just become enamored with Canada as a place for investment," Michael Gregory, an economist with Lehman Brothers, said in a telephone interview. The Toronto Stock Exchange jumped 85 points to close around 5749, fueled by brisk action in interest-rate sensitive issues such as banks and utilities. The key 300 Index has gained more than 20 percent this year, compared to about 19 percent for the Dow Jones Average and 16 percent for the Standard & Poors 500. The Bank of Canada is expected to ease interest rates again as early as this week. The central bank has cut rates 19 times since May 1995 in a bid to revive a sluggish economy. Bank of Canada Governor Gordon Thiessen said on Wednesday that Canada's improving economy gives the central bank more latitude to set Canadian rates independent of U.S. rates. He added Canada is now in a better position to withstand a hike in U.S. rates than it has been in recent years. "The economic outlook is favorable. We will soon see signs of the payoff for the difficult restructuring decisions taken in both the private and public sectors," Thiessen said. After several years of belt tightening, Canadian governments have either balanced their budgets or are on track to wipe out huge deficits. Canada's 1.2 percent inflation rate is one of the lowest in the world and less than half the U.S. rate. Several Canadian banks cut residential mortgage rates on Wednesday to levels not seen in about three decades. Gregory said he expected Canada to continue to outperform the United States on the rate front and that offshore investors recognized that. "I think investors are coming to terms with the fact that Canadian interest rates -- because of low inflation and improving currency prospects -- should be below U.S. rates," he said. "Many investors are jumping on that and the Canadian dollar is undervalued. It's cheap," Gregory said. The Canadian currency closed around C$1.3312 (US$0.7512) on Wednesday after trading around C$1.3300 earlier in the session. The dollar broke through C$1.3300 on Tuesday, its strongest level since October 1995. In stocks, the country's big six banks have been big beneficiaries of favorable interest rates and the overseas scramble to buy Canadian stocks. The TSE's financial services group jumped 2.5 percent on Wednesday after soaring three percent on Tuesday. The sector has gained nearly 1,400 points since September. Declining interest rates make bank lending more profitable and bank dividends more attractive for investors. Soaring bank profits have also lured investors. The major banks report their year-end results in a few weeks and are on track for a third straight year of record profits. Recent listings on the New York Stock Exchange have given Canadian banks a higher profile in the United States where they are considered cheap compared to U.S. bank stocks. New York-based Morgan Stanley issued a bullish recommendation on two Canadian banks on Tuesday and predicted a strong fourth quarter for the entire group.

Anti-government protests swept across Canada's biggest city Friday as demonstrators in Toronto shut down the transit system, disrupted businesses and tried to break into the Toronto Stock Exchange. Thousands of union workers, civil servants and other citizens descended on government offices, transit stations and factories across the city, organisers said. Over 1 million commuters stayed at home, walked, drove or cycled to work after the city's subway and bus services were shutdown, officials estimated. City officials said transit services would resume early Saturday. But picketers did not disrupt commuter trains from Toronto's bedroom communities or interrupt service at Pearson Airport, the country's busiest. Instead of the traffic jams on the city expressways which had been expected, "It was like a Sunday afternoon," one city official said. Toronto police said there were no major acts of violence, though a few people were arrested, mostly for misconduct. The so-called Days of Protest was organised by labour unions to protest deep budget cuts by Ontario's Conservative government affecting many of this city of 2.2 million people. Some critics said the protest did not succeed. "Today's protest was a flop. Yes. They inconvenienced a lot of people, but they failed to shut down the city," said Colin Brown of Ontarians for Responsible Government, a right-wing lobby group. "Hundreds of thousands of people didn't come to work and that is what counts," said Aleda O'Connor, a spokeswoman for the organisers. Ironically, the labour unrest came after Fortune magazine called Toronto the city with the world's best quality of life. Most of the protests were peaceful, but hundreds of demonstrators tried to smash into the Toronto Stock Exchange, a symbol of the business community that has supported the government's tough fiscal policies. Protesters chanted, "Shut it down, shut it down," as they pounded on the glass doors of Canada's biggest stock market. One man wearing a mask and combat fatigues was seen hurling himself against the doors. Riot police were moved into the vicinity of stock exchange, but did not intervene. Rally organisers later moved the raucous group away from the doors of the exchange. "We've come to the place where the real power is ... They get their power and strength from inside this building," Jim Stanford, an economist for the Canadian Auto Workers, told hundreds of protesters outside the exchange. In the days leading up to the protest, a siege mentality gripped Toronto's Bay Street, the heart of Canada's financial community. At least one brokerage firm flew traders to its offices in New York and Montreal, while other brokers slept in hotel rooms or in their offices overnight. Other companies, including the Globe and Mail newspaper, hired boats to ferry employees across Lake Ontario from nearby communities. The demonstrators expressed fury at Ontario Premier Mike Harris' plans to cut spending by C$8 billion ($5.9 billion) to wipe out a big budget deficit by the turn of the century. Since coming to power in 1995 on the promise of a right-wing revolution in Canada's most populous province, the Conservatives have revamped labour laws, slashed welfare payments and required recipients to work, and announced plans to close hospitals and cut education budgets. "These cuts that Harris made are hurting the workers. This is part of the polarisation that is happening in Ontario. The anger is going to grow and grow," Syd Ryan, president of the Ontario division of the Canadian Union of Public Employees, told picketers outside a government building. Harris, who has been dubbed "Newt of the North" in reference to Republican U.S. House Speaker Newt Gingrich, has vowed the protests will not stall his "Common Sense Revolution." "Will they discourage us from creating more jobs? No. Discourage us from workfare? No. That's what we were elected to do and I don't expect that most of the public want us to change from that agenda," Harris told reporters. The Conservatives, who hold their annual convention in Toronto this weekend, have seen their popularity hold at about 50 percent in recent opinion polls. Many commuters took the delays in stride. "I see the protesters have a point, but I think it's going to inconvenience a lot of people who don't have any other choice," said John Ivarey. Police said one man was charged with a weapons offence after allegedly threatening picketers with a baseball bat and five protesters were charged with public mischief. Several major manufacturers cancelled day shifts. De Havilland Inc., a unit of transportation firm Bombardier Inc., said 6,200 employees at its Toronto aircraft plant would be off the job Friday. Other companies that closed Toronto operations included school bus operator Laidlaw Transit Inc., auto parts firm A.G. Simpson Co. Ltd., and candy maker Nestle Canada Inc.

Canada's major banks, still smarting from last year's bank-bashing budget, are hoping for no major surprises and perhaps some tax relief from Finance Minister Paul Martin next week. Last year, Martin stunned the banks when he rejected their bid for expanded powers in insurance. He also extended a controversial capital tax on the banks for another year. In the run up to next Tuesday's 1997/98 budget, bankers have lobbied for a lighter tax burden which, they argue, is among the heaviest in corporate Canada. "We feel the banks are paying more than their fair share of taxes. Particularly our concern is capital taxes," said Mark Weseluck, vice-president of banking operations for the Canadian Bankers Association. The Big Six banks -- Royal Bank of Canada, Canadian Imperial Bank of Commerce, Bank of Montreal, Bank of Nova Scotia, Toronto-Dominion Bank and National Bank of Canada -- have rung up record profits in the past three years. The group earned a combined C$6.26 billion in 1996, up 21 percent from the previous year. The banks are expected to report strong first-quarter results later this month. At their annual meetings this year, bankers stressed they paid record taxes of more than C$5.5 billion in 1996. But social activists argue the banks should pay more tax on what they call "excessive" profits. In its "alternative" budget released this week, the Canadian Centre for Policy Alternatives urged Martin to impose an "excess profits" tax on the banks and other financial institutions totaling C$496 million in 1997/98. Other groups want Martin to use the existing 12 percent capital tax to encourage small business lending -- an area in which the banks have been criticized for not doing enough. In Ontario -- where five of the six major banks are based -- the Conservative government hit the banks with a 10 percent capital tax surcharge in last spring's budget. The banks can eliminate some or all of the tax if they invest more in small business between now and the end of 1999. Ontario Finance officials said it was too early to measure the program's performance, but several major banks unveiled small business loan programs in recent months. Weseluck said the Ontario tax had little to do with those announcements. "The problem when you do this is that taxation gets less efficient the more they are used to boost investment in a certain part of the market which the banks are doing extensively anyway," he said. Analysts doubted Martin would do any major tinkering on bank taxes next week. "I don't expect any new additional taxes and I doubt if there is any tax relief. The only possible source of tax relief is that the government would not extend this capital tax," said Nesbitt Burns analyst Hugh Brown. With bank bashing a popular sport among Canadian voters, Martin may be loathe to give the banks a tax break in what is shaping up to be an election year, analysts said. Adding to this year's budget boredom is the absence of last year's noisy battle between the banks and insurers. Martin shocked the banks when he slammed the door on their bid for broader insurance powers and pre-empted a government white paper on financial reforms, which was several months away from being released. Martin has set up a task force to study those and other competition issues, including whether major banks should be allowed to merge. But reforms recommended by the task force are not expected to take effect until 2000. ((Reuters Toronto Bureau 416-941-8100))

The Canadian Football League began searching for a new leader on Wednesday after CFL commissioner Larry Smith resigned following a chaotic, money-losing season. Smith, 45, said he will not seek a second term as commissioner when his five-year contract expires on April 1, 1997. "I am proud to have had the opportunity to work with the CFL, but feel it's time that someone with new ideas and energy be given the opportunity of taking this league into the next millennium," Smith said in a statement released by the league. His departure comes as many fans wonder if the embattled league will survive at all. Despite an exciting Grey Cup championship game won by the Toronto Argonauts last month, the CFL is dripping red ink. All but one of its nine clubs lost money this year, due to small crowds and cash bailouts to keep teams in Ottawa, Montreal and Vancouver afloat during the 1996 season. The 120-year-old Ottawa Rough Riders franchise folded last month at the end of the regular season. The future is also cloudy for the Montreal Alouettes -- who won the Grey Cup last year as the Baltimore Stallions, but lured few fans this season. The Vancouver-based British Columbia Lions are also in receivership. Smith, a former running back with the Alouettes, was hired with much fanfare in 1992 after serving as an executive with a Canadian food company. Observers said at the time that the struggling league desperately needed a solid businessman at the helm. But five years later, the league's survival is still in doubt. His most ambitious plan was an ill-fated expansion into the United States which lasted only three seasons. Canadian-style football failed to catch on in cities like Sacramento, San Antonio, Memphis, Las Vegas and Birmingham. Baltimore was the only successful U.S.-based CFL club. It drew decent crowds and became the first American team to win the Grey Cup championship in 1995. But the Stallions were forced to move to Montreal when the National Football League returned to Baltimore this year. Although Smith's expansion dream was sharply criticised by CFL purists, his supporters argued the league would have collapsed without the millions of dollars in expansion fees from U.S. teams. Smith said he will devote the rest of his mandate to implement a cost-cutting plan to save the league. Under the plan, all clubs have until January to secure enough season-ticket sales to operate next year.

Stock in Canadian waste and transportation firm Laidlaw Inc. soared on Tuesday as investors and analysts applauded major moves in ambulance services and waste management worth over $2 billion. While Laidlaw's stock hit new heights on the Toronto Stock Exchange, Chief Executive Officer James Bullock said the company was poised for strong growth with two huge deals announced after the market closed on Monday. In a bid to become North America's top ambulance operator, Laidlaw plans to acquire Colorado-based American Medical Response Inc. in a $1.12 billion cash deal and merge it with its California-based MedTrans ambulance services unit. In the other transaction, Laidlaw has signed a letter of intent to sell its South Carolina-based Environmental Services unit for $1 billion in cash, shares and debt to Rollins Environmental Services Inc. of Delaware. After that deal, Laidlaw will own 66 percent of a new combined company, Laidlaw Environmental Services Inc., which will be the dominant player in North American hazardous waste management. The moves came a few weeks after Burlington, Ontario-based Laidlaw completed the $1.65 billion sale of its solid waste management business to Allied Waste Industries Inc. of Arizona. Laidlaw's class B stock closed up C$1.80 ($1.33) at a 52-week high of C$18 ($13) in heavy turnover of 9.3 million shares on the Toronto Stock Exchange. Laidlaw's class A stock rose C$1.45 ($1.06) to a new high of C$17.95 ($13.23). "We've got a (share price) target level of around C$19 ($14) and C$20 ($15) for the year and it will probably go higher when the dust settles," said Ira Katzin, an investment advisor with RBC Dominion Securities. American Medical Response jumped $6.375 to close at $39.375 on the New York Stock Exchange, while Rollins Environmental rose 37.5 cents to $2.375, also on the NYSE. Analysts said the Rollins deal will further consolidate a fragmented industry and may improve prices for hazardous waste companies, which have been depressed in the past four to five years. The American Medical Response acquisition will also boost Laidlaw's presence in the fast-growing health-care transportation area. "Strategically, it is quite wise," Bunting Warburg Inc. analyst Ted Larkin said in a telephone interview. "The highest growth potential is with their transportation companies. They are also able to partially spin off the hazardous waste operations and also allow that company to regain a profile by listing on the New York Stock Exchange," Larkin said. With combined annual revenues of about $1.3 billion, the new American Medical will hold a 14 percent share of the $10 billion ambulance industry. It also gives Laidlaw access to related medical transport services, a $30 billion market. Laidlaw CEO Bullock said American Medical will immediately boost Laidlaw's earnings, but he declined to give a specific forecast. Some analysts raised concerns that antitrust issues may hamper the American Medical deal, but Bullock said he did not foresee any problems with regulators. The transaction with Rollins Environmental will be neutral to Laidlaw's earnings in the near term while operations are consolidated. Bullock said staff levels may be reduced by 15 percent to20 percent and 20 facilities may be closed, leaving about 100 facilities in the merged firm. The transition is expected to result in more efficient operations and savings of $75 million annually.

Toronto stocks soared to new highs on Wednesday as foreign investors jumped into Canada's financial markets, lured by falling interest rates and the recovering economy. Shares in Canada's big six banks hit 52-week highs on the Toronto Stock Exchange, propelling the country's biggest stock market to its 53rd record close of 1996. The Canadian dollar has also surged this week, hitting its strongest level in a year. Declining interest rates, low inflation and falling budget deficits have combined to make Canada the flavor of the month, economists said. "Overall, foreign investors have just become enamoured with Canada as a place for investment," Michael Gregory, an economist with Lehman Brothers, said in a telephone interview. The Toronto Stock Exchange index of 300 stocks jumped 85.45 points to close at 5,749.92, fuelled by brisk action in interest-rate sensitive issues such as banks and utilities. The index has gained more than 20 percent this year, compared to 20.7 percent for the Dow Jones industrial average and 17.6 percent for the Standard & Poor's 500 index. The Bank of Canada is expected to cut interest rates again as early as this week. The central bank has cut rates 19 times since May 1995 in a bid to revive a sluggish economy. Bank of Canada Governor Gordon Thiessen said on Wednesday that Canada's improving economy gives the central bank more latitude to set Canadian rates independent of U.S. rates. He added Canada is now in a better position to withstand a hike in U.S. rates than it has been in recent years. "The economic outlook is favourable. We will soon see signs of the payoff for the difficult restructuring decisions taken in both the private and public sectors," Thiessen said. After several years of belt tightening, Canadian governments have either balanced their budgets or are on track to wipe out huge deficits. Canada's 1.2 percent inflation rate is one of the lowest in the world and less than half the U.S. rate. Several Canadian banks cut residential mortgage rates on Wednesday to levels not seen in about three decades. Gregory said he expected Canada to continue to outperform the United States on the rate front and that offshore investors recognised that. "I think investors are coming to terms with the fact that Canadian interest rates -- because of low inflation and improving currency prospects -- should be below U.S. rates," he said. "Many investors are jumping on that and the Canadian dollar is undervalued. It's cheap." The Canadian currency closed around C$1.3312 (75 cents) Wednesday after trading around C$1.3300 earlier in the session. In stock trading, TSE's financial services group jumped 2.5 percent after soaring 3 percent Tuesday. Declining interest rates make bank lending more profitable and bank dividends more attractive for investors. Soaring bank profits have also lured investors. The major banks report their year-end results in a few weeks and are on track for a third straight year of record profits. Recent listings on the New York Stock Exchange have given Canadian banks a higher profile in the United States where they are considered cheap compared with U.S. bank stocks. New York-based Morgan Stanley issued a recommendation on two Canadian banks on Tuesday and predicted a strong fourth quarter for the entire group.

Toronto stocks ended weaker amid profit taking on Friday, but not before Canada's biggest stock market had struggled to a new intraday high. The TSE 300 Composite Index fell 7.51 points to close at 5591.31 in brisk turnover of 90.4 million shares valued at C$1.47 billion ($1.1 billion). Declining stocks outpaced advances 473 to 435 with 289 issues unchanged. "The story today was profit-taking," said Ira Katzin, an investment adviser with RBC Dominion Securities. The TSE posted its 50th record close on Thursday and also broke through the key 5600 barrier. The TSE managed to hit an intraday high of 5606 before turning lower on the day. Toronto's nine weak sectors included sharp losses in consumer products, base metals, communications and pipelines. The five strong groups were led by financial services. Bank stocks rallied along with firmer North American bond markets and on expectations for another Bank of Canada rate cut next weak. Analysts said the strong Canadian dollar has given the central bank enough leeway to lower rates. The Canadian currency closed stronger at C$1.3335 (US$0.7499) on Friday, the strongest the unit has been since October, 1995. --- HOT STOCKS --- * Bre-X Minerals Ltd. led active stocks, sinking 1.25 to 21.15 on 4.25 million shares. The stock fell on profit taking and continued investor jitters about Bre-X's alliance with a firm controlled by Indonesian president Suharto's son. * Among bank stocks, Canadian Imperial Bank of Commerce rose 0.90 to end at 56.60 after earlier hitting a 52-week high of 56.75. Bank of Montreal jumped 1.05 to close at 41.60 after hitting a 52-week peak of 41.65. * Canadian Airlines fell 0.14 to 1.61 after the struggling airline unveiled a survival plan amid heavy financial losses. Rival Air Canada gained 0.25 to 5.35 on 1.6 million shares. * Luxury hotel operator Four Seasons Hotels Inc jumped 1.75 to 26.50 after announcing plans to sell its stake in its Toronto hotel for C$13 million ($9.7 million). Four Seasons said it will continue to manage the hotel.

Quarterback Doug Flutie led the Toronto Argonauts to a 43-37 victory over the Edmonton Eskimos and the championship of the endangered Canadian Football League on Sunday. In what may have been the last Grey Cup game, the Argonauts overcame a driving snowstorm and a gritty Eskimo club to capture their first CFL championship since 1991. Flutie, named the Grey Cup's most valuable player, silenced critics who labelled him a fair-weather quarterback after the Argonauts lost last year's bitterly cold championship game to the Baltimore Stallions. The former Boston College star and Heisman Trophy winner as U.S. college player of the year also won the CFL's most outstanding player award this week after leading the Argonauts to a 15-3 season, the league's best record. "That's the full package. That's what has been missing the last few years," Flutie said after winning his second Grey Cup since 1992 when he was with the Calgary Stampeders. Flutie completed 22 of 35 passes for 302 yards and made a 10-yard scramble for a touchdown. Canadian newspapers have reported that the CFL's new salary cap may prevent Toronto from paying Flutie's annual salary of $1 million Canadian (about $750,000 U.S.) -- the highest in the league. The snowy, slippery contest was a typical Grey Cup in which weather played a critical role. The steady snowfall blanketed Hamilton's Ivor Wynne Stadium for most of the game and kept field crews busy. Despite the conditions, it was the second-highest scoring Grey Cup game. The highlights included a 91-yard kick return by the Eskimos' Henry "Gizmo" Williams which set a new Grey Cup record. The championship capped a chaotic, money-losing season which left many fans wondering if they will see the venerable Grey Cup next year. "After a game like this, it would be a real shame if the CFL folded," said parka-clad Bob Forbes, one of 38,595 spectators who huddled against the weather. Despite returning to its Canadian roots this year after a failed expansion into the United States, the CFL is dripping red ink. The Grey Cup was not a sell-out, and all but one of the CFL's nine clubs will lose money, due to dwindling crowds and cash bailouts to keep teams in Ottawa, Montreal and Vancouver afloat during the 1996 season. The 120-year-old Ottawa Rough Riders franchise folded in Canada's capital at the end of the regular season. The cash-strapped Eskimos could not afford to fly players' wives to the game. Average CFL attendance slipped to around 22,000 fans a game from 24,400 in 1995, despite a slick "Radically Canadian" marketing campaign trumpeting the league's national heritage.

Canada's Big Six banks are cruising toward a record C$6 billion ($4.4 billion) annual profit with strong earnings from three banks and buoyant profits expected from Canada's two other largest banks next week. Bank of Montreal and Bank of Nova Scotia -- the number three and four banks respectively -- cracked the C$1 billion ($740 million) mark this week. Toronto-Dominion Bank fell short of the billion dollar club, but Canada's fifth largest bank still turned in a record year. The profit parade continues when Royal Bank of Canada and Canadian Imperial Bank of Commerce deliver their results on Wednesday and Thursday respectively. "They will have whopping earnings. They will be record earnings, rest assured," Roy Palmer, a banking analyst with TD Sercurities Inc., said on Friday. National Bank of Canada, the smallest of the Big Six, also reports its earnings next Thursday. Bank of Montreal, Scotiabank and TD posted double-digit increases in net income this week -- with strong growth in personal, corporate and investment banking. The earnings so far have been in line with analysts' forecasts. "There were no surprises. Just really solid quarters from everybody," said CIBC Wood Gundy analyst Mark Maxwell. The banks' investment, brokerage and mutual fund businesses enjoyed a banner year as financial markets soared in 1996. Royal Bank's investment arm. RBC Dominion Securities Ltd, has already posted a record profit. RBC said on Thursday its earnings jumped to C$154.3 million ($114 million) in the 12 months ended Sept. 30, up from C$77 million ($57 million) a year ago. "In addition to two major mergers...each of our four global businesses turned in strong performances contributing to record results for the year," said RBC president Reay Mackay. RBC recently completed its C$480 million ($355 million) purchase of brokerage firm Richardson Greenshields of Canada Ltd., and merged some operations with parent Royal Bank. CIBC's investment unit is also expected to post bullish earnings when the bank reports its results next week. Analysts said earnings growth for the Big Six is expected slow in 1997, particularly if bond and stock markets cool off. However, TD Bank expects the boom to continue. "The current low level of interest rates should result in increased economic activity in Canada in 1997 and the gradual return of consumer confidence," said TD president Charles Baillie. More dividend hikes are possible next week following increases at Scotiabank and TD. Scotiabank raised its payout by C3 cents (2 cents) to C37 cents (27 cents) a share, its second increase of 1996. TD boosted its dividend by C3 cents (2 cents) to C28 cents (21 cents) a share. "I would be astonished if CIBC did not increase its dividend at this time," said Palmer. CIBC last raised its dividend by C5 cents (4 cents) to C45 cents (33 cents) last June. Maxwell said there is less pressure on Royal Bank and National Bank to raise their dividends now, but an increase may come in early 1997. Improved credit quality also contributed to bottom lines of Scotiabank, Bank of Montreal and TD. All three banks reported lower loan loss provisions for 1996. TD surprising analysts with a deeper-than-expected drop in its provision to C$152 million ($112 million) from C$180 million ($133 million) in 1995. Analysts said loan losses for the Big Six appear to have touched bottom and are expected to creep higher next year.

Canada's Big Six banks are poised for a third straight year of record profits when they begin reporting year-end earnings on Tuesday, but analysts expect earnings growth to slow in 1997. The group's combined profit is expected to top C$6 billion ($4.5 billion) for the year ended Oct. 31, eclipsing a record C$5.2 billion ($3.8 billion) in 1995, analysts said. Most of the increase was due to higher investment banking and fee revenues and lower loan losses. "It's going to be a very good quarter again, but we may be getting toward the end of very strong quarter-over-quarter growth," said Roy Palmer, an analyst with TD Securities Inc. High-flying bank stocks may get a further boost if the group beats analysts' estimates for fourth-quarter profit gains of between 15 percent and 17 percent. "If we get good news and they come in at or higher than analysts' estimates, I think you will see some significant strength," said Fred Ketchen, director of equity trading for ScotiaMcLeod Inc. The Toronto Stock Exchange's financial services group jumped 176 points to close at a 52-week high of 5541.40 on Monday as analysts predicted several banks would reward shareholders with dividend hikes. Bank shares have soared this autumn as foreign investors stampeded into Canada's financial markets, lured by declining interest rates, low inflation and a recovering economy. The sector has added about 1,400 points since early September and powered the TSE to record heights. Listings on the New York Stock Exchange have given Canadian banks a higher profile south of the border. Some U.S. brokers have issued buy ratings on Canadian bank stocks, which are considered cheap compared to U.S. issues. But earlier this month, Canadian brokerage CIBC Wood Gundy lowered its recommendations on most of the group. CIBC Wood Gundy analyst Mark Maxwell said the group's valuation multiples were averaging 1.7 times book value -- narrowing the gap between Canadian bank shares and their U.S. counterparts. Maxwell said in a report that bank officials warned analysts that their estimates for average earnings growth of 14 percent in 1997 were too optimistic and that 8 percent was The earnings parade will kick off with Bank of Montreal on Tuesday and wrap up with National Bank of Canada on Dec. 5. Bank of Montreal is expected to post a fourth-quarter profit of C$1.06 (79 cents) a share, up from C$0.93 (69 cents) a share a year ago, according to figures provided by the International Brokerage Estimates Service. Bank of Nova Scotia's earnings on Wednesday are seen climbing to C$1.01 (75 cents) a share from 88 cents Canadian (65 cents) a share. Toronto-Dominion Bank's earnings are forecast to rise to 74 cents Canadian (55 cents) a share on Thursday, up from 72 cents Canadian (54 cents) a share last year. Royal Bank of Canada and Canadian Imperial Bank of Commerce -- the country's two biggest banks -- report next week. Royal Bank's fourth-quarter results are forecast to be C$1.02 (76 cents) a share, compared to last year's 90 cents Canadian (67 cents) per share. CIBC is seen improving to C$1.51 ($1.12) a share in the fourth quarter from C$1.26 (94 cents) per share a year earlier. National Bank of Canada, the smallest of the big six banks, is expected to post a 42 cents Canadian (31 cents) per share profit, up from 33 cents Canadian (25 cents) a year earlier.

"The Times They Are a-Changin" -- Bob Dylan's counter-culture anthem of the 1960's -- is being used in a commericial for a Canadian bank and some fans are up in arms. The Bank of Montreal is running a television commercial using the American singer's 1964 folk classic to lure baby boomers into the country's third biggest bank. The TV spot shows children running down country roads and across lush fields as a choir sings Dylan's song. The commercial ends with a Bank of Montreal logo and the promise of a big announcement on Oct. 16. The new campaign has drawn fire from Dylan fans angry that a big institution has co-opted this protest song from their youth. But a senior bank official said Dylan's lyrics reflect the bank's desire to change in the 1990s. "Our view is a bank has to change because the times are changing. We thought the lyrics caught rather nicely the imperative for large institutions, like banks, that they face having to change," George Bothwell, senior vice-president of public affairs, said in a telephone interview. Some callers to a morning radio show in Toronto were outraged at the ad campaign. The Canadian Broadcasting Corp. played the commercial and Dylan's version, then asked listeners for their reaction. "I was appalled. The bank failed to understand the spirit of the song. It has so many associations for people our age. I hope they reconsider. They went over the line with this one," one female caller said. Another listener said: "Bob Dylan, I can only say, shame on you." Dylan still owns the copyright to the song but was unavailable for comment. Some younger callers said aging baby boomers have only themselves to blame. "I don't know why you're surprised. You had high ideals when you grew up. Then you started making money and buying cars. And all the ideals are no longer convenient so you sold out. Every single one of you. Dylan is just doing what everyone is doing," a young listener said. Another caller scoffed at the controversy: "Baby boomers spare us the crocodile tears. A lot of people have sold out." One listener found it ironic that in these tough economic times a bank would use a song that warned: "You better start swimming or you'll sink like a stone." Canada's big banks, which are on track for a third straight year of record profits, have been criticized for high service fees and tight lending policies.

Veronika Hirsch, the flamboyant Canadian stock picker hired recently to spearhead Fidelity Investments' drive to dominate the Canadian market, has been removed from her fund as she is probed by Canadian regulators. The dramatic move -- just three months after Canada's so-called "Fund Diva" joined the mutual fund giant -- is a blow to Fidelity's expansion efforts in Canada, analysts said. Hirsch, who was unavailable to comment, is embroiled in a controversy over personal trades she made before joining Fidelity, the world's biggest mutual fund company. Her investments earlier this year in a small Vancouver company, Oliver Gold Corp., grabbed headlines and attracted the attention of the British Columbia Securities Commission. Late Wednesday, Fidelity ousted Hirsch from her portfolio and said her status was "under discussion." Fidelity also took the unprecedented step of offering clients their money back without penalty. The fund has grown to C$190 million ($143 million) in assets since it was launched amid much fanfare on Sept. 23. Fidelity's head office in Boston declined to comment and referred all calls to its Canadian subsidiary. "We acknowledge that it is highly unusual for a fund to change portfolio managers so quickly after its launch. This fee recovery program is a proactive and voluntary response on our part to maintain investors' goodwill," Fidelity Canada spokesman Chethan Lakshman told Reuters. Fidelity vigorously defended Hirsch when the controversy first broke several weeks ago. But it canceled a 27-city road show last week when regulators contacted Hirsch. At issue is her purchase of 65,000 special warrants of Oliver Gold through a private placement while she was a fund manager with AGF Management Ltd. in Toronto. Hirsch paid C$1.53 ($1.15) per warrant, according to filings with the British Columbia Securities Commission and reported by Stockwatch, a Canadian investment publication. Shortly afterward, Hirsch's AGF Growth & Income Fund bought 295,000 special warrants at more than double that price. Analysts said regulators are expected to review whether the trades constitute "front running", a practice whereby a fund manager tries to profit personally by buying securities he or she intends to buy later for the fund. Another related issue is whether Hirsch, a resident of Ontario, used an address in British Columbia to buy the Oliver Gold shares, which were only offered to B.C. residents. Lakshman contended the controversy has not damaged Fidelity's reputation or expansion plans in Canada. But analysts saw the publicity as damaging as Fidelity gears up for the critical year-end sale of retirement savings plans. "They look kind of foolish being the ones associated with this situation. I don't think it helps their bid to become the dominant player in Canada by any stretch of the imagination," one industry analyst said. The Hirsch case comes as Canadians are pouring billions of dollars into mutual funds. Over the last six years, investment has jumped seven-fold to C$180 billion ($136 billion). Fidelity wants a bigger share of the Canadian market, where it ranks ninth with C$7 billion ($5.2 billion) in assets, behind leader Investors Group, with C$22 billion ($16 million). To quarterback its effort in Canada, Fidelity poached Hirsch, a high-profile stock picker with AGF, for a rumored C$2 million ($1.5 million) signing bonus in August. Her meteoric rise to celebrity status began when she joined AGF in October 1995 after a successful but low-profile stint at Prudential Insurance Co. of America. A multi-million advertising campaign put Hirsch's face on television screens across the country. She soon rivalled celebrity stock guru Frank Mersch at Altamira Management Ltd. as the country's best-known fund manager. When Hirsch jumped to Fidelity, her blood-red nails and leather outfits appeared an uncomfortable fit with Fidelity's ultra-conservative culture, but the hiring was considered a major coup within the industry. At the time, Fidelity Canada President Kevin Kelly said: "Veronika is one of the country's top equity managers with an outstanding track record and reputation." Kelly was unavailable for comment on Thursday. Industry critics argue that the Hirsch case raises key questions about the fiduciary responsibility of fund managers to their clients. It also highlights the jumble of standards governing the personal investing of Canadian money managers. Altamira has tough rules restricting managers from investing in open-ended mutual funds, short-term government bonds and treasury bills after a controversy involving one of its fund managers. But some industry observers say the entire industry should adopt tougher U.S. guidelines.

Toronto, Canada's biggest city and financial capital, is bracing for a near shutdown Friday when protesters hit the streets against deep budget cuts by Ontario's Conservative government. The so-called "Days of Protest" on Friday and Saturday are shaping up to be the biggest labour protest in Canada since the Winnipeg General Strike in 1919 in which one person died and 30 were injured after a confrontation with police and the army. In a bid to paralyse this city of 2.2 million people, organisers hope to close businesses and disrupt services, including underground trains and Toronto's Pearson Airport, the country's busiest airport. Thousands of unionized workers, civil servants and activists will picket outside the Toronto Stock Exchange, government offices, corporate headquarters and factories. "I must tell you to prepare for days of inconvenience and frustration Friday and Saturday," Alan Tonks, chairman of Metro Toronto, said in a letter to residents on Thursday. Ironically, the labour chaos comes as Toronto basks in the glow of being chosen by Fortune magazine as the world's best city for quality of life. The protesters are furious with the government's plans to cut spending by C$8 billion ($5.9 billion) to wipe out a huge deficit by the turn of the century. Since sweeping to power in 1995 promising a right-wing revolution in Canada's most populous province, the Conservatives have revamped labour laws, slashed welfare payments, introduced workfare and announced plans to close hospitals and trim education budgets. "We want to put pressure on the government and its corporate supporters that we're not going to accept this anymore," Linda Torney, co-chairwoman of the "Days of Protest", said in a telephone interview. Premier Mike Harris, who has been dubbed "Newt of the North" in reference to Republican U.S. House Speaker Newt Gingrich, vowed the protests will not stall his "Common Sense Revolution." City officials were bracing for a disruption of Toronto's bus and subway services, which handle about 1 million commuters a day. Transit officials on Thursday won a partial injunction against picketing at subway stations. GO Transit, the train service that links suburban communities to Toronto, warned commuters that "service may be delayed, adjusted, interrupted or even cancelled." Air travellers can also expect delays at Pearson Airport, which handles about 65,000 passengers a day, said airport spokesman Bruce Reid. A Canadian court ruled Wednesday that picketers cannot interfere with essential airport workers, but can set up informational pickets. Airlines have promised to re-schedule flights if there are significant delays. Meanwhile, several major manufacturers have cancelled day shifts. De Havilland Inc., a unit of transportation firm Bombardier Inc., said 6,200 employees at its Toronto aircraft plant will be off the job Friday. The protest will not affect General Motors Corp.'s Canadian unit, which is getting back to work after a nearly three-week strike ended earlier this week. The Breeders' Cup, a major international horse-racing event on Saturday, will not be affected by the protest. On Toronto's Bay Street, the heart of Canada's financial community, traders not lucky enough to get a scarce hotel room are planning to sleep in their offices. "Some essential people will be in the office. They might grab a couch or a sleeping bag," one broker said. Other firms are sending their employees to offices outside Toronto or telling them to work from home. Many workers are expected to take the day off. The Toronto Stock Exchange, Canada's biggest stock exchange, is planning a "business-as-usual day," despite a large rally planned outside the exchange.

Shares in Canadian waste and transportation firm Laidlaw Inc soared on Tuesday as investors and analysts applauded major moves in ambulance services and waste management worth over $2 billion. While Laidlaw's stock hit new heights on the Toronto Stock Exchange, chief executive officer James Bullock said the company is poised for strong growth with two huge deals announced after the market closed on Monday. In a bid to become North America's top ambulance operator, Laidlaw plans to acquire Colorado-based American Medical Response Inc in a $1.12 billion cash deal and merge it with its California-based MedTrans ambulance services unit. In the other transaction, Laidlaw has signed a letter of intent to sell its South Carolina-based Environmental Services unit for $1 billion in cash, shares and debt to Rollins Environmental Services Inc of Delaware. Laidlaw will own 66-percent of a new combined company, Laidlaw Environmental Services Inc., which will be the dominant player in North American hazardous waste management. The moves came a few weeks after Burlington, Ontario-based Laidlaw completed the $1.65 billion sale of its solid waste management business to Allied Waste Industries Inc of Arizona. Laidlaw's class B stock closed up C$1.80 ($1.33) at a 52-week high of C$18 ($13) in heavy turnover of 9.3 million shares on the Toronto Stock Exchange. Laidlaw's class A stock improved C$1.45 ($1.06) to a new high of C$17.95 ($13.23). "We've got a (share price) target level of around C$19 ($14) and C$20 ($15) for the year and it will probably go higher when the dust settles," said Ira Katzin, an investment advisor with RBC Dominion Securities. AMR jumped 6-3/8 to close at 39-3/8 on the New York exchange, while Rollins Environmental added 1/2 at 2-1/2. Analysts said the Rollins deal will further consolidate a fragmented industry and may improve hazardous waste prices which have been depressed in the past four to five years. The AMR acquisition will also boost Laidlaw's presence in the fast-growing healthcare transportation area. "Strategically it is quite wise," Bunting Warburg Inc. analyst Ted Larkin said in a telephone interview. "The highest growth potential is with their transportation companies. They are also able to partially spinoff the hazardous waste operations and also allow that company to regain a profile by listing on the New York Stock Exchange," Larkin said. In a note to clients, Lehman Brothers analyst Jeff Kessler said the $40 a share offer for AMR is fair and he recommended investors tender their shares. With combined annual revenues of about $1.3 billion, the new AMR will hold a 14 percent share of the $10 billion ambulance industry. It also gives Laidlaw access to related medical transport services which are a $30 billion market. Bullock said AMR will immediately boost Laidlaw's earnings, but he declined to give a specific forecast. Larkin bumped his profit forecast for Laidlaw in the 1997 fiscal year ended August to $0.71 a share from $0.70 per share. He also revised his 1998 forecast up to $0.88 per share from the low eighties. Some analysts raised concerns that anti-trust issues may hamper the AMR deal, but Bullock said he does not foresee any problems with regulators. The transaction with Rollins Environmental will be neutral to Laidlaw's earnings in the near term while operations are consolidated. Bullock said staff levels may be reduced by between 15-20 percent and 20 facilities may be closed, leaving about 100 facilities in the merged firm. The integration will yield more efficient operations and savings of US$75 million annually.

Anti-government protests swept across Canada's biggest city on Friday as demonstrators in Toronto shut down the transit system, disrupted businesses and tried to break into the Toronto Stock Exchange. "We've come to the place where the real power is ... They get their power and strength from inside this building," Jim Stanford, an economist for the Canadian Auto Workers, told hundreds of protesters outside the exchange. Demonstrators chanted "Shut it down, shut it down," as they pounded on the glass doors of Canada's biggest stock market. One man wearing a mask and combat fatigues was seen hurling himself against the doors. Protest organisers later moved the rally away from the doors of the exchange. In another part of the city, Ontario Finance Minister Ernie Eves said it was ironic that some of the groups that are protesting have huge pension funds that invest in stocks. Protesters hit Toronto streets, paralysing rush-hour subway trains and closing businesses in Canada's biggest city to protest deep budget cuts by Ontario's Conservative government. Subway and bus service ground to a halt in this city of 2.2 million people, forcing about one million commuters to walk, drive or cycle to work or just stay home. Unionized workers, civil servants and social activists also descended on government offices and factories in the first day of the so-called "Days of Protest" against budget cutbacks. But picketers failed to disrupt commuter trains from Toronto's bedroom communities or interrupt service at Pearson Airport, the country's busiest. Expected traffic jams on the city expressways also did not materialise. In the days leading up to the protest, a siege mentality gripped Toronto's Bay Street, the heart of Canada's financial community. At least one brokerage firm flew traders to its offices in New York and Montreal, while other brokers slept in hotel rooms or in their offices overnight. Other companies hired boats to ferry employees across Lake Ontario from nearby communities. The protesters are furious with Premier Mike Harris' plans to cut spending by C$8 billion ($5.9 billion) to wipe out a huge deficit by the turn of the century. Since sweeping to power in 1995 promising a right-wing revolution in Canada's most populous province, the Conservatives have revamped labour laws, slashed welfare payments, introduced workfare and announced plans to close hospitals and trim education budgets. "These cuts that Harris made are hurting the workers. This is part of the polarisation that is happening in Ontario. The anger is going to grow and grow," Syd Ryan, president of the Ontario division of the Canadian Union of Public Employees, told picketers outside a government building. But Harris, who has been dubbed "Newt of the North" in reference to Republican U.S. House Speaker Newt Gingrich, has vowed the protests will not stall his "Common Sense Revolution." "Will they discourage us from creating more jobs? No. Discourage us from workfare? No. That's what we were elected to do and I don't expect that most of the public want us to change from that agenda," Harris told reporters. The Conservatives' popularity has held at around 50 percent in recent opinion polls. Many commuters took the delays in stride. "I see the protesters have a point, but I think it's going to inconvenience a lot of people who don't have any other choice," said John Ivarey. A poll taken this week found that 67 percent of Toronto residents opposed the "Days of Action" rallies. Protesters waved placards and temporarily blocked cars from entering government parking lots, but Toronto police said there were no major incidents of violence. One man was charged with a weapons offence after allegedly threatening picketers with a baseball bat outside a bus garage. There also were skirmishes outside a postal station. Several major manufacturers cancelled day shifts. De Havilland Inc., a unit of transportation firm Bombardier Inc. , said 6,200 employees at its Toronto aircraft plant would be off the job Friday.

Ontario Hydro, North America's biggest power utility, said Tuesday that it would take a huge C$2.5 billion ($1.8 billion) charge in 1996 to strengthen its financial structure. The debt-laden, Ontario government-owned utility said its board of directors also approved a C$600 million ($440 million) charge against 1997 earnings. The charges, related to accounting and operational changes, come as the ruling Conservative government of Canada's most-populous province ponders the privatisation of the massive utility. The heavy writedowns add up to an estimated 1996 net loss of C$1.9 billion ($1.4 billion), Ontario Hydro said in a statement. The utility previously forecast net income of between C$600 million ($440 million) and C$625 million ($460 million). "These decisions are driven by our determination to improve nuclear performance and to make capital and policy decisions that enable us to succeed in the business environment we face," said Ontario Hydro Chief Executive Officer Allan Kupcis. He said the move will not affect Hydro's ability to pay down its debt, estimated at more than C$30 billion ($22 billion) due to overexpansion. Ontario Hydro is the continent's largest electricity producer based on installed generating capacity and one of the world's biggest non-sovereign borrowers. It operates 96 hydro-electric stations, five nuclear plants and six fossil-fuel stations. But competitive pressures from within and outside Ontario have forced changes on Hydro in recent years. Last June, a government commission recommended that Ontario Hydro lose its 90-year power monopoly and face competition from private Canadian power suppliers and U.S.-based competitors. Among the operating decisions made Tuesday, the utility said it will scale back or cancel some projects. The biggest single charge was a C$1.2 billion ($882 million) writedown reflecting the costs of surplus heavy water at its nuclear operations. The decisions will not affect employee staffing levels at the utility.