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The Wall Street Journal Weekly Review & QuizCovering front-page articles from October 1 – 7, 2005Professor Guide with Summaries Fall 2005 Issue #7Developed by: Scott R. Homan Ph.D., Purdue University

Questions 1 – 12 from The First Section, Section A

Better Mousetrap In Shakeup, Disney Rethinks How It Reaches AudiencesBy MERISSA MARR October 1, 2005; Page A1http://online.wsj.com/article/SB112812225353857287.html

Robert Iger, who takes over today as Walt Disney Co.'s chief executive, is shaking up the Magic Kingdom by pushing a mandate for the digital age: Consumers must be able to use Disney content whenever and wherever they want it. Mr. Iger is talking about selling episodes of ABC hits such as "Lost" and "Desperate Housewives" online like songs. He is roiling the movie-theater industry by publicly floating the idea of releasing movies in cinemas and on DVD at the same time. He is negotiating with telecom companies about ways to deliver entertainment over cellphones. Mr. Iger, who succeeds 21-year incumbent Michael Eisner, faces enormous challenges as he rethinks Disney's business model. The anytime/anywhere strategy threatens to erode traditional revenue from theaters, DVDs and broadcast television and presents new risks of high-tech piracy. The 54-year-old executive inherits a company whose old way of doing business has been blown up by technology. Legal technologies such as fancy home theaters and digital video recorders are driving down movie attendance and sapping TV ad sales. Piracy is eating into entertainment sales at home and abroad. And Disney has lagged in rapidly growing areas like videogames that have become popular with young consumers. Media moguls have struggled unsuccessfully with these questions for the last decade. Disney's track record of adapting to new technologies is mixed at best, but Mr. Iger is under pressure to devise new ways to drive growth. Its core businesses -- movies, TV, theme parks and consumer products -- are mature, and even when performing well, are hit-driven. Disney's stock, clouded by the threat of piracy and the uncertainty over new digital media, has dropped more than 12% since Mr. Iger was named to succeed Mr. Eisner in March. Under Mr. Eisner, Disney took a more conservative approach to the burgeoning digital media world, intent on protecting such traditional revenue engines as advertising and home video. Mr. Iger believes Disney's future still lies in its entertainment content, but he wants the company to move to deliver it in new ways, in spite of the short-term turmoil it might bring. "If we sit back and rely on old technology, the consumer is going to pass us by," Mr. Iger says, noting that the music industry made that mistake. "It's extremely important as I enter this new role that I not let that happen to the Walt Disney Co. We're not a technology company, but we need to be the closest thing to that." Mr. Iger says his biggest obstacle may be the business habits of Disney's own employees and of theater owners, mass retailers, television affiliates and others. "We need to create an atmosphere that tolerates experimentation, even if it's at the expense of near-term economics," he said during a recent trip to open the new Hong Kong

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Disneyland. Having risen from a job as a TV weatherman to head of Disney's ABC network, Mr. Iger sees television networks as being at particular risk from new technology. Some viewers today watch video clips on cellphones and use digital recorders that skip ads. Others watch entire seasons of a TV series on DVD, missing advertising altogether. These developments are shifting control to viewers, forcing Disney to think beyond the 30-second ad. So even though Disney's television unit is posting strong results, Mr. Iger is examining new delivery models. Among the ideas being discussed at Disney's headquarters: Selling hit television shows online, perhaps for use on portable video devices. That may include providing shows for devices like an iPod that would play video -- something that Apple Computer Inc. could announce by the end of the year, people familiar with the situation say. One of Mr. Iger's top lieutenants, Disney-ABC Television Group President Anne Sweeney, recently handed out to her staff Sony's PSP portable video and games devices, loaded with programming such as the teen TV show "That's So Raven," "ABC News," and the movie "Pirates of the Caribbean." She wanted them to see what their shows looked like playing on a smaller screen. Soon, she says, staffers were discussing fundamental change. Should shows that might prove popular on such devices be shortened? Should certain camera angles be emphasized? Would different promotional techniques be warranted? "In the future, there will be a percentage of people who only receive our content on devices other than television sets," predicts Ms. Sweeney, who is about to appoint a new executive to lead the division's digital efforts.

1. Who is the new chief executive of Walt Disney Co. a. Michael Eisnerb. Robert Iger Correctc. Mickey Moused. Anne Sweeney

2. The Disney-ABC Television Group President recently handed out __________to her staff loaded with programming.a. Dell MP3 Playersb. Dell Laptopsc. Sony's PSP Correctd. DVD’s

Lowering the Wall China Irks U.S. as It Uses Trade To Embellish Newfound CloutBy PETER WONACOTT in Beijing and NEIL KING JR. in Washington October 3, 2005; Page A1http://online.wsj.com/article/SB112830615852958216.html

China has a new calling card: champion of free trade. Since March, Beijing has opened free-trade talks with South Korea, Pakistan, Australia and Iceland. In November, it inked deals with Thailand, Malaysia and eight other Southeast Asian countries. Even though China's government still controls large swaths of the country's economy, it has sealed or is seeking free-trade pacts with 25 countries -- up from zero two years ago. China's pursuit of trade deals, combined with a flurry of big-ticket bids for energy and other



assets, underscores its desire to don the uniform of a great power. Having created a credible army and a booming economy, China is positioning itself as a leader of global trade and investment, rivaling the U.S. in one of its traditional spheres of influence. As a result, China's market clout is making it a rallying point for countries looking for a counterweight to the world's lone superpower. All this is raising alarms within the Bush administration, whose own trade agenda has lost momentum amid rising protectionism in Congress. A U.S. trade deal with five Central American countries squeaked through Congress by two votes this summer after months of Republican arm twisting. In particular, Washington is fretting over China's courting of countries on the outs with the U.S., including Venezuela, Cuba, Sudan and Uzbekistan. "China's involvement with troublesome states indicates at best a blindness to consequences and at worst something more ominous," U.S. Deputy Secretary of State Robert Zoellick said in a speech in New York last month. He said China's new prominence has stirred "a cauldron of anxiety."Chinese officials say they are not trying to rival the U.S. or stir trouble. Beijing's trade and investment agenda, they say, is designed to support an economy dependant on exports that also has a thirst for energy and raw materials. In addition, for decades, U.S. presidents have urged China to join the international economy and to take its rightful place on the diplomatic stage. "Ironically, now our teachers are getting worried because we, the students, followed your advice so faithfully and became so successful," said Long Yongtu, a former deputy trade minister who led China into the World Trade Organization, in a May speech to the Institute for International Economics in Washington, D.C. "As the students, we believe that our teachers should not be worried about that." China's own economy still remains relatively closed. It doesn't allow a free flow of capital, restricts foreign stakes in key sectors, such as autos, telecommunications and banking, and restrains its population's movements. But in the narrower sphere of international trade, its alacrity in signing trade deals is making the U.S. appear sluggish.China took just two years to strike a pact with 10 Southeast Asian countries. The agreement whittles import tariffs on commodities such as fruits and vegetables to zero by 2010. During the same period, in the Asian arena, Washington inked one 1,200-page deal with Singapore. Talks with Thailand have been halting and likely won't wrap up until 2006 at the earliest. Efforts to get negotiations under way with South Korea continue to falter amid misgivings in Seoul. One reason for the slowdown, say trade experts, is that U.S. negotiators are forced to load up agreements with environmental and labor conditions to help them pass through Congress. They also have to try to protect sensitive U.S. markets by maintaining tariffs or quotas. China generally eschews such niceties."The U.S. is losing the competition for influence in Southeast Asia," said Singapore's ambassador at large, Tommy Koh, in remarks late last year that echoed around the region. "The winner, at least for the time being, is the People's Republic of China." Mr. Koh, speaking at a forum sponsored by the San Francisco-based Asia Foundation, offered the Bush administration a pointed bit of advice: "Resist new protectionist measures" and stand firm by America's "longstanding policy of free trade and open investment."

3. Since March, Beijing has opened ___________ with South Korea, Pakistan, Australia and Iceland.a. bank accountsb. free-trade talks Correct


c. technical collegesd. Starbucks Coffee Shops

4. China is positioning itself as a ____________, rivaling the U.S. in one of its traditional spheres of influence.a. humanitarian leaderb. technology leaderc. manufacturing leaderd. leader of global trade and investment Correct

The Cellphone Poets Of Tokyo Marry Tech, Tanka and TraditionBy PHRED DVORAK October 4, 2005; Page A1http://online.wsj.com/article/SB112837716093258879.html

TOKYO -- For years, Ayano Iida used email on her cellphone mainly to tap out quick messages to friends like "Let's get together tomorrow." But these days, Ms. Iida's mobile is spouting out heartfelt verse like this: "The guy who I liked/second-best, was second-rate/in the school that he/went to; and also in his/performance between the sheets." Ms. Iida, 26 years old, is one of a growing number of young Japanese using mobile phones to write and exchange tanka, an ancient form of unrhymed poetry whose roots reach back at least 1,300 years. Scores of tanka home pages and bulletin boards are popping up on cellphone Internet sites with names like Palm-of-the-Hand Tanka and Teenage Tanka. Japan's national public broadcaster airs a weekly show called "Saturday Night Is Cellphone Tanka," which gets about 3,000 poems emailed from listeners' mobiles each week on topics like parental nagging and the boy in the next class. The marriage of tanka and cellphones is all the more unexpected because tanka is so bound up with Japanese tradition. Tanka, literally "short song," is thought to have first emerged around the eighth century. It is composed of 31 syllables arranged in a rigid, five-line pattern of 5-7-5-7-7. It's big on archaic words and has long been associated with high culture. Courtiers of the 10th century exchanged love letters in tanka form, and the imperial family still pens tanka at the start of each year on topics like "happiness" and "spring." Tanka are often used to commemorate pivotal moments like death: Japanese novelist Yukio Mishima wrote two tanka before he slit his belly in ritual suicide in 1970.But young Japanese say tanka is surprisingly suited to the cellphone. It's short enough to fit on little mobile screens, and simple enough to let young poets whip out bits of verse whenever the spirit moves them. In many ways, tanka is similar to the kind of terse, sparse messages Japanese kids have tapped out on their handsets for years -- especially in the early days of the cellphone when just a small number of characters could be crammed into one email. "The rhythm and the length of tanka make it exactly the right vessel for what I want to say," says Ms. Iida, an ebullient woman in red-framed glasses who works nights at a bookstore in the city of Tochigi, a few hours north of Tokyo. Roiling the Kessha. The new, freewheeling wave of poetry on cellphones is roiling the traditional, hierarchical tanka world. There, budding writers spend years of apprenticeship in poetry societies called kessha, under the guidance of a master poet. Many labor for 10 or 20 years before the master decides they're good enough to put out their own poetry



collections. Traditionalists frown on cellphone tanka's liberal use of slang and colloquial Japanese. They say the topics are frivolous and the writing shallow and one-dimensional. Some even take issue with the way tanka is displayed on a handset: horizontally to fit the screen rather than vertically as in traditional Japanese writing. "Almost all of the cellphone poems are stuff I'd never call 'tanka,' " says Tokio Ishii, an 80-year-old former paper-company employee who is a ranking member of Shin Araragi, or New Yew Tree, one of Japan's most traditional kessha. "What we do is something like religious training. It's pure literature. On the cellphones what they're doing is more like a chat group."

5. A growing number of young Japanese use mobile phones to write and exchange _____, an ancient form of unrhymed poetry whose roots reach back at least 1,300 yearsa. binkab. bangc. tanka Correctd. tang

6. The new, freewheeling wave of poetry on cellphones is roiling the traditional world. There, budding writers apprentice in poetry societies called kessha, under the guidance of a master poet. Many labor for _______ before the master decides they're good enough to put out their own poetry collections.a. 10 or 20 weeksb. 10 or 20 monthsc. 10 or 20 seasonsd. 10 or 20 years Correct

Tax Break Brings Billions to U.S., But Impact on Hiring Is UnclearBy TIMOTHY AEPPEL October 5, 2005; Page A1http://online.wsj.com/article/SB112847525167060248.html

Nine months into 2005, U.S. companies have announced plans to repatriate about $206 billion in foreign profits under a special one-year tax break. But it's far from clear whether the spending has spurred the job growth that backers of the break touted. A law signed by President Bush shortly before the 2004 election allows companies to transfer profit from overseas operations back to the U.S. this year at a special low tax rate of 5.25%. Businesses often keep such funds outside the country in part to avoid paying taxes in the U.S., where the effective rate on repatriated profit for many companies is normally closer to 25%. Backers said the measure would provide an incentive to companies to invest those funds in U.S. operations. Most companies using the break have offered only broad outlines for how they intend to use their windfall. For the most part, they say they are using the bulk of the money for tasks such as paying down debt and meeting payrolls. Direct job creation rarely appears on the list. Some companies are even bringing home piles of cash while continuing to downsize. Colgate-Palmolive Co., of New York, said in July that it planned to repatriate $800 million, at a time when the company also is pursuing plans to shut a third of its factories and eliminate roughly 12% of its work force,



or 4,450 people, over four years. So far, 91 large companies have disclosed some profit repatriation under the break, according to International Strategy & Investment Group Inc., an investment advisory company.The one-year break was an amendment in the American Jobs Creation Act. The legislation began as a corrective to an export tax break for U.S. companies that had been ruled illegal by the World Trade Organization. Though U.S. firms generally pay annual taxes on all their income world-wide, there normally is a broad exception for profits "permanently" reinvested in overseas operations. Money moved back to the U.S. gets taxed. Under the one-year law, repatriated funds still generate a tax bill, but one not nearly as hefty as it would have been otherwise. No statistics break out how much of overall U.S. job growth can be tied directly to the provision. Job growth has been respectable this year, though the data don't yet reflect the hurricane shocks, which are expected to take a toll. Nonfarm payroll employment has grown an average of 188,000 a month over the past six months. In August, the unemployment rate fell to 4.9%, a four-year low, from 5% in July. There was much debate when the measure was passed a year ago whether it would create jobs. Many advocates pointed to a study by economist Allen Sinai, released in October 2003, which suggested a temporary cut in the tax on foreign earnings would create 666,000 jobs over five years. Mr. Sinai now says that number may be overstated. "The bottom of the range could be 450,000 jobs, but that's still 90,000 jobs a year," he says. "It looks to me like the act is roughly working as it was expected to." He adds: "We never found huge impact -- but certainly in our work we found improvement in growth, capital expenditures, and jobs coming from the measure." Companies that beef up their balance sheets are stronger competitors and "better positioned to grow in the future," says Daniel Clifton, executive director of the American Shareholders Association, a group that lobbies for shareholder interests. He and others say there also is an indirect impact; for instance, companies using the funds to buy capital equipment may create jobs on factory floors for workers making those machines. "It filters down into the broader economy -- by people who are making the equipment that's being bought," Mr. Clifton says. "It's going to continue to increase factory output. And so the people who are not repatriating are still getting jobs created." The tax break got off to a slow start, partly because of confusion over how the Treasury Department would enforce the law. But companies have stepped up repatriation in recent months, with another burst of announcements expected in conjunction with third-quarter earnings reports in the coming weeks. The deadline for acting is the end of December, though some companies that operate on fiscal calendars will be able to extend that into 2006. U.S. companies ultimately are expected to repatriate as much as $350 billion.

7. A study by economist Allen Sinai, released in October 2003, suggested a temporary cut in the tax on foreign earnings would create ___________ jobs over five years.a. 6000b. 6066c. 66,000d. 666,000 Correct


8. A law signed by President Bush shortly before the 2004 election allows companies to transfer profit from overseas operations back to the U.S. this year at a special low tax rate of __________.a. 1.00 %b. 3.00 %c. 5.25 % Correctd. 25.25 %

Tough Tactics As Russia Squeezes Big Business, A Tycoon Decides to Pick a FightBy GREGORY L. WHITE October 6, 2005; Page A1http://online.wsj.com/article/SB112856247619561303.html

MOSCOW -- Two have fled the country. Another is in jail, his oil empire in ruins. Russian President Vladimir Putin has largely succeeded in his campaign pledge to make oligarchs -- the powerful tycoons who emerged in the chaos of post-Soviet Russia -- disappear "as a class." Now, most of the country's super-rich are either packing up or hunkering down and trying to stay on the government's good side. Except Mikhail Fridman. Using bare-knuckles business tactics, the 41-year-old built an $8 billion empire spanning oil, telecoms, banking and retail. Now, he's picking a fight with Leonid Reiman, Russia's telecommunications minister and a longtime Putin friend. Last fall, lawyers for units of Mr. Fridman's Alfa Group lined up Anthony Georgiou, a former Reiman partner, to provide testimony to a British Virgin Islands court that he'd paid over $1 million in bribes to Mr. Reiman. He testified that the payments happened when the future minister was a top executive at a Russian state phone company in St. Petersburg in the early 1990s. Based in part on allegations raised in the case, German prosecutors have opened an investigation into whether Western banks facilitated any criminal activity. Mr. Reiman has strenuously denied any wrongdoing, and late last year accused Alfa of smearing him to prevail in a business dispute. "Alfa, because it's an old oligarchic structure, is trying to use the traditional means by which they've resolved conflicts many times over many years -- by putting pressure on officials," Mr. Reiman told reporters. In fact, Mr. Fridman makes little pretense that this is just about clean government. He's in a vicious battle over a stake in Russia's No. 3 mobile-phone company. His lawyers are using the corruption charges to fight off a legal challenge from a Bermuda-registered investment fund that claims it owns the stake. Mr. Fridman has offered to drop the lawsuits if the other side agrees to settle. In Russian business, where hostile takeovers often involve burly men with masks and submachine guns, toughness has long been a key to success. But Mr. Fridman, whose hardball tactics are legendary, is charting a lonely course of resistance at a time when the state is increasingly squeezing private business. "It's our style, our strategy and we're not changing it. We do a lot of things that might seem aggressive to some people," the baby-faced Mr. Fridman says with a smile, sitting in his spartan white office in downtown Moscow. So far, Alfa has managed to avoid trouble with the Kremlin itself. Mr. Fridman has tried to insulate himself by hiring former top government officials as advisers, including Pyotr Aven, a former trade minister and an old friend of Mr. Putin who meets the president regularly. Mr. Fridman says he's careful to avoid anything that the Kremlin would see as a challenge to its control of national politics. That's widely



believed to be what got billionaire Mikhail Khodorkovsky in trouble: He was contributing tens of millions of dollars to a broad range of political parties. He's now serving an eight-year prison sentence on fraud and tax-evasion charges. His OAO Yukos oil company was slapped with $28 billion in back-tax claims and largely nationalized last year. Where Mr. Khodorkovsky was often openly critical of the Kremlin during his frequent trips to the U.S., Mr. Fridman is much more careful. In January, he flew to New York to open a lecture series his bank endowed at the Council on Foreign Relations. The speaker was Russian Defense Minister Sergei Ivanov, a Putin confidante and a man frequently tipped as a potential presidential successor. Mr. Fridman introduced him as "an outstanding politician." Alfa also has lined up some high-profile insurance. The oil company it controlled is now half-owned by BP PLC, in a deal for which Mr. Fridman made sure to get public backing from Mr. Putin and United Kingdom Prime Minister Tony Blair. In the wake of the Yukos case, which has battered business confidence and badly tarnished Mr. Putin's international reputation, Mr. Fridman says he doesn't think the Kremlin will risk another open clash with big business.

9. Russian President Vladimir Putin has largely succeeded in his campaign pledge to make ________________ -- the powerful tycoons who emerged in the chaos of post-Soviet Russia -- disappear "as a class."a. monogarchsb. polygarchsc. oligarchs Correctd. bankers

10. In Russian business, where hostile takeovers often involve burly men with masks and submachine guns, toughness has long been a key to ____________________.a. getting customersb. getting moneyc. failured. success Correct

Radicals in Iraq Begin Exporting Violence, Mideast Neighbors Say Rebels Enter Jordan for Attack, Kuwait Finds Bomb Cache As Fighters Cross BordersBy JAY SOLOMON in Amman, Jordan, YASMINE EL-RASHIDI in Kuwait City, and GLENN R. SIMPSON in Herzliya, Israel October 7, 2005; Page A1http://online.wsj.com/article/SB112860923265461686.html

Three al Qaeda operatives crossed from Iraq into Jordan in August, smuggling seven Katyusha missiles in the underbelly of an aging Mercedes with a hidden second gas tank. Their orders were to bomb the headquarters of Jordan's intelligence service and the U.S. and Israeli embassies. The plot ultimately shifted and they instead narrowly missed two U.S. Navy ships in the Jordanian port of Aqaba. The militants then fled safely back to Iraq. The incident, as related by Jordanian security officials, suggests how the violence of Islamic militants in Iraq is beginning to bleed out into the neighboring region. Some



Middle East intelligence and security officials now worry that process threatens a broader, destabilizing conflict in the Middle East region. President Bush voiced concern yesterday that al Qaeda and others want to make Iraq a base from which to launch operations against the U.S. and other secular governments. "The militants believe that controlling one country will rally the Muslim masses, enabling them to overthrow all moderate governments in the region and establish a radical Islamic empire from Spain to Indonesia," Mr. Bush said in a speech to the National Endowment for Democracy in Washington. Indeed, "the terrorists regard Iraq as the central front in their war against humanity," Mr. Bush said. "We must recognize Iraq as the central front in our war on terror," he added, in a characterization he has often used. The speech sought to shore up flagging American support for the war in Iraq. Yet Mr. Bush's words also echoed a concern of some who opposed invading Iraq in 2003: that chaos following an overthrow of Saddam Hussein could make Iraq a magnet for terrorists. Before the war began, Arab leaders including Jordan's King Abdullah II and Egypt's Hosni Mubarak predicted that an invasion would enrage the Arab masses and allow violent extremists to feed off resulting instability. Mr. Bush yesterday disputed any idea that the invasion of Iraq has worsened the terrorist problem the world faces. While acknowledging threats to stability in the Middle East emanating from Iraq, Bush administration officials say the creation of functioning democracy there will ultimately make the region more secure. They say Iraq's successful election 10 months ago has already helped underpin elections in other Arab countries, such as recent ones in Lebanon, Egypt and Saudi Arabia. And they say the changing dynamics in the region could help end the Palestinian-Israeli conflict, citing Israel's recent withdrawal from Gaza.Still, it's clear that numerous governments around the world, including in Europe, now are concerned about a possible terror spillover from Iraq. In particular, some close to Iraq say they're facing a growing network of arms and fighters being smuggled across their borders. Officials in Kuwait, for instance, grew so alarmed earlier this year after uncovering a spate of planned terrorist attacks on their capital that they started building a steel fence on their border with Iraq. Kuwait also detained security guards it believes were involved in smuggling networks. It even banned the import of watermelons from Iraq this summer, after a tip that they might hide explosives, though Kuwaiti officials say they believe they've contained the threat. The covert nature of much intelligence work makes it impossible to verify many claims and warnings from Middle East intelligence sources. Some terrorism experts say U.S. and Middle East officials attribute too much of recent unrest in the region to jihadists, either in order to mask general disaffection within the Arab countries, or as part of a pitch for greater U.S. financial aid. Still, the intelligence agencies in Jordan and Kuwait are widely regarded as among the most credible in the world. Al Qaeda's efforts in Iraq resemble the way Osama bin Laden and other Islamic leaders used Afghanistan in the 1980s to promote global jihad. In both cases, Islamists prosecuted the wars as part of a broader propaganda operation to rally the world's Muslims. Both theaters of war, meanwhile, have given extremists new training in military technologies and tactics. And the tactics in Iraq are getting more sophisticated, some say. Militants fighting there "are not like the mujahadeen 20 years ago, trained in guerrill a warfare, handed an AK-47 rifle and a satchel of grenades," says Bruce Hoffman, a counterterrorism expert at Rand Corp. who consults for the U.S. government. "Rather, these people have been trained in urban


warfare, in ambush and sniper tactics, in the use and placement of improvised explosive devices."

11. In August three al Qaeda operatives crossed from Iraq into ________, smuggling seven Katyusha missiles in the underbelly of an aging Mercedes with a hidden second gas tank.a. Afghanistan b. Iranc. Kuwaitd. Jordan Correct

12. Al Qaeda's efforts in Iraq resemble the way Osama bin Laden and other Islamic leaders used _______________ in the 1980s to promote global jihad.a. Afghanistan Correctb. Iranc. Kuwaitd. Jordan

Questions 13 – 17 from Marketplace, Section B

The Aisles of OptimismBy JANET ADAMY October 3, 2005; Page B1http://online.wsj.com/article/SB112830320355758171.html

METAIRIE, La. -- Winn-Dixie Stores thinks it may have a windfall in rainfall.The devastation of Hurricane Katrina would seem to be case-closed bad news for Peter Lynch, chief executive officer of the Southern grocery chain. Winn-Dixie Stores Inc. is in Chapter 11 bankruptcy protection and has a huge presence in the waterlogged Louisiana market. Sitting in his harborside home near the company's Jacksonville, Fla., headquarters, Mr. Lynch watched television images of looters rolling a Winn-Dixie produce case down the street. A few days after the storm, the executive boarded a private jet to New Orleans and flew over the city at 1,100 feet. He saw some of the dozens of Winn-Dixie stores that were looted, flooded or otherwise damaged. At first, Mr. Lynch considered closing shop in the New Orleans region, where Winn-Dixie operates 125 supermarkets and is the second-largest food seller behind Wal-Mart Stores Inc., according to THLinx, which tracks grocery market share. The company, which filed for bankruptcy protection in February, can exit a market with fewer repercussions than other operators because such protection makes it easier to cancel store leases. Winn-Dixie was already shutting or selling hundreds of stores and eliminating tens of thousands of jobs across the Southeast when the storm hit. But in a make-lemonade-from-lemons approach, Mr. Lynch believed he could benefit from the mess Katrina had made. "I looked down at this thing and said, 'We've got an opportunity here,' " he says. On the plane ride back, he began drawing up plans to reopen faster than competing stores to attract new customers.



Millions of dollars of insurance money will help him rebuild the stores to be brighter and better stocked. As he swept through a store here last week, Mr. Lynch ordered the manager to hire a chef to serve fried chicken and meatloaf to capture the influx of construction workers who will rebuild the city. As it now stands, much of the corporation's future will hinge on whether Mr. Lynch can use the Katrina devastation to orchestrate a comeback in New Orleans. "If I can get these stores up and operating ... there's a tremendous upside for us," he said during last week's visit to the store, where beached boats sat on the median outside. The trick will be shouldering the estimated $100 million the company estimates it will have to spend to spruce up stores. While insurance eventually will cover the cost of remodeling, Winn-Dixie has to front the money -- a challenge considering its narrow cash cushion. As of late August, the company had $55 million of cash and cash equivalents and had access to $142 million more from its "debtor-in-possession" credit facility. Mr. Lynch estimates that he will completely remodel eight stores and partially remodel another eight. Remodeling could cost as much as $4 million a store.

13. Winn-Dixie operates _______ supermarkets in the New Orleans region.a. 12b. 25c. 125 Correctd. 1250

Union Advances As Key Source of Skilled LaborBy GREG IP October 4, 2005; Page A17http://online.wsj.com/article/SB112839462143559335.html

AMARILLO, Texas -- As Jacob Marmolejo carefully laid slabs of Colorado sandstone against a wall more than 100 feet high rising in the center of this town last summer, several things set him apart from most Texas bricklayers: his youth, his skill and, most of all, his shirt, which read, "Proud to be union." Mr. Marmolejo is just 29 years old and a unionized journeyman in a trade that is aging, short of skilled workers and, in this right-to-work state, mostly nonunion. But he offers a small sign of hope for the beleaguered union movement. His employer on the Amarillo job, Brazos Masonry Inc. of Waco, Texas, had earlier in the year happily signed a contract with the bricklayers' union requiring it to pay negotiated benefits and wages and abide by the union's work rules. The draw: The union could supply the trained bricklayers Brazos needed. Brazos had been nonunion since its founding in 1989. But in that time, the average age of its bricklayers has risen to 56 from 43. Then Ed Navarro, president of the bricklayers union in nearby Oklahoma City, called, offering to train apprentices at several of Brazos's projects. "I would have been crazy" to refuse, recalls Mackie Bounds, chief executive of Brazos. Among masonry contractors, he says, "many of us have started our own apprenticeship school. But we don't have the money the union has to put toward training." Mr. Bounds says one of the reasons the bricklayers union lost so many members in the 1980s is that it had shifted its focus from training to higher wages and benefits, until their labor "became unaffordable." Now, in part because of the housing boom, bricklayers are in such demand



that nonunion wages are often higher than the union's contracted wage. "The union is very competitive now," Mr. Bounds says. "It's not going to do any good at all to bring the union back if we raise wages so [high that] we can't get work." Since Mr. Navarro took over in 1995, Local 5 of the International Union of Bricklayers and Allied Craftworkers has expanded its membership to about 2,000 from 300. That is partly because it has taken over other, less successful locals in neighboring Arkansas and Texas. But it also reflects Mr. Navarro's strategy of focusing organization efforts on employers, not workers. "As long as the unions have something positive to offer and management has an open mind, I think there's a lot of room to grow," he says. It's a rare success for unions these days. The proportion of the private-sector U.S. work force that is unionized has fallen to 8% last year from 20% in 1983. In construction, a traditional union stronghold, it has dropped to 15% from 28%. Supplying skilled labor was once a central role of U.S. unions. Until the 1930s, craft unions, such as those representing printers and carpenters, "were the only long-term successful unions because they had a monopoly on skills," says Michael Piore, a labor-relations economist at Massachusetts Institute of Technology. In construction, contractors were small and work was cyclical, forcing workers to change jobs often. Thus, employers had limited ability and incentive to invest in training. Instead, the union oversaw a worker's progress from apprentice to journeyman.

14. As Jacob Marmolejo carefully laid slabs of Colorado sandstone against a wall more than 100 feet high rising in the center of this town last summer, several things set him apart from most Texas bricklayers: his youth, his skill and, most of all, his shirt, which read, "Proud to be __________."

a. employedb. union Correctc. youngd. skilled

Michelle Wie Wins A Deal Helping Nike Target Women GolfersBy STEPHANIE KANG October 5, 2005; Page B1http://online.wsj.com/article/SB112847414133660213.html

When 15-year-old golf prodigy Michelle Wie announces today that she is turning pro, she'll quickly score her first corporate ace: a four-year contract paying up to $5 million a year to help Nike Inc. try to gain a foothold in the women's golf market. Ms. Wie's decision to go professional before she is eligible for a driver's license caps a rise to prominence that began when she was just 10. While it's a boon for the Ladies Professional Golf Association Tour, it's bigger news for sponsors like Nike, which hopes the young superstar will increase its sales by attracting more women players to the game, as Tiger Woods did with golfers in general almost a decade ago. Women players are one of the few growing categories in a long-stagnant golf market, but they still accounted for just a quarter of the 25.7 million golfers in the U.S. in 2004. Ms. Wie isn't applying to join the LPGA Tour, which requires that members be 18 or older unless they get a waiver. But by turning pro, she is eligible for corporate sponsorships, and she can play



overseas and in a limited number of LPGA and men's PGA Tour events. Even as she announces her deal with Nike, Ms. Wie is expected to hire the William Morris Agency's Ross Berlin to represent her and to announce an endorsement deal with Sony Corp. Though her initial bounty is small compared with the estimated $40 million that Mr. Woods earned when he turned pro at age 20, Nike, of Beaverton, Ore., sees big potential in Ms. Wie. Mr. Woods's early professional success and mixed-race background helped ignite interest in golf beyond the older white males who traditionally dominated the sport. Similarly, Ms. Wie has made a splash in the golf world because of her young age and her desire to compete in men's PGA tournaments. A Korean-American raised in Hawaii, Ms. Wie also has the aura of a typical American teenager, giving her a marketing edge in the U.S. over other Asian players on the LPGA Tour like Hee-Won Han and Se Ri Pak. "The way you make money as a spokesperson is if you can transcend sports, genders and ethnicities," says David M. Carter, a University of Southern California sports business professor. "That's where someone like Tiger Woods has been a brilliant marketing asset." But for now Ms. Wie is a teenage question mark. It's unclear how she will react to the pressure of being one of the faces of Nike Golf. And any professional success she achieves may not translate into a sales spike for Nike. Analysts say women golfers making purchase decisions tend to listen more closely to friends than to professional golfers.Nike says it first identified Ms. Wie as a potential endorser when she won the U.S. Women's Amateur Public Links Championship tournament in 2003 at the age of 13. While it's too soon to judge her place in golf or her influence on the public, her talent is unlike that of "any woman out there today," says Nike Golf President Bob Wood. "She is the complete package as a player." She also continues Nike's trend toward signing younger and younger endorsers, including basketball's LeBron James, who signed with Nike at 18, and soccer player Freddy Adu, who signed at 14. The largest sports company in the world, Nike is still a relatively small player in the golf business. Since Mr. Wood took the helm in 1999, Nike Golf has taken a slow and steady approach, first rolling out clubs aimed at the highly skilled players who make up less than 10% of golfers. In recent years, it has introduced a series of clubs targeting the recreational duffer.

15. Golf prodigy Michelle Wie announced that she is turning pro. Her four-year contract pays up to $5 million a year to help Nike Inc. try to gain a foothold in the women's golf market. Michelle Wie is _______________ years old.a. 15 Correctb. 20c. 21d. 17

Handbag Designer Grips Paris FashionablesBy CECILIE ROHWEDDER October 6, 2005; Page B1http://online.wsj.com/article/SB112855999860161246.html

PARIS -- Few of the spectators who will be lining the catwalk at the Celine fashion show here today have heard of Guido Boragno. He won't take a runway bow or pose with the



models, but Mr. Boragno is one of the hottest items in the business today -- a handbag designer. The 36-year-old's previous jobs include stints at Romeo Gigli and Prada Group NV, where he designed leather goods for both the Prada Sport and Jil Sander brands. As the new leather-goods designer at Celine, a unit of LVMH Moët Hennessy Louis Vuitton SA, Mr. Boragno is in charge of sustaining the chic of the brand's bags, which account for 60% of total sales, sell for up to $11,000 apiece and have adorned the arms of Madonna and Sarah Jessica Parker. "I feel the weight of the responsibility," the German-Italian designer said one morning last week, as he cradled in his lap his first stab at a hit handbag for Celine: a large, slouchy, rectangular purse resembling a doctor's bag. "New jobs are always a challenge, and this one is definitely a challenge for me." Accessories creators like Mr. Boragno are playing an increasingly crucial role in the luxury-goods industry. As discount chains sell more-fashionable and higher-quality garments, designer clothes are losing part of their distinction, but a luxury handbag still stands out. Many women who can't afford expensive designer apparel will still shell out for a purse. And bags fit women of every size and age. "A bag is one of the few premium products where women will pay over-the-top prices, because there are fewer comparable products and because having the right bag is such a fashion statement," says Maureen Hinton, senior research analyst with retail consultants Verdict Research in London. With profit margins well above those of apparel, accessories provide the lion's share of sales and profit for fashion heavyweights like LVMH and Gucci Group NV. Some houses, like Chanel and Hugo Boss, are opening stores that sell only accessories and are launching new items more frequently. Prada underscored the accessories trend at its fashion show in Milan last week, when several models pulled roll-on suitcases down the runway. But to meet this increasing appetite, industry executives say, fashion houses need more specialized designers. Salaries vary widely. Smaller houses with limited budgets sometimes pay only $60,000 while a star accessories designer at a top-notch fashion house can make up to $1.8 million. "If I had to give advice to a young designer, I would tell them to get into accessories," says Floriane de Saint Pierre, a Paris headhunter who specializes in the luxury-goods industry. The fashion houses' demand for talented accessories makers is so strong that she declines to do searches for new clients, to give existing clients first crack at talent. Mr. Boragno's career offers a glimpse of this little-known crowd of professional accessories designers. They toil in a relatively unglamorous corner of large fashion firms, move more freely between companies than the more-famous clothing designers and sometimes work as consultants for several labels at once. Celine's accessories operation also shows how designers and marketers are working ever more closely together in the quest to churn out hit bags.

16. Few of the spectators who will be lining the catwalk at the Celine fashion show have heard of Guido Boragno. Mr. Boragno is a _________________.a. marketing professorb. handbag designer Correctc. shoe designerd. hat designer

Fingerprint Matches Come Under More Fire As Potentially FallibleBy SHARON BEGLEY


October 7, 2005; Page B1http://online.wsj.com/article/SB112864132376462238.html

Fingerprint examiners would probably be happy if they never heard the name "Brandon Mayfield" again, but for researchers who study the scientific basis for fingerprint identification Mr. Mayfield is the gift that keeps on giving. Mr. Mayfield is the Portland, Ore., lawyer and Muslim convert whose prints the FBI matched to those taken from a suspicious bag near one of the 2004 Madrid train bombings. When Spanish police insisted the prints didn't match Mr. Mayfield's -- and eventually linked them to an Algerian living in Spain -- the FBI conceded the error and apologized to the jailed Mr. Mayfield. Since such an error is supposed to be impossible (an FBI handbook says, "Of all the methods of identification, fingerprinting alone has proved to be both infallible and feasible"), the case has achieved a certain notoriety. So when scientists recently tested fingerprint IDs, they told examiners one set of prints were from Mr. Mayfield and the other set from the Madrid bombings. "We told them we were trying to understand what went wrong in that case," says Itiel Dror of Britain's University of Southampton, who did the study with student David Charlton. "Could they please look at the prints and tell us where the examiners had gone wrong." One examiner said he couldn't tell if the pair matched. Three said the pair did not match and helpfully pointed out why. The fifth examiner insisted the prints -- notorious for not matching -- did match.

Give that one a gold star.

Unbeknown to the examiners, the prints were not from Madrid and Mr. Mayfield. They were pairs that each examiner had testified in recent criminal cases came from the same person. The three who told the scientists that their pair didn't match therefore reached a conclusion opposite to the one they had given in court; another expressed uncertainty, whereas in court he had been certain. Prof. Dror will present the study later this month at the Biometrics 2005 meeting in London. A study this small would hardly show up on scientists' radar screens. But it comes at a time when traditional forensic sciences -- analysis of bite marks, bullets, hair, handwriting and fingerprints -- are facing skepticism over the validity of their core claim: that when two marks are not observably different, they were produced by the same person or thing. Michael Saks of Arizona State University, Tempe, argues that the claim lacks "theoretical and empirical foundation." There is no basic science that predicts how often marks that match on some number of characteristics actually come from different people, as there is for DNA typing. And data on the frequency of false matches are sparse. It isn't just fingerprints. Last month the FBI announced that its lab would no longer try to match bullets by the trace elements they contain. Although the FBI "still firmly supports the scientific foundation of bullet lead analysis," the bureau said, "neither scientists nor bullet manufacturers are able to definitively attest to the significance of an association made between bullets." That decision may be the first move toward what Prof. Saks calls "the coming paradigm shift in forensic science." For too long, he argues, forensic science has been excused from rigorous research on how frequently attributes (ridges and whorls in fingerprints, trace amounts of tin or antimony in bullets) vary and on the probability that marks with identical attributes come from different people or objects.



In the most serious break with rigorous science, forensic science often regards the very notion of probability as anathema. The International Association for Identification, the largest forensic group, says testifying about "possible, probable or likely identification shall be deemed ... conduct unbecoming." Only 100% certainty will do. The pioneers of DNA typing, in contrast, calculated the probability of false matches, making DNA the most scientific forensic science. The unsupported, and unscientific, claim of infallibility is being tested in Massachusetts' highest court, which last month heard an appeal on the admissibility of fingerprints. Defense lawyers argued that the technique falls short of the standard the U.S. Supreme Court established in its 1993 "junk science" decision. The decision held that scientific testimony must have a known error rate. It will be interesting to see how much longer fingerprinting can get away with "zero." What is it if not zero? FBI proficiency exams since 1983 find an error rate of 0.8%. Multiplied by the millions of cases crime labs process, that works out to about 1,900 possible mismatches every year. But misattributions "appear to be occurring at an accelerating rate," says Simon Cole of the University of California, Irvine, who recently compiled 22 cases of mismatches for a study in the Journal of Criminal Law and Criminology. That rise, he suggests, may reflect the fact that examiners are "under greater scrutiny." According to a 2002 handbook of forensic science, error rates are not what you see on TV. They're as high as 63% for voice ID, 40% for handwriting, 64% for bite marks, 12% for hair. The real numbers may be even higher: Blind tests, slipped into an examiner's workload rather than marked, "Here's the test!", are essentially nonexistent.

17. Using the error rate identified by the FBI about ______ possible mismatched finger prints could be occuring every year.a. 90b. 900c. 1,900 Correctd. 19,000

Questions 18 – 23 from Money & Investing, Section C

Green Thumb The Easy Money People IgnoreBy RON LIEBER October 1, 2005; Page B1http://online.wsj.com/article/SB112811429723757133.html

In coming weeks, you'll probably get that annual note from human resources. Near the bottom you'll be asked to sign up for a flexible-spending account. And you'll probably ignore it. You won't be the only one. FSAs let people set aside pretax money from their pay to cover health-care costs that insurance doesn't. (Similar accounts exist for commuting expenses and child or elder care.) Savvy users can rack up annual savings in the four figures -- but roughly 80% of eligible people blow it off. The Employers Council on Flexible Compensation figures that only about 20 million people are signed up. Everyone else generally makes one of four excuses for not signing up -- all of which wither under scrutiny: IGNORANCE of the options. Many people think FSAs just cover



co-pays and deductibles, but the list is much longer. Vasectomies are covered. So are dancing lessons (as long as they are rehabilitative). For a list, go to fsafeds.com1 and click "Eligible Expenses Juke Box." Cross-check it with your company, as it has some discretion. Over-the-counter drugs are eligible now, too. Go to drugstore.com/fsa2 to see the possibilities for government-subsidized shopping sprees. FEAR of losing the money. You have to spend your FSA money within either 12 months or 14½ months, depending on your company's rules. If you don't, you'll lose that money you socked away. Many employees decline to take the risk. Most people don't lose anything, though. If the deadline approaches and there's money left, it's easy enough to buy new glasses (including prescription sunglasses) or hit the drugstore. Those who do lose money generally don't lose nearly enough to wipe out their tax savings. How much should you save? Add up your spending from the jukebox this year, think about who's scheduled for, say, braces in the house, then set aside a bit more for cushion. RESENTMENT of the system. With FSAs, you're paying twice. First, the money comes out of your check and is put into the account. Then, you have to pay for eligible items out-of-pocket and wait to get the money back. To avoid the second part, put eligible health-care expenses on a credit card. Then, use the time between the charge and the bill's due date to file for reimbursement. Time it right, and the money will arrive before the bill's due. Or play the system this way: Plan big expenses, like Lasik eye surgery, for January. Most FSA plans will reimburse you in full, even though you haven't set aside most of that year's funds yet. It's essentially an interest-free loan. THE HASSLE of all that FSA paperwork. Thankfully, some companies hand out debit cards for FSA spending. Each year, more of these charges are approved automatically, so you don't need to send in receipts. If you don't need your reimbursements right away, just ask for them once per year. Store receipts in an envelope as you collect them, then fill out just one (long) form at year end and send it in. This exercise will take an hour or so. Still feel burdened by it? Let's say it yields $1,000 in tax savings. If you earn more than $1,000 an hour (that would be just over $2 million per year), then perhaps it isn't worth your time. Otherwise, you could be letting easy money slip through your fingers.

18. A ____________ lets people set aside pretax money from their pay to cover health-care costs that insurance doesn't.a. flexible-spending account Correctb. money market accountc. passbook accountd. debit card account

Wooing China's Credit-Card UsersBy ANDREW BROWNE October 3, 2005; Page C1http://online.wsj.com/article/SB112829953436158122.html

SHANGHAI -- Credit-card companies just can't stop showering Angela Yang with freebies. Last month, the 34-year-old product manager for a U.S. drug maker picked up four tubs of Häagen-Dazs ice cream courtesy of China Construction Bank for swiping her Dragon Card six times on purchases of at least 180 yuan ($22) each. She also recently



http://www.drugstore.com/templates/browse/default.asp?catid=59875

https://www.fsafeds.com/fsafeds/index.asp

landed a free CD player by accepting another credit card, issued by Shanghai Pudong Development Bank in a venture with New York-based Citigroup Inc.'s Citibank unit. Ms. Yang has several other credit cards in her oversized wallet, all conferring other perks and no annual fees. Ms. Yang is an early winner in a credit-card war that has broken out in China. For foreign banks piling into the fray, she represents the opportunities and risks of a growth business in its infancy. Less than 1% of China's 1.3 billion people own a credit card. U.S. consulting firm McKinsey & Co. estimates that 12 million are in circulation, compared with 800 million debit cards, which are used mainly at cash machines. China has only about 50 million or so individuals who earn more than $5,000 a year and have disposable income. But salaries are rising by double-digit percentages each year in coastal cities like Shanghai, and the number of credit cards issued in China has been doubling annually for several years. Spending on Visa cards in China last year reached $3.2 billion, up from $1 billion a year earlier. Albert Shiung, the China vice president for Visa International Asia Pacific, says China should comfortably achieve 50 million credit cards in the next five years. Yet the scramble for customers is threatening to spoil the market. David Von Emloh, a McKinsey partner in Shanghai, estimates that issuers are paying so much to lure customers that half of the cards now in circulation will never be profitable. There's a risk issuers "will destroy the economics of the industry," he says. In the past year, foreign investors have committed almost $20 billion to Chinese banks, and credit cards are a big reason. As part of a $1.7 billion investment last year in Bank of Communications based in Shanghai, HSBC Holdings PLC established a credit-card venture. In August, Royal Bank of Scotland PLC led a consortium that invested $3.1 billion in Bank of China in a deal that includes a credit-card plan. The competition is part of a wider struggle for the fastest-growing segment of China's banking industry -- the retail market. Traditionally, Chinese state banks have done little for individual customers except rake in their savings, making easy profits on the difference between low state-set interest rates for deposits and much higher rates they charge for corporate loans. But those loans mainly go to government-owned enterprises with checkered repayment histories, and corporate lending is likely to decline as China develops its stock and bond markets. Under growing pressure to cut loan defaults and fatten returns, banks increasingly are going retail. China remains a mostly cash economy. Even in tourist hotels, merchants and travel desks sometimes demand cash or slap on a hefty surcharges on credit-card transactions. Only 112,000 Chinese merchants accept Visa cards. McKinsey says 4% of Chinese bank profits last year came from consumer credit, including credit cards and home, car and other personal loans. That figure is expected to rise to 14% in 2013, when credit-card profits are expected to reach $1.6 billion.

19. Less than __________ of China's 1.3 billion people own a credit card.a. 50 %b. 30 %c. 15 %d. 1 % Correct

Bain's Fault or Bad Luck That KB Toys Failed?By HENNY SENDER October 4, 2005, C1



Bain Capital, a private-equity firm, took control of KB Toys in 2000 by putting up just $18 million. It financed much of the rest of the $302 million purchase price by loading up the company with debt. It all worked out well for Bain Capital, which in April 2002 collected a $121 million dividend -- a tenfold return on its investment in just 16 months, according to a court filing made by an unhappy holder of KB Toys debt. KB Toys, struggling to compete against volume sellers like Wal-Mart Stores Inc., couldn't recover with so much debt on its hands. Its financial troubles worsened, and the company filed for Chapter 11 bankruptcy protection in January 2004. The debt holder's court filing with the bankruptcy court in Delaware alleges that the rich dividend payout plunged the company into bankruptcy. A Bain spokesman declined to comment on the matter, but an outside adviser to the company said KB Toys was healthy when the dividend was paid, and it was just bad luck that it ran into trouble later. With so many private-equity deals these days, the KB Toys case is being watched carefully. The dividend payment that Bain received isn't unusual; still, investors who buy debt in ailing companies, like KB Toys, are increasingly blaming the return-obsessed private-equity firms for paying themselves handsomely and leaving their portfolio companies struggling with substantial debts and vulnerable to an economic slowdown. The merits of the KB Toys case will take months to resolve, but there have been instances in the recent past where creditors' complaints have forced buyout firms to put money back into insolvent portfolio companies. Many lawyers and restructuring experts expect that conflicts similar to the KB Toys dispute will pick up in coming months, especially if debt financing gets more difficult.

20. Bain Capital, a private-equity firm, took control of KB Toys in 2000 by putting up just $18 million. It all worked out well for Bain Capital, which in April 2002 collected a ___________ dividend.a. $1 millionb. $11 millionc. $12 milliond. $121 million Correct

Enron Trial Heats Up Before It Even BeginsBy JOHN R. EMSHWILLER October 5, 2005; Page C1http://online.wsj.com/article/SB112846450386359967.html

A courtroom man-bites-dog tale: The Justice Department, often criticized by defense attorneys for being secretive, has been trying to unseal documents related to the coming criminal trial of former top Enron Corp. executives. The defense attorneys, usually on the other side of such fights, have opposed making the documents public. The role reversal is part of heated maneuvering in advance of the January trial in federal court in Houston of former Enron Chairman Kenneth Lay, former President Jeffrey Skilling and former Chief Accounting Officer Richard Causey. In what is expected to be the final high-profile trial in the era of corporate scandals, the three former Enron executives are charged with conspiracy, fraud and other crimes in the late 2001 collapse of the energy giant. All three




have pleaded not guilty. The fight over the sealed documents is part of a larger battle in which defense attorneys have accused prosecutors of trying to silence potential witnesses. The sealed documents were produced by the defendants' attorneys to bolster arguments that the Justice Department's Enron Task Force has engaged in widespread "prosecutorial misconduct." Lawyers for the three men said in a recent court filing that the government has been misusing its power to create "an atmosphere of fear" among those connected to Enron. "Put simply, witnesses are afraid to talk to us," hurting efforts to mount an effective defense, they said. Of roughly 150 potential witnesses contacted, only four agreed to meet with defense attorneys, they said. To date, 33 individuals have been criminally charged in connection with the Enron scandal. Sixteen have pleaded guilty and almost all of those have agreed to cooperate with prosecutors. Several are expected to testify for the government at the coming trial. At one Enron-related trial, five people were convicted and one was acquitted. In another, five were acquitted on some charges and the jury couldn't reach a decision on others. Those five face retrials. Three British bankers also still face trial on alleged Enron-related charges. In all, the government has identified more than 100 individuals in court filings as co-conspirators with Messrs. Lay, Skilling and Causey. That means dozens of individuals remain, technically at least, under the threat of indictment. Defense attorneys argue that this threat has been an impediment to getting potential witnesses to cooperate. Former WorldCom Inc. Chief Executive Bernard Ebbers, convicted in that company's accounting fraud, is raising a similar issue in his bid for a new trial. His appeal argues that prosecutors' refusal to grant immunity to former underlings identified as unindicted co-conspirators effectively barred their use as defense witnesses. Fearing that they might say something deemed incriminating, they signaled plans to exercise their right to remain silent. "Whenever there are allegations of a wide-ranging deceptive scheme at a corporation, there will be many company officials who have exposure to possible prosecution," says Christopher Bebel, a former prosecutor now in private practice in Houston. To protect themselves, most people will decline to talk with defense lawyers, which makes for "a very unlevel playing field," he adds.

21. Regarding the Enron scandal the government has identified more than _____ individuals in court filings as co-conspirators with Messrs. Lay, Skilling and Causey.a. 10b. 50c. 100 Correctd. 1000

TIAA-CREF's Fee CountermoveBy TOM LAURICELLA October 6, 2005; Page C1http://online.wsj.com/article/SB112856490423661352.html

The new motto of TIAA-CREF seems to be "if at first you don't succeed ...." In late August, shareholders at nine of the pension and insurance provider's mutual funds for institutions dealt TIAA-CREF and its chief executive, Herbert Allison, a setback when they rejected proposed fee increases on the funds. Now the company, which serves teachers, nonprofit groups and general investors, is considering an unusual step in the



mutual-fund world: holding a second vote on the proposals. A "yes" vote would raise fees that investors of those nine funds pay TIAA-CREF for managing their money to anywhere from twice to more than six times as high as current levels. Along with other expenses, these fees are deducted from fund assets and reduce investor returns. "After weighing the options it has become clear that the best alternative for shareholders and the one that would cause the least disruption" would be a new vote, said Stephanie Cohen Glass, a spokeswoman for TIAA-CREF, or Teachers Insurance and Annuity Association-College Retirement Equities Fund. Fund companies are required to seek shareholder approval of increases in management fees. TIAA-CREF previously said that failure to win approval for the fee increases could result in the funds, which are sold to institutions, being liquidated or closed to new investments. But officials at several state college-savings plans that are shareholders told the company after the vote "that there was a degree of confusion about the impact" of a negative vote, Ms. Cohen Glass said. The board that oversees the funds will meet next week to discuss its options, she said. TIAA-CREF's effort to raise fees contrasts with a push by many of its competitors to lower fees. The proposals represent a reversal for TIAA-CREF, which is known for having some of the lowest-cost funds around and just three years ago made permanent some fee reductions that had been temporary. If the proposals are approved, the funds would still have fees lower than those charged by many other companies. TIAA-CREF's Institutional Large-Cap Value Fund, for example, would charge investors 0.5% of assets to cover all of its expenses after the fee increase, compared with an average of 0.92% for similar funds, according to Morningstar Inc. An investor with $10,000 in the TIAA-CREF fund would wind up paying $604 over 10 years, assuming the fund returned 5% a year, compared with $214 if fees remained the same.The earlier "no" votes were largely cast by the boards of state-sponsored college-savings plans that offer TIAA-CREF's institutional class of fund shares as investment options. After the vote, Mr. Allison set up meetings with officials of three states, in part to lay the groundwork for a potential second vote. The independent chairwoman of TIAA-CREF's mutual funds, Nancy Jacob, sent a letter to one of the states, backing the fee increase. Some observers don't like the idea of a new vote. "The message would be clear that they want to defy shareholders' wishes," said Christopher Davis, who follows TIAA-CREF's funds for Morningstar. Mr. Allison, a former Merrill Lynch & Co. executive who took over as TIAA-CREF's chief executive in November 2002, set the stage for the proposed fee increases when he engineered a companywide reorganization that resulted in a consolidation of financial reporting for the company's mutual-fund group. The result was the recognition internally that the mutual-fund group, which manages $11.9 billion of the company's $350 billion in assets under management, was losing money.

22. In late August, shareholders of TIAA-CREF ________ proposed fee increases on the funds.

a. rejected Correctb. approvedc. outlinedd. doubled


High Prices May Be Damping Fuel Demand Globally, Oil and Gas Use Shows Signs of Easing, for Now Crude Futures Fall for a Fifth DayBy CHIP CUMMINS October 7, 2005; Page C1http://online.wsj.com/article/SB112859369043561497.html

The superhigh oil and gasoline prices triggered by the recent U.S. hurricanes may be softening global demand for fossil fuel, even as oil companies struggle to restore energy production in the Gulf of Mexico. It is too early to say for sure whether the fuel-price spikes that followed Hurricanes Katrina and Rita have pinched oil and gasoline users enough to keep them from buying as much of it as they would normally. But a body of statistics -- from U.S. gasoline-demand estimates to Chinese toll-booth receipts -- suggests that the soaring demand growth of recent years could be easing substantially. That could spell some short-term price relief for consumers. Oil traders have recently sold crude-oil futures off sharply, and some analysts are cutting their oil-price forecasts for next year. Yesterday, oil futures fell for a fifth day running. On the New York Mercantile Exchange, front-month futures settled at $61.36 a barrel, down $1.43, or 2.3%. Futures on gasoline, heating oil and natural gas also fell. For crude it was the lowest settlement since Aug. 3. Crude is still up 41.2% year to date, and 101.8% for the past two years. Most market watchers aren't yet ready to say the pullback of recent days will last long enough to sharply curb today's high oil prices. In the U.S., which consumes roughly a quarter of world daily production, average retail gasoline prices are near $3 a gallon and a big chunk of refining capacity is still out of commission. Oil prices are still roughly twice as high as their average price in 2003 of $31.07 a barrel. The U.S. Energy Department's Energy Information Administration said Wednesday that American gasoline consumption in September fell by 2.6% compared with the same period last year. It is unclear, however, whether that is a sign that drivers bought less because of the higher prices or because they simply couldn't find enough gas to fill up their tanks amid the hurricane-related disruptions. Doug MacIntyre, a senior oil-market analyst at the EIA, said he believes the recent drop in gasoline demand does indicate that consumers are curbing consumption. "I would guess at this point that more of it is related to prices" than to a lingering shortfall in gasoline production, he said. Even in August, before Hurricane Katrina hit, demand growth was showing signs of slowing as prices climbed. U.S. demand rose just 1.2% in the month ended Aug. 26 from the year-earlier period, less than the 1.5% annual rise that is typical. The average price of a gallon of regular unleaded gasoline Aug. 29 was $2.61, 40% higher than a year earlier. Prices kept climbing in September, with the average prices Oct. 3 $2.93, 51% higher than a year earlier. "I am struck that there is some demand destruction related to both high prices and logistic constraints," Claude Mandil, head of the International Energy Agency, said in an interview with Reuters yesterday. "The question is how long will demand destruction remain," he added. The IEA serves as a watchdog agency for big oil-consuming countries. Outside the U.S., crude-oil demand growth also appears to be slowing from its recent breakneck pace. Early indications show that fuel-consumption growth in China -- recently the main engine of new demand for oil -- may be slowing markedly. The IEA estimated last month that crude demand in China will rise by about 3.4% this year from last year, compared with an estimated growth rate of 15% in 2004.



23. The U.S. Energy Department's Energy Information Administration said Wednesday that American gasoline consumption in September _________________ compared with the same period last year.a. fell by 2.6% Correctb. rose by 2.6%c. fell by 26%d. rose by 26%

Questions 24 – 26 from Personal Journal, Section D

Sales of SUVs Fall SharplyBy GINA CHON October 4, 2005; Page D1http://online.wsj.com/article/SB112810411178056944.html

Rising gas prices and a shift to more fuel-efficient models sharply cut into sales of sport-utility vehicles in September. At the same time, falling resale values for traditional SUVs are making it harder for car owners who want to trade for less gas-thirsty vehicles. General Motors Corp. and Ford Motor Co. were hit particularly hard by the shift away from large SUVs. GM sales fell 24% from a strong year earlier, while Ford sales dropped 19.5%. U.S. car and light-truck sales fell 7.6% in September. The seasonally adjusted annual selling pace eased to 16.36 million vehicles from 17.46 million units a year earlier, when Detroit's Big Three pumped up sales with model year-end clearances. The September sales are the strongest evidence to date that consumers are looking for smaller, more fuel-efficient vehicles. Gasoline prices have jumped to $3 a gallon in the aftermath of two hurricanes. Industry executives say it's still unclear whether the abrupt shift toward cars and small to midsize crossover SUVs will become a long-term trend. By contrast, DaimlerChrysler AG's Chrysler Group, which is less dependent on large SUVs, reported a 3.7% increase in sales compared with September of last year, riding strong demand for its lineup of large cars and its heavily discounted Ram pickup. The major Japanese auto makers improved U.S. sales last month over a year ago. Toyota Motor Corp. said sales rose 10%, as demand for its cars, including the gas-electric hybrid Prius, jumped nearly 23%. But even Toyota suffered from the SUV slump, as sales of its large Sequoia SUV -- which lags GM's Chevy Tahoe SUV in government fuel-economy ratings -- plummeted 47%. Nissan Motor Co. said sales rose 16% and Honda Motor Co. said sales increased 11.7%, boosted by a 37% increase in demand for its compact Civic models. Slumping values for SUVs could complicate Detroit's efforts to wean customers off employee discounts.Today, Chrysler is expected to roll out a new discount program that will return to a more traditional approach of ads flagging innovative features, and cash rebates.

24. U.S. car and light-truck sales fell 7.6% in September.a. fell 7.6% Correctb. rose 7.6%c. fell 17.6%d. rose 17.6%



Rich, Successful -- and Miserable: New Research Probes Mid-Life AngstBy JONATHAN CLEMENTSOctober 5, 2005; Page D1http://online.wsj.com/article/SB112846380547659946.html

There really is a midlife crisis. If you're in your 40s, you are probably pulling down a bigger paycheck than ever before, and your portfolio has never been fatter. And yet, if research by economists and psychologists is any guide, you have never been more miserable. What's going on here -- and what can you do about it? Here are some lessons from the burgeoning field of "happiness research." Numerous studies have found that our happiness level through our lives follows a U-shape, with folks becoming increasingly dissatisfied as they approach their 40s and then bouncing back from there.

"That U-shape is just so robust, across so many studies and across so many countries," says Keith Bender, an economics professor at the University of Wisconsin-Milwaukee. "You can't get away from it entirely. But you can do things to mitigate it."It isn't clear why we become grumpy in middle age. It could be that we become increasingly disenchanted through our 20s and 30s as we realize our lives won't be everything we hoped. Eventually, however, we adapt, which is why our happiness rises as we grow older.

25. Numerous studies have found that our happiness level through our lives follows a U-shape, with folks becoming increasingly dissatisfied as they approach their _________ and then bouncing back from there.a. 30sb. 40s Correctc. 50sd. 20s

Tackling Hybrids' Flawed Mileage ClaimsBy GINA CHON October 6, 2005; Page D1http://online.wsj.com/article/SB112856197554661289.html

With consumers complaining that hybrid vehicles don't get the gas mileage advertised on window stickers, Ford Motor Co. and Toyota Motor Co. are stepping up efforts to let drivers know why they might not get the desired fuel economy.Hybrids, which combine a gasoline engine with an electric motor, have become hot sellers because they are touted for their fuel efficiency at a time when gas prices are hovering around $3 a gallon. In September, Toyota's Prius, the top selling hybrid in the U.S., saw sales jump by 90% compared with the same period last year. The vehicle sticker pasted on Prius windows at dealerships says the Environmental Protection Agency estimates the car goes 60 miles on a gallon of gas.But there have been increasing complaints that many cars, and especially hybrids, don't deliver the miles per gallon estimated by the EPA. According to a study by




Consumer Reports that tested the mileage of vehicles in real world conditions, hybrids had some of the biggest disparities, with fuel economy averaging 19 miles per gallon below the EPA city estimate. The problem is that the EPA estimates assume that drivers are operating under certain ideal conditions, such as not using air conditioning and accelerating slowly, that can be very unlike what people actually do on the road.The groundswell of complaints is spurring the EPA to act. The agency says that by the end of this year it will propose changes to the methods used in calculating fuel economy ratings for vehicles. The EPA said the new rules will more accurately reflect how people actually drive and will consider the impact of air conditioning, aggressive driving and traffic congestion on fuel economy.To help drivers improve their mileage, Ford is creating a "Hybrid Patrol," a group of Ford staffers who will travel to 11 cities to talk about fuel economy.This weekend Ford is holding a clinic at the Ford Research and Innovation Center in Dearborn, Mich. More than 280 owners of hybrid-powered Escapes and their guests, who are traveling from 24 different states, will learn driving tips to improve fuel efficiency and get a chance to ask Ford engineers about hybrid technology. The attendees, who are paying their own travel expenses, will also be able to test drive the new Mercury Mariner hybrid, Ford's second hybrid vehicle, which is arriving at dealerships next week.

26. In September, Toyota's Prius, the top selling hybrid in the U.S., saw sales jump by ___________ compared with the same period last year.a. 30 %b. 50 %c. 70 %d. 90 % Correct


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