Rod Warren

Tim Hortons Returns to Canada for Tax Relief

I do not believe that moving THI from US to Canada is in the interest of long term shareholders due to the extremely high personal long term capital gains taxes that shareholders will have to pay for tax year 2009. These personal imputed capital gains taxes far exceed the corporate tax savings. See my email to the board that follows:

While I can appreciate that some
shareholders will benefit from the proposed merger, I still believe that the THI board
has been ill-advised and/or has otherwise failed to adequately address the interests
of long term shareholders such as myself. Please forward this email to Mr. House and all members
of the THI board.
I am still considering sending an open letter to investment advisers, investment managers,
the SEC, and/or class action law firms so as to attempt to block, delay, and or force
modifications to what I consider to be an ill-advised proxy proposal and a failure of the
board to adequately meet their fiduciary responsibility to long term shareholders, not just
the short term investors and traders. I feel strongly that the board's claim that the
merger is in the interest of THI stockholders is false and misleading in the sense that
the merger is NOT in the interest of long term shareholders like myself.

1.My basis in THI is $1.18/sh (from 1980 purchases of WEN)

2.THI closing price on 8/31/09 was $28.25

3.My unrealized gain is $27.07/sh

4.Careful what-if analysis using Turbo-Tax to calculate the marginal tax rates for
the imputed long term gains indicate that my federal and state taxes will be at least
20% and could go as high as 30% if I become subject to the AMT tax due to these imputed
gains or other investment income. This analysis include secondary tax affects such as
federal deduction for state taxes, phaseout of exemptions, and phaseout of deductions.

5. Therefore, the imputed gains from the merger will cost me $5.41/sh to $8.12/sh in
additional tax year 2009 taxes! This is an enormous per share cost for your elusive goal
of obtaining nebulous operational efficiencies and possible tax rate savings.

6. From the proxy, THI's EBITDA(ttm) was $552M (534-257+275) for the year ending 6/30/09
and there were 181M sh outstanding. That implies EBITDA/sh (ttm) was $3.05.

7. The primary tangible savings under the merger proposal seem to be the assume reduction
in tax rates listed in Supplemental Financial Information as 4% in 2010, 6% in 2011, and
8% in 2012. Taking EBITDA/sh times the assumed tax savings, implies the merger provides a
mere $.12/sh, $.18/sh, and $.24/sh tax savings in 2010, 2011, and 2012 respectively.
That is a LOUSY return on my "investment" of $5.41 to $8.21/sh in actual imputed capital gains
taxes to obtain speculative future year tax savings.

8. Long term investors with unrealized gains would be far better off investing money
elsewhere rather than prepaying imputed capital gains taxes to avoid future higher
US THI tax rates. A very safe 5% municipal bond would return from $.27/sh to $.40/sh
for that $5.41 to $8.12 (and I would still have the bond's principal). Alternatively,
investing in high yield junk bonds or stocks I could get an annual return of around 10%
and get $.54 to $.80 per year for that "investment" of $5.41 to $8.21/sh. I would much
prefer that kind of return than the nebulous tax treaty savings of up to $.24/sh that
the short sighted board has proposed for me.

9. Even THI investors with unrealized gains of 25% (rather than my 95%) would probably
be better off investing elsewhere rather than "investing" in imputed capital gains
taxes so as to have questionable minor tax treaty savings from the merger. As admitted
in the prospectus, the tax treaty savings are by no means guaranteed.

I believe the board has used a flawed analysis to arrive at the conclusion that this
merger is in the interest of shareholders. At best it only provides advantages to
short term investors and traders. It is certainly not in the interest of long term
investors to pay the enormous capital gains tax penalty for elusive future year
tax savings that are meager in comparison to other investment options.

It seems that the board has failed to consider out right sale of the company at a premium
price that would provide a meaningful incentive to long term investors to pay the
capital gains taxes.

It seems that the board has failed to consider that the alienation of long term investors
like myself is likely to weaken rather than strengthen the company. Long term investors
that are forced to pay for an updated cost basis are likely to sell THI stock in
droves. There will no longer be an incentive to hold onto THI. This will at least
temporarily depress THI stock prices and could contribute to future volatility in
the stock price by reducing the core base of long term investors in the company.

The board seems to gloss over the numerous advantages of being a US company. Many of
the purported reasons for the merger are not adequately discussed in terms of the cons
for the merger.

Many mutual funds will drop THI or elimninate THI from consideration if THI is no longer
a US company. Being listed on the NYSE is not the same a being a US registered company.
This is likely to drive down the share price (especially in the short term) as mutual
funds holding THI dump THI shares to stay within their investment guidelines.

It seems that the board has failed to realize that being a US company will be desirable
if US growth of the chain occurs as is hoped by all. Will the board come back in the
future and ask shareholders again to pay for an updated cost basis as part of a future
merger to return THI to being a US based company once US sales out pace Canadian sales?

As far as international expansion, it appears highly debatable whether being Canadian
or US based is a serious advantage in either direction. One could argue that being
US based gives THI credibility for international expansion. While the US is currently
out of favor in the international world due to some US foreign policy blunders, I am
not sure that Canadian companies would be viewed any more favorably.

Volatility and exchange rate issues appear to be relatively minor issues that any
truly international company has to deal with. Since the Canadian market for THI
seems fairly saturated, I would hope that increased US and international expansion
would make this a relatively minor cost of international growth rather than the big
deal that the the proposal seems to claim.

The merger proposal seems to claim that the merger allows more flexibility in negotiating
credit facilities. I believe that the company has always had and will continue
to have flexibility as a US company to negotiate more advantageous credit arrangements.
Again, the proposal seems to gloss over the possible advantages that a US company
might have in getting access to capital. The US credit market squeeze was hopefully
just temporary.

If the board continues to make false claims that this proposal is in the interest of
long term shareholders, I would be in favor of shareholder proposals or takeover
efforts to oust the board.

I suggest the board reconsider the merger proposal taking into consideration the objections
that I and others raise. Perhaps out of the box thinking will lead to other alternatives.
Consider out right sale of the company at a PREMIUM price to other companies or a private
equity group. A premium price would at least give investors a real incentive to paythe
capital gain taxes. Perhaps it is worth considering alternatives such as splitting the US and
Canadian opperations into separate companies that would be distributed to share holders
via a Dutch auction process that might possibly minimize the capital gain tax penalties
(I have no idea whether this would pass muster, but perhaps it is worth considering).
I admit these proposals may not be feasible, but please remember that the board has
a responsibility to maximize shareholder value not to build an empire or to make
life easier for the board or management.

While I appreciate that the board was probably trying to maximize shareholder value,
the current proposal is certainly undesirable to long term shareholders such as me.
Even board and mangagement members that pre-date the Wendy's spin-off may find that
they are ill-served by the high capital gain costs of the proposed merger.

Rod Warren