##### 



NOTE: The following compilation report is provided solely in order to
comply with applicable requirements of Canadian securities laws. It should be
noted that to report in accordance with Public Company Accounting Oversight
Board Auditing Standards (PCAOBAS) on a compilation of pro forma financial
statements an examination greater in scope than that performed under Canadian
standards would be required.




---



##### 



1.
    
    Compared the figures in the columns captioned Inco to the audited consolidated
financial statements of the Company as at December 31, 2005 and for the year then ended,
and found them to be in agreement.2.
    
    Compared the figures in the columns captioned Falconbridge to the audited consolidated
financial statements of Falconbridge Limited as at December 31, 2005 and for the year then ended,
and found them to be in agreement.3.
    
    Made enquiries of certain officials of the Company who have responsibility for financial
and accounting matters about:
 (a)
    
    the basis for determination of the pro forma adjustments; and(b)
    
    whether the pro forma consolidated financial statements comply as to form in all material
respects with the regulatory requirements of the various Securities Commissions and similar
regulatory authorities in Canada.The officials:(a)
    
    described to us the basis for determination of the pro forma adjustments, and(b)
    
    stated that the pro forma consolidated financial statements comply as to form in all
material respects with the regulatory requirements of the various Securities Commissions and
similar regulatory authorities in Canada.
 4.
    
    Read the notes to the pro forma consolidated financial statements, and found them to be
consistent with the basis described to us for determination of the pro forma adjustments.5.
    
    Recalculated the application of the pro forma adjustments to the aggregate of the amounts
in the columns captioned Inco and Falconbridge as at December 31, 2005 and for the year then
ended, and found the amounts in the column captioned Pro forma Inco to be arithmetically correct.
  PricewaterhouseCoopers llp




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##### 



INCO LIMITED
 PRO FORMA CONSOLIDATED BALANCE SHEET
 Pro FormaAdjustments
    
    
    Pro FormaInco
    
    
    
    
    
    Falconbridge
    
    
    (Note 3(a))
    
    
    IncoASSETSCurrent assetsCash and cash equivalents
    
    $
    958
    
    
    
    
    
    $
    886
    
    
    $
    (34
    )
    
    $
    1,810Accounts receivable
    
    
    673
    
    
    
    
    
    
    1,007
    
    
    
    
    
    
    
    1,680Inventories
    
    
    996
    
    
    
    
    
    
    1,708
    
    
    
    270
    
    
    
    2,974Other
    
    
    68
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68Total current assets
    
    
    2,695
    
    
    
    
    
    
    3,601
    
    
    
    236
    
    
    
    6,532Property, plant and equipment and other non-current assets
    
    
    9,315
    
    
    
    
    
    
    8,817
    
    
    
    8,777
    
    
    
    26,909Total assets
    
    $
    12,010
    
    
    
    
    
    $
    12,418
    
    
    $
    9,013
    
    
    $
    33,441LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesLong-term debt due within one year
    
    $
    122
    
    
    
    
    
    $
    353
    
    
    $
    1,139
    
    
    $
    1,614Other current liabilities
    
    
    1,043
    
    
    
    
    
    
    1,691
    
    
    
    
    
    
    
    2,734Total current liabilities
    
    
    1,165
    
    
    
    
    
    
    2,044
    
    
    
    1,139
    
    
    
    4,348Other liabilitiesLong-term debt(1)
    
    
    1,852
    
    
    
    
    
    
    3,474
    
    
    
    1,453
    
    
    
    6,779Deferred income and mining taxes
    
    
    2,018
    
    
    
    
    
    
    1,156
    
    
    
    1,858
    
    
    
    5,032Other long-term liabilities
    
    
    1,031
    
    
    
    
    
    
    659
    
    
    
    587
    
    
    
    2,277Total liabilities
    
    
    6,066
    
    
    
    
    
    
    7,333
    
    
    
    5,037
    
    
    
    18,436Minority interest
    
    
    761
    
    
    
    
    
    
    54
    
    
    
    326
    
    
    
    1,141Shareholders equityConvertible debt
    
    
    362
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    362Common shareholders equityCommon shares issued and outstanding
    
    
    3,000
    
    
    
    
    
    
    4,264
    
    
    
    4,364
    
    
    
    11,628Preferred shares
    
    
    
    
    
    
    
    
    
    326
    
    
    
    (326
    )
    
    
    Warrants
    
    
    62
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62Contributed surplus
    
    
    578
    
    
    
    
    
    
    47
    
    
    
    6
    
    
    
    631Retained earnings
    
    
    1,181
    
    
    
    
    
    
    154
    
    
    
    (154
    )
    
    
    1,181Currency translation account
    
    
    
    
    
    
    
    
    
    240
    
    
    
    (240
    )
    
    
    4,821
    
    
    
    
    
    
    5,031
    
    
    
    3,650
    
    
    
    13,502Total shareholders equity
    
    
    5,183
    
    
    
    
    
    
    5,031
    
    
    
    3,650
    
    
    
    13,864Total liabilities and shareholders equity
    
    $
    12,010
    
    
    
    
    
    $
    12,418
    
    
    $
    9,013
    
    
    $
    33,441
 
 (1)
    
    Included in long-term debt are $750 million of junior preference shares (series 1, 2, and
3). Falconbridge has announced that $500 million of these junior preference shares will be
redeemed on April 16, 2006. The remaining $250 million are intended to be refinanced
subsequent to the acquisition of control of Falconbridge by Inco. F-1




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##### 



INCO LIMITED
 PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
 Pro Forma
    
    
    
    
    
    
    Pro FormaInco
    
    
    Falconbridge
    
    
    Adjustments
    
    
    Note 3
    
    
    IncoRevenuesNet sales
    
    $
    4,518
    
    
    $
    8,148
    
    
    $
    
    
    
    
    
    
    
    $
    12,666Cost and operating expenses (income)Cost of sales and other expenses, excluding depreciation,
depletion and amortization
    
    
    2,633
    
    
    
    5,773
    
    
    
    40
    
    
    
    b, c, f
    
    
    
    8,446Depreciation, depletion and amortization
    
    
    256
    
    
    
    555
    
    
    
    197
    
    
    
    d
    
    
    
    1,008Selling, general and administrative
    
    
    207
    
    
    
    80
    
    
    
    17
    
    
    
    e
    
    
    
    304Research, development and exploration
    
    
    78
    
    
    
    59
    
    
    
    
    
    
    
    
    
    
    
    137Currency translation adjustment
    
    
    59
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59Interest expense
    
    
    26
    
    
    
    152
    
    
    
    118
    
    
    
    g
    
    
    
    296Asset impairment charge
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    253,284
    
    
    
    6,619
    
    
    
    372
    
    
    
    
    
    
    
    10,275Other income, net
    
    
    83
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    100Earnings before income and mining taxes and minority interest
    
    
    1,317
    
    
    
    1,546
    
    
    
    (372
    )
    
    
    
    
    
    
    2,491Income and mining taxes
    
    
    408
    
    
    
    511
    
    
    
    (111
    )
    
    
    i
    
    
    
    808Earnings before minority interest
    
    
    909
    
    
    
    1,035
    
    
    
    (261
    )
    
    
    
    
    
    
    1,683Minority interest
    
    
    73
    
    
    
    155
    
    
    
    (123
    )
    
    
    h
    
    
    
    105Net earnings from continuing operations
    
    
    836
    
    
    
    880
    
    
    
    (138
    )
    
    
    
    
    
    
    1,578Loss on discontinued operations, net of tax
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8Net earnings
    
    
    836
    
    
    
    872
    
    
    
    (138
    )
    
    
    
    
    
    
    1,570Dividends on preferred shares
    
    
    
    
    
    
    17
    
    
    
    (17
    )
    
    
    j
    
    
    
    Net earnings applicable to common shares
    
    $
    836
    
    
    $
    855
    
    
    $
    (121
    )
    
    
    
    
    
    $
    1,570Net earnings per common shareBasic
    
    $
    4.41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4.07Diluted
    
    $
    3.75
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3.73
 F-2




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##### 



INCO LIMITED
 NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    BASIS OF PRESENTATIONThe unaudited pro forma consolidated financial statements of Inco Limited (Inco) have been
prepared in accordance with generally accepted accounting principles in Canada. These unaudited
pro forma consolidated financial statements should be read in conjunction with the audited
consolidated financial statements of Inco as at and for the year ended December 31, 2005,
including the related notes thereto.The unaudited pro forma consolidated financial statements have been prepared assuming that the
acquisition of Falconbridge Limited (Falconbridge) had been completed as of January 1, 2005
for the consolidated statement of earnings and as of December 31, 2005 for the consolidated
balance sheet.These unaudited pro forma consolidated financial statements are not intended to reflect the
financial position and results of operations which would have actually resulted had the
transaction and other adjustments been effected on the dates indicated. Further, the pro forma
results of operations are not necessarily indicative of the results of operations that may be
obtained by Inco in the future.2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe unaudited pro forma consolidated financial statements have been compiled using the
significant accounting policies as set out in the audited consolidated financial statements of
Inco for the year ended December 31, 2005 which, based on publicly available information, are
assumed to be substantially similar to the significant accounting policies as set out in the
audited consolidated financial statements of Falconbridge for the year ended December 31, 2005.
Upon consummation of the transaction, the accounting policies will be formally conformed and it
is possible that adjustments may result .3.
    
    PRO FORMA ADJUSTMENTS AND ASSUMPTIONSThe pro forma consolidated financial statements include the following pro forma assumptions and
adjustments:
 (a)
    
    The acquisition is accounted for using the purchase method of accounting, whereby
Falconbridges assets and liabilities are revalued to their fair value and its
shareholders equity is eliminated. Incos assets and liabilities are not revalued. The pro
forma adjustments reflect Incos acquisition of 100 per cent of Falconbridges net assets
at their fair values as at December 31, 2005 and the accounting for Falconbridge as a
wholly-owned subsidiary. Falconbridges interest in joint ventures in which it has joint
control are reflected using the proportionate consolidation method.The determination of the purchase price, based on managements preliminary estimate, is as
follows:
 Purchase PriceConsideration in Inco common shares
    
    $
    8,628Consideration in Inco options issued
    
    
    52Cash
    
    
    2,464Transaction costs
    
    
    110Total
    
    $
    11,254
 The purchase price was calculated using a price of $43.95 for each Inco
common share issued which represents the weighted average Inco share
price over the five day period extending from October 6, 2005 to October
13, 2005, the two days before and the two days after the date of
announcement. The cash portion of the purchase price will be financed
through committed loan facilities.
 F-3




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##### 



The allocation of the purchase price, based on managements preliminary estimate, is as follows:Allocation of Purchase Price
 Fair Value
    
    
    Purchase PriceBook Value
    
    
    Increment
    
    
    AllocationAssetsCash and cash equivalents
    
    $
    962
    
    
    $
    
    
    
    $
    962Accounts receivable
    
    
    1,007
    
    
    
    
    
    
    
    1,007Inventories
    
    
    1,708
    
    
    
    270
    
    
    
    1,978Property, plant and equipment and other non-current assets
    
    
    8,817
    
    
    
    8,777
    
    
    
    17,594Total assets
    
    $
    12,494
    
    
    $
    9,047
    
    
    $
    21,541LiabilitiesLong-term debt due within one year
    
    $
    353
    
    
    $
    
    
    
    $
    353Other current liabilities
    
    
    1,691
    
    
    
    
    
    
    
    1,691Long-term debt
    
    
    3,474
    
    
    
    129
    
    
    
    3,603Deferred income and mining taxes
    
    
    1,156
    
    
    
    1,858
    
    
    
    3,014Other long-term liabilities
    
    
    659
    
    
    
    587
    
    
    
    1,246Minority interest
    
    
    380
    
    
    
    
    
    
    
    380Total liabilities
    
    $
    7,713
    
    
    $
    2,574
    
    
    $
    10,287Total net assets purchased
    
    $
    4,781
    
    
    $
    6,473
    
    
    $
    11,254
 The book value of Falconbridge, as shown above:
 
    
    Reflects Falconbridges stated book values as at December 31, 2005;
    
    Reflects the assumed exercise of vested stock options; and
    
    Reflects the reclassification of the equity portion of preferred shares to minority
interest.
 This allocation is based upon preliminary estimates and certain assumptions with respect to
the fair value increment associated with the assets to be acquired and the liabilities to be
assumed. The actual fair values of the assets and liabilities will be determined as of the
date of acquisition and may differ materially from the amounts disclosed above in the assumed
pro forma purchase price allocation due to the change in fair values of the assets and
liabilities between December 31, 2005 and the date of the transaction, and as further
analysis is completed. The actual allocation of the purchase price may result in different
adjustments being expensed in the consolidated statement of earnings.
 (b)
    
    The increase in cost of sales and other expenses reflects the elimination of deferred
gains on derivative contracts on the pro forma consolidated statements of earnings. The
deferred gains arise from derivative contracts that qualified for hedge accounting and
were realized as a reduction of the cost of operations over the original delivery schedule
of contracts. The gains would not have been realized in the year ended December 31, 2005
since the purchased derivative contracts would have been fair valued as of January 1,
2005.(c)
    
    The decrease in cost of sales and other expenses reflects the elimination of amortized
past service costs and amortized net actuarial losses relating to post retirement benefits
which were expensed in the year ended December 31, 2005.(d)
    
    Represents the amortization of the preliminary fair value increment allocated to
operating capital assets. The pro forma amortization excludes the total amount of the
purchase price allocation not subject to amortization of approximately $2.4 billion as it
has been allocated to non-operating assets. On finalization of the purchase price
allocation, if this amount is allocated to operating assets, pro forma amortization would
change by approximately $104 million, before taxes, for the year ended December 31, 2005.
Pro forma amortization and the above noted sensitivity have been based on a remaining
weighted average estimated economic life of 23 years, and a reduction of one year in the
weighted average estimated economic life would alter pro forma amortization by $28 million,
before taxes, for the year ended December 31, 2005.(e)
    
    The increase in selling, general and administrative expenses reflects the expense
relating to the expected exchange of stock options to be issued pursuant to the acquisition
of Falconbridge.(f)
    
    The increase in cost of sales and other expenses reflects the amortization of the
allocation of the purchase price to equity accounted investments.
 F-4




---



##### 



(g)
    
    The increase in interest expense reflects the issuance of CDN$2.87 billion of debt in
connection with the acquisition of Falconbridge and the amortization of the fair market
value increment related to the Falconbridge debt.(h)
    
    The adjustment reflects the elimination of the Falconbridge minority interest in
earnings assuming that Falconbridge and Noranda were amalgamated at January 1, 2005.(i)
    
    The adjustment reflects the tax effect on the above adjustments.(j)
    
    The adjustment reflects the reclassification of preferred share dividends to minority
interest.
 4.
    
    ITEMS NOT ADJUSTEDThe pro forma consolidated financial information does not reflect (1) any special items such as
payments pursuant to change of control provisions or integration costs which may be incurred as
a result of the acquisition, and does not give effect to operating efficiencies, cost savings
and synergies that are expected to result from the acquisition, (2) the impact of undertakings
that Inco is prepared, as may be required, to make in order to address regulatory clearance
requirements, as there are no current agreements providing for implementation of such
undertakings which, however, are expected to be carried out after the completion of the Offer or
(3) no adjustment has been made to eliminate historical sales between Inco and Falconbridge as
the amounts are not significant.5.
    
    PRO FORMA EARNINGS PER SHAREEarnings per share computation for the year ended December 31, 2005
 Basic pro forma earnings per share computationNumerator:Pro forma net earnings
    
    $
    1,570Pro forma earnings applicable to common shares
    
    $
    1,570Denominator (thousands of shares):Inco shares outstanding
    
    
    189,425Common shares issued to Falconbridge shareholders
    
    
    196,309Pro forma weighted-average common shares outstanding
    
    
    385,734Basic pro forma earnings per common share
    
    $
    4.07Diluted pro forma earnings per share computationNumerator:Pro forma net earnings
    
    $
    1,570Dilutive effects of convertible debentures
    
    
    6Pro forma net earnings applicable to common shares, assuming dilution
    
    $
    1,576Denominator (thousands of shares):Pro forma Inco shares outstanding
    
    
    385,734Dilutive effect of securities:Convertible debentures
    
    
    31,247Stock options
    
    
    1,008Warrants
    
    
    4,218Stock options issued on transaction
    
    
    213Pro forma weighted-average common shares outstanding
    
    
    422,420Diluted pro forma earnings per share
    
    $
    3.73
 6.
    
    SUBSEQUENT EVENTOn March 16, 2006 Falconbridge announced that it intends to redeem $500 million of its junior
preference shares (Series 1,2 and 3). The junior preference shares will be redeemed on April 16,
2006 from holders of record on March 22, 2006. Internal cash resources are intended to be used
to fund the redemption. In the pro forma consolidated balance sheet as at December 31, 2005
there is $750 million of junior preference shares (series 1, 2 and 3) in long-term debt.
 F-5