1. CFA Victoria Society Annual Forecast Dinner Presenter: Paul Balfour January 26, 2010

3. Annual Forecast Dinner (Victoria, B.C.) - 3 - Tonight’s Guesses, er … Forecasts 1.Oil 2.Gold 3.$CAD / $USD 4.Canadian 10 year bond yield 5.S&P/TSX Composite 6.S&P 500

4. Annual Forecast Dinner (Victoria, B.C.) - 4 - Crude Oil – WTI Spot 20.00 40.00 60.00 80.00 100.00 120.00 1985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009

5. Annual Forecast Dinner (Victoria, B.C.) - 5 - Speculation is not an Issue?? 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 198319841985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009 Thousands of Barrels per Day Nymex Average Daily Volume World Oil Demand Average daily oil demand worldwide has risen from 76 million barrels in 1999 to about 85 million today. Average daily traded volumes of just NYMEX light sweet crude futures were 609 million barrels per day in 2009 up from 150 million ten years earlier Source: IEA, NYMEX/CME Average daily oil demand worldwide has risen from 76 million barrels in 1999 to about 85 million today. Average daily traded volumes of just NYMEX light sweet crude futures were 609 million barrels per day in 2009 up from 150 million ten years earlier Source: IEA, NYMEX/CME

6. Annual Forecast Dinner (Victoria, B.C.) - 6 - Gold (London PM Fix) 400 600 800 1000 1985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009

7. Annual Forecast Dinner (Victoria, B.C.) - 7 - Gold – A Metallurgist’s View! Atomic Weight207.20196.9726.9863.50 Density11.319.32.78.9 Hardness1.52.52.83.0 Melting Point327°C 1064°C 660°C 2562°C Electrical Resistance 20822.128.216.8 Price per pound99¢ $17,600$1.00$3.35 LeadGoldAluminumCopper

8. Annual Forecast Dinner (Victoria, B.C.) - 8 - U.S. Trade Weight Dollar (DXY) 80.00 100.00 120.00 140.00 1985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009

9. Annual Forecast Dinner (Victoria, B.C.) - 9 - Source: F:\Group\Econ\Special Charts\DXY (PPP).xls\ DXY bar USD PPP Updated: Jan 4, 2010 Source: F:\Group\Econ\Special Charts\DXY (PPP).xls\ DXY bar USD PPP Updated: Jan 4, 2010 US Dollar - Getting Undervalued? PPP Valuation % Over/Undervaluation, Oct. 2009 27.8 26.5 22.9 20.7 19.7 16.4 7.8 6.0 -2.7 -16.1 -20-15-10-5051015202530 NZD AUD EUR CHF NOK CAD GBP JPY SEK USD Source: Deutsche Bank

10. Annual Forecast Dinner (Victoria, B.C.) - 10 - Canadian Dollar & Commodity Prices Source: Bank of Canada

11. Annual Forecast Dinner (Victoria, B.C.) - 11 - Canada 10-Year Bond Yield 4.00 6.00 8.00 10.00 1985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009

12. Annual Forecast Dinner (Victoria, B.C.) - 12 - Canadian Yield Curve Historically Steep Levels Driven By Low Short Yields Canadian Yield Curves Source: yc/can 3mth… 12/31/09 Source: yc…\can & US yield curves

13. Annual Forecast Dinner (Victoria, B.C.) - 13 - S&P/TSX Composite Index 4000 6000 8000 10000 12000 14000 1985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009

14. Annual Forecast Dinner (Victoria, B.C.) - 14 - Canadian Equity Market 2009 Low Quality Outperformed Source: RBCAM, Bloomberg * Credit ratings as of July 7 2009 # of Companies 5 22 131 187 68 9 3 75 S&P 500 Returns by Credit Rating - 2009 9% 12% 36% 33% 55% 105% 216% 43% 0% 50% 100% 150% 200% 250% AAA+ to AAA- AA+ to AA- A+ to A- BBB+ to BBB- BB+ to bb- B+ to B- CCC+ to C- Not Rated (ALL) 27.9% 35.1% 56.2% 90.8% 0% 20% 40% 60% 80% 100% TSX 60S&P/TSX Composite TSX Small Cap TSX Venture One Year TSX Performance Breakdown (TR)

15. Annual Forecast Dinner (Victoria, B.C.) - 15 - Canadian Equity – Outlook TSX Bottom Up Earnings Expectations - 2011 Source: TD Securities – TSX Bottom Up Earnings 25% 22% 18% 17% 15% 14% 13% 11% 7% 6% 4% 0% 5% 10% 15% 20% 25% 30% Energy Materials S&P/TSX Composite Financial Industrials Consumer Discretionary Consumer Staples Technology Health Utilities Telecom 2011 TSX Bottom Up Earnings Expectations 304% 242% 217% 154% 0% 50% 100% 150% 200% 250% 300% 350% 1992-19951983-19862002-20052010-2013E Conservative Earnings Recovery Expectations? Cumulative TSX Earnings Recoveries Troughs – First 3 Years

16. Annual Forecast Dinner (Victoria, B.C.) - 16 - Canadian Equities – Lots of Cash Around Source: RBC Capital Markets, Bank of Canada, Haver Analytics Canadian Cash (Savings and Money Market Funds) as a % of TSX Market Cap 20 25 30 35 40 45 50 55 60 Jan-95Jan-97Jan-99Jan-01Jan-03Jan-05Jan-07Jan-09 45.5 % 57.0 % 45.8 %

17. Annual Forecast Dinner (Victoria, B.C.) - 17 - S&P 500 Composite Index 200 400 600 800 1000 1200 1400 1985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009

18. Annual Forecast Dinner (Victoria, B.C.) - 18 - Major U.S. Market Indices 2009 Returns Three key performance themes played out in 2009. 1. Mid and small-caps outperformed large-caps 2. Growth strongly outperformed Value (third year in a row) 3. Technology beat everything Three key performance themes played out in 2009. 1. Mid and small-caps outperformed large-caps 2. Growth strongly outperformed Value (third year in a row) 3. Technology beat everything 26.5% 43.9% 24.2% 40.5% 27.2% 19.7% 37.2% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% S&P 500NASDAQ Comp. Russell Top 200 (Lg-cap) Russell Mid-Cap Russell 2000 (Sm-cap) Russell 1000 Value Russell 1000 Growth Source: Morgan Stanley

19. Annual Forecast Dinner (Victoria, B.C.) - 19 - A Big Thanks to my Personal Research Team! “The views presented by Paul tonight do not necessarily reflect those of RBC, RBC Global Investment Management, Phillips Hager & North Investment Management etc., etc … In fact, the opposite is probably the case.” - J. Montalbano

20. THE END CHEERS!