Start Me Up

NAIT
October 14, 2010

Disclaimer
National Bank Financial is an indirect wholly-owned subsidiary of National Bank of Canada. The National Bank of Canada is a public company listed on the Toronto Stock Exchange (NA: TSX). ** The securities or sectors mentioned herein are not suitable for all types of investors. Please consult your investment advisor to verify whether the securities or sectors suit your investors profile as well as to obtain complete information, including the main risk factors, regarding those securities or sectors. *** The information contained herein has been prepared by Angus Watt, an Investment Advisor with National Bank Financial; the opinions expressed do not necessarily reflect those of National Bank Financial. **** While opinions expressed are based on analysis and interpretation of historical data believed to be accurate the underlying data is not necessarily guaranteed as to accuracy.

Angus Watt Advisory Group

Largest Financial Planning Team in Alberta

#1 with one of Canadas most successful hedge fund managers

#3 in Canada with the worlds largest private money manager

Messages Over the Years

Dr. Allard:
Top 3 Principles when Investing in Real Estate. True in business as well.

We are addicted to oil.

We are addicted to growth.

Rex Tillerson, Chairman & CEO, Exxon (Sept/07)

Animal Instinct

9 Steps to Economic Recovery

14000 13000 12000 11000 10000 9000 8000 7000 6000 Apr 2008 Step 5 Apr 2009 Apr 2010 Step 9 Step 1 Step 2 Step 8 Step 3 Step 7 Step 6 Step 4

Dow Jones Industrial Average Index

Step 1 Rescue Plan Step 2 Drop in Interest Rates Step 3 Lower Gas Prices

Step 4 Fed provides liquidity Step 7 "Sugar High" Step 5 Sustainability of US House prices Step 8 "Hand-off" Step 6 Inflation Step 9 "In the Red Zone"

PIMCOs Continuing New Normal

All of which promote slower economic growth, lower inflation in developed countries, bypasses emerging markets that have more favourable conditions

Deleveraging

Reregulation

Deglobalization

About PIMCO. PIMCO is a global investment management firm that was founded in Southern California in 1971. PIMCO has USD$1117.3 billion in assets under management as of June 30, 2010.

Wim Geerts, Ambassador of the Kingdom of the Netherlands, Ottawa

Johannes Vervloed, Consul General of the Kingdom of the Netherlands, Vancouver

Angus Watt, Honorary Consul of the Kingdom of the Netherlands, Edmonton

Population: 16.5M Albertas largest exporting partner in Europe over the last 5 years 3rd largest investor in Canada

2nd largest food exporter in the world

5th largest export of goods in the world

Worlds 6th largest foreign investor

7th largest importer of goods

G20
How do we support a world of 9 billion people in 2050? Climate change: water and water tables Agriculture: food security, China Transportation: method and cost Environment: carbon tax, biofuels and measurement, disease and disease control Infrastructure

G20
Global Perspective

New Knowledge Economy

i.e., fax machine Need to be able to share your knowledge with the world

Sharing of technology Grouping of universities Advanced monitoring systems Need people, money and experience

2015: Looking Back to Fall 2010

According to this test, your hindsight is 20-20.
Source: www.cartoonstock.com

2015: Looking Back to Fall 2010

1) 2) Global Support of Central Bankers Fed Reserve According to this test, your 3) Corporations Flush in Cash hindsight is 4) US Government 20-20. 5) 6) 7)
Source: www.cartoonstock.com

Weak $US Currency US Housing Global Demand

1) Global Support of Central Bankers

2) Fed Reserve
Quantitative Easing (QE)
Fed Chair Ben Bernanke stated: will do all that it can would provide additional monetary accommodation through unconventional measures if it proves necessary Growth too slow Unemployment too high

3) Corporations Flush in Cash

Ratio of Liquid Assets to Short Term Liabilities
Highest in 54 years Buy back stocks Increase dividends Buy competitors or enter new markets Invest in capital projects and technologies CEO Confidence

4) US Government
Fear of new policy/standstill after elections. Harvard study looked at 232 occasions over the past 42 years. The study found strong and widespread evidence of corporate retrenchment in response to government spending shocks. The average firm cut back on capital investment by 15%. New focus on plants and equipment, and research and technology, and as always, infrastructure.

5) Weak $US Currency

America buys American first

Foreigners attracted to US assets, including bonds, stocks and real estate

Supports inflation

6) US Housing
3,000 2,500 2,000 1,500 1,000 500 0

US Housing Starts (Annual Rate)

(Thousands)

Source: Bureau of Census, US Commerce Department

6) US Housing
US Demographics remain positive
4.6% between now and 2015

(Population aged 21 to 40)

0% between 2000 and 2008

Source: NBF Economy & Strategy (data via Census Bureau)

In Europe, over 50% of net household worth is non-financial assets; in Italy and France, over 60% . . . but negative age growth of 8%

US Housing Affordability
Year 2007 2008 2009 2009 2009 2009 2009 2009 2010 2010 2010 2010 2010 2010 2010 2010 Median Priced Existing Single Mortgage Family Home Rate 217,900 6.52 196,600 6.15 172,100 5.14 177,100 5.33 175,900 5.24 172,000 5.10 169,300 5.09 169,600 5.00 163,800 5.08 163,900 5.13 169,500 5.07 172,500 5.10 174,500 5.09 183,500 5.02 183,000 4.90 179,300 4.76 Monthly Payment P&I as a % of Payment Income 1104 21.7 958 18.1 751 14.6 789 15.4 776 15.3 747 14.8 735 14.6 728 14.6 710 14.1 714 14.2 734 14.6 749 14.9 757 15.0 790 15.7 777 15.4 749 14.9 Median Family Income 61,173 63,366 61,845 61,324 60,978 60,631 60,285 59,939 60,498 60,498 60,498 60,498 60,498 60,498 60,498 60,498 Affordability Qualifying Index Income** Composite 52,992 115.4 45,984 137.8 36,048 171.6 37,872 161.9 37,248 163.7 35,856 169.1 35,280 170.9 34,944 171.5 34,080 177.5 34,272 176.5 35,232 171.7 35,952 168.3 36,336 166.5 37,920 159.5 37,296 162.2 35,952 168.3

Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul r Aug p

2010 National Association of REALTORS

7) Global Demand
INDIA
Indias GDP rose 8.8% last quarter Exports at 28%, less than a fifth of GDP

CHINA

In 2009 China overtook the US as the worlds biggest energy user

Chinas GDP rose 10.3% last quarter

Chinas Growth
Cities with a population of more than 1 million
China's Urban Population
Millions

250
200 150 100

Millions

1000 900 800 1000 700 600 500 400 300 633

220

50
0

60

200 100 0

2010

2020

2010

2020

Source: Globe and Mail

Energy Usage
Declines in US while China Gains
2500

Total Primary Energy Consumption (millions of tons of oil equivalent)

2000

United States China

1500

1000

500

Source: International Energy Agency, WSJ

Rebirth of the Alberta Advantage

Unemployment rate of 6.3% in July 2010 versus national average of 8.0% Population growth of 2.6% in 2009 versus Canada 1.2% GDP average annual growth of 3.6% per year from 2003-2008, higher than any other province

Wealth stability

Construction $30B of provincial infrastructure spending over the next 4 years 70,000+ jobs

Global Investors/ Environment

Alberta

Shortage of skilled workforce

Canadian Housing Affordability

Aug-10 Median Family Income*** $83,324 $77,327 $95,059 $90,143 Median Priced Family Home $410,995 $680,782 $385,712 $326,550 Monthly P&I Payment * $1,675 $2,774 $1,572 $1,331 Payment as % of Income 24.12% 43.05% 19.84% 17.71% Qualifying Income** Affordability Index

Toronto Vancouver Calgary Edmonton

$80,387 $133,155 $75,442 $63,870

103.65 58.07 126.00 141.13

* National Bank of Canada 5 Year Fixed Mortgage Rate of 3.69% ** Based on a 25% qualifying ratio for monthly housing expense to gross monthly income with a 20% down payment over 25 years. *** Based on 2005 Census and an increase of 20.2% in Disposable Personal Income between 2005 and 2009Q4.

Sources: Stat Can 2010 Canadian Real Estate Association, Aug 2010 National Bank Financial Group 2010

Might we be back to the age old question?

How do you get a frog into a pot of boiling water?

Summary

We need to remain bullish on Alberta

Questions?
780.412.6644

james_angus.watt@nbf.ca

anguswatt.com

Bank of Montreal
5.00% 4.50% 4.00% 3.50%
3.00%

2.50% 2.00% 1.50% 1.00% 0.50% 0.00%

4.69% 3.40%

2.10%

BMO Common Dividend Yield

5 year Bond

5 year GIC