Institutional Equity Research Industry Update

June 16, 2010
Sector Weighting: None

Off The Press — Collective Research Series

CIBC's CIO Roundtable - Volatility And Slower Growth
Sorting Through The Challenges

Funds have been shifting out of risky assets in recent weeks, reflecting concern about sovereign debt and global growth. Absent an outright sovereign default, we see those fears easing. The drag from fiscal tightening could keep risky assets to muted gains in choppy markets through 2010. Longer-term fundamentals, however, remain favourable for Canada's risky assets. The country's resource endowments, resilient financial system and favourable demographics relative to other G-7 nations make it an economic contender looking out over a five-year horizon. Another notable positive is in the healthier state of public and corporate sector balance sheets. These factors are no iron-clad recipe for national success in the near term, but do mean Canada is better-positioned than many of its competitors to deal with the challenges of the upcoming years. Where economic growth goes, corporate earnings, dividends and other rewards for investors are likely to follow. Nimble asset allocation is likely to be rewarded by the current markets. We are recommending an overweight on equities, tempered by the European uncertainty.

CIBC World Markets Inc. 1 (416) 594-7000 Perry Caicco 1 (416) 594-7279
Perry.Caicco@cibc.ca

Alex Avery, CFA 1 (416) 594-8179
Alex.Avery@cibc.ca

Cosmos Chiu 1 (416) 594-7106
Cosmos.Chiu@cibc.ca

Barry Cooper 1 (416) 956-6787
Barry.Cooper@cibc.ca

Peter Gibson 1 (416) 594-7194
Peter.Gibson@cibc.ca

Paul Holden, CFA 1 (416) 594-8417
Paul.Holden@cibc.ca

Alec Kodatsky 1 (416) 594-7284
Alec.Kodatsky@cibc.ca

All figures in Canadian dollars, unless otherwise stated.

10-103269 © 2010

Mark Petrie, CFA 1 (416) 956-3278
Mark.Petrie@cibc.ca

Andrew Potter, CFA 1 (403) 221-5700
Andrew.Potter@cibc.ca

Brian Quast 1 (416) 956-3725
Brian.Quast@cibc.ca

Ian Parkinson 1 (416) 956-6169
Ian.Parkinson@cibc.ca

CIBC World Markets does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. See "Important Disclosures" section at the end of this report for important required disclosures, including potential conflicts of interest. See "Price Target Calculation" and "Key Risks to Price Target" sections at the end of this report, or at the end of each section hereof, where applicable.
CIBC World Markets Inc., P.O. Box 500, 161 Bay Street, Brookfield Place, Toronto, Canada M5J 2S8 (416) 594-7000

Robert Sedran, CFA 1 (416) 594-7874
Robert.Sedran@cibc.ca

Avery Shenfeld 1 (416) 594-7356
Avery.Shenfeld@cibc.ca

Find CIBC research on Bloomberg, Reuters, firstcall.com and ResearchCentral.cibcwm.com

CIBC's CIO Roundtable - Volatility And Slower Growth - June 16, 2010

Table of Contents CIBC’s CIO Roundtable ............................................................................. 3 Economics............................................................................................... 4 Portfolio Strategy and Quantitative Research.............................................. 16 Introduction........................................................................................ 16 Asset Allocation................................................................................... 18 S&P 500 And TSX ROE ......................................................................... 32 Energy Sector ROE And Security ............................................................ 33 Conclusion.......................................................................................... 36 Sector Outlook....................................................................................... 37 Banks & Lifecos ................................................................................... 37 Asset Managers & P&C Insurers ............................................................. 39 Mining— Precious Metals....................................................................... 42 Mining— Metals & Minerals.................................................................... 45 Oil & Gas............................................................................................ 48 Consumer Products—Merchandising ....................................................... 52 Real Estate ......................................................................................... 55 Appendix .............................................................................................. 58

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CIBC's CIO Roundtable - Volatility And Slower Growth - June 16, 2010

CIBC’s CIO Roundtable
Volatility with Slow Growth – The New Normal Taking a Closer Look At The Future
On June 17, we are pleased to present our inaugural roundtable of Chief Investment Officers engaging our analytical team (equity research and economics) on a variety of market-pressing subjects. From the issues surrounding the Euro zone to the implications of muted global growth, prospects for China and the demand on base metals, we expect to have a wide-ranging conversation. Is the U.S. recovery happening or could this just be a head fake, which will continue to have implications for the financial services sector on both sides of the border? With continued volatility and no distinct leadership in the market, the lustre of gold shines brightly, but will the spotlight last? Finally, while much has been made of Canada’s ability to skate through the global market challenges, are we immune from the sniffles, cold and fever that has beset much of the world? Will our consumer continue to look on the bright side and continue supporting Canadian retail stores and buying real estate? In preparation for our discussion and to stimulate some of the conversation around the table, we have asked the analysts at CIBC to provide their perspective on many of the issues facing the markets over the next 12-18 months and tried to peer into the crystal ball for the 3-5 year outlook. We have tried to distill those views into this report. Avery Shenfeld, our Chief Economist, provides his sense on living in a world where growth is more lethargic and restructurings will continue. When it comes to equities, he has a mildly constructive view on their prospects. Peter Gibson, our Portfolio Strategist, has provided a somewhat complementary view to Avery’s perspective on growth, although they are not without their differences. While Peter believes the global economy is perilously close to a debt crisis, he thinks Canada’s equity market still has some legs – provided the U.S. economy skates through its challenges. Peter highlights his targets for a number of commodities, yields and valuations for the remainder of 2010. We have also provided our asset allocation recommendations, supplemented by a tactical view that is more tradingoriented. Finally, we have asked several of our fundamental analysts to outline their views on their verticals given the future that has been painted by Avery and Peter. We are indebted to our clients for agreeing to lend their expertise/knowledge as key contributors to the CIBC roundtable. A special thanks to the following individuals: Martin Hubbes, EVP & CIO, AGF Funds Inc. Duncan Webster, CIO, CIBC Asset Management John Wilson, CIO, Cumberland Private Wealth Management Inc. David Rosenberg, Chief Economist & Strategist, Gluskin Sheff & Associates Robert Spector, Chief Economist, McLean Budden Ltd. Neil Matheson, SVP, Investment Strategy – Standard Life Investments Inc.

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the US economy had a longer and steeper tumble. “V”-shaped rebound. risk-off trade. All of which puts them in the Vfor-victory camp as well. will be a half-point slower in 2011. the global economy has traced out the first stages of a classic. The business cycle. performance in the CIO seat will critically depend on reading the cyclical and risk-appetite tea leaves correctly. moving in near unison. In Canada. real GDP has rebounded even more sharply. South of the border. we share that sentiment. and China’s GDP is up nearly 12% in the past year. Exhibit 1. Economic growth looks set to decelerate notably in the second half of the year in most major economies (Exhibit 1). rebounded sharply thereafter. Long-suffering Japan has put together two solid quarters. risky assets fell through March 2009.Volatility And Slower Growth . more recently. and then. and commodities into one risk-on. gave up some ground. In the near term. nearly returning to its pre-recession peak.CIBC's CIO Roundtable . Looking at the recent performance of risky assets. has ruled in the past two years as. not stock picking. Global Economy To Slow In The Second Half 12 10 8 6 4 2 0 US 1H10F Source: CIBC World Markets Inc. which link stocks. markets are sensing that today’s economic success story won’t last. % Eurozone 2H10F C hina 4 . Implausible as it might have seemed at the trough of the Great Recession. if not employment. 2010 Economics Avery Shenfeld (416) 594-7356 Benjamin Tal (416) 956-3698 Peter Buchanan (416) 594-7354 Warren Lovely (416) 594-8041 Meny Grauman (416) 956-6527 From “V” to “U”: Living With Slower Growth The macro story matters. due to top 4% this year. but it too has shown solid growth in output. and global growth.June 16. Given the tight correlations for risky assets. annua lize d q/q rea l G DP gro wth. corporate bond spreads. although leaving the unemployment rate some 2%-points higher. as sharply as it fell.

June 16. While that might still transpire. demographics. the lack of any additional evidence of a further move to the brink of default in the next few months should allow some of the recent flight to safety to be reversed. That would tend to shift assets away from safe-haven assets such as high-rated government bonds (Treasuries. We’re less concerned than some about risks of a China-syndrome meltdown in East Asia. but it’s only moving to fight bubbles in those asset markets because Beijing feels it can get more sustained growth in industrial development and exports. it seems less likely to happen in the next year. investors could simply be disappointed by the pace of economic and earnings growth ahead. and will be difficult to sustain politically. and US dollars. markets are still concerned about a near-term credit shock in the Euro zone. next year could be the time to begin looking for opportunities to capitalize on a favourable medium-term picture for our economy. would be enough to refinance all of the weakest players’ maturities through 2011 (Exhibit 2). Europe’s recent collective borrowing proposal. but fiscal belt tightening elsewhere could prevent that from being the first in a chain. one that would begin with a sovereign default and spread to the banking system. and the Canadian dollar). that Greece will face a debt restructuring a few years down the road. Exhibit 2. equities. 5 . Stability Fund Covers Maturity 800 700 600 500 400 300 200 100 0 Debt refinancing Jun10-Dec11 Source: CIBC World Markets Inc. Bloomberg € billion IMF Ireland Portugal Greece Spain EU Stability Fund But equity markets may still be on to something. Canada enjoys a number of advantages in terms of its resource assets. The recent retreat in the purchasing managers’ index still left it at a level consistent with 10% growth (Exhibit 3). and fiscal starting point.. gold. China’s monetary tightening will put a dent into housing prices in major cities and equities markets. Austerity programs are likely to fall short of budget objectives. however. So while portfolios should now be adjusted to reflect the transition from V to U through 2011. with a potential IMF supplement.CIBC's CIO Roundtable . 2010 Longer term. In the interim.Volatility And Slower Growth . and allow for a partial recovery in risky assets (corporate bonds. then. Rather than being hit by the one-time shock wave of sovereign debt defaults. Chances are. Fiscal Policy: It’s A Drag Judging by trends in sovereign CDS markets and bond spreads. Canadas).

But there are still implications for investment strategies in going from V to U. offsetting most of the fiscal drag. where bond markets seem perfectly willing to finance deficits at very manageable funding rates. vs.. While detailed plans are still rolling in. and a stronger greenback will. just as Canada’s economy was sheltered in the 1990s deficit battle by a cheap exchange rate. will be central to a deceleration from today’s global “V” into a flatter “U”-shaped advance. in many countries. The US.Volatility And Slower Growth . a 1-3% GDP boost from stimulus in recent quarters. transmit some of Europe’s fiscal drag to the US.June 16. orthodoxy. in effect. overdone. with more to come as states adopt additional belt tightening. Spain and Ireland. That fiscal tightening. Europe stands alone in undertaking a major fiscal belt tightening this year. for example. and the end to the one-time boost from inventory restocking. More troubling is that in the broader global economy. Bloomberg It’s the developed world where risks of a slowdown are more concerning. Unlike Greece. faces a roughly 1% drag from federal budget measures already in place. fiscal retrenchments will subtract 1 to 2 percentage points from economic growth in each of the next two years. 2010 Exhibit 3. 6 . fiscal restraint has become the new. Chinese PMI Consistent With 10% GDP Pace 14 12 10 8 6 4 2 0 48 GDP y/y g rowth (%) Ma y 2 010 PMI 50 52 54 56 58 Source: CIBC World Markets Inc. are seeing the political mood swing away from stimulus towards a more immediate assault on deficits.CIBC's CIO Roundtable . Its own growth trajectory will be helped by a weaker euro. and perhaps. and on the order of 2½% for North America (Exhibit 4). But that’s a zero sum game for the global economy. The turn from stimulus to tightening will shave as much as 2% from 2011 growth in Canada. with just under 4% 2011 growth for world GDP. policymakers have room to go slowly enough to avoid the dreaded “W” of a renewed recession. Even countries like the US and the UK.

15 1.950 1.10 1.00 4.00 0. 2011) forward earnings yields (relative to analysts’ consensus) are in fact below the historical norm for that far out (Exhibit 5). the difficulty is in discerning just what is being priced in for the next six quarters.00 1.75 4.98 87 1.e.30 1.20 0.12 1.20 1.00 1. showing growth of just over 20%.US 10-Year Bond Spread Canada Yield Curve (30-Year — 2-Year) US Yield Curve (30-Year — 2-Year) EXCHA NGE RA TES CADUSD USDCAD USDJPY EURUSD GBPUSD AUDUSD USDCHF USDBRL USDMXN Source: CIBC World Markets Inc.01 0.04 90 1.46 0.88 3.40 5.June 16.99 91 1.25 4.22 1.90 -0.10 4.48 0.05 -0.940 1.26 0.44 0. might be only slightly above reality.5 2011 Mar 1.01 0. Interest & Exchange Rate Forecast INT EREST A ND FOREIGN EXCHA NGE RA T ES 2010 END OF PERIOD: CDA Overnight target rate 98-Day Treasury Bills 2-Year Gov't Bond 10-Year Gov't Bond 30-Year Gov't Bond U.02 1.80 3.46 0.10 4.30 1.18 1.19 1.30 5.15 2.76 0.24 1.20 2.71 12.46 1. already chops something off the analysts’ calls in deciding how much to pay.13 1.00 4.25 1.01 92 1.70 12.00 89 1.65 -0.95 4. the bottom-up consensus is consistently biased on the upside.95 2.49 0.40 4. and even in bull markets it’s typical for earnings projections to come down to earth as the year gets under way.96 1.25 0. Analysts’ bottom-up (First Call) consensus estimates for TSX earnings.75 0.36 4.75 2. It’s their call for a further.45 2.15 1.38 0. suggesting that investors have taken a largerthan-normal haircut off the consensus in valuing Canadian equities.02 0.850 1.95 1.73 12.20 0.95 1.99 87 1. therefore.29 0.60 1. The market.0 Canada .US T-Bill Spread Canada . given the solid start to the year and the weak base of comparison from a year ago.50 3.60 4.27 1.73 12.80 4.8 Sep 1.15 3.910 1.50 2.00 3.90 0.870 1.15 2.17 0.20 3.CIBC's CIO Roundtable .40 4.43 0.05 91 1.75 1.99 1.40 4.18 1.55 1.35 0. Year-ahead (i. However.15 1.10 1.00 1.10 1.50 0..23 0.95 3.2 Sep 2.15 1.40 0.15 1.25 1.40 2.930 1.85 4.75 12.05 0.5 Dec 1.77 12.38 3.16 1.50 0.30 -0.25 0. 7 .50 1. 2010 Exhibit 4.00 -0.97 3.24 1.Volatility And Slower Growth .15 2.95 1.25 1.890 1.20 0.25 4.3 Jun 1.05 4. nearly equivalent profit jump next year that seems far too optimistic for an economy where nominal GDP looks to rise by no better than 5½% in 2011. Bloomberg How Much Room For Disappointment? In the equity market.95 3.90 2.25 1.85 3.15 1.55 3.0 Dec 2.20 1. Federal Funds Rate 91-Day Treasury Bills 2-Year Gov't Note 10-Year Gov't Note 30-Year Gov't Bond 27-May 0.30 0.25 2.82 12.00 4.20 0.05 2.79 3.20 -0.35 3.00 4.20 1.75 1.00 1.S.

averaging a roughly 4% return in the six months after an initial Bank of Canada (BoC) move.Volatility And Slower Growth .June 16. % (83% avg) Jan-95 Jan-00 Jan-05 Jan-10 Source: MSCI/Barra Total Return Index. bid down comparable earnings yields on stocks. Exhibit 6. therefore. All told. % 10-yr bond yields Average. CIBC World Markets Inc. Earnings Yield Leaves Room For Misses 9 8 7 6 5 4 3 2 1 0 TSX Yr-Ahead Earnings Yield (%) Today Source: Thomson Reuters.CIBC's CIO Roundtable . equities are already discounting a much weaker year ahead than analysts. so investors should. 2010 Exhibit 5. And stocks in Canada have become much more sensitive to overseas equities than was the case in prior decades (Exhibit 6). in fact. Note that bond yields are also below the historical average. leaving them vulnerable to adverse news on economic developments in countries with deeper fiscal adjustments ahead. Canadian equities have typically seen a deceleration after the first rate hike. 8 . closer to 10%) and still leave forward earnings yields at roughly the historical norm. a double-digit return in the preceding six months. Looking across all cycles since 1958. rather than an outright bear market. Best bets. ('87-date) So much so that earnings growth could be about half the consensus projection and in line with our macro-based top-down view (i. and might therefore crawl higher over that period. then. vs. are for sluggish gains. Rising Canadian Equity Market Correlation With Non-US Stocks 120% 100% 80% 60% 40% 20% 0% Jan-90 (44% avg) 12 month moving correlation.e.

Canadian OIS contracts are priced for a 1% overnight rate by December.1 2.1 Source: Bloomberg and CIBC World Markets Inc.5 2.1 10Q4F 1.8 8.9 1.7 4.5 1. Exhibit 8.4 10Q1A 6.4 9. for example.2 2.1 1. given how much slack there currently is in the economy.7 2. 2010 We can also learn a lot about what investors are now assuming by looking at yield curves.Volatility And Slower Growth .0 8.8 2.3 1.5 2.4 2.2 2011F 2. and in the wake of the latest employment shortfall.5 3.8 1.8 0.9 8. That would allow for the Bank of Canada to skip two rate decision dates over that period.e.5 2.3 2010F 3. if growth in Q2 matches our 3½% projection.7 9.0 8. Note that America’s employment rate is still miles below where Canada’s stood when the Bank of Canada launched its 2010 tightening cycle (Exhibit 7).9 1.1 2009A -2.S. Real GDP Growth (AR) Real Final Sales (AR) All Items CPI Inflation (Y/Y) Core CPI Inflation (Y/Y) Unemployment Rate (%) 3.7 1.3 9. an even more dovish outlook than our sub-consensus forecast for a 1.0 9.8 1.2 11Q2F 2.8 2.3 1.5 2.6 1.6 1.0 2.25% rate that includes a pause in December (Exhibit 8).2 3.4 1. 16+ for US May-04 Sep-05 C anada Source: Statistics Canada.4 1.3 3.7 2.2 1.5 -1.9 1.6 9. it appears that equity markets are already cushioned for a substantial slowing from the first quarter’s over-6% pace. Equities therefore have room to rally. Exhibit 7. 9 .5 1. Still. and the inability to price in an outright rate cut.0 1.2 10Q2F 3.1 10Q3F 2.5 0.8 9.5 2.8 1.1 1.0 1. 2% or higher).9 1.5 1. Economic Update (June 14.9 8.6 2.4 2.0 1. and bonds to sell off. US Bureau of Labor Statistics % of working age* population 57 Jan-03 Jan-07 May-08 Sep-09 US More telling is the fact that north of the border.9 0. Since the Bank would likely continue to tighten if Canada’s growth rate remained above its estimate of the non-inflationary potential (i. a norate-hike expectation in the futures market leaves a wide range of plausible assumptions for growth. Fed fund futures.8 1. We’ve long shared that view.1 4.6 2.June 16.8 1.0 1.9 8. into late Q2 2011.7 -0.CIBC's CIO Roundtable . are pushing our first rate hike back another quarter.3 2.4 -1.5 -2.4 1.8 2. already price in no hikes in 2010.1 9.8 8.1 2. 2010) CANADA Real GDP Growth (AR) Real Final Domestic Demand (AR) All Items CPI Inflation (Y/Y) Core CPI Ex Indirect Taxes (Y/Y) Unemployment Rate (%) U.0 8.3 0.9 8. Employment Rate: US is a Mile Behind 65 64 63 62 61 60 59 58 *15 yrs and older for C da.2 11Q1F 2.3 3.8 1.5 1.9 9.9 9.

as we expect. then price out. non-inflationary potential output by the second quarter of 2011. released in April. and tighter standards for CMHC insurance will combine to cool prices. and an even smaller share of houses with negative equity. At that time. House Prices Overshooting Estima te d dev ia tion of Av erage House Price s from Fa ir Value 60 50 40 30 20 10 0 -10 -20 2008 2009 2010 BC ALTA MAN/ QUE ONT ATL SASK 14. which will disappear as prices level off and slowly retreat. we face some corresponding choppiness in fixed income markets as investors price in. we find that house prices are already some 14% above “fair” value based on economic fundamentals (Exhibit 9). 10 . the new supply coming from an upturn in housing starts over the latter half of 2009.0% '000s 20. Using an IMF model.Volatility And Slower Growth . additional rate hikes. A 5-10% correction is likely through 2011. it saw the Canadian economy back at its full.2 13. as the slower growth path leaves the economy short of its non-inflationary potential right through 2011. one sufficient to at least leave it with some doubts about the appropriate pace of future hikes. a decelerating global economy dents Canadian export growth materially. Exhibit 9. But since then. Rising rates.7 % 8. The Bank of Canada’s last published forecast for the Canadian economy. one that will still leave only a small fraction of Canadians under water relative to their purchase prices.6% A s of April 2010 Source: IMF. A dampened wealth effect from housing will contribute to that.CIBC's CIO Roundtable . typically a leading indicator of a softening in prices. which would typically entail taking overnight rates to at least 3½% over that period. CREA and CIBC World Markets Inc. the Bank’s message has been muddied by a correction in both equities and commodity prices.June 16.7 % 17. 2010 Rate Hikes And Canadian Households With all of the pressure points globally. Note that the ratio of sales to listings has already turned higher.4 % 13. Canadians’ demand for consumer goods and housing. If. Moreover. would be consistent with a fairly rapid course of tightening. the Bank will find that a smaller dose of tightening is sufficient to becalm.0 % % 11. the need for rate hikes to moderate growth and inflation will be less pressing. We estimate that the housing wealth effect has been adding about a half-percent to the recent pace of consumer spending growth. but not crush. just as equities are likely to move only sporadically higher. But the broad direction in Canada’s bond market through 2011 is towards higher rates and a flatter yield curve.

its second decade could be Canada’s to shine. talk of a crash in domestic demand under the weight of excessive household debt burdens looks to be overstated.0 9. True. as forecasts with a 100-year horizon rarely pan out. at least among the industrialized economies of the West. the Bank of Canada will have to manage the pace of rate hikes so as to avoid a harsh deceleration by consumers. It didn’t.5% by the end of next year. We therefore look for overnight rates to be no higher than 2. It was some 106 years ago that Wilfrid Laurier opined that while the US dominated the 19th century. a shallower climb than consensus forecasts.Volatility And Slower Growth . and will be earlier than most in feeling the impact of monetary tightening.0 7.4% this year.CIBC's CIO Roundtable . if not the 21st century as a whole. quite work out that way. the US or Japan. Exhibit 10. That should leave real consumer spending growing at 3. A Milder Hangover A key advantage is that the fiscal drag will come to an end sooner here than in Europe. 11 . But it has been on a rising trend for more than a decade as the costs of servicing a given volume of debt have declined. of course. followed by a still-reasonable 2. each 1% rise in rates will have a greater impact on consumer spending power. the 20th century would “belong to Canada”. and much less net debt.2% Effective interest rate on debt: 6. Canada has less gross debt. The Medium Term Belongs To Canada While Canada will share in the global deceleration of 2011.5 times personal income.June 16.0 10. The ratio of debt service to after-tax income looks well manageable at present (Exhibit 10). debt has reached a record level of nearly 1. its medium-term prospects look brighter than most other industrialized economies. With export’s contribution to growth set to slow.3% Source: CREA and CIBC World Markets Inc. Given the high debt load.0 89 91 93 95 97 99 01 03 05 07 09 % of pdi Effective rate:5. than most others (Exhibit 11). 2010 That said. Debt Service Burden 11.7% gain in 2011.0 8. But it might well be that.0 6. with 10-year yields at roughly 4%.

and have long lived with limits on leverage. Canada’s current federal deficit of 3% of GDP (or 5% including the provinces) pales next to double-digit deficit-to-GDP ratios for national governments in the US and the UK. The result is that if each country aimed to stabilize its debt-to-GDP ratio at 45%. While details are still forthcoming. while others would need fiscal cuts several times larger (Exhibit 12). long-bond yields could be lower than elsewhere.June 16.Volatility And Slower Growth . Canada will have a longer-term advantage in dealing with a much lighter burden from fiscal restraint. G Gross While an earlier rate hike cycle could prevent such a growth differential from showing through in 2010-11. given the country’s unquestioned AAA rating. Size Of Fiscal Cuts Needed To Stabilize Net Debt-to-GDP Ratio % of GD P 14 12 10 8 6 4 2 0 St at es pa n K y re ec e It al U er m an an a Ja da y G te d Source: IMF and CIBC World Markets Inc. Exhibit 12. 12 U ni G C -7 vg . But Canada’s banks are already better capitalized (Exhibit 13). while Canada’s short rates will top those of other countries in the near term. Canada would require a retrenchment of less than 3% of GDP. The other hangover from the 2008-09 recession is that the world’s banks are still sitting with much less capital than regulators are likely to demand.CIBC's CIO Roundtable . 2010 Exhibit 11. Moreover. and changes are coming in the definitions used to calculate capital adequacy. the upcoming regulatory regime change should impose fewer restraints on lending growth in Canada than elsewhere given that stronger starting point. Canada’s Government Debt Burden The Least Onerous 250 200 150 100 50 0 y re ec e U K er m U an ni te y d St at es C an ad a an Ja p It al A G d G -2 0 Ec A dv a nc e on o m ie s 2010 general govt debt-to-GDP ratio. % G Net Source: Statistics Canada and CIBC World Markets Inc.

Once full employment is reached. % Other Mature Europe Johnny Canuck Shows Potential Attaining full employment faster will colour the near-term outlook. In that regard. 2010 Exhibit 13. but for the decade as a whole. Canada’s Banks Well Capitalized By International Standards 13 12 11 10 9 8 7 6 C anada UK US Euro Area Source: CIBC WM. but Canada is well-positioned relative to other mature economies. 13 . Fueled by immigration to a multi-cultural society. the economy’s non-inflationary speed limit is tied to growth in working age population and productivity per worker. The IMF puts the country’s initial output gap at about a half-point wider than the Bank’s estimate. the other key is the trend growth rate in the economy’s longer-term non-inflationary potential. the Bank’s current estimate of the elbow room for noninflationary growth.June 16. the Bank is always willing to adjust its output gap estimate to be in line with that evidence. Japan is already seeing labour force shrinkage. If inflation doesn’t heat up. Average Tier 1 C apital Ratio.Volatility And Slower Growth .CIBC's CIO Roundtable . Demographers are concerned about an ageing work force that will slow growth ahead. IMF Source: IMF and CIBC World Markets Inc. is likely to prove too conservative. which allows for only a 2% longer-term pace. and is ill-positioned to attract immigrants given language barriers and cultural homogeneity in its existing population. That sets the speed limit on how fast the Bank of Canada will let the Canadian economy advance without judging it as excessively inflationary. Canada’s economically active population is still set to grow faster than that of the US or Europe (Exhibit 14).

Capital spending plans are recovering from their recessionary malaise. Research across countries has identified that bilateral trade tends to be enhanced between countries in response to the movement of people from one to the other. 2012 (%) y A pa n ce K U C It al an an U Source: Finance Department of Canada and CIBC World Markets Inc. Where Canada’s report card has suffered is on squeezing out more output per worker. 14 G er m Fr an a Ja da S y . Competitive Corporate Taxes Should Support Investment & Productivity Growth 40 35 30 25 20 projected corporate tax rate.Volatility And Slower Growth . Governments have done their part to encourage such spending. Exhibit 15. and corporate Canada is carrying less debt than its US counterpart. 2010 Exhibit 14. On that score. a trend that appears evident in the Canadian data. leaving more room to add leverage to finance those plans. Immigration also has a side benefit. Continued inmigration from East Asia and South Asia should help build Canada’s export prospects in these fast-growing markets.June 16. Business and cultural ties to the home country can facilitate the movement of goods. on sub-par business investment in productivity-enhancing capital equipment. Projected Growth In Economically Active Population. 20102015 5 4 3 2 1 0 -1 -2 -3 -4 C anada United States Western Europe Japan % Source: International Labour Organization and CIBC World Markets Inc. The blame has been placed. with corporate tax rates headed below those in all of the nation’s major developed-economy competitors (Exhibit 15). there are at least some reasons to expect improvement ahead. in part.CIBC's CIO Roundtable . in terms of helping Canada make inroads into some of the world’s faster growing developing-economy markets.

And where economic growth goes.pts Te rms of Trade 2002=100 Source s of Increa se in Incom es Since Q402 Source: Statistics Canada and CIBC World Markets Inc.CIBC's CIO Roundtable . pointing to concerns about sovereign debt and global growth. but do mean Canada is better-positioned than many of its competitors to deal with the challenges of the upcoming years. Another notable positive is in the healthier state of public and corporate sector balance sheets. dividends and other rewards for investors are likely to follow. Canada’s Terms Of Trade And Important Source of Income Growth 140 130 120 110 100 90 80 Domestic Force s (ie .3%. Exhibit 16.Volatility And Slower Growth . These factors are no iron-clad recipe for national success in the near term. 6. those terms-of-trade gains accounted for about a third of Canada’s domestic income growth since 2002. volume gains were supplemented by an improvement in the global market value of the goods that Canada sells to the rest of the world (particularly commodities). resilient financial system and favourable demographics relative to other G-7 nations make it an economic contender looking out over a five-year horizon. remain favourable for Canada’s risky assets. The Bottom Line CIOs and other investors have been shifting funds out of risky assets in recent weeks.June 16. the drag from fiscal tightening could contain risky assets to muted gains in choppy markets over the next few quarters. 2010 Productivity.4%. relative to what it imports (consumer goods) (Exhibit 16). doesn’t tell the whole story in terms of income and wealth. corporate earnings. While we see those fears easing off in the months ahead in the absence of an outright sovereign default. productiv ity & work force growth). 10. That trend almost certainly has further to run given the rising needs of dynamic resource-hungry emerging markets.pts Te rms of Trade. Longer-term fundamentals. however. 15 M ar -9 M 8 ar -0 M 0 ar -0 M 2 ar -0 M 4 ar -0 M 6 ar -0 8 . Even including the setback from softer energy and metal prices during the recent global recession. In the past decade. which focuses on the volume of goods produced per hour. The country’s resource endowments.

real estate are all stable.S.S. is not yet selfsustaining and the entire global economy still depends on the urgent need to ensure that the U. Concurrently. all asset class returns tend to fall to low single digit levels on average. It is imperative that the U. bond yield is close to the recent 3% level and S&P 500 ROE is stable. We recommend overweighting stocks since S&P 500 ROE is stable and bond yields are toward the lower end of our critical important range. economy. based on population and their potential to alter the global economic landscape. Our financial sector is stronger than the rest of the world and the energy and materials sectors should continue to benefit from emerging economy growth while inflation and interest rate risk remains paradoxically low. the U.S. Emerging economy growth. is not yet out of the woods. economy. growth is still positive. 16 . more trading-oriented and more aggressive with respect to asset allocation.S.Volatility And Slower Growth .S. debt levels. Furthermore.S. thereby implying a stable U.S. rates and relatively favourable commodity prices resulting from emerging economy growth. economy can and must muddle along.S. Great returns from successful investing will continue to depend on tactical asset allocation decisions and every critically important change to stock and bond exposure will continue to be driven off the level of 10-year U. the U. We believe that the U. For CIOs. (416) 594-7194 Jeff Evans.S. we expect a rebound in oil prices driven by current emerging economy growth. These challenges tend to persist until the financial system collapses or the debt levels recede. energy and materials sectors represent 78% of the TSX market cap and Canada is benefiting from low U. eclipses anything ever witnessed historically. At the same time. Canada is very well positioned as long as the U. Federal Reserve can postpone tightening for the foreseeable future.June 16. The U. Canadian banks also continue to post strong profit growth and although profit growth is expected to be weaker over the next 12 months.S. which can be many years.S. the enormous size of the emerging economies. Volatility and risk premia tend to soar. consumer and U. Base metals companies are recording an improvement in ROE and the gold companies continue to benefit from secular gains in the commodity. will record a modest rate of economic growth thanks to an artificially low bond yield.S. The financial. bond yield stay in the range of 3% to 3.S.CIBC's CIO Roundtable . treasury yields. however. (416) 956-3250 Introduction The global economy is dangerously close to a debt crisis and western governments are doing everything possible to avert such a crisis. In this environment. suggest that the U. U. as well as recent weakness in the housing market and U.2% and that tightening by the Federal Reserve be delayed as long as possible so that housing inventories have time to fall and corporate profitability has sufficient time to recover. employment. Investors must be far more active.S. 2010 Portfolio Strategy and Quantitative Research Peter Gibson. the asset allocation and currency calls have never been more complex or more important.

6%) 1.6 4.1 95 1.S. 17 . economy is stable.2 1.307 . The anticipated and recently witnessed rebound in earnings for the energy and materials sector could make the Street forecast achievable if global markets can avoid any more exogenous crises for now.22%.57%) 0. As long as the U. then the TSX has considerably more potential for strong returns than the S&P 500. S&P 500 ROE appears to be holding at 19. Exhibit 17.9%.63) 14. however.52 0.53% (19.4x from 16. our year-end 2010 targets represent a very attractive rate of return of 10.5 4.29 (0.9%.75x compared with 17x for the S&P 500. although it shows no evidence of growth. the more time that the U.230 0. we believe that the gold price could easily achieve levels in the range of US$1500-2000/oz. We also believe that the oil price will rebound to US$93-95/Bbl as a result of emerging economy demand and the modest U.S. recovery. Ireland or France and Germany. Our outlook is based on the fact that the 10-year U.89% (11.300 0. or if the Fed is forced to tighten due to a bond yield level in excess of 3.4 1.95-1.June 16. then the TSX P/E would be expected to decrease to 16. we believe gold will reach US$1300/oz by year-end.1 0.Volatility And Slower Growth .08 3.59 3. The Fed is in no hurry to tighten based on the still weak U.07(0.0x GPS Fwd 0.S. The longer the U. banking system has to recapitalize.8x GPS 15..4x) 14.CIBC's CIO Roundtable .9x 12587/$768 (street) = 16. a Greece default occurs that stands to spread to Spain.091 Actual 65 16.225 Ours $68 Ours 18.S. but not with the bottom-up Street forecast.28% for the S&P 500 over the next six months (Exhibit 17).666 Actual 640 18. yield curve can remain steeply positively sloped.0x 1225/$72 (Street) = 17. If so.47) 19.66x) 8.06) ROE2qF (19. due to the recent stock market correction.38 0.46x (19. If we could be sure that we would remain below the crucial bond yield ceilings (3.9%). well below the $768 Street forecast.29% for the TSX and 12.4x GPS Fwd 0.32) ROE2qF (14.9688 2010E 12.S. housing market.867 Ours $634 Ours 19. Bloomberg Recent 11. In addition.2x (16.S. If. Treasury bond yield is currently 3. This would be consistent with the current rate of earnings growth.7-3.22 74.2x GPS 14.12.57%. while the ceiling is in the range of 3. or in the face of other geopolitical risk. Targets TSX Earnings Top Down P/E (x) P/E Median(Wtd) & Street Fwd Trail ROE m(w) & Street Fwd ROE S&P 500 Earnings Top Down P/E (x) P/E Median(Wtd) & Street Fwd Trail ROE m(w) & Street Fwd ROE Canada T-Bills (%) 10-year Bond Yields (%) US T-Bills (%) 10-year Bond Yields (%) WTI Oil (US$/bbl) Gold (US$/oz) C$/US$ (Trading Range) Source: CIBC World Markets Inc. 2010 Expectations For The Remainder Of 2010 In part.02 Our TSX top-down earnings forecast for year-end is $634.

Our Canadian conservative asset allocation recommendations are predicated on a 12.to 18-month horizon (Exhibits 18 & 19).52 standard deviations on a weighted basis. Of greater near-term concern.17 standard deviations. economy. Exhibit 18. We would like to increase our equity weighting. which may not be surprising for micro cap stocks.23 standard deviations. Teasury yields to exceed the range of 3. then we would view that favourably as well.89% and is rising at a more subdued 0.June 16. TSX ROE should rise from the recent 11.S.60% and rising at an impressive 0. it is likely that an eventual rise in S&P 500 ROE and bond yields would lead to a rise in short-term rates.S. 18 .9%. Recommended Asset Mix Equities 50% Bonds 45% Tbills 5% Source: CIBC World Markets Inc.9% level over the next three quarters. There remains a very significant possibility that the crisis in Greece leads to a default and continued concern over the survivability of the Euro. Specifically. we would be looking for 10-year U.Volatility And Slower Growth . if short rates increase and long rates fall proportionately. The median TSX ROE is 8.6% level to the 14. but it is rising slightly at 0. real estate prices and S&P 500 ROE. however. Our 430 company Canadian small cap index is recording a +0. The ECB has frequently cited concern over the risk of inflation.6% to 14. but we need to see some resolution in the European crisis and a recovery in U. Federal Reserve was tightening. TSX ROE is currently 11. The one-quarter forward Street estimates for the TSX indicate a respectable 0.CIBC's CIO Roundtable . Inflation fears are otherwise misplaced. as significant increases in debt levels are necessary to buy up debt in regions facing default.S. Since the global economy is still trying to recover from recession. Even at that point.7% to 3. is the fact that there is an underlying weakness to the U.02% ROE level. 2010 Asset Allocation We recommend being overweight equities until we have indications that the equity cycle is over.S. especially if S&P 500 ROE was falling and/or the U. and the European crisis is not yet resolved. These concerns are most likely moral suasion. as well as the distinct possibility of another global liquidity crisis.32 standard deviation growth rate.

05 to 1. and later because of anticipated renewed deflation fears. Recommended Asset Mix Recommended Asset Mix Equities Bonds Tbills Source: CIBC World Markets Inc. though it remains one of the most volatile asset classes historically. but this would be unusual.S. Exhibit 20. The more aggressive equity exposure is the result of indications of a rebound in index prices for the TSX and the S&P 500. 19 . Canadian Tactical Asset Allocation Equities 65% Bonds 35% Tbills 0% Source: Company reports and CIBC World Markets Inc. the Canadian dollar should appreciate further. We have been recommending gold for eight years. we would expect the Canadian dollar to trade between $1.00 and 1. the economic and equity cycles can last for several years.June 16. equities and a view that as long as the U. 50% 45% 5% Allowable range Equities/Bonds Tbills 40-60% 0-30% Our Canadian Tactical asset mix is based on a 3. The international asset mix is comprised of a 15% recommended exposure to gold (Exhibits 22 & 23). if we are emerging from recession. dollar reserve currency.10 in 2011 and 2012.Volatility And Slower Growth .to 6-month investment horizon. Gold is still favoured longer term. economy is stable.05. Our asset mix models should tell us if the equity cycle ends in a more traditional way later this year or.S. 2010 Exhibit 19. Exhibit 21. respectively. initially because of an anticipated devaluation of the U. In the latter case.S. We also have a strong preference for Canadian equities over U. and $1.CIBC's CIO Roundtable . Canadian Tactical Asset Allocation Recommended Asset Mix Equities Bonds Tbills 65% 35% 0% Allowable range Equities/Bonds Tbills 30-70% 0-40% Source: Company reports and CIBC World Markets Inc. as well as an upward implied move in bond yields (Exhibits 20 & 21).

geopolitical risk remains very elevated and our uninspiring weights in this region reflect the better perceived opportunities in Canada and less currency risk in the United States. Equities. & International Equities U. 4% U. 20 . & Initernatiional Equities. The significance of a possible Greek default is most relevant to the likelihood of a larger crisis in the region due to a contagion affect.June 16.S. The ECB role in buying Greek debt is critical. Ultimately. International And Gold Asset Allocation Gold Bonds Canadian Equities U. 35% Asia. Exhibit 22. 15% Japan. 4% UK. International & Gold Asset Allocation Canadian Equities. Ireland and Spain. The Bank for International Settlements estimates that French and German banks have nearly one trillion dollars of exposure to the residents of Greece.S.S. the decision by the ECB to intervene is a decision to avert a potential bank crisis while taking a step toward centralizing banking through bailouts. Portugal. we predicted that the Euro would cease to exist by 2010 and today.CIBC's CIO Roundtable . 70% Source: Company reports and CIBC World Markets Inc. 4% Germany.S. Exhibit 23. 35% Gold.Volatility And Slower Growth . we remain very uncertain about its survivability.S. 9% France. 2010 Finally. The external debt of Spain and Ireland represent a larger concern for the survivability of the Euro if the Greek situation cannot be stabilized. & International Equities 15% 35% 35% 15% U. Equities 70% Asia 4% UK 9% France 4% Germany 4% Japan 9% Source: Company reports and CIBC World Markets Inc. 9% Bonds. In 2003. 15% U. Rarely when countries have a public debt to GDP ratio in excess of 93% can default or effective default be avoided.

Exhibit 26.69 Canada 4.26 0.S.33 23.24 -5. S&P 500 and TSX Price 16000 14000 12000 10000 8000 6000 4000 Oct-07 Apr-07 Apr-09 Jan-07 Jan-10 Oct-08 Oct-09 Apr-08 Jan-09 Jan-08 Apr-10 Jul-08 Jul-07 Jul-09 1800 1600 1400 1200 1000 800 600 400 S&P TSX (RHS) Source: Company reports and CIBC World Markets Inc.13 0.44 4.S.89 0.92 UK 8.95 Japan 8. 2010 Exhibit 24 – Global Benchmark Weights Benchmark Weights MSCI% U. S&P 500 (LHS) 21 .49 17.36 18.54 7.01 -4.June 16.99 Germany 3.07 -4.63 Total 100 Source: Company reports and CIBC World Markets Inc.15 Asia (ex-Japan) 8.59 S&P TSX Canadian 10-year Government Bond Canadian 3-month t-bills S&P 500 U.Volatility And Slower Growth .S.53 9.80 4.16 1. 3-month and 12-month Total Returns 3-month -2.09 -4.46 Others 20. 41.16 Total Returns 12-month 15.CIBC's CIO Roundtable . Exhibit 25.21 France 3. 3-month Tbills DOW Industrials Nasdaq S&P 500 C$ Source: Company reports and CIBC World Markets Inc. 10-yr Government Bond U.42 0.

June 16.4 1.4 0.6 0.2 Jan-08 Jan-07 Apr-07 Apr-08 Apr-09 Jul-08 Oct-07 Oct-08 Jul-07 Jan-09 Jul-09 Canada Equities/Bonds Source: Company reports and CIBC World Markets Inc. S&P 500 and TSX ROE 25 23 21 19 17 15 13 11 9 Feb-07 Aug-09 Feb-10 Oct-09 Apr-10 Jan-10 Aug-07 Aug-08 S&P 500 Source: Company reports and CIBC World Markets Inc. US Equities/Bonds 22 .Volatility And Slower Growth . 2010 Exhibit 27.CIBC's CIO Roundtable .2 1 0. Feb-09 Feb-08 S&P TSX Exhibit 28.8 0. Relative Total Return 1.

CIBC's CIO Roundtable - Volatility And Slower Growth - June 16, 2010

Exhibit 29. Selected Country Median Values
TSX S&P500 CANADIAN SMALL CAP US MID CAP US SMALL CAP SOUTH AMERICA ENGLAND FRANCE GERMANY SWITZERLAND SPAIN JAPAN CHINA TAIWAN AUSTRALIA ROE (%) ROE Chg/Vol 8.89 0.23 14.53 0.01 0.04 10.54 7.8 14.47 16.01 10 11.39 14.84 13.89 5.58 7.59 11.14 7.4 0 0.15 0.06 0.72 0.25 -0.29 0.59 0.08 -0.03 1.07 0 1.34 -0.12 P/E 14.46 15.2 1.13 17.08 15.8 14.8 12.01 15.45 15.1 16.93 10.45 15.62 15.21 12.88 13.52 P/BV Yield (%) 1.88 1.9 2.34 1.4 1.63 2.03 1.63 2.28 2.33 1.49 1.79 2.86 1.39 1.07 2.06 1.67 1.84 0 0.83 0 0.43 2.93 3.11 1.56 2.02 4.94 1.66 0 1.88 3.83 6 month Return # of Co. 6.32 221 2.66 500 9.33 6.7 6.72 -3.67 4.35 -1.92 3.04 -1.39 -15.65 -1.45 -18.38 -9.29 -3.87 430 400 600 99 101 39 30 20 34 225 53 117 201

Source: Company reports and CIBC World Markets Inc.

Core And Trading Portfolio Recommended Sector Weights
There are a myriad of ways to set sector weights. For example, our GPS (global portfolio system) has well over 100 criteria for value, growth, capital structure, operating characteristics and trading /option data. The recommended weights depend entirely on the investment style and investment horizon of the client. The portfolios (see Appendix) of 48 stocks are designed with the goal of being relatively large cap and as diversified as stock fundamentals allow. The name list is the same for both portfolios, but they involve differences in important underlying assumptions. The purpose of these portfolios is simply to show which stocks are relatively superior to their peers and the relative emphasis on sectors while remaining fairly close to the benchmark sector weights. These portfolios are what we refer to as core plus trading. The core names are more fundamentally attractive, relatively larger names. In order to be included in the core, the company must have an index weight of over 0.07%, an ROE level greater than 5%, moderate or stronger trailing ROE growth, forward ROE growth and a calculable probability of outperforming the TSX. The trading component by contrast requires only a positive ROE level, forward and trailing ROE growth, but requires favourable absolute price momentum and favourable relative price momentum based on our trading techniques. If a name qualified for both the core and trading portfolios, it is identified as C+T.

23

CIBC's CIO Roundtable - Volatility And Slower Growth - June 16, 2010

Exhibit 30. Summary Of Core + Trading (C+T) Portfolio Weights Vs. Benchmark Weights
Energy Materials Industrials Consumer Discretionary Consumer Staples Healthcare Financials Info Tech Telecom Utilities
Source: Company reports and CIBC World Markets Inc.

Total Weight: 22.33% 19.78% 6.94% 2.07% 0.72% 0.00% 41.63% 1.02% 4.20% 1.31%

Benchmark Weight: 26.15% 20.43% 5.44% 4.51% 2.96% 0.46% 31.39% 3.02% 3.97% 1.69%

Portfolio A (see Appendix) companies qualify for the portfolio based on their relative weights (relative market capitalization). There are no constraints on these weights and, therefore, they are more reflective of the weighted average fundamental characteristics of the various sectors (Exhibit 30). For example, the energy sector is 22.33% of this portfolio by weight relative to the 26.15% weight of this sector in the TSX. In recent months, this weight has increased significantly as fundamentals have improved. In the financial sector, the large banks with their significant rate of profit growth have caused the sector weight to reach 41.63% of the portfolios. Bank of Nova Scotia (BNS–SP) and Bank of Montreal (BMO–SO) are both core and trading recommendations. This significant financial sector overweight reflects the strong fundamentals, but real institutional portfolios are unlikely to be unconstrained like this. Portfolio B (see Appendix), therefore, overlays two important techniques. First, we increase or lower the recommended weight of every stock in the portfolio based on our price momentum ranks. This facilitates better timed exposure to core fundamental names and sets the trading names to their appropriate weights based exclusively on price momentum. Finally, we overlay a single stock weight limit (SSL) with a minimum single stock weight of 0.5% to a maximum single stock weight limit of 7%. Portfolio B, therefore, should outperform portfolio A over time due to changes in timing, but may give up some incremental performance due to limits on single stocks weights and better diversification. Both portfolios, however, provide indications of fundamental sector preferences (Portfolio A) and timing differences (Portfolio B) by comparing the precise, mathematically derived sector weights with the benchmark weights.

24

CIBC's CIO Roundtable - Volatility And Slower Growth - June 16, 2010

Exhibit 31. Summary Of Core + Single Stock Limit (SSL) Tilt Weights Vs. Benchmark Weights
Energy Materials Industrials Consumer Discretionary Consumer Staples Healthcare Financials Info Tech Telecom Utilities
Source: Company reports and CIBC World Markets Inc.

Total Weight: 26.48% 19.09% 5.26% 2.84% 1.09% 0.00% 36.05% 1.05% 6.37% 1.78%

Benchmark Weight: 26.15% 20.43% 5.44% 4.51% 2.96% 0.46% 31.39% 3.02% 3.97% 1.69%

There are some good core names outside of the financial, energy and materials sectors, but the concentration in these three sectors is a critically important issue for investors.

Background: A U.S. Economic Recovery Is Still Essential
Since the market low of 1998, the S&P 500 price level is essentially unchanged, yet the market has recorded five of the largest rallies and collapses in the last 150 years. Even from the lowest point the S&P 500 witnessed in 1998, the index has only averaged a 2.97% total return over the last 12 years. Yet, in succession, the market rallies and declines were +57%, -50%, +94%, -57%, and +84%. Each stock market rally coincided with a collapse in bond prices and each stock market collapse coincided with a huge rally in bond prices. This phenomenon has only been witnessed on two occasions in the last 150 years (The Long Depression and the Great Depression). This type of market behaviour only occurs during periods of debt crisis and/or deflation. It is a game changer. Truth be told, we have been living on the edge of a global debt crisis. The goal is to postpone the debt crisis by any and every means possible until an energyrelated, productivity-driven technological breakthrough allows us to grow out of debt. Until that happens, tactical, shorter-term, asset-mix decisions and stock trading systems are essential to generating even a respectable return.

Exhibit 32. S&P 500 P/E And Bond Yield Positive Correlation
40 35 30 25 20 15 10 5 0 1871 1889 1907 1925 1937 1943 1949 1955 1961 1967 1973 1979 1985 1991 1877 1883 1895 1901 1913 1919 1931 The Great Depression
8

T he Long Depression

7

Entire period positive correlation as illustrated by U.S. bon d yields & stock prices since 1998

1800 1600

6

1400 1200

5 1000 4 800 3 600 2

400 200 0

1

0

Apr-07

Apr-06

Apr-08

Apr-09

Oct-08

Oct-06

Oct-07

Positive Bond Yield/Equity Correlation

S&P 500 P/E (LHS) Monthly S&P 500 P/E levels from 2006 - present

10 year US bond yield

Oct-09

S&P 500

(Shaded region show only coincident falling bond yields and falling stock prices for calendar years) Source: CIBC World Markets Inc., Bloomberg

25

Apr-10

2003

1997

10-Yr U. then the existence of the Euro itself is threatened and a global liquidity crisis is a possibility.Volatility And Slower Growth .CIBC's CIO Roundtable .79 Failure of Largest US Bank 1920 US unemployment soars 1921 Depression 2007 . TSX Vs. 26 . defaulting would be their immediate fate (Exhibit 34). Reading Railroad 10 1 US Bond Yield 2 0 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 0 2010 Source: CIBC World Markets Inc.000 1906 . 2010 Exhibit 33. The risk to the Euro and the core Euro zone nations is that their bailouts might compromise the core countries to the Euro.S. more serious than Greece because of huge external debt burdens.June 16.000 1925 UK Returns to GOLD STANDARD 18 16 14 12 10. the rise in bond yields and collapse in the currency can be halted. Bloomberg Beware The Bond Yield Spike/ Currency Collapse When bond yields exceed the critical ceiling and the currency is falling.08 Mortgage Lender/ Subprime/ Banking Crisis/ Liquidity Crunch 1929 .. then bond yields tend to skyrocket and a debt crisis and economic crisis follow. but great economic hardship and austerity tend to follow. When New Debt Is Used For Bailouts. S&P 500. This combination implies that bond investors are fleeing those countries’ debt markets.96 Failure of US.07 Bankers Panic of 1907 Run on Knickerbocker Trust Co. Sometimes the resulting improvement in productivity growth leads to an economic recovery. It Can Compromise Future Growth Usually. Bond Yields 1873 . if the central bank raises short-term interest rates dramatically.000 1900 Return to GOLD STANDARD TSX 1. Were it not for an ECB bailout of Greece. a hot capital exodus is gaining momentum. Spain and Ireland are in serious potential crises. S&P 10 8 6 4 100 1893 .03 Technology Bubble September 11. when public debt to GDP levels exceeds 90%. Alternatively. If the central bank does nothing to stop this. If the current crisis results in a contraction of economic growth in broader Europe and rising bond yields and credit spreads. it is difficult or impossible for a country to avoid default. 2001 100.39 Great Depression 1973 Quadrupling oil price 2000 .

stocks Canadian Stocks Source: CIBC World Markets Inc.S. and the 1930s.S.S. therefore.S.S. The U.S. economy. Pension Challenges Multiplied Exhibit 35. there is no prospect of a global recovery if the U.June 16. the inflationary mid to late 1960s and 1970s show a consistent pattern of rising bond yields and rising stock prices. to “credit ease” in 2009.88 8. Stock Volatility Soared. Asset Class Returns U. Stock Returns Collapsed. bonds outperformed U. on average.year historical relationships between bond yields and stock prices and relates this to rates of return for stocks. and a paradigm shift occurred in perceived risk and with it a move to higher credit spreads.S. itself would be facing an imminent debt crisis.10 As bond yields and stock prices became positively correlated in 1998. Not only did all asset class returns begin to fall to record low average levels over the next 12 years.CIBC's CIO Roundtable . The harsh reality is that U.S. then the U. thereby allowing the U. bonds U.07 5. bonds and T-bills. but U. as indicated by Exhibit 35. government debt at all levels is already 100% of GDP and so is consumer debt. For only the sixth time in over 150 years and the third time since 1920. Were it not for the fact that the U.61 11.95 2. For example. Source: CIBC World Markets Inc. 2002 and 2008 are 27 . is the relative “safe haven” and global reserve currency.30 9.01 1998-present 3.97 9. Safe Haven Artificially Low Bond Yield Strategy Of course. T-bills U. the U. P/E Compressed. The years 2000. stocks. 2010 Exhibit 34.59 4.present 4. consumer is lost and. By contrast. our investment world almost completely changed.S. the deflationary 1883 and 1893 time frames.70 9.S.S.38 1980-1998 6. Exhibit 36 illustrates the 150.Volatility And Slower Growth . the cumulative rate of return on stocks stalled out over an extended period of time. are observed under the category of stock prices down and bond yields down. Greece CDS USD SR 5yr Corp Credit default swaps spreads in Greece rose to truly crisis levels and the risk of default remains very high. 1850 .S.64 15.

1979.58 n/a 3 0 1853. 1967. 1951. 1928.18 26. The highest average rates of return and the largest number of occurrences are the more “normal” stocks prices up/ bond yields down environment. 1937. 1915. 2006 Total 4. 2007 Stock Down Yield Down 4% < yield < 7% yield > 7% 7. 1933. 1927. 1983. 1976. 1939. 1981. 1890. 1924.21 n/a 9. 1994 1973. 1949. 1952. 1984. 1957. 2001 Total 5. 1963. 1904. 1859. 1917.S. 1891. 1895. 1975. 1906. 1985. 1962. This gives the U. 1887. 1870.86 0. 1960.01 21. 2003. 1868.9%. 1858. 1912. 1995. 1909. 1857. we have witnessed our estimated ceiling on U. 2002.34 -11. 1932.2%.59 19 Source: CIBC World Markets Inc.68 1. 1873. 1901. which is crucial to home prices and forestalls any urgent need for Fed tightening. 2009 yield < 4% T-bills Bonds Stocks # of observation Year 3. 1916. 1988 1964. 1911. 1913. 1900.03 61 Stock Down Yield Up 4% < yield < 7% yield > 7% 7.06 -14. the Euro zone crisis caused an inflow of safe haven seeking capital that drove U.07% to less than 3.13 11 6 1854. 1993. 1982. especially if index profitability (ROE) is rising (Exhibit 37).94 7. 2005. 1907. 1959. 1893. 1885.6% to 4. 1965. 1934. 1948. 1929. 2010 also found here. 1926.61 8. Exhibit 36. 1972. 1871.39 1.S. 1902. 1903. 1970.88 1.Volatility And Slower Growth . 2008 Stock Up Yield Down 4%< yield < 7% yield > 7% 5. 1908. 1866. 1999. 1945. 28 . 1997. 1986. 1918. 1923. 1897. 1898. 1882. 1922.S. 1941. yield < 4% T-bills Bonds Stocks # of observation Year 2. 1940. 1875.08 6. 1894.90 29 1878. 1879.28 -8.89 22.3% to 4. 1867.30 17. 1954 yield < 4% 2. 1971. 1980. Fortunately for North America. 2000 Total 4. 1876. 1852.31 6.53 -11. Asset Class Observations in the U. 1886. 1880. 1938. 1931. economy more time to recover as long as the offshore crisis can be contained. 1992. 1989 1864. 1955. 1968.68 0.61 10.S. 1869.41 22 1889. 2004. 1920. 1881. 1966. 1990.June 16. 1950. 1919. This is the key to our forecasts of stock and bond returns. 1998. 1862. 1974. 1874. 1936. 1961.03 14 1884.39 19 7 1856. 1861. establishing a lower average level of bond yields. 1921.98 27 5 1851. This combination is also common to the early stages of new economic cycles. 1953 Stock Up Yield Up 4% < yield <7% yield > 7% 4. 1942. bond yields down to 3. Most relevant to CIOs has been the overarching significance of calculating bond yield “floors and ceilings” and selling stocks in favour of bonds at the “ceilings” and selling bonds in favour of stocks at the “floors”. 1888. 1877.84 3. 1892.25 n/a -9.87 -9. 1935.91 31 Total 3.43 48 yield < 4% 3.43 -9. 1914. 1865.09 19. 1958. 1905. 1991. 1863. 1944.93 2.19 21. bond yields fall from the range of 4. 1987. 1855. 1969. 1978. 1996.92 2.86 21.CIBC's CIO Roundtable . 1943. 1860.64 9.59 16 1883. 1872. 1896.46 7. 1956.55 18. During the last year. 1977. 1910.03 19. 1947.05 4. 1925. 1930. 1899. 1946.

June 16. Canadian interest rates can be relatively low as a result of artificially low U.34 Positive Correlation +57% +0. 10-year Bond Yield Floors And Ceilings S&P 500 Buy & Hold since 1.S.0% Ul timate floo r Term Structure 3 40 0 2 20 0 1 0% 0 19 94 199 4 1 995 19 95 199 6 1 996 19 97 199 7 1 998 19 98 199 9 1 999 20 00 200 0 2 001 20 01 200 2 2 002 20 03 200 3 2 004 20 04 200 5 2 005 20 06 200 6 2 007 20 07 200 8 2 008 20 09 200 9 2 010 20 10 201 1 2 011 20 12 0 SPX In dex USGG10YR Ind ex Source: CIBC World Markets Inc.2 % ceil in g 4.64 +79% inc volatility -50% +94% +0.9% ) 2 002 ce il ing 5 . It is our floor/ ceiling analysis coupled with our ROE analysis of markets and currencies which determines unambiguously what the Fed can and must do at any time and how stocks and bonds will react. treasury yield is 3.57%. Fortunately. It is the level of bond yields which we believe forces the Fed to tighten unless a non-North American crisis forces yields down immediately.0% De sired l on g te rm avera ge 2.64% pa -0.6 %) 120 0 20 03 ce ili ng (5.S.3-4 .20 Real Estate Bubble -41% -57% +84% +0.S.6 % 4 .S.5% Exce ss deb t floo r 5 4 60 0 3. Federal Reserve policy. 2010 Exhibit 37. To summarize. we benefit from relatively strong commodity prices.. stable rates and higher commodity prices are very beneficial for the TSX since the energy and materials sectors represent about 46% of the TSX market capitalization and the interest rate sensitive financials represent another 31.0 7% 3. The record stock market crashes of 2000-2003 and 2007-2009 were signaled by the combination of Fed tightening while the level of bond yields exceeded their ceilings of the respective periods and S&P 500 ROE was falling. At present.9% Dan ger ran ge 7 6. U.Volatility And Slower Growth .2% and sufficiently below the ceiling of 3. treasuries that signals great valuation risk to stocks and real estate prices. 29 .67 9 Correlation & Volatility 8 +174% 200 9 cei lin g (4.CIBC's CIO Roundtable . Yet. Bloomberg Significance Of The Bond Yield Ceiling The ceiling represents the level of 10-year U. the 10-year U. a crisis at that point may drive stock prices lower as well.S.S.5%. economy is stable. S&P 500 ROE is stable at a very high 19. This is especially true if S&P 500 ROE is falling and/or the U. dollar is falling at that point. Of course.8% ce ili ng 6 100 0 4% 19 97 flo or 80 0 4 . As long as the U.S.7% to 3.44% pa 1998 low Bond Buy & Hold 180 0 199 5 ceil in g 160 0 19 97 cei li ng 140 0 200 0 ceil in g 3 .7 -3. Canada In A Global Context Canada occupies a very unique global niche. This is unusual because strong commodity prices are usually associated with higher inflation expectations and higher interest rates. the Fed is not tightening. because of emerging economy growth.9%.3 % 4 . rates. we believe that it is the collective pressure of the global debt and currency market which dictates U.

Sustainable gains in stock indices.S.Volatility And Slower Growth . 2010 The potential for the Canadian dollar to rise vis-à-vis the U.CIBC's CIO Roundtable . Naturally. The real risk to the Canadian dollar in the shorter term is its link to the “risk bet”.0% range. GDP yoy % 1. housing cycle (or at least stabilizing it). This is common for most export-dependent currencies when the U. weakness in the U. During the 2003 -2007 speculative mania in housing and its subsequent collapse.8 0.6 Jan-22 Jan-32 Jan-42 Jan-52 Jan-62 Jan-72 Jan-82 Jan-92 Jan-02 Jan-07 Jan-27 Jan-37 Jan-47 Jan-57 Jan-67 Jan-77 Jan-87 Jan-97 US GDP yoy % C$/US$ 25 20 15 10 5 0 -5 -10 -15 Source: CIBC World Markets Inc.S. banks to re-liquefy and try to stabilize their balance sheets (Exhibit 39). however. Exhibit 38. equities are undervalued relative to U. consumer spending and U. financial sector. dollar strengthens for safe haven reasons.S.9 0.$ vs U.S.S. In general.S. Bloomberg Corporate Profitability (ROE) As An Indication Of North American Economic Growth Recent levels for the U.S. bond yield are favourable and imply that U. with the hope of restarting the U. housing sector has necessitated a return to a steeply positive sloped yield curve in the U. economic growth.S.1 1 0. we would expect the Canadian dollar to trade in successively higher ranges over the next several years. which would force the Federal Reserve to tighten.S. The direction of U. except when U. bonds. housing prices is a major determinant of consumer confidence.7 0.S. 30 .S. the direction of housing prices was also profoundly important to ROE in the U.S.S. dollar is significant.S.. depend on profit growth and a favourable level of bond yield.S. Exhibit 38 illustrates the tendency for sharp selloffs in the Canadian dollar during economic crisis and/or recessions. as well as the urgent need for U.June 16. bond yields reach the 3. therefore. C$/U.7% to 4.

if U. 2010 Exhibit 39.Ca n Med . bond yields rise and the Fed is forced to tighten.June 16.S.Can Av e-US Me d-US US Hou sing Ind ex ( Rad ar Lo gic) Source: CIBC World Markets Inc..S. there is still the possibility that higher short rates could cause long rates to fall.S. at least until financial sector ROE has time to recover.CIBC's CIO Roundtable .0 5 N o v-06 N ov -07 N ov. and Canada Financial Sector ROEs & U.06 Ma y.Volatility And Slower Growth .0 8 M ay. A tilting of the U.S. yield curve of this type also tends to benefit stocks as long as ROE is recovering (Exhibit 40). Exhibit 40. Yield Curve 20 18 + slo pe 16 14 12 10 8 1 6 4 2 0 Y ield C urve Slope Inv er te d M ay -0 4 Ma y.0 5 Ma y. Bloomberg The crisis since 2007 is justification enough for the Fed to maintain the positively sloped yield curve for as long as possible. Housing Index 18 A ve US 16 26 0 14 24 0 22 0 20 0 10 A ve CA 18 0 16 0 14 0 6 12 0 4 10 0 30 0 28 0 12 8 M ay-0 1 M ay-0 2 M ay-0 3 M ay-0 4 M ay-0 5 N ov-0 5 N ov-0 6 N ov-0 7 N ov-0 8 Ma y-06 Ma y-07 Ma y-08 A v e.0 1 N o v-02 N ov -03 N ov -0 4 No v. and Canada Financial Sector ROEs & U.0 1 M ay -03 M ay.0 9 -1 0 2 3 + s lop e 4 5 A ve. Clearly.S. though..C an Med-Ca n Av e-US Med.0 7 N ov -00 N ov.02 Ma y.09 No v. U. U.US US Y ield Cu rve Source: CIBC World Markets Inc.0 8 Ma y. Bloomberg 31 Ma y-09 N ov-0 9 N ov -00 N ov -01 N ov -02 N ov -03 N ov -04 .S.

66 0.90% in the future. ROE suggests that the Fed has a vested interest in sustaining the relatively low level of U. Energy & Materials (%) Energy & Materials Source: CIBC World Markets Inc.CIBC's CIO Roundtable .71 0.S. 2010 As of June 11.02 3.63 22.46 10. By contrast.53 3 0. TSX (221) Benchmark 26.08 20.32 11. rates.68 Fwd > 0.03 1.24 1.22% of the S&P 500 market cap. This is a very favourable combination for the TSX.68 18.99 98 companies 60.48 7.94 103 companies 49.26 10. yet the TSX is recording a phenomenal rebound in ROE.81 3.12 2. Between 2003 and 2007.3 19. Exhibit 41.77 13.3 21. only 197 of the S&P 500 companies are recording ROE growth. representing only 39.29 30.57% and shows no evidence of expected growth in the next two to three quarters.16 11.41 4. 2010 S&P 500 And TSX ROE Rarely do we see TSX ROE record dramatically stronger growth than the S&P 500. are expected to post ROE growth next quarter! All together.19 6.62% and is rising at the impressive rate of 0.87% Financial. Forward Street estimates for TSX stocks rolled up to forward ROEs indicate a range of between 14.15 0.58% of the index weight.4 81.47 3.52 standard deviations.2 19. Even more startling is the fact that the forward analyst earnings suggest only 169 companies.09 3.58% 87.45 197 companies 39.64 77. Our data indicates that weighted average TSX ROE was recently 11.65 22. with 98 of the 221 companies recording profit growth. S&P 500 ROE is currently 19.53 60.72 0.93 9.63% and 14.93 3. 2010 Energy Materials Industrials Consumer Discretionary Consumer Staples Healthcare Financial InfoTech Telecom Utility Trailing > 0.91 15.17 5.43% Trailing > 0.S.79 3.94 169 companies 33.81 5.58 26. This same phenomena is being witnessed again in recent months.06 0.46 31.22% S&P 500 (500) Benchmark 11.23 32 . the weak recovery in U. By contrast.32 5. TSX And S&P 500 ROE Characteristics As of June 11.Volatility And Slower Growth .3 22.43 10.47 17. representing a mere 33.84 0. Exhibit 41 clearly indicates far better internal profit dynamics for the TSX.87 46.71 6. emerging economies pushed commodity prices higher and gave the TSX a vastly better rate of growth than the S&P 500. These companies represent almost 61% of the TSX weight.97 10.48 11.66 39.28 2.June 16.61 1.01 4.7 Fwd > 0.02 0.67 9.72 2.3 33.3 23.27 0.26 3.5 48.

right ax is) Source: CIBC World Markets Inc. 16 12.000.000. suggest that an energy squeeze is an ongoing concern. Two simple examples illustrate the leverage to emerging economy growth and the obvious need for energy alternatives. Correlation: GDP & Oil 45 40 35 30 25 20 15 10 5 0 -5 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Jul-00 Jul-01 Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Nov-00 Nov-01 Nov-02 Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Jul-09 Nov-09 India 120 100 Oil 80 60 40 20 0 -20 -40 -60 -80 China US USA China India Oil (US$/bbl .Volatility And Slower Growth .000. Exhibit 43. the yearover-year rise in oil prices is driven by a recovery in the GDP of the U. China and India.000. Historically.000. this would be roughly equivalent to adding two billion new cars to the world with all of the related resources depletion and environmental destruction (Exhibit 43). 000 10 8 6 8. 000 6. Not surprisingly.. Bloomberg Oil And Energy Security If the rapidly growing emerging economies get into trouble.000. then some moderation of the upward pressure on commodity prices is possible. 000 4. 000 Finally. a comparison of GDP growth rates for China and India relative to the U. The World Bank Group 33 . 000 14 12 10. the lagged year-over-year change in West Texas intermediate prices is very highly correlated with energy sector ROE.000. but Exhibit 42 shows a stunning rise in consumption driven by China from the 1990s forward.000.June 16.000.000.CIBC's CIO Roundtable .000.000. if China and India had as many cars per capita as the U.S. 000.. energy security and selfsufficiency are an extremely urgent problem. 000 14. GDP Growth: U.000. 000. China And India 20 18 16.000.S.000.. Exhibit 42.000.S..S. 2010 Energy Sector ROE And Security International oil consumption has benefited from growth in India. Without a major energy-related technological breakthrough.000. 000 4 2.000. 000.000. First.000. 000.. 000 2 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 0 US GDP growth ( annual %) China GDP (current US$) China GDP growt h (annual % ) India GDP (current US$) n I di a GDP growth (annual % ) U GDP (current US $) S Source: CIBC World Markets Inc.

.5 0 $1. Wikipedia It has been estimated that at 85 million barrels per day (bpd) of consumption.net. 205 $1 . CIA World Factbook.17 3.80 $295 . would be expected to rise by 3060%.10 3. China and India achieved the same ratio of GDP to population size as the U. In fact. Exhibit 44.70 Br azil 20 1. Population. 232. then the GDP circle would completely obscure all of China and India.804 . the middle east and most of western Europe. one day.90 $ 165 China 1 . Ima ge : GEBCO.S.390.8 63 $14 .141. 2010 Second.S.June 16. GDP and population. it is possible that a variety of base metals will also become depleted as a result of the scale of emerging economy growth.10 8.433 $ 5.50 $136 $1 58.19 4 Japan 12 6. oil reserves will be depleted in 30 years.8 1 $ 921.23 $196 . oil demand. but with new emerging economy consumption. If.43 $1.S. Wikipedia US Population GDP (US$ trillion) Imports (US$ billion) Expor ts (US$ billion) 310.CIBC's CIO Roundtable . Image: GEBCO..330 .10 $25 3. if unconstrained.net.4 45 $994 .Volatility And Slower Growth .018 $ 1.60 Source: CIBC World Markets Inc. Exhibit 44 provides an easy comparison of U. GDP And Imports/Exports Russia US Silk Road Jap an Brazil Populat ion GDP (US$ trillion ) Imports (US$ billion) Exports (US$ b illion) Sources: CIBC World Mark ets. BRIC Nations & U.29 5 $4. Evidence supporting this possibility is seen in the fact that oil prices remained in the US$40 to $90 range per barrel during the 2008/2009 recession (depression).90 India 1.330 $1.60 $51 6.11 $49 0. CIA Wor ld Factbook .30 Russia 139 . 34 .

Bloomberg Conceptually. Path A would illustrate a clear focus on generating a higher GDP per capita relative to the energy inputs required to generate that standard of living–the direction of the highly energy-efficient Japan. 2010 Exhibit 45. $40.000 A A rg entina World Spain Korea $15.08 Ja n-10 18 Thousands Sometime around 1999. it would be preferred that these highly populous nations follow path A rather than path B (Exhibit 46).92 Ja n -94 Jan -96 Jan. IEA 35 .000 Com petitive Eff ect $10.S .000 Mexico Brazil $5.50 Jan-0 4 Jan -80 Source: CIBC World Markets Inc. probably due to the growing leverage from emerging economy growth as these nations became larger and larger. more than 90% of the world's population. GNP Per Capita $45.S.Volatility And Slower Growth . the path that China and India take to energy consumption per capita is crucial. For example. CPI yoy & Oil price yoy % 40 35 300 250 200 C h ina N et Imp orter 150 100 50 0 U . real GDP O bserve chang e in re lative pe rform ance .000 Japan US $35. Real GDP Growth.CIBC's CIO Roundtable .000 UK Germany France Italy Jan-06 16 Canada Austral a i $25. Path B would suggest that far more energy consumption is occurring for the world’s two most populated countries—implying enormous upward pressure on commodity prices and probably severe global constraints.000 GDP pe r cap it a The graph plots the per capita power versus the per capita income for all countries with more than 20 million inhabitants. Energy Consumption Rate Per Capita vs.1 00 J an-8 4 Jan-0 0 Jan -7 6 Ja n -86 Ja n-88 Ja n-90 Jan .000 $20. U.000 $30. The image shows the broad relation between wealth and energy consumption. 30 25 20 15 10 5 0 -5 -10 J an-82 Jan-7 4 Jan-7 8 C PI yoy W Ti oil p ri ce y o y R are ly Nega tive y oy .June 16.000 India Chin a $0 0 2 4 6 8 10 12 14 Saudi Arabia Population Effect South Af r ica Russia B k W p er cap ita h Ener gy Consumption vs GDP Source: CIBC World Markets Inc.. Exhibit 46.. as China and India industrialize and GDP per capita grows.98 Jan -0 2 Jan. it appeared as if the year over year change in oil prices turned consistently positive.

S. Our focus is on ensuring that U. 2010 Conclusion There is no shortcut to confronting the problem associated with excessive western government and consumer debt levels. The only real solution is a dramatic improvement in productivity growth. the TSX can benefit from relatively high commodity prices with little or no inflation and interest rate risk. This may give the U. Investors must constantly grapple with the following question: Is the equity cycle still intact? If it is.S. The TSX index by comparison is dominated by the energy and materials sector. As long as the U.S. a low and stable level of U. whose profitability is being driven by growth from emerging countries. 36 .June 16.S.Volatility And Slower Growth .S. yet our financial sector may be the strongest in the world fundamentally. bond yields is critically important. time to work through its housing crisis with the goal of protecting consumer confidence. equity prices. In the interim. economy is stable. then Canada could probably be said to have the best of all characteristics that are essential to successful investing. but the Euro zone continues to struggle with the dangerous combination of enormous debt and very weak economies. bond yields remain in a safe range so that an ROE recovery can lift U.CIBC's CIO Roundtable .

it is here that we note a significant divergence between the Canadian banks and life insurance companies. this question might be difficult to answer across all banking regimes. although we note that after the very strong performance of the shares over the last year. with products that are both higher-risk and less profitable than they appeared to be before the downturn. We see two important implications flowing from this view. For the Canadian banks. it is our view that the discount to the Canadian lifecos at which the shares previously traded is no longer appropriate given the lasting negative impact on profitability mentioned above for that sector. From a global perspective.e. we favour the banks over the lifecos at this time. the Canadian lifecos do show signs of structural damage from the downturn. we believe the central question that must be asked of any financial service company globally is whether the nature of the downturn was cyclical (i. on valuation. we believe that bank shares should migrate towards their pre-crisis average of 12x forward earnings.June 16. comfortably above the current average F2011 multiple of closer to 10x. our investment thesis for the banks assumes improving profitability and accelerating earnings growth as loan losses continue to decline and the net interest margin benefits from a gradual increase in short-term interest rates. we think they are exiting the downturn in a stronger position than the one in which they entered it – not just when compared against damaged international peers. earnings are depressed temporarily) or structural (i.e. Moreover. there is more lasting pressure on profitability). We remain constructive on the capital markets businesses – though we do expect them to slow from an exceptionally strong F2009 – and look for them to remain above historical levels as the banks defend market share gained through the downturn. but against themselves as well.Volatility And Slower Growth . we think in Canada the answer is reasonably clear. First. By contrast. we are convinced that the vast majority of the impact is cyclical. the upside is less compelling than it was. 37 . Second. In short.CIBC's CIO Roundtable . However. 2010 Sector Outlook Banks & Lifecos Robert Sedran (416) 594-7874 Mike Rizvanovic (416) 594-7283 Overweight & Market Weight Sector Outlook As we slowly exit a particularly nasty downturn that featured capital market and macroeconomic turmoil. core products in the lending and capital markets businesses carry better profitability with less risk and balance sheets are materially stronger.to 18-month investment stance on the banks at this time. With better earnings visibility and less volatility. Pretax pre-provision earnings are higher. The combination of these two factors leads to a positive 12.

continued strong performance of the core retail franchises. which implies that the excess capital being generated in the mature Canadian market will be in part returned to shareholders through higher dividends and share repurchase programs and in part deployed into international expansion strategies. In our view. 2010 Regulatory Response To The Crisis Is Still Developing In response to the crisis. the most significant long-term strategic question facing the banks is the deployment of excess capital being generated domestically.CIBC's CIO Roundtable . The potential for unexpected or unintended consequences is elevated. we look for a return to more normal single-digit earnings growth rates for the sector. 3-5 Year Outlook Once the recovery from cyclically depressed earnings is largely complete (we assume F2011 for the banks). Top Picks TD Bank (TD–SO) is currently our top pick given the company’s above-average leverage to falling loan losses. we are not dismissive of this issue as an ongoing challenge.June 16. balance sheets are very well positioned to meet these challenges. while we are confident that the banks can manage tighter capital requirements. Here again. especially given the uncertainty created by the upcoming implementation of international accounting standards (IFRS). We currently rate the shares Sector Outperformer with a $72 price target. after an early response to the crisis that saw the banks aggressively raise capital. Moreover. we believe the Canadian banks remain relatively well positioned compared to their international peer group given the exceptionally strong domestic franchise. we believe all stakeholders will need to balance the goal of improving the safety of the financial system with the desire to not impede what seems likely to be an already sluggish recovery. 38 . we rate the shares Sector Outperformer with an $85 price target. The relative success of these expansion initiatives will be an ever larger influence on relative returns. underpins our expectation of the highest earnings growth rate of the banks over the next two years. both regulators and politicians are actively considering reforms to help reduce the likelihood and/or severity of the next crisis. With solid positioning in both the near term and longer term. In our opinion. our optimism regarding the firm’s U. In our view. That said. TD Bank – which we believe has achieved critical mass in the United States – has one of the best answers to that question. personal and commercial banking expansion strategy and what we believe to be a compelling relative valuation. where there has been less visibility on the potential impact of greater requirements. Uncertainty is higher for the life insurance industry.S. Presumably the regulatory environment will be more stable by this time. We also have a favourable view on Bank of Montreal (BMO–SO). which when combined with better performance in the domestic retail bank.Volatility And Slower Growth . This bank retains above-average exposure to falling loan loss provisions. This bank is a leader in the Canadian marketplace and we expect it to perform well in the United States.

and 3) economic growth.5x versus 11. Finally. the company has netted $2. Industry AUM is up a measly 0.6 billion for the previous four months of May. you are paying much more for expected earnings from an asset manager versus an insurance company.0x BV and approximately 8x 2010E and 2011E EPS given the prospect for rising EPS. almost one-sixth of the industry 39 . is constructive for the volume of insurance underwritten. In our opinion. which is predominately made up of fixed income instruments. 2) regulatory capital levels are strong and getting stronger. We expect that trend to continue through our 2010-2011 forecast horizon with improving employment and firm home prices. DundeeWealth (DW–SO) is easily outpacing the industry in terms of mutual fund sale and AUM growth.1x for insurance companies.6% YTD. Claims losses have been trending down since peaking in Q2/09. whose profits are heavily skewed towards equity-related mandates.June 16. ROE for the P&C insurers likely bottomed in the first half of 2009 and the cyclical recovery for the industry should continue through at least 2011. Top Picks Our top picks in the vertical are Genworth Canada and DundeeWealth. and a relatively consistent rise in equity markets. Namely: 1) personal insurance lines are in a hard market as the low interest rate environment dictates that insurers must generate a greater return from underwriting insurance. In addition.CIBC's CIO Roundtable . albeit lukewarm. The average P/E on 2010 and 2011 expected EPS for the asset managers are 13. a gradual rise in interest rates does not pose the same risk to the market value of float.9x and 11. A more ideal scenario for the asset management industry would be robust economic growth. rather than purely relying on their investment float. as rapid interest rate increases would. Valuations for Genworth Canada (MIC–SO) are extremely compelling at 1. choppy equity market environment. Volatile equity markets have already taken their toll on mutual fund flows. valuations have recently been pushed down due to concerns over home prices and housing affordability in the context of higher interest rates. The outlook is somewhat more challenging for the asset managers.Volatility And Slower Growth . the company expects to return a portion of its excess capital to shareholders in 2010. We would expect the positive underwriting trends we are seeing in the Canadian P&C insurance space to continue. CIBC’s outlook for gradually rising rates and manageable personal debt corresponds to an improving earnings environment for Genworth Canada. Through the first five months of 2010. Retail investors are clearly skittish and will likely remain gun shy if equity markets remain choppy.9x and 10. with the industry experiencing net redemptions in May of this year compared to average net sales of $1. which could total nearly $3 per share. 2010 Asset Managers & P&C Insurers Paul Holden. (416) 594-8417 Kevin Cheng. poor returns on bond funds fueled by a rapid increase in rates (encouraging investors to buy/switch into equity funds).0 billion in long-term fund sales. (416) 956-6676 Market Weight Sector Outlook Broadly speaking we favour the property and casualty insurance companies over asset managers in a slow-growth.

2010 total.6%. In addition. Given the superior growth outlook. 2010YTD AUM growth is 9. We believe that DundeeWealth will continue to grow faster than the industry during our forecast horizon due to strong fund returns and an overall portfolio tilt in favour of resources.0%. and thus potentially attract more inflows.0x. The company’s balance sheet looks solid with a net cash position of nearly $170 million.Volatility And Slower Growth . its hedge fund mandates provide more of an opportunity to generate returns in a volatile market environment. 40 .June 16. well ahead of the industry at 0.CIBC's CIO Roundtable .8x and US comps at 7. we think the shares are modestly priced at 5.9x EV/2011E EBITDA versus Canadian comps at 5.

9x 1.B CIX DW GS IGM SII Rating SO SU SO SO SP SP Price Target $21.25 $44.2x Target 12.1x 1.3x 8.4x 9.0x 2.75 $5.00 $82.1x 2.1x 1.1x 1.5x 2.9x 1.3x 2.7x 15.1x 1.8x Current (2) 1.1x 1.8x 9.8x 12.3x 12.5x 1.2x 11.0x 2.00 $20.75 $38.8x 8.7x 9.CIBC's CIO Roundtable .4x 9.6x nm 1. and CIBC World Markets Inc.8x Historic Avg 1.3x 11.9x P/B Multiples Historic Avg 2.1x 1.8x 12.0x 11.8x 11.3x Historic Avg 8.8x 1.4x 1.5x 2.June 16.0x 15.2x 41 .4x 1.UN OCX Rating SP SO Price Target $17.6x 11.8x 2. Summary Of Our Ratings & Price Targets CANADIAN BANKS Ticker BMO BNS CM NA RY TD Rating SO SP NR SP SP SO Price Target $72.2x 1.1x 1.6x 1.1x 1.2x Current (1) 7.0x 9.4x Historic Avg 1.5x 2.2x 11.5x 11.2x 12.00 $33.00 Average: OTHER P/E Multiples Ticker DHF.4x 11.9x 2.00 $22.6x IAG SO ASSET MANAGERS P/E Multiples Ticker AGF.00 $65.5x 15.3x nm 10.9x 11.75 Average: (1) Based on our current EPS estimates for F2011.2x nm 8.6x Current (1) 10.4x Current (2) 1. (2) Based on the current book value per share.50 $33.4x 10.1x nm 11.4x 2.8x Current (2) 1.6x Historic Avg 14.6x Target 12.3x 11.7x 3. P/B Multiples Target 11.7x 11.8x 2.4x P/B Multiples Historic Avg 2.1x 22.0x Target 2.8x 1.7x 2.5x 8.8x 12.4x 7.1x 2.9x 14.2x 1.2x 3.3x 12.7x 2.9x 2.1x 1.5x 11.4x 2.7x 10.00 Big Six Average: $26.2x 10.0x 11.5x 2.4x 11.00 $47.4x Target (3) 1.9x 6.9x 6.0x 9.8x 3.4x 13.3x 1.5x 23.2x Historic Avg 10.00 Avg for all Bank: Current (1) 10.4x 12.6x 3.0x 1.3x Current (2) 2. Source: Thomson Analytics.0x 10.7x P/E Multiples Historical Avg 12.4x 1.1x 3.0x Target 2.1x Current (2) 1.2x 11.8x 11.7x 14.25 $20.6x 9.7x 2.6x 1.4x 14.3x 1.0x 2.0x 2.00 Avg for all Lifecos: Current (1) 10.3x 12.5x 11.5x Target (3) 2.8x 1.1x 2.4x 1.5x 12.9x P/B Multiples Target 12.00 Big Three Average: $40.2x 5.00 $56.7x Current (1) 10.3x P/B Multiples Target 11.4x 5.4x 8.6x 10.0x 1.9x 13.5x 2.2x 1.3x 8.1x 2.2x 1.3x 9.0x P/E Multiples Historical Avg 11.25 Average: P&C INSURERS P/E Multiples Ticker IFC MIC Rating SP SO Price Target $53.9x 10.4x 17.0x CWB LB SU SP CANADIAN LIFECOS Ticker GWO MFC SLF Rating SU SO SP Price Target $28.00 $85.7x 12.4x 1.0x 10.00 $67.0x 14.7x 9.3x 1.7x 10.1x 10.7x Historic Avg 1.5x 12.0x 11.5x 10.5x Target (3) 1.00 $25. company reports.5x 12.8x 10. 2010 Exhibit 47.1x 11.0x 2.1x 10.0x 9.8x 2.Volatility And Slower Growth .

00 $16. (416) 594-7457 Robert Hales.00 $16.000 $15. but not without precedent. While jewelry demand has softened due to higher prices.00 $125. it has been more than replaced by increased investor purchases of gold. causing an extended period of varying uncertainty that should maintain the interest in gold.000 $1. In most cases.00 $0.CIBC's CIO Roundtable .400 $20.90 Source: CIBC World Markets Inc. (416) 594-7261 Overweight Sector Outlook Gold is asserting itself as an investment providing safety and performance. the holdings in ETFs were less than a week’s supply. Secondary supply such as Central Bank selling is dwindling.90 $3. currency debasing.50 $1. market volatility. We believe there will be a rotation of compounding problems that ripple through world markets.200 $18.48 2011E $1.June 16. 2010 has seen both the trade-weighted dollar and US dollar gold prices increase by about 13%. Exhibit 48.00 $182. $1. Five years ago. We believe that investors will continue to seek diversification to the multitude of uncertain factors described in the Economics section of this report.28 $1.Volatility And Slower Growth . with these aspects underpinned by strong fundamental criteria. Bloomberg 42 . the correlation flips when some other major currency wavers in strength. The reaction is uncommon.90 $0. (416) 956-3725 Khaled Sultan.00 $14.00 $0. Turmoil in Europe has provided the basis for not only currency devaluation..80 $0. occurring about 18% of the time.25 $1.74 2012E Long Term Est. With limited supply.00 $200.50 $2. (416) 594-7106 Brian Quast. including debt build up.95 $3. as evidenced by the strength of the bullion-backed ETFs that now house 10 months of mine supply.00 $14.00 $0. and general mayhem in world geopolitics.00 $140.25 $9. (416) 956-6787 Cosmos Chiu. Primary production remains stagnant.00 $1.00 $0.00 $8.85 $0.00 $7. we think that demand will continue to drive gold prices higher.02 $65. The economic factors that have driven gold to current levels continue to plague the world.70 $75.00 $70.00 $75.00 $8.00 $1. (416) 594-7297 Kevin Chiew. Whereas most of the time gold prices behave as negatively correlated movements against the US dollar. but the movement of money into gold bullion as a means to preserve capital. Key Commodity Price Assumptions Gold Silver Aluminum Copper Nickel Zinc Uranium Molybdenum Metallurgical Coal Iron Ore US$/oz US$/oz US$/lb US$/lb US$/lb US$/lb US$/lb US$/lb US$/tonne US$/DMTU 2010E $1.00 $15.85 $2. 2010 Mining— Precious Metals Barry Cooper.

Barrick (ABX–SP) has delivered a strong operational performance that is likely to draw attention to the name.Volatility And Slower Growth . Pan American Silver (PAAS–SO) benefits from an excellent operating history. It currently sits at 7 or 65% above the long-term average and 45% above the average trading levels of the past decade.June 16. 43 . 2010 Gold equities appear inexpensive relative to the commodity itself. Kirkland Lake (KGI–SO) has high grades with the potential of scaling up production that is building as of now. The 23-year range of units of the XAU purchased for an ounce of gold has been between 3 and 6.CIBC's CIO Roundtable . We think that newcomers to the group may look upon gold stocks with traditional valuation criteria and find the group attractive under this measure as opposed to the more common metric of net asset value where gold shares typically appear more expensive than other sectors. our ranking is as follows: Goldcorp (GG–SO) is one of the few seniors that is forecast to experience growth in production of 10%-15% per year over the next five years. Finally. Newmont (NEM–SP) offers investors the prospect of gold leverage coupled with steady state production. In the seniors’ space. Semafo (SMF–SO) should benefit from continued growth at Mana. Red Back (RBI–SO) is one of the few companies that are experiencing growth. and new discoveries at Rosebel. A profile of our coverage universe and current ratings is shown below. We think that either gold shares are reflecting an impending lower gold price or they are mismatched with the commodity and the improved earnings power of the group. and growth from the recently acquired Navidad project. we favour: Detour Gold (DGC–SO). Eldorado Gold (EGO–SO) has the best growth profile for next year plus among the best reductions in operating costs. Some of the major gold producers are now trading below the average P/E multiple for the S&P 500 for the first time in history. Amongst the non-producers. Amongst names in our universe. which we believe represents good value and potential for expansion through further drilling results and the transition to production albeit two years off. while Franco-Nevada (FNV–SO) offers a superior risk-return profile. both in terms of production as well as reserves. Osisko (OSK–SO) is transitioning into an intermediate producer within 12 months and is a likely takeout candidate. we think Kinross’ (KGC–SU) growth has been impaired but prospects should improve in 2012. Top Picks IAMGOLD (IAG–SO) is likely to benefit from a number of catalysts over the next six months including the startup at Essakane. appointment of a new CEO.

523 $43.82 $50.23 607 $0.32 $55.657 $2.Volatility And Slower Growth .87 777 $23.00 1.210 437 745 1.13 $5.04 $3.784 55 2.998 Rating Sector Outperformer Sector Outperformer Sector Outperformer Sector Outperformer Sector Outperformer Sector Outperformer Sector Outperformer Sector Outperformer Sector Outperformer Sector Outperformer Sector Outperformer Sector Outperformer Sector Outperformer Sector Outperformer Sector Outperformer Sector Outperformer Sector Outperformer Sector Outperformer Sector Outperformer Sector OutperformerSpeculative Sector Performer Sector Performer Sector Performer Sector Performer Sector Performer Sector Performer Sector Performer Sector Performer Sector Performer Sector Performer Sector Performer Sector Performer Sector Performer Sector Performer Sector Performer Sector Performer Sector Underperformer Sector Underperformer Sector Underperformer Sector Underperformer Sector Underperformer Sector Underperformer Sector Underperformer Sector Underperformer Source: CIBC World Markets Inc.90 1.87 2.35 $3.61 $4.89 $11.864 $0. 2010 Exhibit 49.432 $2.272 12.65 $14.992 $17. Summary Of Our Ratings Company Alamos Andean Resources Aurizon Detour Eldorado Gold Fortuna Silver Franco-Nevada Goldcorp IAMGold Corp Kirkland Lake Gold Minefinders Mineral Deposits Northgate Minerals Osisko Pan American Silver Perseus Red Back Mining Silver Wheaton Semafo Alexis Minerals Agnico-Eagle Mines Barrick Gold Corp Centerra Gold Coeur d'Alene Etruscan Resources Endeavour Silver First Majestic Gammon Gold Golden Star Resources Gold Wheaton Lake Shore Gold New Gold Newmont Mining Orezone Royal Gold San Gold Claude Resources Hecla Mining Kinross Gold Corp Rainy River Rubicon Minerals Silver Standard Silvercorp Metals Yamana Ticker AGI AND ARZ DGC EGO FVI FNV GG IAG KGI MFL MDM NXG OSK PAAS PRU RBI SLW SMF AMC AEM ABX CG CDE EET EDR FR GAM GSS GLW LSG NGD NEM ORE RGLD SGR CRJ HL KGC RR RMX SSRI SVM AUY Exchange TSX TSX TSX TSX NYSE TSX TSX NYSE NYSE TSX TSX TSX AMEX TSX NASDAQ TSX TSX NYSE TSX TSX NYSE NYSE TSX NYSE TSX TSX TSX TSX AMEX TSXV TSX TSX NYSE TSX NASDAQ TSX TSX NYSE NYSE TSX TSX NASDAQ TSX NYSE Currency US$ C$ US$ C$ US$ C$ US$ US$ US$ C$ US$ US$ US$ C$ US$ C$ US$ US$ US$ C$ US$ US$ US$ US$ US$ C$ C$ US$ US$ US$ C$ US$ US$ C$ US$ C$ C$ US$ US$ C$ C$ US$ C$ US$ 10-Jun-10 Market Cap.515 $18.CIBC's CIO Roundtable .735 1.461 26.01 221 $30.81 0 $25.81 53 9.337 $7.660 $1.98 $2.086 2.) $14.70 1.41 $0.50 1.24 $59.40 6..74 425 $2.18 $17.53 9.37 $10.366 $4.659 $17. Share Price (US$mlns.214 7.209 2.38 $6.90 $7.27 $3.62 31.48 6.75 593 $9.386 1.90 3.053 1.40 $1.67 3. Bloomberg 44 .01 6.309 42.324 1.223 148 1.11 $6.126 127 224 362 1.99 870 $10.42 $42.June 16.917 $24.62 $3.60 $7.024 325 1.49 $17.43 $0.58 $3.310 $8.

even under benign growth assumptions. in the order of 5% to 10% of global supply. (416) 594-7284 Ian Parkinson. (416) 956-6169 Terry K. the equities with underlying exposure to these commodities should demonstrate exceptional levels of profitability relative to their peers.S. and very modest economic growth in the Western World. 2010 Mining— Metals & Minerals Alec Kodatsky. When viewed in this light. with positive implications for related equities. and 2) substantial inventories of these metals accumulated during the recent economic downturn. we expect a generally more balanced supply-demand picture. (416) 956-3287 Matthew Gibson. we see limited downside to the prices for these metals from current levels.Volatility And Slower Growth . dollars. we believe it becomes clear that subdued growth expectations for the Western World should be less of a concern for the commodities complex than current sentiment might suggest. base metal and bulk commodities can sustain price levels well above historical averages despite a subdued outlook for global economic growth. We remain less inclined to invest in aluminum. 45 . of further accumulation of surplus metal inventories (which could further depress market prices for an extended period). with growth being more heavily skewed towards emerging markets. unless otherwise stated.CIBC's CIO Roundtable . resulting in an acute scarcity of supply across all commodities. zinc and nickel in the near-term for two key reasons: 1) we believe current supply is outpacing demand for these commodities. Additionally. Tsui. Additionally. Sector Outlook – Near Term We believe that in the near term. (416) 956-6729 Market Weight Constructive Pricing Outlook Despite Subdued Growth Environment All figures in U. well below the double-digit growth rates observed at the beginning of 2010.June 16. but estimate that critical supply shortages persist in copper. as we believe they are the most likely commodities to sustain elevated price levels and possibly rise further. aluminum and nickel. metallurgical coal and iron ore. metallurgical coal and iron ore over an 18-month horizon. in our view. That said. We believe our view aligns closely with Avery Shenfield’s expectations for a relatively weak economic recovery in developed nations. much of the higher-cost “swing” production capacity of these commodities is in China. we strongly prefer investment exposure to copper. This rational response in a timely fashion lessens the risk. China currently consumes approximately 30%-35% of global metal supply and accounts for a remarkable 75% of metal demand growth annually.H. CFA. Declining domestic Chinese production typically necessitates the increase of metal imports to offset the drop in supply. In the absence of a similar economic environment. For this reason. The dramatic rise in commodity prices between 2004 and 2008 was fuelled by an extended period of strong geosynchronous economic growth. which typically has positive pricing implications. We have already begun to see the emergence of substantial output cutbacks in zinc. Key to our demand expectations is a sustained GDP growth rate in China of 8%.

we would be inclined to transition away from bulk commodity exposure over the longer term in favour of zinc. Therefore.00 $200.June 16. Consequently. and in deficit for the foreseeable future.to 5-year horizon.00 $0. we believe there is sufficient supply of new projects that a constrained growth environment should balance the market in 3 to 4 years.CIBC's CIO Roundtable .00 $14.90 $75. we can envision several scenarios generating positive pricing implications. this deficit becomes significant in 2012.00 $182. This should prove supportive for copper prices over a long-term horizon. The availability of project financing and tax stability remain key risks to this view.85 $2.02 $65. relative underinvestment should improve pricing prospects over a longer-term horizon.Volatility And Slower Growth .74 2012E $1. these markets could become tighter than we currently expect. This should prove supportive for longer-term pricing.00 $140. and at this point there is insufficient new supply in the pipeline to balance the market. Given our expectations for weaker relative pricing. the risk-reward profile appears skewed to the upside. uranium and aluminum and. In the case of metallurgical coal and iron ore.28 $1. Key Commodity Price Assumptions Gold Silver Aluminum Copper Nickel Zinc Uranium Molybdenum Metallurgical Coal Iron Ore US$/oz US$/oz US$/lb US$/lb US$/lb US$/lb US$/lb US$/lb US$/tonne US$/DMTU 2010E $1.25 $1.00 $0.00 $8. Although less certain. aluminum. 2010 Sector Outlook – Long Term Over a 3. we anticipate less new supply of zinc. Should financing availability decline.200 $18. For example.00 $0.000 $15. even during a period of subdued growth. which we think will compound to project supply shortages out 3-5 years. In our estimates.95 $3.80 Long Term $1.00 $0.90 $3.00 $0. With downside price risk capped by the emergence of higher-cost new capacity.00 $14.85 $2.to 5-year view.00 $75.70 $70. On a 3. We forecast that the copper market will continue to remain very tight.50 $1.90 Source: CIBC World Markets Inc. leading to a normalization of prices. nickel in the coming years. Exhibit 50.00 $125.. albeit with a higher cost structure due to rising energy costs and the general deterioration in the relative quality of new projects.00 $16. we expect the supply-demand picture for the sector to undergo substantial changes. and/or potential changes to tax regimes discourage new project development.00 $1. Our forecast high price environment for copper and bulk materials should stimulate the addition of significant new supply. The current uranium price is not enticing large-scale investment. Bloomberg 46 . we would maintain an overweight exposure to copper on the basis of its very positive long-term supply-demand fundamentals.00 $0.25 $9. to a lesser extent. The high capital intensity of new aluminum supply may deter investment in new projects and possible technical challenges associated with new nickel laterite projects may crimp supply expectations and deter further investment in this critical new source of supply for that metal.400 $20. uranium and nickel.48 2011E $1.00 $0. to the benefit of existing lower-cost producers.00 $16.00 $1.50 $8.000 $15.00 $7. few companies are devoting any capital to investments in zinc.

766 4. (US$mlns.78 1.870 136 1. This.45 2.317 144 1.11 1. Summary Of Our Ratings Company Copper Capstone Mining Equinox First Quantum Ivanhoe Mines Mercator Minerals Quadra FNX Mining Taseko Uranium Bannerman Cameco Denison Paladin Uranium Energy Uranium One Diversified and Other HudBay Inmet Mining Lundin Sherritt Teck Molybdenum General Moly Thompson Creek Iron Ore Baffinland Consolidated Thompson New Millennium Labrador Iron Ore Ticker CS EQN FM IVN ML QUX TKO BAN CCO DML PDN UEC UUU HBM IMN LUN S TCK.91 55. Our preferred names are Teck (TCK. instigate a revival in M&A activity and support the financing of growth opportunities—all of which have positive implications for equity valuations.B GMO TCM BIM CLM NML LIF.128 1. in our view. Bloomberg 47 . Quadra FNX (QUX–SO).77 12. Top Picks Our favoured stock recommendations focus on exposure to our preferred commodities (copper.42 8.542 Rating SP SO SO SP SP SO SO SO SP SP SO SO Restricted SO SP SO SP SO SO SP SO-S SO SO-S SP Source: CIBC World Markets Inc.402 345 2. While these events could continue to weigh on investor sentiment for the next few months.5 1.16 0. Exhibit 51.42 0. metallurgical coal and iron ore) and are well-capitalized companies with good growth pipelines and a solid.62 2.35 3.5 34. Strong cash flow generation among our companies should in turn promote significant returns of capital to shareholders.Volatility And Slower Growth .29 3.4 44. First Quantum (FM–SO) and Taseko (TKO–SO).345 459 2.474 159 1.607 259 1.B–SO).02 48.735 2. We estimate the market valuations for our covered mining equities imply long-term commodity prices well below the cost of production of many current producers. in our view.CIBC's CIO Roundtable .79 14.25 11.2 Market Cap. low-cost operational base.UN Exchange TSX TSX TSX TSX TSX TSX TSX TSX TSX TSX TSX AMEX TSX TSX TSX TSX TSX TSX AMEX TSX TSX TSX TSX TSX Currency US$ US$ US$ US$ US$ US$ C$ A$ C$ US$ US$ US$ US$ C$ C$ US$ C$ C$ US$ US$ C$ C$ C$ C$ Share Price 2.63 3. as higher political risk plays.912 20.93 3. Equinox (EQN–SO)..322 1. we believe that equity valuations for the metals and mining space will ultimately be supported by what continue to be highly profitable commodity prices.496 6.28 23.504 2. is unsustainable and is reflective of the uncertainty surrounding Euro zone growth and the potential impact of a cooling Chinese economy.67 6. with the space on average offering in excess of 40% upside potential under our conservative commodity price assumptions.) 453 2.310 961 56 9.June 16.57 9.25 5. 2010 Equity Valuation Outlook Current equity valuations are extremely compelling. Consolidated Thompson (CLM–SO) and.

(403) 221-5049 Jeff Shen. (403) 221-5047 Market Weight Jeremy Kaliel. we expect less commodity momentum than 2009. it is difficult to see a scenario where inventories are eroded sufficiently to bring the supply-demand equation back into balance. The short-term outlook for natural gas prices remains relatively bleak as inventories are plentiful and the pace of drilling is once again accelerating driven by aggressive development of gas shales. 2010 Oil & Gas Andrew Potter. It will be difficult for oil prices to move much beyond US$90/Bbl without a significant erosion in spare capacity – which is still likely several years away. We forecast natural gas prices of US$4. 48 . Key Themes Given our view of oil prices trading in a US$70-$90/Bbl range through 2011. Overall sector valuations are quite attractive following the recent selloff with the average large cap trading at 80% of ‘risked’ NAV and 6. with spot prices trading above US$85. in a bid to hold lands. we project 20% returns for the group as a whole based on our US$85/Bbl and US$6/Mcf long-term commodity price forecasts. leading to gradual erosion in spare capacity.June 16. We believe the sector is discounting an approximately US$70/Bbl oil price over the long term. Sentiment towards the global economies took a severe turn for the negative surrounding the Greek bailout. The short. With the oil price forecast to be somewhat range-bound in 2010 and 2011. we believe the industry requires US$6. (403) 216-8518 Jon Morrison (403) 216-3402 Kyle Balaux (403) 216-3401 Sector Outlook Commodity Outlook – Taking An Oil Bias In Short Term WTI prices have remained volatile in recent months. producers continue to drill aggressively. With this back-drop. (403) 216-3405 Nick Lupick. when oil rallied 78% and the sector as a whole increased 43%. However. Even with low prices.75/Mcf in 2010 and gradually moving back up to a long-term sustainable price of US$6/Mcf.0x 2011 EV/DACF— slightly below historical valuation ranges. We forecast US$80/Bbl in 2010 and US$85/Bbl in 2011. particularly in the US. we see global oil demand increasing moderately.to medium-term price of oil has less to do with specific inventory levels and more to do with sentiment regarding the global economy.Volatility And Slower Growth . Over the long term (2012+). we believe stock returns will be driven more by company-specific factors such as growth and valuation re-rating/de-rating. (403) 260-8657 Diana Chaw. (403) 216-3400 Adam Gill. (403) 221-5700 Jeff Fetterly. Overall.CIBC's CIO Roundtable .00/Bbl at the beginning of April down to the US$70/Bbl level recently on concerns of global oil demand stalling. with global GDP growth expected to remain around the 4% level for the foreseeable future.00/Mcf to generate sufficient cash flow to fund drilling efforts at the necessary pace. which is quite a discount from our US$85/Bbl forecast.

50 ($0.00 ($2.95 $17. 2010 Exhibit 52.00 ($0.41) $5.98 $12.58 $6. with return potential at or around 30%.48) $5.58 $6.81 2016E+ $85. We continue to believe technology could unlock further value in the oil sands.5-10.34) $4.00 ($0. The valuation re-rating combined with above-average growth should lead to outperformance versus its domestic and global peers.95 $17.US$/mcf NYMEX Diff .81 2014E $85.97 $15. the underlying economics have improved remarkably thanks to slightly lower costs. Following the $3-4 billion of asset sales.00 ($0.US$/mcf AECO 30+day spot .48) $5.89 $71.50 2011E $85.58 $6. We believe Suncor is capable of delivering 8% oil-weighted production growth through 2015 at least by spending only 65% of cash flow . similar to the impact it had on shale gas. As long-life resources comprise a greater proportion of production. We believe there is a large disconnect between oil sands valuations in the asset market (both producing assets and non-producing) and what is implied in corporate valuations. lower natural gas prices and tightening light-heavy differentials.75 2013E $85. Oil sands have received a bad rap over the past few years – both environmentally and in terms of economics.00 ($2. we expect valuations to continue to expand for the sector as a whole.89 $75.00) $0.00 ($2.90 $18.00 ($0.85) $0.5 billion range by the end of 2010 at which point the company will be well situated to begin to utilize the substantial free cash in 2011/2012 to increase debt or buyback shares.C$/bbl Western Canada Select . We expect corporate activity to remain high over H2/2010 and 2011 in terms of both M&A and potential corporate splits.00 ($2.89 $71. we expect Suncor to have debt down to the $9. Top Picks We highlight Suncor (SU–SO).56 $6. Suncor – Sector Outperformer ($44 target.13 Source: Bloomberg and CIBC World Markets Inc. 29% implied return) We believe Suncor's valuation is poised to re-rate upwards as the company completes its asset sales and once again starts to deliver reliable oil sands operations. We highlight Talisman (TLM–SO) as having the most to gain if it spun off is North American assets in the next 12-18 months.00) $0. 49 .00) $0.63 $4.00 ($0.CIBC's CIO Roundtable .Volatility And Slower Growth .48) $5.00 $69.81 2015E $85.71 $70.25 2012E $85.00 ($1.00) $0.83 $6.00) $0.US$/Bbl Forex .June 16.00) $0.00 ($2.89 $71.48) $5.C$/bbl NYMEX . While the environmental backlash is still in full swing.C$/mcf $80.34 $72.95 $17.48) $6. Key Commodity Price Assumptions 2010E WTI . Talisman (TLM–SO) and Nexen (NXY–SO) as our top investment ideas.00 ($2.US$/C$ Light Heavy Differential . A dominant theme in the Canadian space will continue to be the progression towards long-life resources.29 $5.75 ($0. We also believe that further corporate splits are possible.US$/bbl Light Oil Basis Differential .96 $17. This disconnect may be a precursor to M&A.a rare combination of growth and free cash flow. Husky (HSE–SO) is the most likely given its public musings of spinning off its international assets. We believe non-upgraded SAGD projects offer some of the best risk-adjusted rates of return in the world while still holding significant optionality on technology.

Major discoveries in the Eastern Gulf of Mexico. we believe Talisman has the asset mix to finally see the valuation expand. We believe the company is now capable of 10%-15% gas production growth through 2015. 50 . but following a solid string of exploration success in 2008/09.a level that will likely lead to some market recognition for this asset. Talisman has transformed its uncompetitive North American gas business to top tier. we expect unconventional to represent approximately 50% of North American production. along with commercialization of Horn River shale gas. In a US$5/Mcf+ gas price scenario. 28% implied return) After many years of below-average performance and valuation. implies that Nexen can generate ~8% average growth through 2015.June 16. but is still a long way from peak production. making it one of Nexen's largest single producing assets. we believe it has better-than-average growth potential/visibility and catalyst potential.Volatility And Slower Growth . we expect a steady stream of exploration results. we believe Nexen could ramp up production from this asset to 90 MMcf/d by year-end 2011 and 140 MMcf/d by year-end 2012. 2010 Nexen – Sector Outperformer ($30 target. Talisman's international business has also transformed with vastly improved growth visibility and greater exposure to high impact exploration. with our focus being primarily Colombia and Indonesia. we estimate our $23 target would be easily achieved and there could be upside to the $30/share level. Talisman – Sector Outperformer ($23 target.CIBC's CIO Roundtable . Weak results from Long Lake in 2008 and 2009 have overshadowed Nexen's strong performance elsewhere. Long Lake is showing encouraging signs. 30% implied return) Nexen has been a chronic underperformer. By year-end 2010. North Sea and West Africa. Should Talisman's valuation not re-rate as we expect. In H2/10 and early 2011. the company would be prime for a break-up in the next 12-18 months. We believe it will achieve cash flow breakeven within the next few months and be generating ~$300 million of annualized cash flow by late 2010 . We believe Horn River is a hidden gem in Nexen's portfolio. In a break-up scenario. led by the Marcellus play.

6 $24.88 $0.10 $22.24 SO SO SP SO SO SO SP SP SP SO SP SP SO SP $27.2x 7.50 $2.0x 6.00 $30.CIBC's CIO Roundtable .25 $16.62 SO R SP $1.81 $10.63 $6.88 $13.50 $7.00 10% 7% 13% 33% 29% 18% $40.00 $32.73 $5.21 $11.7x N/A N/A 51 .7x 6.00 $38.10 $0.00 $30.Volatility And Slower Growth .58 $31. Analyst Price Rating Price Target1 Price Return Mkt Cap ($C Bln) EV/EBITDA Price / Unrisked NAV CVE HSE IMO SU Potter Potter Potter Potter $29.80 SP SP SP SO SO $41.8x 7. As such.75 27% 19% 23% $0.50 $10.50 $17.00 $0.00 18% 23% 8% 31% 20% $22.26 $8.93 $0.3 N/A N/A N/A N/A 81% 66% 82% 67% CNQ COS ECA (US) NXY TLM Potter Potter Potter Potter Potter $37.00 $12.10 N/A N/A 40% 60% AXL NGL PVE.3 $22.22 $0.00 $7.01 $14.01 $8.5x 9.00 24% 32% 28% $3. Bloomberg and CIBC World Markets Inc.48 $0.0x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A FTT TIH Fetterly Fetterly $17.65 R 8.01 $33.70 $26.4 $52.89 $2.40 $2.50 $13..50 $17.50 $10.50 $7. comparative figures shown are offset (i.25 31% R 8% 20% 35% 23% 28% 31% 36% 36% 22% 14% 27% 31% 23% 31% 27% 34% 28% $0.89 $12.00 $32.25 $7.2 $34.24 SP SP $22. Summary Of Our Ratings & Price Targets 2010E Ticker Seniors Integrateds Cenovus Energy Husky Energy Imperial Oil Ltd Suncor Energy Average Canadian Large Caps Canadian Natural Resources Canadian Oil Sands Trust Encana2 Nexen Talisman Energy Average Small Cap Oil Sands OPTI Canada UTS Energy Average Intermediate & Junior Producers Anderson Energy Angle Energy Provident Energy Energy Equipment & Services Calfrac Well Services Cathedral Energy Services Ensign Energy Services Flint Energy Services Mullen Group Newalta North American Energy Partners3 Pason Systems Phoenix Technology Income Fund Precision Drilling Savanna Energy Services Total Energy Services Trican Well Service Trinidad Drilling Average Capital Equipment Finning International Toromont Industries Average 1) Price targets are 12 to 18 months 2) All figures in $USD unless stated otherwise 3) North American Energy Partners has a March 31st fiscal year-end.13 $0.02 $1.3x 8.53 $1.00 $44. 2010 (FY2010E)).29 $7.00 $10.00 $44.1x 6.86 8.UN Gill Gill Gill $1.e.00 $23.2x 5.1x 9.22 $2.97 $0.7 $11. 2010 Exhibit 53.25 $1.43 $0.01 N/A R N/A 127% R 89% CFW CET ESI FES MTL NAL NOA PSI PHX.8x 8.37 $0. Source: Company reports.11 $40.62 $17.40 $5.97 $0. 2009 figures are for the 12 months ended March 31.1x 9.8x 4.27 $28.9 $18.1 N/A N/A N/A N/A N/A 78% 89% 46% 55% 45% OPC UTS Potter Potter $1.36 $8.1x 8.68 $24.8x 5.63 8.31 Spec SO SO $2.93 SO SO SU SO $35.10 $8.21 $1.59 $1.5x 4.6 $13.June 16.6x 7.00 $12.00 $13.00 $19.UN PD SVY TOT TCW TDG Fetterly Fetterly Fetterly Fetterly Fetterly Fetterly Fetterly Fetterly Fetterly Fetterly Fetterly Fetterly Fetterly Fetterly $20.

At that point. Reitmans [RET–TSX]) suggest that Canadian consumers are spending at reasonable rates. the continued growth of the ethnic consumer. by August or September. patio furniture and sports equipment. they are not predatory. Over time. we consider six major issues: the Canadian dollar exchange rate. However. Walmart (WMT–NYSE). All of these will play meaningful roles in how investors should examine the consumer products and merchandising vertical. provincial governments are seeking savings and drugstores are easy targets. In most countries. almost as if a recession never happened. new entrants. the company prices right with Canada’s traditional discount food operators. Because returns have been poor. but has struggled to produce decent returns. This has created a profit windfall in everything from fruits and vegetables to strollers. expansionary efforts outside of Canada. the independent networks will likely shrink. When we think about the outlook for Canadian retail and consumer stocks. the CAD will lap last year’s levels so profit windfalls will disappear. square footage growth is too slow to put pressure on sales productivity. Hence. Walmart is a formidable force. The economics of the drugstore industry have been severely damaged by government intervention in Ontario. apparel and furniture weaker). 2010 Consumer Products— Merchandising Perry Caicco. On the general merchandise side. sales may be maintained. garden strong. As always. As the major insurers of Canadians consuming prescription pharmacy products. but recent results from the more discretionary retail companies (Forzani [FGL–SO].June 16.Volatility And Slower Growth .CIBC's CIO Roundtable . Canadian Tire [CTC. the retailer has come close to maximizing its business over the past 15 years and there’s not much more to conquer. and. and Walmart is uninterested in opening up the same price gaps here as they have in other countries. and the latest project is to simply jam fresh food into existing small discount stores.A–SP). and it is probable that other provincial governments will follow. retailers may have to carefully raise prices and seek other types of cost efficiencies – in other words. hardlines. while prices are “low”. but not below. These interventions will also impact grocers and mass merchants who sell pharmacy products. and sales should be driven into more-efficient chain operations. but it’s basically back to normal for the Canadian consumer. On the food side. Most Canadian retailers have been benefitting from the strong Canadian dollar since lower purchasing costs for goods sourced offshore have not turned up in lower retail prices. 52 . but not in Canada. The traditional Supercenter model has not driven strong results (for a wide variety of reasons). certain sectors have fared better than others (sporting goods. (416) 594-7279 Mark Petrie (416) 956-3278 Market Weight Sector Outlook We don’t pretend to be economists. but gross profits will be tougher to realize. but that may not begin to occur for a couple of years. Prices have stayed high because there are few aggressive price retailers in the Canadian market. government intervention. finally. the company has grown to over $3 billion in sales (in a $78 billion food market).

Couche-tard (ATD. who are struggling to respond and serve. The U. The company is about to install scanning.June 16. Aeroplan (AER–SO). As Canadian retail has become more sophisticated.Volatility And Slower Growth . Investors in Canadian companies live in constant fear of multinational retail or consumer companies entering Canada and destroying the existing competitors. 2010 Canada’s liberal immigration laws have led to huge growth in populations of ethnic new Canadians. and reduce shrink and labour costs. but more recently aggressive expansions by Tim Hortons THI–SP). and threats remain on a number of fronts. Recent fears include possible entries from Target (TGT–NYSE).S. these threats are somewhat muted. dominant in the “dollar” category in Canada. It has strong same-store sales. and is adding stores in key markets at low rents. Cott (COT–SO) and Weston (WN–SP) have worked out well. the generally high pricing (on an international basis) in the Canadian market could attract selected discount entrants.B–SO). Walmart. which should improve in-stock levels and sales. They have in many geographies developed their own shopping venues and these venues are steadily siphoning sales from traditional Canadian retailers. Its operating metrics are better than comparable U. it is imperative that Canadian companies at least consider other markets. Nevertheless. Aldi. Gildan (GIL–SP). or even those of traditional European immigrants. Top Picks Dollarama (DOL–SO) is a fast-growing niche retailer.CIBC's CIO Roundtable . Empire Company (EMP–SO) has over 90% of its asset value domiciled in Sobeys (SBY–TSX). with good regular traffic growth. an undervalued supermarket chain with strong same-store sales momentum. With a finite market to serve. but their spending patterns and shopping behaviours are unlike those of traditional Canadians. Banners are clearly positioned and the company has a solid national presence. dollar stores. most notably from Asia and South Asia. These have become a powerful economic force. 53 . specialty apparel is continually being invaded. Leading-edge logistics and a re-bannered discount store in Ontario should drive earnings growth to levels superior to its comparables. Lidl or Dollar General (DG–NYSE).S. Costco and Home Depot had that impact in the early 1990s. has been a cemetery for Canadian consumer companies in the past.

7x 6.4x 21.3x 11.2x 10.7x 6.032 7.1x Note: For companies not covered by CIBC World Markets.0% 2.6x 6.7x 12.0% 2.8x 5. Inc.3x 6.6x 13.7x 7.0% 4.9% 0.7x 7.6x 8.8x 9.2x 16.June 16.4x 7.5x CTC/A DOL EMP/a FGL WN L MRU/a NWF.5x 12.8x 21.4x 5.6x 11.0% 1.5x 15.40 1.4x 6. Alimentation Couche-Tard Inc.3x 22.8x na 10.04 $ 7.786 6.0x 8.8x 37.4x 7.91 17.64 5. Saputo Inc.3x 16.5x 15.835 3.5x 13.UN PJC/a RON SC THI CAD CAD CAD CAD CAD CAD CAD CAD CAD CAD CAD CAD Sector Performer Sector Outperformer Sector Outperformer Sector Outperformer Sector Performer Sector Performer Sector Outperformer Sector Outperformer Sector Outperformer Sector Performer Sector Performer Sector Performer $ $ $ $ $ $ $ $ $ $ $ $ 55.148 18% 4% 11% 20% 9% 15.6x 5.6x 11.0x 6.9x 7.2x 9. Ltd.2x 9.3x 6.3x 15.4x 8.7x 12. Consumer Products Average Merchandising Canadian Tire Corporation.Volatility And Slower Growth .9x 7.9x 13.4x 10.3x 7.8x 19.0x 7.62 25.4x 10.4x 11.554 519 9.3x 13.1x 4.9x 7.1x 7. North West Company Fund Jean Coutu Group Inc.7x 10.1% 1.1x 6. Cott Corporation Gildan Activewear Inc.8x 19.0% 2.8x 6.860 3.4% 0.50 51.8% 0. Source: Company reports and Bloomberg 54 .0% 1. Dollarama Inc.7% 2.1x 15.60 19.1x 16.2% 2.5x 16.3x 11.6x 10.83 $ 31.048 4.68 34.177 10% 16% 5% 7% 6% 6% 7% 9% 7% 7% 11% 26% 13.7x 4.9x 9.3x 4.0x 15.1x 6.45 34.5x 11.6% 7.9x 11.4% 1.3x 8.0x 6.0x 19. Metro Inc.0x 13.1x 8.55 8.8x 17.9x 10.0x 12.124 2. AER ATD/B COT GIL SAP CAD CAD USD USD CAD Sector Outperformer Sector Outperformer Sector Outperformer Sector Performer Sector Performer $ 9.2x 7.4x 12.99 15.1x 13.3x 12.539 1.6x 11.8x 16.4x 15.9x 11.1% na 14.435 11.9x 6.9% 1.5x 9.6x 7.2x 5. Summary Of Our Ratings 14-Jun Share price LTM EBITDA Margin Price-toearnings ratio Last This Next year year year Current EV/EBITDA Last This Next year year year Company Consumer Products Groupe Aeroplan Inc.491 6.4x na 12.624 948 2.8x 7.2x 16.7x 6.617 627 3.4x 11.20 $ 19.4x 8.2x 5.7% 1.0x 9.6x 14.5x 10.6x 7. RONA Inc.CIBC's CIO Roundtable .8x 9. Shoppers Drug Mart Corporation Tim Hortons. Merchandising Average Overall Average Ticker Currency Rating Dividend yield Market cap. 2010 Exhibit 54.6x 8.9x 7.0x 7.6x 13.19 73.3x 12.6% 1.9x 13.8x 7.4% 0.7x 9.3x 14.1x 7. Empire Company Ltd.0% 0.00 42.6x 11.5x 12. consensus numbers were used.1x 8.30 $ 29.10 40.9x 13. Forzani Group Limited George Weston Limited Loblaw Companies Ltd.6x 8.

This compares very favourably with most other sectors. and Brazil. However. developing mortgage markets. driven by top-of-cycle optimism. offer much greater return potential.S. Demand for commercial real estate remains relatively stable throughout economic cycles. offers relatively stable fundamentals (occupancies and rental rates are stable) and opportunities in financial restructurings. uncertain property rights. with limited changes in occupancy and mainly positive lifts on lease renewals.June 16. Large Canadian pension funds have recently been investing directly in major mature markets like Manhattan office property. (416) 594-7399 Overweight Sector Outlook Performance Through Crisis Has Been Very Stong The credit crisis was the first baptism by fire for Canadian REITs and REITs globally. Stable fundamentals and renewed financial discipline should support stable and growing financial performance from REITs focused in major markets in mature economies. REIT operating fundamentals have remained very stable. with broad-based growth returning in 2011E. there had been no major economic or real estate downturns to challenge the industry since REITs emerged in their current form in the 1990s as a product of the real estate and economic recession of the early 1990s. with low-single-digit growth during times of expansion and flat demand during recessions and early recovery. where earnings and cash flows have greater exposures to shorter-term economic conditions. Real estate cycles are typically ended by development booms that oversupply markets. low-risk environments in which to own property and collect cash flow. they also present greater risk relating to the potential for overbuilding. (416) 956-3643 Brad Sturges. In the short term. and rising incomes. with stable. The winners and losers among REITs in the credit crisis were defined by their financing strategies. 2010 Real Estate Alex Avery. where financing strategies were generally conservative. driven by higher economic and population growth. partly because of maturing rental rates that were reflective of market rents 5 or 10 years ago when these leases were signed. most Canadian and mature global markets have avoided over-building.CIBC's CIO Roundtable . cultural barriers and emerging market currency exposure. which stifled market optimism. the U. 55 . The vast majority of these declines in FFO and AFFO related to dilutive financings (both debt and equity) completed during the peak of credit market uncertainty. but limited restructurings. In Canada. etc). Sector Outlook – Near Term Supply of space continues to define real estate market conditions. Dubai has already crashed and China could follow. Dubai.Volatility And Slower Growth . Emerging markets like China. in part due to the speed and severity of the credit crisis. (416) 594-8179 Troy MacLean. With a few notable exceptions (Calgary. while Canada offers very stable fundamentals. We see these markets as offering risk and return characteristics that appeal to institutional investors. differing and evolving legal and regulatory environments. Until 2008. REITs experienced modest 3% to 5% average total declines in FFO and AFFO from 2008 to 2010E (not annual). India.

Sector Outlook – Long Term We expect a low-growth. 56 . 10 years remaining). assuming stable valuations.UN–SO. renewable power and infrastructure assets globally. Demographically driven demand for high yields in a low-growth. with strong economic growth. We expect further upside could result from upward revaluation of real estate and REITs. the company has a very strong board of directors. which include professional management. low-interestrate environment positions Canadian REITs to generate attractive returns.June 16. We believe the company is well positioned to generate strong returns from its high-quality asset portfolio and attract substantial new capital to manage on behalf of institutional partners. relatively constrained property development and a developing mortgage market. Given this outlook. following generally positive outcomes from REITs facing their first major economic and property market crisis. The REIT structure is well positioned to gain real estate ownership market share (currently <10% in Canada). with a strategy of targeting the ownership and management of real estate. 2010 Brazil appears to have the most favourable real estate market among emerging economies. long-term mortgages (8 years) and high-credit-quality tenants like Bell Canada (BCE–TSX). In addition. TransCanada (TRP–SO). vastly better liquidity and the ability to manage and adjust exposure on a continuous basis. including 6%+ current cash yields. both on its own behalf and for institutional investors. we expect REITs and real estate to perform well. Royal Bank (RY–SP) and Canadian Tire (CTC. We expect this proliferation will result in a larger. PT: $33. and its defensive strategy of targeting long-term leases (avg. low-inflation environment with more conservative lending practices to result in limited new property development in mature markets over the next 3 to 5 years. life insurance companies and retiring baby-boomers have investment profiles that include net cash outflows that can be well matched with these cash-flow producing assets. more liquid REIT sector in Canada and globally that will grow in importance as a capital markets sector. providing average annual returns near the lower end of the 10% to 15% range.CIBC's CIO Roundtable . PT: $20. The REIT recently announced a plan to increase distributions by 46% over the next two years. Telus (T–SO). reflecting the advantages it offers over direct ownership of property.00) is another top pick. bringing its AFFO payout ratio to approximately 70% (still one of the very lowest payouts in the sector). reflecting current spreads of capitalization rates over 10-year government bond yields that are wider than historical averages. Top Picks H&R REIT (HR. We expect these returns to be comprised of distribution income accounting for 6 to 8 percentage points of annual returns.A–SP).Volatility And Slower Growth . driven by the levered effects of 1% to 3% same-property NOI growth and the impact of accretive acquisitions. and has strong alignment through considerable insider and management ownership.00) is our current top pick among large capitalization Canadian REITs due to its discounted valuation to all other large cap Canadian REITs measured by both AFFO multiples and relative to NAV. The company has developed robust operating platforms. Pension funds. including the proliferation of the REIT structure. and 3 to 5 percentage points of growth in FFO and AFFO. Multi-industry Brookfield Asset Management (BAM–SO. We believe these characteristics are core to the company's future success. and has a broad and deep senior management team with strong expertise across each of its operating platforms. geographic diversification. The institutionalization of real estate globally should continue.

9% 4.1%) 1.75% 7.8x 12.067 Distribution Current Current Annual Yield $1.471 $0. ($mlns) 13.958 $1.0x 14. Bloomberg Rating SO 6/15/10 Unit Price $24.1x 12.3x 11.9% 1.7% 5.5% SP SU $40.116 2.9x 15.84 $1.00 Unit Price (Disc.05 $19.June 16.0x 14. Summary of Our Large Cap Ratings 6/15/10 Unit Price $19.3x 17.623 2.9x 11..3x 12.1% 5.38 $1.66 2.4x 12.24 $17. 2010 Exhibit 55. NAV 5.0x 12.50% 6.80 $14.8x $39.25% (11.210 24.799 Current Yield 2.00 Est.5x 13.9% 15.08 4.0x 12.59 Market Cap.2% CFPS Multiple 2010E 2011E 9.2x 15.7x 12.1x 14.0x 14.3x 13.8% 4.9x 12.8x 12. Avg NOI Cap Rate 6.56 $0.210 27.00% Unit Price (Discount)/ Premium to Est.4x 13.36 2.2x SO SP SP $16.55 $1.)/ Prem.01 $20.2x 17.9x EPS Multiple 2010E 2011E 30.5x 16.Volatility And Slower Growth .6% 6.5x 13.75% (4.4% 5. ($mlns) 4.50 7.0x 12.50 $18.8x 10.0x 18.7x 14.5x 18.6% (5.8x 14.9% SP SO $14.4x 12.96 3.44 5.0% 7.8% Est.3% 14.272 10.04 Market Cap.3%) (9.8x 14.9% 13.8% Multi-Industry Brookfield Asset Management Source: CIBC World Markets Inc.80 $1.2x 12.2x 8.8x 11.0x 20.748 $0.50 $27.6x 16.9%) (1.50% 2.5% 6.5x 14.50 7.00% 6.1x 11.1x 13.25% 8. NAV Per Unit $30.0% 1.6x $18.1%) 1.392 1. NAV Per Unit $18.6x 18.817 9.1x 19.0x 12.056 1.2% Rating Shopping Centre RioCan REIT Calloway REIT Primaris Retail REIT First Capital Realty Shopping Centre Total/Averages Diversified (office/retail/industrial) H&R REIT CREIT Cominar REIT Diversified Total/Averages Office Brookfield Properties (US$) Brookfield Office Properties Canada Office Sector Total/Averages Average/Total: Commercial Residential Boardwalk REIT CAP REIT Residential Sector Total/Averages Average/Total: All REITs SO SO SO Restricted FFO Multiple 2010E 2011E 13.25 $17.3x 14.25% 7.25 $12.128 1.2x 12. NAV (19.8x 11.9%) 57 .863 1.0%) 2.0x 17.4x 10.189 5.1x 13.5x $15.00% 7.9%) (13.3x 12.9x 13.420 1.9% 5.46 $28.3x 13.7% 25.00 7.082 3.3x 15.31 $15.7x AFFO Multiple 2010E 2011E 14.6x 13.8x 11.9x 11.1x 12. to Est.4% 6.74 $19.22 7.4x 13.00 $21.4% 12.50 6.50 $22.9x 11.0x 14.1x 28.41 $1.9% 11.3% 7.0x Est.CIBC's CIO Roundtable .8% 6.

09 0.07 0.1 0.08 0.63 9.8 0.55 13.36 3.36 4.19 1.42 10.53 11.91 0.6 4.29 0.07 0.58 0.16 0.32 10.48 6.9 15.75 11.46 4 4 4 2 2 3.19 72.4 0.64 7.82 P/Bv to FV VolAdj 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 58 .45 0.1 4 4 3.36 0.8 12.84 3 2.19 1.03 0.81 2.16 1.16 1.7 3.36 6.52 1.56 4 4 4 1.1 1.01 0.88 18.85 0.85 2.05 1.03 0.42 4.28 1.15 1.93 0.92 0.23 1.71 0.89 2.9 36.63 7.04 0.11 1.94 15.96 2.4 5.38 0.16 1.78 0.01 0.83 2.25 2.19 40.18 4.08 3.57 0.59 4.7 12.49 2.11 0.97 0.53 19.17 1.41 0.15 4 3 2.1 -2.69 4.56 0.79 1.21 9.55 3.67 1.45 16.42 0.89 0.57 21.98 5.93 2.45 0.62 7.68 8.04 -0.25 0.11 12.89 2.39 12.01 2.19 1.46 5.04 0.77 3.13 2.13 2.84 0.16 1.16 10.2 -0.33 7.41 1.98 12.81 0.81 0.6 7.94 1.79 1.89 0.51 5.99 22.9 0.98 0.6 2.9 2.46 1.12 -7.67 0.35 2.83 1.15 2.86 0.64 14.19 1.76 -1.7 1.77 20.97 0.99 1.42 1.08 -1.04 -0.77 5 3.48 -0.48 10.56 16.42 31.72 4 4 3 3 4 4 4.56 10.94 0.78 1.13 2.77 25.51 5.8 20.03 -2.83 11.13 1.76 0.June 16.45 1.8 0.05 0.7 1.96 326.95 3.94 0.26 17.87 0.55 15.36 0.64 0.35 2.03 13.17 2.07 0.35 18.94 49.98 1.16 1.77 1.75 0.91 1.2 14.87 0.62 1.22 40.62 1.98 2.35 15.24 1.47 0.2 0.51 2.28 11.1 2.03 0.98 1.46 5.53 -0.96 0.94 36.99 12.86 -0.62 7.92 1.42 5.07 0.22 -0.81 0.84 3 3 3 2.08 8.62 7.34 67.62 0.49 0.66 0.98 13.6 1.24 0.52 0.55 11.87 40.98 2.89 36.03 151.73 2.03 1.96 3 3 3 2 2 2.81 0.27 0.14 3.66 1.44 19.88 1.66 0.74 0.49 16.25 9.87 0.85 0.87 0.01 0.98 1.96 -9.79 1.14 25.94 1.94 18.71 -0.87 0.72 5.34 17.92 0.45 12.68 0.31 7.73 21.91 9.35 6.95 2.86 0. 2010 Appendix Exhibit 56.85 0.53 6.71 0.14 0.96 15.77 0.15 19.64 13.05 0.93 0.4 168.87 0.05 4.55 15.93 0.5 12.17 0.44 256.01 0.03 1.11 1.04 26.11 72.38 12.93 2.78 0.76 0.04 0.07 0.38 3.92 0.26 4.79 -3.19 6.03 2.66 ROE 3Mo Chg 97 97 -34 -111 34 101 30 173 -321 -3 -28 119 119 344 365 342 70 70 74 116 69 25 30 285 285 -31 -172 -237 -237 -190 -190 -314 -314 8 8 -53 -69 -52 60 -182 7 7 49 -228 -228 68 66 173 -45 -45 92 475 475 475 326 61 61 392 392 120 120 120 -25 -25 -56 21 -57 86 -23 10 -21 -106 -6 54 160 19 6 -32 -48 -48 -18 -59 30 ROE BP Rng 280 280 281 277 285 280 316 321 190 101 257 248 248 299 371 295 90 90 241 336 215 189 333 187 187 140 226 302 302 176 176 115 115 199 199 104 104 63 97 130 104 104 98 225 225 87 84 231 220 220 126 159 159 159 192 80 80 220 220 170 170 170 107 107 117 74 173 101 84 96 76 209 53 124 170 102 132 115 90 90 48 105 211 ROE 3mo/ BPRng 0.08 3.16 22.26 11.49 0.98 P/Bv 1.9 0.28 2.38 29.52 0.CIBC's CIO Roundtable .15 15.33 15.83 1.63 17.08 0.03 1.98 11.41 0.85 0.34 0.98 1.69 0.41 -7.4 5.81 0.85 0.12 1.56 1.8 0.57 12.83 0.63 2.96 11.89 0.25 0.07 0.4 -0.97 87.92 0.09 0.96 0 0 2.09 2.46 4.04 0.04 16.96 7.94 8.17 1.84 2.96 16.34 0.12 27.15 28.26 0.74 3.03 0.77 0.07 2.09 0.92 0.2 0.74 21.76 -0.95 0.83 23.76 2 P/Bv to 5yrAve 0.86 0.31 2.03 1.95 3.31 -0.78 9.75 0.64 12.52 4.63 -1.8 2.27 -0.7 0.59 24 7.44 0.78 2.9 0.59 0.8 27.56 1.14 0.92 15.98 0.95 0.82 1.96 26.95 2.74 0.48 6.71 -0.41 3.77 11.09 2.38 29.35 0.96 27.56 3.81 21.72 0.55 1.49 13.79 1.84 1.98 1.87 1.53 2.28 6.74 1.54 2.85 0.78 0.71 -0.33 0.98 0.62 0.03 1.45 0.16 5.15 37.68 0.96 2.18 2.08 -0.92 0.22 1.95 1.75 0.84 3.14 1.01 1.65 2.26 3.14 1.31 6.23 0.05 38.86 0.66 0.98 2.8 0.93 1.09 2.98 0.96 326.44 256.87 1.41 1.46 30.11 0.59 0. GICS TSX Summary Name Energy Energy Energy Equipment & Services Oil & Gas Drilling Oil & Gas Equipment & Services Oil Gas & Consumable Fuels Integrated Oil & Gas Oil & Gas Exploration & Production Oil & Gas Refining & Marketing Oil & Gas Storage & Transportation Coal & Consumable Fuels Materials Materials Chemicals Commodity Chemicals Fertilizers & Agricultural Chemicals Containers & Packaging Metal & Glass Containers Metals & Mining Diversified Metals & Mining Gold Precious Metals & Minerals Steel Paper & Forest Products Forest Products Industrials Capital Goods Aerospace & Defense Aerospace & Defense Construction & Engineering Construction & Engineering Machinery Construction & Farm Machinery & Heavy Trucks Trading Companies & Distributors Trading Companies & Distributors Commercial & Professional Services Commercial Services & Supplies Commercial Printing Environmental & Facilities Services Diversified Support Services Professional Services Research & Consulting Services Transportation Airlines Airlines Road & Rail Railroads Trucking Transportation Infrastructure Marine Ports & Services Consumer Discretionary Automobiles & Components Auto Components Auto Parts & Equipment Consumer Durables & Apparel Household Durables Home Furnishings Textiles Apparel & Luxury Goods Apparel Accessories & Luxury Goods Consumer Services Hotels Restaurants & Leisure Restaurants Media Media Advertising Broadcasting Cable & Satellite Movies & Entertainment Publishing Retailing Multiline Retail Department Stores General Merchandise Stores Specialty Retail Apparel Retail Home Improvement Retail Specialty Stores Consumer Staples Food & Staples Retailing Food & Staples Retailing Drug Retail Food Retail Food Beverage & Tobacco Count 53 53 8 4 4 45 5 31 1 6 2 55 55 3 1 2 1 1 48 13 27 5 3 3 3 19 8 2 2 2 2 1 1 3 3 4 3 1 1 1 1 1 7 3 3 3 2 1 1 1 19 2 2 2 2 1 1 1 1 1 1 1 9 9 1 2 2 1 3 5 2 1 1 3 1 1 1 12 8 8 2 6 4 Weight QMV (%) (US$ bln) 25.01 13.98 15.95 0.36 7.01 3.17 0.93 0.55 21.92 3.32 14.58 0.37 4.58 4.89 9.1 -1.84 16.88 2.54 57.54 2.59 4 4 1 1 4 4 4 3.94 3.34 1.19 0.9 0.28 2.96 1.85 0.29 3.32 3.7 Yield (%) 3.27 2.09 4.53 -0.47 -0.81 0.72 12.66 7.1 1.42 5.14 1.07 0.19 11.81 0.42 17.4 5.06 0.04 12.69 0.88 1.11 1.19 72.91 0.76 0.28 0.19 -47.14 15.16 5.43 3.23 12.79 1.22 0.51 18.37 1.53 -0.11 1.41 2.Volatility And Slower Growth .77 0.19 1.75 1.01 1.9 0 1.24 26.02 1.1 0.34 4.92 0.46 3.9 1.27 -0.77 0.04 1.59 7.51 24.15 1.4 1.84 16.23 -0.47 3 37.4 0.07 1.02 25.57 -1.82 0.32 18.53 1.53 6.08 1.6 27.97 1.31 0.7 0.74 21.81 0.79 4.98 2.96 15.6 25.05 1.7 0.35 13.07 3.09 6.07 0.46 12.85 27.52 0.95 1.69 0.49 8.8 1 0.94 22.86 0.27 0.29 3.87 59.29 1.29 3.46 30.91 1.81 2.17 4.3 1.76 4.97 0.54 0.29 0 1.47 1.99 1.24 317.18 5 3.99 19.96 -0.54 0.2 19.93 12.44 18.14 1.08 1.17 2.72 -0.16 1.4 0.71 0.83 1.12 18.46 5.08 0.91 0.96 27.97 0.48 17.31 3.49 6.98 16.04 12.16 4.2 13.71 3.74 3.12 1.81 2 2 1.62 1.25 12.38 3.7 0.28 4.63 0.98 4.8 0.63 7.09 1.1 1.37 6.63 -0.24 3.19 20.72 17.79 1.72 9.06 0.95 0.71 3 2.7 1.34 -0.22 2.17 ROE (%) 6.72 2.97 1.2 2.16 5.09 11.15 0.18 24.97 -0.35 1.39 -0.82 1.77 1.68 8.11 4.86 0.78 0.11 0.32 -1.69 1.79 0 0 1.05 0.49 2.84 0.85 0.05 0.11 P/E 5o 5yrAve -1.08 18.52 -0.51 1.98 4 3 1 3.26 1.14 1.81 0.68 -2.87 5.69 0.28 -0.54 1.84 211.89 2.66 3.6 2.09 1.1 3.75 3.36 2.01 1.47 0.04 0.19 P/E 21.73 13.8 0.46 2.71 12.04 5.8 3.03 0.5 18.96 0.19 0.41 17.38 4.74 0.26 2.19 11.32 1.02 0.51 -0.4 1.68 9.6 13.55 2.52 1.97 0.02 6.31 8.86 1.19 2.55 6.57 10.89 1.52 -0.49 5.18 6.24 17.71 0.58 10.26 13.68 -0.03 0.35 2 3 2 3 3 3.19 -0.86 18.63 0.71 13.04 0.79 2.48 4.04 0.54 2.65 8.98 1.03 1.86 Abs Mom 2.04 26.78 0.71 0.13 0.87 2.36 2.27 -0.18 11.44 18.74 0.28 13.03 1.56 1.24 24.29 0.54 1.52 4.

61 1.96 2.93 0.99 7.35 1.54 19.07 0.56 0.12 2.04 2.77 2.95 0.45 0.84 0.77 248.88 1.74 0.57 7.31 16.4 19.4 ROE (%) 21.2 19.4 -0.92 1.1 1.95 12.18 2.87 -3.58 0.4 2.03 1.78 4 4 4 4 3 3 5 5 5 5 5 3.41 2.67 1.14 1.03 0.23 11.94 0.79 1.38 4.3 6.05 0.75 2.08 1. 2010 Name Beverages Soft Drinks Food Products Agricultural Products Packaged Foods & Meats Health Care Health Care Equipment & Services Health Care Providers & Services Health Care Services Health Care Technology Health Care Technology Pharmaceuticals Biotechnology & Life Sciences Pharmaceuticals Pharmaceuticals Life Sciences Tools & Services Life Sciences Tools & Services Financials Banks Commercial Banks Diversified Banks Regional Banks Thrifts & Mortgage Finance Thrifts & Mortgage Finance Diversified Financials Diversified Financial Services Other Diversified Financial Services Multi-Sector Holdings Specialized Finance Capital Markets Asset Management & Custody Banks Investment Banking & Brokerage Insurance Insurance Life & Health Insurance Multi-line Insurance Property & Casualty Insurance Real Estate Real Estate Investment Trusts (REITs) Diversified REIT's Office REIT's Residential REIT's Retail REIT's Specialized REIT's Real Estate Management & Development Diversified Real Estate Activities Real Estate Operating Companies Real Estate Services Information Technology Software & Services Internet Software & Services Internet Software & Services IT Services IT Consulting & Other Services Software Application Software Technology Hardware & Equipment Communications Equipment Communications Equipment Electronic Equipment Instruments & Components Electronic Manufacturing Services Telecommunication Services Telecommunication Services Diversified Telecommunication Services Integrated Telecommunication Services Wireless Telecommunication Services Wireless Telecommunication Services Utilities Utilities Electric Utilities Electric Utilities Multi-Utilities Multi-Utilities Independent Power Producers & Energy Traders Independent Power Producers & Energy Traders S&P/TSX Composite Count 1 1 3 1 2 4 2 1 1 1 1 2 1 1 1 1 39 9 8 6 2 1 1 8 3 1 1 1 5 4 1 8 8 6 1 1 14 11 3 1 2 3 2 3 1 1 1 5 3 1 1 1 1 1 1 2 1 1 1 1 5 5 4 4 1 1 10 10 2 2 3 3 5 5 221 Weight QMV (%) (US$ bln) 0.15 13.05 0.84 P/E 7.83 0.62 0.94 0.04 18.99 0.03 0.87 -4.4 1.87 0.71 2.02 13.71 2.83 0.05 5.75 1 -0.86 1.55 4.56 8.45 4.43 0.64 4.01 14.58 4.9 1.91 1.08 15.23 13.69 5.44 -1.5 9.51 0.1 1.02 1.49 56.19 -0.63 13.66 0.2 15.24 4.46 1.59 0.83 0.1 12.1 1.6 95.23 0.8 0.01 6.47 12.85 0.23 1.62 0.23 2.52 16.75 1.16 7.94 3 1.94 0.39 0.62 0.55 1.17 2.94 4.02 21.39 0.91 2 4.64 15.96 30.25 0.06 1.12 3.22 4.18 2.64 2.01 0.95 0.13 1.23 0.8 1.51 30.44 0.99 0.6 95.47 0.95 14.96 0.72 0.92 1.2 16.95 2.52 0.63 0.71 0.19 0.26 16.72 3 3 4 4 3.97 11.98 0.84 2.12 0.6 7.53 5.43 5.36 0.49 1.27 9.37 27.75 0 0 4.01 1.7 21.5 2.73 3.5 0.54 2.33 -0.55 4.27 0.68 2.33 4.61 0.76 2.07 0.11 1.18 37.3 5.39 16.05 2.19 15.2 3.18 1.75 3.06 51.12 -0.26 28.22 37.76 -22.5 15.68 11.57 -0.88 4.04 0.69 5 2.4 1.31 2.82 0.79 15.5 -0.06 51.39 4.18 2.74 1.5 0.4 2.89 6.42 16.67 2.05 0.04 4.3 3.36 3.13 5.31 13.07 0.87 30.62 3.95 0.48 8.51 0.6 7.1 2.5 2.86 3.83 0.9 21.46 -15.5 0.1 2.15 1.03 0.16 0.13 0.13 9.58 7.34 -2.02 1.45 7.02 1.6 37.86 18.3 P/Bv to 5yrAve 0.9 8.5 -0.13 1.03 1.38 6.24 2.16 0.55 1.69 -0.41 1.64 1.94 0.15 19.66 7.84 0.23 0.63 -0.64 4.66 0.2 0.47 1.76 34.07 4.91 18.54 3.85 2.09 15.02 19.61 7.41 30.68 2.53 6.76 9.99 22.07 2.67 0.99 15.71 0.57 7.53 0.69 1.3 21.67 247.51 1.19 1.92 0.4 2.26 4.06 0.35 1.95 9.29 4.46 5.46 0.22 2.18 2.98 1 1 1.27 2.67 0.52 Yield (%) 0 0 1.5 21.36 -0.56 35.01 29.06 4.53 6.09 13.36 2 3 3 3.17 2.02 4.03 0.94 2 2.6 0.03 -0.53 5.61 3.37 -11 10.11 1.59 -0.32 0.69 0.94 2.52 3.64 0.83 0.55 9.68 16.74 6.82 0.04 0.97 1.53 100 1256.76 6.59 0.55 9.68 1.48 13.01 1.72 0.26 3.68 4.03 0.15 21.3 16.5 2.55 2.74 0.42 1.14 1.1 0.23 0.47 12.53 25.9 -4.41 3.96 0.79 12.17 2.28 0 1.57 0.2 2.45 6.13 15.06 0.61 1.99 0.04 18.52 11.31 0.26 28.67 -2.6 0.75 0.87 0.72 0.45 8.31 16.43 -0.78 37.61 1.26 11.CIBC's CIO Roundtable .83 1.38 2.71 0.81 -1.43 16.93 1.81 0.84 0.72 0.21 9.21 17.14 1.8 0.7 0.87 -0.67 15.47 1.85 0.17 13.28 1.8 0.21 0.31 16.02 37.25 1.32 -0.88 0.11 1.03 4.93 13.19 0.52 5.74 0.73 0.42 0.1 1.94 0.12 4.05 0.41 30.32 0.67 1.66 -0.02 0.87 17.66 1.06 3.66 1.05 0.48 17.15 3.77 0.7 21.38 16.76 34.12 12.19 13.27 24.51 0.87 2.79 1.19 11.34 0.92 0.24 3.43 16.62 3 10.08 0 0 0 0 0 0 0 0 0 0 0 0 0 0 5.82 4.34 3.17 2.51 1.01 0.76 13.01 1.3 3.68 1.52 0.33 -2.22 5.32 11.26 11.99 -0.56 31.25 3.03 0.13 13.83 10.75 0.24 1.64 1.18 0.87 2.6 4.08 0.39 1.96 35.15 3.74 1.5 37.92 0.14 4.92 0.98 0.02 21.61 1.21 12.17 16.82 0.73 0.65 14.71 0.15 6.87 12.25 0.89 0.63 1.16 -0.65 -4.82 1.5 0.75 4.37 -1.69 1.34 4.52 7.5 2.72 15.94 0.81 4.81 0.98 2.03 0.63 3.49 12.01 0.74 1.71 21.48 1.83 0.97 1 4 3.18 5.72 0.04 11.73 29.51 1.46 4.94 0.81 -0.67 13.45 0.67 1.83 0.12 1.95 0.64 0.04 0.01 0.35 14.36 4 4 3.18 2.18 0.4 4.1 -0.18 2.48 1.01 -0.62 1.04 0. 59 .94 1.79 -3.57 3.55 5.76 0.04 -75 14.28 3.1 1.June 16.89 0.22 5 2 4 4.19 2.56 0.63 -11.08 0.6 1.23 0.26 2.48 20.66 3.67 0.81 10.93 12.11 2.69 1.75 0.26 17 14.75 2.83 0 0 2.44 0.59 4 4 2 2 3.91 0.49 12.82 0.34 1.5 1.19 0.43 P/E 5o 5yrAve 0.97 1.57 3.29 4.63 0.19 0.06 -0.13 1.93 15.08 9.18 3.23 1.07 0.54 1.72 0.18 0.62 ROE 3Mo Chg -448 -448 69 -86 147 -111 -112 -4 -4 -154 -154 -110 -71 -71 -261 -261 175 146 147 148 101 -8 -8 35 -198 -29 -500 78 105 103 161 267 267 290 118 112 221 -17 -98 -5 1 27 61 458 500 327 500 24 -77 -403 -403 31 31 102 102 49 51 51 14 14 80 80 6 6 237 237 4 4 59 59 -41 -41 -15 -15 110 ROE BP Rng 310 310 203 374 116 299 304 259 259 321 321 293 341 341 107 107 155 146 146 147 96 70 70 236 344 72 424 367 204 200 333 160 160 141 378 145 159 99 74 195 218 53 165 227 257 138 243 183 105 161 161 50 50 158 158 203 207 207 131 131 190 190 112 112 354 354 126 126 75 75 116 116 184 184 204 ROE 3mo/ BPRng -1.62 1.19 21.27 15.07 4.25 0.Volatility And Slower Growth .14 0.22 13.05 2.54 4.3 33.13 1.24 7.6 8.49 244.89 1.08 -17.48 395.42 49.26 0.23 0.25 1.41 2.35 1.57 2.86 P/Bv to FV VolAdj 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Source: CIBC World Markets Inc.42 0.8 0.13 12.55 P/Bv 1.46 -1.57 3.68 1.13 17.85 2.6 82.24 3.69 2.96 0.61 5.93 31.19 1.87 3.27 16.95 0.46 1.24 0.69 -0.04 4.03 2.42 2.75 -2.31 13.46 0.53 6.51 2.51 0.61 0.92 1.16 -0.08 0.26 8.4 4.04 6.6 0.56 3 3 3 3 3.46 6.8 2.6 7.94 20.63 15.45 29.76 -0.04 15.31 -22.85 2.17 4.12 27.27 15.9 2.44 0.51 Abs Mom 5 5 1.13 14.

99 2.51 0.57 0.51 15.81 2.81 17.89 220.76 -75 -75 12.89 0.12 11.65 0.01 0.14 ROE 3Mo Chg 129 129 -148 -207 -142 178 208 198 -372 -5 -227 140 140 109 327 -227 -12 36 -16 -16 -207 -290 -31 293 483 308 200 292 64 288 -75 -20 -47 -191 -191 289 289 -192 -192 11 11 -30 -30 151 174 128 7 7 -4 9 125 -17 303 -76 -99 -11 -184 95 125 125 76 76 65 68 -41 58 281 433 423 500 -217 0 -217 88 167 500 239 413 36 85 122 122 0 20 109 ROE BP Rng 254 254 224 224 224 259 245 297 369 222 314 224 224 179 237 221 89 100 186 186 198 251 85 323 215 458 212 338 195 267 150 129 137 146 146 208 208 143 143 122 122 100 100 175 240 109 96 96 150 110 120 86 218 88 345 289 372 88 97 97 119 119 76 74 118 162 307 173 147 352 369 399 188 158 192 238 89 245 190 176 175 161 311 128 167 ROE 3mo/BPRng 0.65 609.73 22.73 2.72 19.84 0.36 2.09 0.93 17.49 2.76 0.08 -1.44 16.99 13.4 -1.67 10.22 3.75 2.99 1. 2010 Exhibit 57.39 1.73 0.61 2.28 2.95 2.76 23.02 0.19 1.07 2.65 -12.21 20.46 0.87 1.97 322.June 16.29 14.81 3.32 -0.51 -0.53 1.11 1.97 2.92 7.73 0.08 0.64 4 4 3.34 18.28 2.66 -1.06 0.67 5 4 4 3.93 0.46 3.51 2.7 1.76 0.67 0.23 -10.45 3.95 14.01 7.03 0.49 4.23 4.18 0.03 2.42 1.79 29.77 1.34 -1.29 0.58 18.27 0.69 19.49 0.16 5.96 0.91 24.84 3.57 1.38 2.95 3 3.83 1 1.43 3.29 0.28 16.88 0.18 0.73 17.18 1.04 6.43 18.61 0.17 4.92 0.75 P/Bv to 5yrAve 0.09 1.11 1.76 15.07 3.16 -0.09 0.12 13.4 0.72 2.71 12.65 -7.45 3.98 13.95 1.57 42.22 23.4 -0.22 -0.89 30.07 15.54 0.33 0.25 3.03 0.94 1.27 QMV (US$ bln) 1019.9 Abs Mom 4.83 5 3.95 29.66 1.5 9.5 18. GICS S&P 500 Summary Name Energy Energy Energy Equipment & Services Oil & Gas Drilling Oil & Gas Equipment & Services Oil Gas & Consumable Fuels Integrated Oil & Gas Oil & Gas Exploration & Production Oil & Gas Refining & Marketing Oil & Gas Storage & Transportation Coal & Consumable Fuels Materials Materials Chemicals Diversified Chemicals Fertilizers & Agricultural Chemicals Industrial Gases Specialty Chemicals Construction Materials Construction Materials Containers & Packaging Metal & Glass Containers Paper Packaging Metals & Mining Aluminum Diversified Metals & Mining Gold Steel Paper & Forest Products Forest Products Paper Products Industrials Capital Goods Aerospace & Defense Aerospace & Defense Building Products Building Products Construction & Engineering Construction & Engineering Electrical Equipment Electrical Components & Equipment Industrial Conglomerates Industrial Conglomerates Machinery Construction & Farm Machinery & Heavy Trucks Industrial Machinery Trading Companies & Distributors Trading Companies & Distributors Commercial & Professional Services Commercial Services & Supplies Commercial Printing Environmental & Facilities Services Office Services & Supplies Diversified Support Services Professional Services Human Resource & Employment Services Research & Consulting Services Transportation Air Freight & Logistics Air Freight & Logistics Airlines Airlines Road & Rail Railroads Trucking Consumer Discretionary Automobiles & Components Auto Components Auto Parts & Equipment Tires & Rubber Automobiles Automobile Manufacturers Motorcycle Manufacturers Consumer Durables & Apparel Household Durables Consumer Electronics Home Furnishings Homebuilding Household Appliances Housewares & Specialties Leisure Equipment & Products Leisure Products Photographic Products Textiles Apparel & Luxury Goods Apparel Accessories & Luxury Goods Count 39 39 11 4 7 28 7 12 3 3 3 32 32 14 5 2 3 4 1 1 5 3 2 9 1 2 1 5 3 1 2 57 37 12 12 1 1 3 3 4 4 3 3 12 4 8 2 2 11 8 1 3 2 2 3 1 2 9 4 4 1 1 4 3 1 80 4 2 1 1 2 1 1 16 9 1 1 3 2 2 3 2 1 4 3 Weight (%) 10.64 0.76 24.9 2.79 0.76 2.11 96.56 29.05 26.56 8.93 3.94 0.15 1.21 21.08 2.2 12.02 0.07 0.81 864.14 3 4 3.85 12.1 0.05 1.8 14.88 0.34 1.01 1.65 0.5 30.79 0.97 2.24 3.71 1.62 42.83 1.35 82.65 0.02 1.79 0 4.47 8.03 -2.26 1.04 1.86 13.18 0.16 0.93 1.78 0.38 1.43 1.5 3.77 16.24 0.14 10.85 0.02 0.45 2.08 1.7 -19.23 6.39 272.96 0.15 1.07 14.43 1.8 2.76 0.6 11.21 22.09 0.82 16.72 7.28 0.59 2.33 17.76 0 23.4 11.08 14.55 P/E 5o 5yrAve 1.11 -0.15 1.44 24.36 1.97 17.01 2.42 0.98 6.7 1.86 1.3 2.88 19.11 -1.92 0 8.15 1.13 14.76 1.41 1.11 3.3 5.82 0.78 9.04 -0.03 17.49 1.46 0 -1.87 17.7 32.54 2.08 1.4 2.32 -1.25 1.96 1.75 4 3.2 1.93 3.79 6.93 4.56 6.11 0.6 2.97 0.19 27.21 -1.08 14.25 5 5 3.9 2.57 0.3 4.89 2.04 0.47 75 20.95 1.29 0.63 0.21 0 1.08 3.02 10.22 0 1.03 0.08 -6.47 17.47 2.73 16.53 4.41 28.83 0.67 Yield (%) 2.13 0.64 -4.18 -8.65 0.06 1.24 25.04 1.26 52.06 0.21 2.63 0.87 0.07 1.98 0.15 2.18 0.67 18.17 28.17 1.46 0.14 0.07 -0.04 1.06 4.74 1.93 4.92 0.89 1.69 0.61 2.29 14.4 0.61 2.68 1.09 2.8 1.96 0.66 0.58 4.15 2.06 2.67 27.51 3.02 0.21 13.06 4 4.9 0.15 31.88 0.13 0.44 1.72 3.48 9.59 3.12 0.25 26.8 0.32 17.97 1.07 1.42 -1.74 1.3 8.45 3.43 1.75 0.09 0.1 2.62 2.82 5 3.69 -0.8 0.26 4.84 4.82 50.61 1.79 3.81 5.11 1.43 0.84 40.55 5.23 27.87 13.64 7.11 0.85 1.6 179.41 2.78 0.03 0.29 -0.46 1.16 0.8 272.53 2.12 0.56 0.25 3.07 3.99 0.73 24.74 4.57 0.29 1.42 -0.39 1.08 2.22 6.59 0.98 17.88 0.85 19.61 0.88 20.77 3.93 3.11 2.13 27.32 1.85 0.4 1019.05 0.02 20.2 1.84 1.78 0.95 11.85 27.48 3.34 3.59 49.03 14.2 1.51 -0.36 -1.92 0.34 0.8 1.3 -0.72 75 12.44 62.07 6.96 1.6 2.07 34.38 -0.08 -0.41 1.7 -0.15 2.03 0.7 9.33 0.15 0.89 10.52 24.78 2.02 1.49 84.65 2.06 16.34 3.6 2.87 P/E 18.03 1.09 0.01 0 0.22 2.11 1.15 0.6 26.04 1.32 16 -2.36 5 5 3.05 1.48 3.92 3.87 167.37 7.3 15.23 1.95 3.95 5 3.79 3.74 4 3.92 3.41 154.77 5.85 49.05 17.05 0.45 10.28 14.27 1.94 17.46 10.11 2.02 1.44 13.12 0.03 3.99 0.74 5.5 1.34 11.87 3.69 2.01 0.85 15.77 15.96 6.63 0.42 11.56 13.15 2.93 0.98 P/Bv 2.41 16.79 0.36 1.01 -0.01 1.8 2.6 1.92 3.53 59.93 0.88 1.13 6.8 20.25 4.29 2.06 81.07 15.29 0.73 2.36 3.94 -0.05 2.09 -0.61 1.13 0.61 -6.95 0.65 4 3.73 5 5 5 3.59 1.97 14.93 P/Bv to FV VolAdj 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 60 .82 0.92 17.15 0.03 0.92 3.02 0.26 4.94 1.06 5.76 0.51 2.4 47.01 -0.96 12.89 0.35 ROE (%) 14.56 0.14 2.66 1.06 18.07 17.07 -0.08 0.79 166.07 12.26 971.41 0.22 0.07 2.93 -0.54 14.85 0.93 0.86 13.26 9.44 0.14 12.03 0.94 -11.61 31.64 0.CIBC's CIO Roundtable .15 3.9 0.83 2.96 0.08 4.2 188.45 0.17 20.47 1.26 2.46 10.53 0.78 -3.21 0.2 0.57 12.45 0.59 1.06 0.16 1.89 1.63 13.78 0.54 0.85 36.3 3 3 2.69 1.07 1.53 0.1 0.93 1.87 31.21 0.59 0.97 1.72 0.17 963.29 0.11 0.24 4.45 0.37 0.76 77 74.26 16.98 14.44 3.79 0 -0.79 220.61 2.75 6.78 0.36 2.9 3.77 19.59 3.8 4.81 0 2.17 1.71 1.94 0.83 4 4 3.45 1.79 3.06 0.65 22.58 15.91 2.55 17.57 5 3 3.41 -1.23 0.06 0.84 11.33 0.17 1.11 22.84 1.84 0.79 0.1 2.76 1.17 0.18 0.72 0.2 0.8 4.96 0.17 1.39 2.08 2.04 0.8 0.18 1.04 1.2 2.91 0.08 0.11 2.6 5.15 0.91 0.47 -1.33 3 4.49 3.32 2.89 50.45 17.99 27.05 36.95 36.14 13.12 2.47 11.94 10.89 0.14 0.36 15.96 0.87 0.04 0.52 4.79 0.65 18.46 8.75 2.21 1.3 81.49 2 2 3.24 25.15 19.64 0.11 1.18 0.96 138.92 0.43 1.77 19.97 24.62 79.05 1.6 0.92 0.58 30.55 7.3 1.39 4.71 2.73 0.43 18.2 2.99 3.66 -0.53 12.18 11.37 2.89 1.25 0 4.92 0.77 2 2 3.2 8.65 3.69 13.21 0.3 4.99 1.37 2.01 19.83 0.05 744.98 16.7 1.98 1.81 2.87 1.72 0.82 0.1 106.97 2.28 17.56 2.31 0.89 0.76 -7.68 -0.29 19.31 3.98 0.19 0.Volatility And Slower Growth .9 0.33 15.08 -0.06 2.74 19.76 8.65 1.08 1.63 1.6 0.86 0.6 322.95 9.18 4.44 14.99 11.39 0.8 19.54 17.88 1.29 -0.3 18.86 5.36 22.02 10.78 9.4 14.5 3.33 49.58 24.09 4 5 3.34 21.57 4.15 -0.

25 -1.61 0.98 1089.99 13.97 0.19 0.45 0.86 1.4 2.42 4.69 14.42 1.77 0.53 31.87 0.61 2.86 51.74 3.94 0.97 4.76 272.73 0.14 0.42 1.69 0.93 3.5 7.1 13.98 3.25 1.84 4.22 1.92 1.17 0 1.95 0.12 11.11 11.4 2.94 0.76 7.05 2.79 1.53 4.02 12.06 0.24 3.68 1.59 3.01 27.99 -0.5 27.37 2.49 4.33 1.35 4.33 2.07 -0.8 1.18 21 21.71 16.32 21.91 1.79 0.91 0.23 2.71 0.08 24.62 0.64 0 0 3.1 0.77 0.78 0.33 10.96 10.82 0.03 0.54 30.41 3.97 3 3.3 0.71 3.04 0.07 2.95 0.81 2.1 0.88 5.86 0.3 15.04 22.81 1.4 1.09 37.26 1.84 0.39 -0.08 244.31 0.95 1.96 379.15 1.73 290.75 22.57 5.5 3.45 4 3.32 0.33 0.96 3.18 2.58 1.17 1. 2010 Footwear Consumer Services Hotels Restaurants & Leisure Casinos & Gaming Hotels Resorts & Cruise Lines Restaurants Diversified Consumer Services Education Services Specialized Consumer Services Media Media Advertising Broadcasting Cable & Satellite Movies & Entertainment Publishing Retailing Distributors Distributors Internet & Catalog Retail Internet Retail Multiline Retail Department Stores General Merchandise Stores Specialty Retail Apparel Retail Computer & Electronics Retail Home Improvement Retail Specialty Stores Automotive Retail Homefurnishing Retail Consumer Staples Food & Staples Retailing Food & Staples Retailing Drug Retail Food Distributors Food Retail Hypermarkets & Super Centers Food Beverage & Tobacco Beverages Brewers Distillers & Vintners Soft Drinks Food Products Agricultural Products Packaged Foods & Meats Tobacco Tobacco Household & Personal Products Household Products Household Products Personal Products Personal Products Health Care Health Care Equipment & Services Health Care Equipment & Supplies Health Care Equipment Health Care Supplies Health Care Providers & Services Health Care Distributors Health Care Services Health Care Facilities Managed Health Care Health Care Technology Health Care Technology Pharmaceuticals Biotechnology & Life Sciences Biotechnology Biotechnology Pharmaceuticals Pharmaceuticals Life Sciences Tools & Services Life Sciences Tools & Services Financials Banks Commercial Banks Diversified Banks Regional Banks Thrifts & Mortgage Finance Thrifts & Mortgage Finance Diversified Financials Diversified Financial Services Other Diversified Financial Services Multi-Sector Holdings Specialized Finance Consumer Finance Consumer Finance Capital Markets Asset Management & Custody Banks Investment Banking & Brokerage Insurance Insurance Insurance Brokers Life & Health Insurance 1 13 10 2 4 4 3 2 1 17 17 2 3 3 4 5 30 1 1 3 3 8 5 3 18 6 3 2 3 3 1 41 9 9 2 1 4 2 26 7 1 2 4 15 1 14 4 4 6 4 4 2 2 52 30 13 12 1 16 4 5 1 6 1 1 22 6 6 11 11 5 5 79 16 14 3 11 2 2 27 9 3 1 5 4 4 14 10 4 21 21 2 7 0.73 1.75 0.54 12.19 1.02 1.94 0.01 4.11 1.4 14.89 0.17 1.07 2.12 42.03 0.04 -0.21 2.57 0.53 5.65 0.43 2.27 -0.47 -1.28 132.6 1.41 3.24 14.67 7.37 0.32 117.95 6.74 -0.14 3.54 4.71 2.65 0.42 1.17 7.93 26.98 16.74 0.98 0.19 0 0 4.39 9.71 2.77 1.74 0.11 3.56 135.31 1.8 16.12 0.29 45.59 2.94 0.45 14.95 1.66 2.7 18.66 7.5 3 3.55 15.05 11.28 15.37 2.13 3.31 1.26 14.16 -1.56 9.63 0.37 247.77 15.22 3.77 4.05 0.13 3.75 -0.07 76.01 2.81 4.8 0.61 0.8 94.43 2.95 0.31 3.66 3.09 0.4 10.48 1.54 1.85 2.84 0.05 0.32 1.59 3.86 1.09 4.79 -0.34 164.31 10.16 0.19 3.26 12.89 1.15 0.94 17.52 16.2 1.71 0.56 0.87 11.79 14.95 0.52 0.99 1.23 0.67 4.65 0.18 3.94 0.61 14.01 14.25 42.31 19.96 9.39 32.95 0.32 29.22 3.21 22.32 0.71 9.52 0.96 1.41 24.1 4.88 1.7 0.96 41.26 4.05 0.21 11.71 -0.07 2.4 85.49 2.1 1.36 0.96 1.11 0.37 31.June 16.36 0.91 10.92 0.49 16.18 2.46 3.63 0.26 16.01 0.32 14.06 6.27 4.27 43.81 0.85 2.3 28.19 4.73 48.75 0.5 12.53 2.59 4.2 33.59 5.86 1.99 2.33 13.2 14.07 1.92 0.71 24.53 1.68 172.26 3.79 0.72 1.19 0.57 0.42 6.14 0.64 0.41 53.46 5.94 15.46 1.28 16.89 0.63 0.24 3 3 3.31 0.72 13.31 19.36 0.22 87.52 2.93 0.88 4.83 3.32 0.45 0.41 3.76 19.77 14.61 190.CIBC's CIO Roundtable .07 1.88 267.45 3.94 1.62 0.23 0.07 -0.17 2.38 3.99 -0.96 13.23 3.68 0.97 3.25 0.83 3.72 0.94 17.97 0.76 18.3 88.48 -0.15 19.04 50 17.19 3.89 0.04 -1.77 25.1 3.43 2.1 1.56 15.74 0.18 0.33 1.44 0.06 0.81 2.63 0.82 0.61 -0.6 0.49 1462.8 0.22 1.69 4.12 249.12 5.53 741.64 4.11 0.87 5.25 1.06 0.45 1 1.79 5 4.53 5.82 0.41 74.95 0.32 3.74 0.87 4.47 345.02 3.84 1.Volatility And Slower Growth .89 9.23 5.8 4.93 0.73 0.88 0.69 15.18 15.83 230.57 17.82 48.46 1.78 12.05 5 2.98 272.52 1.2 2.86 0.85 1.38 2.88 1.98 0.54 2.73 15.98 0.35 4.46 -0.25 5 3.94 0.3 310.59 0.19 5.44 12.75 3.27 0.8 132.18 109.8 0.86 3.08 70.72 15.44 1.07 0.82 0.71 16.78 0.91 2.27 18.82 0.88 -0.37 8.82 17.3 169.26 1.42 0.99 0.35 6.3 34.45 15.42 -0.12 13.8 0.37 2.83 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 61 .79 578.3 2.54 2.42 0.81 9.36 7.2 2.07 25.89 -1.51 3.22 3.23 0.69 17.67 3.07 1.44 20.43 11.37 3.26 0.22 1.61 44.23 15.12 3.83 0.04 1.02 0.71 -0.98 1.29 1.14 13.02 187.23 15.74 12.49 43.59 2.41 0.4 -7.79 1.21 4.19 12.47 17.23 0.55 25.99 -0.76 0.05 27.74 1.18 2.62 175.46 -0.46 4.53 48.36 2.63 0.87 4 4.89 0.44 -0.82 0.59 19.36 11.27 3.52 19.69 -0.57 19.9 0.91 2.05 17.91 0.8 201.09 38.29 1.92 3.52 0.56 4.82 26.18 4.34 15.71 0.08 0 0.94 15.03 1.98 1.16 0.63 0.24 14.63 0.91 0.82 3 4.74 15 11.43 42.43 3.66 0.15 0.16 -0.47 16.79 2.19 0.91 0.03 0.79 -0.15 249.08 14.86 0.8 2.68 0.44 1.19 3.93 12.39 -1.88 -0.27 -61 -22 -22 -105 -34 -11 -18 -32 11 93 93 -58 62 196 61 -25 46 -10 -10 -106 -106 84 95 74 72 169 -23 37 30 65 183 -66 -15 -15 -24 -87 -59 11 -63 -213 -74 -10 -223 -71 148 -92 209 209 -121 -106 -106 -330 -330 -94 -52 -66 -67 -49 -41 48 -156 500 1 -3 -3 -116 -54 -54 -135 -135 -51 -51 40 -74 -77 -112 -16 17 17 133 100 105 500 14 337 337 125 90 157 -42 -42 40 -85 93 177 168 243 152 165 269 234 339 131 131 157 105 181 94 178 154 48 48 333 333 108 152 71 129 207 188 73 101 191 85 136 57 57 71 84 97 36 134 110 100 150 109 194 182 195 100 100 211 204 204 314 314 146 127 106 107 67 144 98 177 352 133 68 68 155 203 203 148 148 110 110 169 136 138 143 129 104 104 183 170 162 303 235 233 233 190 126 249 173 173 115 138 -0.62 1.45 0.8 1.64 0.74 0.18 0.35 3.66 0.04 1.84 1.62 0.59 -0.8 0.49 2.71 15.75 2.77 1.98 1.83 235.33 25.17 2.87 20.94 0.27 3.4 15.01 18.85 8.12 15.15 20.01 0.73 14.8 565 565 43.35 1.42 11.71 1.2 -0.53 2.33 111.69 3.85 34.27 25.04 -0.06 53.98 1.76 0.23 0.83 299.62 3.01 142.11 424.23 5.49 0.56 -0.81 -0.44 0.37 -0.05 11.22 730.81 1.56 3 3 3.4 0.15 0.82 -0.86 0.47 12.44 14.75 1.67 23.42 -0.45 18.07 7.12 32.22 15.68 0.62 -0.93 0.05 2.6 244.01 14.69 0.9 1.03 18.04 -0.02 41.11 119.25 15.12 18.32 8.1 0.72 0.16 0.49 1.43 -0.12 0.31 1.76 14.49 3.22 11.67 0 0 3.95 0.5 15.03 1125.07 4.73 20.92 2.38 1.69 15.8 16.42 1.63 1.66 0.91 15.75 0.11 1.3 0.36 1.32 3.21 9.9 0.62 0.34 14.47 2.03 1.75 2.65 0.06 0.36 14.58 4.64 17.63 3 3 3.67 0.37 11.2 -0.8 5.82 0.17 7.18 4.52 10.73 -0.42 -0.11 1.42 1.7 0.69 0.59 3.81 1.91 11.57 8.57 2.99 0.76 0.92 0.12 7.04 0.75 0.83 21.15 1.57 0.54 -0.06 1.05 1.02 0.69 0.17 0.5 3.42 3.81 33.87 27.57 13.41 84.48 1.49 3 3.82 17.86 0.18 4.18 3.73 18.64 0.3 1.59 3.06 7.12 1.6 0.38 3.92 2.32 -0.8 0.23 5.48 1.4 4.45 3.15 0.24 0.99 25.47 32.62 14.19 28.89 4.91 0.4 0.22 1.42 3.19 2.71 0.01 9.89 0.57 3 3.69 0.75 0.89 0.75 0.18 4.83 74.82 0.22 290.22 -0.24 19.07 3.46 15.21 0.02 4.64 0.67 3.95 8.18 2.47 27.72 13.57 0.1 14.98 24.81 2.61 5.87 3.44 14.39 0.42 -0.22 -0.47 3.97 1.47 209.46 13.96 0.75 0.78 126.74 -0.51 0.34 0.46 -0.01 9.67 43.12 6.69 -7.42 1.7 1.06 -0.12 8.26 3.83 14.27 7.06 0.15 -0.55 3.11 0.88 0.18 4.91 0.09 -0.62 3.6 384.64 2.21 0.11 0.8 15 18.13 0.72 0.73 0.62 0.64 1.52 2.99 0.99 0.83 16.89 0.34 7.74 0.8 0.89 0.24 0.14 25.82 16.57 0.7 -0.29 6.87 -0.09 20.03 6.3 1.87 25.06 0.94 -1.74 0.65 5 3.87 3.74 1.03 3 3 4.61 1.59 10.59 0.25 5.99 0.01 18.46 0.69 0.83 160.36 11.88 0.48 1.88 3.94 28.72 11.27 -0.05 17.24 20.51 2 0.77 0.88 142.

93 0.51 1.15 48.76 0.68 3.16 8.41 178.99 0.29 9.96 12.71 0.98 0.82 2.74 19.86 0.79 3.86 -5.76 18.7 0.67 9.79 3.95 0.93 0.21 0.29 2.19 1.9 0.9 841.36 0.55 0.13 6.87 0 0 1.91 2.97 2.28 -0.2 1.25 -0.04 4.66 4.22 7.34 16.64 12.4 3.31 0.51 -0.66 0.95 5.31 3.64 12.99 130.82 24.79 0.84 0.98 0.95 3.81 0.73 0.07 -0.17 0.02 0.12 2.3 19.CIBC's CIO Roundtable .83 0.02 2.91 1.88 17.12 0.57 2.23 4.79 0.67 3.91 0.87 0.78 -0.59 14.96 11.48 28.72 122.75 27.31 11.88 12.51 0.11 21.19 234.86 6.71 0.38 1.55 0.71 1.66 -1.95 30.12 0.82 178.93 0.38 2.63 0.71 5.04 2.65 9364.21 34.38 2.29 2.48 6.37 17.96 704.01 5.59 1.5 2.63 18.34 0.41 345.91 1.22 12.18 3.71 0.79 4.45 1.43 1.26 3.86 16.96 11.79 1.07 -0.74 0.48 0.6 0.05 1.73 0.36 35.01 2.81 0 -0.78 17.97 14.95 2.36 1.57 0.04 1.51 0.3 33.56 5.52 70.11 4.84 0.55 0 0.81 4.29 5.98 0.76 12.06 -0.35 3.19 -1.08 2.3 17.83 0.19 27.91 0.15 0.42 0.93 0.88 0.55 3.65 3.5 0.25 -0.75 15.93 6.78 0.13 0.29 2.82 2.32 0.05 19.05 0.78 311.75 19.84 0.26 1.15 24.1 1.54 0.79 0.65 27.67 5.31 0.17 0 0 1.8 3.79 0.55 12.96 18.89 2.24 17.69 1.41 4.46 22.04 3.44 13.06 0.72 0.22 11.99 0.49 1.85 10.88 0.54 2 2 2.43 11.89 0.84 0.86 19.4 25.46 1779.63 1.93 0 0 4.92 3 3 3.69 3.23 0. 2010 Multi-line Insurance Property & Casualty Insurance Real Estate Real Estate Investment Trusts (REITs) Diversified REIT's Industrial REIT's Office REIT's Residential REIT's Retail REIT's Specialized REIT's Real Estate Management & Development Real Estate Services Information Technology Software & Services Internet Software & Services Internet Software & Services IT Services IT Consulting & Other Services Data Processing & Outsourced Services Software Application Software Systems Software Home Entertainment Software Technology Hardware & Equipment Communications Equipment Communications Equipment Computers & Peripherals Computer Hardware Computer Storage & Peripherals Electronic Equipment Instruments & Components Electronic Equipment & Instruments Electronic Components Electronic Manufacturing Services Office Electronics Office Electronics Semiconductors & Semiconductor Equipment Semiconductors & Semiconductor Equipment Semiconductor Equipment Semiconductors Telecommunication Services Telecommunication Services Diversified Telecommunication Services Integrated Telecommunication Services Wireless Telecommunication Services Wireless Telecommunication Services Utilities Utilities Electric Utilities Electric Utilities Gas Utilities Gas Utilities Multi-Utilities Multi-Utilities Independent Power Producers & Energy Traders Independent Power Producers & Energy Traders S&P 500 Source: CIBC World Markets Inc.17 3.73 11.23 20.46 2.87 0.16 -0.99 0.96 0.52 1.85 0.66 0.97 32.72 3.33 2.71 -0.69 63.86 1.25 3.89 0.11 0.56 -1.57 0.95 0.63 5.June 16.24 3.72 3.68 13.04 3.64 12.73 -2.86 0.05 0.96 0.66 16.26 3.81 0.93 0.98 0.03 2.73 1.87 0.39 2.4 29.37 1.57 0.41 5 4 4 3 3 3.1 0.1 51.04 0.93 0.45 3.73 3.3 -1.99 3 3 3.85 1.94 18.57 11.05 7.88 -2.9 2.29 4.41 13.19 11.49 1.92 284.82 18.39 -0.09 2.71 4.79 0.22 1.12 -0.8 4.88 4.02 1.84 3. 5 7 15 14 1 1 1 3 2 6 1 1 75 33 6 6 12 3 9 15 6 8 1 24 7 7 10 4 6 6 2 2 2 1 1 18 18 5 13 9 9 6 6 3 3 36 36 14 14 4 4 15 15 3 3 500 0.8 0.88 0.69 2.24 6.19 6.65 18.38 -0.61 0.39 1.11 -1.13 348.05 172 172 301.66 222.95 1.13 2.94 0.9 -2.46 4.58 6.34 2.73 33.63 9.51 -0.35 0.95 3 5 2 4 2.Volatility And Slower Growth .48 -1.46 4.08 1.64 205 -121 -67 -52 125 -383 1 -96 42 -111 -500 -500 26 -154 14 14 -318 -446 -131 -98 -20 -116 228 112 102 102 98 87 149 286 229 293 458 68 68 426 426 451 422 -23 -23 -17 -17 -68 -68 -15 -15 -19 -19 143 143 -4 -4 -210 -210 13 192 222 167 161 190 216 246 81 152 171 339 339 198 188 146 146 199 246 130 199 212 195 292 189 167 167 190 180 239 263 275 269 155 241 241 257 257 290 253 107 107 104 104 131 131 116 116 90 90 192 192 124 124 232 232 170 0.94 129 129 18.16 3.14 2.59 37.27 3.06 4.44 18.82 1.92 251.68 3.57 0.64 419.09 1.82 0.08 -0.41 4.78 0.84 0.54 -0.04 4.48 0.53 2.37 206.43 3.66 0.44 11.26 3.13 6.04 0.54 34.11 0.66 0.89 3.44 14.73 2.48 140.76 0.06 -0.04 23.34 17.15 4.86 17.52 0.82 0.22 3.2 3.95 0.04 0.98 1.63 1.66 1.95 0.8 7.15 18.19 13.95 0.74 10.02 2.09 178.15 21.27 3.64 11.64 126.97 251.86 0.88 37.78 0.2 0.89 4.48 3.87 2.87 -2.93 8.71 15.21 3.46 4.7 0.75 1.69 3.94 39.38 11.51 39.94 2.99 5.21 0 0.55 17.14 1.82 284.36 -0.66 1.86 0.33 1.19 11.31 234.08 8.44 3.39 -0.4 1.28 -0.04 14.96 51.05 2.95 2.89 3.2 0.05 0.72 30.39 4.83 3.02 3.39 0.76 0.85 5.38 12.85 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 62 .52 1.54 17.04 18.18 4.96 12.57 3.64 26.37 0.2 100 34.57 1.26 0.9 3.92 17.4 27.55 12.47 0.07 3.29 2.09 33.43 26.36 367.47 10.47 1.87 20.23 1.1 3.14 0.73 3.85 -0.6 5 4.96 1.87 -0.29 4.82 13.91 4.79 0.91 1.91 0.3 13.02 1.31 0 1.69 2.64 222.48 0.73 1.95 345.38 0.6 16.92 0.07 1.84 1.47 0.08 17.04 -0.8 0 0.19 2.31 1.62 2.32 0.01 8.69 0.81 0.67 4.95 32.43 0.58 1.63 -0.93 17.87 14.89 0.35 0.38 4.47 12.6 -2.94 1.88 2.79 0.96 15.98 0.94 46.53 0.03 71.17 12.45 2.82 0.61 29.11 30.13 12.61 0.63 0.36 1.68 2.3 35.

2010 Exhibit 58. S&P 500 and TSX Sector Performance Last Month Last Quarter Utilities Financial Telecom Info Tech Healthcare Consumer Staples Consumer Discretionary Industrials Materials Energy -15 -10 -5 0 5 -10 -5 0 5 10 15 Utilities Financial Telecom Info Tech Healthcare Consumer Staples Consumer Discretionary Industrials Materials Energy 1-year Trailing Last 5 years Utilities Financial Telecom Info Tech Healthcare Consumer Staples Consumer Discretionary Industrials Materials Energy -40 -20 0 20 40 -100 -50 0 50 100 150 Utilities Financial Telecom Info Tech Healthcare Consumer Staples Consumer Discretionary Industrials Materials Energy Last 10 years Since March 9.CIBC's CIO Roundtable .June 16. Bloomberg Utilities Financial Telecom Info Tech Healthcare Consumer Staples Consumer Discretionary Industrials Materials Energy 50 100 150 S&P 500 TSX 63 . 2009 Low Utilities Financial Telecom Info Tech Healthcare Consumer Staples Consumer Discretionary Industrials Materials Energy -100 -50 0 50 100 150 0 Source: CIBC World Markets Inc.Volatility And Slower Growth ..

91% 3.31% 1.17% 0.42% 1.26% 0.96% 0. Portfolio A: Core + Trading Portfolio (June 15.77% 6.33% 0.UN IMO C+T NKO C+T BTE.74% 5.44% 1.UN T BNP.17% 1.46% Materials ABX POT TK SLW FM TRE T NGD IMN C+T CG S T GAM Industrials CNR CP Consumer Discretionary THI C+T GIL DII.43% 5.16% 2.63% 31.71% 0.73% 1.42% 2.23% 1.50% 0.62% 0. 2010 Exhibit 59.UN Canadian Natural Resources Ltd EnCana Corp Enbridge Inc Canadian Oil Sands Trust Imperial Oil Ltd Niko Resources Ltd Baytex Energy Trust Bonavista Energy Trust Inter Pipeline Fund Pembina Pipeline Income Fund Trican Well Service Ltd Fort Chicago Energy Partners L Total Weight: Benchmark Weight: Barrick Gold Corp Potash Corp of Saskatchewan In Kinross Gold Corp Silver Wheaton Corp First Quantum Minerals Ltd Sino-Forest Corp New Gold Inc Inmet Mining Corp Centerra Gold Inc Sherritt International Corp Gammon Gold Inc Total Weight: Benchmark Weight: Canadian National Railway Co Canadian Pacific Railway Ltd Total Weight: Benchmark Weight: Tim Hortons Inc Gildan Activewear Inc Dorel Industries Inc Reitmans Canada Ltd Total Weight: Benchmark Weight: Saputo Inc Total Weight: Benchmark Weight: Total Weight: Benchmark Weight: Financials TD C+T BNS C+T BMO CM PWF IGM GWO POW IFC BPO T REF.83% 0.87% 4.25% 2.39% 0.40% 0.A C+T SAP Health Care Info tech GIB.03% 4.23% 1.91% 0.51% 0.A MDA Telecom 64 .26% 22.53% 0.June 16.06% 0.02% 3.33% 0.19% 19.68% 0.77% 0.07% 4.00% 0.18% 41.44% 0.53% 0.94% 5.02% 6.72% 0. 2010) Energy C+T CNQ C+T ECA C+T ENB COS.Volatility And Slower Growth .67% 0.78% 20.11% 6.CIBC's CIO Roundtable .35% 0.72% 2.33% 26.UN C+T CWB AGF.15% 7.B RET.UN T IPL.21% 0.84% 0.34% 0.79% 1.UN T PIF.70% 0.78% 9.B Toronto-Dominion Bank/The Bank of Nova Scotia Bank of Montreal Canadian Imperial Bank of Comm Power Financial Corp IGM Financial Inc Great-West Lifeco Inc Power Corp of Canada/Canada Intact Financial Corp Brookfield Properties Corp Canadian Real Estate Investmen Canadian Western Bank AGF Management Ltd Total Weight: Benchmark Weight: CGI Group Inc MacDonald Dettwiler & Associat Total Weight: Benchmark Weight: 10.54% 0.52% 3.UN T TCW T FCE.

UN T IPL.82% 0.10% 2.20% 4.52% 0. 2010 T BCE BCE Inc Total Weight: Benchmark Weight: TransAlta Corp Emera Inc Total Weight: Benchmark Weight: 4.92% 1.51% 0.Volatility And Slower Growth .67% 0.26% 5.50% 1.52% 19.63% 0.00% 7.53% 0.53% 0.96% Barrick Gold Corp Potash Corp of Saskatchewan In Kinross Gold Corp Silver Wheaton Corp First Quantum Minerals Ltd Sino-Forest Corp New Gold Inc Inmet Mining Corp Centerra Gold Inc Sherritt International Corp Gammon Gold Inc Total Weight: Benchmark Weight: -4 -3 -2 -4 -5 -3 -1 -3 -1 -3 -2 5. Portfolio B: Core + Single Stock Limit (SSL) Tilt Energy C+T CNQ C+T ECA C+T ENB COS.05% 0.67% 0.44% 0.85% 4.B RET.03% 0.84% 4.00% 0.00% Canadian National Railway Co Canadian Pacific Railway Ltd Total Weight: Benchmark Weight: Tim Hortons Inc Gildan Activewear Inc Dorel Industries Inc Reitmans Canada Ltd Total Weight: Benchmark Weight: Saputo Inc Total Weight: Benchmark Weight: -4 -4 3.09% 20.June 16. Exhibit 60.78% 0.UN IMO C+T NKO C+T BTE.26% 1.54% 0.80% 0.47% 2.71% 0.51% 2.31% 1.69% Utilities C+T TA C+T EMA Source: Company reports and CIBC World Markets Inc.52% 26.92% 0.48% 26.UN T BNP.52% 0.97% 0.09% 1.43% Canadian Natural Resources Ltd EnCana Corp Enbridge Inc Canadian Oil Sands Trust Imperial Oil Ltd Niko Resources Ltd Baytex Energy Trust Bonavista Energy Trust Inter Pipeline Fund Pembina Pipeline Income Fund Trican Well Service Ltd Fort Chicago Energy Partners L Total Weight: Benchmark Weight: -2 -1 -2 -3 -4 -2 -2 -2 -2 -2 -2 -2 7.09% 2.40% 1.46% -4 -2 7.CIBC's CIO Roundtable .15% -4 -1 -4 -4 -1 Financials TD C+T BNS Toronto-Dominion Bank/The Bank of Nova Scotia 65 .20% 3.69% 0.34% 5.51% 1.87% 5.UN Materials ABX POT TK SLW FM TRE T NGD IMN C+T CG S T GAM Industrials CNR CP Consumer Discretionary THI C+T GIL DII.80% 1.00% 6.UN T PIF.UN T TCW T FCE.A Consumer Staples C+T SAP Health Care Total Weight: Benchmark Weight: 0.

50% 36.02% 0.51% 1.72% 3.97% 1.55% 0.June 16. 2010 C+T BMO CM PWF IGM GWO POW IFC BPO T REF.A MDA Telecom T BCE Utilities C+T TA C+T EMA Bank of Montreal Canadian Imperial Bank of Comm Power Financial Corp IGM Financial Inc Great-West Lifeco Inc Power Corp of Canada/Canada Intact Financial Corp Brookfield Properties Corp Canadian Real Estate Investmen Canadian Western Bank AGF Management Ltd Total Weight: Benchmark Weight: CGI Group Inc MacDonald Dettwiler & Associat Total Weight: Benchmark Weight: BCE Inc Total Weight: Benchmark Weight: TransAlta Corp Emera Inc Total Weight: Benchmark Weight: -1 -4 -3 -3 -3 -3 -4 -4 -2 -2 -5 7.76% 1.45% 1.52% 0.55% 0.37% 6.69% -4 -3 -1 -2 -1 Source: Company reports and CIBC World Markets Inc.78% 1.05% 3.81% 1.B Info tech GIB. 66 .39% 0.00% 3.02% 6.Volatility And Slower Growth .75% 1.37% 3.54% 0.CIBC's CIO Roundtable .UN C+T CWB AGF.69% 0.05% 31.51% 0.

Research analysts do not receive compensation based upon revenues from specific investment banking transactions. related securities or in options. 67 . directly or indirectly. or will be. Additionally. 2010 IMPORTANT DISCLOSURES: Analyst Certification: Each CIBC World Markets research analyst named on the front page of this research report. CIBC World Markets generally prohibits any research analyst and any member of his or her household from executing trades in the securities of a company that such research analyst covers. may at times give rise to potential conflicts of interest. hereby certifies that (i) the recommendations and opinions expressed herein accurately reflect such research analyst's personal views about the company and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst's compensation was.CIBC's CIO Roundtable . director or advisory board member of a company that such analyst covers. futures or other derivative instruments based thereon. CIBC World Markets generally prohibits any research analyst from serving as an officer.June 16. CIBC World Markets may have a long position of less than 1% or a short position or deal as principal in the securities discussed herein. including the CIBC World Markets Investment Banking Department.Volatility And Slower Growth . as well as more specific disclosures set forth below. Recipients of this report are advised that any or all of the foregoing arrangements. In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report. is. or at the beginning of any subsection hereof. related to the specific recommendations or views expressed by such research analyst in this report. Potential Conflicts of Interest: Equity research analysts employed by CIBC World Markets are compensated from revenues generated by various CIBC World Markets businesses.

74. Sector Performer) Bannerman Resources Ltd. 2g. 7) (BMO-TSX. 2d. 3a. (2a. 2g) (AMC-TSX. C$38.UN-TSX. C$8. 14) (BAM-NYSE. US$15. C$24.24.UN-TSX. Sector Outperformer) CI Financial Corp. US$15. 3a. C$15. (2g) (CRJ-TSX. C$23. Sector Performer) Canadian Pacific Railway Ltd. 2e) (CCO-TSX.91. 2g. 2c. (2a. 9) (CNQ-TSX. 2c. 2g) (NGL-TSX. 9) (CP-TSX.10. 2g) (CG-TSX. 7. C$19. Sector Outperformer) Baffinland Iron Mines Corporation (2a.UN-TSX. 2c. 3a) (BPO-NYSE. Sector Outperformer) Angle Energy Inc. 7. 2c. 2c.43. 2g. 2f. 2c. C$15.00. C$0. 7) (BCE-TSX.15. C$1. C$28. 2g) (DML-TSX. 3c. (2a. 3c. 2e. 2e. (2g) (CDE-NYSE. 2g.02.A-TSX. Sector Underperformer) Claude Resources Inc. 9) (CVE-TSX.UN-TSX.A-TSX.42. C$0. Sector Outperformer) DundeeWealth Inc. 13) (AGF. (2a. 2c.34.90. (2a.27. 2e. US$61. 2e.Speculative) Alimentation Couche-Tard Inc. C$21. 2010 Important Disclosure Footnotes for Companies Mentioned in this Report that Are Covered by CIBC World Markets Inc.26. 2e. 2g. C$18. C$31.UN-TSX. Sector Outperformer) Brookfield Office Properties Canada REIT (2g) (BOX.: Stock Prices as of 06/16/2010: AGF Management Limited (2g. (CLM-TSX. 2c. (2g. 9) (CM-TSX. Sector Underperformer) Canadian Imperial Bank of Commerce (2a. 2e. Sector Performer) Boardwalk REIT (2g. Sector Outperformer) Bank of Nova Scotia (2a.CIBC's CIO Roundtable . C$15. C$75. 2g) (CIX-TSX. 2e. 3c. 2c. C$24. 2c. 2d.35. 7) (CUF. 2c. C$3. Sector Performer) BCE Inc.72.90. C$20.80. C$56. 2g. 2e. Sector Performer) Detour Gold Corporation (DGC-TSX.94. C$63. Sector Performer) Canadian Oil Sands Trust (2a. 2e. 2c. Sector Performer) Calfrac Well Services Ltd. 2c. Sector Outperformer) Andean Resources Ltd. 2c. (AGI-TSX. C$5. Ltd.95. 2g) (AEM-NYSE. (2g. 7.70. 2c. C$16. Sector Outperformer) Cameco Corporation (2a. 2e.51. 2g.97. 2g) (ABX-NYSE. Sector Performer) Canadian REIT (2a. Sector Outperformer) Anderson Energy Ltd. 2c. 2f. Restricted) Aurizon Mines Ltd. 2e. 2g) (DOL-TSX. Sector Underperformer) Coeur d'Alene Mines Corp. 2f. 2c. 2g. Sector Outperformer . Sector Performer) Canadian Apartment Properties REIT (2g. 12) (GIB. Sector Performer) Cominar Real Estate Investment Trust (2a. Sector Performer) Alamos Gold Inc.76. C$16. (2g) (ARZ-TSX. 2g. (2a. 13) (CTC.68. Sector Outperformer) Alexis Minerals Corporation (2a. 2g) (CWT. Sector Outperformer) Brookfield Properties Corporation (2a. C$25.42. Sector Performer) Canadian Western Bank (2g) (CWB-TSX. 2g) (COT-NYSE. C$19. 2e. Sector Underperformer) Capstone Mining Corporation (7) (CS-TSX.15. (2a. 2e. 7. Sector Outperformer . C$15. US$7. Sector Outperformer) Calloway REIT (2a.77. 7) (DHF. 2g) (AXL-TSX. 7. 2g) (AND-TSX. (2g) (ATD. C$28. (2g) (CFW-TSX. 2e. 7. Sector Outperformer) Agnico-Eagle Mines Limited (2f. Not Rated) Canadian National Railway Co.UN-TSX. Sector Performer) Canadian Natural Resources Ltd (2g. C$29.96. 2e. C$1. Sector Outperformer) Davis + Henderson Income Fund (2g. 2e. Sector Performer) Cathedral Energy Services (2g) (CET-TSX. Sector Outperformer) Cenovus Energy Inc. 2c. 2c.26. Sector Outperformer) Cott Corporation (2a. 2e. 2e. 2e. Sector Outperformer) 68 .85.18. (2a. 2c.36. 2e. 2g. C$0. 9.Speculative) Bank of Montreal (2a. 2c. 2e. 2e. (2a.70.68. C$40. C$60. 3a.53. Sector Outperformer) Dollarama Inc.40. 7) (COS. 3c. US$42. 2d. 7) (BNS-TSX.03. Sector Outperformer) Centerra Gold Inc. Sector Performer) CGI Group Inc. 2g.UN-TSX.20. Sector Performer) Consolidated Thompson Iron Mines Ltd. (2g. 6a. Sector Performer) Denison Mines Corp. 7) (BEI. C$51. (2a. (2a. Sector Outperformer) Barrick Gold Corporation (2a. Sector Performer) Brookfield Asset Management (2a.B-TSX. 7) (CAR. C$18. 2e. Sector Performer) Canadian Tire Corporation.Volatility And Slower Growth .82. 9) (CNR-TSX.24. C$63. 3a. C$8. US$24.44. 3a.12.67.June 16. C$12.B-TSX. 2e) (DW-TSX. C$2. 2c. C$5.58. (2g) (BAN-TSX. C$1.03.UN-TSX. 2g) (BIM-TSX.00.28. 7) (REF. 8.

Sector Performer) Jean Coutu Group (PJC) Inc. US$17.51. 7. C$11.19.51. (2g) (EET-TSX. (2g. Sector Performer) Laurentian Bank (2g) (LB-TSX.: (Continued) Stock Prices as of 06/16/2010: Eldorado Gold Corporation (2g) (EGO-NYSE. 4b. 2c. 2g) (FCR-TSX. 2g) (IGM-TSX. Sector Performer) Lake Shore Gold Corp. Restricted) First Majestic Silver Corp. (2a. 2g) (FCE.A-TSX. Sector Performer) Loblaw Companies Limited (2g) (L-TSX.19.09. Sector Performer) First Quantum Minerals Ltd. (FM-TSX. (KGI-TSX.UN-TSX.51.40. 7) (MIC-TSX. (2g) (GIL-NYSE. C$23. C$2. Sector Performer) Empire Company Limited (2g.June 16. 13) (EMP. C$41. 2e. 7) (IAG-TSX.25.44.96. 2e. C$60. Sector Outperformer) Golden Star Resources Ltd.87. C$4. US$34. 2c. Sector Performer) Gildan Activewear Inc. US$4. C$18. C$75. 2c. 7) (IPL. 2e. (2a. C$35. 2f.10. Sector Outperformer) George Weston Limited (2g. 7) (EMA-TSX.55. 2e. (2g) (GSS-AMEX. Sector Outperformer) Gold Wheaton Gold Corp. C$9. C$13.90. (LSG-TSX. (2g) (ESI-TSX. L. US$17. (2a. C$33. 2g. C$17. C$40. 2g. 2g. (2a.24. 2g) (IMN-TSX. (2a. 2g. (2g) (GLW-TSX. 2e. (2a. 3a.35. C$7. (2g) (GAM-TSX. Sector Performer) Great-West Lifeco Inc. 2c. 2c. (2a. 2c. 2g.23. C$2. 2c. Sector Outperformer) Hecla Mining Company (2g) (HL-NYSE. 7) (FNV-TSX. Sector Outperformer) Gammon Gold Inc. C$0. C$49.73. (2a. Sector Outperformer) Inmet Mining Corporation (2a. US$43. C$3. Sector Outperformer) Labrador Iron Ore Royalty Income Fund (7) (LIF. 2e. 2e. Sector Outperformer) EnCana Corporation (2a.00. Sector Outperformer) Husky Energy Inc. 2c. C$44. Inc. C$52. C$4.53. 2g. 2c. 7. 2c.45. C$3. C$10. 2g) (FVI-TSX.06. 2g. 3c. (7) (HBM-TSX. Sector Performer) Gluskin Sheff + Associates Inc.35. (2g) (GMO-AMEX. 2e.37. Sector Outperformer) Fort Chicago Energy Partners. 7) (WN-TSX. Sector Performer) Intact Financial Corp. Sector Performer) 69 . (2a. Sector Performer) Fortuna Silver Mines Inc.01.A-TSX. 9) (ECA-NYSE. 2c. 14) (IFC-TSX. US$3. 7. Sector Performer) Ensign Energy Services Inc. (2a. C$9. (2a. 2f. 2e. Sector Outperformer) Enbridge Inc.95.UN-TSX. C$26. Sector Outperformer) H&R REIT (2a. Sector Performer) Goldcorp Inc. 4a.97. Sector Outperformer) IAMGOLD Corporation (2g) (IAG-NYSE. 2e.57.14. 7) (AER-TSX. 2c. 2c. US$31.32.70. (2g) (FES-TSX. 12) (GS-TSX. C$17. 2g) (IVN-TSX. Sector Outperformer) Emera Inc. (2a. C$25.82. 2e. (2a. 7. 9) (ENB-TSX.68. Sector Performer) Endeavour Silver Corp. L.P. Sector Outperformer) Genworth MI Canada Inc. 2c.71. 2e.56. 2e. 12) (PJC.57. 2e. 2g) (GWO-TSX.17. C$44. 2e. Sector Outperformer) Kinross Gold Corporation (2g) (KGC-NYSE.09. C$47.P. C$11. Sector Underperformer) HudBay Minerals Inc. (2g. (2a.06. 7) (FTT-TSX. 2g. 3c) (GG-NYSE.10. Sector Underperformer) Groupe Aeroplan Inc. 3a. Sector Underperformer) Industrial Alliance Insurance And Financial Services Inc. 2g. Sector Performer) Finning International Inc. Sector Performer) First Capital Realty Inc. 2c. C$25. Sector Outperformer) Flint Energy Services Ltd.10. (2g) (FR-TSX. (2a. 2e.UN-TSX. Sector Performer) Imperial Oil Limited (2g) (IMO-TSX.15. 2c. Sector Outperformer) IGM Financial Inc.73.UN-TSX. C$47. Sector Performer) General Moly. C$14. Sector Underperformer) Kirkland Lake Gold Inc. 2e. (2g.CIBC's CIO Roundtable . C$8. Sector Outperformer) Ivanhoe Mines Ltd. 2g) (HR. (2a. Sector Performer) Inter Pipeline Fund. C$14. C$39. 2e) (EDR-TSX. Sector Outperformer) Etruscan Resources Inc. 2e.27. Sector Outperformer) Franco-Nevada Corporation (2a. 2g) (HSE-TSX. 2e.07. Sector Performer) Equinox Minerals Limited (2g) (EQN-TSX. US$17.66.40. C$12.Volatility And Slower Growth . US$5. 2010 Important Disclosure Footnotes for Companies Mentioned in this Report that Are Covered by CIBC World Markets Inc. 3a.

(RBI-TSX. Sector Outperformer) Pan American Silver Corp. 7) (SAP-TSX. 2d. 2b. (2a. C$7. 2g) (PRU-TSX. 2c. 2c. (2g) (MFL-TSX. C$8. (2g. 2e. C$34. 2e. 7) (PMZ.UN-TSX.83. Sector Performer) Royal Gold. 2e. C$17. 2c. Inc. C$16. 2c. Sector Performer) Nexen Inc. Sector Outperformer .17. 2g) (OPC-TSX. Sector Outperformer) 70 .00. Sector Outperformer) Manulife Financial Corporation (2a. 2e.70. C$11. Sector Outperformer) Mercator Minerals Ltd. 3b) (NXY-TSX. 2e.64. Sector Outperformer) Newmont Mining Corporation (2a.99.49.40. (2a. C$58. US$18. C$20. 7) (REI. C$14. (2a.27. 7) (RON-TSX. (2a. US$2. (2a. 2g) (POT-TSX. (2g) (NML-V. (2g) (NGD-TSX. Sector Performer) North West Company Fund (2g. 7) (RY-TSX. C$3. 7) (NWF. Sector Outperformer) North American Energy Partners (2a. Sector Outperformer) National Bank Of Canada (2a. 2e. (2g) (SVY-TSX. C$3. Sector Performer) Rubicon Minerals Corporation (RMX-TSX. C$7.15. Sector Outperformer) Pason Systems Inc. C$10. (2g) (PSI-TSX. C$43. 2e. C$9. Sector Outperformer .71. Sector Performer) Metro Inc.65.58. 2g) (NOA-TSX. C$7. Sector Performer) New Gold Inc. 2e. 3c. 7. 2g. C$54. (2g.34. 2g.90. Sector Outperformer) RONA Inc. 2g) (PAAS-NASDAQ. 2c. (2g) (MDA-TSX. 3b) (NEM-NYSE.85. (2g) (PDN-TSX. Sector Performer) Silver Standard Resources Inc. 2c. 2d.53. Sector Performer) Shoppers Drug Mart Corporation (2g) (SC-TSX. C$43.UN-TSX.98. C$6. Sector Performer) Semafo Inc. 3c.62. C$11. 2c. 2c. 2e.80.38. 3a. Sector Underperformer) Silver Wheaton Corp. Sector Outperformer) OPTI Canada Inc. C$5. C$1. Sector Outperformer) Paladin Energy Ltd. 2b. C$1. 2g. 7) (PIF. 8) (NA-TSX. (RR-TSX. 2e. C$6.June 16. 2e) (SLW-TSX. Sector Underperformer) San Gold Corporation (2g) (SGR-V. 2g. 2e.20.73.11. Sector Outperformer) Mullen Group (2g) (MTL-TSX. 2f.57. Sector Outperformer) Sherritt International Corporation (2g) (S-TSX. 2g) (NAL-TSX.58. 2e.58.: (Continued) Stock Prices as of 06/16/2010: Lundin Mining Corporation (2g) (LUN-TSX. Sector Performer) Quadra FNX Mining Ltd. (2a.52. C$12. C$18. 2g. C$26. Sector Outperformer) Provident Energy Trust (2g) (PVE.95. C$23.92. Sector Performer) Potash Corporation (2a. 7) (PHX. C$15. 3a. (2g) (RGLD-NASDAQ.24. 3a. Sector Performer) Saputo Inc. Sector Outperformer) MacDonald. 2e.41.CIBC's CIO Roundtable . Sector Performer) Precision Drilling Trust (2g) (PD. C$30. (2a. US$25.Speculative) Newalta Inc. C$26.65. 2g. Sector Outperformer) Phoenix Technology Income Fund (2a. 12) (OCX-TSX. 2c. 2c. 2e.50.UN-TSX.UN-TSX. 7) (MFC-TSX.55. C$0. C$8.33. 3a. Sector Outperformer) RioCan REIT (2a. 2g. US$52. 2e. Dettwiler and Associates Ltd.Speculative) Orezone Gold Corporation (2a. Sector Underperformer) Red Back Mining Inc. 2c. Sector Outperformer) Northgate Minerals Corporation (2a. (2a.76. Sector Outperformer) Minefinders Corporation Ltd. Sector Outperformer) Mineral Deposits Limited (2g) (MDM-TSX. 2c.Volatility And Slower Growth . 2e. C$104. 2c. 3a. C97) (QUX-TSX. 2g) (SMF-TSX. 2c.57. 2e. Sector Outperformer) Onex Corporation (2g. C$19. Sector Performer) New Millennium Capital Corp. 2g.10.54. C$19. 2f.61. 2c.33. 2d. C$1. (2g) (ML-TSX. C$4. 2e. Sector Outperformer) Rainy River Resources Ltd. Sector Underperformer) Perseus Mining Limited (2a. 2e.UN-TSX. C$0.67. C$6. US$56. Sector Performer) Savanna Energy Services Corp.80.79.UN-TSX. C$3. 7. 2c.UN-TSX. 2g) (ORE-TSX.46. 3c. (2a. 2010 Important Disclosure Footnotes for Companies Mentioned in this Report that Are Covered by CIBC World Markets Inc.A-TSX. 2g) (SSRI-NASDAQ. 12) (MRU. 2e. C$1. 2g) (NXG-AMEX. Sector Performer) Pembina Pipeline Income Fund (2g. Sector Performer) Royal Bank of Canada (2a.51. Sector Performer) Osisko Mining Corporation (2g) (OSK-TSX. Sector Outperformer) Primaris Retail REIT (2a.

C$34. (NKO-TSX. Sector Outperformer) Teck Resources Limited (2g. Inc. (2g) (FGL-TSX. Sector Performer) TransCanada Corp. C$36.A-TSX. C$36. C$26. Not Rated) Dorel Industries Inc.00. 7) (TRP-TSX. C$36. Not Rated) Power Corporation of Canada (POW-TSX.61.23. 7. (RET-TSX. 2e. 2010 Important Disclosure Footnotes for Companies Mentioned in this Report that Are Covered by CIBC World Markets Inc.CIBC's CIO Roundtable . (COST-NASDAQ.81. 2e. 2c. (2a.10.97. Not Rated) Important disclosure footnotes that correspond to the footnotes in this table may be found in the "Key to Important Disclosure Footnotes" section of this report. 7. C$21.24. Sector Performer) Sun Life Financial Inc. Not Rated) Bonavista Energy Trust (BNP. 2g) (TRE-TSX.63.25. C$2. 2g. (2a.June 16.26. US$54. (SBY-TSX.94. 2c. C$5. 2c. C$8.55. (2a. 2e.90. C$3. US$10. C$13. (2a.Volatility And Slower Growth . 2g. 9. C$39. 2e. Sector Performer) Sprott Inc.00. 13) (T-TSX. Restricted) UTS Energy Corporation (2g) (UTS-TSX. Sector Underperformer) Companies Mentioned in this Report that Are Not Covered by CIBC World Markets Inc. Sector Performer) TransAlta Corporation (2a. Sector Performer) Suncor Energy Inc.40. C$16. US$59.60. 2g) (THI-TSX.48. C$18. 3c. (2g) (AUY-NYSE. Sector Performer) Uranium Energy Corp. (2a.UN-TSX. 2g. 7) (TLM-TSX.50. Not Rated) Target Corp. 2g) (UUU-TSX. Sector Outperformer) Uranium One Inc. Not Rated) Dollar General (DG-NYSE. 2c. Sector Performer) Total Energy Services (2g) (TOT-TSX. C$30.94. 2c. 2g) (TIH-TSX. Sector Performer) Toromont Industries (2a. Sector Outperformer) Trican Well Service Ltd.26.19. C$102. US$32.90. 2g. C$28. Sector Outperformer) Talisman Energy Inc. Sector Outperformer) Thompson Creek Metals Company. 2e. C$10. 2c. (DII. (2g) (SVM-TSX. 2g. Sector Outperformer) Yamana Gold Inc. 2g. (2g) (UEC-AMEX. Inc. Not Rated) Costco Wholesale Corp. Sector Outperformer) TELUS Corporation (2a.79. (2g) (SII-TSX. C$73. 2c.48. (2g) (TCW-TSX. Sector Performer) Tim Hortons. Not Rated) Home Depot (HD-NYSE.48. 3a. 2e. C$2.B-TSX. C$24. Not Rated) Wal-Mart (WMT-NYSE.44.: (Continued) Stock Prices as of 06/16/2010: Silvercorp Metals Inc. Sector Outperformer) Taseko Mines Limited (2g) (TKO-TSX.: Stock Prices as of 06/16/2010: Baytex Energy Trust (BTE.99. 2e.89. Not Rated) Niko Resources Ltd.95. C$17. (2a. 2d. 71 . (2g) (TCM-TSX. US$51. 2e. Not Rated) Reitmans (Canada) Ltd. Sector Outperformer) Trinidad Drilling Ltd. 7) (SLF-TSX.UN-TSX. 2g. 2b. Sector Outperformer) The Forzani Group Ltd. C$5. C$34. Sector Performer) Sino-Forest Corporation (2a. 2e.64. 7) (TD-TSX. 2f. C$33. 7) (TDG-TSX.36. 2e. Not Rated) Power Financial Corporation (PWF-TSX.16. 9) (TA-TSX. C$57.22. 2c. 12) (TCK. Sector Outperformer) TD Bank (2a. US$2.36. C$24. (TGT-NYSE.04. (2a. C$6. Not Rated) Sobeys Inc. 2g. C$16. 9) (SU-TSX. US$30.71. 2e. 7.

has received compensation for non-investment banking. and CIBC World Markets Corp.. 2010 Key to Important Disclosure Footnotes: 1 2a 2b 2c 2d 2e 2f 2g 3a 3b 3c 4a 4b 4c 5a 5b 6a 6b 7 8 9 CIBC World Markets Corp. The equity securities of this company are non-voting shares. CIBC World Markets Corp. has managed or co-managed a public offering of securities for this company in the past 12 months. fundamental research analyst who covers this company has a long position in the common equity securities of this company. the parent company to CIBC World Markets Inc. CIBC World Markets Inc. has received compensation for non-investment banking. CIBC World Markets Corp.June 16. An executive of CIBC World Markets Inc. and CIBC World Markets Corp. has received compensation for investment banking services from this company in the past 12 months. CIBC World Markets Inc. CIBC World Markets Inc. securities-related services in the past 12 months. CIBC World Markets Corp. The equity securities of this company are restricted voting shares. analyst(s) who covers this company also has a long position in its common equity securities. has managed or co-managed a public offering of securities for this company in the past 12 months. CIBC World Markets Corp. fundamental analyst(s) who covers this company also has a long position in its common equity securities. and their affiliates. non-securities-related services from this company in the past 12 months. CIBC World Markets Inc. in the aggregate.CIBC's CIO Roundtable . the parent company to CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from this company in the next 3 months. has a significant credit relationship with this company. expects to receive or intends to seek compensation for investment banking services from this company in the next 3 months. CIBC World Markets Inc. CIBC World Markets Inc. A member of the household of a CIBC World Markets Inc. A member of the household of a CIBC World Markets Corp. This company is a client for which a CIBC World Markets company has performed investment banking services in the past 12 months. 10 11 12 13 14 C97 72 .. has received compensation for non-investment banking. This company is a client for which a CIBC World Markets company has performed non-investment banking. CIBC World Markets Corp. This company is a client for which a CIBC World Markets company has performed non-investment banking. securities-related services from this company in the past 12 months. or a member of his/her household is an officer.. Canadian Imperial Bank of Commerce ("CIBC"). The equity securities of this company are limited voting shares. director or advisory board member of this company or one of its subsidiaries. CIBC World Markets Inc. beneficially own 1% or more of a class of equity securities issued by this company. non-securities-related services in the past 12 months. or any analyst involved in the preparation of this research report has provided services to this company for remuneration in the past 12 months. CIBC World Markets Corp. non-securities-related services from this company in the past 12 months. has received compensation for investment banking services from this company in the past 12 months. The equity securities of this company are subordinate voting shares. has received compensation for non-investment banking. is an advisor to Quarda FNX Mining in a JV agreement with State Grid. makes a market in the securities of this company. A senior executive member or director of Canadian Imperial Bank of Commerce ("CIBC"). The CIBC World Markets Corp. research analyst who covers this company has a long position in the common equity securities of this company. securities-related services from this company in the past 12 months.Volatility And Slower Growth .. The CIBC World Markets Inc.

Brookfield Place. Sector is expected to equal the performance of the broader market averages.3% Inv. 73 . including potential conflicts of interest information. Banking Relationships Sector Outperformer (Buy) Sector Performer (Hold/Neutral) Sector Underperformer (Sell) Restricted Count 116 116 19 12 Percent 94.CIBC's CIO Roundtable .5% 100.S. 2010 CIBC World Markets Inc.June 16.4% 4. hold and sell recommendations.0% Ratings Distribution: Off The Press — Collective Research Series Coverage Universe (as of 16 Jun 2010) Sector Outperformer (Buy) Sector Performer (Hold/Neutral) Sector Underperformer (Sell) Restricted Count 0 0 0 0 Percent 0. Ontario M5J 2S8.com under 'Quick Links' or by writing to CIBC World Markets Inc. for the purposes of complying with NYSE and NASD rules. our system for rating investment opportunities and our dissemination policy can be obtained by visiting CIBC World Markets on the web at http://researchcentral. Stock is expected to underperform the sector during the next 12-18 months.com/sec2711 or write to CIBC World Markets Inc. *Although the investment recommendations within the three-tiered. CIBC World Markets Inc.0% Inv. Stock is expected to perform in line with the sector during the next 12-18 months. Coverage Universe (as of 16 Jun 2010) Sector Outperformer (Buy) Sector Performer (Hold/Neutral) Sector Underperformer (Sell) Restricted Count 123 125 21 12 Percent 43. CIBC World Markets is restricted*** from rating the stock. Toronto. Attention: Research Disclosures Request. Attn: Research Disclosure Chart Request.0% 0. ***Restricted due to a potential conflict of interest.. 4th Floor. Sector is expected to outperform the broader market averages. Banking Relationships Sector Outperformer (Buy) Sector Performer (Hold/Neutral) Sector Underperformer (Sell) Restricted Count 0 0 0 0 Percent 0.3% 92. please visit CIBC on the web at http://apps.cibcwm. 161 Bay Street. Toronto. 161 Bay Street. 4th Floor. "Speculative" indicates that an investment in this security involves a high amount of risk due to volatility and/or liquidity issues. do not correlate to buy. Sector is expected to underperform the broader market averages.3% 7. hold ratings to securities rated Sector Performer. Rating Description Sector Weightings** **Broader market averages refer to the S&P 500 in the U.0% 0. and sell ratings to securities rated Sector Underperformer without taking into consideration the analyst's sector weighting. CIBC World Markets Inc. Ratings Distribution*: CIBC World Markets Inc.6% 44. Important disclosures required by IIROC Rule 3400.0% 0. Price Chart For price and performance information charts required under NYSE and NASD rules. has assigned buy ratings to securities rated Sector Outperformer.0% Off The Press — Collective Research Series Sector includes the following tickers: (none).0% 0.0% 0.0% 0. and the S&P/TSX Composite in Canada.. Stock Rating System Abbreviation Stock Ratings SO SP SU NR R O M U NA Sector Outperformer Sector Performer Sector Underperformer Not Rated Restricted Overweight Market Weight Underweight None Stock is expected to outperform the sector during the next 12-18 months.cibcwm. Ontario M5J 2S8. Sector rating is not applicable. relative stock rating system utilized by CIBC World Markets Inc. CIBC World Markets does not maintain an investment recommendation on the stock.Volatility And Slower Growth .8% 90. Brookfield Place.

All estimates. Each such address or hyperlink is provided solely for the recipient's convenience and information. CIBC World Markets will not treat non-client recipients as its clients by virtue of their receiving this report.Volatility And Slower Growth . "CIBC World Markets") and (d) in the United States either by (i) CIBC World Markets Inc. U. and does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such offer or solicitation would be prohibited. prior to acting on any of the recommendations herein. the Canada Deposit Insurance Corporation or other similar deposit insurance. to institutional investor and retail clients of CIBC World Markets in Canada. Although each company issuing this report is a wholly owned subsidiary of Canadian Imperial Bank of Commerce ("CIBC"). The comments and views expressed in this document are meant for the general interests of wholesale clients of CIBC Australia Limited. 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