Warren Jestin SVP & Chief Economist

1. As The World Turns Warren Jestin SVP & Chief Economist Presentation to: Appraisal Institute of CanadaNational Conference May 28, 2009Mont Tremblant

2. The Global Economy Approaches a Turn G7 Set for Slow Recovery Emerging Nations Remain Growth Leaders real GDP,annual average % change real GDP, annual average % change

3. Commodities Show Early Signs of Revival Industrial Production Price Fluctuations Since January 2007 % change between Oct ‘08 & Mar ‘09 Low High OIL 33.87 145.29 62.38 US$/bbl High Low NATURAL GAS 3.53 3.25 13.58 US$/mmbtu Low High COPPER 1.26 2.06 4.08 US$/lb Low High NICKEL 5.81 4.00 24.59 US$/lb Blue bar represents price at May 26, 2009.Historical end of day observations; Source: Bloomberg.

4. The Freefall is Ending in U.S. Housing and Autos … Vehicle Sales & Inventories Housing Starts & Inventories days’ supply millions of units mn units months’ supply Housing Starts (RHS) US New Vehicle Sales (RHS) US Dealer Inventories (LHS) Inventories (LHS)

5. . . . But U.S. Private & Public Financial Strains Remain Intense . . . Rising U.S. Foreclosures U.S. Federal Revenues Slide Personal Income Tax Total Revenues Corporate Income Tax 12-month moving sum, y/y % change Source: Global Insight. Source: U.S. Treasury.

6. . . . & Auto Producers Face Major Structural Adjustments Motor Vehicle Production Motor Vehicle Sales Change, 2000-08 Change, 2000-08 millions of units millions of units *2007 data. Source: Scotia Economics.

7. For Canada, These Trends Point to Big Competitive Challenges . . . Major Canadian Exports U.S. Imports % share of total index: 2000=100 Crude Petroleum Canada China Canadaex. Energy Euro zone Mining Natural Gas Mexico Agriculture Vehicles & Parts Japan Forest Products

8. forecast . . . & Rising Dependence on Global Demand for Commodities Growth in Export Receipts: 2002 - 2008 Exports– Shares average annual % change % share of total export receipts, 2008 All Other Goods 37% Agri-Food 7% Vehicles & Parts 12% Forest Products 5% Mining 14% Export Volumes index: 2002=100 Energy 25% U.S. Canada Commodities50%

9. forecast forecast forecast Central Banks Signal Commitment to Ultra-Low Rates . . . Central Bank Rates CPI U.S. % y/y% change U.S. Canada Canada Bond Yields % change, 2007-08 U.S. 10-yr T-Bond Canada 10-yr Gov’t. Bond Canada

10. … But Credit Spreads Remain Elevated … Canada Securities vs. Comparable Canadian Bond AAA & BAA Rated Corporate Bonds vs. U.S.10-yr Treasury %, spread %, spread RioCan 3.5% due 2013 Canadian Tire 4.95% due 2015 ‘BAA’ Rated TransCanada 5.65% due 2014 ‘AAA’ Rated Source: PC Bond.

11. … & Business Lending Has Tightened Business Conditions Business Lending y/y % change balance of opinion U.S. Short-term Commercial & Industrial Lending U.S. Canada Canada Tightening Easing

12. forecast Euro € Balance ex. Social Security Federal Budget Balance CAD $ Yen ¥ Yuan 元 U.S. Dollar Remains on Shaky Ground U.S. Fiscal Deficit Soars US$ Shows Signs of Weakening US$ Exchange Rates Since January 2007 High Low 0.77 1.09 0.89 Trade Balance High Low 1.39 1.25 1.60 High Low 1.26 124 95 87 High Low US$ billions 7.81 6.83 6.81 Blue bar represents spot price at May 26, 2009.Historical end of day observations; Source: Bloomberg.

13. Provincial Balance Federal Balance The Swooning Loonie Begins to Take Flight Commodity Revival Will Boost Canadian Export Earnings … … & Underpin the Canadian Dollar CAD/USD forecast C$ billions forecast Energy Balance Canadian Dollar Trade Balance Motor Vehicles & Parts 20-year Average (1988-2008)

14. forecast Canada Leads in Jobs & Consumer Spending Spending Stronger in Canada Household Equity% of household real estate Real Consumption annual y/y% change Canada U.S. Household Debt% of household assets Employment U.S. Canada annual y/y % change

15. forecast forecast Canadian Households Are in Better Shape … Housing Startsindex: 2002=100 Motor Vehicle Salesindex: 2002=100 Canada U.S. Canada U.S. Housing Starts - Provincialindex: 2002=100 Motor Vehicle Sales - Provincialindex: 2002=100 B.C. Alberta B.C. Alberta Ontario Ontario

16. . . . But Spending has Weakened in All Regions Retail Sales Urban Housing Starts % change, 2009 ytd Quebec Atlantic % change, 2009 ytd Saskatchewan Quebec Atlantic Manitoba Ontario Manitoba Ontario CANADA CANADA Alberta B.C. Sask. B.C. Alberta

17. forecast Non-res Construction Better on this Side of the Border . . . Office Vacancy Rates Non-Residential Construction % index: 2002=100 U.S. Canada Canada U.S. Office Vacancy Rates Non-Residential Construction Price Index % y/y% change Vancouver Calgary Vancouver Toronto Calgary Toronto

18. . . . But C & I Construction Weakens in Major Markets Ontario Alberta index: 2002Q1=100 index: 2002Q1=100 Commercial Commercial Industrial Industrial Quebec British Columbia Commercial index: 2002Q1=100 index: 2002Q1=100 Industrial Commercial Industrial

19. forecast Canada Still Has a Big Fiscal Advantage . . . Ottawa Avoids Washington’s Mega-Deficits… …But Fiscal Pressures Hit All Governments % of GDP SK Canada MB AB* NS* BC PE** Federal Budget Balance QC NB ON budget balance, $ per capita FED U.S. (ex. Social Security Surplus) NL *Balanced budgets assumed for FY10, **FY09.

20. . . . But All Canadians Face a Long Road to Recovery . . . real GDP, annual % change

21. . . . & Big Environmental & Demographic Challenges on the Horizon Federal Government’s Projected Carbon Prices Median Age Climbs marginal emissions price, $/tonne of CO2equivalent years Provincial GHG Emissions tonnes of CO2 equivalent per capita Source: Environment Canada Source: IMF

22. Disclaimer This report has been prepared by Scotia Economics as a resource for the clients of Scotiabank and Scotia Capital. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotiabank Group nor its affiliates accepts any liability whatsoever for any loss arising from any use of this report or its contents.