Alberta Venture February 2011

reWriting the rules oF retireMent|the Big Business oF BorroWing |5 Ways to Finance your Business 5 Ways to Finance| Why succession
Planning strategies Matter|reWriting the rules oF retireMent|the Big Business oF BorroWing
to catch a thieF: inside the asc
Fortune tellers: are u.s. real-estate deals our economists on 2011 too good to be true?
www.albertaventure.com
Why succession Planning strategies Matter|reWriting the rules oF retireMent|the Big Business oF BorroWing |5 Ways to Finance
needs brokera sToCkWaT ? Ch

Page 40
Who
2011
[ is in this magazine]
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your Business| reWriting the rules oF retireMent|Why succession Planning strategies Matter
We see the possibilities.

As an Operations Manager at Suncor Energy, Stephen Young is one of more than 12,000 employees who have seen how innovation can turn possibilities into reality. Like turning tailings ponds into solid ground. Suncor marked a significant milestone with the return of our first tailings pond to a solid surface in 2010. Weve also developed a game-changing technology that reclaims former oil sands mines into natural habitat decades faster than before. Developing these kinds of solutions begins with seeing the possibilities. And were just getting started.
1.2
billion
actual and planned investments in new tailings technology
1,182
hectares
of land reclaimed to date
3.5
million
trees planted on Suncors site since 1967
energy innovation commitment
Find out more about Suncors track record and how we are planning to responsibly develop North Americas energy supply. www.suncor.com/sustainability
TM
Trademark of Suncor Energy Inc.
Contents
fEBRUARy 2011 | VOL 15 ISSUE 02
54
Cover Story
The Money Issue
Theres a bit of an inferiority complex here. I had always thought of Alberta as a can do province
Leo de Bever, CEO of Alberta Investment Management Corp.
33
By The nuMBers
34
Travel advIsory
Leading economists Todd Hirsch and Craig Alexander map out the road that lies ahead
By MAx fAWCETT
40
sTockwaTch
COVER ILLUSTRATION: Tom White CONTENTS IMAGES: Bluefish, Dominic Bugatto, Jason Stang and Luc Melanson Publication Mail Agreement #40020055. Return undeliverable mail to Circulation Department 10259-105 Street, Edmonton, AB, T5J 1E3 or email circulation@albertaventure.com
Analyst fabrice Taylor reports on the best-performing Alberta-based stocks for 2010
www.albertaventure.com ALBERTA VENTURE/fEBRUARy 2011 3
Contents
fEBRUARy 2011 | VOL 15 ISSUE 02
WeB eXCLUsIVes
Stockwatch
get the details on the best performing stocks of 2010 with this clickable and sortable web chart
albertaventure.com > web exclusives > Stockwatch
64
70
REPORT ON BUSINESS FINANCING
mixed returnS
The Smart Investor, fabrice Taylor, breaks down the Stockwatch 2010 with his unique and insightful analysis
albertaventure.com > web exclusives > Stockwatch analysis money PodcaSt
58
Beg, Borrow and deaL

By LUCAS WARREN
A look at five leading ways to finance your business
Editors Paul Marck and Max fawcett deconstruct februarys money issue
albertaventure.com > web exclusives > money Podcast
FEATURES
64
trade runner
15 LetterS 16 winnerS circLe 17 LifeStyLe eSSentiaLS 21 LegaL eagLeS

Who puts the man in manicure?
25
THE MONEY ISSUE
A look inside the world of white-collar crime through the eyes of a top ASC enforcement gumshoe
By gEOff MORgAN
how to fire with cause WestJets CEO is flying high Ride the tax-saving benefits of flow-through shares
70 76
25 executive SPeak 28 Smart inveStor
44
Buyer Beware
Real estate in the Sunbelt has never been more affordable, but are the deals too good to be true?
By CAILyNN KLINgBEIL
itS PayBack time

By MIKE SAdAVA
Why the business of debt is booming
ready, Set, grow

By CAILyNN KLINgBEIL
30 riSk management
49
Second Life
Retirees are waking up to a new vision of life after work. It isnt what they were saving for
By LISA RICCIOTTI
Some of your best employees are about to retire. heres how you can replace them
Time to take your risk-aversion temperature Aspiring condo king looks to build Edmontons skyline
80 next uP
DEPARTMENTS
6 8 editorS note contriButorS
Calgarys private school for tomorrows entrepreneurs; Albertas dinosaur dollars; Insight into oil-and-gas emissions
82 marketing inteL
54
Tough markets are good times to advertise The kids arent alright
Big StrategieS, Bigger Payoff

By RAy TURChANSKy
11 out front
84 oPen range 86 inSide out
Why eastern Canadas mega-pension funds have nothing on AIMCo
ATBs marquee attraction
4 ALBERTA VENTURE/fEBRUARy 2011 www.albertaventure.com
the
classic
watch
No other watch is engineered quite like a Rolex. The Datejust, introduced in 1945, was the rst wristwatch to display the date through an aperture on the dial. Its unique magnifying Cyclops eye, added a few years later, became recognized as a Rolex design standard. Now in a larger, more distinguished 41 mm size, the Datejust II is a natural evolution of a classic. The Datejust II is presented here in Rolex signature Rolesor, a unique combination of 904L steel and 18kt white gold.
the date just ii
EDITORS NOTE
Its All About the Money

The best things in life are free. But you can keep them for the birds and bees. Now give me money. Thats what I want.
In the march Issue
engineers, architects and conventions Our Industry Report on engineering and architecture spotlights trends that will shape the future. Plus, the guide to Western Canadas Meeting Places highlights what you need to know and where to go
on the web
KeePing stocK StockWatch provides an interactive display on the performance of Alberta stocks with investment analyst fabrice Taylors incisive commentary. Albertaventure > Web Exclusives > StockWatch
Join Paul online at BizBeat, where he blogs on major news, including new developments on stories Alberta Venture has covered in the past. Albertaventure.com/bizbeat
Bluefi sh
errata: A quote was wrongly attributed in a story about Auspice Capital Advisors Ltd. in the January issue. In fact, Auspice CEO Tim Pickering said: Being an entrepreneur is tough, the toughest thing I have ever done. Alberta Venture regrets the error.
t cost $12 to hear John Lennon warble those lyrics on an open-air stage in 1969, then a princely sum for a multiple-act concert that also featured the Doors, Alice Cooper and other iconic players of the day. When your after-school weekly wage from flipping burgers amounts to $18 a week, spending wisely is only prudent, whatever your investment target. In this case, it was worth it. It is also well worthwhile to be reading this, Alberta Ventures Money Issue, which might just be the best investment you make this year, whatever you decide to do with your portfolio. This issue marks a departure from our usual cornucopia of profiles, business service stories and advice pieces for Albertas corporate sector. Instead, we turn our approach to the subject of personal finance. We offer an examination of the issues that individuals face every day, whether it is making a decision about pensions, retail investing, debt or real estate. Consider this issue of Alberta Venture as your investment boutique. Today, life, money, investments and Lennons words assume a different meaning than they did in the psychedelic 60s. As the ship of state steams onward, all those itinerant baby boomers are sailing noisily towards a new destination. As the biggest consumer demographic on the planet swells retirement ranks over the next 20 years, baby boomers need to be ready for the challenge ahead. Within these pages you will find stories on economic trends, pension plans, corporate financing, how to stay out of debt trouble, succession planning and whether that U.S. real estate vacation getaway gamble is a good bet. If thats not enough, take in our feature act: Economists Todd Hirsch of ATB Financial and Craig Alexander of TD Canada Trust face off over the question of whether Canada is headed for an era of economic stability and how people can prepare for and profit from it.
Pensions are not as universal a concept as many of us might think. Alberta has the lowest participation rate in corporate pension plans and companies that offer plans in the country. Frequent contributor Lisa Ricciotti has penned a piece on pension options for both individuals and companies. In StockWatch, investment writer Fabrice Taylor weighs in on the 2010 performance of Alberta stocks and offers sage advice on whats ahead. Growing numbers of Canadians and lots of Albertans are looking at real estate as an investment hedge against retirement. Vacation and sunbelt properties in the U.S., where depressed housing meltdown values continue to lead the market are popular cross-border investment strategies. Editorial intern Cailynn Klingbeil examines the trend and whether it is a sound idea. The money theme is carried through writer Mike Sadavas exploration of options to personal bankruptcy, as well as the companies that have built businesses around that. Since the recession wreaked havoc on so many investors, individual, corporate and institutional alike, we get inside the top minds making the key decisions at Alberta Investment Management Corporation, which has assets of $70 billion under management on behalf of public pensions and the Alberta Heritage Trust Fund. Much has changed since AIMCo was formed in 2008 and the investment landscape necessitated different strategies as a result of the recession. Columnist Ray Turchansky explores what AIMCo boss Leo de Bever and his top managers are thinking and doing. Along with these future-forward news, views and opinions, contributing writer Lucas Warren looks at the trends for corporate financing. There are more options today and your banker is not necessarily your banker. So, there you have it. Plenty for us all to ponder, besides the meanings behind John Lennons lyrics.
Paul Marck editor
BEST
PRACTICE.
THINKPRODUCTIVITY.CA
Why not tweak your business with the help of our productivity experts? Answering straightforward questions can unlock a better way of doing business because sometimes you just need to see it from another angle.
WORST
OUTCOME.
Well, pretty darn close. The recession was hard on everyone, but especially on those who werent productive. But we learned our lesson right?
CONTRIBUTORS
11
Todd Korol
58
lucas Warren
44
roberT carTer
78
cailynn Klingbeil
With camera in hand, Todd Korol has travelled the world on assignment for top magazines. For the past 20 years, assignments have taken him to Europe, Africa, the Middle East, Japan, South and Central America, throughout the U.S. and north of the Arctic Circle. He currently shoots for Reuters, Time, The Globe and Mail, and the National Post. His fine art work is represented by the Paul Kuhn Gallery and he lives in Calgary with his wife and two boys.
Lucas Warren is a father, husband and sometimes writer based in Wetaskiwin. His work has been published in magazines and journals across Canada. He is also the co-founder and editor of WONK, an irregular literary arts sheet with the goal of making Wetaskiwin cooler. Warren overcame his chronic fear of capital letters to research capital markets in Beg, Borrow & Deal.
Award-winning professional freelance illustrator Robert Carter combines a strong foundation in por traiture with a unique sense of visual and conceptual problem-solving. He creates textured illustrations and portraits with subjects running the gamut from political and controversial to surreal and fantastic. Carters work, including the piece in Buyer Beware on recreational real estate, is hand-painted on canvas before its scanned for glossy magazine pages.
Cailynn Klingbeil is Venture Publishings editorial intern, and when shes not busy writing, she spends her time in the mountains, be it on cross-country skis, in hiking boots or strapped to snowshoes. Klingbeil has studied new media in China, produced keepsake DVDs as media director of a summer camp and reported for the Calgary Heralds city department. This month she tackles business succession planning and purchasing American recreational real estate.
2011 Canadian Business Leader Award Dinner Wednesday, March 2, 2011

President and CEO, TELUS Corporation
Darren entwistle
To reserve your corporate table (please consider sponsoring a business student) or to buy individual tickets, please visit www.business.ualberta.ca or contact Susan at 780.492.2348 or 1.877.362.3222.
000AV.UofA_1-2H.indd 1
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Volume 15 Issue 2
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Discover Why Corporate Socially Responsible Organizations Choose The Fairmont Chateau Lake Louise To Hold Their Events
Ruth Kelly (rkelly@albertaventure.com) Joyce ByRne (jbyrne@albertaventure.com) paul maRcK (pmarck@albertaventure.com) max fawcett (mfawcett@albertaventure.com) Geoff moRGan (gmorgan@albertaventure.com) cailynn KlinGBeil (cklingbeil@albertaventure.com) duncan Kinney (dkinney@albertaventure.com) Kim tannas (ktannas@albertaventure.com) Kim laRson (klarson@albertaventure.com) lindsay maclachlan (lmaclachlan@albertaventure.com) Ryan GiRaRd (rgirard@albertaventure.com) andRew foRBes (aforbes@albertaventure.com) JennifeR whyte (jwhyte@albertaventure.com) Betty-lou smith (bsmith@albertaventure.com) GunnaR BlodGett (gblodgett@albertaventure.com) nicK Jamison (njamison@albertaventure.com) andRea cRuicKshanK (acruickshank@albertaventure.com) JennifeR KinG (jking@albertaventure.com) andRew williams (awilliams@albertaventure.com) KaRen BuRGess (kburgess@albertaventure.com) ally speRle (asperle@albertaventure.com) Glenna GRavel (ggravel@albertaventure.com) donna aRmstRonG (darmstrong@albertaventure.com) anita mcGillis (amcgillis@albertaventure.com) dennis mccoRmacK (dmccormack@albertaventure.com) seRap oztuRK (sozturk@albertaventure.com) taRa Kochan (tkochan@albertaventure.com) Jacqueline cReeK (jcreek@albertaventure.com) BoB thodas (bthodas@albertaventure.com) Julia ehli (jehli@albertaventure.com) KaRen cRane (kcrane@albertaventure.com) marzena czarnecka, George Koch, cheryl mahaffy, mifi purvis, mike sadava, lisa Ricciotti, fabrice taylor, Ray turchansky, lucas warren, steve williams Bluefish, Bookstrucker, malcolm Brown, dominic Bugatto, Robert carter, francis lveille, luc melanson, Jason molyneaux, todd Korol, Rod leland, Jason stang, tom white
AlbertA Venture Is PuBlIsHeD 12 TImes A yeAR By VeNTuRe PuBlIsHINg INC. CoNTRIBuTINg PHoTogRAPHeRs AND IllusTRAToRs CoNTRIBuTINg WRITeRs sAles AND mARkeTINg AssIsTANTs ADVeRTIsINg RePReseNTATIVes (AlBeRTA) CAlgARy mANAgeR VICe-PResIDeNT, sAles ADmINIsTRATIVe AssIsTANT ACCouNTINg AssIsTANT CoNTRolleR eVeNT Co-oRDINAToR AssIsTANT PuBlIsHeR CIRCulATIoN Co-oRDINAToR CIRCulATIoN oPeRATIoNs
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mANAgINg eDIToR
AssIsTANT eDIToR eDIToRIAl INTeRN WeB eDIToR CoPy CHIeF
ART DIReCToR
AssoCIATe ART DIReCToR AssoCIATe ART DIReCToR gRAPHIC DesIgNeR
gRAPHIC DesIgN INTeRN
PRoDuCTIoN Co-oRDINAToR
WeB AND sysTems ARCHITeCT
CIRCulATIoN mARkeTINg mANAgeR
CM
MY
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Contents copyright 2011 by Venture Publishing Inc. Content may not be reprinted or reproduced on websites without permission. IssN #1207-2591
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McMillan in Calgary
Michael Thackray, QC
McMillans Calgary office is anchored by Michael Thackray, QC, the man who wrote the book* on oil and gas law in Canada. Take advantage of our local expertise in Calgarys most important industryand of our recent combination with Lang Michener to access complete coverage across Canada and beyond. So you can take the lead.
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*Oil and Gas, Halsburys Laws of Canada
McMillan LLP | Vancouver | Calgary | Toronto | Ottawa | Montral | Hong Kong
out
february2011
i n n o v at o r s ideas
EdiTEd By gEoff moRgAN
inquiry
oddities
Leaving the ivory tower

todd koroL
Entrepreneur launches into the world of private education >

By Cailynn Klingbeil
out
Business professor-turned-entrepreneur LesLie roBerts
was teaching an MBA course two years ago when she found herself, yet again, complaining about the lack of helpful business education available to new entrepreneurs. With 50 per cent of Canadian small businesses failing within the first two years, and 70 per cent failing by year five, Roberts was justified in feeling a problem existed. Why doesnt someone do something about it? Roberts asked. Then I realized, why cant that person be me? After nearly 16 years as a professor at Mount Royal University and the University of Calgary, Roberts, who holds Canadas first PhD in entrepreneurship, quit her job and vowed to quit complaining. She started the GoForth Institute in 2009, a national private sector company that educates entrepreneurs. GoForth provides a comprehensive online skills-based program to micro-business owners. Through high-definition online videos, GoForth can reach clients anywhere, anytime. Those clients are often in rural areas, where learners do not necessarily have access to traditional classroom training. GoForths first client was Community Futures in Alberta, an organization that is part of a national community economic development program. Another client, Susan Power, recently completed GoForths curriculum and says she now feels ready to launch her own business. GoForths expert-taught videos gave Power the confidence and knowledge to form a sound business model for her consulting service, which she intends to start this year. To have more than a dozen different experts who are mentors to you whether you want to spend your time on [the program] at midnight or four in the morning its there for you and thats tremendous, says Power.
The first few months of not having a secure paycheque were pretty terrifying.
Though Roberts says she is planning for 6,000 GoForth students in 2011, she admits there were initially many days when she just wanted her old job back. The first few months of not having a secure paycheque were pretty terrifying. Spending my retirement savings on this idea was also terrifying, says Roberts. She attributes GoForths quick success to the time spent conducting research and talking to small business owners in Canada to understand the needs of the market. Just two years after launching, GoForth is already looking to expand to new markets, including underserved populations like aboriginal people. Roberts is busy working with translators to adapt the curriculum for other languages. For Roberts, who says she first felt the thrill of entrepreneurship when she made and sold Christmas decorations to teachers and friends in Grade 3, building relationships with entrepreneurs and organizations provides the greatest excitement to her job. Were helping other people succeed in small business and helping them to achieve their dreams of independence, she says. Roberts thinks small businesses are crucial for the nations balance sheet, as they generate income, taxation revenue and create jobs. If we can help a few more of them succeed, she says, thats a really great thing for the Canadian economy.
If I Knew Then
Biolithic
GettinG started: This was my masters
Maziyar Khorasani
name: Maziyar Khorasani, VP business development Company: Biolithic Corp. What they do: Biolithic is developing a low-cost diagnostic device for medical and non-medical applications that will eliminate the need for doctors to send medical samples away to an off-site lab. if i KneW then, i WouLd have more effectively sought out experienced individuals in the life sciences sector from the U.S.
degree project at the University of Alberta so it was something that I thought, at the time, was at a point where we could commercialize the technology. Ive learned that I was a little incorrect there. We could have waited a little longer to launch. The other three founders and I had a great vision for technology but we didnt really know where we were going to go with it. We had to narrow it down and we narrowed it down to medical applications as that seemed to be what our strength was in.
the faLLout: My first company was
investors are more wary, which made it much more difficult to raise the capital required. Another big challenge is Alberta hasnt had the biggest share of life science successes. There are only a few life science companies that have been very successful in Alberta and in Canada, so its hard to raise that pool of resources to feed off The U.S. in comparison just blows us out of the water in the life sciences sector. Having to move forward without the experienced personnel makes it much more challenging, but its also a great learning opportunity.
in hindsiGht: It is a people business that
Ryan GiR aRd
launched during boom times so there was lots of money. Everyone was throwing money at projects, and people were excited about this kind of stuff. That wasnt that far away; it was around 2007 or so. But things have been more economically challenging now. There is less capital to work with and
is what Ive learned. It is knowing how to deal with people both internally and externally. Dealing with your own founders and employees is a serious factor that you have to take into account, and also dealing with people on the outside. The better you are at dealing with people, the more successful youll be.
DECONSTRUCTION
Albertas Dinosaur Money
Forget the beaver, elk and polar bear.
The Royal Canadian mint is packing some more ferocious Canuck creatures on a special edition of its silver coins to celebrate the 25th anniversary of Drumhellers Royal Tyrrell Museum (right). The mint stamped dinosaurs that once roamed Albertas badlands, like the plant-eating Euoplocephalus tutus, whose name means well-armoured head, onto the backs of its special edition coins last year. Geoff Morgan
The well-armoured-head dinosaur lived in alberta 70 Million yeaRs ago, and was 5.5 MeTRes long and weighed 2.5 Tons
The armadillo-like dinosaur appears on the back of a 99.99 per cent silver coin with a face value of $4 and weighT of 15.87 gRaMs
only 13,000 of
the Euoplocephalus coins were minted No two coins are alike due to the selecTive finish on the reverse side of the coin The Albertosaurus, cousin of the fearsome T-rex, appears on a 50-cent coin that has solD MoRe Than 12,000 uniTs to date
upstarts
stAtus:
insight emissions
Tr avel alber Ta
[Capturing sweet methane] is a lowhanging fruit for producers to pick in terms of fuel and gas efficiency and environmental stewardship.
Joshua Anhalt
Joshua Anhalt, president, and Joshua Pinter, chief technology officer

Biz: Insight Emissions writes software and
assembles hardware kits comprised of tablet computers and monitoring cameras for upstream oil and gas facilities. The technology lets oil and gas producers closely monitor their sweet methane, ethane and propane emissions.
Activities: Oil and gas plants produce
both wanted and unwanted sources of methane gas. The wanted gas can be used to run pneumatic devices and pumps. The unwanted gas escapes into the atmosphere. Insight provides a way to monitor both, so energy producers can harness one methane source and control the other.
Joshua Pinter (left) and Joshua anhalt
out
Survey Says Relocation Reluctance
Few CanadianS aRe willing to ReloCate FoR woRk. Fully nine in 10 agree that they would rather not relocate for a job, according to a poll conducted by Ipsos Reid of 1,046 respondents on behalf of Microsoft Corp. Eight in 10 Canadians agree that location can be a barrier to securing the best jobs, but many still refuse to move.
1. Middle-aged CanadianS, between 35 and 54 years
old, are least inclined to relocate at 93 per cent.
2. 86 per cent of youngeR CanadianS, aged 18 to 34,
would rather not relocate for a job.
3. At 84 per cent, albeRta had the loweSt peRCentage of people unwilling to move for work. 4. atlantiC CanadianS, ManitobanS and people in SaSkatChewan are least inclined to relocate for work
at 96 per cent.
The survey intended to show Canadians attitudes toward technology and whether it helps people avoid the need to move for a job. Atlantic Canadians and people aged 18 to 34 agreed in the greatest numbers with the statement, Technology should help people avoid the need to relocate for work.
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TO THE LETTER
Send us your thoughts: feedback@albertaventure.com
Each issue, Alberta Venture will use this space to publish your thoughts. The author of a letter that has caught our interest will receive a book from our business library. Send your comments to feedback@ albertaventure.com. Alberta Venture reserves the right to edit letters.
Income Trust Column Sparks Debate

Re: Goodbye, and Good Riddance December 2010
I am certaIn that moSt anyone InveStIng
In a coLumn dated december 1, 2010,
hoW totaLLy facILe for fabrIce tayLor
in the oil and gas trust sector realized that they were buying units in a depleting asset. You could say that about Imperial Oil or Exxon. Isnt it up to the investor to decide? Whether or not the oil and gas trust units they purchased had management, the created accretive value was up to the investor. The depleting asset argument could not be said for the business trust sector, unless you feel that business in Canada is a depleting asset. As far as tax leakage is concerned, the argument that Fabrice Taylor puts forward about the proof that there was a tax loss based on the value of the outstanding shares going up or down on conversion between the corporate and income trust structure representing the governments share of the cash flow is bogus. Stating that money that goes to investors as distributions, who then pay tax on this money, leaves the economy worse off than just sending more tax to the treasury is sort of like saying we would all be better off if we worked for the state and then they would take all our salaries to look after us. For Canadian taxpayers, the revenue issue is a red herring. Estimates of the revenue impact vary widely and are very sensitive to parameters about which too little is known. In any case, the biggest tax leakage is to retirement savings vehicles. Any revenue lost in the short term is in fact just deferred. It will be recovered at full personal income tax rates, instead of at the lower rates applied to capital gains and dividends. Finally, it will be recovered just when Canadas aging population puts maximum strain on public services such as health care. How many times does the tax leakage argument need to be repeated in the press before I myself am brainwashed into believing it? Give it up!
geoffrey Laxton Hamilton, Ontario
for Alberta Venture, Fabrice Taylor stated that Of all the great fibs to roll off the Bay Street assembly line, none is more laughable than the assertion that income trusts didnt cost the government anything. The claim [is] demonstrably not true. However, Taylor provides no evidence to support the claim that income trusts caused tax revenue losses for the federal government. Here is my summary of the best analysis available. The federal department of finance said that income trusts resulted in $500 million in tax revenue losses for the federal government in 2006 (Backgrounder, January 28, 2007). This was fully rebutted in a press release by HDR/HLB Decision Economics on February 1, 2007, describing consultant Dennis Bruces testimony from the day before the Commons Finance Committee. Thus, when Dennis Bruce corrected all the errors and included deferred taxes, there was no tax leakage in 2006, not $500 million as finance had said. Why is it that the proponents of the conventional wisdom about so-called tax leakage do not provide any reputable study to back up their position? Studies by the department of finance do not qualify as reputable studies as they are full of errors and omissions.
W.t. Stanbury, professor emeritus, University of British Columbia, and author of a forthcoming book on the income trust tax
to argue in Alberta Venture magazine that income trusts must have caused tax leakage on the basis that their market valuations increased upon their announced conversion to trusts. Rather than confront the government to prove its own case about tax leakage, Taylor would prefer to forage around looking for arguments that hold no water. These conversion announcements increased the value of these companies for the simple fact that cash in investors hands is worth considerably more than cash residing inside of companies, the evidence of which is everywhere you look. Why would National Banks stock price rise on the announced increase in their dividend? Was it because of tax leakage? Why did Inco pop when they announced their special $10 dividend? Was it because of tax leakage? When these trusts values increase upon their announced conversion back to corporations mean that they are causing tax leakage? What about the real tax leakage that occurred from the foreign leveraged buyout of Prime West Energy by Abu Dhabi Energy, etc. That is what Fabrice Taylor meant by good riddance, that its better for foreigners to own Prime West than taxable Canadians?
brent fullard By email
CERI 2011 NATURAL GAS CONFERENCE

February 28 - March 1, 2011, Calgary TELUS Convention Centre
Gas Supply By Location Next Generation of Gas Supply The Other Players in the North American Gas Game! Conventional and Unconventional Demand Looking into the Crystal Ball The Industry Image Executive Panel Discussion: Natural gas supply appears to be slipping south of the border. What do we do now???
Supply, Supply, Supply and Demand

Session Topics Include:
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For more information call: (403) 282-1231 visit our website: www.ceri.ca or email: conference@ceri.ca
1/16/11 10:27:12 AM
WINNERS CIRCLE Alberta Venture salutes individuals and companies which have been singled out for recognition of their accomplishments. Send your notices of awards or appointments to winnerscircle@albertaventure.com
The Alberta Motor Transportation Association (AMTA) appointed Don Wilson as its new executive director. The Natural Sciences and Engineering Research Council awarded Peace River-based novaNAIT Boreal Research Institute a $2.3 million grant for forest research. Shell Canada has also committed $520,000 to the project. Twist Marketing won a tourism branding project for Medicine Hats Tourism Industry Group. The Calgary-based company beat out international competition to take on the new branding assignment. The 2010 BioAlberta Achievement Awards were presented to Dr. Marvin J. Fritzler, Canadian Bio-Systems Inc., and Dr. Matt Coffey, all of Calgary. The awards recognize individuals and organizations that have made outstanding contributions to the development of Albertas life sciences sector. The Alberta Business Family Institute honoured the Brewster family. Six generations of the Brewster family have been involved in businesses that include Brewster Adventures, Brewster Mountain Lodge and Shadow Lake Lodge. Calgary-based Bellstar Hotels & Resorts acquired Ultimate Resorts & Hotels. The acquisition adds more than 300 accommodation units to Bellstars portfolio, including units in Kicking Horse Mountain Resort and in Canmore. The Womens Executive Network named 11 Albertans to its list of Canadas Most Powerful Women: Top 100. Ann Lewis-Luppino,
/ Awards/ Events
Gwyn Morgan has been inducted to the Order of Canada
High Honour
Governor General David Johnston added five Albertans to the Order of Canada at the end of December 2010. Retired Calgary oilman Gwyn Morgan was named member of the order for his contributions as a business and community leader and as a philanthropist. Retired University of Calgary professor Christopher Wiseman was honoured for his contributions to the development of creative writing. Three Edmontonians were also named members of the order, longtime swimming volunteer Ollie Currie, leading community volunteer Robert C.P Westbury and Charlene . M.T. Robertson for her contributions to neonatal and pediatric intensive care. More than 5,000 people have been inducted into the Order of Canada since it was established in 1967 to recognize a lifetime of outstanding achievement, dedication to community and service to the nation.
Margaret-Ann Armour, Lesley Conway, Kristine Delkus, Lorraine Mitchelmore, Susan Gallacher, Lakshmi Raj, Michelle Rempel, Irene Lewis, Arlene Ponting and Jacqueline Shan were recognized. Sherri Brillon of Encana Corp. was inducted into the networks hall of fame. Triple-i Tracking Technologies Inc. won the second
annual Hatch business plan competition. The trio running Triple-i, Dean Vistin, Katrina Lee and Igor Teterski, are 2010 NAIT graduates who have created an asset management system. The Edmonton Journal appointed Lucinda Chodan as editor-in-chief. Chodan joins the Journal from the Victoria Times Colonist. Visimonde Inc. founder Scott Rusnak and Edmonton Oilers president and CEO
Patrick LaForge
Star Student
The Canadian Manufacturers and Exporters Association honoured one University of Alberta student with its Business Studies Award this December. Summer Curtis, a fourth-year bachelor of Summer Curtis (middle) commerce co-operative education student, is majoring in East Asian Studies at the University of Alberta. She was one of the first students to participate in a partnership program between the Business Co-op Program and AISEC Edmonton. Curtis won the award for her knowledge of East Asian economics, the Chinese language and Chinas history and culture.
together announced the hockey club would launch an online virtual community, Rinksters, for children aged six to 12. AV
Afexa Life Sciences Inc.s chief scientific officer, Jacqueline Shan, was named one of Canadas Most Powerful Women
lifestyle esseNtiAls Why good grooming is your most important accessory

showing up at the Getaway for hair removal, for example, is ushered directly into the private room where hell be getting the service. Many spas offer this sense of privacy as an integral part of the experience. Edmonton lawyer Patrick Nugent had his first facial in the early 1990s. (In a facial, an esthetician cleans, exfoliates and hydrates the skin.) Since his first spa visit, Nugent has gone for a facial three or four times a year, usually at Edmontons Perugia or Healing Waters spas. for him, its all about the relaxing hour away from it all. Its pleasant, he says. The smell, the massage, the quiet ... Im never as relaxed as I am during that hour. The services offered by day spas can vary widely. Some are basically tricked-out beauty parlours, offering the hair and skin basics with a massage chair in the back. Others offer more specialized services, from certified massage therapy and hot stone massage to medical-esthetic services such as Botox and dermabrasion. The Getaway calls on the services of Dr. Richard Kowalewski for medical-esthetic treatments. The goals are different for men, Burwash says. We aim to masculinize the mans face, not smooth it out, like most women are after. The line between grooming and medical-esthetic services and wellness gets even blurrier when you include such spa add-ons as life coaching. The Getaway offers image consultation packages for clients that can include skin analysis, haircut, in-home closet consultation and even personal shopping. This is a new and growing side of the business, Burwash says, a natural extension of what we do. This could be a guy whos lost some weight and needs a new wardrobe, someone whos gone through a divorce or someone looking for an edge in their business life. Whatever their particular situation, a staff life coach can focus clients on goal-setting and moving forward. Most men are after a great haircut, massage or, like Patrick Nugent, a facial. And most men will stick to what works for them for the simple reason that it feels great. Im sure it has some kind of recharging effect, says Nugent. And Im happy that a facial helps my skin, but its really more about that hour of relaxation.
Putting the Man in Manicure

By MIfI PURVIS A greAt hAircut is A must-hAve for men. If theres no second
chance for a first impression, then it makes no sense to spend $1,000 on a good suit and $10 on a bad haircut. But a great haircut may require the average man to make a great leap, from the familiar confines of the local barber shop to a place that was previously the exclusive domain of women the spa. A decade ago, there was no place a guy could go in Calgary to take his hot stone massage like a man, or, for that matter, like anything at all. Seeing this unfilled niche in the burgeoning spa market, Annette Burwash opened the Getaway Spa for Men. Its a place where tired execs and others can come for a massage, a great haircut and maybe even a little laser skin therapy. Not that any of them would visit a spa together. Guys dont typically want to sit with their buddies with a towel on their heads, Burwash says of a mans approach to spa-going. Thats why, aside from haircuts, all our services are offered in private. A man
three looks to Avoid

A good tailor is an essential part of any mans wardrobe
ties Are for tying. If you feel like its time to loosen the tie, why stop there? Take it all the way off. A loosened tie looks sloppy; a jacket over a great shirt sans societys noose can look terrific.
Wrinkles only look good on elephAnts.
Everyone hates ironing, but for a shirt or blouse to look great it has to be wrinkle free. Learn how to press it properly, or have your shirts pressed professionally for under $4.
WeAr your ActuAl size. Wearing a jacket from heavier days makes both sexes look decidedly unsexy. Similarly, if your clothes are too tight, you risk showing off all kinds of things that should not be seen. Show off the new you, whatever its shape might be, either by buying new or visiting a talented tailor who can make your wardrobe match your measurements. >
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Visit our Executive Education section sponsored by MacEwan School of Business at www.albertaventure.com Find the perfect executive education program for your education needs.
A Straighter Style
the demAnd for super strAight womens hairstyles remains strong. A quality flat iron sets you back about $100. The Brazilian Blowout was a hugely popular longer-term solution until Health Canada recently warned consumers that the American-made straightening solution contains 12 per cent formaldehyde, a known carcinogen. (Only 0.2 per cent is allowed in cosmetics.) As a result, Health Canada has advised stylists to stop using this product. One alternative is the Keratin Complex treatment at Eveline Charles in Edmonton and Calgary, which costs between $300 and $500 and takes three or more hours.
Add Some Sparkle

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BizBeat Blog
Riverside Salon and Spas aim of maximum relaxation extends to its tranquil interior design
A Couple of Reasons
A strictly spA experience, Calgarys Riverside Spa doesnt offer salon services, says director Dan Hossli. Men and women alike come for massages, and a steam and Swiss rain shower with body jets are offered with the price of the experience. For the Gentlemans Paraffin Manicure ($50) or Pedicure ($85), men get a warm wax treatment instead of a polish, Hossli
riversidespa.ca
Oil and Gas editors picks And more!
says. Also popular with his male clientele is hair removal. Hossli has seen groups of guys come in together, but its not the norm. More typical, men come with their wives for the couples package. The Riversides Couples Retreat, a four-hour fest that includes massage, organic facial and pedicure, as well as tasty spa lunch, costs $640. AV
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Thank You!
On behalf of Alberta Venture, our partner, KPMG LLP, and all of the Fast Growth 50 sponsors, congratulations to those companies that made the 2011 Fast Growth 50 list featured in the January issue. Alberta Venture thanks its sponsors for their support in making this years Fast Growth 50 program a success. Your generous contributions make it possible for us to recognize the achievements of Albertas Growth Champions.
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By MARzENA CzARNECkA
The Firing Line

THE TopiC
Had enough of an employees bad habits? Heres how to send them packing
youve been there. All you want to do is point at the door and scream, youre outta here! This months guests are here to remind you why thats not necessarily a good idea.
oN THE HoT sEAT
William Armstrong, QC, partner with Calgarys Armstrong Management Lawyers
Craig Neuman, of Edmontons Neuman Thompson
erminating with just cause is probably the most contentious employment law issue any employer will ever grapple with. On the face of it, its a simple enough task. An employee does something very bad, thus providing the just cause for an immediate dismissal. The employer fires. End of story. Except, of course, its not. Calgary employment lawyer William Armstrong laughs when I tell him I want a blueprint for how to terminate with just cause and without fear. Im not sure you can ever do it without fear, because someone can always sue, he cautions. Its possible, of course, and Albertas Employment Standards Code tells you roughly when and how you can do it. But its not as easy as American sitcoms might make you think. Do I have a case to fire with just cause? is a question Craig Neuman, an Edmonton employment lawyer, fields almost daily from clients (usually followed by, And if I dont, how much is it going to cost me to get rid of this person?) Usually, Neuman has to disappoint the caller. The fundamental, underlying notion about just cause in the legal sense is that it has to be serious, culpable conduct of an employee, he explains. That means that to be just, the cause has to be very serious a minor performance deficiency does not justify termination, and a major one probably doesnt either. The employees stumble has to be huge. It has to amount to the employee essentially repudiating their obligations under the employment contract, Neuman
says. The act has to be culpable, too, which means It was an accident! actually does function as a get-out-of-jail-free card. So, something seriously bad and done on purpose gets you part of the way there, but nowhere near the finish line. Even when you are looking at an act thats serious in itself such as a theft or a glaring form of insubordination, a physical assault on a manager then youre saying, OK, thats probably just cause, but even in those circumstances, the days are gone when something like that would be immediate just cause, Neuman says. Armstrong agrees. Theres a good lawyers answer when an employer asks if theres cause, and thats, It can be, he says. Justifying the summary dismissal of a person without a penny of compensation is a fairly high hurdle to meet. OK, we get it, not easy. But possible, right? People can do it, Armstrong says, but it requires a great deal of legwork. If an employers lawyer gives just cause a nod, its the beginning of operation cover-your-behind. The lawyer will ask for records and documents galore, including statements from other employees or witnesses to the incident. I want to have the evidence now so that if I do end up in court months or years later, we have the goods, says Armstrong. (Good to know: under most circumstances, a terminated employee has up to two years to sue.) Now heres the really tough part, and the point which most employers flub. The employee does something purposefully terrible that clearly violates the employment contract. You call the lawyer for advice. The lawyer agrees. And then asks, When did this
happen? And what has the employee been doing since then? If the answer to the first question is three days or three weeks ago, and to the second, still working, youve probably shot yourself in the foot. How are you going to explain that to the judge? asks Armstrong. But we had to investigate! Sure, you did, and good for you. But while youre investigating, make the employee stay home (with pay), because every moment they stay on the job after the possible just cause incident weakens your case. So does how can we put this being too nice. Its human nature, and I understand it: most employers prefer to use carrots over sticks, says Neuman. That means that theyd rather reward good performance than actively point out the bad, even when it happens again and again. Thats what makes firing with just cause for incompetence nearly impossible. In most situations when an employer wants to get rid of a badly performing employee, the incompetence isnt a new thing. Theyve tolerated poor performance sometimes for years, they havent effectively dealt with in terms of accumulating and documenting warnings and feedback, and they call me one day and say, Ive had enough, says Neuman. And I have to say, I feel for you, but you havent managed the situation properly. If you want to terminate that employee for poor performance, youve got to get to work documenting that. At that stage, many employers thrown in the just cause towel and choose to ante up however many weeks pay the Employment Standards Code prescribes. Its not unusual for employers to, when they find out what they need to do, say that theyre not willing to go through that because it can impact their business in a negative way, and it may affect the morale of the people who stay, says Neuman. And when you dont have just cause in the legal sense, you will have to put up some money. The moral of the story: if youre going to fire for incompetence, do it sooner rather than later, and preferably while the employee is on probation, during which time no notice is needed for termination. But tread carefully here: an employee isnt automatically on probation just because shes new, or because >
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you think shes on probation. The probationary period and what it entails needs to be spelled out in the employment contract. Often, employers will choose to put up some money even if they have just cause. Armstrong has seen more than a few situations where, as he saw it, the employer had just cause and then some. And Id look at the facts and what they wanted to do, and ask, Why are you paying this guy a severance? he says. The employers response, usually, is that they dont want to air their dirty laundry in public. The lawyers response well, its to do what the client wants. In some circumstances, however, a lawyer may advise a client to consider discounting the severance. Its a practice thats not precisely sanctioned by the Employment Standards Code or other legislation in fact, its been squashed by a couple of courts but it still happens in the oil patch. Armstrong explains, We present the employee with three letters. Letter one says, youre fired with cause. Letter two says, without prejudice and notwithstanding that we have cause, were giving you this much in severance if you sign letter number three. Letter number three is the fabled release: the promise the employee wont sue. Unless, of course, a few months down the road hes still unemployed and angry and finds a lawyer with whose help he decides to argue that the release he signed wasnt valid because um, lets not go there. (If you want to go there, check out the position of the Alberta Human Rights Commission on severance agreements.) The Alberta Human Rights Commission, of course, is the watchdog that ensures just cause or other forms of employment termination dont violate the Alberta Human Rights Act. Few employers set out to violate the act or discriminate, but there are certain areas that may trip them up. In particular, situations that involve addictions and the extent to which employers need to accommodate employees with addictions may require specialized legal advice before you hand out that pink slip. Its an area where with a certain degree of interest we say, talk to a lawyer before you do anything, Neuman says. Its advice to keep in mind the next time you feel the urge to holler, Youre fired!
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Alberta Venture sits down with Shawn Denstedt, a business-side lawyer with the Calgary office of Osler Hoskin & Harcourt LLP, and Edward Molstad, aboriginal-side lawyer with the Edmonton office of Parlee McLaws LLP, to discuss the implications of aboriginal consultation. AV
Marzena Czarnecka is a Calgary-based business and legal affairs writer. She can be reached at mac@falstaffproductions.ca.
YOU DONT NEED A DEGREE TO INNOVATE.

Spending time assessing my company is: A) A good investment (turn to page 73) B) Something Ill get to. Eventually. (turn to page 7)
What is this? Start back at page 63.
1/10/11 12:35:00 PM
In fact, some of the best ideas come from the plant floor. Taking the time to create a culture of innovation is a huge step in creating a culture of productivity.
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PAGE 23
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ExEcutivE SpEak
High Flyer
New WestJet CEO reflects on the decisions that landed him the companys top job
todd korol
Theres a good fiT, and Then Theres gregg sareTsky
and WestJet. Saretsky, who at one point or another in his career has done every job an airline can offer short of flying the planes, seems tailor-made to lead a company that prides itself on customer service. He joined the company in June 2009 as vice-president of WestJet Vacations before becoming the executive vice-president, operations, in October 2009. His ascent up the corporate air stairs continued in April 2010, when he was named president and CEO. Nine months later, heres what he has to say about his new job. >
AV: Whats the best professional decision that youve made in your career? GS: Landing a job at WestJet. Its a great job with great people, and were doing lots of exciting things at a time when the companys right in the middle of a great growth plan with 45 more planes coming in the next six years. I cant imagine a better place to be. Whats the worst? It was being involved in a group at Canadian Airlines that decided to try to fly DC-10 transpacific, non-stop, to Hong Kong, where several months of the year the planes just couldnt make it. They just didnt have the range. Whats the biggest challenge that WestJet will have to address in the next few years? We have some very aggressive and exciting growth planned, and with that is going to come an opportunity for us to expand our employee base. Were just shy of 8,000 employees today, and in the next couple of years its very conceivable that well be over 10,000. What has, from the beginning, differentiated WestJet the most from our competitors has been our strong culture of engagement and guest service, and I think one of the challenges as we get that much bigger is how we keep a connectedness in the company. How do we keep the culture as vibrant and alive as it is today? Thats going to require more effort in a larger company than a company which is smaller. You spent a few summers as a flight attendant while you were in university. Do you think that this hands-on experience gives you a different perspective on the business that youre building? I think it does. Its given me the opportunity to have walked in the shoes of the people who are on the front lines every day doing what helps set WestJet apart. I spent a couple of summers as well as a customer service agent with Wardair, and so having worked in almost every area of the airline business over the last quarter century, I think it has uniquely situated me to really appreciate the work that WestJetters do and some of the challenges that they have. I think its made me a more empathetic boss.
Is there anyone in the business world that you admire? If so, why? I was going to say Warren Buffett, because hes a brilliant businessman whos made a lot of great business decisions, but Im going to change that up and go with Jim Sinegal, the CEO of Costco. Costcos one of my favourite stores because their model is so beautifully built around simplicity and driving value for guests. As the new CEO for WestJet, I think every day about how were going to better drive value to our guests. Whats your leadership style, and where did you learn it? Its a combination of management by objective and what I call management by walking around. I think people at WestJet would tell you that increasingly were talking about setting some pretty lofty
wine and chocolate, and that seems to go well with a busy workweek. Whats the most important book that youve read in the last year? We had Ken Blanchard here on our property last week, and he has a new book called Who Killed Change? Its really all about solving the mystery of how to lead people through change, and given where we are in our evolution here at WestJet, for me it was a moment of inspiration. It really hit home because it speaks to the things that were going to have to be good at as we drive change through our organization. Have you experienced failure? I dont know how you can go through a career and not experience failure. For me, I spent 13 years at Canadian Airlines, and
I get my emotional gas tank filled when Im out with WestJetters working on the front lines.
objectives for the organization and then managing to accomplish those objectives. Its about being driven to set goals and not being happy until we reach them. But its also about being visible, and being out there in the operation. We have 31 stations in Canada, and Ive made it a priority to visit all 31 in my first several months here in this role. Being in the operation, seeing WestJetters performing and interacting with guests, its like having one giant focus group from which to draw inspiration about the things that we do well and need to do more of and the things that we need to change. How do you spend your downtime? Do you have a guilty pleasure? I havent had a whole lot of downtime, because Im still carrying two jobs (Saretsky is still the executive VP of operations). When I do get downtime I like to read and play golf, but my guilty pleasure is red there was a period of time where we went for a year and a half not knowing if wed live to see the sun rise tomorrow. It wasnt uniquely my failure, but I was part of the senior leadership team that was struggling with keeping the airline going. What did it teach you? It taught me the importance of being absolutely focused on driving cost out of the organization, and how fragile a business is that doesnt have enough cash to keep it going. WestJets in a very enviable position with $1.1 billion in cash, but as I look at that it constantly reminds me of the need to be vigilant with respect to running the business in a way that doesnt compromise the cash position and the viability of the enterprise. It moves quickly, and our industry is very cyclical. You can move from being very comfortable with your cash position to being very worried about it depending on where you are in that cycle. AV
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The SmarT InveSTor
By fABRICE TAyLOR
Good Bet: Flow-Through Shares

Incentive to support oil, gas and mining turns into investor advantage
avvy investors are not always on the hunt for the next big thing or even the next great gusher. Its one thing to be prescient. But the wise investment strategist also makes stock picks based on solid if unspectacular performance as a way of balancing a portfolio against volatility. After all, you want some of the companies in your portfolio to click along in somnolent bliss and not cause you to wake up in a cold sweat. But in staying with equities, there are other strategies to consider if you dont want to go into fixed-income products. What if there was a way to buy value and whittle down your tax bill at the same time? Not only is such an investment above board and encouraged by the government, but there are pretty decent tax incentives as well. Which brings us to the subject of flowthrough shares. Many Canadian taxpayers are unaware of the deductions available in the flow-through shares of junior resource companies and other enterprises that qualify for the Canadian Exploration Expense (CEE). While not likely to evoke a lot of excitement, the benefit of flow-through shares as a way to
What is a flow-through share? A company sells you new treasury stock and uses the money to explore for resources, for which it earns a special tax deduction. Instead of keeping the deduction, the company flows it through to you, the investor, and it becomes fully deductible against your income. How does it work? In the simplest terms, you are taking taxable income and paying the rate of capital gains tax instead of the rate at which income is taxed. You are also able to delay the capital gains payable until you wish to sell the stock. Walk us through the typical process and tell us the most effective way to do this. Companies or brokerage houses will sell flowthrough shares directly or fund companies will sell managed limited partnerships throughout the year. We believe the highest chance of success is offered by managing individual portfolios for private clients. We have been successfully managing portfolios this way for three years now, and I have been managing flow-through portfolios for the last nine years.
get by donating to charity and getting the charitable tax credit. We summarize it this way: If this was income you were going to pay to the government in taxes, and you were going to make a charitable contribution this year anyway, then you absolutely should consider flow-through investing. The math is very powerful and we believe this is where the market is evolving to. Flow through also sells at a premium. Is there an optimal return where it makes more sense to buy hard dollars instead, factoring all this in plus tax rates? Because you have such a tax advantage, we try to flip investing on its head. Instead of trying to buy stocks that go up, we try to buy things that are less likely to go down. We focus on companies that have real tangible value and then we try not to pay too much for it. The market will try and sell you all sorts of combinations. However, we have been very successful with this strategy and with the added benefit of dramatically reducing the risk of the portfolio. If theres lots of flow through being sold, is it a good time to avoid buying? Again, this is like any other investment. It is always better to buy when nobody is interested and sell when the market gets hot. We like to make it clear to clients that this is still junior resource company investing with all the cyclical risk that that entails. Are there any other risks? Other than junior company risk, there is the less-talked-about risk that the company does not spend the flow-through money correctly and the CEE deduction is denied. The investor or the manager is responsible for making sure the company spends the money correctly. If a clear answer cannot be determined, then dont make the investment. That is why we spend so much time focusing on risk management. AV
Fabrice Taylor is The Smart Investor. He is an awardwinning journalist and equity analyst. The Smart Investor is an independent overview and assessment of investments available to Albertans. Alberta Venture assumes no responsibility for the accuracy of any stock recommendations. you can send letters about this column to feedback@albertaventure.com.
If you have a high income, its hard to beat this kind of investment as a means to lower your tax bill.
manage your taxes is a subject worth talking about. Doesnt everybody want to pay less tax? So, bear with me and I promise you will discover something useful in this little exploration of discovery. If you are not already realizing the benefits of flow-through shares, you will want to have this as an option for future years, especially those where you expect a sizable tax hit. The government wants you to support extractive industries oil, gas, and mining and has nice enticements for those who do, such as flow through. If you have a high income, its hard to beat this kind of investment as a means to lower your tax bill. To find out more, we asked a pro, Bill Harris of Avenue Investment Management, whose firm oversees more than $200 million in client assets. When is a good time to buy flow through? For example, if you buy in January, can you use a flow-through investment for the past tax year like an RRSP? When do you get the writeoff? The tax writeoff is applicable to the year the investment was made. I liken flow-through investing to fishing. You can only make the investment when the company is willing to sell new shares. Therefore giving yourself lots of time to assess opportunities is very important for landing the right kind of deal. Flow through gives you a full discount off your income, hence your tax bill, but the adjusted cost is zero for capital gains? Yes, because you get the CEE deduction, you now have a zero-dollar cost base security for calculating capital gains. The true power of this zero cost base security is the benefit you
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Inspired Leadership
Trish Bronsch is working towards a future without breast cancer and motivating others to do the same.
very job requires initiative, skill and dedication, but once in a while someone comes along and brings something more to the table, exceeding expectations and changing the course of an organization. When she began her career with a degree in Nursing with a subspecialty in psychiatry, Trish Bronsch never thought she would nd herself at the helm of one of Canadas leading charitable organizations dedicated to the breast cancer cause. A decade ago, Bronsch joined the Canadian Breast Cancer Foundation, a national volunteer organization, to spearhead the development of the Alberta Region. At the time, the Region had three paid staff and was raising approximately $80,000 annually. During her tenure, it has evolved into a regional organization encompassing Alberta, Saskatchewan, Manitoba and the Northwest Territories, with three ofces, 30 employees and a volunteer base exceeding over 2,000 individuals. Capitalizing on her previous experience in program design and delivery, Bronsch has introduced a number of new programs ranging from public education and awareness, to fundraising and partnership development to meet the long-term strategic goals of the Region. One of the programs Bronsch takes
special pride in is the Regions Youth Advisory Council. Recognizing that the future of any organization depends on getting young people involved, Bronsch led the development of the Prairies/NWT Regions Youth Advisory Council or YAC for short to involve those aged 16-25 in volunteerism and philanthropy, as well as provide a youth perspective on issues pertaining to fundraising, awareness, education and research. YAC continues to be the only program of its kind within the Canadian Breast Cancer Foundation, with 18 full-time volunteer Council members. In her time with the Canadian Breast Cancer Foundation, Bronsch has been twice selected by the National Board of Directors to assume CEO responsibilities on an interim basis for the national ofce. Her objectivity and multi-tasking skills
allowed her to successfully navigate the central service organization through complex periods of transition, while maintaining strategic and result-oriented leadership of the Prairies/NWT Region. As the CEO of a philanthropic organization reliant on public and private sector support and the dedication of thousands of volunteers, Bronsch herself is committed to giving back to the community. Shes served on the board of directors for organizations like the Edmonton International Film Festival, International Childrens Festival, Canadian Breast Cancer Research Alliance, and is a member of the Glenora Rotary and Synergy Networking Group. Bronsch has also been called upon to represent the breast cancer cause internationally as the Canadian representative on the Global Breast Cancer Planning Committee at the Leaders in Breastcare meetings in both Prague and Italy. A strong, dedicated leader committed to excellence, Bronsch builds, mentors and motivates a team of staff and volunteers committed to working collectively to create a future without breast cancer for the estimated 1 in 9 Canadian women who will diagnosed at some point during their lifetime. Her work has made an impact in many areas, from public awareness and fundraising to partnership development.
THEN
1986. Imagine, the death rate from breast cancer was 30% higher than it is today.
NOW
Diagnostics: Digital mammography, needle biopsies and sentinel node biopsies are examples of technologies that have been introduced to improve breast cancer diagnosis.
FUTURE
Personalized Medicine: Not everyone responds the same to treatment. Each year, as more is learned about genetics, molecular biology and immunology, more effective and less toxic treatments can be developed for individuals.
Breast Cancer Timeline: Then, Now & the Future

Screening: Mammography for breast cancer screening was in a trial stage. Therapeutic: Chemotherapy the use of multiple drugs and of post-surgical hormonal therapy was in the early stages of investigation. 2011. An estimated 23,000 Canadian women will be diagnosed with breast cancer this year, and over 5,000 will die from the disease. Surgery: Lumpectomy (removal of the cancer/ lump) followed by local radiation therapy has replaced removal of the breast for early stage cancers. This knowledge can also be used to target indicators for breast cancer development, thereby preventing cells from becoming cancerous. To learn ways you can help create a future without breast cancer visit, www.cbcf.org
Risk ManageMent
By RAy TURCHANSKy
How Is Your Risk Tolerance?

Timely examination of your portfolio helps strike the right balance
ne consequence of the recent global financial crisis is that investors have become more realistic about their own risk tolerance, and placed a new emphasis on capital preservation. The Economist Intelligence Unit, an arm of the firm publishing The Economist newspaper, reports that financial advisors say clients have become more risk averse and are more likely to ask about risk involved with different investment strategies and products. Corporate investors have taken the step of using a wider range of asset classes than they did 10 years ago in order to diversify risk, the report said. However, private investors still seem torn between accepting that investing is a long-term activity, even if they see losses, and wanting to avoid asset classes in which they have lost money in the past. Now, as investors make decisions prior to the tax-filing deadline, it is a good time to review risk strategies. An evolving trend lets investors price their risk, and then buy products or insurance that reduces that exposure to a comfortable level. While that is relatively new, history suggests that while time and circumstances change, there are certain tenets of finance that never go out of style. Sixteenth-century German banker Jacob Fugger the Rich is credited with the modern portfolio strategy of diversifying wealth into four equal parts of stocks, real estate,
He won the 1990 Nobel Prize in Economics, along with William Sharpe and Merton Miller, when they concluded that 87 to 95 percent of your investment return depends on which asset classes you invest in, and you can reduce risk by spreading out investments between equities plus fixed income and cash, and by diversifying within asset classes by geography, market capitalization and sectors. Canadians could realize better returns by diversifying their portfolios beyond our borders. The financials, materials and energy make up 70 or 75 per cent of the Canadian industry. That is a problem from a point of view that youre actually taking a very big sector bet, said Mark Bandola, vice-president of Franklin Templeton Investments, speaking at the western conference of the Canadian Pension & Benefits Institute. It still makes sense, he says, to have some exposure to non-Canadian equities, like big pharmaceutical companies. With equities, investors should be aware of the swinging performance pendulum between value stocks, mature companies that often pay dividends with little increase in share price, and growth stocks, young companies whose profits do not go into dividends but into expanding the firm thus raising share price. It still makes sense to diversify by style, said Bandola. There are distinct periods where styles continue to go in and out of
You name the risk, you should be able to buy the insurance.
bonds and gold coins. His philosophy was that three of the four will generate returns at any given time. Risk management through asset diversification was later advanced by Harry Markowitz, an economics grad student at the University of Chicago in the early 1950s when his study reported that when people invested in stocks that had a negative correlation one went up when the other went down it reduced the overall risk in a portfolio over time. favour. Values had a good run lately, but maybe growth is on a comeback trail as we move through recovery. A common strategy is dollar cost averaging, investing a fixed dollar amount regularly, so you buy more shares or units when their prices are low and fewer when theyre high. Similarly with bonds, sentiment often shifts between corporate and government bonds. Laddering bond or guaranteed investment certificate lengths, say from one to 10 years, reduces risk by ensuring you never have
everything maturing during a down time in the market. Another ploy is to divide bonds among three types high-yield bonds with higher risk but potentially greater returns, regular bonds that are relatively safe plus real return bonds that guarantee a return greater than inflation. Fixed income is a very important diversifier. It has very low correlations with other asset classes, particularly equities, says Gene Morrison, portfolio manager with Fidelity Investments. Its an important stabilizer, especially in a volatile equity market. Investors are increasingly using strategies and products aimed at reducing investment risk. While the financial crisis has been one reason people have embraced risk reduction, another is an aging population, as investors move from capital accumulation to preservation. Moshe Milevsky, finance professor at Torontos York University, says finsurance or financial insurance is the new wave. Youre going to be able to buy insurance products linked to finance and vice versa, so that when I accumulate wealth I buy my health insurance and home insurance and have someone manage my money, but as I start transitioning into retirement the two will be managed together, says Milevsky. In his recent book, Pensionize Your Next Egg, he advises that people planning for retirement go beyond asset allocation and also diversify among three investment products. Those include accumulation accounts with assets like stocks and mutual funds, guaranteed income products like annuities and defined benefit pensions, plus a combination of the two called guaranteed lifetime withdrawal benefit products. Financial institutions and insurance companies have a variety of plans. One example is a segregated fund paying out guaranteed minimum benefits that can increase according to market performance. What I see [in the future] is the ability to hedge out or insure any risk that you face, whether its sequence of return risk or bear markets when you retire or the real estate market collapsing or your unique inflation rate, says Milevsky. You name the risk, you should be able to buy the insurance. AV
Ray Turchansky is a veteran business writer and tax preparer. Send your comments to feedback@albertaventure.com
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UNdER mANAgEmENT By ThE pENsION INVEsTmENT AssOCIATION Of CANAdA IN 2009
invested 25.67% of those funds are bonds in Canadian nominal those funds are invested 15.88% of Canadian equities in those 13.03% of global funds are invested in equities
SIX MILLION
57%
Registered pension plan members in Canada. 10.4 % of those in Alberta
UNdER mANAgEmENT By ThE ALBERTA INVEsTmENT mANAgEmENT CORp . AImCOs CLIENTs INCLUdE 26 pENsION, ENdOwmENT ANd gOVERNmENT fUNds IN ThE pROVINCE. ThE fUNd pROVIdEs fOR 300,000 ACTIVE ANd RETIREd pUBLIC sECTOR EmpLOyEEs
$71BILLION
of 623,413 registered pension plan members in Alberta come from the private sector
12
pER CENT
AImCos total fund return for the year ending march 31, 2010
725
pension plans supervised by Alberta finance and Enterprises superintendents office
>
registered defined benefit plans covering 94,054 total members had unfunded liabilities
104
>
plans covering 147,053 members had solvency deficiencies
125
Sources: alberta Finance and Enterprise, alberta Investment Management Corp., Pension Investment association of Canada, Statistics Canada
The current maximum that a retired couple can collect in benefits from the Canada Pension Plan, Old Age Security and the Guaranteed Income Supplement.
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Under normal circumstances, this increase of the money supply would have stoked inflation. However, times are not normal.
The analogy Canadian Heaping mor if there is sti But, if it (th
Craig alexander, chiEf EcoNomisT, TD BANk fiNANciAL GRoUp
that comes to mind is one to which most s will relate: a campfire that is dying. e logs on the fire usually works, but only ll enough heat left in the dying embers. is too cool, just adding more wood e Feds cash) wont do a thing.
travel advisory Two of

cANAdAs LEAdiNg EcoNomisTs discUss ThE RoAd ThAT LiEs AhEAd >
By mAx fAwcETT phoTogRAphEd By mALcoLm BRowN ANd BooksTRUckER
todd hirsch, chiEf EcoNomisT, ATB fiNANciAL
MAx FAwCEtt, MAnAging EditOR, AlbertA Venture MAgAzinE:
Economic experts are divided on whether the near- and medium-term futures for the North American economy will be defined by deflation or inflation. Whats your take?
tOdd HiRSCH, CHiEF ECOnOMiSt, AtB FinAnCiAl: With the
U.S. economy in tatters, were clearly running a bigger risk of the long, hissing sound of price and asset deflation in the broader North American economy. In fact, if you take out some of the noise in the inflation data, general prices have been softening for some time. Demand in the worlds largest economy just isnt there to pull prices back up.
CRAig AlExAndER, CHiEF ECOnOMiSt, td BAnk FinAnCiAl gROUP: I think the question of inflation versus deflation is
not in 2011, and probably not at all. The analogy that comes to mind is one to which most Canadians will relate: a campfire that is dying. Heaping more logs on the fire usually works, but only if there is still enough heat left in the dying embers. But, if it is too cool, just adding more wood (the Feds cash) wont do a thing. The more fundamental problem of overleveraged households in the United States has not been addressed, and with a quarter of mortgages still under water there is far too little heat left in the fire of their economy. The most likely impact of the latest round of quantitative easing will be asset price inflation in emerging economies, to which American investors are looking for higher returns.
the odds are the central bank will not get the timing perfectly right.
FAwCEtt: What are the odds of a worst-case scenario Japan on the deflation side, and pre-WWII Germany on the inflation side unfolding? What would be the trigger for such a situation? HiRSCH: A 20-year long Japanese-style stagnation is certainly not inevitable,
really a discussion about timing and region. In the developing world, economies are booming and the pace of expansion is threatening to create asset bubbles and inflation problems. In the developed world, including North America, I agree that the risk of inflation is low in the near term. However, deflation outright contracting prices is a very low probability. Such an outcome would require a doubledip in the economy. Far more likely is disinflationary pressures, which amounts to inflation heading a bit lower over the next year or so. The real issue is that eventually the balance of risks will shift and the disinflation will abate. When that happens, inflation will become a greater risk but that is more likely in three to five years time.
FAwCEtt: The United States Federal Reserve has now enact-
but the U.S. situation is showing more similarities to Japan in 1990 than Germany pre-World War II. The Fed is clearly trying to learn from Japans mistake of not offering enough stimulus for long enough, and hence, were seeing more quantitative easing. Fortunately, the United States has a more flexible economy than Japan, and it has rushed to the aid of its banking sector, as politically unpalatable as that was. Japan didnt do enough of that in the 1990s. That will help the U.S. avoid most of the nastiness Japan suffered, but not all of it. Theres still more nasty coming.
AlExAndER: You know, Todd, Id say that the odds of the U.S. experiencing
ed two rounds of quantitative easing worth approximately US$2.3 trillion. What effect will this have on the probability of inflation or deflation?
AlExAndER: Quantitative easing has injected an enormous volume of money into the U.S. economy. Under normal circumstances, this increase of the money supply would have stoked inflation. However, times are not normal. The circulation of money, what economists call velocity, has fallen, so inflation just isnt a risk at the moment. However, as the U.S. financial system is gradually mended, the circulation of money will improve, and when that happens the onus will be on the central bank to reduce the supply of money and raise interest rates. The odds are the central bank will not get the timing perfectly right. If they tighten too soon, the economy will be hurt. If they rebalance policy too slowly, they will have an inflation problem. The central question is which side they will err on, and my bet is that policy will be left too accommodative for too long. Enjoy the low inflation while we have it. HiRSCH: Craig, I think youre absolutely correct to say that
a Japan-like lost decade are probably around one in five. Although it is by no means the most likely scenario, a 20 per cent possibility is significant, and TD Economics published a report on this precise subject. The U.S. has learned many lessons from the Japanese experience, but the one lesson that has received limited attention is that the root of the bad loan problem must be tackled. Financial intermediation wont become healthy until that problem is solved, and I think that radical mortgage reform is whats called for in order to do that. In terms of a German hyperinflation scenario, I would say that the odds are negligible. When I said that inflation will be a more significant risk in a few years time, I was talking about inflation being well above the Federal Reserve implicit comfort zone of around 2.0 to 2.5 per cent. The risk of the central bank permitting hyperinflation in the double digits is extremely low.
FAwCEtt: The price of gold has nearly tripled in less than five years, moving from less than US$500 an ounce to more than US$1,400 an ounce. What does this mean, and where is it headed next? HiRSCH: Gold is a funny commodity. We dig it out of the ground, we refine
times are not normal. But they are so abnormal that I dont believe the Feds quantitative stimulus will be inflationary:
it and we stick it back in the ground and through this process, somehow its worth $1,400 an ounce! And unlike other metals like nickel or copper, gold isnt even particularly useful. More than any other commodity, gold
ticker>>
FEbruary 25, 1901 American banker and financier J.P. Morgan merges his federal Steel Company with several smaller firms to form the Unit birth to companies like Exxon, Mobil and Chevron >> DEcEMbEr 23, 1913 President Woodrow Wilson signs the Federal Reserve Act into law,
GOld FEvER
thirty-one years ago, as the corrupting forces of inflation threatened to break free of the tenuous hold that the worlds central bankers had on it, the price of gold raced from US$250 an ounce all the way up to US$850 an ounce. Today, a different monetary crisis has propelled the price of gold skyward, past the US$1,000 barrier and towards the $1,500 mark. The spike in its price has led to a gold rush of a different kind, as people line up either to buy it or turn what they have of it into instant cash. In fact, with the U.S. printing press being used to create another round of quantitative easing and the possibility of more to come, Given the uncertainty that lies ahead, such a forecast isnt totally outside the realm of possibilities. But its important to remember what happened to investors who placed their bets on doomsday predictions the last time the price of gold went parabolic. Those who bought at or near the 1980 peak had to wait nearly 20 years just to break even on their investment, and even with the recent run-up in the price of gold they would only have earned somewhere in the neighbourhood of 50 per cent over the life of the investment. Over the same time period, they would have done better putting that money in a standard interest-bearing chequing account. Meanwhile, by way of comparison, every major North American stock index has produced at least a 20-fold return with dividends invested. Bearing those results in mind, it may be more useful for the average investor to look at gold as a barometer of instability and insecurity than the foundation of an all-encompassing investment strategy. As James Sinclair, a leading and longstanding voice within the gold investing community puts it, Gold is not to be loved or hated, accepted or refused. Gold is not barbaric or angelic. It fixes nothing in itself. But it is a mirror.
some investors are predicting that gold will surpass the $2,000 mark in short order on its way to $5,000 or even $10,000 an ounce. As global currencies are debauched, gold aficionados argue that the shiny stuff is the only remaining reliable store of value. The situation is so dire, some say, that a restoration of the linkage between gold and currency that Richard Nixon severed in 1971 is all but inevitable.
is perceived as a store of value for investors, and therefore it reacts much more to investor psychology and nervousness rather than global supply and demand fundamentals. And, as always, its price can move around quite dramatically. Interestingly enough, if you track gold prices over the past 500 years, they have almost always approximated the price of a mans good quality suit. Five years ago (at $500) it may have been a bit low, and now maybe a bit high. But the point is that despite its spectacular spikes recently, over the long haul, gold will track inflation. Where it goes in the short term future, though, is hard to speculate. Tell me with certainty where investor psychology is headed, and Ill tell you where gold prices are going.
FAwCEtt: The Canada dollar has played chicken with parity
over the last few months. With the American printing presses working overtime and the Canadian economy in comparatively good shape, will the loonie continue its advance against the greenback or retreat to more modest levels?
HiRSCH: I think that the Canadian dollar still has more upward momentum than downward. It really is a U.S. dollar story, however, and thats whats driving the loonie higher. In 2011, with the additional quantitative easing and a dim outlook for the U.S. economy, I see a continuation of the greenbacks depreciation. That said, anything can happen, and with wobbles in Europe (especially Ireland) in the latter half of 2010, that tends to drive nervous investors running and ducking for cover in U.S. dollar treasuries. Its a bit oxymoronic, but in times of great distress, the U.S. dollar is still king QE2 or not! So, if we were to see more tremors rising out of Europe (say, for example, Spain hits the wall in 2011), there could be a terror-led run-up in the U.S. dollar, and a weakening of all other currencies, including the loonie. AlExAndER: Like you, Todd, I think that the Canadian dollar
its a bit oxymoronic, but in times of great distress, the U.S. dollar is still king.
AlExAndER: Youre right, Todd, in saying that the recent run-up in gold prices has been entirely driven by investment demand. It is a reflection of the fact that it is priced in U.S. dollars, and the greenback has fallen in value. Gold has also been playing the role of a safe haven. Economic uncertainty and worries about global imbalances, like fiscal deficits in much of the developed world have also propelled buying of gold. There is also the view that all of the stimulus provided by central banks will eventually spark inflation, and gold is a hedge against inflation. But while I do think that there is a medium-term risk of inflation, I do think gold might have gone too far, too quickly. As such, a pullback seems likely at some point in the coming year, but it is likely to remain above $1,000 per ounce. However, there is a risk of inflation in the medium term, so having some exposure in portfolios might be prudent for investors.
is likely to average parity or better in 2011 and 2012. And like you, I see the main drivers behind the movement of the loonie being commodity prices and the difference in interest rates between Canada and the United States. In my opinion, commodity prices are likely to grind a bit higher over the next two years, but not dramatically. The bigger influence on the currency is expected to be interest-rate spreads, because while the U.S. Federal Reserve is not expected to >
ed States Steel Corporation, the largest business enterprise ever launched to date >> May 15, 1911 The U.S. Supreme Court orders the breakup of Standard Oil, giving creating the much-maligned central banking system and investing it with the power to issue legal tender. >>
raise rates before mid-2012, the Bank of Canada may lift the overnight rate by one percentage point in the second half of next year. That will mean that Canadian short-term interest rates will be 1.75 percentage points above U.S. rates, which could be very attractive to international investors. However, I do expect considerable volatility in the exchange rate, and there may be periods where the U.S. dollar appreciates, such as when there are global financial issues. Nevertheless, the loonie should continue to fly high.
FAWceTT: What can businesses and individuals do to prepare
recommendation might be to have some exposure to gold and/or real return bonds just in case inflation does become a problem in the future. These financial instruments also get used as a safe haven in troubled times. Think of these assets like air bags in your car: you dont expect an accident and you dont plan to use them, but it is nice to know you have them just in case something goes wrong.
HIrScH: I agree totally with you here, Craig, that decisions should be based on whats most likely to happen. Sometimes the extreme viewpoints can cause companies and individuals to take such risk-averse positions that they are totally paralyzed, and miss some really great opportunities. But if I am of the belief that deflation (or at least extremely low inflation) is still the most likely outcome, that could present a very favourable opportunity for companies looking to borrow for capital spending. Granted, taking on debt must always be done with caution, and it really depends on each individual companys own situation. But while they must eventually rise, borrowing costs are going to remain extremely low for a considerable length of time. If a company or individual has been expecting to make some major purchase of new equipment or other capital outlay in the future and will have to finance it anyway, they may want to consider moving that decision up a bit to take advantage of the still low borrowing rates. AV
for what lies ahead? Is there a strategy that addresses both concerns about inflation and deflation?
AlexAnder: Individuals and businesses should base deci-
sions on the most likely possibility, not the extreme risk scenarios like deflation or a major inflation episode. The most likely outcome is that inflation will remain low in the near term and rise towards two per cent in the second half of 2012. Based on this relatively common consensus among forecasters, no special actions are required by individuals and businesses. From an investors point of view, a possible
PreVenTIVe MedIcIne
If economists are split on whether the future will be defined by inflationary or deflationary pressures, theyre much more united on which theyd rather avoid. While inflation can be corralled by interest rates and borrowing policies, deflation is far more difficult to control. It is the economic equivalent of a death spiral, one in which lower prices lead to lower wages, which in turn suffocates demand and produces still lower prices, lower wages and diminished demand. The Japanese economy has been stuck in its own deflationary spiral for almost two decades now, and there are worries that North Americans may soon face a similar situation. Once deflation has set in, strong medicine is required in order to prevent the patient from getting worse. That medicine usually takes the form of direct fiscal stimulus, and in particularly grave cases the deliberate expansion of the money supply. But like most strong medicines, the cure can sometimes be nearly as dangerous as the disease. Too much stimulus can send the economy racing wildly away in the other direction at a clip too fast for even the most responsive policy-maker to keep pace. Economists and elected officials are hoping for something closer to equilibrium, the state of rest between demand and supply that the market is theoretically supposed to seek out. But as Nobel Prize-winning economist Joseph Stiglitz says, The reason that the invisible hand often seems invisible is that it is not often there. In its absence, heres how to deal with the alternatives.
deFlATIon
rISkS: Intense deflationary pressures can create strong disincentives for both consumer purchases and capital investment, since the price of a good or service down the road will almost certainly be lower than what it is today. As a result, jobs disappear and the value of almost every physical asset drops substantially, while debt becomes an even more punishing burden.
InFlATIon
rISkS: In extreme cases, the erosion of purchasing power
associated with inflation can wipe out a lifetimes worth of savings. Meanwhile, the interest rate hikes needed to keep it in check punish investment and borrowing and suppress opportunities for economic growth.
UPSIde: less is more, particularly for those holding liquid assets AVoId: Debt and consumer-oriented equities HoArd: Cash and fixed income products
UPSIde: A dollar wont be worth as much as it used to be, but neither will your debts. AVoId: fixed income products HoArd: Gold, physical assets
ticker>>
SEPTEMBER 20, 1917 The Income War Tax Act receives royal assent. Sir Thomas White, Canadas minister of finance, implemented the modest tax in order to pay off war-related debts and expenses. White regarded it as a temporary measure. >>
themoneyi$$ue
STOCK WATCH
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Fabrice flexes his analytical muscles to give the best advice about investing
MIxeD ReTuRNS FOR AlbeRTA STOCKS

By fABRiCE TAyLOR It was a mixed year for Albertas publicly listed companies. While the TSX/S&P benchmark index produced healthy returns, many of the provinces blue chip names Suncor, Imperial Oil, Canadian Oil Sands Trust, Encana either gave up ground or failed to match the index. >
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Ticker SU CNQ IMO TRP CVE ENB HSE ECA TLM COS-U AGU NXY CPG CP PWT-U SJR/B AET-U CU ERF NKO BTE TA PBG BNP-U PGF-U IPL-U VET PBN PPL ACO/X TCW PRQ PD KEY PEY ESI PVE POU DAY WJA VSN CPX CWB NAE-U ALA BNK CR CLT PXX TET
Name SUNCOR ENERGY INC. CANADIAN NATURAL RESOURCES LTD. IMPERIAL OIL LTD. TRANSCANADA CORP . CENOVUS ENERGY INC. ENBRIDGE INC. HUSKY ENERGY INC. ENCANA CORP . TALISMAN ENERGY INC. CANADIAN OIL SANDS TRUST AGRIUM INC. NEXEN INC. CRESCENT POINT ENERGY CORP . CANADIAN PACIFIC RAILWAY LTD. PENN WEST ENERGY TRUST SHAW COMMUNICATIONS INC. ARC ENERGY TRUST CANADIAN UTILITIES LTD. ENERPLUS CORP . NIKO RESOURCES LTD. BAYTEX ENERGY CORP . TRANSALTA CORP . PETROBANK ENERGY & RESOURCES BONAVISTA ENERGY TRUST PENGROWTH ENERGY TRUST INTER PIPELINE FUND LP VERMILION ENERGY INC. PETROBAKKEN ENERGY LTD. PEMBINA PIPELINE CORP . ATCO LTD. TRICAN WELL SERVICE LTD. PROGRESS ENERGY RESOURCES CO. PRECISION DRILLING CORP . KEYERA CORP . PEYTO EXPLORATION & DEVELOPMENT CORP . ENSIGN ENERGY SERVICES INC. PROVIDENT ENERGY LTD. PARAMOUNT RESOURCES LTD. DAYLIGHT ENERGY LTD. WESTJET AIRLINES LTD. VERESEN INC. (Formally Fort Chicago Energy) CAPITAL POWER CORP . CANADIAN WESTERN BANK NAL OIL & GAS TRUST ALTAGAS LTD. BANKERS PETROLEUM LTD. CREW ENERGY INC. CELTIC EXPLORATION LTD. BLACKPEARL RESOURCES INC. TRILOGY ENERGY CORP .
Price* $35.96 $41.84 $37.06 $37.07 $31.47 $56.80 $24.57 $28.57 $19.92 $25.36 $85.29 $21.89 $42.81 $65.72 $22.17 $20.68 $24.60 $51.57 $30.34 $96.40 $43.30 $20.93 $43.48 $28.45 $13.10 $15.00 $42.90 $19.46 $21.18 $57.63 $21.28 $11.50 $9.02 $35.30 $17.52 $13.73 $7.74 $27.35 $9.99 $14.05 $12.58 $23.93 $27.37 $12.13 $20.35 $6.68 $19.07 $17.02 $5.59 $11.36
Market Cap $55,791,419,392 $45,440,421,888 $31,700,439,040 $25,747,820,544 $23,247,919,104 $21,894,330,368 $20,983,840,768 $20,919,349,248 $20,521,140,224 $13,763,149,824 $13,185,930,240 $11,520,679,936 $11,341,750,272 $11,213,840,384 $10,244,140,032 $9,079,207,936 $6,788,056,064 $6,498,777,088 $5,485,237,248 $4,926,218,240 $4,916,429,824 $4,657,891,840 $4,574,202,880 $4,354,944,000 $4,310,420,992 $3,865,020,928 $3,861,444,096 $3,634,587,904 $3,462,317,056 $3,362,533,120 $2,989,573,120 $2,507,575,040 $2,482,045,952 $2,445,029,888 $2,244,435,968 $2,098,017,024 $2,083,516,032 $2,045,640,960 $2,031,864,960 $2,027,497,984 $1,975,713,024 $1,933,936,000 $1,819,361,024 $1,785,548,032 $1,706,326,016 $1,637,942,016 $1,544,654,976 $1,520,019,968 $1,509,139,968 $1,317,492,992
52 Week $39.50 $42.05 $43.50 $39.28 $31.04 $58.25 $30.88 $36.65 $20.87 $33.05 $91.25 $26.91 $43.69 $67.50 $23.96 $23.50 $25.14 $52.35 $30.50 $115.87 $44.42 $24.00 $58.77 $28.55 $13.34 $15.39 $43.88 $34.00 $22.35 $58.33 $21.09 $14.70 $9.73 $36.42 $18.15 $17.04 $8.26 $27.64 $11.68 $14.49 $13.27 $24.84 $27.72 $14.98 $22.27 $9.74 $21.00 $17.32 $5.68 $11.83
*All information as of December 2, 2010
#16
Turnover at the top for Shaw

Jim Shaw accelerates his departure from the corner suite at Shaw Communications (TSX:SJR.B) after an odd performance at a November investor meeting that drew raised eyebrows from portfolio managers and company officers alike. Shaw issued a release afterwards saying, We are well underway in the integration of the Shaw Media assets, and shortly thereafter names Jims brother Brad as the companys new president.
52 Week Date 12/04/2009 12/02/2010 04/26/2010 10/19/2010 12/02/2010 12/02/2010 01/05/2010 01/14/2010 01/11/2010 04/12/2010 10/26/2010 04/23/2010 05/03/2010 10/25/2010 11/04/2010 10/21/2010 12/02/2010 11/26/2010 12/02/2010 04/15/2010 12/02/2010 02/22/2010 04/05/2010 12/01/2010 12/01/2010 11/24/2010 12/02/2010 12/18/2009 10/12/2010 12/02/2010 12/01/2010 01/11/2010 01/18/2010 12/01/2010 11/10/2010 01/19/2010 10/20/2010 12/01/2010 03/18/2010 03/11/2010 10/25/2010 10/18/2010 12/02/2010 12/18/2009 10/20/2010 04/06/2010 11/04/2010 12/02/2010 12/02/2010 09/08/2010
52 Week $29.91 $31.96 $36.98 $30.01 $24.26 $45.00 $24.21 $27.70 $15.71 $24.24 $51.39 $18.33 $35.30 $49.58 $17.09 $18.37 $18.77 $41.01 $18.22 $89.25 $27.03 $19.55 $35.30 $19.90 $8.43 $9.00 $30.01 $18.56 $16.34 $43.08 $10.43 $10.30 $5.99 $22.82 $11.68 $11.38 $4.37 $12.53 $8.40 $11.35 $7.75 $20.34 $19.85 $9.68 $16.28 $5.07 $11.60 $8.76 $2.15 $6.90
52 Week Date 05/21/2010 08/25/2010 11/30/2010 05/06/2010 02/11/2010 06/17/2010 08/25/2010 08/25/2010 07/05/2010 09/29/2010 06/29/2010 08/25/2010 08/25/2010 02/08/2010 05/05/2010 05/07/2010 08/24/2010 12/03/2009 05/06/2010 11/29/2010 12/09/2009 05/06/2010 09/23/2010 12/08/2009 05/06/2010 05/06/2010 12/14/2009 11/29/2010 05/21/2010 12/03/2009 05/25/2010 10/27/2010 05/25/2010 12/03/2009 12/09/2009 08/27/2010 05/06/2010 12/07/2009 07/05/2010 08/25/2010 05/06/2010 12/09/2009 02/05/2010 05/21/2010 05/25/2010 12/09/2009 12/08/2009 05/21/2010 02/25/2010 12/08/2009
Total Return YTD* -2.93% 10.59% -6.99% 5.56% 19.29% 21.80% -14.06% -15.02% 2.90% 1.74% 28.09% -12.49% 15.36% 18.32% 29.98% -0.17% 29.98% 22.42% 35.67% -1.90% 55.43% -4.94% -15.78% 36.16% 39.52% 48.35% 42.29% -37.82% 29.36% 27.47% 48.68% -15.41% 17.65% 53.44% 34.63% -6.77% 41.04% 85.78% 4.11% 12.59% 27.35% 20.25% 26.08% -3.84% 17.42% 7.88% 31.06% 61.23% 117.72% 39.23%
5 Year Total Return 7.86% 56.28% 4.94% 24.01% 0.00% 87.21% 4.10% 8.38% 8.67% 29.40% 264.95% -17.67% 218.70% 39.94% 12.61% 103.23% 42.88% 37.32% -9.47% 86.50% 295.01% 5.05% 397.57% 32.44% 15.59% 134.28% 104.52% 0.00% 100.86% 55.13% -14.91% -30.58% -65.60% 159.61% 5.90% -33.18% 25.74% -15.84% 2.62% 13.22% 2.34% 0.00% 72.54% 30.93% 10.69% 70.30% 4.89% 175.02% 70.46% -22.88%
Sector Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Basic Materials Energy Energy Industrial Energy Communications Energy Utilities Energy Energy Energy Utilities Energy Energy Energy Energy Energy Energy Energy Utilities Energy Energy Energy Utilities Energy Energy Energy Energy Energy Consumer Energy Utilities Financial Energy Energy Energy Energy Energy Energy Energy
2010 Revenue $32,242,999,808 $12,752,999,936 $22,595,999,744 $8,213,000,192 $12,794,313,472 $14,171,000,064 $17,052,000,000 $9,614,999,808 $6,938,999,936 $3,419,000,000 $9,616,000,000 $6,413,000,064 $1,172,950,016 $4,809,099,904 $2,498,000,000 $3,717,580,032 $971,600,016 $2,623,500,032 $1,117,491,024 $389,591,000 $813,676,000 $2,771,000,000 $1,791,659,968 $792,106,976 $1,126,422,032 $1,001,774,976 $603,100,000 $879,192,992 $1,214,975,024 $3,364,999,936 $1,263,900,976 $376,654,000 $1,280,182,976 $1,883,753,984 $227,659,000 $1,230,372,976 $1,784,006,976 $159,834,000 $470,517,000 $2,486,488,000 $671,155,008 $1,015,526,560 $642,762,992 $398,972,000 $1,336,840,000 $119,379,000 $177,983,000 $206,170,000 $97,917,000 $246,971,000
#10
Thanks for that

Just when sentiment toward bitumen plays was starting to turn, Canadian Oil Sands Trust (TSX:COS.UN) tells investors their distributions will be cut by 60 per cent once the trust becomes a corporation in the new year. It turns out that keeping those bitumen plants running costs a lot of money at least more than anyone at Syncrude, of which COS owns more than a third, anticipated. Units drop 14 per cent.
Visit Albertaventure.com to see a full rundown of almost 200 companies and extended stats.
themoneyi$$ue
TOP 50 ON THE TSX VENTURE
STOCK WATCH
When markets are uncertain, Fabrice has to look even harder to find good values.
To peer into the tea leaves that was this years performance, it seems that renewed interest in the oil sands will do right by the shares of companies involved in that work. The gas glut, according to analysts, shows no sign of abating for several years.
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Ticker CNE IAE PPY/A SGY WSX ARN POE NLR PUR CVL RPL CDI NVS WRG RP EUG YO SOG SDX WEE CVU/A BMX/A ZED REL SRN ALH CYR CXP TOL TVE SYZ LS EPL AOS CWC ISC BRY CYG VQS CLN AMA AUT AE/A PTT WX PHN PNE RFC CFL-U PYN
Name CANACOL ENERGY LTD. ITHACA ENERGY INC. PAINTED PONY PETROLEUM SURGE ENERGY INC. WILD STREAM EXPLORATION INC. ARCAN RESOURCES LTD. PAN ORIENT ENERGY CORP . NULOCH RESOURCES INC. PURE TECHNOLOGIES LTD. CERVUS EQUIPMENT CORP . RENEGADE PETROLEUM LTD. CANELSON DRILLING INC. NOVUS ENERGY INC. WESTERN ENERGY SERVICES CORP . REALEX PROPERTIES CORP . EUROGAS CORPORATION YOHO RESOURCES INC. STRATEGIC OIL & GAS LTD. SEA DRAGON ENERGY INC. WAVEFRONT TECHNOLOGY SOLUTIONS SEAVIEW ENERGY INC. BELLAMONT EXPLORATION LTD. ZEDI INC. RELIABLE ENERGY LTD. SUROCO ENERGY INC. ALHAMBRA RESOURCES LTD. CIRRUS ENERGY CORP . CANADIAN PHOENIX RESOURCES TRIOIL RESOURCES LTD. TAMARACK VALLEY ENERGY LTD. SYLOGIST LTD. LAKESIDE STEEL INC. EAGLE PLAINS RESOURCES LTD. ALBERTA OILSANDS INC. CENTRAL ALBERTA WELL SERVICE IROC ENERGY SERVICES CORP . BRI-CHEM CORP . CYGAM ENERGY LTD. VIQ SOLUTIONS INC. CULANE ENERGY CORP . AEROMECHANICAL SERVICES LTD. AUTOMATED BENEFITS CORP . ANTERRA ENERGY INC. PRIMERA ENERGY RESOURCES LTD. WRANGLER WEST ENERGY CORP . PHOENIX OILFIELD HAULING INC. PINE CLIFF ENERGY LTD. RIFCO INC. CANADIAN EQUIPMENT RENTAL POYNT CORP .
Price* $1.61 $2.16 $7.93 $7.32 $9.35 $5.07 $6.60 $1.75 $4.92 $14.05 $3.90 $3.48 $0.96 $0.29 $8.00 $0.80 $3.00 $0.85 $0.28 $1.12 $1.20 $0.61 $0.80 $0.32 $0.60 $0.69 $0.78 $1.42 $5.32 $0.46 $2.39 $0.32 $0.68 $0.44 $0.27 $0.99 $3.05 $0.42 $0.45 $1.30 $0.26 $0.25 $0.11 $0.35 $3.05 $0.11 $0.38 $0.76 $2.75 $0.06
Market Cap $730,284,096 $554,820,928 $410,662,400 $409,777,600 $394,376,288 $379,805,600 $326,682,208 $228,029,200 $218,130,000 $200,090,096 $192,760,608 $184,969,408 $159,775,904 $152,989,296 $143,151,904 $124,894,800 $120,004,800 $106,604,496 $105,268,600 $95,265,512 $87,560,472 $86,969,856 $75,268,512 $74,383,560 $73,167,504 $71,756,072 $68,837,600 $65,645,840 $64,315,380 $62,032,160 $48,204,540 $47,594,080 $47,353,488 $45,539,352 $44,506,152 $43,200,600 $41,932,272 $41,034,392 $37,815,340 $35,346,680 $27,976,960 $27,212,180 $26,976,510 $21,565,680 $19,720,770 $18,594,550 $17,535,360 $16,172,340 $15,730,000 $14,847,990
52 Week $1.90 $3.04 $8.19 $7.84 $9.35 $5.49 $8.75 $2.04 $5.30 $14.72 $4.49 $3.75 $1.20 $0.90 $8.85 $1.23 $3.25 $1.50 $0.71 $3.04 $1.37 $0.99 $0.84 $0.53 $0.80 $0.75 $2.90 $1.60 $7.37 $0.48 $2.92 $0.48 $0.72 $0.69 $0.30 $1.10 $3.15 $0.76 $0.64 $4.00 $0.63 $0.25 $0.24 $0.43 $4.10 $0.16 $0.45 $1.00 $4.00 $0.31
Call before you dig, not after

Proving that theres more to Albertas publicly traded universe of firms than oil and gas, shares in Synodon (TSXV:SyD) perk up after a natural gas pipeline explosion in San francisco. Synodons leak-detection technology, inherited from the Canadian Space Agency, can find a leak from a fast-moving aircraft instead of by walking up and down a pipeline, as is the current method.
Join Fabrice online for his analysis of Alberta stocks and the complete list of Alberta issuers and their 2010 performance. Albertaventure.com/stockwatch
52 Week Date 11/18/2010 04/29/2010 03/12/2010 04/05/2010 12/02/2010 05/10/2010 10/07/2010 11/08/2010 01/18/2010 03/09/2010 04/01/2010 11/22/2010 04/23/2010 01/27/2010 10/25/2010 04/12/2010 11/17/2010 04/30/2010 01/11/2010 12/17/2009 08/26/2010 01/19/2010 11/30/2010 12/29/2009 04/12/2010 10/05/2010 01/14/2010 09/17/2010 12/21/2009 11/25/2010 04/30/2010 04/23/2010 12/02/2010 04/06/2010 10/12/2010 04/12/2010 11/25/2010 01/26/2010 10/13/2010 01/13/2010 02/09/2010 11/29/2010 01/05/2010 07/22/2010 06/11/2010 10/21/2010 07/15/2010 11/24/2010 02/01/2010 02/25/2010
52 Week $0.32 $0.91 $5.26 $2.81 $4.25 $1.22 $4.71 $0.80 $3.65 $10.04 $2.00 $2.00 $0.73 $0.08 $4.10 $0.59 $2.00 $0.46 $0.22 $0.88 $0.82 $0.47 $0.38 $0.26 $0.32 $0.21 $0.49 $0.51 $3.65 $0.13 $0.97 $0.25 $0.11 $0.26 $0.15 $0.55 $0.71 $0.30 $0.23 $1.10 $0.25 $0.08 $0.05 $0.21 $2.61 $0.05 $0.21 $0.37 $2.12 $0.05
52 Week Date 12/04/2009 12/04/2009 05/20/2010 12/03/2009 12/22/2009 12/08/2009 07/05/2010 12/23/2009 12/03/2009 08/12/2010 12/21/2009 12/22/2009 09/01/2010 12/04/2009 12/07/2009 12/17/2009 12/04/2009 12/11/2009 09/14/2010 08/24/2010 03/12/2010 08/25/2010 12/08/2009 05/21/2010 12/07/2009 06/11/2010 08/27/2010 12/03/2009 09/07/2010 12/08/2009 12/11/2009 03/03/2010 06/08/2010 09/03/2010 04/01/2010 12/14/2009 12/14/2009 08/10/2010 12/09/2009 07/21/2010 10/01/2010 03/01/2010 06/03/2010 01/28/2010 12/15/2009 06/28/2010 02/16/2010 06/29/2010 09/14/2010 12/02/2010
Total Return YTD* 150.77% 47.62% 35.17% 130.82% 112.87% 246.90% -11.71% 100.00% 13.63% 17.17% 70.00% 87.50% 3.23% -38.30% -4.85% 31.15% 27.66% 44.07% -48.15% -57.88% 10.00% -18.31% 87.95% -34.38% 74.29% 40.82% -70.34% 91.67% -7.23% 210.34% 114.63% 6.67% 233.33% 43.33% 38.46% 63.72% 291.03% -26.32% 69.81% -61.19% -49.06% 53.33% -42.11% 1.32% 16.86% 37.50% 31.03% 86.67% -17.91% -64.71%
5 Year Total Return 145.45% 0.00% 0.00% 12.31% 257.25% -21.99% 221.26% 4.88% 185.14% 22.10% 207.79% 0.00% -45.71% -90.90% -53.19% -34.29% -53.60% 102.38% 0.00% -44.33% 0.00% 0.00% -35.48% 0.00% -16.67% -21.77% -13.33% -90.84% 0.00% -30.77% 37.12% 0.00% 204.35% -4.35% -96.98% -64.71% 771.43% -71.43% 84.00% -16.13% -6.90% -28.12% 0.00% 0.00% -60.65% -95.27% -6.65% 40.00% 77.42% -85.78%
Sector Energy Energy Energy Energy Energy Energy Energy Energy Industrial Consumer Energy Energy Energy Energy Financial Energy Energy Energy Energy Industrial Energy Energy Industrial Energy Financial Basic Materials Energy Energy Energy Energy Technology Industrial Basic Materials Energy Energy Industrial Energy Energy Technology Energy Industrial Technology Energy Energy Energy Energy Energy Financial Consumer Communications
2010 Revenue $35,515,000 $140,606,788 $46,377,570 $45,236,519 $30,259,040 $33,548,336 $90,766,000 $13,573,000 $44,696,868 $443,827,464 $16,261,585 $46,437,000 $11,425,150 $38,360,319 $57,874,000 $8,178,859 $20,704,053 $4,968,917 $9,042,000 $2,200,603 $33,481,000 $25,623,180 $56,094,000 $5,707,214 $21,556,432 $15,209,611 $20,189,000 $10,713,251 $12,776,700 $5,383,689 $10,059,532 $199,314,502 $2,362,720 $2,161,831 $59,453,688 $58,999,999 $136,701,692 $757,410 $11,812,430 $16,502,000 $5,456,982 $5,568,215 $4,801,519 $3,431,097 $11,537,482 $32,115,000 $1,111,721 $13,754,000 $12,301,294 $670,870
TOP 7 IPOs
1 2 3 4 5 6 7
Ticker MEG ATH TOU CZE KOV SES ROZ
Name MEG ENERGY CORP . ATHABASCA OIL SANDS CORP . TOURMALINE OIL CORP . C&C ENERGIA LTD. KULCZYK OIL VENTURES INC. SECURE ENERGY SERVICES INC. RODINIA OIL CORP .
Sector Energy Energy Energy Energy Energy Energy Energy
IPO Date 07/29/2010 04/08/2010 11/23/2010 05/25/2010 05/25/2010 03/30/2010 05/28/2010
IPO $ $35.00 $18.00 $21.00 $8.50 $1.89 $3.00 $1.00
Last $* $38.75 $13.87 $20.36 $12.00 $1.52 $5.19 $1.63
Market Cap $7,163,816,960.00 $5,528,956,928.00 $2,742,309,888.00 $646,140,416.00 $606,270,016.00 $337,038,304.00 $169,025,904.00
themoneyi$$ue
buyer beware
By cailynn klingbeil / illustration by Robert carter
REAL-EsTATE pRicEs iN somE sUNNy AmERicAN mARkETs Lows, BUT ARE ThEy Too good To BE TRUE? >
ARE AT oNcE-iN-A-LifETimE
Its unbelievable, says Levy, the vice-president of sales and marketing for Florida Home Finders of Canada, his voice pitched with undisguised glee. As he launches into his familiar spiel, one that he has given to plenty of standing-room-only crowds packed with potential buyers, its clear that Levy believes in what hes trying to sell. A strong Canadian dollar, a depressed U.S. real estate market, a short plane ride to sunnier skies, properties available directly from developers for significantly discounted prices, tenants already in place, monthly rental income, housing prices that have nowhere else to go but up, serious capital appreciation to be made its at this point that Levy pauses for deliberate and dramatic effect, before finishing with one final thought. How could you go wrong? he asks. How could you go wrong? The same question is being asked in housing markets across the United States, particularly in sunny destinations long popular among sun-starved Canadians. As a result, those same Canadians are packing planes and arriving in Florida, Arizona and California in hordes, cash in hand. Theyre picking up distressed properties at discounted prices with the intention of either renting them out and selling once the economy turns around or sitting on them for their own use. The opportunity today in terms of the prices and the currency and interest rates is unprecedented, says Arnold Porter, co-founder of Phoenix-based real-estate firm, Arizona for Canadians. We may never see this again in our lifetime. Porter is one of many real estate professionals in the growing business of selling U.S. property to eager Canadians, a demographic that includes a lot of Albertans. According to Porter, the hard-hit U.S. real estate market allows buyers to purchase homes at 25 per cent of the price a similar property would go for in Canada. Diane Olson, a former Winnipeg police officer now serving an entirely Canadian
Wayne Levy is excited.
client base with Phoenix-based realty firm HomeSmart, tells a similar story. You always want to buy low and sell high, she says, And right now, you cant build these houses for what people are buying them for. Its not if the market goes up, its when the market goes up. So why would you not want to buy and take advantage now? The benefits of buying arent limited to making money, Olson says, noting that shes currently wearing shorts and a tank top and just finished hiking the nearby mountains under the shining sun. We have over 300 days of sunshine, she says.
REgARDLESS of WhoS mAkIng ThE pITch oR
what they happen to be wearing at the time, it seems to be working. Canadians, and particularly Albertans, are buying U.S. real estate in significant numbers. A recent TD Canada Trust Repeat Home Buyers Report found 13 per cent of Albertans are likely to be looking for a vacation home, more than twice the national average of five per cent. Jessy
Bilodeau, a Calgary-based mobile mortgage specialist with TD Canada Trust, thinks that the interest Albertans have shown in buying second homes is directly correlated with the fact that more of them have paid off their mortgage than any other group of Canadians. Baby boomers are particularly eager to hold such real estate, and the TD Boomer Buyers Report states that the majority of Albertan boomers would consider purchasing a retirement property south of the border. Those selling the properties, including Olson, Levy and Porter, are seeing a growing interest on the part of Albertans in their listings. As the dollar started going higher and the properties [started] going lower, I started getting busier and busier, says Olson. Numbers from a National Association of Realtors report tell a similar story, with Canadians recognized as the top international buyers of U.S. real estate for the third year in a row. Loretta and James McDonald have already invested in real estate in Alberta, B.C. and Saskatchewan. The DeWinton, Alberta, couple recently headed south and added Arizona to their list, paying $174,900 in cash for a four-bedroom, three-bathroom house with desert landscaping and a backyard pool. If you were ever to buy a house like that here in Alberta, youre looking at $400,000 to $500,000, says Loretta McDonald. The home was such a good deal. Like many buyers entering the market right now, the McDonalds have no plans to vacation or retire in their new Phoenix home. After finalizing the purchase of the house in June 2010, the McDonalds contacted a rental company, and by mid-July tenants were in their new property. Now the McDonalds only contact with their new Arizona home is a cheque issued monthly by the rental agency. The McDonalds are part of a burgeoning group of Albertans who are tapping into an emerging rental market in the hope of realizing long-term gains. With so many people in the U.S. walking away from their homes, the rental market is growing. The rental market
ticker>>
April 8, 1925 Edward (Ted) Rogers Sr. invents the worlds first alternating current radio tube, enabling radios to be powered by ordinary household elec >> July 8, 1932 The Dow Jones Industrial Average hits rock bottom. The index closed the day at 41.22, an 89 per cent decline from its peak on Septem
is so strong because all the people who are losing their home through strategic default they become renters, says Porter. A formula is emerging: foreign buyers enter the market with cash, buy cheap real estate and lease the house to a family of once owners, now renters. In some cases, the property is even leased back to the original homeowners. With some renters already asking to have the first right to purchase once the lease is up, a category of built-in buyers is creating a tempting situation for many investors.
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The opportunity today in terms of the prices and the currency and interest rates is unprecedented. We may never see this again in our lifetime.
There are a lot of renters, there is fairly good rent compared to home purchase prices, and in five to seven years these people will be buying homes again, says Porter. The real opportunity is to get in, have a tenant and sell it to them down the road. This kind of opportunity is bringing a younger group of investors into the mix, people who may not have the resources to buy a vacation home but can buy a smaller rental property in the low $100,000 range. With these new investors comes a growing industry of companies handling property management services that promise investors a worry-free investment on all fronts.
ShElDon JohnSTon, A lIcEnSED REAl ESTATE
Invest in your team. www.nait.ca/cit | 780.378.1230
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12/9/10 4:27:00 PM
ITS NOT LIKE YOU CAN SWEAT HARDER.

Its a common misconception that you need to cut back or work harder to be more productive. Sometimes a simple change in process can have a much broader impact. Innovation is the responsibility of: A) MBA, BSc, PhD (turn to page 23) B) Everyone (turn to page 53)
000AV.ProdAB_1-6H_p47.indd 1 1/16/11 1:53:13 PM
associate in Alberta and author of a popular Edmonton-based real estate blog, isnt buying it. Though Johnston hears constantly about the supposedly amazing deals fellow Albertans have gotten on U.S. properties, and receives >
tric current. Rogers Sr.s invention also helped popularize the radio. ber 3, 1929. It wouldnt see those heights again until 1954. >>
PAGE 47
emails daily from American Realtors promising such deals (Hurry, it wont last long!), he, for one, is not convinced. Most of the people who Ive talked to who are investing in U.S. real estate have no idea what theyre getting into, says Johnston. He thinks that many people are completely unaware of the tax implications of buying in a foreign market, and notes there is the possibility that certain markets have not yet bottomed out. Sometimes on the surface things look one way. Then when you really dig into it, they are not as good of a deal as they appeared to be on the surface, he says. Wes van den Brink is one of those people scratching beneath the surface. Van den Brink deals daily with the ins and outs of purchasing U.S. real estate through his cross-border tax consulting firm, B.C.-based Kotler van den Brink & Co., and hes learned to take a cautious approach. Theres a bunch of issues that pop up all the time, says van den Brink, noting common problems include the U.S. tax return that must be filed if rental income exists, and U.S. estate tax issues that may saddle beneficiaries with liabilities. There are definite deals, no doubt. You hear about some of the prices people are buying these properties for and you just shake your head, says van den Brink. But is it as low as its going to get? Is it ever going to come back? Who knows? Your guess is as good as mine. For those questioning this so-called oncein-a-lifetime investment opportunity, the possibility that the market has not bottomed out and prices may only sink further looms large. There is no guarantee that things wont get cheaper because of several major economic trends and factors, says Naveen Gopal, vice-president of client services of Pacifica Partners, a firm specializing in cross-border portfolio management. The continued weakness in the U.S. economy and the possibility of a credit contraction in Canada could conspire to push house prices even lower, as both Americans and Canadians off-load vacation properties in popular snowbird locales. There are demographic concerns as well, Gopal notes, as aging Americans are more likely to sell unnecessary investments like vacation homes in order to pay for necessities like health care. David MacDonald is well versed in the intricacies of real estate markets, and all the more so when it comes to the asset bubbles that can form in them from time to time.
tax conSiderationS
Investing in real estate when the dollar is at par and youre getting real estate values that are quite depressed does make a lot of sense from the outset, but you have to dig into it a little deeper to make sure that its right for you, says Paul Bains, a cross-border financial planner and managing director of Pacifica Partners, a firm specializing in cross-border portfolio management. According to Bains, the two biggest issues potential buyers should concern themselves with when it comes to taxation are withholding taxes and estate taxes. Any time a non-resident owns real estate property in the U.S. and sells the property, a withholding tax of 10 per cent applies. A one-time deposit against income tax is taken out of the proceeds when the property is sold and held until income/capital gains taxes are paid on the sale. A separate withholding tax applies to rental properties, at a rate of 30 per cent. The other issue relates to U.S. estate taxes. Though these taxes were repealed for 2010, Bains notes they could revert back to 2001 levels for 2011, which would put the exemption available at $1 million, rather than the previous rate of $3.5 million. This would mean that any person purchasing U.S. real estate who has a total net worth greater than $1 million would be subject to U.S. estate taxes.
He recently authored a report for the Canadian Centre for Policy Alternatives on the subject and believes its not yet clear if the U.S. market has found its bottom. If youre investing in real estate, its not for a quick buck, or it shouldnt be anyway, he says. If Canadas own real estate market is any guide to what lies ahead down south, buying on a downswing might not be the bargain many people think. On average, MacDonald says, prices tend to stagnate for as long as a decade before they begin to turn upward again, as was the case in Torontos 1989 housing bubble and Vancouvers housing bubble in the early 1990s. As such, investors looking to get into the U.S. market now and leave in a short amount of time, cash in hand, may end up walking away disappointed.
Sharon Pachet JenkinS and her huSband
are two recent investors who quickly learned there is more than meets the eye when it comes to purchasing foreign real estate. Spurred by the boisterous Canadian dollar, the three-hour flight from Calgary to Palm Springs and the depressed real estate market, Pachet Jenkins and her husband bought a house in Palm Springs last February. A lot of the foreclosures and short sales have been on the market for a long time and a lot of them are really beaten up, says Pachet Jenkins. After looking at a number of properties in Palm Springs, Pachet Jenkins and her husband opted to buy into a gated 55-plus community development and have a house built, with the idea of using the property once they retire. You dont know what you dont know,
Pachet Jenkins says of her experience buying foreign real estate. From making the purchase through a land-titles office rather than a lawyer to having to arrange and pay for a property manager to be present when the furniture was delivered to learning what plants grow in the desert and the realities of life on a fault zone, the business of buying real estate is about more than capital-gains calculations. These are the things you dont think about when you purchase, Pachet Jenkins says. I dont think time-wise I was prepared for how long it took to get everything done. And I think anyone who is going to consider purchasing down there, you really have to look at that. Despite the unforeseen complications and expenses, though, Pachet Jenkins says she would do it all over again. For those who want to join her and the many other Albertans buying U.S. real estate, a thorough examination of the situation at hand is advised. Ultimately, it becomes a personal choice, says Gopal. Those thinking that they can flip a U.S. vacation property for quick capital gains are likely to be disappointed. Prices are likely to be stagnant for a very long time. But if you want to buy a property for long-term family enjoyment, and you understand the tax implications and other costs involved, it is true that you are likely better off buying in Phoenix or Palm Springs rather than somewhere in Canada, he says. And while van den Brink deals with clients purchasing U.S. real estate daily, he notes that he has yet to follow suit. Is it a once-ina-lifetime opportunity? asks van den Brink. Only time will tell. aV
ticker>>
March 11, 1935 the bank of canada begins operations. Prior to the Bank of Canadas creation, the bank of Montreal, the countrys biggest financial institution at the time, had acted as the governments banker. >>
FOOLS GOLD: The golden years dont always glitter, says economic guru Jack Mintz
SECOND LIFE H
As dreams of freedom 55 fade into the sunset, many retirees are waking up to a new vision of life after work
By Lisa Ricciotti / Photography by Jason Molyneaux
e might have sold people the idea of Freedom 55 but Barry Flatman, the actor from the onceubiquitous campaign, hasnt had the chance to enjoy it himself. Today at 60 hes still working hard, and like a lot of people his age it isnt on his golf swing or his tennis game. Now, he tells people, hes focused on Freedom 85. The concept of an early retirement is so laughable, in fact, that it even has economists cracking jokes. Jack Mintz, the chair of the University of Calgarys School of Policy Studies, notes that Freedom 55 really happens when your kids turn 55. >
themoneyi$$ue
Its a good line,
but Mintz isnt just after a few laughs. Hes also the author of a recent report on retirement-related issues that was prepared for a steering committee of federal and provincial finance ministers, and he knows the challenges that Canadian retirees face. The average Canadian currently retires at 63 still below the traditional 65-year milestone but expectations for the golden years are not as gilded as they were just two decades ago. Instead of romping on Caribbean beaches, more seniors are donning Walmart greeter uniforms and adopting frugal lifestyles to make ends meet. Even with the recent increases to benefits and the possibility of further increases in the future, few expect to survive on Canada Pension Plan (CPP) or Old Age Security cheques alone after retirement. As such, personal savings and workplace pension plans are more important than ever to carry us through an expanded post-work life cycle that could span 20 years or longer. But collectively, Canadians arent doing very well on the savings front. We dont really need Statistics Canada to point out that personal savings rates have been declining since 1982 or that our debt levels are rising. A simple look at our credit card balances tells the story. Things arent much better when it comes to employer pension plans, given the fact that Albertans have the dubious distinction of having the lowest corporate participation rates in Canada. Nationally, approximately 40 per cent of employees belong to a registered pension plan (RPP) offered through the workplace. In Alberta, though, that figure drops to 33 per cent, and if you take out the RPPs in the public sector the total shrinks further to just 18.3 per cent. Mintz thinks thats a reflection of Albertas low union rates relative to other provinces, and the Alberta Federation of Labour agrees. As its 2009 policy paper, The Looming Crisis in Retirement Incomes, states: Its simply a fact that workplace pensions are rapidly becoming a thing of the past in non-union companies, and unless the rate of unionization rises, we can expect further declines in pension coverage. As a result, the next generation of Albertan retirees are even less prepared than other Canadians for their so-called golden years. Pension
analysts caution that Canadians on average are currently on track to replace only half of their pre-retirement income, when 60 to 70 per cent is the generally recommended guideline for comfort. But Albertas replacement ratio is only 45 per cent, which again is the countrys lowest. In fact, according to a University of Waterloo retirement study funded by the Canadian Institute of Actuaries, two-thirds of private-sector workers currently earning between $30,000 and $100,000 wont have enough retirement income to cover basic living expenses. Canada still has the lowest poverty rate among seniors in the world, but how much longer will that last?
If were not worryIng about thIs yet,
Dennis Erker, a partner with the Fairley Erker Advisory Group, thinks that its time for us to start. Its been a rude awakening for many who havent really managed their retirement planning, just expecting that adequate funds would be there. They look at their savings and think, well, Ill be OK if I die the Friday after retiring. If theyd been
that a comparatively smaller workforce wont be able to replace in time for their own retirement. Germany and Australia have already reacted to this potential crisis by raising the eligible retirement age from 65 to 67, while the United States and Great Britain are quietly shifting theirs to 67 and 68 respectively. Here in Canada, calls for an increase to CPP premiums have come from labour leaders and the political left, but in December of 2010 Finance Minister Jim Flaherty announced that the Canadian government would go in a different direction. Rather than making significant changes to the CPP, the government instead decided that it will create a new pension instrument called the Pooled Registered Pension Plan, a voluntary program that will be administered by the financial industry. While the shakiness of the first pillar is grabbing headlines worldwide, the second and third pillars arent in much better shape. When Nortel declared bankruptcy and refused to honour its pension obligations, retirees discovered that the once ironclad reward of a corporate pension for years
Its been a rude awakening for many who havent really managed their retirement planning, just expecting that adequate funds would be there. They look at their savings and think, well, Ill be OK if I die the friday after retiring.
Dennis Erker, fairley Erker Advisory Group
alive 30 years ago, that might have been true. Today, though, the traditional formula of government entitlement programs, workplace pensions and personal savings, what the Organization for Economic Co-operation and Development describes as the three pillars, no longer adds up to a comfortable retirement for many Canadians. Governments around the world are particularly worried about the state of the first pillar, government-funded pensions and programs, which will be under even greater pressure in the years to come as the massive baby boomer demographic becomes a senior citizen explosion. Under such a scenario, the sheer volume of new retirees drawing on entitlement programs would threaten to deplete reserves
of dedicated service may be no more than a hollow and unenforceable promise. Others watched their retirement funds evaporate as RRSP savings lost up to 30 per cent of their value during the recent economic downturn and related stock market collapse. And as more soon-to-be retirees approach their golden years without having paid off their mortgages, even the idea of cashing in by downsizing ones home is becoming a dubious option. The pension landscape is changing broadly, says Evelyn Jacks, the author of numerous books on taxes and personal finance. One of the biggest changes to that landscape is an imminent merger between the second and third pillars, structures which >
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March 27, 1990 Prime Minister brian Mulroney temporarily increases the size of the Senate in order to ensure the passage of the controversial new gst. The Liberal opposition would get its revenge three years later when the Tories are nearly wiped clear off the electoral map. >>
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are already teetering towards each other. While a previous generation focused on maximizing their personal retirement savings and left the management of workplace pension plans to employers, that separation of work and wealth is starting to disappear. Beginning in the late 1990s, businesses began to shift the burden of providing for retirement from their shoulders and back onto those of their workers. The gold-plated defined benefit pension plans of the past are fast becoming an endangered species in corporate Alberta, rarely seen outside the safe confines of unionized and public-sector workplaces. The defined benefit plan guarantees a worker a set income for life after retirement, one thats usually indexed for inflation. The precise amount is determined by an employees cumulative contributions from years of service and the total wages that they earned during that time. If that sounds a bit like CPP, its no coincidence. The CPP is a classic example of a defined benefit plan, although one thats maintained by the government rather than a corporation.
For businesses, the deFined beneFit system
system worked well in an era when employees tended to stay with one company for the bulk of their career. It also reflected the spirit of the time, one in which corporations took on a paternalistic role in their relationship with employees in exchange for their loyalty. Not surprisingly, corporations were more adept at reading the writing on the wall about the looming pension crisis than governments were, and they acted accordingly. Several decades ago they realized that saddling themselves with predetermined payments to an ever-increasing pool of former employees, who also happened to be living longer, was no longer financially sustainable. That rational calculation produced the defined contribution pension plan, which works more like an RRSP. Employers contribute to an individual investment account set up for each employee, who in turn assumes the risks and rewards associated with allocating and investing it. On retirement, the employee takes whatever the plan has earned rather than a set amount. This model has become increasingly popular over the past decade-plus, and today most registered employer retirement plans in Alberta are of the defined contribution style. Selling the switch hasnt been difficult for most businesses, who emphasize the port-
ability and flexibility of defined contribution plans over the predictability of defined benefit ones. Since todays employees are likely to work at a variety of workplaces during their careers, theres little opportunity for a defined benefit pension to build any cumulative value. And while legally one plan is just as transferable as another, defined contribution plans move more easily with employees from one job to another without the hassle of administrative fees and complicated calculations. Todays employees want to control their careers and their retirement and companies cognizant of the rising risk and costs of managing defined benefit plans are only too happy to oblige. For registered retirement plans, thats usually a change to direct contribution, but the group RSP is an increasingly popular option. Look at the retirement benefits offered by the 2010 Alberta winners on Canadas Top 100 Employers list, and youll see a handful of direct benefit plans, a smattering of direct contribution and a strong trend towards group RSPs, many of which feature the ability for employers to match contributions made by their employees. Erker has also noticed that businesses and employees are looking more at the value of total compensation packages rather than the standard equation of salary plus pension. Employers are educating their workforce about total costs of hiring workers, explaining that a $50,000 salary going into an employees pocket can actually be a $70,000-to-$80,000 investment on the employers side. Ross Undershute at Funds Administrative Service Inc., a service provider for union and multiple-employer pension plans, has noticed a similar trend. When theres a limited amount for benefits, employers want to deliver the biggest bang for their buck, he says. Employees over 40 put a lot of value on pensions, and generally a defined bene-
fit plan is whats best for them. But younger employees in their 20s and 30s dont see pensions as such a big benefit. Retirement is so far off that theyre more concerned with the immediacy of house payments and childcare costs. So why would an employer take on the complications of a direct benefit plan for something thats not perceived as a benefit? Instead, employers ask employees what they want, and that might be a benefits package that emphasizes free gym memberships, an added holiday for personal errands or extra health benefits rather than a premium pension plan.
iF the plus-45 set is mourning the passing
of the defined benefit pension plans that their parents enjoyed, theres a younger generation of workers who may not even know what theyre missing. Kristin Smith, a pension lawyer with Spectrum HR Law LLP in Calgary, feels the up-and-coming generation of employees have moved past the direct benefit versus direct contribution debate. Most have never had a direct benefit plan so its not an issue. For them its something from the past that their parents had. Something else their parents didnt have is responsibility for managing their own portfolios. Employees must become more engaged in their retirement future, Smith says. But are they prepared to do so? Some do better than others, but employees who invest conservatively in low-risk default options like money markets or GICs may find they arent earning enough to pay for their retirement. The issue of financial literacy comes up over and over again at conferences, she says, but its yet to be adequately addressed. Making matters more complicated is the fact that companies are legally prohibited from providing direct advice for group RSP or direct contribution plans. But, Smith says, they can help with
exCeeding design speCiFiCations

We might think of pensions today as an integral part of the social safety net, but thats not how they were originally intended. Over a century ago, when Otto von Bismarck introduced the worlds first national public pension plan to Germany in 1889, a pension was something to be aspired to rather than depended upon. Bismarcks innovation drew on a pool of tax revenue collected from workers to pay out benefits, and later became the model for western government and corporate plans. There was a catch, though: the first German pensions paid out at 70 years, and back then the average Prussian only lived to 45. There really wasnt any cost to it, explains Dennis Erker, a partner with the fairley Erker Advisory Group in Edmonton. Companies promised to pay for employees retirement if they lived that long, and most didnt. Thats not the case today, when life expectancy is 82 and the 80-plus population is our fastest growing sector.
ticker>>
January 1, 1994 The north american Free trade agreement, an expansion of the existing free Trade Agreement between Canada and the U.S. region in the world. >> January 21, 2002 the Canadian dollar is worth just us$61.79, the lowest level it has ever seen. Exporters rejoice, but
Business is about managing change.

PillArS oF SeCUriTy
Every retirement plan is composed of three pillars: government-administered pension plans, workplace pensions and private investments. Heres how they compare:
47 24
rrSP TFSA SAViNGS
29
WorKPlACe PeNSioNS
CPP oAS GiS
SOURCE: STATISTICS CANADA
financial education by bringing in outside advisors and providing the best information available in order to encourage employees to make good choices. Ultimately, theres no law that says employers even have to offer a pension plan. Still, most continue to feel a corporate duty to prepare their workforce for retirement, something most workers wont voluntarily do until its too late if left to our own devices. Its a push/pull relationship, says Undershute. Employers are reassessing how much risk theyre still willing to assume for their employees pensions down the road, while still giving them benefits they value today. For employees, its time to pick up the double-edged sword of increased personal retirement responsibility and learn how to wield it properly. The good news is that they now increasingly control their workplace pension. The bad news is that theyre in control, so its up to them to manage their future properly. That means not skipping the financial planning session offered at work, and asking an employer to create one if it doesnt already exist. The recent financial crisis has made it clear that we have to be responsible for our own economic futures, says Jacks. RRSPs remain the most efficient use of your money. Youre underfunding your future if you have unused RSP contribution room maximize it! Maybe theres still room for a sailboat in those sunset years after all, even if the launch date does get pushed back a few years. AV
to include Mexico, is signed. It creates the largest free-trade cross-border shopping becomes prohibitively expensive. >>
Business is about managing change.

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1-877-899-AFSC (2372).
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1/14/11 3:20:25 PM
YOUD BE SURPRISED WHERE THE GAME IS CHANGED.

Innovation isnt just about invention; its about improving everyday operations. Good ideas for change can come from anywhere if the culture is right for them to be developed, shared and implemented. Spending time assessing my company is: A) A good investment (turn to page 73) B) Something Ill get to. Eventually. (turn to page 7)
PAGE 53
*
big strategies,
By Ray Turchansky Photography by Bluefish
themoneyi$$ue
Changing course means dividends for Albertas biggest institutional investor
bigger payoff
L
eo de bever was perplexed to be greeted by naysayers when he began investing $70 billion in assets as chief executive officer of the newly minted Alberta Investment Management Corp. in 2008. One thing that has surprised me since Ive come here is that people have questioned the chances of success, for a company like ours, in Alberta, de Bever, 62, said in a wide-ranging interview. They were saying What makes you think you can build a company like they have in Eastern Canada? Theres a bit of an inferiority complex here. I had always thought of Alberta as a can do province. >
CHANGE AGENT: Leo de Bever, CEO Alberta Investment Management Corp.
Taking heart from how Warren Buffett became one of the greatest investors in history while living in Omaha, thousands of kilometres away from the noise of Wall Street, de Bever has set out to pull off a similar move on the Canadian prairies with AIMCo. The government made a courageous decision to set us up as a separate company with the ability to pay for talent to come to Alberta, and weve done that in a big way. AIMCo began with 130 staff and has more than doubled that to 270. Now that the established talent is in place, de Bevers strategy is to develop more local expertise. Most of the people I brought in are very seasoned; the drawback is they have a limited shelf life, so one of my issues is attracting young people in their 30s and 40s and building them into the next generation of managers of AIMCo.
the Dutch-born De bever haD workeD for the bank of
how they stack up

In recent years, most Canadian pension plans have reduced external money management fees while hiring professional internal money managers to improve performance. Latest fiscal year-end results show ontario teachers pension plan returned 13 per cent and caisse de dpt returned 10 per cent, each for the year ending December 31, 2009, while AIMCo reported a 12 per cent return for the year ending March 31, 2010. The Caisse had greatly underperformed major pension plans in 2008, when it lost $39.8 billion or 25 per cent of assets, due in large part to exposure to asset-backed commercial paper.
Canada, the Ontario Teachers Pension Plan and was with Victorian Funds Management Corp., one of Australias largest public sector pension funds, when he was tapped to run AIMCo, formed as a Crown corporation in 2008 to manage 26 Alberta pension, endowment and government funds. It was baptism by fire, as six weeks after he arrived on his new job, the bankruptcy of Lehman Bros. in the United States triggered a global financial crisis. Every 40 years or so we have a combination of stock and bond market problems and financial systems corrections, and it usually comes about because of some structural change in the system, says de Bever. In 1907 the formation of trust companies blew up the U.S. financial system, which in turn led to establishment of the Federal Reserve. The 2008-2009 recession was caused by the collapse of the giant shadow banking system of private capital financiers that dragged down the U.S. and global economies with it.
compareD to others, aImco emergeD relatIvely un-
cathed, in large part because de Bever recognized it had one big advantage it handles $20 billion to $25 billion of short-term government money, which is essentially close to cash. The government then granted AIMCo the authority to shift its investment strategy to cope with the instability of the recession. By fundamentally changing the mix that was weighted towards long-term fixed assets and by injecting liquidity into the system, it could be more nimble and responsive. The strategy paid dividends almost immediately. We made $130 million for the government for that privilege; it wasnt as if they did it for free. Ontario Teachers or CDP (Caisse de dpt) in Montreal didnt have that kind of flexibility. A number of our peers had gotten themselves into structures that were a bit more problematic. Ability to access government cash meant AIMCo didnt
have to lock in equity losses, and held onto most investments as they bounced back. AIMCo made a 12 per cent return during the fiscal year ending 2010, and assets under management remain around the $70 billion mark. The positive returns on endowment and pension assets are offset by the fact that the government is using the stabilization fund to fund the current government deficit, says de Bever. Just before year-end, they withdrew three-quarters of a billion dollars. Alberta is very conservative in how it does its budgeting; it finances all its capital projects out of current income. That would be like you or I buying a house and putting 100 per cent down. Its tied in with the notion that the province doesnt want to have any debt. In its last annual report, AIMCo held 56 per cent of its assets in fixed income, 36 per cent in public equities and commodities (including a combination of public and private equity called relationship investing) and the remainder in alternative investments like real estate, private equity, infrastructure and timberlands. But facing possible market corrections, it has been shifting into more relationship investing and alternative investments. It looks to me like the bond market is an accident waiting to happen. If interest rates go up, it reduces the value of the bonds we already own, de Bever says. Given that long-range bond portfolios have a duration of about 16 years, a one per cent upward shift in interest rates will devalue that portfolio by 16 per cent, which de Bever calls a dangerous risk. Over the last 20 years, bonds made more money than stocks, but over the next 10 years that is definitely not going to be the case. With relationship investing, AIMCo has taken significant positions in the Dutch firm TNT, plus Canadian companies Viterra, Precision Drilling and Fairfax Financial. You take a company with a problem, and instead of taking it private and paying a premium for that, you take a big enough stake in the company that you have the ability to influence it. You contribute to capital, you help them do some things differently and the value of the stock goes up.
aImco has also gotten Into the materIals anD fooD sectors anD
companies improving energy efficiency. We invested in a [U.S.] company called Calera that thinks it can bind carbon dioxide and turn it into essentially cement. Weve got other investments in a company like Bloom Energy; they are able to produce electricity on the fly locally using natural gas. We think a lot of sources of energy that have been written off will have a second life, coal being one of them, if we can reduce the environmental impact.
ticker>>
july 13, 2004 At the Calgary Stampede, alberta premier ralph klein announces that the province has set aside enough money to pay off all of it 24, 2009 Toronto-based nortel applies for court approval for creditor protection. It marks the end of a spectacular collapse for corporate Canadas o
The materials sector is doing novel things with technology, one company which claims it can turn small wood fibres, including sawdust, into synthetic oil. Meanwhile, the growing environmental issues of the oil sands will see technology investments improve return and reduce the industrial footprint, de Bever believes. My prediction is that in the next 10 years technology will come along to where the conversion ratio of one barrel of energy to produce three will probably go to one barrel of energy to produce six or 10, and the environmental consequences will be dealt with. AIMCo has also ensured that its asset mix includes property and infrastructure, with the Bow Valley Square office complex in Calgary among its holdings. Infrastructure, heavy in regulated utilities and pipelines, now also includes First Wind power generation in the United States. Plus, AIMCo made its biggest private investment to date late last year, US$850 million to buy a 50 per cent stake in Sociedad Concesionaria Autopista Central, which operates a toll road going through Chiles capital of Santiago. If you have real boring assets like utilities, toll roads, pipelines, they have a real good return. Society needs these assets and it regulates them to protect both consumers and producers. That regulation, if done well, becomes an efficient way for producers to attract capital, and a very good way for us to deal with liabilities. He says private equity is a little more contentious, after major losses in 2008 and 2009. Enormous amounts of private equity went into leveraged projects that did not adequately price risk factors. The old formula of acquiring a company, taking it private and piling it high with debt to make it look like an attractive purchase became a lot riskier. The kind of private equity program that we are running tries to stay away from that and stick to the fundamentals of private equity, which we see as transformation. You use your capital to improve the true economic condition of a company, says de Bever, by addressing specifics like structural issues, repositioning products or making an acquisition.
While AiMCo hAs beeN A RelAtively loW-Key oPeRAtioN, As
it grows there is pressure to use its clout and become more activist with companies it invests in. So far its strongest stand was disagreeing with the $1-billion payout to Magna International founder Frank Stronach for eliminating the firms dual-class share structure. Some of the U.S. activist programs are more of a play to the balcony than something that has a good economic reason, says de Bever. Without resorting to activist stunts, there is a role for active investors to prod companies into doing whats in shareholders best interests. If AIMCo is going to advocate, it has to be because something in the company can be done better and there are better returns available beyond a quick boost in share price, says de Bever. We are long-term investors, and frankly were not really enamoured with hedge fund strategies when all they are interested in is getting a short-term bump and then they get out. We want to make sure that whatever we advocate benefits the company in the long term. Thats why we have to be careful who we partner with. Weve come to the conclusion that were probably better off working with an institution thats similar to us, another pension plan. Innovative strategies separating AIMCo from the institutional pack made it nimble and profitable in the last financial crisis. De Bever expects that kind of corporate creativity will continue to steer it though good times as well as bad. Av
AIMCos Leo de Bever discusses the avalanche of requests that come with being the provinces biggest public investor. Albertaventure.com/aimco
4 thiNgs to WAtCh foR

filip Ksiazkiewicz, lead economist with Alberta Investment Management Corp., made these key observations at a session of the Canadian Pension and Benefits Institute in Edmonton.
PeNsioNs
eMeRgiNg eCoNoMies
equities
boNds
Markets arent going to deliver what pension plans need. it might be time to look at piling into alternative assets, which are attractively priced or priced at a discount. As pension plans you can hold onto an asset a lot longer than normal investors.
We think emerging economies are going to outperform commodity economies [like Canada], which are going to outperform the G4 economies of U.S., Japan, Germany and the U.K.
equities are going to move sideways with a slight upward tilt. Stocks will be below average for the next couple of years. I think there will be another bull market that lasts a generation, but the timing of that is very, very difficult.
Bonds are a dangerous place to be. over the next 10 years, nominal bond rates are going to be below average. Inflations going to return; Asia is really at risk to Chinese inflation. A search for yields should probably be in alternative assets, in terms of pension plan investment.
s debt by 2005. Just a decade earlier the provinces debt load sat at $22.7 billion, a figure that translated to $8,400 for every man, woman and child in Alberta. >> january ne-time darling, a company that just a decade earlier had sported a $366 billion market capitalization and employed 95,000 people. >>
Report on business financing
Beg, Borrow & Deal

By LUcAs WARREN | ILLUsTRATIoNs By fRANcIs LVEILLE
When it comes to raising capital in Alberta, theres more than one way to get what you need
inding a good tailor is to the business person what
finding a good financier is to their firm. The goal is to determine the best fit, which means the underwriter should measure the company even its inseams and produce an exact solution. There is no off-the-rack answer to accessing capital in Alberta. Companies are looking for made-to-measure solutions. Large companies have the most options, including accessing the public equity markets, initial public offerings (IPOs) and reverse takeovers (RTOs) both of which are increasing in frequency. Startups and private businesses, meanwhile, spend their energies trying to cour angel investors for seed capital as well as securing loans and grants. In extreme cases, small businesses are turning to credit cards and lenders of last resort. Options abound, but companies continue to ask, What is the best way to access capital in Alberta? The consensus is, simply, whatever works. The good companies are still getting funded, says Amit Monga, an angel investor and Alberta School of Business finance professor at the University of Alberta. A good idea will always find money.
Public capital markets have rebounded from the lows of the recession
Public Options
are considering or reconsidering this strategy. An IPO is neither easy nor particularly cheap, though. It involves a lot of red tape, including working with an underwriter to develop a large company prospectus that includes a regulatory review, budgeting for additional marketing and setting a final price. But for companies like Athabasca Oil Sands, the upside outweighs the down. Of course there is a bit more red tape, says Athabasca president Sveinung Svarte. But we had deliberately introduced the same kind of reporting standards before [the IPO] because we knew that, one day, if you are successful in the oil sands, you will be so big you cant avoid becoming a public company. Athabasca went public in April 2009, in one of Canadas largest IPOs. For the Calgary-based company, the timing ended up being a mixed blessing. Thanks in part to its previous involvement with PetroChina, Athabascas initial offering was almost five times oversubscribed. The decision was made to raise the more than $1 billion that was needed to fund future development plans. Unfortunately for Athabasca, the release of a balance sheet a week after the IPO, combined
The opTion To go public is
tantalizing for large companies looking to secure big capital. By the third quarter of 2010, Canadian firms had raised more than $4 billion in the course of 10 IPOs more than double the amount in 2009, but still far from the glory years of the late 90s. Public capital markets have rebounded from the lows of the recession, and in Alberta Smart Technologies Inc.s $660 million IPO, MEG Energy Corp.s $800 million IPO and Athabasca Oil Sands Corp.s $1.35 billion IPO headlined the years biggest offerings. With the potential of increased exposure, new opportunities and access to significant capital, more companies
with investor concerns about oil sands development, conspired to devalue the stock price 33 per cent in the first month of trading. The company, however, remains positive about its future. [There is] very little you can do about it in the short term, says Svarte. Oil sands investment is a bit like a marathon, with a long horizon. And if you invest as a short-term investor, its probably not the right place to invest.
backwards buyouT
RTO: When private companies merge with, or are acquired by, public shell companies.
a reverse Takeover (rTo) is a TacTic smaller companies can use To raise
capital in the public market without the hassles associated with an IPO. These takeovers happen when private companies merge with, or are acquired by, public shell companies. In January 2009, private resource company Artek Exploration Ltd. completed an RTO with publicly traded Costa Energy Inc. for Artek, the idea behind going public came from investors who believed that the ease, speed and income-tax benefits of the RTO outweighed the potential downside. We were in the midst of doing a private placement and the feedback that we were getting from [potential investors] was that they wanted us public sooner than later, says Darcy Anderson, Arteks vice-president finance and CfO. Despite taking the company public, employees say very little has changed in Arteks day-to-day business. [The RTO was] not really a dramatic change, says Anderson. you still try and operate your business the same way. you try to make sound business decisions whether youre private or public.>
Report on Business financing
Good Morning, Angels

professor at the Alberta School of Business. If companies knew what they were doing, he argues, they would approach the right investors and attract capital. But theres a problem. People dont know how to pitch their ideas, says Monga. People dont know which VC to talk to [and they] have to understand what peoples strengths are in terms of what sectors they are looking for what. Simply put, many private companies are not doing their homework. That requires a lot of extensive research and people dont do that. Ian Wild agrees. Wild is an executive vice-president with ATB Financials corporate financial services division. You will get money if you are considered to be one of the gifted management teams, says Wild. But if youre not on that list, it gets very difficult. If youre in the private equity space, there is private equity and there are
for some companies, going
public can be more trouble than its worth. The associated hassle, expense and increased scrutiny ensures the option of accessing private capital remains popular with Alberta companies. In 2009, Canadian venture capital markets continued to decline, sliding back towards mid-90s levels. The markets provided investments worth $1 billion six per cent of that in Alberta. While the first two quarters of 2010 showed slight increases, the issue for some investors is less about the amount of money out there and more about the calibre of the plans trying to attract it. People think that there is a lack of venture capital. There is no lack of venture capital. There is a lack of strong management teams. There is a lack of investable companies, says Monga, angel investor and
private equity pools. But, again, it goes back to management teams that are perceived in the marketplace to be extremely good. With the average venture capital investment in 2010 hovering around $3 million, a lot of Alberta startups have turned to the growing trend of approaching angel investors. Randy Thompson is president of VentureAlberta, an eclectic mix of Calgary and Edmonton real-estate dealers, bankers, tech entrepreneurs
and other angel investors who, since 2003, have helped seed more than 50 companies. While there still is the same amount of money available for startup companies, what Im finding is the investors have less patience with entrepreneurs than they did three years ago, says Thompson. The trend [is toward] smaller cheques $25,000 to $50,000 and have the entrepreneur hit a milestone and then ask for more money quicker, as opposed to giving him all the
The exempt market is a good option for companies looking to raise more than $1 million
Lucky LoophoLes
The exempT markeT is ofTen seen as The
best of both private and public capital. Not without its share of controversy, the exempt market lets companies access public investor capital while remaining a private company. Companies that access public capital but remain private are exempt from producing a costly prospectus and the onerous reporting requirements that come with a listing on public exchanges. The exempt market is a good option for companies looking to raise more than $1 million but who are willing to give a higher yield to their investors. Accessing capital in the
exempt market does, however, require companies to create an offering memorandum than can cost upwards of $50,000. If an investment doesnt fit into the little box that a bank needs it to fit into but we can see that theres a strong business case and theres enough on the table to make our investors happy, says Adam Derges, vice-president at Raintree financial Solutions, an exempt-market dealer, then maybe thats something we can do. When National Instrument 31-103 came into force in September 2009, it helped legitimize and re-invigorate the Canadian exempt
5
money and trust up front and hope that they come back. But, again, the opportunity to access angel investment capital comes down to quality. Weve become geographically agnostic. Right now its all about capital finding a good deal to invest in, and [being from] Alberta doesnt give you the right to have the money, explains Thompson. Although if you are a really solid Alberta opportunity with a great management team and an excellent plan, youre more likely to see capital.
The Last Stop
The recession has made banks less willing To open Their
If companies knew what they were doing, they would approach the right investors and attract capital.
vaults to Alberta businesses, making financing a big concern. In 2007, of Canadas approximately 1.6 million small and medium-sized enterprises, roughly 13 per cent applied for new or additional financing, almost half with the goal of increasing their working capital. Most of the requests, more than $51 billion worth, were made to chartered banks and credit unions. But even this traditional method has become more difficult in recent years, with financing approval rates shrinking eight per cent between 2007 and 2009. The business person will probably hear the word no many, many times, so they have to get used to it, says Jim Ewing, client service manager for the Business Link, a federal and provincially funded business information and service center in Alberta. Really, its about taking the time, exploring the options, being creative and coming at things with an innovative twist.
This traditional method has become more difficult in recent years, with financing approval rates shrinking
eIght per cent between 2007 and 2009. market as a means of raising capital by introducing a new Canada-wide registration regime that emphasizes accountability and due diligence. Before [NI 31-103], the process was very difficult because there were no organized dealers and you had to go around from salesperson to salesperson and find the people who were interested in introducing your product to their clients, says Stephen Johnston, a partner in Petrocapita, an Alberta energy investment fund that has successfully used the exempt market.
Community futures is one of those innovative other options. Community futures provides more than $20 million each year to small businesses across Western Canada. It operates a network of 90 development corporations with a particular focus on businesses outside the major cities like Calgary and Edmonton. Were not formula-based lenders, says Jon Close, manager of Community futures Alberta. He prefers the term developmental lender to lender of last resort. We look at the business management team, their ability to achieve
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the results in their business plan, their cash flow and [finally] the level of security were taking for the loan. This more holistic approach seems to be working, both for businesses looking for capital and for the lender. Community Futures, like other alternative lenders, has seen a big upswing in loan requests throughout the recession. In 2009, the Alberta network provided a total of 472 loans worth $28.7 million 112 loans or $11.6 million more than in 2007. Our average loan loss across the province runs in the five to six per cent range over [our] 25 years, Close says. Considering were a developmental lender and most of our clients are required to first go to conventional lenders thats a pretty good rate of success.
it takes a Village
For the majority oF alberta businesses, IPOs or high-end venture capital deals are reserved for major companies. More typical is the experience of Brady Weiler, chef and owner of the Pipestone Food Company, a restaurant in Wetaskiwin. [Weve used] banks, other banks, lenders of last resort, and borrowed money from family and friends to keep things going, says Weiler, referring to East Parkland, his local branch of the developmental lender Community Futures. We would sit down in a Tim Hortons and talk about [everything]. It was kind of different, but in the end it turns out that its an amazing program. While the networks style is often unconventional Weiler recalls meeting his loan officer at various local coffee shops, for example the results speak for themselves. Starting out as a home business offering meat and seafood sales, the company has expanded in its 10 years and now features a high-end restaurant, banquet and conference facility along with a popular pub and bistro in downtown Wetaskiwin. His company accessed the $150,000 maximum amount available through the lender, albeit at a higher interest rate than a traditional bank, with Community Futures interest rates ranging from six to 10 per cent. In the end, for Weiler, success is more about passion than resources. We do whatever it takes. Adversity either kills you or cures you.
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Which companies are building
Follow the Dream

Recent economic challenges have seen more traditional methods such as bank loans rarefy. But the challenges have also opened the doors to other tactics like the exempt market or developmental lenders, each with their own risks and rewards. The list of options for businesses looking to raise capital continues to grow, but no universal surefire method has emerged. Its a matter of doing the research and due diligence yourself, David Bayda advises from the Business Link. Theres no one magical tool that will tell you exactly what you need. You have to be willing to put in some of the work and effort to find the programs that might be useful for you. At the University of Alberta, however, Monga takes his advice one step further than the simple hard work and due diligence that most experts prescribe. We need real entrepreneurs we dont need people who are moonlighting at night, trying to do this on the side, he says. We need people who actually take real risks, who quit their day jobs to follow the dream. AV
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WHEN WAS THE LAST TIME YOU ASKED YOURSELF HONEST QUESTIONS ABOUT YOUR BUSINESS? NOWS A GOOD TIME TO START.
Productivity means: A) Doing more with less (turn to page 47) B) Working smarter not harder (turn to page 69)
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PAGE 63
TRADE RUNNER
An inside look at the shadowy world of securities enforcement >
By Geoff Morgan // Illustration by Dominic Bugatto
n the middle of October, a 73-year-old Calgary businessman learned he would spend the next two years in a federal penitentiary for fraud. A provincial court judge found Robert John Sellars guilty of making untrue statements, misleading investors and ignoring Alberta Securities Commission (ASC) orders not to trade or distribute securities. His company, Sellars Financial Inc., is not currently allowed to trade securities but between August 2001 and May 2009, Sellars and his wife Penny sold fixed-rate term notes to more than 250 Albertans. The Sellars raised more than $30 million and allegedly promised returns up to 18 per cent. An ASC Insider Trading Report lists Sellars in an August 2001 trade of $30,000. In 2006, the ASC issued cease-trade orders against him, his wife and his company. The orders were ultimately ignored. We take a dim view of that, says Gus Gallucci, a senior investigator in the ASCs enforcement division. Albertans generate a lot of personal wealth and its his job to keep that money away from the dodgy characters who want to get their hands on it. A white-collar detective, Gallucci has a soft spot for seniors who have been tricked into shady investments. His team of gritty gumshoes went to work, piecing together enough evidence to build a case against Sellars. Finally, on October 19, 2010, a judge found Sellars guilty on seven counts and ordered him to pay almost $2 million to four Alberta investors. He was shackled and will be no threat to the investing public for two years a victory for veteran investigators like Gallucci. Gallucci spent a total of 27 years in law enforcement between the RCMP and the Calgary Police Service, where he served as commercial crimes detective. There he investigated Canadas largest cheque-kiting scheme, an affair that took three banks for a ride and required months of legwork culminating in a six-year jail term for one Edmontonian. Now, Gallucci puts his skills to work scratching behind the surface of investments for the ASC. He is constantly breathing down the necks of Albertas white-collar criminals, and since its easier to shred paper than bury a corpse, that can be a daunting task. Its like finding a fingernail and building a body around it, Gallucci says. Gathering evidence is a team exercise, one that takes place on the enforcement floor at the ASCs headquarters. Galluccis workplace is a complicated network of key card-accessible doors where investigative accountants work closely with ex-cops, and sleuths with stock-brokerage experience work with investigative geologists and lawyers. All this effort can produce a gargantuan stack of evidence. In days long past, youd have a case thats only 50 documents, Gallucci says. Now its not unusual to have a case thats 50,000 documents. In fact, Galluccis current projects include an investigation papered with more than 100,000 documents. From his office on the corner of Calgarys Fifth Street, the streets surrounding Gallucci radiate prosperity. Cranes building the Bow Tower cast long shadows over the crowds of corporate citizens in designer suits shuffling between upscale restaurants, their desks and back again.
THE ROGUES THAT OPERATE IN THIS INDUSTRY ARE SUCCESSFUL IN GOOD AND BAD TIMES.
In November, a U.S. federal court fined two Calgary businessmen $300 million for running a massive Ponzi scheme. In the same month, the ASC issued nine cease-trade orders, two decisions, two hearings notices and three revocations. Early predictions suggest the ASC could be even busier this year. Due to a regulatory change January 1 that is designed to simplify processes, accountants in the province began filing financial and trading documents using International Financial Reporting Standards (IFRS) format as opposed to the Generally Accepted Accounting Principles used previously. I think IFRS increases the potential for fraud, says University of Alberta business professor Karim Jamal, an accounting expert who studies fraud detection. He says the new system lets managers make more judgment calls and allows for more fair-value accounting. The result, Jamal says, is more room for managers to skew the numbers the way they want them. Which means, Somebody has to be there, somebody has to write the rules and especially in the case of this IFRS somebody has to be watching. The ASC says its ready for the transition. The commissions forensic accountants have been training for the change in accounting procedures for two years. And besides, Gallucci says, theres never a slowdown in securities enforcement. The rogues that operate in this industry are successful in good and bad times. In bad times they prey on individuals who are desperate, and when times are good they prey on individuals who want to get in on the ride of the economy flying high.
T
oN thE Go: Gus Gallucci must move fast to catch all of Albertas corporate criminals
photo C oUR tE SY oF thE A SC
IN FACT, BY THE TIME IM CALLING THESE INVESTORS, ITS TOO LATE.
o keep pace, the ASCs enforcement team has expanded fivefold in the 10 years that Gallucci has been there. The team includes a FasTrac unit which monitors stock trades and compels all documents whenever insider trading is suspected. But enforcement should never be confused with evaluation. We dont comment on the quality of the investment thats not my job, Gallucci says. My job is to determine whether or not the investment complied with the [Alberta Securities Act]. And while the ASC has the power to issue warrants, it does not have the muscle of the criminal code, Gallucci says, and relies instead on the regulatory statutes of administrative law. But for all the tools at his disposal, Galluccis most vexing problem is with investors refusing to co-operate. Most times, when Im trying to establish a beachhead in an investigation, I find that people investing in these things think that if they talk to the regulator, that theyre going to lose their money, he says. In fact, by the time Im calling, its too late. Thats Galluccis biggest frustration: his job becomes much more difficult without the co-operation of investors. Gallucci froze accounts containing $2.9 million in one case with the ASC, and the investors were able to get their money back through civil process. But its not always that simple. We have had a situation where weve frozen funds, he says through gritted teeth. The funds were returned to the investors and within days were returned to the individuals who took the investors money in the first place. >
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nother enforcement veteran echoes Galluccis frustration. Jerry Forst spent 13 years with the ASC in Edmonton before taking his skills to the private sector, where he now works as ATB Financials general manager of security. According to Forst, another ex-RCMP officer, A lot of times, up front, the investors dont want to help the commission out. And you cant force everybody to come in and tell you [what you need to know]. Part of the problem stems from the slippery sales teams which tout these investments; in some cases investors have been told that if they talk to a regulator like the ASC, theyll almost surely be audited by Canada Revenue Agency. People get sold a bag of goods, and away they go with it. When we call these people, we depend on their testimony to further our investigation, Gallucci says. Many investors buy from shady advisors in blind faith. In fact, Hollywoods portrayal of these phenomenal salespeople, as Gallucci describes them, is pretty accurate. In the 2000 Hollywood feature film Boiler Room, a college dropout in New York City develops a taste for the high life when he gets a job selling fake investments. The movies young protagonist Seth Davis, played by Giovanni Ribisi of Avatar fame, learns to swindle, selling stocks in companies that dont exist. His bosses teach him to pump stocks (Ask em rhetorical questions just to get a yes out of em) before dumping the stocks.
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t the ASC, Gallucci says the movie has a lot of value. Its a good read for people that want to see how boiler rooms operate and sell securities that are basically worthless. One of Galluccis investigations led to a Toronto-based boiler room that cold called the vicepresident of a major company, swindling him into a $50,000 worthless investment. It doesnt matter how sophisticated you are at investing, Gallucci says. If youre caught in a weak moment, youre susceptible to these sorts of things. While Boiler Room depicts salesmen pushing stock in false companies that supposedly manufacture products like the cancer pill, real-life examples are even stranger than Hollywoods fiction. Consider VisuaLABS Inc., a Calgary-based company that claimed to have created 3-D television sets long before technogiants like Samsung and Sony. It was all just smoke and mirrors, Gallucci says of VisuaLABS, one of his greatest success stories. Sheldon Stephen Zelitt f led the country when Galluccis investigation of VisuaLABS turned up enough evidence for a jail term. Zelitt and his team at VisuaLABS operated a warehouse in Calgarys northeast. Gallucci served orders on the law firm representing VisuaLABS, gained access to the warehouse and began marking exhibits for trial. The trial was held despite the disgraced CEOs absence, who was convicted on 11 counts of securities offences in January 2003. A warrant was issued for his arrest, and after the RCMP dragged him back to Canada from the Czech Republic, Zelitt spent four years in jail and paid $1.85 million in fines. Score another victory for Gallucci. AV
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LITTLE = BIG.
Often simple changes in day-to-day processes can lead to big improvements in productivity. Its not about pink slips; its about being resourceful and innovative. Innovation is the responsibility of: A) MBA, BSc, PhD (turn to page 23) B) Everyone (turn to page 53)

PAGE 69
P yback a
By Mike Sadava | Photography by Jason Stang
Its
How the business of debt became a growth industry
Time
PENNY SAVIOUR: Tracy Watson of Money Mentors says debt, and debt repayment, is on the rise
ost people rely on job creation
figures and indications of significant GDP growth as signs of an economic recovery. But Money Mentors, a notfor-profit credit counselling service, takes the provinces economic pulse in a different place: debt repayment rates. Tracy Watson, head of communications for Money Mentors, says that business has picked up, somewhat paradoxically, because the economic recovery is encouraging more people to pay off debts rather than declaring bankruptcy. As far as putting people on the orderly payment of debt program, our numbers have increased, she says. We see that as a sign that the recession is getting better, that people are back to work and have more money in their budget to pay off their debt. Thats only one half of the story, though. The other half is the borrowing binge that Canadians have been on over the past 25 years, a spree that has turned a nation of savers into a community of credit junkies. In 1985, the average Canadian saved 15.8 per cent of his or her take-home pay, but by the turn of the century that figure had crossed into negative territory. Getting credit >
has become easy, while the terms of repayment have grown deceivingly permissive. On one credit card alone you can build up a debt of $20,000 with a minimum monthly payment as small as $10, and most Canadians have more than just one credit card in their wallet. As a result, the average debtto-income ratio in Canada sits somewhere north of 140 per cent, and almost 60 per cent of us would be in trouble if our paycheques were delayed by just one week.
financial problems dont have an upper income limit. All you do is spend more than you make.
the Superintendent of Bankruptcy Canada. Turn the clock back another year, though, and the figure looks a lot worse. In 2008, the number of insolvencies was only 6,433, which means that the rate of insolvency has gone up 75 per cent in just two years. That figure may be about to spike upward again. With interest rates almost certain to rise, those debts may become even harder to service. That will produce considerable collateral damage, economists warn, as rising rates will force a deleveraging process essentially, the repayment of this mountain of debt that may slow down consumer spending and investment and interfere with the economic recovery. Not everyones suffering, though. For those in the burgeoning business of debt management, Canadas dalliance with debt has represented the opportunity of a lifetime. Whether they specialize in helping people stay out of bankruptcy or shepherding them through it, the last few years have been good ones for just about everyone involved in the growing financial management sector. Paul Howarth, who returned to Alberta from Britain in 2008 to start Calgary-based Debtors Advocates, is one of those people. He started with four employees, but in just two years his staff roster has grown to 20. He doesnt have to worry about a shortage of clients any time soon. His company serves anywhere from 60 to 80 Albertans each month, and these are people from all walks of life. Professionals in high-income brackets, he points out, are just as likely to live beyond their means as those earning less. A person earning $20,000 a month can get in as much trouble as someone earning $1,000 or $2,000 per month. Regardless of how much they make, though, by the time someone comes to see him theyre often already in crisis mode. A client, no matter what situation theyre in, its a very hard time. Theyre going through financial hardship. You have to be very sensitive with people who are in debt, which is traumatic in their life. We had a client commit suicide its a very stressful thing.
oung people appear to be
increasingly vulnerable to the allure of debt, too. While Money Mentors 2009 annual report says that the average age of their clients is 39, Watson says that they are seeing more young people than before. Were trying to reach more young people about getting educated and not getting to that point. For example, credit cards are already on the university campuses. They get a credit card, ring up $5,000 and they cant pay it. Even young Albertans working in the oil patch are vulnerable to the dangers of debt. A 20year-old can earn $100,000 in a year and adopt a lifestyle to match, only to find him or herself laid off just as quickly. As a result of this growing comfort with sixfigure credit balances and the punishing interest rates that are routinely charged on them, personal bankruptcy, which was once a refuge for the rich, now affects people across the economic spectrum. A total of 11,374 Albertans were personally insolvent in the year ending Aug. 31, 2010 an increase of 4.5 per cent from the previous 12-month period, according to the office of
onald Harrison, a manager witH tHe national firm debt managers, says
that his company has been enjoying double-digit percentage growth for the past few years, although he declines to provide specific figures. Its like a tiger by the tail, he says. We look at families out there suffering and we are a relief valve. Like Howarth, Harrisons clients include high income earners. One man had inherited a business from his family, decided he had to maintain his late fathers lifestyle and expand
waning interest
for Canadians born after 1980, the idea of doubledigit interest rates is an ancient concept. After all, its been almost 20 years since the Bank of Canadas benchmark rate was higher than 10 per cent. Since then, the rate has been on a long-term decline, inching inexorably lower and bringing with it the cost of borrowing. It bottomed out in 2009 at 0.5 per cent, in an effort to stimulate economic activity during the worst part of the recent recession, and while its since risen to 1.25 per cent, borrowing money is still cheaper today than at just about any other point in Canadian history. In fact, over the last decade the Bank of Canadas benchmark rate topped out at just six per cent, a figure thats still lower than the average rate between 1935 and 2010.
25%
bank of Canada - interest rates 1980 to present

20%
15%
fell below 10%

10%
In 1991, interest rates
5%
0% 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99
the business, and ended up in some deep debt problems. The first step for people turning to these firms is something called a debt arrangement, a plan that forces people to spend less than they earn. This is the debt junkies version of detox treatment, and its nearly as traumatic as the version that more conventional addicts have to undergo. Its an absolute shock to the system, Harrison says. We put them through a strict diet of no credit cards, and you have to pay cash and live within your means. For those looking to avoid bankruptcy, the most common service that debt management firms provide is something called debt pooling. For a fee, generally 15 per cent of the monthly debt repayment, the company becomes the go-between with all of the creditors and negotiates a deal with them on behalf of the client. Initially the sound of 15 per cent is shocking, Howarth says, but you have to compare that to the daily marginal closing balance that is compounded at 19.5 per cent or 27.5 per cent on a monthly basis. In some cases the financial institution prefers to write off part of the debt and continue to charge interest, but the most common arrangement involves the repayment of the principle and interest accrued to date over a period of four to five years. The aim is to try to minimize losses for all parties. That means paying the creditors off as much as possible, while leaving the debtor with enough income to get by. Another alternative to bankruptcy is an orderly payment of debt (OPD) program, something thats only available to residents of Alberta, Saskatchewan, Prince Edward Island and Nova Scotia (Manitoba >
Thank You!
Alberta Venture extends its thanks to our program partner, the Chartered Accountants of Alberta, as well as Henry Singer, the official clothing supplier for this years award recipient, for making the 2010 Albertas Business Person of the Year luncheon a great success. View exclusive web coverage of the event, including the official Albertas Business Person of the Year tribute video, candid photos and a video series of Don Lowrys keynote address, Leadership from the Ground Up, at http://bpoy.albertaventure.com
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and British Columbia used to have OPD programs but have since cancelled them). Albertas OPD program started out in the Consumer Affairs Department but was privatized in 1997 and transformed into Money Mentors. It operates on a slightly different basis than the private firms, with the interest rate over the four-year period of repayment fixed at a legislated five per cent. The agency also charges a $50 administration fee and a monthly fee depending on the size of the debt. When the debt load becomes unbearable, the debtor is forced into bankruptcy. Bruce Alger, a Calgary bankruptcy trustee and CEO of Alger and Associates, says his business probably peaked in 2009, with the bust after the boom, but its still thriving. Business has been good for the last couple of years, thank you, he says. His client base also includes people from all income levels. While those in higher income brackets have more options, financial problems dont have an upper income limit. All you do is spend more than you make.
in the deep end

The 1980s may have been the decade of decadence, but when it comes to debt it has nothing on the last 20 years. Since the mid-1980s, total household debt in Canada as a share of personal disposable income has nearly tripled, from approximately 50 per cent to 146 per cent. More worrying still, as a TD Canada Trust report released in October 2010 highlights, the rate at which Canadians have been taking on debt has actually accelerated since 2007. The relentless rise in household debt in Canada, both in absolute terms and relative to personal disposable income, is a growing cause for concern, the report states. Tumbling interest rates have played their part in this trend, but so too has a change in the attitudes that the average person has towards debt. We have become impatient, it argues, buying things when we want them rather and financing the purchase with credit rather than waiting until we can afford then. If were in the deep end of the pool, though, were not yet in danger of drowning. The TD report describes the current levels of household debt as excessive, but rejects the idea that Canada is on the verge of a major deleveraging crisis. Interest rates arent likely to increase substantially in the near term, and that may provide Canadian households with the breathing room they need to reduce their debt loads. Nevertheless, the report concludes, policy-makers and lenders should be aware that personal indebtedness is becoming a more pressing problem, and lowincome Canadians are particularly vulnerable to future interest rate increases. This suggests that prudential actions might be warranted to temper the rate of debt growth in the future.
Ratio, % 26
Canadian household metriCs of indebtedness
24
any people find themselves
22
unable to do more than tread water, until a crisis such as divorce, illness or reduced hours finally pushes them underwater, Alger says. The stress leading to bankruptcy is often unbearable. A debtor might be harassed at all times of day and looking over their shoulder all the time. Yes, filing for personal bankruptcy is disruptive and traumatic, but their lives are already horribly disrupted. Bankruptcy offers stability in an untenable situation, Alger says. People considering bankruptcy are asked to list all of their assets, consider whether there are other ways of dealing with debt, and then go home and think about it. If they decide to go ahead and declare bankruptcy, they have to file a statutory declaration of expenses and assets. Once they file, they instantly get the creditors off their back. For an average fee of $1,800, the trustee will deal with the creditors, dispersing assets and collecting surplus wages above the basic level for nine months until the bankruptcy is discharged. Alger says that personal bankruptcy doesnt necessarily mean that a person will lose their home or car. For instance, if you have equity in your home, you can protect $40,000 of that and you can only protect one vehicle worth up to $5,000. They can even keep equipment they need for work, such as computers or tools. Some investments,
20
18
16
14 Debt-to-net worth Debt-to-assets
12
10 Q1-1990 Q1-1993 Q1-1996 Q1-1999 Q1-2002 Q1-2005 Q1-2008 Source: Statistics Canada/Haver Analytics
including RRSPs and pensions, are also exempt through federal bankruptcy legislation. But they must give up most of their assets to the trustee under Albertas bankruptcy legislation, even though it is one of Canadas most generous for debtors. For better or worse, its unlikely that Alger and his colleagues in the business of debt management will see their fortunes change any time soon. Bank of Canada governor Mark Carney tried to remind Canadians about the virtues of prudence and saving, but they dont appear to have listened very closely. Theyre hooked, it seems, and the supply of easy credit remains all-too readily available. If theres an upside, its that it will continue to create opportunities for businesses that provide arbitrage between creditors and debtors, according to Adam Finn, acting chair of the department of marketing business economics and law at the University of Alberta. Because of the huge spread between interest rates offered by banks to preferred customers and credit card rates, it makes financial sense for both creditors and debtors to come to an arrangement, he says. In the end, though, none of these services make up for personal planning to ensure that you are living within your means and are ready and able to get through a bad patch, says Money Mentors Tracy Watson. Its the job of a consumer to be a wise consumer and use credit wisely, she says. av
Succession planning prepares a new crop for looming retirements
GRow
By CAiLyNN KLiNgBEiL // iLLUSTRATioN By LUC mELANSoN
Ready, Set,
elebrating a 65th birthday is normally an occasion
reserved for the usual birthday offerings: presents, cake, numerous candles and the obligatory over-the-hill jokes. But as the oldest of the baby boomers celebrate their 65th birthdays this year, a collective sense of worry will be added to the celebratory mix. Canadas population is aging, and with that fact comes far-reaching implications. Everything from health care to the labour force will feel the stresses of the baby boomers, those born in the 20 years following the Second World War, blowing another candle out on their birthday cakes. With more than a third of the entire labour force expected to retire over the next two decades, succession planning, the process of identifying and developing internal employees to fill leadership positions within a company, will become an increasingly important job for many Alberta companies in the years to come. As the baby boomer generation retires over the next two decades, companies will be challenged to fill the positions that they vacate and replace the experience they brought to them. Steve Brierley, the group lead of staffing and development at Encana Corp., is actively preparing for those retirements. Brierley describes succession planning at Encana as a collaborative process done on a regular basis. Its not just a human resources process, its a business process, says Brierley. The succession planning process at Encana begins with a review of the companys demographics, information that provides the company with a precise picture of how many people might retire over the coming five years and which roles the company will need to fill as a result. Brierley says that the demographic profile of Encanas workforce is very similar to other large organizations, with many baby boomers nearing retirement. >
focus turns to employee development plans that aim to groom future leaders and ensure technical knowledge is passed down to successors. Simplicity, Brierley says, is important throughout the process. One of the reasons a lot of succession plans fail is because they make them too complicated. Theres an academic approach to succession planning and then theres a practical approach. Alan Gee knows a thing or two about putting succession plans into practice. While for most people in his position, the prospect of having to replace three retiring senior executives in just over a year would be enough to trigger a cold sweat, for Gee, the director of organizational development at Stantec Inc., meeting that challenge turned out to be a perspiration-free experience. Gee and his team first filled the position of CFO, followed four months later by the president and CEO and eight months after that the chief operating officer, and they did it all with internal candidates. Gee credits a consistent approach to talent management with taking a potentially tumultuous transition and making it manageable. Gees voice doesnt betray either stress or worry as one might expect, but instead the same kind of excitement that one might hear from a mountain climber whos just scaled a particularly intimidating peak. If you prepare properly, its not as nerve-wracking, says Gee, who is based in Stantecs Edmonton head office. If you know which leaders want to rise to the next level and if you understand where the gaps are, you can manage that.
fter identifying the roles that need to be filled, the
former vice-president, finance and treasury, for Stantec, assumed the CFO role in January 2009. Similar conversations and development plans led to the appointment of internal candidates Robert Gomes, who succeeded Tony Franceschini as president and CEO effective May 2009, and Rich Allen, who succeeded Mark Jackson as chief operating officer as of January 2010. If you dont tell people theyre the future of the organization, they wont know and they may be looking somewhere else, says Gee. Our strategy has been to connect with those people that are high potential, high performers and have discussions with them about their careers, says Gee. Theyre valuable to us, but also to everybody else in our industry, so we need to ensure that we put them on a development path and develop their careers within the organization. While Stantec practises one approach to succession planning, Calgary Economic Development recently hosted a forum on the topic where panelists, including Encanas Brierley, outlined several different approaches organizations can take. That forum was the result of feedback from the human-resources industry, whose research showed that succession planning was a top priority for many companies. Through conversations with employers, we kept hearing concern about the greying of the C-suite and the concerns that employers had regarding who was going to fill some of the leadership positions of the organizations in the future, says Elsbeth Mehrer, the director of research, workforce and strategy for Calgary Economic Development.
Panelist lynn roger, senior vice-President of talent strategies
The organizations who arent thinking long term, those who continue to focus only on having the right talent in place for tomorrow, they are not going to be successful.
Gee is Stantecs number-one advisor on succession planning, and he has filled hundreds of positions within the company using a forward-thinking approach. Stantec has nearly 10,000 employees operating out of 150 offices in North America, but Gee says consistency in the process, particularly when it comes to the development of pools of talent, ensures that no position will be left unfilled. There are a lot of succession models, but basically what it comes down to for us is two elements, says Gee. There are the high performers and the high potentials, and the combination of the two is where we develop our talent pool. Career development performance reviews are also at the core of Stantecs succession-planning strategy. These are conversations that every manager has with employees about their careers, including discussions about where they want to go and how they want to get there. Prior to the retirement of CFO Don Wilson at the end of 2008, Wilson had talked with the four people identified as potential successors. He then worked with them, through coaching seminars and the creation of a development plan. Wilson passed away in January 2010, but Gee credits him with setting the ball in motion on the entire succession-planning process. In the end, Dan Lefaivre, the
and executive resourcing at BMO Financial Group, has an extensive background in the area of succession planning. She believes the biggest breakthrough in succession planning came from the simplification of the process, which in turn makes such practices more relevant for business owners who are busy running a business. Instead of human resources departments pushing talent practices onto business leaders, Roger now sees business leaders proactively seeking out those strategies. Involving the leaders in the succession planning process makes it their process and not human resources process, says Roger. Roger is also well aware of the inflated ego that can result when individuals are told they are being groomed for a future leadership role. Its really easy to have a big ego when people say Youre smart and you get promoted, says Roger. You can kind of be blinded to your weaknesses. So what were trying to make sure of is that our leaders receive feedback not just from their managers, but they receive feedback from their employees and from their peers. Rogers says this process helps employees become self-aware of their strengths and weaknesses, which strengthens the organization as a whole. Whatever the approach a given company takes, Calgary Economic Developments Mehrer says its crucial that they take one. The organizations who arent thinking long term, those who continue to focus only on having the right talent in place for tomorrow, they are not going to be successful, she says. Mehrer believes that the recent labour shortage of 2007 and 2008 is merely a preview of whats to come. Companies who are not thinking long term those are the businesses that are really going to struggle into the future to ensure they have the pipeline of talent in place to meet their own needs. AV
A DV E R T I S I N G F E AT U R E
SUCCESS
PROFILE
OF
FINANCIAL SOLUTIONS
Raintree Financial Solutions
202, 10310 176 Street NW Edmonton, Alberta, Canada T5S 1L3 Phone: 780-443-0340 www.raintreesolutions.net
ON THE JOB: Raintree President Nick Fournier, VP of Sales Kyle Jacober, and VP of Business Development Adam Derges
Transparency Rules New Investment Market

aintree Financial Solutions is changing the way dealers in the previously unregulated world of exempt markets communicate. The Edmonton-based exempt market dealership has based its business on transparency, with dealing representatives across Western Canada helping investors to build their wealth responsibly through a portfolio of exempt market products. Nick Fournier, Adam Derges and Kyle Jacober started Raintree in January 2010. The three business colleagues were unable to nd an exempt market dealership that aligned with their values, and so they decided to create their own. The partners at Raintree have a combined 40 years experience in the real estate and nancial worlds. Their extensive and varied experience, combined with their distinct yet complimentary skills, have ensured a strong foundation for the new business. Raintree was approved by the Alberta Securities Commission, who now regulates the exempt market industry, on Sept. 1, 2010, and has since been approved in B.C. and Saskatchewan. Over 40 Raintree dealing representatives now operate across Western Canada. Fournier, president of Raintree, says that the young company has hit its targets every month, and every month those targets have increased. The investments offered through Raintree are unique in that they do not participate in the market in any way. And, unlike
many other nancial institutions and other exempt market dealerships, Raintree is not nancially tied to any of its products. Every investment is a third party offering one that has been evaluated through an intensive product approval process involving third-party legal, tax, and business opinions. Were completely transparent, says Derges, vice president of business development. Of the more than 80 products Raintree has reviewed, 12 products have been added to its offering. The bar that were adhering to when choosing products is quite high, says Jacober, vice president of sales. Creating its own back ofce system for its dealing representatives and clients has also set Raintree apart. The system, built by a local software development company (Pderas), provides accurate and timely reports to each client. Raintree is currently building an application that will allow dealing representatives and clients to access their information from their mobile devices at any time. Raintree is just over a year old but the company is already well on its way to becoming the leading exempt market dealership in Western Canada. The company, already approved in three provinces, is closing in on approval in Manitoba and eyeing the Ontario market. For Raintree, though, its not just about being the largest dealer. If youre growing just to grow, you might grow in ways that dont benet everyone, says Derges. Were looking to grow the right way. We dont want to just be the largest, we want to be the best.
Next up
Heir to the Throne

Edmonton Realtor brings a new perspective to the market
By MAx fAwcETT
BLUEFI SH
f a casting agent were looking for someone to play the role of a realestate professional, theyd be hardpressed to find a more natural fit than Edmontons Robert McLeod. From the French cuffs peeking out from the sleeves of a well-tailored suit to the boyish good looks accented by a faint dusting of grey at the temples, the 31-year-old real-estate agent personifies the balance between friendliness and formality that is the industrys answer to a uniform. But while McLeod may look like his industrys archetype, hes far from being a one-dimensional caricature. After all, despite the clean-cut image, hes made a name for himself by being willing to get his hands dirty. McLeods early days in the business were spent working on condominium conversion projects, but he made his mark as a troubleshooter, the guy you go to when a project isnt selling as well as it should. In fact, its those sales-oriented survival skills, the ability to salvage stumbling projects and manage other forms of adversity, that has allowed him to thrive in a market thats been tough for just about everyone else in his business. The bulk of our growth has come in a down market, he says. Its easy to grow a business in an up market, but working with problem sales projects or developers in default is more difficult. Playing the role of troubleshooter has obviously been good for McLeods bottom line. As the founder and CEO of McLeod Project Marketing he now leads a team of real-estate professionals working on a wide variety of projects, including a commercial redevelopment at the corner of Jasper Avenue and 101 Street called, appropriately enough, McLeod Tower. But while the conversion business remains strong, McLeod is anxious to get more involved at the front-end of the process. Im normally brought into the picture once the problem is realized, he says, and what were trying to do is put ourselves in the picture from day one. One of the reasons he wants to be in the picture from day one is so he can make sure
BOB THE BUILDER: Robert McLeod wants to change the way Edmontonians see real estate
it gets painted properly. I can generate the traffic, he says, but at that point its about the message, and what the developers in Edmonton are missing is their message. Most buildings are built with no story. Its downtown, and its concrete, and you get granite. OK. What next? Wheres the story? How do I fall in love with that? Part of the problem, McLeod says, is that Edmonton developers havent given buyers much to fall in love with. In Vancouver
and Toronto, you have jewel-boxing, which is the creation of smaller spaces with more refinements, he says. Condos in Edmonton are still a commodity, and we have to work to change that so that people dont see it that way any more. Another reason so many Edmonton projects are missing a story, McLeod thinks, is because developers havent bothered to build a space in which to tell it. In other markets, that space is the pre-sale showroom, a living
At the same age, Bob Rennie was only selling houses. Already, Robert has moved way beyond that.
and interactive blueprint in which prospective buyers are given a taste of what life could be like with the right fixtures and finishes. In Edmonton, though, projects are still routinely sold out of unmodified trailers and other equally pedestrian environments. The Pearl, a new project that will be the tallest residential tower in downtown Edmonton when its completed, serves as a perfect example of the Edmonton condo markets old-fashioned approach to sales and marketing, McLeod says. Youve got a big hole in the ground, youve got a massive crane up there, you have people whizzing by all the time, and what does it have? It has a website, which is just a placeholder website, with no pricing and no information on it. You should have a trailer there on site, you should have glass frontage on it, it should be lit at night. It should drive people to come and be a part of it, be a part of it being built. If McLeods attitude towards selling real estate sounds vaguely familiar, thats because it has a great deal in common with that of Bob Rennie, Vancouvers socalled condo king and the architect of the glittering Shangri-La that is Yaletown. Over the course of his 30-plus year career, Rennie has gone from selling real estate to telling developers and even the city itself how it ought to be built. What I respect about him, McLeod says, is that hes had influence in what has been built. Its an influence that McLeod would like to have in, and on, his own city one day. Dale Williams, the president of Futura Financial Services and the man who gave McLeod his first job in real estate, thinks he can do even better than that. I would say hes at least as talented as Bob Rennie, or maybe better. At the same age, Bob Rennie was only selling houses. Already, Robert has moved way beyond that. In the real estate world, thats almost as audacious as a talent scout saying that a college basketball player has the potential to be better than Michael Jordan. But Williams, who has worked with both Rennie and McLeod, thinks that the students accomplishments may eventually exceed those of the master. Ive been in the real estate industry for 30 years, Williams says, and hes probably the most talented Realtor Ive ever met. Williams isnt the only person who believes in McLeods potential. Allan Carr, the senior vice-president of Maclab Enterprises, the largest privately owned residential property holder in Alberta, also thinks that McLeod has all the tools and talent needed to achieve special things. He just brings a different angle to the equation, Carr says. Too many people have looked at things the same old way, and they cant see the forest for the trees. One of those angles is McLeods willingness to listen to what buyers want instead of telling them what they need. He might admire the work of a so-called condo king, but when it comes to selling real estate, McLeods more a fan of the democratic process. The recommendation has been: listen to the customer, McLeod says. It sounds really obvious, but its not something that many developers have done. Despite the challenges associated with selling condominiums and other forms of value-added real estate in Edmonton, McLeod remains a firm believer in the city and its future. Ive lived downtown consistently since 2000, and lived in various parts to try to understand which areas I like, and Ive seen it change an enormous amount in 10 years. Now, you can drive downtown and again were seeing cranes, were seeing the skyline changed and weve got talk of an arena that for all intents and purposes sounds like its going to go ahead. Those cranes, he says, are an important metaphor for the kind of growth and prosperity that people want to see in their city. Cranes are incredibly empowering for people to see, he says. If I ever ran for mayor of Edmonton, I would lease every available crane and I would position them randomly within the city. If he gets his way, McLeod will be adding a few cranes of his own to the skyline in the years to come. AV
Next Up is a series of profiles of emerging leaders in Albertas business community and public life.
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MARKETING INTEL
By STEVE WILLIAMS
Unleash Your Marketing Budget

Its false economy to tighten your promotional belt when times are tough
ne of the most curious effects of a recession and the subsequent recovery is the way many companies slash their marketing budgets. I liken it to lowering the lifeboats the moment you spot an iceberg. The marketing-as-sacrificial-lamb practice has its roots in your companys culture. It often depends on whether your firm regards marketing as an investment or an expense. If youre of the mind that it is an expense, then youll trim ad budgets and appear like a fiscal hero in the short term. If you think of marketing as an investment, you will make sure you have strong marketing fundamentals, then maintain or even increase your budget. The benefits of maintaining marketing spending in a tough economy are well documented. As far back as 1927, the Harvard Business Review reported that of 200 firms tracked through the recession of 1923, the largest sales increases were experienced by companies that advertised the most. A similar study in 1979 corroborated the findings, adding that the companies also did better in the years after the recession. Yet another report in 1985 showed that sales of aggressive recession
microprocessor giant Intel chose the unfriendly business climate of the early 90s to launch its Intel Inside marketing campaign. Maintaining your marketing spending is not simply a matter of staying the course (the iceberg analogy above will only extend so far). There are course corrections to be made. Savvy marketers will examine all aspects of their marketing mix and try to achieve efficiencies in everything from pricing to distribution. Research, another item that marketers find it easy to kick to the curb in a recession, is a great investment. If your competitors are tightening their belts, invest in research and learn more about your target audiences changing values, fears and frustrations. Then tailor your marketing programs to the prevailing mindsets. Youve no doubt heard a brand likened to a companys personality or character. Studies show that customers hold a higher opinion of companies that stay in touch during tough times as well as during periods of prosperity. The logic is sound: you choose your closest friends based on character. Brands like friends that keep in contact through thick and thin create the most powerful bonds.
When you engage in overzealous belt tightening, you run the risk of damaging vital organs.
advertisers outpaced their budget-slashing brethren by 256 per cent in the two years immediately following the downturn. Evidence continues to pile up in the modern era. In the early 90s blue-ribbon brands like Jif peanut butter and Kraft salad dressing increased their advertising budgets and experienced sales growth of 57 per cent and 70 per cent respectively. In the beer industry, where market share points are contested like Second World War beachheads, Coors Light and Bud Light increased sales by 15 per cent and 16 per cent by upping their advertising investments when others were cutting. This points to another oft-observed phenomenon: the gains you can make with strategic marketing increases can be multiplied because many of your competitors will be cutting. This may be one of the reasons If you question whether people will notice your absence from the marketplace, heres a cautionary tale. Years ago I was with clients observing focus groups of farmers giving their impressions of various print advertising campaigns we were planning. Several of the farmers questioned, How come these ads are in black and white? Your ads are usually in colour is everything OK with the company? Your target audiences are paying attention. Cutting marketing spending is not like other austerity measures. Stifling your marketing voice is more hazardous for two reasons. First, you degrade the value of your previous investment by losing share of mind. And share of mind has a direct correlation to share of market. Second, when the recovery starts you have to play catch-up with consumers and competitors. This will likely cost you what you
saved when you cut your marketing expenditures during the downturn. So who out there is increasing their marketing spend? When even the most optimistic observers were still seeing doom and gloom through their rose-colored glasses, Hyundai was increasing its ad spend and turning mind share into market share. From one six-month period in 2008 to another in 2009, the carmaker increased its marketing investment by 58 per cent. This helped it achieve record profits. The Israeli Tourism Ministry recently upped its marketing budget for 2010-2011 by 20 per cent from 2009 levels, in an effort to reach its target of four million visitors by 2012. Closer to home, Western Canadas prestigious Rocky Mountaineer luxury train travel company went against conventional thinking which saw competitors discounting their products and services. Instead, Rocky Mountaineer increased its investment in branding, opened new direct channels to consumers, created new products, revitalized core competencies and devised new ad campaigns for Canada, the U.S. and Australia. After conducting research in five countries, the company launched new campaigns domestically, in the U.S. and in Australia. The results were convincing. Direct revenues were up 17.3 per cent year over year. Direct bookings from the U.S. increased by 6.4 per cent in a period where overall visits to Canada from the U.S. declined by 14.9 per cent. Direct guests from Australia and the U.K. were up 90 per cent and 23 per cent, respectively. During this same period, Rocky Mountaineers competitors experienced double-digit decreases. These are not isolated examples. According to GroupM, a global media investment management company, global advertising spending in measured media will exceed US$500 billion in 2011 a 5.9 per cent increase over 2009. This would be the highest level of ad spending in history. As a marketer, now is the time to ask yourself a vital question: will I be looking at my competitors tail lights in 2011? When you engage in overzealous belt tightening, you run the risk of damaging vital organs. Your brand is one of them. AV
Steve Williams is the former chief creative officer of a national marketing communications firm.
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OPEN RANGE
By GEORGE KOCH
The Decline of Service

In our narcissistic culture, the customer is always wrong
ey, Katie, hows it goin? the young snowboarder queuing up in the ski area cafeteria asked the cashier. Pretty good but really stressed! she answered breathlessly. Id been through the brief lineup a couple of times breakfast, lunch and now an aprs-ski snack before hitting the road. The mountain was operating at maybe one-quarter capacity and the guests were in first-day-of-the-season good cheer. Stress? What might happen to the young cashier with four times the traffic, running out of french fries midway through the lunch rush, underage punks trying to wheedle beers, harassed parents with yelling kids, when much of the after-ski crowd is on their sixth round of shooters? Theres something seriously wrong with our service sector in Canada. Service culture is almost an oxymoron. Theres a growing attitude among service employees that theyre entitled to fun on the job, free of demands for exertion or thought outside the confines of their one task. The customers role is to line up meekly, endure delays without complaint and silently hand over their chip card. If anything isnt working quite right, its the customers fault. Any questions? Dont ask the staff go away and Google it. We Canadians love to laugh at the relatively uncultured ways of American service staff, especially their ignorance of other countries. But ours arent far behind.
When such a naf enters the service sector, no wonder they feel the customer exists to make them happy. Those customers have a way of rudely deflating the bubble creating all that stress. For all their coolness and 13-going-on-30 worldliness, todays young service employees seem alarmingly fragile. Theres the admittedly dehumanizing environment in many large corporations. Machines have not only replaced service employees at the utilities, for example, but even at the retail level each party interfaces more and more with technology than one another. Ive noticed a clear age divide in attitude and ability to perform services. Younger staff, for all their familiarity with gadgets, are virtually devoid of general knowledge and have little ability to think while conversing to actually interact. Theyre as one with the electronics, but alienated from warm-blooded humans with their unpredictable ways. One way they cope with the frightening randomness is to treat all but the most rudimentary inquiries as mysterious gibbering akin to a space alien or dementia sufferer. This happened to me twice within five minutes at a big-box retailer recently. I was in search of a stout plastic grain shovel to deal with that big mid-November blizzard. The racks held all kinds of flimsy plastic snow shovels, plus aluminium grain shovels. So I asked a staffer. He guffawed with a disbelieving grin: Plastic grain shovels?
The private sector has become nearly as procedurally obsessed as government.

I think a large part stems from the decline of our educational system. Kids are taught that theyre the centre of their own self-constructed universe, where theyre always the hero, the sun around whom others orbit with the singular goal of making them feel good. The boomers psychotic over-parenting completes the infantilizing of children through their mid-20s. Adult life including work is foreseen as an endless upward spiral of self-esteem and self-actualizing experiences. Those are seasonal. Come back in April. I turned around, looked up and saw an entire wall full of rakes and spades, which somehow counted as year-round stock. Moments later I asked another staffer about where to find one of those big, square lantern batteries, thinking this non-standard configuration might be in the camping section. She gaped. Lantern? Battery? And wandered off. It only gets worse when youthful indifference meets the advance of progress.
For all our whiz-bang technology, the private sector has become nearly as procedurally obsessed as government. Front-line staff appear in turn irritated, baffled, paralyzed or terrified at deviation from routine. Financial companies making their unsolicited late-evening marketing calls warn that a conversation may be recorded or monitored. When I ask, Well, is it or isnt it? the company consultant freezes up in a near-panic. My wifes dental office keeps calling our house weekdays to remind her of appointments. Ive asked them repeatedly to call her at the office. The other day I finally started yelling very un-Canadian. But mindlessly repeating routines without regard to the customers response isnt service. Merge procedural obsession with todays smothering safety cult and the results can be toxic for the customer. Not long ago the absurd interactions of occupational health and traffic safety nearly wiped out rural mail delivery. At ski areas, the liftees tending the older chairlifts refuse to actually slow down the chairs for fear of throwing out their backs so thousands of paying patrons end up with black and blue calves. In B.C., safetyrules now make it illegal for gas stations to allow you to fill your tank and then pay for the gas. Every motorist is presumed a criminal. Bad service at a fast food joint or retail outlet might seem trivial, but its a window on a civilization so tyrannized by technology and weighed down by rules its losing the ability to cope with the natural give and take of life. What might happen in a true cataclysm you know, enormous physical damage, mass casualties, power and communications systems down for days? Would firefighters allow entire cities to burn while waiting in vain for the power company to show up and tell them all the electrical lines had been disconnected? The metaphor Byzantine encapsulates a culture of infinite and incomprehensible rules, elaborate ceremony, impenetrable political structure and utter inertia incapable of taking action. Were close to living the 21st century version. AV
George Koch is a Calgary-based freelance writer and commentator. More of his writing can be found at www.drjandmrk.com. Send your comments to feedback@albertaventure.com.
Call for nominations TechRev Innovators 2011

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Lethbridge, where a group of savvy developers saw potential in an old Paramount theatre, one of the most recognizable buildings in the city, and decided to save it from extinction. The corner lot on which it sits now houses an ATB Financial branch, while the remainder of the 25,000 square feet has been turned into an eclectic mix of retail and office space. Joni MacFarlane
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2010 PricewaterhouseCoopers LLP. All rights reserved. PwC refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, which is a member rm of PricewaterhouseCoopers International Limited, each member rm of which is a separate legal entity. 0400-20

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reWriting the rules oF retireMent|the Big Business oF BorroWing |5 Ways to Finance your Business 5 Ways to Finance| Why succession

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Beg, Borrow and deaL

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Income Trust Column Sparks Debate

In a coLumn dated december 1, 2010,

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