uwaterloo.ca and agriculture 34 . target price - 20% weighted of 5 methodologies . company...

Advisory Board Meeting – Fall 2012 December 4th, 2012

Agenda

December 4, 2012 - Advisory Board Meeting 2

SAF Investment Fund Overview

Stock selection: Process & methodology

Portfolio Performance

Investment Action

Stock Pitches

Next Steps

Global Macro Outlook

Click to edit Master title style

FUND OVERVIEW SAF Investment Fund

http://www.saf.uwaterloo.ca/SAF/SAFInvestmentFund.html

The Team – Introductions

December 4, 2012 - Advisory Board Meeting 4

Student Investment Team L to R: Front Row: Sammy Shen, Jing Xu, Catherine Zheng, Alex Wang, Linda Teng, Talha Omer, William Li, Leon Wu L to R: Back Row: Judith Ma, Mo Du, Anqi Wang, Michael Wang, Prasanth Pahirathan, Dustin Fader

Faculty L to R: Alan Douglas, Craig Geoffrey, Ranjini Jha, Andrew Ecclestone

Organization Structure

5

Analyst Leon Wu Fertilizer and Agriculture

Analyst Linda Teng Gold Mining

Analyst Michael Wang Diversified Mining

Analyst Talha Omer Oil & Gas

Analyst Sammy Shen Financials

Analyst Catherine Zheng TMT

Analyst Alex Wang Consumer

Analyst Judith Ma Utilities

Analyst Jing Xu Industrials

Analyst Dustin Fader REITs

Mo Du Chief Investment Officer

Anqi Wang Portfolio Manager

Prasanth Pahirathan Portfolio Manager

William Li Portfolio Manager

Fund Overview

Advisory Board

Aazar Zafar CA, CFA

Principal

Anish Chopra CA, CFA, CBV

Managing Director and Portfolio Manager

John Gort CA, CFA

Vice-President and CFO

Dr. Thomas Scott Director

Dennis Huber Vice President, Finance

Jeffrey D. Stacey Founding Partner

Industry Mentors

Derek Chu CA Associate IB

Aly Hadibhai CA, CFA Director

Kevin Huynh CA, CFA IB Analyst

Simon Kwan CA Analyst

Dan Lavric CFA Portfolio Manager

David Middleton CA, CFA Principal

Saran Ananth Senior Risk Analyst

Ohad Lederer CA, CPA, CFA Investment Analyst

ONCAP

Middleton Family Office

Industry Mentors

Phillip Huang CFA, CA Director

Niall Glynn CFA Associate

Milenko Sikljovan CA Associate

Investor Policy Statement

9

Category Restriction

Asset Class Canadian Equities

Market Capitalization

$300 Million +

Debt Rating S&P greater than B (or equivalent)

Individual Holdings

< 10% of Fund assets

Industry Sectors

< 25% of Fund assets

Trading Volume

< 5% of 10-day daily average

Exemption during one-year

“phase-in period”

Fund Overview


STOCK SELECTION: PROCESS & METHODOLOGY

SAF Investment Fund

Quantitative Ranking Methodology

Stock Selection 11

• Define universe of stocks in each industry

• Select metrics relevant to the industry

• For each metric, rank universe from first to last

• Add up rankings across all metrics to get final “Score” for each stock

• Arrive at final ranking based on each stock’s

“Score”


PORTFOLIO PERFORMANCE SAF Investment Fund

JULY 31ST 2012 – NOVEMBER 30TH 2012

Updates to Previous Holdings - November 30, 2012

Portfolio Performance 13

Sells Holds

Performance Update: July 31, 2012 - November 30, 2012

14

Stock Shares (#) Last Close ($) SAF

Analyst Target ($)

% Variance

Canadian Natural Resources (SOLD) 175 28.35 34.09 20% National Bank 65 77.58 79.65 3% Fortis 150 33.38 35.71 7% Metro (SOLD) 90 61.16 63.00 3% Northern Properties (SOLD) 150 30.67 35.90 17%

Stock Cost Basis ($) MV ($) Dividends P&L ($) P&L (%) % of

Portfolio

Canadian Natural Resources (SOLD) 4,953.45 4,961.75 18.38 8.30 0.5% 19.76% National Bank 4,888.35 5,042.70 51.35 154.35 4.2% 20.08% Fortis 5,036.45 5,007.00 45 15.55 0.3% 19.94% Metro (SOLD) 5,023.95 5,504.40 38.23 518.68 10.3% 21.92% Northern Properties (SOLD) 5,041.95 4,600.00 57.39 (384.56) -7.6% 18.32% Total 24,944.15 25,115.85 210.35 312.32 1.5% 100.0%

TSX Holding Period Return 4.93%



15

-12.00%

-7.00%

-2.00%

3.00%

8.00%

13.00%

18.00%

23.00%

28.00%CNQ FTS MRU NPR.UN NA

Cumulative Portfolio Performance: July 31, 2012 - November 30, 2012


Strategy Performance: July 31, 2012 - November 30, 2012

16

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%Portfolio - Cumulative Returns TSX - Cumulative Returns Passive Portfolio - Cumulative Returns

Benchmark Against Passive Portfolio of iShares ETFs

TSX Return 4.93%

Passive Portfolio Return 1.02%

Portfolio Return 1.46%

Passive Portfolio : Equally Weighted Portfolio of iShares: XRE for NPR.UN, TSX:CLO for CNQ, XUT for FTS, XFN for NA,XST for MRU

Sector Performance July 31, 2012 - November 30, 2012

17

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%Energy Index Financials IndexREIT Index Information Technology IndexMaterials Index Composite IndexConsumer Discretionary Index Diversified Metals & Manufacturing IndexHealth Care Index Utilities Index


Key Metrics

18

NPR-U NA MRU CNQ FTS

NPR-U 1 0.26 0.076 0.111 0.155

NA 0.26 1 0.118 0.325 0.315

MRU 0.076 0.118 1 0.295 0.118

CNQ 0.111 0.325 0.295 1 0.308

FTS 0.155 0.315 0.118 0.308 1 Source: Bloomberg - 5 years weekly data

Source: CapIQ

Beta 0.77 Average Daily Returns 0.02% Annualized Returns 5.20% Annualized Standard Deviation 0.100

VAR - 5% ($25,000 invested) $2,802.12 Sharpe Ratio 0.29 Number of Days underperformed Index 45 Number of Days outperformed Index 39



GLOBAL MACRO OUTLOOK SAF Investment Fund

Global Economic Environment - September

20

U.S Federal Reserve recently announced start of open-ended QE3 and extension of “Operation Twist”

Begin buying $40-billion in agency mortgage-backed securities every month lower long-term interest rates by selling short-term bonds and buying long-

term bonds in an effort to drive down mortgage rates Confirmed near-zero interest rate guidance until mid-2015

Rationalities

Global Market Volatility

• Market could have QE3 priced in • Doesn’t fundamentally change weaknesses in U.S

and global economies • Struggling European bank deposits continue to fall

on higher yield and higher debt balances • Further deterioration of credit conditions

Scenario I: Improvement in macro conditions: Scenario II: Global economic slowdown

Quantitative Easing and Operation Twist


Overseas Markets – Euro-zone and China

21

Record household debt and large government deficit had led to financial restraint

A weak global environment and an elevated exchange rate are weighing on exports

Export and investment outlook could improve against strong macro conditions

Analyst pegging real GDP growth at ~ 2.0% in 2012 and improving in 2013 and 2014 with less than stellar job growth

Cautious Optimism

A Growing Debt Problem Risks and Opportunities

• Growing consumer debt and a resource focused economy could derail recovery efforts

• Weak demand for oil and bulk commodities likely to continue in the near future

Source: TD Economics


Overseas Markets – Euro-zone and China

22

• QE3 stimulates capital spending and higher consumer confidence spurs brighter global economic outlook

• Investment Bias: High beta, cyclicality, and large international exposure

• Probability: Low

Scenario I

Scenario II • QE3 ineffective as macro outlook

continues to deteriorate while EU and emerging economies fail to deliver

• Investment Bias: Low correlation and volatility defensive, and large domestic focus

• Probability: High Source: RBC Research


Investment Thesis

23

• Balanced portfolio with emphasis on high yield low beta investments punctuated with high growth risker plays to boost returns

Balanced Approach with a Focus on Key Themes

Key Themes • Attractive long term plan • Short-term catalysts (sale process, key phase of business) • Value focused • Effective risk management


Looking Beyond the Cliff

24

Source: TD Economics

Source: CBO

5% GDP in proposed spending cuts Dampen consumer confidence in the

short-term Improving but fragile U.S housing market

Dividend and capital gains tax hike could lead to shift in asset preferences


Cautious Optimism

25

Strategy – U.S. Focus

• Bullish: ▫ Gold and precious metals ▫ Healthcare and domestic industries

• Bearish: ▫ Consumer discretionary ▫ Infrastructure and real estate

• China’s monetary easing to create tailwinds for recovery

• Greater clarity surrounding high risk Euro countries could lead to less volatility



INVESTMENT ACTION SAF Investment Fund

Analyst Recommended Stocks

Investment Action 27

Other Proposed Stocks

28

Portfolio Overview – November 30, 2012

29

Stock Shares (#) Cost Closing

Price SAF Analyst

Target ($) % Upside Cost Basis ($) MV ($) % of

Portfolio

Agrium* 50 101.41 101.44 120.76 19% 5,099.45 5,072.00 10.10%

BCE* 119 42.08 42.06 47.14 12% 5,036.47 5,005.14 9.97%

Capital Power* 185 21.77 21.83 24.50 12% 4,056.40 4,038.55 8.04%

Canadian Tire* 76 66.01 65.9 76.00 15% 5,045.71 5,008.40 9.97%

Goldcorp* 104 38.05 38.71 51.06 32% 3,986.15 4,025.84 8.02%

Westjet* 240 18.88 18.84 23.50 25% 4,559.15 4,521.60 9.00%

National Bank 65 75.21 77.58 79.65 3% 5,042.70 5,042.70 10.04%

Fortis 150 33.58 33.38 35.71 7% 5,007.00 5,007.00 9.97%

Metro 90 55.82 61.16 63.00 3% 5,504.40 5,504.40 10.96%

Total 43,225.63 86.08%

Cash $6,987.19 13.92%

Total Assets $50,212.82

* Indicates Stocks Purchased on November 30, 2012

Portfolio Overview – December 3, 2012

30 Investment Action

Correlation Matrix FTS NA G AGU CPX WJA BCE CTC FTS 1 0.44 0.13 0.34 0.21 0.16 0.33 0.34 NA 0.44 1 0.03 0.43 0.17 0.26 0.27 0.36 G 0.13 0.03 1 0.15 0.09 0.11 0.06 0.12 AGU 0.34 0.43 0.15 1 0.17 0.28 0.14 0.26 CPX 0.21 0.17 0.09 0.17 1 0.13 0.13 0.20 WJA 0.16 0.26 0.11 0.28 0.13 1 0.13 0.13 BCE 0.33 0.27 0.06 0.14 0.13 0.13 1 0.24 CTC 0.34 0.36 0.12 0.26 0.20 0.13 0.24 1

5 Year Correlation Matrix

Beta 0.58 Dividend Yield 2.35%


QUESTION PERIOD SAF Investment Fund


STOCK PITCHES SAF Investment Fund

Agrium Inc.

December 4, 2012

Mo Du, Chief Investment Officer Leon Wu, Analyst

Recommendation - Buy

Fertilizer and Agriculture 34

Target Price - 20% Weighted of 5 methodologies Company Highlights

Risk Exposure

• Strong fundamentals: industry leader, diversified business lines and markets, defensive

• Growth potential through business acquisition and production expansion

• Attractive EV/EBITDA multiples

• Low operating risk: small use of leverage, strong cash flow

• Commodity prices • Foreign exchange • Operational factors

Low / Medium Risk

$66.00

$87.00

$111.00

$75.09

$114.48

$107.95

$107.50

$166.00

$191.00

$140.87

$135.39

$131.13

$50.00 $90.00 $130.00 $170.00 $210.00

52 WeekTrading Range

AnalystConsensus

Sum of PartsEV/EBITDA

P/CF

DCF -EBITDA Exit Multiple

DCF -Perpetuity Growth

Target Price $120.76

Target price represents a 19% premium on closing price of $101.44 (Nov. 30th)

Company Profile

35 Fertilizer and Agriculture

Market Cap $14.34B

Beta 1.234

Current Price $97.81

52 Weeks High/Low 107.5/66

1 Year Return 21.72%

Current Dividend Yield 1.07%

LTM EPS 9.86

-20

-10

0

10

20

30

40

Perc

enta

ge A

ppre

caiti

on (%

)

AGU CN Equity SPTSX Index STFERTR Index

TSX: AGU Generally Outperformed S&P/TSX Index

Gross Profit Contribution by Business Unit as of 2011

45% - $1,982 million Retail

52% - $2,286 million Wholesale

3% - $115 million

Advanced Tech.

Industry Overview

36

• China is the global leader in crop production. However, low production efficiency results in high production cost

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

2003 2004 2005 2006 2007 2008 2009 2010

Nitrogen Fertilizers Phosphate Fertilizers Potash Fertilizers

$0

$50

$100

$150

$200

$250

$300

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Brazil Canada China

• AGU’s high exposure to stable nitrogen production leads to earnings stability

Growth in Global Nutrient Consumption

Cost of Wheat Production ($/ Tonne)

Fertilizer and Agriculture

Recommendation - Buy

37

• The sum of parts valuation indicates and upside potential to achieve an incremental $7.7-billion enterprise value (~$41.3 adj. share price upside)

Implied EV and Potential Upside

$14,224

$15,460

$8,660

$7,786

$362

$0

$5,000

$10,000

$15,000

$20,000

$25,000

Wholesale and other Retail Advanced Tech. Current EV

Upside

Fertilizer and Agriculture

CNQ Update Anqi Wang, Portfolio Manager

Talha Omer, Analyst

CNQ Update

Oil & Gas 40

CNQ Announces Q3 Earnings (dividend)

Downward guidance on production

Downward Guidance

on production

Profits fell by 57%

Cash Flow decreased by 19%

Q3 Earnings

Oil & Gas 41

Investment Risks

Oil and Gas 42

Industry level asset

sell-off

CNQ lowering guidance

Production mix limits

upside

High correlation with Capital

Power

Goldcorp Initiating Coverage

December 4, 2012

Anqi Wang, Portfolio Manager Linda Teng, Analyst

Investment Highlights

Metals & Mining - Gold 44

Goldcorp (TSE:G)

Source: Bloomberg on 2012/11/25

• Stock Rating: BUY • Current Price: $40.78 (2012/11/23) • Implied Share Price: $51.06 (23.3% upside)

Focus on Low Risk & Low Cost

Growth Profile

Valuation & Opportunity

0

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G CN Equity - Volume G CN Equity - Last Price

Goldcorp Inc. – Overview


Description • Second largest gold miner by

market cap • Engages in gold, silver, copper,

lead and zinc • 100% sales unhedged

Recent Earnings – Q3/12

Metrics (LTM) Large Cap Average Goldcorp Inc.

Market Cap 6.1B 36.4B

1 Yr Return -5.5% -18.0%

Beta (1 Yr) 1.7 0.81

Basic EPS 0.7 2.0

P/E 38.7 23.8

Dividend Yield % 1.5 1.3

EBITDA Margin % 40.0 54.1

• EPS Actual: $0.54, Estimate: $0.45 Share Price: +8.2% d/d

• EBIT +9% from Q3/11 • First gold pour at mine in

Dominican Republic Source: BMO Research report, CapitalIQ, Bloomberg on 2012/11/10

71%

16%

6% 5% 2% 0%

Revenue Breakdown YTD Q3/12 Gold

Silver

Copper

Zinc

Lead

Other

Goldcorp Inc. – Advantages


Growth Leader • Robust project development pipeline with 6 new mines • Expect ↑ 90% in CFPS to $5.46 in 3 years

Source: Goldcorp Inc. company website on 2012/11/10



• Focused on low risk jurisdictions

Competent Management Low Political Risk • Consistently met street

expectations • Outstanding execution in

operations

Environment protection • Dedicated to increase energy

efficiency and renewable energy use

• Focus on water conservation – recycle 74% used water

Source: Goldcorp Inc. company website on 2012/11/10



• Reduce exposure to capital inflation • By-product cost of $220/oz in Q3/12 vs. $258/oz in Q3/11

Low Cost Producer

Source: Goldcorp Inc. company website on 2012/11/10, BMO Research Report

$300

$400

$500

$600

$700

$800

2010A 2011A 2012E 2013E 2014E 2015E

Expected Co-product Cash Costs per Ounce

Sr. Producer Avg. Barrick Gold Corp. Goldcorp Inc.

NAV


Net Asset Value

Source: Goldcorp Inc. company website, Capital IQ on 2012/11/25

• NAV = PV(mines) + fully diluted in the money working capital – long term debt – minority interests + other items

Producing Assets (Figures in USD)

Name Value Per Share

Red Lake $5.62 Porcupine $2.61 Penasquito $10.46 Marlin $1.75 Los Filos $4.13 Musselwhite $2.57 Alumbrera $0.83 Marigold $0.81 El Sauzal $0.33 Wharf $0.36 Pueblo Viejo $3.64 Total $33.1

Developing Assets (Figures in USD)

Name Value

Per Share

Eleonore $2.69 Cerro Blanco $0.83 Cerro Negro $3.70 Cochenour $2.09 Camino Rojo $1.82 Noche Buena $0.63 El Morro $4.76 Total $16.52

Valuation Per Share (Figures in USD) Cash & Equivalents $1.10 Equity Investments $1.70

Liabilities

Minority Interest

$0.26

Reclamation $0.49 Long Term

Debt $0.95

Net Asset Value $50.73

P/NAV 0.811x

Upside 23.38%

Assumptions Gold Price $1,800 3-Year Annual Depreciation 25.24% Discount Rate (Producing) 5.0%

• Diversification & hedge • Low correlation with current holdings Portfolio Fit

• Mainly focused in low risk jurisdictions • Low cost senior producer

Low Risk & Costs

• Undervalued at 0.81x P/NAV Valuation

• Unmatched growth profile • +70% in production by 2016 Growth

Recommendation – BUY


Bell Corporation Inc. Initiating Coverage

December 4, 2012 Prasanth Pahirathan, Portfolio Manager

Catherine Zheng, Analyst

Recommendation - BUY

TMT

Large and growing subscriber base for wireless

Wireless EBITDA grew by 15% y/y as of Q3

Fast growth in Wireless

54 TMT

Bell Media maintains the industry’s strongest ratings at CTV channels

Media EBITDA growth at 93% y/y

Commitment to Media

TMT 55

Solid Management Execution

56

Investment in customer service has brought down churn rates to 1.6%

Accretive M&A activity regardless of Astral fallout

TMT

Football Field Valuation Map

57 TMT

Canadian Tire Corp. Initiating Coverage

December 4, 2012

Prasanth Pahirathan, Portfolio Manager Alex Wang, Analyst

Canadian Tire Corp. (TSX: CTC.A)

59

Company Profile

Market Cap $5,543.5M

52 Week Price Range $62.09 - $73.46

Beta (5Y) 0.54

P/E 11.33

EV/EBITDA 7.3x

Debt Rating BBB Stable

Return on Equity 11.2%

Recommendation: Buy Target Price: $76

$66.01 (Nov 30/12)

Consumer Discretionary

Business Description

Sales Mix CTR

Mark's

FGL Sports

Petroleum

FinancialServices


Strong cash flow from operations and ample cash balance 2011 acquisition of FGL Sports for $765 million mostly funded by

cash Cash balance of $262 million at end of Q3/12

Consistent dividend payout Dividend hike of 17% in Q3/12 to $0.35/share

Strong Financial Performance

0

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2007 2008 2009 2010 2011 2012 YTD

Dividend Payout

0

500

1000

1500

2000

2007 2008 2009 2010 2011

Cash Flow from Operations


Positive sales and same-store sales growth Mark’s and FGL Sports experience higher growth

Improving EBITDA margin Efforts to upgrade merchandising and IT processes have paid off Expected to recognize cost synergies with acquisition of FGL

Sports

Strong Financial Performance

7.47.67.888.28.48.68.899.29.4

0

5

10

15

20

25

30

35

2007 2008 2009 2010 2011 2012E

EBITDA Margin

Credit EBITDA Retail EBITDA

-3

-2.5

-2

-1.5

-1

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1.5

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2.5

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2000

4000

6000

8000

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2007 2008 2009 2010 2011 2012

Sales and Same Store Sales Growth

Sales SSS Growth


Strengths: brand, difficult to replicate retail network, diversified product offering

Benefits from acquisition of FGL Sports Mark’s has doubled sales since acquisition in 2002

Smart store formats and pro shops In place of traditional CTR stores

New loyalty program in pilot stage 1% return versus 0.4% of existing loyalty program

Timing Q3 Revenues miss because of mild winter weather Negative reaction in stock price

Ability to Grow and Timing


50.00 55.00 60.00 65.00 70.00 75.00 80.00 85.00 90.00 95.00

P/E

Forward P/E

DCF - Perpetual Growth Method

DCF - Exit Multiple Method

Analyst Expectations

52-Week Price Range

Valuation – Recommendation : Buy


Metro Inc. Update Prasanth Pahirathan, Portfolio Manager

Alex Wang, Analyst

Metro Inc. (TSX:MRU) Update

66

Purchase Price: $55.50 (Aug 3/12) Current Price: $61.09(Nov 30/12) Return: 10.02% Target Price: $63 (limit order)

Consumer Staples

National Bank Update Prasanth Pahirathan, Portfolio Manager

Sammy Shen, Analyst

0.00

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85.00

National Bank of Canada (TSX:NA) - Volume

Recommendation Company Profile

Market Cap $12390.9M

52 Week Price Range

$64.25- $81.27

Beta (5Y) 0.68

Dividend 4.1%

P/E 8.8

P/B 1.89


Recommendation: Hold Target Price: $79 (limit order)

$76.89 (Nov 27/12)

Financials

Capital Power Initiating Coverage

December 4, 2012

William Li, Portfolio Manager Judith Ma, Analyst

Capital Power Corporation

Utilities 71

• North American independent power producer • Develops, acquires and operates power generation from

coal, natural gas and renewables • Approximately 50% contract through PPA, rest is sold at

market • Recently completed large generating facility in Alberta in Sept 2011

(18% increase)

• EPCOR in the process of fully divesting its investment

Company

• Q3 earnings: Strong operating and portfolio optimization performance led to 28% increase in normalized EPS in the quarter

• Impressive earnings despite spot power prices in Alberta significantly lagging compared to 2011

• Board approves adoption of Shareholder Rights Plan to prevent potential hostile takeover

Q3 & Recent News Update

Market Capitalization $1,465.6 M

52 Week Price Range $20.75 - $25.72 Beta 0.3438

Dividend Yield 5.83% P/E 13.0x

EV/EBITDA 7.9x Debt Rating BBB-



72

• Looking to develop power generation projects in BC, Alberta and Ontario. • Committed $1.4B to 4 wind projects

• Quality Wind project set to commence operations in Nov 2012 in BC • Three in progress:

• Halkirk Wind Project: deregulated wholesale market, Alberta • Port Dover & Nanticoke Wind Project: PPA in Ontario, target completion at

end of 2013 • JV in the K2 Wind Power Project: PPA in Ontario, for 2014

• By completion, approximately 13% of energy production from wind • New initiatives should support further EBITDA growth

Major Projects & News

Utilities


73

• Fast growing independent power producer • Current dividend yield of 5.8%, above industry average

Capital Power

• Operationally excellent fleet of power generators • Pipeline of wind developments: provide steady stream of income

through PPAs • Strong management team with relevant experience • Alberta power prices are volatile: commercial activities have been

hedged; long-term outlook positive

Summary of Drivers

Utilities

Capital Power Corp Valuation Chart

Utilities 74

Football Field

$- $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 $90.00

52 - Week Range

2.4-3.4% Growth Rate, 6.3-7.1% Discount Rate

7.9-9.1x Multiple, 6.3-7.1% Discount Rate

2012 P / E:

2012 EV / EBITDA:

Comps Analysis: Regulated Utilities & IPPs

DCF Analysis

Trading Range

Recommendation – Buy

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TSX:CPX - Share Pricing

$21.10 (November 16, 2012)

$24.50 (December 31, 2013)

Utilities

Westjet Initiating Coverage

December 4, 2012

William Li, Portfolio Manager Jing Xu, Analyst

Growing industry Highly cyclical Intense competition Thin profit margins Mature North America

market Fuel price biggest cost

WestJet - Airline Industry

Industrials 77

Airline Industry Drivers & Risks

Fuel Price Economy

Weather ?

Labour ↓

WestJet - Company Overview

78

Canadian low-cost carrier Based in Calgary Operates 99 Boeing Next-Gen 737 aircrafts Serves 81 destinations in Canada, the United States, Mexico, Central

America, and the Caribbean

WestJet Profile

Strategy

People and culture Guest experience and

performance Revenue and growth Cost and margin

Market Profile Market Capitalization $2,567.6 M 52 Week Price Range $10.30 - $19.31 Beta 0.64 Dividend Yield 1.7% P/E 12.1x EV/EBITDA 3.6x Debt Rating NA Return on Equity 15.5%

Industrials

WestJet Valuation Chart – Recommendation: Buy

Industrials 79

$- $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00

52 - Week Range

0.5-3.0% Growth Rate, 5.25-6.75% Discount Rate

2.0-4.5x Multiple, 5.25-6.75% Discount Rate

2012 EV / Revenue:

2013E EV / Revenue:

2012 EV / EBITDA:

2013E EV / EBITDA:

2012 EV / EBITDAR:

2012 P / E:

2013E P / E:

Public Company Comparable:

Discounted Cash Flow Analysis:

WestJet - Summary of Investment Drivers

80

• 30% gain in market share in 10 years • Expansion into profitable destinations • Potential to attractive high yield customers

Growth

• Non-unionized but motivated employees • Committed to low cost edge over competitors • Top two airlines for customer service

Strategy

• One of North America’s most profitable airlines • 30 consecutive quarters of profitability • Able to maintain profitable when competitors suffer

Profitability

• Buy • Target: $23.50 Current: $18.93 • Potential return: 24%

Recommendation

Industrials

Northern Property Update William Li, Portfolio Manager

Dustin Fader, Analyst

Northern Property REIT – Sell Recommendation

82

FFO/unit decreased to $0.55 from $0.63 Decrease mainly due to sale of senior residences (approx. 15% of

property portfolio) Low utility costs with the summer months temporarily helped to boost

FFO Share price is down 8.9% since purchase (REIT index down 5.8%) Vacancy is up to 4.7% from 3.6% Q2

Q3 Results and Updates

REITs

Northern Property REIT

83

Peer Multiple Comparison

$- $20.00 $40.00 $60.00 $80.00 $100.00 $120.00 $140.00 $160.00 $180.00 $200.00

2012 P/NAV

Implied Cap Rate:

2012 P / AFFO

2012 P / FFO

2012 P/NAV

Implied Cap Rate:

2012 P / AFFO

2012 P / FFO

US REITs

Canadian REITs

REITs

Fortis Update William Li, Portfolio Manager

Judith Ma, Analyst

Fortis – Hold Recommendation

85

• Q3 earnings of $0.24 per share below expectations of $0.26 • Capital expenditures for the year expected to reach $1.3B • Fastest growing segments are FortisAlberta and FortisBC

• Even with reduction in the allowed rate of return on common shareholder’s equity in Alberta in 2012, offset by rate base growth

Q3 Results and Updates

• Canada’s largest regulated distribution utility • ~90% regulated utility operations • BC, Alberta, Newfoundland, Grand Cayman

Utilities

Quick Facts


NEXT STEPS SAF Investment Fund

Capturing Opportunities in the U.S

88

Update current back-testing procedure (Bloomberg EQS)

Create uniform quant screen

Complete detailed macro-scan for U.S market

Determine industries with high investment potential

Assign coverage analysts

Action Steps

December 4, 2012 - Advisory Board Meeting

Analyst Responsibilities – Continuation

89

• Quarterly Earnings Releases

• Significant Events

Continuing Coverage

• Results of Quant. Screening

• Change of Global Macro Outlook

Initiating Coverage

vs


Reporting Role

90

Weekly Monthly Quarterly

• Macro-economic analysis

• Detailed portfolio update

• Significant news releases

• Potential next actions to sell or add to existing positions

• List of transactions completed in month

• Copies of analysis reports

• Copies of trade approvals

• Summary of portfolio assets & market valuations

• Compliance report (SIPP)

• Macro-economic analysis

• Summary of portfolio assets & turnover

• Portfolio rate of return

• Performance relative to benchmark

• Summary of investment decisions made

• Proxy voting info



FINAL QUESTION PERIOD SAF Investment Fund


THANK YOU FOR LISTENING


APPENDICES


PORTFOLIO PERFORMANCE

Relative Performance

95

Consumer Markets and Healthcare: Start Price

Current Price

% Change

TSX:MRU Metro Inc. 55.73 61.16 9.7% NasdaqGS:LULU Lululemon Athletica Inc. 53.35 71.78 34.5% TSX:CDL.A Corby Distilleries Limited 17.13 17.70 3.3% TSX:ATD.B Alimentation Couche-Tard Inc. 47.77 49.07 2.7% TSX:GBT.A BMTC Group Inc. 17.87 14.20 -20.5% TSX:MG Magna International, Inc. 39.37 46.35 17.7% TSX:VRX Valeant Pharmaceuticals International, Inc. 47.16 55.34 17.3% TSX:PLB Paladin Labs Inc. 49.70 40.77 -18.0% TSX:DR Medical Facilities Corp. 13.97 13.85 -0.9% TSX:THI Tim Hortons Inc. 53.18 46.20 -13.1% Average: 3.3%

Utilities: Start Price

Current Price

% Change

TSX:FTS Fortis Inc. 33.17 33.38 0.6% TSX:TA TransAlta Corp. 15.54 14.95 -3.8% OTCPK:CUPU.F Caribbean Utilities Co. Ltd. 9.85 10.08 2.4% TSX:ACO.X ATCO Ltd. 73.49 76.15 3.6% TSX:VNR Valener Inc 15.84 15.91 0.4% TSX:EMA Emera Inc. 35.04 34.12 -2.6% TSX:CPX Capital Power Corporation 21.65 21.83 0.8% TSX:CU Canadian Utilities Ltd. 68.50 67.24 -1.8% Average: 0.0%



96

Banks: Start Price

Current Price

% Change

TSX:NA National Bank of Canada 74.56 77.58 4.1% TSX:BMO Bank of Montreal 57.43 59.67 3.9% TSX:LB Laurentian Bank of Canada 47.77 45.01 -5.8% TSX:CM Canadian Imperial Bank of Commerce 73.55 80.20 9.0% TSX:CWB Canadian Western Bank 26.30 29.10 10.6% Average: 4.4%

Insurance: Start Price

Current Price

% Change

TSX:IFC Intact Financial Corporation 62.46 64.10 2.6% TSX:GWO Great-West Lifeco Inc. 21.26 23.52 10.6% TSX:PWF Power Financial Corporation 24.31 26.51 9.0% TSX:POW Power Corporation of Canada 22.73 25.00 10.0%

TSX:IAG Industrial Alliance Insurance and Financial Services, Inc. 20.75 28.99 39.7%

Average: 14.4%



97

REITs: TSX:NPR.UN Northern Property Real Estate Investment Trust 32.87 30.70 -6.6% TSX:MRT.UN Morguard REIT 17.95 18.08 0.7% TSX:CUF.UN Cominar REIT 24.50 21.95 -10.4% TSX:D.UN Dundee REIT 38.39 36.20 -5.7% TSX:REF.UN Canadian REIT 41.25 41.57 0.8%

TSX:NWH.UN NorthWest Healthcare Properties Real Estate Investment Trust 13.34 12.64 -5.2%

TSX:CRR.UN Crombie Real Estate Investment Trust 15.02 14.85 -1.1% TSX:AAR.UN Pure Industrial Real Estate Trust 4.95 4.67 -5.7% TSX:EXE Extendicare Inc. 7.82 7.41 -5.2% Average: -4.3%

Industrials: TSX:CAS Cascades, Inc. 4.84 4.15 -14.3% TSX:SPB Superior Plus Corp. 7.32 10.00 36.6% TSX:TCL.A Transcontinental Inc. 9.54 9.57 0.3% TSX:CP Canadian Pacific Railway Limited 81.64 92.70 13.5% TSX:FTT Finning International Inc. 22.70 22.76 0.3% TSX:WPK Winpak Ltd. 15.69 14.75 -6.0% TSX:NAL Newalta Corporation 12.60 15.36 21.9% TSX:GNV GENIVAR Inc. 21.10 20.60 -2.4% TSX:ATA ATS Automation Tooling Systems Inc. 8.15 8.50 4.3% TSX:BBD.B Bombardier Inc. 3.60 3.51 -2.5% Average: 5.2%



98

Tech, Telecom, and Media: TSX:BCE BCE, Inc. 42.58 42.06 -1.2% TSX:T TELUS Corporation 62.71 64.84 3.4% TSX:RCI.B Rogers Communications Inc. 39.54 43.87 11.0% TSX:SJR.B Shaw Communications, Inc. 19.64 21.90 11.5% TSX:CJR.B Corus Entertainment Inc. 22.30 22.86 2.5% TSX:MDZ.A MDC Partners Inc. 9.45 10.61 12.3% TSX:CMG Computer Modelling Group Ltd. 18.07 19.74 9.2% TSX:CSU Constellation Software Inc. 91.00 119.86 31.7% TSX:BA Bell Aliant Regional Communications Inc. 25.09 27.19 8.4%

TSX:MBT Manitoba Telecom Services, Inc. 34.02 33.54 -1.4%

TSX:EXF EXFO Inc 4.75 4.48 -5.7% Average: 7.4%

Mining and Materials: TSX:CNQ Canadian Natural Resources Limited 27.60 28.59 3.6% TSX:LIM Labrador Iron Mines Holdings Limited. 2.04 0.69 -66.2% TSX:FM First Quantum Minerals Ltd. 17.93 20.40 13.8% TSX:PAA Pan American Silver Corp. 14.84 19.24 29.6% TSX:FR First Majestic Silver Corp. 16.07 22.89 42.4% TSX:RIO Rio Alto Mining Limited 4.37 5.06 15.8% TSX:MDI Major Drilling Group International Inc. 10.10 9.20 -8.9% TSX:FVI Fortuna Silver Mines Inc. 3.67 4.59 25.1% TSX:AGU Agrium Inc. 94.70 101.44 7.1% TSX:WEF Western Forest Products Inc. 0.96 1.15 19.8% Average: 8.2%


99

Energy: TSX:EFX Enerflex Ltd. 11.38 11.08 -2.6% TSX:TOT Total Energy Services Inc. 14.20 13.86 -2.4%

TSX:PXT Parex Resources Inc. 4.69 5.48 16.8%

TSX:BNK Bankers Petroleum Ltd. 2.47 2.63 6.5% TSX:CFW Calfrac Well Services Ltd. 23.20 23.20 0.0% TSX:CZE C&C Energia Ltd. 6.34 8.61 35.8%

TSX:WRG Western Energy Services Corp. 6.87 6.65 -3.2%

TSX:PRE Pacific Rubiales Energy Corp. 22.00 21.67 -1.5% TSX:COS Canadian Oil Sands Limited 20.03 20.16 0.6% Average: 5.6%

Gold: TSX:ABX Barrick Gold Corporation 32.68 34.49 5.5% TSX:YRI Yamana Gold, Inc. 14.78 18.72 26.7% TSX:CG Centerra Gold Inc. 7.03 8.91 26.7% TSX:SMF SEMAFO Inc. 3.06 3.47 13.4% TSX:HRG High River Gold Mines Ltd. 1.42 1.39 -2.1% TSX:NSU Nevsun Resources Ltd. 3.41 4.03 18.2% Average: 14.7%

uwaterloo.ca and agriculture 34 . target price - 20% weighted of 5 methodologies . company...

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