Agenda Jas Gill I. Executive Summary Portfolio Manager Blake - PowerPoint PPT Presentation

BEAM | Q2-2018 / Q3-2018 Performance Review November 1, 2018 8888 University Drive | Burnaby | British Columbia | Canada | www.beedie.sfu.ca/beam

Agenda Jas Gill I. Executive Summary Portfolio Manager Blake Coombes II. Equity Update Analyst, Utilities Carl Davies III. Fixed Income Update Analyst, Fixed Income Yuliya Kim IV. Going Forward Portfolio Manager Questions V .Appendix

I. Executive Summary Jas Gill | Portfolio Manager jga77@sfu.ca

I. Executive Summary BEAM Overview - Timeline 2011-12 Feb 2012 2013-14 2015-16 2017-18 1 st 5 th 7 th Founding 3 rd Cohort Cohort Cohort Cohort Cohort Jan 2012 2012-13 2014-15 2016-17 2018-19 BEAM Inception 6 th 8 th 2 nd 4 th Cohort Cohort Received Cohort Cohort C$3 mm IC  BEAM is unique in that management turns over every two years as students graduate from the program and enter the work force  Since inception, BEAM has had 6 cohorts and approximately 70 members graduated from the program 3

I. Executive Summary BEAM Overview – Toronto Trip Firms Visited  Asset Management • Connor, Clark & Lunn • Franklin Templeton Investments • Fidelity Investments • RBC Global Asset Management • Sprucegrove Investment Management  Capital Markets • BMO Capital Markets • CIBC World Markets • Scotiabank Global Banking and Markets • TD Securities  Research Analytics • MSCI 4

I. Executive Summary BEAM Overview – Cohort Integration Training & Education  The 2018 - 2019 cohort are in the process of completing two 3-credit courses, specifically tailored to help them manage the fund and learn the tools and methods necessary to evaluate portfolio and security performance Management of Equity & Fixed Income Investments BUS Publishable research: 318 Industry/sector analysis Credit analysis Company valuation Portfolio Management BUS BUS Portfolio management 493 493 Risk management Performance measurement Ethics 5

I. Executive Summary BEAM Overview - Recruitment New Cohort Training & Application Integration Deadlines BEAM Open Meeting Interviewing & Lecture Hiring Presentations & Campus Promotion Completed Upcoming

I. Executive Summary BEAM Overview - Objectives 1 To preserve inflation-adjusted invested capital To outperform the equity benchmark by 150 basis points and outperform the fixed 2 income benchmark by 40 basis points on a rolling 4-year average Use ESG as a tool to conform to SFU endowment responsibilities and the United 3 Nations’ Principles for Responsible Investment Provide an engaging educational experience that trains the next generation of 4 responsible and ethical finance professionals 7

I. Executive Summary Balanced Portfolio Return Relative Return Tracking Error Information Ratio (1.65%) 2.39% (0.69) YTD-2018 Portfolio vs. Benchmark Total Return 3.00% 2.00% 1.00% 0.79% 0.00% (0.86%) (1.00%) (2.00%) (3.00%) (4.00%) Portfolio Benchmark (5.00%) (6.00%) 0.00% (0.25%) (0.50%) (0.75%) (1.00%) (1.25%) (1.50%) (1.75%) (2.00%) Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Source: Bloomberg 8 Note: As of September 28, 2018.

I. Executive Summary Asset Allocation 60% 60% 39% 38% 2% 1% Equity Fixed Income Cash Current Benchmark Source: Bloomberg Note: As of September 28, 2018. 9

I. Executive Summary ESG Methods Exclusionary Best-in-Class Screening Selection Active Ownership Thematic Investing Impact Investing ESG Integration 10

I. Executive Summary ESG Methods Exclusionary Best-in-Class Screening Selection Active Ownership Thematic Investing Impact Investing ESG Integration 11

I. Executive Summary ESG Methods Selection of companies that are consistent with the Exclusionary Best-in-Class United Nations’ Principles for Screening Selection Responsible Investment  Companies producing cluster munitions or Active Ownership Thematic Investing nuclear weapons are excluded  Companies earning greater than 5% of revenues from the manufacture, distribution, or sale of Impact Investing ESG Integration tobacco are excluded 12

I. Executive Summary ESG Methods Systematic and explicit inclusion of ESG risks and Exclusionary Best-in-Class opportunities in investment Screening Selection analysis (revising forecasts and discount rates) Stage 1: Qualitative analysis Stage 2: Quantitative Active Ownership Thematic Investing analysis Stage 3: Investment decision (buy/sell/hold) Stage 4: Active ownership assessment (underweight/ Impact Investing ESG Integration overweight) 13

I. Executive Summary ESG Integration Templates Factors Sectors   Violations of human rights All Sectors   Lack of Indigenous consultation Commodity-Based Sectors   Spill response time Energy and Railways   Transition from coal to low-carbon Utilities emissions Other ESG Factors Environmental Social Governance Carbon Intensity and Water Total Reportable Incident Women on Board Usage Frequency Total Energy Consumption Loss-Time Injury Frequency Independent Directors Waste Produced Community Engagement Executive Compensation 14

I. Executive Summary Compliance Current IPS Guidelines and Constraints Compliance  • General Asset Mix within IPS Range  • Limits on equity security holdings  • Micro Cap, prohibited  • Equity 7 Sectors, with 50% allocation relative to benchmark  • At least 25 stocks  • 15 largest stocks, at most 70% of equity value  • No more than 5% per issuer, excluding federal and provincials  Fixed Income • Allocation limits based on bond ratings  • Duration within ± 1 year of the DEX 15

II. Equity Update Blake Coombes | Analyst, Utilities bcoombes@sfu.ca

II. Equity Update Equity Portfolio Return Relative Return Tracking Error Information Ratio (2.56%) 2.47% (1.04) YTD-2018 Portfolio vs. Benchmark Total Return 6.00% 4.00% 2.00% 1.38% 0.00% (1.18%) (2.00%) (4.00%) (6.00%) (8.00%) Portfolio Benchmark (10.00%) 0.00% (0.50%) (1.00%) (1.50%) (2.00%) (2.50%) (3.00%) (3.50%) Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Source: Bloomberg 17 Note: As of September 28, 2018.

II. Equity Update Equity Performance Total Return Annualized Dec 31, 2014 – Sep 28, 2018 Year to Date 17.09% 4.30% (1.18%) BEAM Equity 22.78% 5.62% 1.38% Benchmark Source: Bloomberg Note: As of September 28, 2018. 18

II. Equity Update Year-to-date Selection Health Care (0.47%) Real Estate (0.26%) Utilities (0.08%) Consumer Discretionary (0.05%) Information Technology (0.14%) Consumer Staples (0.48%) Communication Services 0.14% Industrials (0.77%) Materials 0.01% Energy (0.72%) Financials 0.20% (1.00%) (0.80%) (0.60%) (0.40%) (0.20%) 0.00% 0.20% 0.40% Source: Bloomberg Note: As of September 28, 2018. Note: Telecommunication Services has been changed to Communication Services. 19

II. Equity Update Year-to-date CTR Overweight Underweight 1.00% Underperformed 0.50% 0.18% 0.17% 0.14% 0.10% 0.09% 0.00% (0.27%) (0.34%) (0.34%) (0.50%) (0.42%) (0.76%) (1.00%) 1.00% 0.59% 0.50% Outperformed 0.29% 0.26% 0.20% 0.15% 0.00% (0.18%) (0.23%) (0.28%) (0.30%) (0.34%) (0.50%) (1.00%) Source: Bloomberg 20 Note: Excludes TRP and ATD.B as we were both overweight and underweight at different points in the year. Note: As of September 28, 2018.

II. Equity Update Financials Sector Update Market Commentary Current Holdings TCN  New mortgage qualification rules came into effect, XFN TD 6% 7% slowing mortgage growth 21% IFC  Higher interest rates helped with net interest 7% margin expansion NA  Capital adequacy ratios remain strong 8% RY  Litigation threats on legacy insurance contracts 14% caused a devaluation of Manulife BAM 11% MFC CM 13% 12% Go-Forward Strategy  We will continue to monitor the pace at which the Bank of Canada raises interest rates and how this affects mortgage origination and net interest margin expansion  While mortgage growth has slowed for Canadian banks, we believe stronger margins and expense discipline will continue to support quality EPS growth  We will continue to monitor the trend towards passive investing and believe many asset managers will see pressure on AUM over the coming years Source: Bloomberg Note: Holdings as of September 28, 2018. 21

II. Equity Update Energy Sector Update Market Commentary Current Holdings AAV  Setbacks with respect to Canadian pipeline CCO 6% approval has affected WCSB producers, as SU 6% 27% takeaway issues have caused WTI / WCS CU 8% spreads to blow out  Increasing demand for global LNG, particularly from Asian markets, has driven prices higher WCP 13%  Rising interest rate environment continues to be a headwind for high-yielding dividend stocks CNQ 20% TRP 20% Go-Forward Strategy  We continue to favour low-cost E&P names with strong growth prospects and limited leverage  In our view, Suncor is well positioned to withstand a lower-for-longer Canadian oil price environment due to its integrated business model  We favour well-positioned, integrated utilities with sustainable cash flows that will support continued dividend growth Source: Bloomberg Note: Holdings as of September 28, 2018. 22