Q3 2020 Performance Review The Beedie Endowment Asset Management Fund at SFU’s Beedie School of Business
November 17, 2020
8888 University Drive | Burnaby | British Columbia | Canada | www.beedie.sfu.ca/beam Agenda
Marisa Sun I. Executive Summary Equity Analyst (Energy)
Emily Ong II. Fixed Income Update Fixed Income Analyst
Laurel Dao III. Equity Update Equity Analyst (TMT & Health Care)
Michael Le IV. Operations Update Risk Analyst
Questions
Appendix I. Executive Summary Marisa Sun | Equity Analyst (Energy) [email protected] BEAM’s Objectives
BEAM has four distinct objectives
1 To preserve inflation-adjusted invested capital
2 To outperform the equity benchmark by 150 basis points and outperform the fixed 2 income benchmark by 40 basis points on a rolling four-year average
3 Use ESG as a tool to conform to SFU endowment responsibilities and the UN’s 3 Principles for Responsible Investment
4 Provide an engaging educational experience that trains the next generation of 4 responsible and ethical finance professionals
4 BEAM’s AUM Has Grown at a 4.1% CAGR Since Inception
BEAM’s AUM has declined 0.9% from the beginning of 2020 to the end of Q3 2020
1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th Cohort(1) Cohort Cohort Cohort Cohort Cohort Cohort Cohort Cohort Cohort
$8.00 10.0%
$7.15 $7.08 $6.69 $6.37 $6.21 $5.91 $6.00 $5.67 7.5% $5.38 (%) Inception Since CAGR $5.00 $5.03 5.7%
5.0% 5.0% $4.00 4.6% 5.0% 4.1%
3.7% AUM AUM ($mm) 3.2% 3.1%
$2.00 2.5%
0.7%
- - Jan-2012 Sep-2012 Dec-2013 Dec-2014 Dec-2015 Dec-2016 Dec-2017 Dec-2018 Dec-2019 Sep-2020
1. As of September 30, 2012 5 Q3 2020 Balanced Portfolio Return
BEAM’s balanced portfolio outperformed by 37 basis points in the third quarter
Relative Return Tracking Error Information Ratio
Q3 2020 0.37% 1.55% 0.24
Portfolio vs. Benchmark Total Return
6.0%
4.0% 3.43%
2.0% 3.06%
0.0%
(2.0%) Portfolio Benchmark
1.5%
1.0%
0.37% 0.5%
0.0%
(0.5%) Jun 30 Jul 31 Aug 31 Sep 30
6 Compliance Summary
BEAM did not breach any of its compliance constraints throughout the quarter
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 ✓
• Less than 5% per issuer, excluding federal and provincials ✓ Fixed Income • Allocation limits based on bond ratings ✓
• Duration within ± 1 year of the DEX ✓
7 Portfolio Positioning
BEAM has deployed excess cash to continue strategically overweighting equities
Weights 62.5% 60.0%
Asset Benchmark IPS Range Class
Equity 60% 50% - 70%
38.0% Fixed Income 38% 30% - 50% 35.4%
Cash 2% 0 - 10%
Portfolio Benchmark
2.1% 2.0%
Cash Fixed Income Equities
$0.15mm $2.50mm $4.43mm
Note: As of September 30, 2020 8 BEAM Has Been Executing on its Strategy
BEAM is maintaining its previously outlined strategy moving forward
Identify Sector Allocation Duration Management & Overweight Equities Prioritize Stock Selection Opportunities Prudent Credit Selection
✓ End of quarter weight in ✓ Following partial Energy ✓ Maintain overweight in the ✓ Increased allocation to equities was 62.5% divestment in Q1 2020 and Materials and Utilities essential services and 3 businesses swapped in sectors reduced weight in ✓ While evaluating the Q2 2020, BEAM sold discretionary companies current economic backdrop, Manulife for TMX Group in ✓ Currently underweight in we continue to overweight Q3 2020 Financials, Telecoms, ✓ Repositioned and equities as expansionary Energy, and Health Care, maintained negative monetary & fiscal policies ✓ Sector teams continue to with plans to further reduce duration in sovereign bonds continue, and anticipate a be active in identifying & weight in Energy further rally in equities once researching new ✓ Continue to hunt unfavored COVID-19 fears subside opportunities to find quality ✓ Research the potential to parts of corporate bond companies at favourable gain alpha through more market for individual alpha- valuations aggressive sector plays generating opportunities
62.5% Over (Under) Weight (bps) Active CTD
Federal Energy (195) (0.58) 35.4% Telecom (114) Provincial 0.31
Healthcare (91) Municipal (0.21) 2.1% Financials (90) Corporate 0.03 Utilities Equity Fixed Cash 137 Income Materials 245 Total (0.46) BEAM Benchmark
Note: As of September 30, 2020 9 II. Fixed Income Update Emily Ong | Fixed Income Analyst [email protected] Overview of Strategy
1. Use Federal bonds as duration tool ✓ 2. Gain long-end exposure through Provincial bonds ✓
3. Generate alpha through positive selection performance and duration decisions ✓
4. Prudently increase allocation to corporate bonds ✓
11 Outlook at End of Q2
We looked to reduce solvency risk and add inflation protection on the back of our outlook
Corporate Credit Outlook and Strategy Actions Taken Through Q3
▪ Expectation: • Further spread tightening in corporate credit albeit at a reduced pace to H1 2020 Bought: ▪ Strategy: • Reduce allocation to issuers linked to discretionary spending • Rotate into “essential services” like utilities, transportation, etc. and into entities that are subsidized by government agencies
Generic Sovereign Credit Outlook and Strategy Swapped:
▪ Expectation: Inflation • Further curve steepening over the long-run as inflation expectations Indexed rise partly from economic rebound and partly from large-scale fiscal stimulus
▪ Strategy: Sold: • Maintain at least a neutral duration in sovereign bonds with a tilt towards negative duration • Increase weight in inflation-linked sovereign bonds (Canadian Real Return Bonds)
12 Canadian Bond Market Performance
The market traded in-line with our expectations leading to outperformance
Credit Market Over the Past Quarter Yield Per Unit of Duration (1)
▪ Yields bottomed in late August and have trended 0.5 higher since 0.4 ▪ Sovereign curve has steepened as in previous recessions; we believe the short end of the curve is 0.3 locked in place 0.2 ▪ We believe a short duration strategy is necessary in FTSE Canada Universe this environment with a high allocation to short-term 0.1 Bond Index corporate bonds 0.0 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 Sep-20
iShares Canadian Corporate Bond Index(2) 2-Year 10-Year Spread
$23.00 $22.80 300bps
200bps $22.00
100bps
$21.00 0bps
$20.55 $20.00 -100bps Jan 01 Mar 01 May 01 Jul 01 Sep 01 Nov 01 1999 2003 2007 2011 2015 2019
Reccesionary Period Spread
Source: Bloomberg LP Note: As of November 11, 2020 13 1. Using iShares Canadian Universe Bond Index ETF as an index proxy 2. Using iShares Canadian Corporate Bond Index ETF as a proxy for Canadian corporate credit Fund Performance
The BEAM Fixed Income Fund gained 71 bps on its benchmark through Q3 2020 and 77 bps YTD
Performance Comparison as of September 30, 2020 (%)
3 Mo 6 Mo YTD 1 Yr 2 Yr 3 Yr 4 Yr
BEAM Fixed Income Fund 1.19 7.38 8.78 7.73 8.62 6.31 3.63
FTSE Canada Universe Bond Index 0.48 6.52 8.01 7.11 8.41 6.13 3.79
Relative Performance +0.71 +0.86 +0.77 +0.62 +0.21 +0.18 -0.16
Periods less than one year are not annualized.
Duration decisions and prudent credit allocation have led to outperformance
Total Q3 Return (%)
0.80% +0.71%
0.60%
0.40%
0.20%
0.00%
(0.20%) Jun 30 Jul 31 Aug 31 Sep 30
14 Fund Attribution & Maturity
Through Q3 our strategy generated alpha in all areas
Attribution to September 30, 2020 (%)(1) Relative Performance
3 Mo 6 Mo YTD 1 Yr
Interest Rate Anticipation
Duration & Yield Curve +0.42 +0.63 +0.36 +0.40
Credit & Liquidity
Provincial & Government Agency Bonds +0.20 +0.78 -0.21 -0.15
Investment Grade Corporate Bonds +0.09 -0.54 +0.62 +0.37
Total +0.71 +0.86 +0.77 +0.62
BEAM Fixed Income Portfolio as of September 30, 2020
Modified Duration (Yrs) Effective Maturity (Yrs) Yield to Maturity (%)
BEAM Fixed Income Portfolio 7.87 9.95 1.22
FTSE Canada Universe Bond Index 8.40 11.36 1.27
1. Values in attribution are subject to rounding error. May be slightly different than reported performance 15 Dollar-Weighted Fund Characteristics
Large allocation to highly rated corporate bonds
40.5% 37.8% 33.2% 34.7% 26.8% 24.8%
2.2% 0.0%
Federal Provincial Municipal Corporate
37.0% 36.2% 37.0% 32.8% 28.6%
14.1% 12.0%
2.4%
AAA AA A BBB+ & Below BEAM Fixed Income Portfolio FTSE Canada Universe Bond Index
Source: Bloomberg LP, BlackRock Note: As of September 30, 2020 16 Note: Federal Agency bonds were included within the Federal asset class Active Contribution to Duration
Reduced duration from federal bonds and reinvested on the short end of corporate curve
Active Contribution to Duration
Medium Sector Short Term Long Term Term
(1-5 Years) (6-10 Years) (10+ Years) Total Total Active Contribution to Duration
Federal (0.26) (0.30) (0.03) (0.58) (0.58)
Provincial (0.18) (0.18) 0.67 0.31 0.31
Municipal (0.02) (0.05) (0.15) (0.21) (0.21)
Corporate 0.15 0.05 (0.17) 0.03 0.03
Total (0.30) (0.47) 0.31 (0.46) (0.46)
Source: Bloomberg LP, BlackRock Note: As of September 30, 2020 17 Note: Federal Agency bonds were included within the Federal asset class Outlook and Strategy Remains Largely Unchanged
Maintain portfolio positioning and reinvest on the short end of the curve as maturities come due
We expect marginal further corporate spread tightening 1 Keep the bulk of our credit allocation on the short end of the corporate curve as yield per unit of duration is still low; maintain slight overweight in credit duration at max
2 We still perceive solvency risk as elevated 2 “Essential services” are still preferred; however, we are looking at unfavoured sectors (i.e. real estate) for individual opportunities
3 3 We expect further curve steepening Maintain our negative duration position in federal bonds
4 4 We remain bullish on long-term inflation expectations We continue to like Canadian Real Return Bonds; however, we are not looking to actively increase our allocation
18 III. Equity Update Laurel Dao | Equity Analyst (TMT & Health Care) [email protected] BEAM’s Equity Portfolio Outperformed in Q3 2020
Outperformance was as high as 150 basis points in Q3, with relative return tightening in the final weeks
Relative Return Tracking Error Information Ratio Q3 2020 0.19% 2.54% 0.07 Portfolio vs. Benchmark Total Return 10.0%
8.0% 4.92% 6.0%
4.0% 4.73%
2.0%
-
(2.0%) Portfolio Benchmark
2.0%
1.5%
1.0%
0.5% 0.19%
-
(0.5%)
(1.0%) Jun 30 Jul 31 Aug 31 Sep 30
Source: Bloomberg LP Note: As of September 30, 2020 20 Power & Utilities Outperformance in Q3 2020
Favourable economic conditions and attractive renewable energy growth attracted investor demand
Q3 2020 Total Return: Sector Holdings vs. Sector Benchmark and TSX Composite
20.0%
16.0% 15.7%
12.0% 11.1% 8.0%
4.0% 4.7%
- Jun 30 Jul 31 Aug 31 Sep 30 (4.0%) P&U Holdings P&U Benchmark TSX
Sector Attractiveness in Q3 2020 Renewables Rally ▪ Economic turmoil acted as a catalyst for the sector, as ▪ Renewable companies produced the greatest total investors sought safe-haven equities with strong return in Q3 2020, with Boralex, Northland Power, defensive characteristics and low reactivity to market Innergex, and Brookfield Renewable leading returns fluctuations ▪ Optimism towards renewable power expansion arises ▪ Investors found comfort in the essential nature of the from government-implemented clean energy targets, industry’s operations, which sheltered operations from ESG targets for corporations, and plummeting costs of government-forced shutdowns and ensured ongoing renewable energy generation cash flow generation ▪ Canadian renewables benefit from early mover ▪ The sector’s stable and predictable dividends attracted advantage – all four of the aforementioned companies yield-seeking investors during the preceding period of operate across different jurisdictions and hold all-time low interest rates in Q3 international expertise to capture growth opportunities
Source: Bloomberg LP 21 BEAM’s P&U Holdings and Selection Methodology
Strong selection led our Utilities portfolio to generate +0.38% CTR in Q3 2020
Q3 2020 P&U Coverage List CTR
0.70% 0.56% 0.50%
0.30% 0.26%
0.10% 0.00% 0.00% 0.01%
(0.10%) (0.03%) (0.03%) (0.02%) (0.01%) (0.01%) (0.01%) (0.01%) (0.07%) (0.04%) (0.12%) (0.10%) (0.30%) Brookfield Brookfield Fortis Hydro One Boralex Innergex Emera Altagas Capital Superior Transalta Atco Transalta Canadian Algonquin Northland Ren. Infra. Power Plus Ren. Utilities Power Selection Methodology BEAM P&U Research ▪ The P&U team seeks to invest in companies with: • Justified valuation metrics • Proven capabilities of efficient capital allocation and value-creation for shareholders • Strong dividend growth to maintain attractiveness in the low interest rate environment • Exposure to renewable energy, due to the secular trend towards clean energy adoption and foreseeable catalysts in the medium to long term • Above-average MSCI Environmental scores
Source: Bloomberg LP 22 Our Equity Portfolio Classified by GICS
Our largest overweight is within Materials, while Energy makes up our largest underweight
Portfolio Weights (%)
28.3 Portfolio Weight 27.4 Benchmark Weight(1)
17.9
15.5
13.4 12.4
10.3 10.3 10.7 8.8
6.7 5.3 5.3 5.2 4.4 4.1 3.1 3.5 3.1 3.2
0.9 0.0
Financials Materials Industrials Information Energy Utilities Consumer Communication Consumer Real Estate Health Care Technology Staples Services Discretionary
Source: Bloomberg LP Note: As of September 30, 2020 23 1. Equity benchmark is the S&P/TSX Total Return Index Diversified Materials & Utilities Dominate Within Benchmark
BEAM’s largest overweight’s in Materials, Utilities & Industrials, with NPI, CNR, BAM & ATZ as largest bets
Q3 2020 YTD 2020 Q3 2020 Top Holdings
14% Industrials 65% IT Intertape 25%
11% Utilities 26% Materials Tricon 21%
9% Materials 10% Staples Nutrien 21%
9% Staples 10% Utilities Northland Power 19%
8% Discretionary 8% Industrials CNRL 19%
5% TSX (3%) TSX Premium Brands 17%
4% Real Estate (5%) Discretionary Kirkland Lake 17%
4% Financials (7%) Telecom Algonquin 11% Total (%) Return Total 4% IT (13%) Financials Finning 11%
2% Telecom (15%) Real Estate Intact 11%
(8%) Energy (36%) Energy First Quantam 10%
(14%) Healthcare (42%) Healthcare Wheaton 10%
▪As of end of Q3, Energy remains ▪I.T. YTD led by SHOP (+150% ▪Diversified Materials began positive largest active underweight (-1.95%) return YTD slowed to +5% in Q3) momentum following suit with Gold with research being conducted to ▪Holdings Wheaton and Franco & Silver equities, while NPI, CNR, further divest an integrated name BAM & ATZ represent largest bets into a pure midstream business represent two of top 20 YTD TSX names ▪Swapped Manulife for TMX while ▪Materials (1), Utilities (2), Industrials
Takeaways increasing weight in Aritzia, (3) were largest active overweight’s ▪Divested Health Care into I.T. during Q2; have not added back Brookfield & First Quantum in Q3
Source: Bloomberg LP Note: As of September 30, 2020 24 Q3 2020 Portfolio Attribution Analysis
Q3 outperformance driven by selection in the Real Estate, Utilities, and Materials sectors
Q3 Active Contribution to Return by Sector (bps)
Real Estate 41
Utilities 38
Materials 36
Consumer Staples 17
Health Care 15
Communication Services 6
Industrials (9)
Energy (15)
Financials (22)
Information Technology (35)
Consumer Discretionary (52)
Source: Bloomberg LP Note: As of September 30, 2020 25 Q3 2020 Active Contribution to Return Breakdown
Performance from our holdings fueled BEAM’s positive active return in Q3 2020
Holdings: Lowest Active CTRs(1)(2) Holdings: Highest Active CTRs
0.52% 0.53% 0.56% 0.43% 0.34%
(0.09%) (0.07%) (0.24%) (0.17%) (0.34%)
Non-Holdings: Lowest Active CTRs Non-Holdings: Highest Active CTRs
0.13% 0.05% 0.06% 0.06% 0.12%
(0.20%) (0.19%) (0.18%) (0.36%) (0.36%)
Source: Bloomberg LP 1. Active CTR = Portfolio CTR - Benchmark CTR 26 2. “Holding” includes all companies held at any point during Q3 2020 Aligning to Philosophy: Reviewing Q2 Moves & Move in Q3
After divesting certain Energy holdings in Q1 & improving selection in Q2, Q3 saw replacement in Financials
Sold Bought Thesis in Q2 2020 Q2&3 Performance (%)
• Diverse, clean energy generation in N. America, Europe, Asia and L. America TSX:NPI TSX:CU • Foreseeable catalysts arising from Northland’s growth pipeline, international clean energy mandates, plummeting renewable costs and on-going climate change concerns • Stable and predictable cash flows sourced from PPAs with state-owned entities and a utility operation (EBSA)
• Comprehensive growth strategy through customer-focused approached and unique TSX:ATZ TSX:GIL boutique experience • Methodical and logical expansion into the US acts as catalyst for future growth • Strong balance sheet and liquidity to persevere through COVID-19 related headwinds
• Well-diversified exposure to small-cap software across different vertical software markets TSX:CSU TSX:SIA • Strong management team with a proven track record of disciplined capital allocation and delivery of shareholder value • Expectations of lowered valuations after the pandemic and economic downturn will present an opportunistic time for CSU’s M&A-focused strategy
Sold Bought Thesis in Q3 2020 Q3 Performance (%)
• Monopoly in the Canadian financial exchange industry, with returns that are uncorrelated TSX:X TSX:MFC with typical drivers within Financials (e.g. interest rates and equity markets appreciation) • Defensive attributes from stable & recurring data subscription revenue sources • Proprietary possession of data and technology that is inherent within financial exchange operations which can be leveraged as a catalyst for growth opportunities in the fast- growing data services industry • Strong balance sheet and growth/risk profile that is consistent with peers, while maintaining superior operational efficiency and free cash flow conversion
Source: Bloomberg LP 27 Financials Were Largest Average Underweight During Q3
BEAM added TMX Group Limited and divested from Manulife Financial Corporation in Q3
What’s Happening in the Market? Strategy Going Forward ▪ Low interest rate environments have created a ▪ Currently underweight in Financials with seven headwind against the balance sheets of both banks holdings and life insurance companies • Added TMX Group Limited to portfolio in Q3 ▪ Commoditized insurance products makes the life • Now hold four diversified banks and have insurance sector unattractive exposure to alternative asset management, P&C ▪ Elevated volatility in the public markets have insurance, and financial exchange sub-sectors contributed to unprecedented levels of equity, fixed ▪ Keeping a balanced exposure with the capacity to income, and derivatives trading activity achieve returns in all stages of the market cycle ▪ TMX Group Limited well positioned to benefit from elevated trading and capital markets activities
Financials Performance Active Contribution to Return
12.0% 0.24%
0.18% 8.0%
4.73% 4.0% 3.99% 0.04% 0.03% 3.39%
0.0%
(0.07%) (4.0%) (0.12%) Jul 01 Aug 15 Sep 29 (0.18%) (0.19%) Financials Holdings Financials Benchmark TSX
Source: Bloomberg LP Note: As of September 30, 2020 28 BEAM’s Stance on Materials
Materials was BEAM’s largest sector overweight and generated the third highest CTR
What’s Happening in the Market? Strategy Going Forward ▪ Copper mine strikes in Chile foreshadow possible ▪ Increased active weight in FM as we are bullish in the supply constraints outlook for demand as government stimulus picks up ▪ China’s demand for copper better than anticipated ▪ Low forecasted fertilizer prices over the coming years driving prices to two-year highs are a sign to decrease active weight in Nutrien ▪ Lumber futures taper-off from September records but ▪ Large active weights in top quality gold names to remain well above historical levels – forestry hedge against US election outcome uncertainty and companies have surprised analysts with earnings potential for long-term currency devaluation ▪ Precious metals prices remain elevated following a ▪ High commodity prices are a bullish sign for junior bull run, with mine shutdowns leading to a weakening producers; research is ongoing for a junior royalty & metal supply despite record investor demand streaming company to gain upside exposure
Materials Performance Active Contribution to Return
20.0% 0.3% 0.3% 16.0% 0.3% 0.3% 12.0% 10.5%
8.0% 9.1% 0.0% 0.0% 4.0% 0.0% 4.7% 0.0% (0.0%) (4.0%) (0.1%) (0.1%) Jul 01 Aug 15 Sep 29 (0.1%)
(0.2%) Materials Holdings Materials Benchmark TSX
Source: Bloomberg LP Note: As of September 30, 2020 29 Real Estate Generated the Highest Positive CTR in Q3
Single-family housing proved to be resilient during the pandemic
Outperformance Drivers Strategy Going Forward ▪ Strong demand for single-family homes driven by ▪ We expect continued tailwinds for industrial assets WFH trends and low interest rates fueled by increased investments from retailers into ▪ Real estate sector weighed down by companies with their online distribution capabilities large exposure to retail and office properties • In contrast, we believe the demand for retail space ▪ Blackstone’s $300M preferred equity investment will continue to diminish ▪ Latest quarter saw strong fundamentals in single- ▪ Single-family housing should continue to benefit from family portfolio, proving its resilience in this pandemic WFH trends and lower interest rate for longer – occupancy above historical average and rental ▪ Multi-family and office space could be bold well as increases on renewed/new leases attractive long-term plays
Real Estate Performance Active Contribution to Return
25.0% 20.7% 0.52% 20.0%
15.0%
10.0% 4.7% 5.0% 4.1% 0.0%
(5.0%) 0.02% 0.01% 0.01% 0.01% Jul 01 Aug 15 Sep 29 (0.01%) (0.02%) (0.03%) (0.05%) (0.06%) Real Estate Holding(s) Real Estate Benchmark TSX
Source: Bloomberg LP Note: As of September 30, 2020 30 Portfolio Characteristics
Equity portfolio turnover peaked in 2018, expecting similar to lower levels for 2020
Portfolio Turnover (Including Rebalancing)(1) Portfolio Characteristics
28.5% Portfolio Benchmark
Weighted Avg. 40.23(2) 52.73 Market Cap ($B)
Dividend Yield 2.92% 3.23% 18.0%
5.0% P / E (Trailing) 22.61x 24.70x
Profit Margin 6.73% 5.57% 6.8% Return on Equity 7.06% 5.92% (Trailing)
Debt / EBITDA(3) 4.48x 4.30x 6.5%
Debt / Equity(3) 111.76% 106.48% 2018 2019 2020
Q1 Q2 Q3 Beta 0.97 1.00
Source: Bloomberg LP 1. Calculated as minimum of buy or sell transaction value divided by the average equity value over the period 2. Excludes holding in XIC 31 3. Excludes the financials sector IV. Operations Update Michael Le | Risk Analyst [email protected] We Continue to Integrate ESG in our Investment Decisions
ESG Analysts have contributed to all equity research reports while access to MSCI reveals superior rating
Portfolio vs Benchmark Rating Portfolio Carbon Footprint(1) Letter Industry 464 6.11 457 5.93 Rating Adjusted Score 368 AAA 8.57 - 10.00 AA 7.14 - 8.57 A 5.71 - 7.14 BBB 4.29 - 5.71 BB 2.86 - 4.29 B 1.43 - 2.86 CCC 0.0 - 1.43 Portfolio Benchmark 2016 Q2 2020 Q3 2020
Example of ESG Integration Into a Stock Pitch ▪ Evaluated Gibson’s ESG using a variety of sources and on several elements including carbon emissions, land management, employee safety, board independence, and executive pay 6.6M 17.5M 1,388
13.9M 758 772 3.7M 3.4M 589 514 2.6M 425 420 2.0M 1.6M 1.2M 2.4M 2.1M 2.3M 2.1M 1.1M
ENB TRP ALA IPL KEY PPL GEI ENB TRP ALA IPL KEY PPL GEI
tCO2e (Scope 1+2) Carbon Intensity CEO Comp
Source: MSCI Note: As of September 30, 2020 33 1. Carbon footprint measured as tCO2e per $mm invested Increasing our Shareholder Engagement for Better Decisions
Following the BEAM Advisory Panel’s recommendation, we met with TC Energy to discuss concerns
Social Concerns Environmental Concerns
▪ Effect of changing land title on pipeline route ▪ Recent non-compliance orders issued for failure to • The MOU being provincially decided right now survey wetlands will not be retrospective • Used an accepted method (inferred • Land use permits given in 2014/2015 were methodology) but dates of completed work given by the government and are binding didn’t match permit • Construction of the pipeline is not in question • Did not significantly delay project but did create ▪ Right of indigenous groups a lot of extra work to be completed in a short • Did get permission from 20 elected indigenous amount of time groups – expected to provide $865M in income to various groups
Outcome of Meeting ▪ From a valuation standpoint the Coastal Gas Link controversy is not expected to significantly affect the valuation of TC Energy • Route is not in question • Non-compliance orders don’t point to a systemic issue with surveying or addressing environmental concerns ▪ On going monitoring will be required for several unaddressed concerns • Still considerable opportunity for disruptive protests depending on handling of further issues • Potential ethical concerns and potential conflict with the UN Declaration of the Rights of Indigenous People • TC Energy ranked 2nd lowest globally on MSCI for biodiversity and land use – largely due to ongoing controversies on the Keystone XL pipeline and Potomac pipeline
34 High Engagement Is Leading to Robust Interest
BEAM welcomed a record number of attendees at the annual information session
BEAM Info Session Event Registrants Engagement Rate on LinkedIn(1)
108 27%
80 16% 15% 15% 14% 11% 10% 26 6%
2018 2019 2020
BEAM 2020-21 Cohort Recruitment Is Underway BEAM Recruitment Events Coming Soon: Team Introductions
1. From LinkedIn Analytics as of July 1 to Sept 30, 2020 35 2020 Continues to Be a Transformative Year for BEAM
BEAM continues to diligently manage assets while collaborating in a virtual environment
Continue to examine Increase cross Ensure our portfolio Continue thorough changing ESG trends functional continues to meet recruitment efforts and the impact of the collaboration between compliance into the end of the fund’s holdings on analysts in different requirements, while year as applications SFU’s ESG sectors, asset seeking investment for the 2020-2021 commitments while classes, and opportunities at cohort open in the actively voting on operational roles attractive valuations beginning of proxies to add to our portfolio December
36 Questions Appendix BEAM Has Returned 44.5% Since Inception
Performance Since Inception
70% 2011 – 2012 2012 – 2013 2013 – 2014 2014 – 2015 2015 – 2016 2016 – 2017 2017 – 2018 2018 – 2019 2019 – 2020 Cohort Cohort Cohort Cohort Cohort Cohort Cohort Cohort Cohort
60% 59.1%
50%
44.5% 40%
30%
20%
10%
Portfolio Benchmark
0%
Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20
Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20
Sep-12 Dec-12 Sep-13 Dec-13 Sep-14 Dec-14 Sep-15 Dec-15 Sep-16 Dec-16 Sep-17 Dec-17 Sep-18 Dec-18 Sep-19 Dec-19 Sep-20
1. Note: As at September 30, 2020 2. Total benchmark is composed of S&P/TSX Total Return Index (60%); FTSE TMX Canada Universe Bond Index (38%); 91-day T-Bill Index (2%) 3. Assumes inception date of July 1, 2012, which marks the date at which the portfolio was fully constructed 39 4. Assumed cohort transition in December of every year Fixed Income Four-Year Fixed Income Performance
The BEAM Fixed Income Fund has underperformed by 70 bps over the last four years
Relative Return Tracking Error Information Ratio
Since Sep 30, 2016 (0.70%) 0.56% (1.26)
Portfolio vs. Benchmark Total Return(1)
20.0% 16.03% 15.0% 15.33% 10.0%
5.0%
-
(5.0%) Portfolio Benchmark
-
(0.4%)
(0.8%) (0.70%) (1.2%)
(1.6%)
(2.0%) Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 Sep-20
Source: Bloomberg LP Note: As of September 30, 2020 41 1. Fixed Income Benchmark is the FTSE Canada Universe Bond Index LTM Fixed Income Performance
The BEAM Fixed Income Fund has outperformed by 62 bps over the last twelve months
Relative Return Tracking Error Information Ratio
Since Sep 30, 2019 0.62% 0.59% 1.11
Portfolio vs. Benchmark Total Return(1)
10.0% 7.73% 7.5% 7.11% 5.0%
2.5%
-
(2.5%) Portfolio Benchmark
0.8%
0.6% 0.62%
0.4%
0.2%
-
(0.2%)
(0.4%) Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20
Source: Bloomberg LP Note: As of September 30, 2020 42 1. Fixed Income Benchmark is the FTSE Canada Universe Bond Index YTD Fixed Income Performance
The BEAM Fixed Income Fund has outperformed by 77 bps year to date
Relative Return Tracking Error Information Ratio
Since Dec 31, 2019 0.77% 0.72% 1.13
Portfolio vs. Benchmark Total Return(1)
10.0% 8.78% 8.0% 8.01% 6.0%
4.0%
2.0%
-
(2.0%) Portfolio Benchmark
0.8% +0.77%
0.6%
0.4%
0.2%
-
(0.2%) Jan 01 Jan 31 Mar 01 Mar 31 Apr 30 May 30 Jun 29 Jul 29 Aug 28 Sep 27
Source: Bloomberg LP Note: As of September 30, 2020 43 1. Fixed Income Benchmark is the FTSE Canada Universe Bond Index Contribution to Duration
BEAM Fixed Income Fund maintains a strategic underweight in duration
Contribution to Duration
Sector Benchmark Portfolio
Short Medium Short Medium Long Term Long Term Term Term Term Term (6-10 (10+ (6-10 (10+ (1-5 Years) Total (1-5 Years) Total Years) Years) Years) Years)
Federal 0.54 0.59 1.04 2.16 0.28 0.29 1.01 1.58
Provincial 0.27 0.64 3.25 4.16 0.09 0.46 3.92 4.47
Municipal 0.02 0.05 0.15 0.21 0.00 0.00 0.00 0.00
Corporate 0.32 0.41 1.13 1.86 0.47 0.46 0.96 1.89
Total 1.14 1.68 5.58 8.40 0.84 1.21 5.89 7.94
Source: Bloomberg LP, BlackRock Note: As of September 30, 2020 44 Note: Federal Agency bonds were included within the Federal asset class Equity Four-Year Equity Portfolio Return
The Equity Portfolio underperformed significantly over the last four years
Relative Return Tracking Error Information Ratio Since Sep 30, 2016 (13.70%) 3.02% (4.54) Portfolio vs. Benchmark Total Return(1) 40.0%
30.0% 23.84%
20.0%
10.0% 10.15% -
(10.0%)
(20.0%)
(30.0%) Portfolio Benchmark 2.0% - (2.0%) (4.0%) (6.0%) (8.0%) (10.0%) (12.0%) (14.0%) (16.0%) Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 Sep-20
Source: Bloomberg LP Note: As at September 30, 2020 46 1. Equity benchmark is the S&P/TSX Total Return Index LTM Equity Portfolio Return
The Equity Portfolio underperformed by 517 basis points over the last twelve months
Relative Return Tracking Error Information Ratio Since Sep 30, 2019 (5.17%) 5.10% (1.01) Portfolio vs. Benchmark Total Return(1) 20.0%
10.0% 0.09% -
(10.0%) (5.08%)
(20.0%)
(30.0%)
(40.0%) Portfolio Benchmark
1.0% - (1.0%) (2.0%) (3.0%) (4.0%) (5.0%) (6.0%) Sep 30 Oct 31 Nov 30 Dec 31 Jan 31 Feb 29 Mar 31 Apr 30 May 31 Jun 30 Jul 31 Aug 31 Sep 30
Source: Bloomberg LP Note: As at September 30, 2020 47 1. Equity benchmark is the S&P/TSX Total Return Index YTD Equity Portfolio Return
The Equity Portfolio underperformed by 504 basis points over the last twelve months
Relative Return Tracking Error Information Ratio Since Dec 31, 2019 (5.04%) 5.48% (0.92) Portfolio vs. Benchmark Total Return(1) 10.0%
- (2.97%)
(10.0%) (8.01%)
(20.0%)
(30.0%)
(40.0%) Portfolio Benchmark
- (1.0%) (2.0%) (3.0%) (4.0%) (5.0%) (6.0%) Dec 31 Jan 31 Feb 29 Mar 31 Apr 30 May 31 Jun 30 Jul 31 Aug 31 Sep 30
Source: Bloomberg LP Note: As of September 30, 2020 48 1. Equity benchmark is the S&P/TSX Total Return Index Equity Portfolio Summary
BEAM’s Equity Portfolio outperformed by 19 bps in Q3 2020
Average Weight Contribution to Return Total Return Contribution to (%) (%) (%) Relative Returns (bps)
Relative Sector Stock Sector Port Bench Relative Port Bench Relative Port Bench Relative Contri- Allocation Selection bution
Communication 4.1 5.3 (1.2) 0.2 0.1 0.1 4.1 2.0 2.0 4 8 12 Services Consumer 2.8 3.4 (0.6) (0.2) 0.3 (0.5) (7.7) 8.4 (16.1) (2) (48) (50) Discretionary Consumer Staples 5.6 4.3 1.4 0.6 0.4 0.2 10.2 9.1 1.1 3 6 9
Energy 10.6 12.0 (1.5) (1.1) (1.0) (0.2) (10.8) (8.1) (2.7) 21 (31) (10)
Financials 27.0 28.5 (1.5) 0.9 1.1 (0.2) 3.4 4.0 (0.6) - (16) (16)
Health Care - 1.0 (1.0) - (0.2) 0.2 (14.3) (14.3) (0.0) 20 - 20
Industrials 13.0 11.8 1.2 1.4 1.5 (0.1) 11.5 13.6 (2.1) 10 (26) (16) Information 10.5 10.1 0.4 0.1 0.4 (0.4) 0.3 3.6 (3.4) 8 (46) (38) Technology Materials 17.5 15.4 2.1 1.7 1.3 0.4 10.5 9.1 1.4 10 17 27
Real Estate 2.8 3.1 (0.3) 0.5 0.1 0.4 20.7 4.1 16.6 1 44 45
Utilities (1) 6.1 5.0 1.1 0.9 0.6 0.4 15.7 11.1 4.5 8 17 34
Not Classified - 0.2 (0.2) - - - 0.1 0.1 - 1 - 1
Equity Portfolio 100.0 100.0 - 4.9 4.7 0.2 4.9 4.7 0.2 84 (65) 19
Source: Bloomberg LP Note: As at September 30, 2020 49 1. Total Relative Contribution for the Utilities portfolio had a positive contribution of 1 bps in Q3 2020 due to a currency effect Highest Carbon Contributors to Our Fund
Energy, Industrials, Materials and Utilities holdings were the largest contributors to our carbon intensity
Carbon Intensity (Scope 1+2 Emissions per US$MMs Sales Weighted to Portfolio Weights)
55.7
51.3 50.4 50.0 45.6
25.7
15.6 15.4 13.9
3.5
AQN TRP CNQ NPI CNR NTF SU KL FM ITP
Source: MSCI ESG Manager Note: As of September 30, 2020 50 Exclusionary Screening
Principle 2: no human rights abuses Principle 4: elimination of forced and compulsory labor Principle 5: abolition of child labor Principle 10: no corruption or bribery
▪ Companies producing cluster munitions or nuclear weapons are excluded ▪ Companies earning greater than 5% of revenues from the manufacture, distribution, or sale of tobacco are excluded
Serious violations of widely accepted international norms of responsible corporate behavior
51 V. Appendix
Equity Holdings
Company Name # of Shares Price Market Value % of Total ALGONQUIN POWER & UTIL CORP 6,527 $19.34 $126,232.18 1.78% ARITZIA INC 7,600 $17.43 $132,468.00 1.87% BANK OF NOVA SCOTIA 2,768 $55.32 $153,125.76 2.16% BROOKFIELD ASSET MGMT INC 5,800 $44.06 $255,548.00 3.61% CGI INC 1,590 $90.38 $143,704.20 2.03% CANADIAN NATIONAL RAILWAY CO 2,356 $141.81 $334,104.36 4.72% CANADIAN NATURAL RESOURCES LTD 6,406 $21.34 $136,704.04 1.93% CONSTELLATION SOFTWARE INC 100 $1,479.63 $147,963.00 2.09% FINNING INTERNATIONAL INC 5,462 $20.36 $111,206.32 1.57% FIRST QUANTUM MINERALS LTD 8,839 $11.87 $104,918.93 1.48% FRANCO-NEVADA CORP 922 $186.07 $171,556.54 2.42% INTACT FINANCIAL CORP 972 $142.58 $138,587.76 1.96% INTERTAPE POLYMER GROUP INC 3,600 $14.83 $53,388.00 0.75% ISHARES CORE S&P/TSX CAPPED 5,250 $25.58 $134,295.00 1.90% KIRKLAND LAKE GOLD LTD 2,000 $65.00 $130,000.00 1.84%
Note: As of September 30, 2020 52 V. Appendix
Equity Holdings Cont.
Company Name # of Shares Price Market Value % of Total NATIONAL BANK OF CANADA 2,150 $66.14 $142,201.00 2.01% NORTHLAND POWER INC 4,000 $40.28 $161,120.00 2.28% NUTRIEN LTD 2,597 $52.21 $135,589.37 1.91% OPEN TEXT CORPORATION 2,650 $56.28 $149,142.00 2.11% PREMIUM BRANDS HOLDINGS CORP 1,326 $100.53 $133,302.78 1.88% ROYAL BANK OF CANADA 1,984 $93.49 $185,484.16 2.62% SAPUTO INC 2,883 $33.40 $96,292.20 1.36% STANTEC INC 3,250 $40.43 $131,397.50 1.86% SUNCOR ENERGY INC 5,137 $16.26 $83,527.62 1.18% TMX GROUP LTD 600 $136.94 $82,164.00 1.16% TC ENERGY CORP 2,756 $55.90 $154,060.40 2.18% TELUS CORP 7,348 $23.43 $172,163.64 2.43% TORONTO DOMINION BANK 3,562 $61.65 $219,597.30 3.10% TRICON CAPITAL GROUP INC 11,893 $11.04 $131,298.72 1.85% WHEATON PRECIOUS METALS CORP 2,700 $65.33 $176,391.00 2.49%
Note: As of September 30, 2020 53 V. Appendix
Equity Transactions
Date Name Buy/Sell # of Shares Fill Price Amount 07/07/2020 MANULIFE FINANCIAL CORP SELL -7,683 $18.54 $142,321.65 07/07/2020 TMX GROUP LIMITED BUY 600 $134.64 -$80,934.00 09/15/2020 ARITZIA INC BUY 1,300 $17.87 -$23,389.00 09/15/2020 BROOKFIELD ASSET MANAGEMENT BUY 1,000 $44.04 -$44,190.00 09/15/2020 CANADIAN NATURAL RESOURCES BUY 500 $24.22 -$12,260.00 09/15/2020 FIRST QUANTUM MINERALS LTD BUY 3,300 $12.99 -$43,017.00 09/15/2020 CGI INC SELL -160 $91.74 $14,528.40 09/15/2020 OPEN TEXT CORP BUY 300 $56.45 -$17,086.00 09/15/2020 SAPUTO INC SELL -800 $32.68 $26,000.00 09/15/2020 TORONTO-DOMINION BANK SELL -100 $63.44 $6,194.00 09/15/2020 TC ENERGY CORP SELL -550 $60.91 $33,355.50 09/15/2020 ISHARES CORE S&P/TSX CAPPED SELL -750 $26.36 $19,620.00
Note: As of September 30, 2020 54 V. Appendix
Fixed Income Holdings
Coupon Market Issuer Maturity # of Shares % of Total Rate Value
PROV OF ALBERTA 2040-12-01 42,000 4.50% $58,017.62 0.82% PROV OF ALBERTA 2024-06-01 60,000 3.10% $65,364.28 0.92% PROV OF ALBERTA 2048-12-01 65,000 3.05% $75,405.32 1.06% ALTALINK L P 2026-05-29 65,000 2.75% $70,887.73 1.00% BRITISH COLUMBIA FERRY SVCS 2034-10-13 49,000 6.25% $71,263.52 1.01% PROV OF BRITISH COLUMBIA 2020-12-18 44,000 3.70% $44,327.50 0.63% GOVERNMENT OF CANADA 2024-06-01 56,000 2.50% $60,579.10 0.86% GOVERNMENT OF CANADA 2026-06-01 65,000 1.50% $69,241.08 0.98% GOVERNMENT OF CANADA 2050-12-01 39,000 0.50% $50,284.06 0.71% GOVERNMENT OF CANADA 2024-03-01 143,000 2.25% $152,653.81 2.16% GOVERNMENT OF CANADA 2027-06-01 41,000 8.00% $61,466.90 0.87% GOVERNMENT OF CANADA 2031-12-01 49,000 4.00% $112,872.95 1.59% CANADA HOUSING TRUST 2029-11-15 64,000 2.10% $70,640.58 1.00% CONSUMERS GAS CO LTD 2023-07-05 46,000 6.05% $52,261.05 0.74% FARM CREDIT CORPORATION 2020-10-05 45,000 4.30% $45,012.13 0.64% 407 INTERNATIONAL INC 2030-03-06 110,000 3.14% $124,267.07 1.75%
Note: As of September 30, 2020 55 V. Appendix
Fixed Income Holdings Cont.
Coupon Market Issuer Maturity # of Shares % of Total Rate Value
HYDRO ONE INC 2022-01-13 72,000 3.20% $74,433.42 1.05% HYDRO ONE INC 2029-04-05 42,000 3.02% $47,175.53 0.67% IGM FINANCIAL INC 2027-01-26 76,000 3.44% $83,465.06 1.18% LAURENTIAN BANK OF CANADA 2022-09-12 50,000 3.00% $51,479.13 0.73% PROV OF MANITOBA 2038-03-05 81,000 4.60% $112,359.37 1.59% PROV OF MANITOBA 2042-03-05 97,000 4.40% $135,386.31 1.91% MUNICIPAL FINANCE AUTH OF BC 2027-12-01 74,000 4.95% $93,810.16 1.32% NATIONAL BANK OF CANADA 2022-06-30 80,000 1.96% $81,934.11 1.16% OMERS REALTY CORP 2030-06-05 71,000 3.63% $83,738.01 1.18% PROV OF ONTARIO 2041-06-02 20,000 4.65% $29,222.46 0.41% PROV OF ONTARIO 2046-12-02 46,000 2.90% $54,105.08 0.76% ROYAL BANK OF CANADA 2023-12-05 110,000 2.33% $115,374.44 1.63% SNC-LAVALIN GROUP INC 2020-11-24 60,000 2.69% $60,076.52 0.85% PROV OF SASKATCHEWAN 2033-09-05 58,000 5.80% $85,876.50 1.21% PROV OF SASKATCHEWAN 2040-06-01 80,000 4.75% $114,954.68 1.62% TORONTO DOMINION BANK 2024-07-24 91,000 3.23% $99,154.28 1.40%
Note: As of September 30, 2020 56 V. Appendix
Fixed Income Transactions
Date Name Buy/Sell Shares/Par Fill Price Amount 07/09/2020 HYDONE 3.02 4/5/29 MTN BUY 42,000 $112.401 -$47,552.45 07/09/2020 CANRRB 4 12/1/31 CPI BUY 10,000 $150.2 -$22,398.06 07/09/2020 ALTALK 2.747 5/29/26 MTN BUY 65,000 $108.745 -$70,904.39 07/09/2020 BCFERR 6.25 10/13/34 BUY 49,000 $147.61 -$73,092.43 07/09/2020 CANHOU 2.1 9/15/29 BUY 64,000 $110.59 -$71,219.46 07/09/2020 CAN 2.25 3/1/24 BUY 93,000 $107.08 -$100,356.33 07/09/2020 OMERS 3.628 6/5/30 11 SELL 19,000 $117.028 $22,307.08 07/09/2020 ATDBCN 4.214 8/21/20 SELL 42,000 $100.37 $42,208.85 07/09/2020 CAN 5 6/1/37 SELL 50,000 $164.7 $82,637.67 07/09/2020 YORKMU 2.6 12/15/25 SELL 107,000 $108.65 $116,468.91
Note: As of September 30, 2020 57