matco-small-cap-fund-presentation

MATCO FINANCIALPRIVATEWEALTHMANAGEMENTMATCO SMALL CAP FUND AUGUST 2014

Who is Matco Financial?AGENDA1. Who is Matco Financial?2. How Does Matco Invest?3. Why Invest in Small Caps?4. Why Invest in the Matco Small Cap Fund?PRIVATEWEALTHMANAGEMENT

Who is Matco Financial?MATCO FINANCIAL• An independent, privately-owned investmentmanagement firm• Founded in 2006 to manage the investments ofseven families• A boutique firm serving individual clients, families,business owners, trusts, non-profits and foundationsPRIVATEWEALTHMANAGEMENT

Who is Matco Financial?MATCO FINANCIAL• Manages $400 million in assets, administers $1.6 billion• Partners invested alongside our clients• Matco abides by CFA Institute’s Asset Manager Code ofProfessional ConductPRIVATEWEALTHMANAGEMENT

Who is Matco Financial?STRONG ROOTS• Related to Matco Investments, a privately-held energy andreal estate investment firm• Matco Investments founder also involved in establishingsuccessful businesses such as Western Energy Services andCalfrac Well Services. An early investor in Ensign EnergyServices• Matco Investments co-owns several significant commercialreal estate properties in Calgary–For example, 8 th Avenue Place and HSBC BuildingPRIVATEWEALTHMANAGEMENT

Who is Matco Financial?EXPERIENCED TEAMTHE VALUE OF EXPERIENCEMATCO ASSET MANAGEMENT TEAM YEARS CORPORATE RESPONSIBILITIESJason Vincent, B.Comm., PFP, TEPDirector, President20+ Balanced / Fixed IncomeBill Dickie, CFADirector, Chief Investment Officer25+ Canadian EquitiesJill Angevine, CA, CFAVice President, Portfolio Manager20+ Canadian EquitiesJeff Parent, B.Eng., CIM, FCSIVice President, Portfolio Manager; Private Client20+ Technical AnalysisPeter Doig, CFA, MBAAnalyst18 Balanced / Fixed IncomeBaron Lee, CFAAnalystEverett Knight, B.CommAnalyst52AnalysisAnalysisPRIVATEWEALTHMANAGEMENT

Who is Matco Financial?EXPERIENCED TEAMTHE VALUE OF EXPERIENCEMATCO ASSET MANAGEMENT TEAM YEARS CORPORATE RESPONSIBILITIESRonald Mathison, CA, CBV, CFAChairman, Director25+ StrategicMichael Tims, B.Comm., CBV, MBAVice-Chairman (Matco Investments)35+ StrategicPRIVATEWEALTHMANAGEMENT

Who is Matco Financial?MATCO STRATEGIESSTRATEGYDESCRIPTIONBalancedBonds and equitiesBondsShorter duration, investment grade bondsCanadian Equity Income Core income and growth at the right priceCanadian Small Cap Core growth at the right priceEnergyNorth American, pure oil and gas companiesGlobalSub-advisedPRIVATEWEALTHMANAGEMENT

How Does Matco Invest?PHILOSOPHY• We believe in active management – We have consistentlyoutperformed our benchmark• We believe in bottom-up investing – We invest inundervalued, mispriced companies• We believe in strategy before tactics – We invest for the longterm,but tactically exploit short-term inefficiencies• We believe in fundamental analysis – Rigorous fundamentalresearch incorporating macro-economic and bottom-upanalysis• We believe in investing in management teams and businessplans – We regularly meet with management teamsPRIVATEWEALTHMANAGEMENT

How Does Matco Invest?PHILOSOPHY FOUNDED UPON• Returns first, benchmarks second• Concentrated portfolios – 25 to 40 companies• Disciplined focus on Canadian equities in the energy, smallcap and large cap space• Delivering consistent, reliable returns while effectivelymanaging risk with lower volatilityPRIVATEWEALTHMANAGEMENT

How Does Matco Invest?INVESTMENT PROCESSInvestmentCommitteeChair: Bill K. DickieMeetings: MonthlyMembers: Jill Angevine, Jason Vincent, Jeff Parent, Peter Doig Baron Lee, Everett KnightMandate: Ensure Matco Financial has sound management process that is implemented andcommunicated consistentlyComplianceJill Angevine, Chief Compliance OfficerBill Dickie, UDPPRIVATEWEALTHMANAGEMENTAsset MixCommitteeChair: Jason N. Vincent Meetings: QuarterlyMembers: Bill Dickie, Jill Angevine, Jeff Parent•Research & Analysis: Yield Curve, Macro Economic , Relative Valuations, & Risk ManagementWorking GroupsFixed IncomeChair: Peter Doig Meetings: WeeklyMembers: Jason Vincent, Baron Lee, Bill K.Dickie•Proprietary Discussion: Fixed income buy(s) &sell(s), interest rate, duration & credit riskmanagement•Macro economic indicators, asset allocation,performance attribution, & risk managementBalancedChair: Jason Vincent Meetings: MonthlyMembers: Bill K. Dickie, Peter Doig, Jeff Parent•Proprietary Discussion: Manager review, AssetClass Targets, Performance Attribution, RiskManagement Controls, & Macro-economicanalysisCanadian EquityChair: Jill Angevine Meetings: DailyMembers: Bill Dickie, Jeff Parent, Baron Lee,Everett Knight•Proprietary Discussion: performance attribution,positives, challenges, company reports & news,buy(s) & sell(s), style, & risk management•Market Discussion: Economic news,contribution & style, top down sector reviewMatco Funds & PortfoliosCanadian BondPortfolioMatco GlobalEquity PortfolioMatco BalancedFundMatco CanadianEquity IncomeFundMatco Small CapFundMatco EnergyFund

How Does Matco Invest?OUR STYLE• Bottom-up approach and comprehensive researchidentify opportunities• Invest in businesses, not stocks• Committed to the long-term plans and management teamsof our holdings• Low turnover of portfoliosPRIVATEWEALTHMANAGEMENT

How Does Matco Invest?OUR STYLEGARPGrowth at a Reasonable PriceValue Core GrowthPRIVATEWEALTHMANAGEMENTLarge CapMid CapSmall Cap

How Does Matco Invest?INVESTMENT LIFE CYCLEIdeaGeneration• Idea Generation• Bottom up companyanalysisC.P.M.S.Computerized PortfolioManagement ServicesBloombergSell SideResearchManagementInterviewsResearch &AnalyticsMatco KeyCharacteristics• Invest in companieswith superiorcharacteristicsCanadianEquities5 Fold InvestmentProcess• Identify companiesthat exhibit highquality investmentfundamentalsPortfolioConstruction &AllocationCanadianEquities• Macro economics• Risk analysis –portfolio beta andcorrelations“No” – Sell stockMonitor PortfolioSell Discipline• Do the companiesexhibit theinvestment thesiswe bought in thefirst place?Allocation Discipline• Do our sectorweights fit with ouroverall theme?“No” - Review risk, sectorallocation and macroeconomic conditionsPRIVATEWEALTHMANAGEMENT

How Does Matco Invest?CHARACTERISTICS• We invest in companies with superior fundamentalcharacteristicsQualityReturn on Equity (%)Reinvestment Rate (%)Income Yield (%)Growth Bottom Line Growth (%)Value Price to EarningsRisk Beta - 5 Years vs. S&P/TSXPRIVATEWEALTHMANAGEMENT

How Does Matco Invest?5 FOLD INVESTMENT PROCESSOur investment focus is on identifying companies that exhibit superior fundamental characteristics.ManagementValuation• We seek out management teams that are proven value creators with expertise andexperience in their core business. Ownership levels and compensation structure arekey variables we analyze along with corporate governance and succession planning.• We strive to find companies that are trading at a discount to its intrinsic value andreasonable valuation on a number of metrics including P/E, P/CF, and P/BV relative toits own history, the market and expectations. But, we don’t invest in companies simplybecause they are cheap – we identify what we believe is reasonable to pay for thebusiness.PRIVATEWEALTHMANAGEMENTGrowth• Companies that consistently demonstrate a sustainable rate of earnings growth, top linegrowth, margin growth and free cash flow growth tend to continue to do so in the future –and we like that.Financials• A history of above market Return on Equity (ROE) complemented by a strongreinvestment rate is what great businesses exhibit. This combined with a history ofreturning proceeds to shareholders through dividends are essential to what we look forwhen seeking out investments.Balance Sheet• We look for high quality balance sheets analyzing the capital structure of the companyincluding the amount of working capital, debt and propensity to finance growth throughequity/debt. Strong balance sheets enable companies to execute their business plan.

How Does Matco Invest?SELL DISCIPLINEOur selling process is very similar to our investment process.We reduce or eliminate investments for the following reasonswhen a company deviates from our investment thesis. Thiscould include:• Eroded confidence in management• A significant change in company direction or capitalization• Excessive valuation• Significant financial leverage• We find a more attractive alternative from our investmentprocess• Deteriorating FundamentalsPRIVATEWEALTHMANAGEMENT

Why Invest in Small Caps?MATCO SMALL CAP FUND PERFORMANCEValue of C$100 Invested in the Matco Small Cap Fund vs BMO Small Cap Index vs TSX Composite180GROWTH OF $100 SINCE INCEPTIONPRIVATEWEALTHMANAGEMENT170$170160150140$150$142130120110100902010 2011 2012 2013 2014MATCO SMALL CAP BMO Small Cap Index TSX COMPOSITE TOTAL RETURN INDEX

Why Invest in Small Caps?WHY WE LIKE SMALL CAP COMPANIES• Strong ROE companies• Higher EPS growth opportunities• Lack of coverage creates buying opportunitiesPRIVATEWEALTHMANAGEMENT

Matco Small Cap FundHOW DO WE COMPARE TO THE BENCHMARK?• The Matco Small Cap Fund gives investors exposure to higher ROEcompanies (more than 2x index) while taking on less riskPRIVATEWEALTHMANAGEMENTMatco SmallCap FundBMO Small CapIndexMarket Capitalization 1,320 1,109Beta 0.75 1.33Yield 2.12 2.09Reinvestment Rate 6.60 0.68Return on Equity 15.86 7.40Price to Earnings 20.51 39.89Quarterly Earnings Momentum 0.97 3.64As of June 30, 2014

Matco Small Cap FundHOW DO WE COMPARE TO THE BENCHMARK?• Our Beta is 40% less risky than our benchmarks• We have decreased our yield in favor of dividend growth companies rather thanhigh dividend companies but still remains above the indexPRIVATEWEALTHMANAGEMENT• We own substantially higher quality companies shown by our largerReinvestment Rate and Return on Equity• Our Price to Earnings has increased over the last year due to multipleexpansion and our increased exposure to E&P companies but remains almosthalf the index’s price to earnings• Our quarterly earnings momentum remains positive and we believe willcontinue to increase as earnings come through in the back half of the year.

Matco Small Cap FundOBJECTIVEThe Fund seeks to provide long-term capital appreciation byinvesting primarily in small to mid capitalization Canadiancompanies.• We invest in companies that provide a consistent return onequity, not companies with a high return on equity• We invest in companies that are capable of growing theirdividend, not companies with a high dividend yieldPRIVATEWEALTHMANAGEMENT

Matco Small Cap FundSTYLEWe are GARP (growth at a reasonable price) investors thatcombine characteristics from both value and growth investingPRIVATEWEALTHMANAGEMENTValue Core GrowthLarge CapMid CapSmall Cap

Matco Small Cap FundIDEAL COMPANY CHARACTERISTICS• Boyd Group Income Fund (BYD.UN) is an example ofcompany with ideal characteristics• We initiated a position in May 2013PRIVATEWEALTHMANAGEMENTBoyd Group Income Fund BYD.UN (May 2013)Market Capitalization 243Beta 0.78Yield 2.42Reinvestment Rate 20.55Return on Equity 33.64Price to Earnings 17.59Quarterly Earnings Momentum 12.23

Matco Small Cap Fund5 FOLD INVESTMENT PROCESS FOR BOYDManagementValuation•Very experienced, conservative, and disciplinedmanagement team•Boyd’s valuation has expanded as it demonstratedconsistent organic and acquisition growth but we believeit continues to trade under it’s intrinsic valuePRIVATEWEALTHMANAGEMENTGrowth•Consistent organic and acquisition growth. Boyd is thebiggest player in a highly fragmented industry.Financials•Strong return-on-equity complemented by a excellentreinvestment rate. Long history of returning proceeds toshareholders though paying and growing dividendsBalance Sheet•Strong balance sheet and conservative payout ratio giveBoyd flexibility for future acquisitions

Matco Small Cap FundINVESTMENT THESIS1. Consistent organic and acquisition growth2. Consistent dividend growth3. Stable revenue stream - Greater than 90% of revenuecomes from insurance companies (recession resilient).4. Top tier management team5. High quality characteristicsPRIVATEWEALTHMANAGEMENT

Matco Small Cap FundCURRENT CHARACTERISTICS• Boyd’s characteristics have become more attractive• Boyd has successfully demonstrated organic and acquisition growth it hasjustified a higher valuation• Boyd’s yield has decreased because of price appreciation. It continues toconsistently increase its dividend.PRIVATEWEALTHMANAGEMENTBoyd Group Income Fund BYD.UN (July 2014)Market Capitalization 612Beta 0.56Yield 1.15*Reinvestment Rate 18.89Return on Equity 37.01Price to Earnings 26.77Quarterly Earnings Momentum 15.34

Matco Small Cap FundPERFORMANCE• We consistently outperformed the BMO Small Cap Index over the long termYTD 1 Yr. 2 Yr. 3 Yr. 4 Yr. InceptionMatco Small Cap Fund 12.3% 25.7% 22.0% 13.7% 16.4% 12.9%BMO Small Cap Index 16.0% 28.2% 15.8% 3.6% 9.4% 8.8%PRIVATEWEALTHMANAGEMENT• We consistently outperformed the TSX Composite over the long termYTD 1 Yr. 2 Yr. 3 Yr. 4 Yr. InceptionMatco Small Cap Fund 12.3% 25.7% 22.0% 13.7% 16.4% 12.9%TSX Composite TR Index 14.5% 26.5% 18.2% 9.0% 10.1% 10.2%As of July 31, 2014All Matco Performance Numbers are Series O = Gross of Fees, but Net of Trading & Expenses (ER)Matco Small Cap Inception Date: Mar 1, 2010

Fund InformationFUNDMatco Balanced FundMatco Canadian EquityIncome FundMatco Small Cap FundMatco Energy FundFUND CODESeries A – MAT100Series F – MAT101Series O – MAT102Series A – MAT300Series F – MAT301Series O – MAT302Series A – MAT400Series F – MAT401Series O – MAT402Series A – MAT200Series F – MAT201Series O – MAT202PRIVATEWEALTHMANAGEMENT

ContactsPhone NumberEmail AddressBill Dickie, CFAChief Investment Officer 403.539.5741 bdickie@matcofinancial.caJill Angevine, CA, CFAVice President, Portfolio Manager 403.539.5085 jangevine@matcofinancial.caPeter Doig, CFA, MBAAnalyst 403.718.2130 pdoig@matcofinancial.caBaron LeeAnalyst 403.718.2129 blee@matcofinancial.caEverett KnightAnalyst 403.718.7797 eknight@matcofinancial.caPRIVATEWEALTHMANAGEMENT

DisclaimerMATCO FINANCIAL is a privately owned and independent wealth management firm. The materialpresented is intended to provide information to Matco Financial clients, contacts, and affiliates. Readersshould not act on this information without first consulting with their financial planner, investment advisor,tax advisor, and/or lawyer. This communication does not constitute an offer or solicitation by anyone inany jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it isunlawful to make such an offer or solicitation. Management fees, commissions, and expenses may beassociated with investment management services and mutual fund investments. Before investing,please read the applicable information such as the prospectus, which contains detailed investmentinformation and is available from your advisor. Most marketable securities such as mutual funds are notguaranteed or insured, their values change frequently and past performance many not be repeated. Allstatements that look forward in time or include anything other than historical information are subject torisks and uncertainties and are not guarantees of future performance. Investors should not rely onforward looking statements. Actual results, actions or events, could differ materially from those set forthin the forward looking statements.PRIVATEWEALTHMANAGEMENT