Profitable ideas in North American equities Danny Bubis, CFA

Agenda Energy – secular outlook remains strong Financials – past the worst Gold – losing its luster? Mega-cap technology – it ain’t 1999 anymore!

Tetrem – Who we are Value investors North American Independent Established

Stocks are cheap versus bonds Source: Strategas. As of March 31, Equity risk premium (forward earnings yield less real bond yield)

Bear markets precede secular bull markets Source: Strategas. As of March 31, S&P year returns (1920 – Q1 2012)

No cycle excesses Source: US Department of Commerce, Federal Reserve Board, Empirical Research Partners Analysis. As of December 31, The U.S. Consumer capital spending As a share of nominal GDP 1952 through Q4 2011

Corporate balance sheets are strong Source: Strategas Research Partners. As of December 31, U.S. Non-financial corporations Cash as a percent of total assets

Energy stocks are contrarian Source: Empirical Research Partners. As of April 13, Relative price to book of E&P stocks E&P Stocks More Expensive Current: All E&P Stocks Current: Natural Gas E&P Stocks Percentile (100 = Lowest Price-to-Book Ratios)

Secular demand growth Source: US Energy Information Administration. As of December 31, World energy consumption, 1990 – 2035 (quadrillion Btu)

Moving towards equilibrium Source: Bloomberg. As of March 30, Oil to natural gas ratio

Suncor: cash flow is coming Unmatched assets 27 billion barrels of resource base No exploration required 40-year resource life Low-risk regulatory environment Financially strong $4B cash on balance sheet Next material debt maturity 2018 Harvesting the cash Expect $3B free cash flow in 2012 Ample room to raise dividend (10% payout ratio) Long-term cash flow can hit 25% of current market cap

Source: Scotiabank. Canadian Banks include: BMO, BNS, CM, NA, RY and TD US Banks include: BAC, C, JPM, USB and WFC Financials – past the worst U.S. and Canadian banks Tier 1 capital ratio 2007 – fourth quarter 2011

CIBC: do you see what we see? Compelling value 19% P/E discount vs. peers 4.8% dividend yield, safe and growing Industry leading returns and capital levels 22% ROE (group average 18%) Highest capital ratios Opportunity to differentiate through capital return Expect meaningful share repurchase announcement Room for future dividend increases

Source: Dow Jones Indexes and KBW Estimates. U.S. Banks are cheap on valuation KBW Bank Index – Price to tangible book value

Source: 13D Research, Bloomberg. As of April 25, Spread Between NYSE Arca Gold Miners Index and Spot Gold Gold stocks lagging bullion Spread between NYSE Arca Gold Miners Index and Spot Gold

Source: Market Vane Corporation. As of April 17, Gold sentiment (% bullish) Gold sentiment getting contrarian

Average is calculated as median. Highest outlier in each period not shown: Yahoo! Inc. in 2000 (P/E of 441x) and Amazon.com Inc. in 2012 (P/E of 164x). Source: Strategas. As of March Overall Average: 31.0x Overall Average: 13.6x Tech Average: 73.1x Tech Average: 13.8x March 2000 March 2012 Mega-cap technology – It ain’t 1999 anymore!

Source: Capital IQ: data. Rolling 5 year standard deviation. Companies contained in Tech Basket: ORCL, IBM, MSFT, CSCO, INTC. Companies contained in Consumer Basket: KO, GIS, WMT, PG. EPS Volatility – Tech vs. Consumer Staples Mega-cap technology – stable earnings

FY 1999FY2012Change Price$58.37$ % Revenue$23B$72B213% EPS$0.85$ % P/E68.7x11.3x-84% Dividend Yield NA2.60% Dividend 3 Year CAGR NA15.40% Microsoft Revenge of the nerds revisited – Nerds in Paradise

CI Canadian Investment Fund: A long history of excellence YTD3 Year5 Year10 YearSince Inception CI Canadian Investment Fund7.00%11.95%-0.10%5.80%9.40% Quartile2211n/a Source: Globefund, March 31, 2012

Tetrem’s new mandates YTD1 Year3 Year5 Year Castlerock Canadian Dividend Fund B6.3%2.6%15.1%1.9% Quartile1122 Castlerock Capital Appreciation Fund B9.0%-3.3%9.3%-3.4% Quartile3332 Castlerock Canadian Dividend B Castlerock Capital Appreciation B Tetrem assumed management of the funds April, 2012 Source: Globefund, March 31, 2012

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