1. Caisse Desjardins de Lévis Head Office Maxwell Reilly Sheng Kong Etienne Ricard IceAir Airlines January 26 st, 2016 1

2. Table of Contents Current Situation Decision Process Hedging & Portfolio Analysis Recommendation Implementation 2

3. Objective 3 To provide an effective hedging strategy for IceAir over the next year, specifically in March, while also setting up a diversified pension portfolio that can succeed in the long term

4. Current SituationDecision Process Recommendation Analysis Implementation Current Strategy 4 Company Outlook & Current Strategy Full service transportation company offering the organization, distribution, and marketing of vacation packages Vertical integration of travel services Derives revenues from trips to Europe in the summer season and South America in the winter Holds fleet of 26 Airbus, with ability to lease more as demand increases Focus on family friendly services Company Outlook Economic recovery will boost bottom line Growth due to high demand in 2014 summer months High exposure to fuel prices that must be mitigated Defined benefit pension plan that is underfunded and in need of restructuring Head of risk management has just left the company

5. Current SituationDecision Process Recommendation Analysis Implementation Ticker: TSX:ICE Stock price: $25 Revenue: $3.7BB Profit: $58MM Operating Cash Flows: $123MM Net Chance in Cash: $94.6MM Total Pension Shortfall: $30.9MM 5 Company Financial Situation Gross Margin: 17.2% EBIT Margin: 2.2% ROA: 9% Quick Ratio: 1.1 Cash Ratio:.344

6. Current SituationDecision Process Recommendation Analysis Implementation Strong economic growth means strong airline industry growth Industry is moving away from vertical integration, leaving niche space for IceAir Trend towards hidden fees and add-on charges 6 Industry Outlook & Trends

7. Current SituationDecision Process Recommendation Analysis Implementation Energy Prices: We project a decrease in energy prices over the short term and long term due to shale deposits, and a lack of cooperation between OPEC members 7 Macroeconomic Outlook Interest Rates: We project flat rates for the short term, and gradually rising rates over the long term Economic Growth: Stable, solid growth in Canadian markets Better growth in large cities

8. Current SituationDecision Process Recommendation Analysis Implementation 8 Estimated March consumption Projected 2014 March fuel consumption (barrels): 663,120 Projected annual consumption for 2014: 5,526,000

9. Current SituationDecision Process Recommendation Analysis Implementation 9 Fuel Hedging Alternatives Percentage of fuel costs hedged Future Price

10. Current SituationDecision Process Recommendation Analysis Implementation Past Performance & Highlights 2013 Return: 5.06% 2013 Return (excluding Transat gains): 1.9% β of Portfolio: 0.17 10 Current Pension Portfolio Overview

11. Current SituationDecision Process Recommendation Analysis Implementation Investment Assumptions Passive Management in ETFs Light investment in tourism industry 8% annual return to avoid deficit. Minimizing the portfolio risk Higher rates in Canada + US Growing US + emerging country equity Neutral on Canada 11 Management Investment Assumption Our Economic & Return Forecast

12. Current SituationDecision Process Recommendation Analysis Implementation Problems with Current Portfolio High allocation to bonds Extremely high duration, considering potential increases in interest rates Active management: investment in tourism industry  result is high correlation between performance of company and performance of funds 12 Alternatives

13. Current SituationDecision Process Recommendation Analysis Implementation Active Investment Portfolio Shift weights from bonds to equities Eliminate tourism portfolio Move 10% of portfolio to alternative investments to gain diversification and upside potential 13 Recommended Portfolio Allocation

14. Current SituationDecision Process Recommendation Analysis Implementation 14 Alternatives 1.Passive Investing 2. Mix of passive and active 3. Pure active investing

15. Current SituationDecision Process Recommendation Analysis Implementation 15 Expected Returns Under Each Alternative

16. Current SituationDecision Process Recommendation Analysis Implementation Bonds: Short Duration US Bonds, NYSE: EVG Short Duration, Corporate CAN bonds Treasuries Canada Equities: S&P 500 ETF Consumer Staples ETF Financials ETF Energy Sector ETF S&P/TSX ETF Emerging Countries Russia and Chinese ETFs 16 Specific Investment Ideas Alternative Investments: REITs MBSs Hedge Funds

17. Current SituationDecision Process Recommendation Analysis Implementation Currency hedging Shifting away from defined benefit towards defined contribution 17 Other Considerations

18. Current SituationDecision Process Recommendation Analysis Implementation 18 Recommendation

19. Current SituationDecision Process Recommendation Analysis Implementation Fuel Prices continue to increase Interest rates rise more quickly than anticipated Higher Beta and volatility in pension plan leads to losses Employees protest migration to defined contribution plan 19 Risks & Mitigation

20. Key Takeaways 1.Fuel hedges should be entered, but we don’t want to be fully hedged due to belief that prices will fall 2.Pension plan should be completely reallocated to more aggressive mixture of stocks and bonds, removing allocation to tourism industry 3.Shift pension plan to defined contribution for new employees 20

21. Caisse Desjardins de Lévis Head Office Thank You 21