Investment Saskatchewan The Newest Commercial Crown Janet Wightman November 15, 2005

1. Investment SaskatchewanThe Newest Commercial CrownJanet WightmanNovember 15, 2005

2. Investment Saskatchewan • Commercial Crown operating at arms-length from Gov’t. • Capital available for investments in SK businesses • Client focus by adding value to investee company 3 C’s

3. Overview Investment Saskatchewan Commercial Crown Capital for Investments Client-Focus

4. The Gap • GDP growth of 3% in 2004 projected 2.6% in 2005/2006 • VC activity up 37% in Western Canada • $ 28 million disbursed to 17 SK companies • 21% increase • 2.9% of deals in Canada • 1.6% of total Canadian VC dollars invested in SK • Focus on life sciences and traditional sectors • LSVCC account for most VC backing • Local funds typically do smaller deals (<$3-4 million) Without public capital an equity financing gap exists.

5. A New Commercial Crown • Created in September 2003 to: • invest public capital to encourage economic activity and • separate decision making from political system • Independent private sector board mandated to make decisions at arms-length on: • investments/divestments • management • investment management model • Challenge is to balance: • commercial operations and return • shareholder expectations on public policy Unique in its governance structure

6. Mandate • Invest public capital in SK businesses on commercial terms • Leverage investments in order to encourage private sector investments • Achieve return commensurate with risk on new investments • Maximize return on existing portfolio • Seek private sector management of portfolio Focused Operating Mandate

7. New Investments • Full Range of investments • Directly or • Through sub-manager • Direct Investments >$3 million • Equal terms with partners • 5-7 year hold period • Prefer < 40% ownership • Channel other Investments through sub-managers: • Small or specialty niche investments • PFM, Westcap, Primaxis, Foragen, Western Life Sciences, PVF Covers full spectrum of capital needs

8. Evolution - A New Model • Board’s task was to determine best model for private sector management between: • Existing third party firm • Create investment management company • Open national competitive process involving >50 firms • RFP process completed - no award of contract for variety of reasons • Board is investigating creation of an employee owned IMC (e.g. Greystone): • Better economics • Mind and management in Saskatchewan • Retention of expertise and existing investee relationships • Add to the investment management industry in SK Outcome - unknown

9. Investees by Sector Adv. Tech, Biotech and Pharma 3% Other (Tourism/Culture, Mining, Real Estate) 7% Manufacturing And Processing 7% Ag and Ag Related 8% Financial / Insurance 19% Forestry and Related 27% Fertilizer 29% Strong client base in diverse businesses

10. Direct Investments • Minds Eye Entertainment Ltd.. • Pangaea Systems Inc. • Premium Brands Inc. • Saskatchewan Valley Potato Corporation • SaskFerco Products Inc. • Solido Equity Debt Properties • Beauval • Big Sky Farms Inc. • Bioriginal • Centennial Food Partnership • Hypor • Meadow Lake Pulp Limited Partnership • Meadow Lake OSB Limited Partnership • HARO Financial Corporation • Kitsaki/Zelensky Sawmill • Canadian Western Bank • Great Western Brewing Co. • Various Our contribution is unique to each business

11. Partnering Through Fund-of-funds • Prairie Ventures Limited Partnership • Local fund currently $18.25 million – fundraising mode • Foragen Technologies Limited Partnership • National early stage Ag biotech – growing value & planning exits Western Life Sciences Ventures Fund Limited Partnership • Western early stage life sciences – growing value & planning exits • Primaxis Technology Ventures Incorporated • National early stage advanced technologies – growing value & exits • WTC/PCF Outsource Contracts • Small investments (< $3 million)- original book $20 m – now <$10 m • Primarily economic development driven investments • Mandate to maximize returns & liquidate as appropriate Complements private sector investment capacity

12. Overview Investment Saskatchewan Commercial Crown Capital for Investments Client-Focus

13. Available Capital • Annual allocation of $50 million for new investments • New capital generated from existing portfolio • $459 million assets pooled from previous programs • Each with different mandates (CIC III, SOCO, SEDCO) • Strong cash-flow • Mandate to be self-sustaining • No dependency on appropriation from shareholder • Except if additional capital required for large investment Existing portfolio throws off capital for new investments

14. 2004 Financials • Financials • $ 459 million portfolio reduced from $600 million • $ 19.3 net income ($7m budget) • $ 42 million dividend to shareholder (0 budget) • $ 125 million cash Strong portfolio performance

15. Historic Results • Since 1999 invested $93.7 million in 8 new projects • levered $284 million of private sector capital • Since 2000 committed $54 million to 4 funds • levered additional $157 million in private sector funds • In 2002 outsourced management of small portfolio • valued at approximately $23 million • Forecast Returns – weighted average 3% IRR • not commercial rates of return

16. Portfolio Diversification • Restricted geographically therefore diversification is achieved through: • all sectors (forestry, agribusiness, advanced technology, IT, environmental technology, resource extraction & energy) • alll stages (early stage, start-up, expansion, mbo’s, turnarounds, succession) • all financing instruments (equity, common & preferred, sub-debt, mezz etc.) Portfolio management through diversification

17. Risk / Return Continuum 35%+ 25%+ 20% 16-18% 10-15% Prime+ VC Private Equity Mezz Sub-Debt Stretch Sr. Debt Early Stage Later Stage Critical Factors: Stage of Investment & Industry Sector Risk profile drives return expectations

18. Overview Investment Saskatchewan Commercial Crown Capital for Investments Client Focus

19. Focus on the Client • Objective is to grow investee companies • Over 5-7 year average hold period • Active ownership contributes to growth of investee companies: • On boards and owners committees • With management teams in sharing expertise • External Board appointees chosen for skills/domain expertise • Strong network of strategic and joint venture partners • Work in the best interests of investee companies • In distress - workout for best return for shareholders Clients access resources which might otherwise be unavailable

20. Differentiators • Strong knowledge of local market and business environments • Experienced, professional management • Best-in-class governance framework • Policies & investment guidelines • Due diligence, monitoring and reporting protocols • Quarterly valuation reviews and annual re-valuation (CVCA/EVCA standards) • Patient partner with long-term view • Risk adjusted return expectations – no one size fits all • Commercial terms and flexible to “tailor-fit” (e.g. puts/calls, buy-backs, etc.) “Investment Saskatchewan will make decisions about future investment opportunities independent of the government” (Premier L. Calvert, September 2003)

21. Key Points to Remember • Commercial Crown corporation • Independent private sector board with delegated authority • Capital - $50 million annually for new investments • Active partnerships and connections with other sources of capital • Client Focused • Growth objective • Active ownership in the best interests of investee company Saskatchewan is business friendly