Kingsway Reinsurance Portfolio Returns

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Table of Contents

• I Profile Biographies
• II Small Cap Equity Management
• III High Yield Bond Management

For more detailed information on Deans Knight
visit our website at www.deansknight.com
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Deans Knight Capital Management
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The Team
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Deans Knight Investment Strategy

• Opportunity
• Markets are not perfect mispricing exists
  causing the securities of certain companies to be
  overvalued and undervalued
• Mispricing can be taken advantage of through
  buying the bond or equity securities of
  individual companies, not an index
• Where are the most opportunities?
• Small Capitalization Equities
• Corporate Bonds
• Canadian Markets

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Small Cap Equities

• Portfolio Characteristics
• Average market cap of companies purchased 200 -
  500 million
• Concentrated Portfolios
• Low Portfolio turnover

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Small Cap Equities

• Decision Making Process
• Step 1 A potential investment is identified by
  one of the following
• direct approach from company
• a referral by an outside research analyst
• newspapers or magazine articles
• referral by an existing company we have invested
  in
• Step 2 An in house analyst(s) begins screening
  process by reviewing all available publications
  and third party research if available.

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Small Cap Equities

• Step 3 Characteristics of the company and the
  industry are compared to our qualitative
  criteria which includes
• Distinct competitive advantage(s)
• Hidden assets or unrealized values
• Natural barriers to entry
• Broad identifiable trends
• Proven management
• Financially committed management teams
• Strong and independent directors
• Democratic share structure

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Small Cap Equities

• Step 4 The financial state of the company is
  examined and the price is compared against our
  quantitative benchmarks.
• The most important decision an investor makes is
  the price to pay for a company.
• The lower the price, the higher the return.

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Small Cap Equities

• Step 5 The investment merits are discussed
  amongst the analysts and portfolio managers.
• Step 6 A relationship is established with the
  CEO of the business.
• Step 7 A final decision is made by the
  portfolio manager including size of purchase.
• Step 8 Purchase initiated by the portfolio
  manager, and then processed by the administration
  team at Deans Knight.
• Step 9 Purchase process is monitored by the
  portfolio manager until desired position is
  achieved.
• Step 10 Ongoing dialogue with company to monitor
  progress and track valuation.
• Sell Discipline
• sell if the business becomes overvalued, or the
  business is adversely affected and can not be
  corrected.

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Equity Short-term Long-term Value Added
The Deans Knight Equity Growth Fund Ten-Year
Return Ranked 1st among Small Cap Managers and
3rd among all managers in the API Asset
Performance Inc. Universe as of March 31, 2004.
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Deans Knight Equity Portfolio Returns
Annualized Rates of Return As of March 31, 2004
Annual Returns
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Deans Knight Equity Strategy vs. Global Benchmarks
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Small Caps Have Outperformed by 70 over Long-Term
Bank of Montreal - Nesbitt Burns
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Return Diversification Benefits
Since DKEquity Inception March 93 to December 03
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High Yield Bond Philosophy
Portfolio yield is the primary determinant of
long-term returns in bond portfolios Deans
Knight is a recognized leader in the management
of corporate bonds in Canada. We invest
exclusively in corporate bonds in order to
maximize income returns. We believe that bond
yield (i.e. coupon) is the primary determinant of
long-term bond returns. By focusing exclusively
on corporate bonds we earn much higher yields
than those available from Government bonds. Our
independent internal research process is targeted
at identifying the best quality credits
generating the highest yield. We maintain a
diversified portfolio to reduce specific company
and industry exposure to acceptable levels. As a
result, our portfolio of higher yielding
corporate bonds provides higher returns than
those available from Government bonds.
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High Yield Bonds

• Portfolio Strategy
• We invest exclusively in corporate bonds and
  other credit linked securities to generate
  maximum income. We use proprietary in house
  credit research to identify the best possible
  corporate credits that generate the highest
  portfolio yield.
• 70 of companies listed in the SP/TSX Composite
  Index are high yield bond credits.
• Corporate bonds provide higher income returns
  than government bonds and are much less risky
  than shares.
• Portfolio diversification reduces risk.
• Fully hedged foreign currency exposure.
• Portfolio construction
• Income Corporate bonds yield 3-8 more than
  Canada Bonds
• Credit quality Securities rated BBB and lower,
  including non-rated (primarily single B)
• Diversification 35 to 50 security holdings

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Superior DKBond Returns from Portfolio Yield
SCM Universe Yield to Maturity
DKBond Portfolio Yield to Maturity
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Credit Spreads Near Historical Averages
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Portfolio Composition
Other includes non-rated securities, structured
notes and other.
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Deans Knight Value Added Return
Short-Term Returns as at Mar. 31, 2004
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High Yield Bond Returns
Annualized Rates of Return as of March 31, 2004
Annual Rates of Returns