Fixed Income: The Game Has Changed. Marc-André Gaudreau & the Dynamic Fixed Income Credit Team

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2 Fixed Income: The Game Has Changed Marc-André Gaudreau & the Dynamic Fixed Income Credit Team

3 Yields Near Historic Lows Traditional approach to fixed income will be challenged HISTORICAL YIELDS: 10-YR US TREASURY ( ) Sources: Bloomberg, Bank of Canada. As of May 20, Estimated future yield based upon the average projection at year-end 2014 by: BMO, BNS, CM, NBF, TD, RBC. This is hypothetical scenario is for illustrative purposes only and is not intended to imply future results or performance. Actual results will be different. Assumes parallel move in interest rates and does not factor for convexity and other variables which may impact changes in the price of a particular bond or index.

4 Yields Near Historic Lows Traditional approach to fixed income will be challenged HISTORICAL YIELDS: 10-YR US TREASURY ( ) 3.4% 2.5% = 6.3% capital loss for traditional bond mandate Sources: Bloomberg, Bank of Canada. As of May 20, Estimated future yield based upon the average projection at year-end 2014 by: BMO, BNS, CM, NBF, TD, RBC. This is hypothetical scenario is for illustrative purposes only and is not intended to imply future results or performance. Actual results will be different. Assumes parallel move in interest rates and does not factor for convexity and other variables which may impact changes in the price of a particular bond or index.

5 Yield (%) The New Reality More risk; less reward HISTORICAL DURATION VS. YIELD Duration (years) Sources: PC Bond Analytics

6 Dynamic Credit Absolute Return Fund An alternative approach to fixed income investing What is it? Very flexible mandate Invests in diversified long and short credit positions within North American What does it do? Maximize absolute returns Mitigate interest rate risk and overall volatility How does it do it?

7 Game Plan to Win the Cup 1. Leveraged Investment Grade Credit Strategy 2. Long/Short Single Name Credits 3. Our Solution

8 Leveraged Investment Grade Credit Strategy Overview Modest use of leverage on high quality corporate bonds Active approach Low interest rate risk

9 Leveraged Investment Grade Hypothetical Scenarios - Interest rate changes Interest rates rise 100bps Interest rates fall 50bps 6% 4% 2% 0% -2% 3.10% 5.36% 10% 8% 6% 4% 5.95% 6.31% 8.62% 6.15% -4% -6% -4.24% DEX Universe -3.43% Corporate Bonds High Yield Bonds *Leveraged IG Hypothetical 2% 0% DEX Universe Corporate Bonds High Yield Bonds *Leveraged IG Hypothetical Source: Datastream, 1832 Asset Management L.P. This is hypothetical scenario assumes a static approach and is for illustrative purposes only and is not intended to imply future results or performance. Actual results will be different. Duration, maturity range and yield information sourced from DEX Universe, DEX Corporate, BoA Merrill Lunch US Corporate and Barclays VLI CAD Hedged indices from as at December 31, Assumes parallel move in interest rates and does not factor for convexity and other variables which may impact changes in the price of a particular bond or index.. *Dynamic Credit Absolute Return Fund assumptions: credit roll down = 10 bps / credit duration = (0bps rate change example: * 0.1 = YTM = 5.89). **Spread change assumptions: DEX Universe +20 bps / -10 bps, BoA ML US Corporate +50 bps / -25 bps, Barclays High Yield +200 bps / -75 bps.

10 Leveraged Investment Grade Hypothetical Strong downside protection 1-year rolling returns ( ): Assumes NO active management Average Annual Return 8.0% 8.1% 6.6% 5.7% Maximum Loss -47.5% -33.2% -14.8% -11.6% Yield to Worst 1.9% 5.1% 3.1% 4.8% Source: Datastream, 1832 Asset Management L.P. Chart from Jan 1992-Feb Returns/Drawdown from Jan 1998 Feb This is hypothetical scenario is for illustrative purposes only and is not intended to imply future results or performance. Actual results will be different. Hypothetical constructed from: (2/3 DEX Short Term Corp + 1/3 DEX Mid Term Corp - 2/3 DEX Short Term Corp - 1/3 DEX Mid Term Corp) x 2 + DEX 91-Day T-Bills. BOFA ML High Yield Cash Pay Index (High Yield), BOFA ML US Corp Master Index (Corporate Bonds), S&P 500 Index (US Equities).

11 Dynamic Credit Absolute Return Fund Ability to short and make money during the entire business cycle ACTUAL VS. IMPLIED DEFAULT RATES Source: Datastream, US Federal Reserve, Moody s. As of March 31, 2014.

12 Payoff Payoff Dynamic Credit Absolute Return Fund Short pay-off: equities vs. fixed income SHORT EQUITY POSITION SHORT BOND POSITION Downside unlimited Downside limited Source: 1832 Asset Management L.P. Equity price Bond price

13 Heinz Stock Long/Short Credit Opportunities HEINZ STOCK VS. HEINZ 2039 BONDS Stock + 20% Bond - 22% Heinz Bond Source: Bloomberg

14 Long/Short Credit Opportunities QUEBECOR MEDIA BONDS CURRENCY COUPON MATURITY SPREAD Quebecor Media $USD 5.75% 1/15/ bps Quebecor Media $CAD 6.63% 1/15/ bps ACTION SELL BUY The 47 bps difference in spread is worth $3! Source: Bloomberg as of May 9, 2014

15 Long/Short Credit Opportunities Credit Arbitrage YELLOW MEDIA COUPON PRICE MATURITY 1 X Convertible Bond 8% $120 11/30/ Shares 0% $ NA ACTION BUY SELL SHORT You make money if Yellow Media defaults again but you get paid until you wait! Source: Bloomberg as of May 9, 2014

16 Dynamic Credit Absolute Return Fund Expected sources of alpha and alternative beta Source of Alpha and Alternative Beta Leveraged Investment Grade Bonds Expected % of Return Bearish Neutral Bullish 10% 60% 50% Long/Short Single-Name Credits 40% 25% 30% Arbitrage Opportunities 50% 15% 20% Total 100% 100% 100% CURRENT OUTLOOK

17 The Credit Team Extensive experience in managing both long and short mandates

18 Dynamic Credit Absolute Return Fund The Competition LIQUIDITY REDEMPTION NOTIFICATION MANAGEMENT FEE SERIES A SERIES F PERFORMANCE FEE HURDLE RATE Dynamic Daily None 1.85% 0.85% 20% T-bill +1% (5% cap) Competitor #1 Weekly Monthly 1.75% 1.00% 15% NA Competitor #2 Monthly 45 days 2.00% 1.50% 15% NA Competitor #3 Monthly 45 days 1.50% NA 15% NA Source: All data sourced off each companies respective website and O.M. as of January 31, 2014.

19 Dynamic Credit Spectrum Fund Growth of $100,000 since inception* 2013 YTD 2014 Dynamic Credit Spectrum Fund *Best Performing Traditional CDN Fixed Income Fund in Difference Source: 1832 Asset Management L.P., PALTrak, Morningstar Direct. As of April 30, Returns are Series A (NET of fees). *Represented by Canso Corporate Bond Fund (Series A). Top ranked fund for 2013 within the CDN Fixed Income category. **Inception date of December 31, Name change as of September Formerly Dynamic High Yield Credit Fund.

20 Dynamic Preferred Yield Class #1 since inception 1 Mth 3 Mth 6 Mth 1 Yr Inception* Dynamic Preferred Yield Class Quartile NA S&P/TSX Preferred Share TR Index NA Outperformance vs. Index NA Source: 1832 Asset Management L.P., Morningstar Direct. As of April 30, DPYC inception: April 10, Returns are NET of fees.

21 Dynamic Credit Absolute Return Fund The Stanley Cup Focused on credit-driven returns, providing reduced sensitivity to interest rate movements Focused on liquid securities and high transparency Experienced management team Potential for equity-like returns with less volatility

22 Coaches Corner YOU CAN ALWAYS GET SOMEONE TO DO YOUR THINKING FOR YOU. - GORDIE HOWE

23 Important information Commissions, trailing commissions, management fees and expenses all may be associated with investments in mutual funds or hedge funds. Please read the prospectus or offering memorandum before investing. The indicated rates of return are the historical annual compounded total returns including changes in units value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds and hedge funds are not guaranteed, their values change frequently and past performance may not be repeated. Views expressed regarding a particular company, security, industry or market sector are the views of that individual only, and do not necessarily represent the views of 1832 Asset Management L.P. These views should not be considered as an indication of trading intent of the mutual fund, nor are they a recommendation to buy or sell, nor should they be relied upon as investment advice. This document is for Advisor Use Only and is not to be distributed or reproduced without the consent of 1832 Asset Management L.P. Dynamic Funds is a registered trademark of its owner, used under license, and a division of 1832 Asset Management L.P.

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