PURPOSE BEHAVIOURAL OPPORTUNITIES FUND TRADE EXAMPLES

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1 31-May-18 7-Jun Jun Jun Jun-18 5-Jul Jul Jul Jul-18 2-Aug-18 9-Aug Aug Aug Aug-18 6-Sep Sep Sep Sep-18 4-Oct Oct Oct Oct-18 1-Nov-18 Index Return Spread (%) QUICK FACTS ETF CLASS BHAV MGMT FEE 1.00% CLASS F RAM361 MGMT FEE 1.00% CLASS A RAM360 MGMT FEE 2.00% PERFORMANCE FEE 10%* SUBADVISOR: RICHARDSON GMP / CONNECTED WEALTH At Connected Wealth, Craig Basinger and his team manage upwards of $600 million, with a focus on long term wealth building strategies. The team consists of three portfolio managers and two analysts, headed by Mr. Basinger, who has worked in investment management since Their guiding principles are transparency, cost efficiency and connectedness. *On the increase in the NAV in a year when performance of the Fund exceeds the positive return of the benchmark OCTOBER 2018 This update is designed to showcase a select number of strategies we implement in Purpose Behavioural Opportunities Fund (Class A: RAM360 / Class F: RAM361 / ETF Class: BHAV). This includes how the strategy targets what we believe to be opportunities in the market caused by investors behavioural biases, as well as how we implement the strategy to limit our own behavioural biases. The following are recent examples traded in the Fund. Important note: This report is not for broad distribution, as it discusses existing trades we have on. These are not recommendations to buy or sell securities, nor is there any notification when we adjust stops or adjust these positions in the Fund. EMOTIONAL CASCADE On spikes in news, investors often overreact, losing sight of the long term. This is especially evident when information is plentiful and one-sided over a number of trading sessions. This overreaction to abundant and persistent news skews the risk/return trade-off creating an opportunity. This is a long and short strategy. Though the price change is usually sudden and sizable, the surge often erodes over time as the news flow dries up. There are a number of key factors that must be considered when implementing this strategy. As the market is emotional, often ignoring fundamentals, the biggest question is how long this opportunity will last. We have developed a number of tools that help measure when the emotional overreaction is beginning to lose momentum in the initial direction. In addition, we use strict stop-loss levels to help limit downside risk. Targeted Behavioural Bias Availability bias causes investors to focus more on recent or widely available information and lose sight of the longer-term picture and fundamentals. This becomes especially acute when the quantity of new information spikes due to some news or critical event. This cascading new information can cause an asset price to dramatically overreact, thus presenting an opportunity to be a contrarian. Emotional Cascade Unloved Oil We recently published a Market Ethos report that discussed the widening differentials between WTI and WCS in depth (WTI is priced out of Cushing Oklahoma while WCS priced out of Alberta). The spread between WTI and WCS was near record levels due to a number of contributing factors. Not saying this will resolve itself anytime soon, but the market participants are good at making profits from misallocations, helping alleviate extreme pricing differentials. We believe this is an extreme and that overtime the spread will revert back to the mean. The current differential is a clear market overreaction. To capitalize on any pending reversion, the Fund entered a pairs trade to be short U.S. E&P and long a Canadian equal weighted energy ETF, which is highly correlated to the Canadian E&P sector. To diversify away from single security unsystematic risk we chose to implement the trade using ETFs, namely the SPDR Oil & Gas ETF ZEO - XOP

2 31-Jul 5-Aug 10-Aug 15-Aug 20-Aug 25-Aug 30-Aug 4-Sep 9-Sep 14-Sep 19-Sep 24-Sep 29-Sep 4-Oct 9-Oct 14-Oct 19-Oct 24-Oct 29-Oct (XOP) and BMO Equal Weight Oil & Gas (ZEO). ZEO was the best available option in Canada to execute the idea (there is no pure Canadian E&P ETF). The trade was entered on October 18 th and this chart outlines the spread between the ETFs since the trade was initiated. EARNINGS OVERREACTION We believe the market often overreacts to earnings results in the short term. A positive or negative earnings surprise can often elicit a dramatic move in the share price and a spike in volume. We have been active with this strategy lately; the third-quarterearnings season created many opportunities. Targeted behavioural bias Availability bias Making a judgement about the likelihood of an event based on how easily an example, instance or case comes to mind. Recency bias We re inclined to use our recent experience as the baseline for what will happen in the future. Given the large amount of information that is released around earnings, surprises can create an emotionally charged environment that often causes behavioural biases to get the better of investors. Availability bias causes investors to overweight the impact of the most readily available news. Higher-quality companies that suffer a significant price drop following a disappointing earnings report tend to recover the loss, while lowerquality companies that enjoy a price jump on positive earnings don t tend to hold onto these gains for long. BHAV earnings overreaction strategy Quantitative model Highlights companies in Canada and the US that experienced a material price change following the release of earnings results. Largely a function of the company s historical volatility. Additional parameters We look at several additional factors that have historically indicated whether the stock price move is an overreaction or not. Some of these include the quality of the company, whether it is in an existing trend ahead of earnings. Portfolio risk analysis We look at how adding the trade could change the overall portfolio s allocation to each strategy, sector exposure, geographic exposure, etc. This is also incorporated into sizing the positions. As noted in our strategy overview, lower-quality companies tend to experience a price jump on decent earnings; however, they typically don t tend to hold onto these gains. These are prime short-selling opportunities. Earnings overreaction: A few SHORT examples. NOTE the FUND covered ALL short positions (besides pairs trade) on October 25 th ) On August 21 st Toll Brothers reported an earnings beat. The stock jumped 13%. Toll Brothers had been in a well established downtrend since January. Rising rates have put tremendous pressure on homebuilders. The Fund initiated a short position, selling at $ Immediately the trade started working, with the selling pressure only intensifying during the October correction. The Fund covered the short at $30.07 on October 25 th, benefitting from a -22% decline in just over two months. $41 $39 $37 $35 $33 $31 $29 $27 Initial Sell Tough time for Toll Brothers Short Earnings Overreaction period Coverd Short On August 24 th Autodesk reported better than expected earnings. The stock jumped 15%, breaking out of a narrow six-month trading range. Typically with these types of gaps a retest of the breakout level can be expected. A short position was entered, selling at $ Though prices briefly rose above this level the following day, the ensuing two months saw the full jump on earnings fully retraced, and then some. The Fund covered the short position on October 25 th at a cost of $ Locking in a 18% gain in just two months.

3 31-Aug Sep Sep Sep Sep Sep Sep Oct Oct Oct Aug 20-Aug 25-Aug 30-Aug 4-Sep 9-Sep 14-Sep 19-Sep 24-Sep 29-Sep 4-Oct 9-Oct 14-Oct 19-Oct 24-Oct 29-Oct $165 $160 $155 $150 Initial Sell $145 $140 $135 $130 Autodesk gives it all back Short Earnings Overreaction period long-only bias, and are more or less focused on the longer-term appreciation of markets. Betting on a decline brings about a sort of dissonance internally, as investors are afraid to bet against a market they want to go higher. Rationalizing the want of longterm appreciation and the belief of short-term overextension makes it difficult for investors sell, which can create irrational price levels. $125 $120 HERD HEDGE The Herd Hedge strategy is a tail risk protection strategy. Herd mentality is a behavioural bias that is hard-coded in our DNA; in essence, we tend to feel more comfortable being a part of the consensus. However, during periods of market extremes, the consensus is often wrong. When market sentiment is exacerbated in one direction and demonstrating irrational exuberance, we can take a contrarian position using options. By holding small positions in equity index options, we create a safety net within the portfolio. The put option strategy purchases out-of-the-money options a few months before expiration. We ll continue to hold these options, rolling before maturity as long as we feel the herd is acting irrationally. This is a type of portfolio insurance in case a correction or bear market surfaces in the weeks or months ahead. During periods of sudden market weakness, these out-of-the-money options, coupled with the spike in volatility, can undergo rapid price appreciation. In doing so, the seemingly small options positions grow into a material size of the fund. It s the ability to have a positive payoff in bad times that allows strategies like the Herd Hedge to justify the performance drag of rolling the options during good times. Targeted Behavioural Bias Coverd Short Cognitive Dissonance is the mental stress we experience when we re holding two independent and conflicting states of mind. Most investors have a Herd Hedge trade: SPX put option It was the middle of September, and the S&P 500 was trading just a few points off of it s all-time high. Volatility was low, with the VIX trading around 12. The herd was clearly overly optimistic, especially considering the historic volatility of October. The Fund held some deep out of the money 2600 SPX puts that had fallen to an almost insignificant weighting. The Fund bought SPX 10/19/2018 put options with a strike of 2700 at a cost of $4.90. These were pretty deep out of the money considering the index was trading above 2900 at the time. $35 $30 $20 $15 $10 $5 $0 Herd Hedge - SPX 10/19/18 P2700 Initiated long position at $4.90 Sold another 1/3 at $26 Sold 1/3 at $11.50 The trade was well-timed, as the ensuing market correction quickly followed. Less than two weeks after initiating this Herd Hedge, the market began to roll over, coupled with the ensuing spike of volatility. On October 11 th the VIX spiked to over 25, fear had taken over. At that point, we decided to lock in some gains by selling one-third of the position at a price of $ Later in the afternoon we sold more at $26. The rest of the position remained in the Fund as further protection to potential future market weakness. Unfortunately, what followed was a

4 31-Aug Sep Sep Sep Oct Oct Oct Oct Oct-18 rebound week with the next leg lower occurring after expiration. The hedge performed as desired, partially protecting to the downside during a market correction. Equally important, using a systematic approach to realize the profits on some of the options helps the Fund avoid giving back the gains as the market recovers and volatility levels normalize. the Funds shorts covered, and a call in the Herd Hedge strategy the Fund is positioned for what we expect to be recovery off of the October market lows. Herd Hedge - Going long QQQ C170 $20 Herd Hedge trade: QQQ Call option $15 The Herd Hedge Strategy is meant to take advantage of market extremes, in either direction. When emotions are highest, the consensus is often wrong, irrational exuberance can be quickly replaced by irrational fear. It s this fear that grips the market and depresses stock prices. On October 26 th, the Fund bought call options on the QQQ ETF, which tracks the NASDAQ 100. A January 170 strike was chosen, which at the time was just slightly out of the money. For reference, the ETF had traded at a high of $187 at the beginning of the month. With $10 $5 $0 Initiated long position at $6.52

5 All charts sourced by Bloomberg. *The Fund will pay the Manager an incentive fee, annually based on performance as at December 31, subject to all applicable taxes, equal to a percentage of the daily net asset value of the applicable Securities of the Fund. Such percentage will be equal to 10% of the difference by which the return in the net asset value of the Fund from January 1 to December 31 exceeds the percentage return of the Fund s benchmark, which shall be a 50/50 S&P/TSX Composite Index/S&P 500 Index (in Canadian dollars) blended index. The incentive fee will be accrued on a daily basis and payable at the end of the year based on performance against the benchmark as at December 31 and subject to the following: if the performance of a series or class, as applicable, of the Fund in any year, at December 31, is less than the performance of the benchmark (the Deficiency ), then no incentive fee will be payable in any subsequent year until the performance of the applicable series or class of the Fund, on a cumulative basis calculated from the first of such subsequent years has exceeded the amount of the Deficiency. The Manager may share this incentive fee with a Portfolio Advisor of a Fund in accordance with the agreement between these parties. Redwood Asset Management Inc. amalgamated with its parent company, Purpose Investments Inc., on March 31, Purpose Investments is a different kind of investment company, with an unrelenting focus on customercentric innovation, and offers a range of managed and quantitative investment products designed to meet a specific goal in building resilient portfolios for clients. The content of this document is for informational purposes only, and is not being provided in the context of an offering of any securities described herein, nor is it a recommendation or solicitation to buy, hold or sell any security. The information is not investment advice, nor is it tailored to the needs or circumstances of any investor. Information contained in this document is not, and under no circumstances is it to be construed as, an offering memorandum, prospectus, advertisement or public offering of securities. No securities commission or similar regulatory authority has reviewed this document and any representation to the contrary is an offence. Information contained in this document is believed to be accurate and reliable, however, we cannot guarantee that it is complete or current at all times. The information provided is subject to change without notice. Commissions, trailing commissions, management fees and expenses all may be associated with investment funds. Please read the prospectus before investing. If the securities are purchased or sold on a stock exchange, you may pay more or receive less than the current net asset value. Certain statements in this document are forward-looking. Forward-looking statements ( FLS ) are statements that are predictive in nature, depend on or refer to future events or conditions, or that include words such as may, will, should, could, expect, anticipate, intend, plan, believe, estimate or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained in this document are based upon what Purpose Investments and the portfolio manager believe to be reasonable assumptions, Purpose Investments and the portfolio manager cannot assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on the FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed, that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.