STRATEGY PROFILE INCEPTION: September 2012 1 BENCHMARK: MSCI World Total Return Index STRATEGY ASSETS: US$ 365 million LEAD PORTFOLIO MANAGER: Paul Musson, CFA STRATEGY OVERVIEW We seek to provide long-term capital growth by investing in high quality, larger capitalization companies from anywhere in the world with a focus on maximizing risk-adjusted returns We seek to create a portfolio with the following attributes: Low volatility relative to benchmark that seeks to achieve superior risk/return attributes Low correlation to benchmark providing improved diversification High conviction portfolio with higher concentration of holdings APPROACH Labor intensive, bottom-up investment approach focused on identifying high quality businesses around the world Intensive fundamental analysis of the company s competitive position, management strengths, expected profitability and financial position Once high quality companies are identified, proprietary valuation models determine appropriate entry prices for positions Portfolio will often not resemble the composition of its benchmark and due to its strict high quality criteria will have an emphasis on developed markets Target 25-45 securities from equity markets around the globe and typically with market capitalizations above US$3 billion Constrained vehicle seeks to be fully invested. Maximum 10% cash weight INVESTMENT PROCESS Global Equity Universe Initial Filters 3000 Stocks Screening 900 Stocks Fundamental Analysis 200 Stocks Liquidity requirements: average daily trading value of US$ 30 million Free Cash Flow Net Debt/EBITDA > 50% of net earnings < 3 ROC > 10% ROE > 10% Labour intensive Analysts must be able to understand the company and its financials Uncover the quality of the business Rank names from A- to A+ Fundamental Analysis II Labour intensive Examine each name starting with A+ 25-45 Stocks Full models built for high quality names Target entry price determined Repeat for A and A- Investing involves risk. Please read the important disclosures under Disclaimer which contain more information about the significance and the limitations of the information on this page. 1 Mackenzie Investments (the Firm ) has been managing Global Large Cap Quality Growth Constrained assets since September 2012. The Firm claims compliance with GIPS starting January 1, 2008 and has been independently verified for the period of January 1, 2008 to December 31, 2017. FOR INSTITUTIONAL INVESTORS ONLY. NOT FOR DISTRIBUTION TO RETAIL INVESTORS.
SECTOR ALLOCATION SECTOR PORTFOLIO BENCHMARK Consumer Staples 29.11% 8.66% Health Care 14.53% 13.36% Industrials 12.94% 10.93% Communication Serv. 9.29% 8.29% Consumer Discretionary 8.38% 10.44% Financials 7.97% 16.20% Information Technology 5.82% 14.93% Materials 4.25% 4.62% Energy 0.00% 5.94% Real Estate 0.00% 3.20% Utilities 0.00% 3.45% Cash & Equivalents 7.72% 0.00% 100.00% 100.00% GEOGRAPHIC ALLOCATION COUNTRY PORTFOLIO BENCHMARK United States 51.90% 61.73% United Kingdom 9.48% 5.92% Australia 7.96% 2.42% Japan 6.57% 8.60% Germany 4.56% 3.08% Sweden 3.17% 0.95% Canada 3.05% 3.34% Hong Kong 2.72% 1.36% France 1.51% 3.88% Switzerland 1.37% 3.02% Other 0.00% 5.71% Cash & Equivalents 7.72% 0.00% 100.00% 100.00% WEIGHTINGS RELATIVE TO BENCHMARK OVERWEIGHT COUNTRY SECTOR ACTIVE WEIGHT Henry Schein, Inc. United States Health Care +5.29% Omnicom Group Inc United States Comm. Services +4.81% Oracle Corporation United States Info. Tech. +4.73% Seven & I Holdings Co., Ltd. Japan Cons.Staples +4.53% Henkel AG & Co. KGaA Pref Germany Cons.Staples +4.47% UNDERWEIGHT COUNTRY SECTOR ACTIVE WEIGHT Apple Inc. United States Info. Tech. -2.13% Microsoft Corporation United States Info. Tech. -2.07% Amazon.com, Inc. United States Cons. Disc. -1.74% JPMorgan Chase & Co. United States Financials -0.92% Alphabet Inc. Class C United States Comm. Services -0.91% TOP TEN HOLDINGS (%) HOLDING COUNTRY SECTOR WEIGHT Henry Schein, Inc. United States Health Care 5.3% Oracle Corporation United States Info. Tech. 5.1% Procter & Gamble Company United States Cons.Staples 5.0% Omnicom Group Inc United States Comm. Services 4.9% Seven & I Holdings Co., Ltd. Japan Cons.Staples 4.6% Henkel AG & Co. KGaA Pref Germany Cons.Staples 4.6% PepsiCo, Inc. United States Cons.Staples 4.4% Johnson & Johnson United States Health Care 4.3% Amcor Ltd Australia Materials 4.2% H&M Hennes & Mauritz Sweden Cons. Disc. 3.2% AB Class B Total: 45.6% Cash & Equivalents 7.7% CHARACTERISTICS PORTFOLIO BENCHMARK Price/Earnings 16.6 14.9 Price/Book 3.1 2.1 Price/Sales 1.5 1.4 Debt/Equity 152.6 138.7 Net Debt/EBITDA 1.5 3.5 Return on Capital 12.3 11.9 Return on Equity 32.7 21.6 Dividend Yield 2.7 2.7 Turnover (1 year to December) 31.2 NA Median Market Cap (US$ millions) 38,399 9,270 Weighted Market Cap (US$ millions) 83,408 121,365 RISK PORTFOLIO BENCHMARK Standard Dev. (3-yr Trailing) 9.5 10.5 Alpha (3-yr Trailing) 0.9 N/A Beta (3-yr Trailing) 0.8 N/A Sharpe Ratio (3-yr Trailing) 0.5 0.5 Tracking Error (3-yr Trailing) 5.7 N/A Information Ratio (3-yr Trailing) -0.1 N/A Past performance does not guarantee or indicate future results. Mackenzie Portfolio Analytics Group is responsible for calculating the non-benchmark information shown above. That information, which does not constitute formal investment guidelines/ restrictions, is subject to change from time to time and over time.
COMPOSITE PERFORMANCE (US$) COMPOUND ANNUAL RETURNS (%) 15 9 3 5.1 4.1 5.7 6.3 5.3 6.3 4.7 3.7 4.5 4.5 3.6 4.6 7.6 6.5 8.0-3 -9-15 -7.5-7.7-13.4 3 Months -1.4-1.9-3.4-4.3-9.1-8.7 6 Months 1 Year 2 Years 3 Years 4 Years 5 Years Since Inception* CALENDAR YEAR RETURNS (%) 30 21 12 3-6 -3.4-15 14.2-4.3-8.7 2018 13.2 2017 22.4 8.9 7.9 2016 7.5 0.1-0.8 2015-0.9 3.8 2.8 2014 4.9 23.4 22.3 2013 26.7 Mackenzie Global Large Cap Quality Growth Constrained (Gross) Global Large Cap Quality Growth Constrained Net (Net) MSCI World TR Index CONTRIBUTORS TOP 5 CONTRIBUTORS COUNTRY SECTOR AVG. ACTIVE WEIGHT CONTRIBUTION TO Q4 RETURNS Omnicom Group Inc United States Comm. Services 4.66% 0.97% Procter & Gamble Company United States Cons. Staples 3.96% 0.90% Seven & I Holdings Co., Ltd. Japan Cons. Staples 4.30% 0.51% PepsiCo, Inc. United States Cons. Staples 3.85% 0.48% Apple Inc. United States Info. Tech. -2.47% 0.47% DETRACTORS TOP 5 DETRACTORS COUNTRY SECTOR AVG. ACTIVE WEIGHT CONTRIBUTION TO Q4 RETURNS W.W. Grainger, Inc. United States Industrials 2.99% -0.52% H&M Hennes & Mauritz AB Class B Sweden Cons. Disc. 3.85% -0.27% Samsonite International S.A. Hong Kong Cons. Disc. 1.25% -0.16% Verizon Communications Inc. United States Comm. Services -0.61% -0.11% Merck & Co., Inc. United States Health Care -0.52% -0.11% *Since Composite Inception on October 1, 2012 Past performance does not guarantee or indicate future results. Mackenzie Portfolio Analytics Group is responsible for calculating the non-benchmark information shown above. That information, which does not constitute formal investment guidelines/ restrictions, is subject to change from time to time and over time.
CONTRIBUTORS TO PERFORMANCE From a sector perspective, an overweight exposure and stock selection in Consumer Staples, as well as stock selection in Communication Services, contributed positively to relative performance. An underweight exposure and stock selection in Information Technology and lack of exposure to the worst performing Energy sector also contributed. At a regional level, stock selection in the United States and Japan contributed positively to relative performance. Cash weighting in the portfolio contributed positively to relative performance with the benchmark down significantly during the period. The largest active contributors were: Omnicom, Procter & Gamble, PepsiCo, and Seven & I. PepsiCo, a global consumer products company boasting some of the world s best-known brands: Pepsi, Frito Lay, Tropicana, Quaker and Gatorade. Recent business performance has improved for Pepsi driven by an improvement in the North American Beverage unit which is suffering from weaker volume growth relative to Coke following Coke s bottler refranchising efforts which coincided with a lot of marketing and promotional activity. Pepsi has responded and performance has improved while at the same time regions outside the U.S. are doing well as is their Frito Lay business. We also believe Pepsi along with other less economically sensitive stocks were weak earlier in the year when economic growth expectations were high and the impact on valuations of higher rates were deemed to be relatively negative for these types of companies. As market concerns over growth have increased it looks as though more defensive stocks have generally done better including Pepsi. DETRACTORS FROM PERFORMANCE From a sector perspective, stock selection in Industrials detracted slightly from relative performance. At a regional level, stock selection in Hong Kong and Sweden detracted from relative performance. The largest detractors included: W.W. Grainger, H&M, Samsonite and CK Hutchison. Samsonite s Q3 results were weaker compared to recent trends due to challenged consumer sentiment in Asia and North America. Our long-term view of the business has not changed and we view the current valuation as attractive. CK Hutchison Holdings (CKHH) share price has been hit due to broad market declines, and also due to negative sentiment related to weakness in the British Pound and concern about the pace of improvement in its European telecom segment. We believe CKHH s underlying business offers good relative stability in a turbulent economic environment, and view the current valuation as very attractive. MARKET OUTLOOK The team has a long history of careful investing. The team tries to be careful about the businesses they buy and the prices they pay, and at times hold cash when prices seem excessive across the board. Sometimes, as in 2017, being careful in these ways proves detrimental to short-term returns. In welcome contrast, it paid to be careful in 2018, particularly in the fourth quarter. The team welcomes the recent market volatility, as they believe this may further offer opportunities to own great businesses at attractive prices.
DISCLAIMER Issued by Mackenzie Financial Corporation ( Mackenzie Investments ). For Institutional Use Only. This material does not constitute an offer to sell, or a solicitation of an offer to buy, any type of securities. The contents of this document are provided for illustrative and marketing purposes and do not constitute specific advice. Certain information contained in this document is obtained from third parties. Mackenzie Investments believes such information to be accurate and reliable as at the date hereof, however does not guarantee that it is accurate or complete or current at all times. The information provided is subject to change without notice and Mackenzie Investments cannot be held liable for any loss arising from any use of or reliance on the information contained in this document. No portion of this communication may be reproduced or redistributed without the express permission of Mackenzie Investments. There can be no assurance any account will achieve its objectives or avoid incurring substantial losses. Performance may be volatile and may vary materially on a monthly, quarterly or annual basis, and over the course of a market cycle. This strategy is not intended as a complete investment program and is subject to numerous risks. Further information on those risks can be requested from Mackenzie. Views expressed regarding a security, industry or market sector are the views of only that speaker/author as of the time expressed and do not necessarily represent the views of Mackenzie Investments or its affiliates. Any such views are subject to change at any time based upon markets and other conditions and Mackenzie Investments and its affiliates disclaim any responsibility to update such views. These views are not a recommendation to buy or sell and may not be relied on as investment advice and, because investment decisions are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any client. Speculation or stated beliefs about future events, such as market and economic conditions, company or security performance, upcoming product offerings or other projections are forward-looking statements. These forward-looking statements represent the beliefs of the speaker/ author and do not necessarily represent the views of Mackenzie Investments or its affiliates. Forward-looking statements are inherently subject to, among other things, risks, uncertainties and assumptions which could cause actual events, results, performance or prospects to differ materially from those expressed in, or implied by, these forward-looking statements. Past performance does not guarantee or indicate future results. Information under Composite and Benchmark Performance (USD) reflects the performance of the Mackenzie Global Large Cap Quality Growth Constrained Composite, and does not necessarily reflect the performance that any particular account investing in the same or similar securities may have had during the period. The performance of other accounts is likely to differ from the performance shown for a variety of reasons, including, but not limited to: differences in market conditions, portfolio turnover and in the number, types, availability and diversity of securities that can be purchased; economies of scale, regulations and other factors applicable to the management of large separate accounts and funds; client-imposed investment restrictions; the timing of client investments and withdrawals; the deduction of taxes; tax considerations; and other factors. Information regarding portfolio characteristics relates to a representative account within the composite. Gross and net returns do not include the deduction of custody fees. The returns assume the reinvestment of dividends, interest, and realized and unrealized capital gains and losses. Gross performance results also do not reflect the deduction of management fees and other fees and expenses. Net performance results reflect the deduction of the maximum standard fee of 0.95% charged to institutional clients without considering breakpoints, calculated daily and invoiced quarterly, as well as the transaction costs and other fees and expenses, including certain taxes. Index returns do not reflect transaction costs or the deduction of other fees and expenses and it is not possible to invest directly in an index. COMPLIANCE STATEMENT Mackenzie Investments claims compliance with the Global Investment Performance Standards (GIPS ). COMPOSITE DESCRIPTION The Global Large Cap Quality Growth Constrained Composite seeks to provide long-term capital growth by investing in high quality, larger capitalization companies from anywhere in the world with a focus on maximizing risk-adjusted returns. This strategy differs from the Global Large Cap Quality Growth strategy in that cash weights will generally be limited to less than 10%. The composite was created on June 30, 2014. BENCHMARK DESCRIPTION The benchmark is the MSCI World Total Return Index, net of withholding taxes. The MSCI World Index is a free float adjusted, market capitalization weighted index that is designed to measure the equity market performance of developed markets. It consists of 23 developed market country indices. REPORTING CURRENCY Valuations and composite performance are reported in U.S. dollars. The composite includes Canadian dollar portfolios that have been converted to U.S. dollars. Returns were converted at the end of each month based on the 4:00 PM spot rate on the last business day of the month as reported by StatPro to our system vendor CGI StarSource. Mackenzie Financial Corporation 2019. All rights reserved. 231041 2/19 INVESTMENTS 180 Queen Street West, Toronto, Ontario M5V 3K1 T 416 967-2380 F 416 922-3435 E cdeveau@mackenzieinvestments.com mackenzieinvestments.com