INTEGRITY SERVICE PERFORMANCE INDEPENDENCE
The Vertex Fund Arbitrage Strategies Tom Savage, CFA, MBA Portfolio Manager, Arbitrage and Special Situations 2
COMPANY PROFILE Funds: Vertex Fund Vertex Managed Value Portfolio Vertex Enhanced Income Fund Vertex Growth Fund Vertex Value Fund Founded in 1997 Independent Focused Team of 20 Active Management Assets Under Management $1.7 Billion 3
WHY MERGER ARBITRAGE? 7000 6000 5000 4000 3000 2000 1000 0 Value of $1000 invested January 1, 1993 to December, 2012 S&P500 TR Hennessee Merger Arbitrage Barclays US Aggregate Bond Index Summary Statistics Beta to S&P500 0.14 Hennessee Merger Arbitrage US Aggregate Bond Index S&P500 TR Annualized Return 9.0% 8.7% 6.3% Annual Standard Deviation 3.8% 15.0% 3.6% Percentage of "up" months 82% 65% 70% Largest "up" month 3.3% 10.9% 3.9% Largest "down" month -4.7% -16.8% -3.4% Largest Drawdown (%) 5.6% 50.9% 5.1% Annualized Sharpe Ratio 1.47 0.42 0.80 Source: Bloomberg, Hennessee Group LLC. Net of fees (no fees on S&P500 or US Bond index), dividends reinvested. 4
EXPLAINING ARBITRAGE Arbitrage involves the purchase of securities that have a contractual right to convert into another security or other form of consideration (cash) over a reasonably certain timeframe, coupled with an equivalent position in the offsetting security. A classic example of arbitrage and a core strategy of the Vertex Fund is merger arbitrage. Other examples of arbitrage strategies include convertible bond arbitrage, closed-end fund NAV arbitrage (where a redemption right exists), share class trading (where there is a known time frame for conversion), subscription receipts, yield-to-call on fixed-income securities, and others. When we discuss merger arbitrage, we are referring to investing in publicly announced, legallybinding merger situations (not rumours of takeout bids). 5
A NATURAL HEDGE AGAINST RISING INTEREST RATES Merger Arbitrage spreads on new deals increase with rising interest rates leading to higher potential returns Bond Investing rising interest rates lead to declining bond prices and mark-to-market losses 6
APPENDIX» Vertex Fund Multi-Strategy & Event Driven» Vertex Fund Performance» Family of Funds Performance» Vertex One Awards & Rankings 7
VERTEX FUND MULTI-STRATEGY & EVENT DRIVEN The portfolio has an event-driven focus, wherein catalysts are identified that will likely have an impact on a company's stock price or capital structure. Throughout an economic cycle, different strategies will provide more favourable risk/reward trade-offs, permitting opportunities for reallocating capital. Fundamental analysis is the cornerstone of the team's skill set, with the following investment strategies employed: Merger Arbitrage Capital Structure Arbitrage Distressed / High Yield Relative Value Short Sales (bankruptcy candidates) Longs (value-based) Options Takeover Candidates Special Situations 8
VERTEX FUND PERFORMANCE 16.57% SINCE INCEPTION $1,200,000 $1,000,000 $1,090,970 Performance of $100,000 Vertex Fund vs Indices Value (CAD$) $800,000 $600,000 $400,000 $200,000 $267,080 $160,530 $131,480 $- Vertex Fund TSX Total Return S&P 500 Total Return (CAD) Cdn Alternative Index** COMPOUND RETURNS 1 MTH YTD 1 YR* 3 YR* 5 YR* 10 YR* SINCE INCEPTION* Vertex Fund 1.40% 8.63% 13.38% 8.20% 8.50% 12.83% 16.57% S&P 500 TRI ($CAD) -0.39% 23.20% 27.01% 18.08% 7.17% 4.25% 3.08% S&P/TSX Composite TRI 1.55% 3.86% 9.27% 5.00% 1.31% 8.11% 5.73% *Annualized **Globe Alternative Strategies Peer Index Inception (Feb 6, 1998) to August 31, 2013. Class A Shares 9
VERTEX ONE FAMILY OF FUNDS Vertex Fund: Multi-strategy, event-driven fund Vertex Managed Value Portfolio: North American equity & fixed income Vertex Enhanced Income Fund: North American income Vertex Growth Fund: North American growth equity Vertex Value Fund: North American value equity Fund YTD 1 Year 3 Year* 5 Year* 10 Year* Inception* Inception Date AUM Vertex Fund 8.63% 13.38% 8.20% 8.50% 12.83% 16.57% Feb, 1998 $1.1 B Vertex Managed Value Portfolio Vertex Enhanced Income Fund 21.49% 37.44% 14.89% 11.83% 8.11% 8.96% Apr,1998 $200 M 6.89% 11.41% 8.09% - - 9.20% Sept,2009 $175 M Vertex Growth Fund 11.70% 19.70% 13.23% - - 12.70% Sept,2009 $63 M Vertex Value Fund 23.66% 50.88% 19.41% - - 15.86% Sept.2009 $72 M *Annualized Returns Net of fees as at August 31, 2013 10
VERTEX ONE AWARDS/RANKINGS 2002 2005-2006, 2012 2007, 2011 2008 2009, 2010, 2012 2010, 2012 Vertex Fund #3 on the Hot 100 Funds list Vertex Fund #2 ranked Non- US event driven manager, 3-year Return, 2005 and 2006 Top 100 Most Successful Hedge Funds of 2012 List Vertex Fund Top 50 World s best performing hedge funds list, 3-year return Vertex Managed Value Portfolio #1 ranked Canadian Balanced Manager +2% in 2008 Vertex Fund, Managed Value Portfolio 5-star Ranking Fundata FundGrade A C.I.A. Multi- Strategy Award, Bronze Enhanced Income Fund - #1 Return in its Category, 2010 and 2012 Growth Fund - #2 Return in its Category, 2010 - #3 Return in its Category, 2012 Value Fund - 2012 #1 Return in its Category 11
DISCLAIMER This statistical information is intended to provide you with information about the Vertex Fund. Advertised performance is based on Class A shares. Important information about the Fund is contained in the Offering Memorandum which should be read carefully before investing. You can obtain an offering memorandum from Vertex One Asset Management Inc. The Offering Memorandum for Vertex One Asset Management Inc. s Investment Funds does not constitute an offer or solicitation to anyone in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. The indicated rates of return are the historical annual compounded total returns for the period indicated, including changes in security value and the reinvestment of all distributions and do not take into account income taxes payable that would have reduced returns. The funds are not guaranteed; their values change frequently and past performance may not be repeated. 12