STANTON ASSET MANAGEMENT

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1 STANTON ASSET MANAGEMENT CORPORATE FIXED INCOME MARKET MONITOR Third Quarter 215

2 Canadian Corporate Bonds Third Quarter 215 Data as of September 3, 215 Market Data (Avg.) Size Performance Spread DuraIon Yield to 1 month 3 months 1 year Worst $ Billion % % % % bps Years % CANADIAN GOVERNMENT CANADIAN INVESTMENT GRADE CANADIAN HIGH YIELD CANADIAN BROAD MARKET 1, Annualized performance since January 21: 5.5% $16, $14, $12, $1, bps C $ Billion HISTORICAL SPREAD NEW ISSUANCE BY TERM $9. $6.8 Growth of $1, $8, $16. $13.3 $36. $45.3 Canadian Investment Grade Canadian High Yield Canadian Broad Market $12.1 $13.3 $9.7 $1.6 <2 year 2-4 year 5-7 year 1 year Long Concern over slower growth in China and pressure in the commodity complex pushed Canadian spreads wider in Q3. On the rate front, the weaker macro picture increased expecta^ons for a more dovish BoC, resul^ng in the Canadian 1- year declining to 1.43%. In this environment Government Bonds outperformed, returning 1.2%, followed by Investment Grade and High Yield, which returned -.17% and % respec^vely. Canadian investment grade spreads widened by 25 bps to 157 bps in Q3. Infrastructure, Regulated U^li^es and Retail outperformed, widening the least during the period. Conversely, BBB rated Energy Infrastructure, Oil & Gas and Pipelines widened by the largest margins at 39 bps, 44 bps and 46 bps respec^vely. Year- to- date new issuance is now approximately $92 billion, up nearly 14% year- over- year. Increased deal flow is largely from Financials, which includes insurance, banks, mortgage companies and auto and machine financing. In contrast, new issuance from non- financial corporates is down 7.5% year- over- year at $26.8 billion. Canadian Investment Grade bonds declined moderately in Q3, alongside risk assets, as fears concerning the global economy permeated markets. With spreads at their widest levels in over three years, we feel this presents an akrac^ve entry point for the asset class. Using modest assump^ons, achieving a total return of 3% to 5% over the next 12 months is reasonable Source: Bloomberg, BofA Merrill Lynch, JP Morgan, Credit Suisse, RBC Capital Markets, TD Securi^es. Data as of September 3, 215. The informa^on contained in this report has been compiled by Stanton from sources believed to be reliable. No representa^ons or warranty, express or implied, are made by Stanton or any other person as to its accuracy, completeness or correctness. All comments, opinions and es^mates contained in this report cons^tute Stanton s judgment as of the date of this report and are subject to change without no^ce and are provided in good faith but without legal responsibility. This report is not an offer to sell or a solicita^on of an offer to buy any securi^es. This material is prepared for general circula^on to Investment Professionals and does not provide regard to the par^cular circumstances or needs of any specific person who may read it. Stanton, nor any other person, accepts any liability whatsoever for any direct or consequen^al loss arising from any use of this report or the informa^on contained herein. This report may not be reproduced, distributed or published by any recipient hereof for any purpose. 2

3 Global High Yield Bonds Third Quarter 215 Data as of September 3, 215 Market Data (Avg.) Size Performance Spread DuraIon Yield to 1 month 3 months 1 year Worst $ Billion % % % % bps Years % GLOBAL HIGH YIELD 2, US HIGH YIELD 1, CANADA HIGH YIELD EUROPE HIGH YIELD EMERGING MARKETS HIGH YIELD Annualized performance since January 21: 7.6% $18, $16, $14, $12, $1, HIGH YIELD MUTUAL FUND FLOWS ANNUAL HIGH YIELD NEW ISSUANCE Growth of $ 1, $8, Source: Bloomberg, BofA Merrill Lynch, JP Morgan, Barclays, Credit Suisse. Data as of September 3, 215. Q3 was vola^le for global credit markets. Depressed commodity prices remained a headwind and concern over global growth persisted, culmina^ng in the Fed s decision to delay lil- off in September. Alterna^vely, the FOMC elected to remain cau^ous and con^nue to survey global stability. U.S. 1- year yields ended the quarter at 2.4%, down from 2.35% on June 3, while high yield suffered its worst quarter since Q3 211, returning - 4.9%. Spreads widened by 162 bps, ending the quarter at 662 bps, while energy con^nued to weigh on the market, with spreads widening by 386 bps to 198 bps. Aggregate spreads are currently at three year wides, while energy spreads have moved out to financial crisis levels. In this environment, new issuance was muted, with volumes totaling $21.1 billion in September. Year- to- date issuance now stands at $25.9 billion, down 12% year- over- year. Energy and Metals & Mining were the worst performing sectors during the quarter returning - 16.% and - 15.%, respec^vely. High yield flows were nega^ve for the quarter, as $6.8 billion flowed out of the asset class. With market vola^lity having pushed high yield spreads to thee year wides, we feel the asset class currently offers an asymmetric risk/return profile. Under assump^ons of modest macro improvements, the total return outlook appears akrac^ve. Should commodity prices stabilize, we feel high yield has the poten^al to return 8% - 1% over the next 12 months, with rela^vely limited downside. The informa^on contained in this report has been compiled by Stanton from sources believed to be reliable. No representa^ons or warranty, express or implied, are made by Stanton or any other person as to its accuracy, completeness or correctness. All comments, opinions and es^mates contained in this report cons^tute Stanton s judgment as of the date of this report and are subject to change without no^ce and are provided in good faith but without legal responsibility. This report is not an offer to sell or a solicita^on of an offer to buy any securi^es. This material is prepared for general circula^on to Investment Professionals and does not provide regard to the par^cular circumstances or needs of any specific person who may read it. Stanton, nor any other person, accepts any liability whatsoever for any direct or consequen^al loss arising from any use of this report or the informa^on contained herein. This report may not be reproduced, distributed or published by any recipient hereof for any purpose. 3

4 Third Quarter 215 Data as of September 3, 215 Market Data (Avg.) Size RaIng Yield DuraIon Spread VolaIlity (%) Performance (%) $ B % Years bps 1yr 3D 1yr 2yr FLOATING RATE SENIOR LOAN INDEX 934 B+/BB- 6.3 < FLOATING RATE NOTE INDEX 39 BB- 6.3 < SHORT DURATION HIGH YIELD BOND INDEX 491 BB Selected Index New Issues Size RaIng Yield DuraIon Spread Price Performance (%) EffecIve $ B % Years bps Since Issue Annualized performance since January 21: 5.3% LEVERAGED LOAN MUTUAL FUND FLOW INSTITUTIONAL LOAN ISSUANCE Source: Bloomberg, Bank of America Merrill Lynch, Barclays, Credit Suisse. Data as of September 3, 215 FloaIng Rate Senior Loans CHARTER COMMUNICATIONS BBB- /BB JARDEN CORP BBB- /BB CONSTELLATION BRANDS BB $16, $14, $12, $1, Growth of $1, $8, Global markets were vola^le in the third quarter of 215. Commodity prices remained a headwind while concern over global growth resulted in the U.S. Fed maintaining zero interest rate policy. In this environment the U.S. 1- year moved lower, ending the quarter at 2.4%. The market is now puong a 41% probability of the first hike coming in December and a 48% probability in January. While loans outperformed most risk markets in Q3, the asset class was not immune to macro vola^lity and declined 1.22%. Higher rated credits with robust balance sheets and likle exposure to commodi^es outperformed, as did names with strong domes^c sales. Conversely, commodity sectors such as Energy and Metals & Minerals underperformed. The average loan price is now $94.33 versus $96.72 on June 3, while the discount margin to three year takeout has widened to 581 bps from 524 bps. New issuance slowed to $59 billion on the vola^lity and usual summer lull. The year- to- date total is now $266 billion, well off the $49 billion pace this ^me last year. With loans now trading at 212 levels and paying a current yield of approximately 5%, we view the risk- adjusted return profile as akrac^ve. While vola^lity may persist in the short- term, return projec^ons of 6% - 8% over the next 12 months are not unreasonable. Moreover, given Energy exposure of less than 4% for loans, versus nearly 13% for high yield, loans remain rela^vely insulated from extended weakness in oil. Finally, we believe eventual lil off from the Fed should akract flows as investors seek to mi^gate the risk of higher rates. The informa^on contained in this report has been compiled by Stanton from sources believed to be reliable. No representa^ons or warranty, express or implied, are made by Stanton or any other person as to its accuracy, completeness or correctness. All comments, opinions and es^mates contained in this report cons^tute Stanton s judgment as of the date of this report and are subject to change without no^ce and are provided in good faith but without legal responsibility. This report is not an offer to sell or a solicita^on of an offer to buy any securi^es. This material is prepared for general circula^on to Investment Professionals and does not provide regard to the par^cular circumstances or needs of any specific person who may read it. Stanton, nor any other person, accepts any liability whatsoever for any direct or consequen^al loss arising from any use of this report or the informa^on contained herein. This report may not be reproduced, distributed or published by any recipient hereof for any purpose. 4

5 Third Quarter 215 Data as of September 3, 215 ASSET CLASS CHARACTERISTICS Credit asset classes are unique in that they provide investors with akrac^ve yield, coupled with reduced vola^lity and low correla^on to tradi^onal fixed income. Canadian investment grade corporate bonds, global short dura^on high yield bonds and floa^ng rate senior loans are a ~1.9 billion USD ins^tu^onal asset class with a long history of stable returns. 1 Since 29, these three asset classes have generated posi^ve returns on an annual basis, which is not the case for the tradi^onal fixed income asset class. As a result of these posi^ve features, ins^tu^onal investors seeking added yield and diversifica^on have increased their alloca^on to these asset classes. Canadian Corporate Bonds Global High Yield Bonds FloaIng Rate Senior Loans Average Credit RaIng A BB- B+/BB- Maturity 8-1 years 6-8 years 2-5 years Market Size $ Billion Approx. $4 Approx. 2,1 Approx. 1, # of Issues Approx. 85 Approx. 3,7 Approx. 1,65 INVESTMENT PROCESS Top- Down Analysis Corporate Fixed Income Strategies SecuriIes with Best PotenIal Risk- Adjusted Return Porholio ConstrucIon Porholio Monitoring The firm s investment process combines both top- down and bokom- up analysis. Our approach focuses on alloca^on decisions based on top- down assessment of macroeconomic condi^ons and asset class valua^on, and on fundamental bokom- up research and selec^on of securi^es in order to add value within defined levels of porpolio risk. INVESTMENT TEAM Bogom- Up Analysis Over 25 years of global investment experience, including on Wall Street in M&A, capital markets and private equity, and in Canada in managing porpolios invested in Canadian and global equity and debt securi^es. Connor O Brien, MBA President and CIO Previously with Lehman Brothers and Par- Four Investment Management in New York, a firm managing total assets of over $3 billion in non- investment grade debt. Adam Smalley, CPA, MBA Senior Porpolio Manager Fixed Income ABOUT STANTON Stanton Asset Management is an independent investment management firm that offers fixed income and equity investment strategies with over $8 million of assets under management. Stanton is registered with and regulated by the AMF, the OSC, and the Alberta Securi^es Commission. Stanton s team is comprised of over fourteen professionals responsible for investment and risk management, compliance, opera^ons, legal, client servicing and finance. The investment team brings extensive experience across asset classes in Canadian and global markets including investment grade bonds, high yield bonds, floa^ng rate debt, conver^ble bonds and equi^es. Stanton is the porpolio advisor of O'Leary Funds and also manages porpolios for private, family office, corporate and ins^tu^onal clients. Contact InformaIon Connor O Brien, cobrien@stantonasset.com T: (514) Rocio Gueto, rgueto@stantonasset.com T: (514) Sherbrooke Street West # 17, Montreal (QC), H3A 2R7 www. stantonasset.com 1. Source: The BofA Merrill Lynch, Credit Suisse Index Data: Floa^ng Rate Senior Loan Index : Credit Suisse Leveraged Loan Index; Floa^ng Rate Note Index : Barclays U.S. HY FRN Index. Short Dura^on High Yield Bonds : The BofA Merrill Lynch - 3 Year Dura^on BB- B Global Non- Financial High Yield Constrained Index 5