Investor Presentation on the Regulatory Landscape November, 2014

2 Outline The Regulatory Landscape CRM2 Point of Sale What does this mean to you? Understanding Mutual Fund Fees The Value of Advice

3 THE REGULATORY LANDSCAPE

4 What is happening In the last few years, the Canadian Securities Regulators (CSA) have been reviewing, considering and weighing the benefits of implementing regulatory changes across the Canadian investment industry. These initiatives are designed to provide investors with greater transparency and disclosure to make it easier for Canadians to understand their investments. These initiatives are at different stages - some ready to be rolled out, some under development while others are still at the discussion phase and being contemplated for the future. Initiatives currently in the implementation stage: Client Relationship Model (CRM2) Point of Sale

5 CLIENT RELATIONSHIP MODEL (CRM2)

6 Client Relationship Model The Client Relationship Model (CRM) is a rule reform package designed by regulators to give you, the retail investor, tools to help you make better investment decisions. Rules are intended to strengthen the standards of care as it relates to the suitability of investments for investors. Phase I* required that new clients be given a Relationship Disclosure Information (RDI) package at account opening describing: the products and services offered; the nature of the account and the manner in which the account will operate; and description of process used to assess investment suitability * Implemented in March 2012

7 Client Relationship Model Phase II (CRM2) Under Phase 2 (CRM2), dealer firms will be required to provide you with specific information at specific times: Account opening (RDI) Pre-trade basis (charges related to transactions) Post-trade in the trade confirmation On a summary basis – both quarterly and annually account statements Requirements are being phased-in over the next three years

8 CRM Requirements Pre-Trade Disclosure: Prior to accepting a client’s instructions, your advisor must provide you with disclosure of any charges that may be associated with the purchase or sale of a security Charges related to transactions includes: Commissions Account charges Switch fees Transaction charges Referral fees Short-term trading Redemption fees Sales charges Applicable taxes Enhanced Trade Confirmations for debt securities showing the yield of the security and any sales charges or commissions New Benchmark Disclosure in the RDI explaining to you how to use benchmarks to assess the performance of your account and what your options are for benchmarking July 15, 2014 Charges related to transactions includes: CommissionsAccount chargesSwitch fees Transaction chargesReferral feesShort-term trading Redemption feesSales chargesApplicable taxes

9 December 31, 2015 Quarterly account statements must contain disclosure on: “Market value” for each security in the account Specified information about the “cost” of each position Identification of which securities are subject to a deferred sales charge (if any) Name of applicable investor protection fund Name of the party that holds or controls each security and a description of how it is held Can be combined in certain circumstances if client has both types of securities and consents CRM Requirements

10 Two new reports are being introduced: Annual Charges & Compensation Report Shows all charges paid by you to your dealer for the previous year Shows the compensation the dealer received through third-parties (such as mutual fund companies and other investment manufacturers) Annual Investment Performance Report Report provided on an annual basis and for each account Shows the value of your account at the start and end of the period Shows any withdrawals or contributions and change in market value Shows your personal rate of return on the account CRM Requirements July 15, 2016

11 CRM2 Charges & Compensation Report Discloses all charges paid directly by you Operating charges Administration fees Account closing fees Transfer fees Annual registered plan fees, etc. Transaction charges Front-end sales charges Switch or change fees Performance fees Short-term trading fees Compensation the dealer firm received from third parties (ex. mutual fund companies) Deferred sales charges Trailing commissions

12 CRM2 Investment Performance Report Sent every 12 months Separate report for each account unless client consents in writing to consolidating into one report Key terms and concepts Amount invested Total percentage return

13 CRM2 Investment Performance Report (cont’d) Change in value of your account Opening market value Closing market value Market value of deposits and withdrawals Change in market value Personal Rates of Return

14 POINT OF SALE

15 Point of Sale A brief history… Regulators have found in their research that investors: do not read the prospectus when considering a purchase have trouble finding and understanding the information in it find it difficult to compare information on different funds Solution? A new plain language document called the Fund Facts Fund Facts are 3-4 page summary documents written in plain language, intended to provide investors with key information about a mutual fund they are considering purchasing

16 Point of Sale 3 stages Stage 1 – Mutual fund companies had to produce and post a Fund Facts on their website for all Series of all funds offered for sale (July 2011) Stage 2 – Dealers/advisors must now deliver the Fund Facts instead of the prospectus within 2 days of a purchase of a mutual fund (June 2014) Stage 3* – Dealers/advisors must deliver the Fund Facts at or before the point of sale and in all cases before a trade is entered Expected to be implemented in 2015/2016 Can be delivered in person, by mail, by fax, or electronically (PDF or link) * Not yet implemented

17 What are Fund Facts? Fund name and Series Date Fund Facts filed Quick Facts: Series creation date Most recent MER Portfolio Manager Sub-advisor (if any) Distributions Minimum investment amounts Top 10 holdings Holdings by sector Historical Fund performance Average returns Year by year returns Risk level assessment

18 Fund Facts Guide

19 Where can you find them on Dynamic.ca?

20 What does this mean to you? The goal of CRM2 and the Point of Sale is to provide investors with better information before, during and at the point of sale to help them make informed decisions. More information means that you will have a better understanding of: the products you are investing in the services your advisor provides you with the costs of investing and the costs of advice Better understanding of investments in general and the performance of their investments. Make better investment decisions and be more prepared to meet your financial goals.

21 UNDERSTANDING MUTUAL FUND FEES

22 Cost of Ownership Acquisitio n Costs Ongoing Costs Dispositio n Costs Cost of Ownership

23 Acquisition & Disposition Costs Acquisition Costs Ongoing Costs Disposition Costs Cost of Ownership Front-end load sales charge Other account opening fees ex. account set-up fee, RRSP fee Redemption fees Other transaction fees ex. short-term trading fee, switch fee

24 Ongoing Costs Acquisitio n Costs Ongoing Costs Dispositio n Costs Cost of Ownership Embedded - MER that includes distribution costs ex. Transaction-based: MER with Trailing Commissions or Unbundled - MER + Service fee ex. Fee-based: MER + 1% on assets Other ongoing fees ex. Performance fee

25 Management Expense Ratio (MER) MANAGEMENT EXPENSE RATIO (MER) MER is an annual fee that is charged by a mutual fund to pay for expenses associated with running the fund. Management fee (includes Trailing Commission) + Operating expense + Tax MER = AGGREGATE FEES & EXPENSES PAYABLE PER YEAR X 100 AVERAGE NAV PER YEAR Example: A fund holds $10,000,000 in assets and incurs a total annual expenses of $200,000. The MER is calculated as: MER = _$200,000_ = 2% per year 10,000,000 Remember, the compounded annual return reported is after deducting MER. A published return of 8% with 2% MER, has a gross return of 10%. Commission-based

26 Management Expense Ratio (MER) Commission-based

27 Management Expense Ratio (MER) Operating Expenses * Bookkeeping and admin fees Trustee and custodial fees Registrar and transfer agency fees Regulatory and reporting expenses Accounting, audit and legal fees Independent review committee Management Expense Portfolio management Investment research Supervision of the fund Marketing Trailer Fee Fund compensates the dealer for ongoing services including: Professional financial advice provided to investors including portfolio construction, investment recommendation, monitoring/rebalancing Services including account opening, reporting, client communications Expenses associated with dealer services o Compliance o Advisor’s licensing fees o Suitability reviews o Client statement production o Insurance * Some mutual fund companies, including Dynamic Funds, have replaced the majority of their operating expenses with a Fixed Administration Fee. The result is increased predictability and transparency to investors. Taxes GST or HST where applicable Commission-based

28 Management Expense Ratio (MER) MANAGEMENT EXPENSE RATIO (MER) MER is an annual fee that is charged by a mutual fund to pay for expenses associated with running the fund. Management fee + Operating expense + Tax MER = AGGREGATE FEES & EXPENSES PAYABLE PER YEAR X 100 AVERAGE NAV PER YEAR Example: A fund holds $10,000,000 in assets and incurs a total annual expenses of $200,000. The MER is calculated as: MER = _$200,000_ = 2% per year 10,000,000 Remember, the compounded annual return reported is after deducting MER. A published return of 8% with 2% MER, has a gross return of 10%. Fee-based

29 Management Expense Ratio (MER) Fee-based

30 Management Expense Ratio (MER) Operating Expenses* Bookkeeping and admin fees Trustee and custodial fees Registrar and transfer agency fees Regulatory and reporting expenses Accounting, audit and legal fees Independent review committee Management Expense Portfolio management Investment research Supervision of the fund Marketing Taxes GST or HST where applicable Fee-based * Some mutual fund companies, including Dynamic Funds, have replaced the majority of their operating expenses with a Fixed Administration Fee. The result is increased predictability and transparency to investors.

31 THE VALUE OF ADVICE

32 Value of Advice BENEFITS COSTS > ADVICE ALLOWS INVESTORS A BETTER CHANCE OF… 1 Accumulating greater wealth through better savings behaviour 2 Building assets for a more comfortable retirement 3 Selecting tax-efficient investment vehicles 4 Maintaining a long-term investment strategy 5 Protecting against poor financial decisions 6 Avoiding emotional investing habits Source: Value of Advice Report 2012, Claude and Nathalie Viennnot-Briot, Econometric Models on the Value of Advice of a Financial Advisor, CIRANO Institute, July Empirical research reveals that financial advice provides significant benefits to investors

33 Source: Value of Advice Report 2012, IFIC, Econometric Models on the Value of Advice of a Financial Advisor, CIRANO Institute ADVISED ACCUMULATE MORE THAN FOUR TIMES THE ASSETS THAN NON- ADVISED HOUSEHOLDS GREATER WEALTH ACCUMULATION

34 Source: Value of Advice Report 2010, IFIC, Ispos Reid Canadian Financial Monitor Household Average Investable Assets GREATER WEALTH REGARDLESS OF INCOME LEVEL … Income Level

35 GREATER WEALTH REGARDLESS OF AGE … Source: Value of Advice Report 2010, IFIC, Ispos Reid Canadian Financial Monitor Household Average Investable Assets Age of Household Head

36 ADVISED SAVE AT TWICE THE RATE THAN NON-ADVISED HOUSEHOLDS INCREASED SAVINGS Source: Value of Advice Report 2012, IFIC, Econometric Models on the Value of Advice of a Financial Advisor, CIRANO Institute

37 More Comfortable, More Confident, Better Outlook with advice COMFORT & CONFIDENCE Source: Value of Advice Report 2010, IFIC, Ispos Reid Canadian Financial Monitor % of respondents who agree – 6 to 10 on a 10-point scale

38 Fees are an important part of any purchase decision. But like any purchase decision, there is more to consider than just the cost. The Mutual Fund fees you pay provide you with a valuable and important financial service. Find out exactly what these fees cover so that you are comfortable knowing what you receive for the fees you pay. Just what do these fees PAY FOR? “ What do I get for the 2% fee I’m paying ? ”

39 Mutual Fund Company How Mutual Fund companies earn their fees

40 How Dealers / Financial Advisors earn their fees Dealers / Financial Advisors

41 Dealers / Financial Advisors (cont’d) How Dealers / Financial Advisors earn their fees

42 INVESTOR RESOURCES

43 Important Information Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. This presentation is provided for information purposes only and is based on publicly available information from sources believed to be reliable as of the time written and is not guaranteed to be current, accurate or complete. Information herein is subject to change without notice and 1832 Asset Management L.P. is not responsible to update this information, nor does it accept any responsibility for any loss or damage that results from any information contained herein. This presentation should not be reproduced or distributed without the express consent of Dynamic Funds. 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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