The Big Picture David Irwin, Equity PM EAMG

Agenda Investment philosophy/style Market update Par fund 2

Investment philosophy Tactical Asset Allocation Top- Down, Macro Active Balanced ETFs

Tactical asset allocation 94% 4

Investment approach 5 Top-down, Macro-driven US equity Cdn equity Gov’t bonds Corp bonds Int’l equity Real estate Money market Natural resources Low volatility Preferred equity TechnicalQuantitativeFundamental Tactical Asset allocation Market perspectives Investment style

EAMG investment strategy 6 Market return Excess market return We don’t pick stocks We pick markets We do this with ETFs

4 Drivers of market uncertainty Potential recession Oil prices US Federal reserve Geo-political risks 7

8

Is china still a risk? 9

Market sell-off: causes Chinese growth slowing Continued yuan depreciation High valuations & low growth US interest rate hike Oil market sell-off 10

Investor psychology Recency bias effect creates a reactive mentality; avoid this. S&P 500 up over 200% since Markets on average experience a 10% sell off every 20 months which takes about 3 months to recover. All losses on the S&P 500 for 2016 have fully recovered! 11

Oil Driving the CAD and the TSX 12

13 Source: Yardeni.com Rig cuts not effective

14 OPEC increasing production Source: Bloomberg, EIA Oil -70% Supply +10%

Supply-demand imbalance continues 15 Source: Bloomberg, EIA

Canada effects: Neutral to negative Low dollar (inflationary) Low growth Continued weakness in oil Increase in manufacturing on lower Canadian dollar 16 Outlook for Canada

Central bank policy 17 US policy diverges, for now

Investors still need more yield

Range bound markets

20 S&P 500 Income statement Models Revenues GDP, consumer confidence, PMI -COGSCommodities, PPI = Gross margin -SG&A Wages, unemployment -Interest, taxes, depreciation Interest rates = Net Income EPS Share buy backs, share issuance EAMG equity model

21 S&P 500 inc. S&P 500 Income statement Models Revenues Risk- manufacturing weak, pricing power low -COGSNeutral – oil holding? = Gross margin Risks -SG&ARisks – wage inflation -Interest, taxes, depreciation Neutral: interest costs increase, low levels = Profit marginRisks EPSRisks: GAAP EPS weak

Canada more expensive 22 P/E ratios remain above 15-year average

Low bond yields in Yields could remain low over 2016 Driven by low GDP growth profiles in both Canada and the U.S. Investors are likely to remain risk averse which also supports low yields Low inflation a contributing factor

Diversification matters 24

Par diversification – a great balanced fund

Commercial Mortgages: add diversification into an asset class challenging for clients to achieve on their own, by a team of experienced mortgage specialists. Private Placement Loans: provide corporate bond type returns with reduced risk and/or higher yields. Real Estate: adds equity-like returns with less volatility. Similar to commercial mortgages, a diversified portfolio of commercial real estate is challenging for clients to acquire and manage independently. Alternative asset classes

A high quality fixed income portfolio, with long duration, supports the dividend scale Investment Mix Government50% Corporate50% Investment by Term Years to MaturityPercentage 0 to 5 years23% 5 to 10 years19% Over 10 years57% Fixed income

Performance is enhanced with a solid real estate portfolio, as well as a common and preferred equity program. Investment Mix Equity Type Percentage Common Stock41.2% Real Estate41.8% Preferred Shares16.9% Total Equity assets100.0% Non-fixed income

The real estate portfolio is comprised of high quality, income producing properties which are diversified geographically across Canada and by property type. Real estate

1.Tactical portfolio management 2.Ideal Portfolio Size 3.Mutual Company Equitable life advantages

Historic fund returns