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Points in Time Q1 2019 Recovery Supported by Stable Economic Data and Dovish Central Banks

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Points in Time Q1 2019 Recovery Supported by Stable Economic Data and Dovish Central Banks Points in Time Q1 2019 Recovery supported by stable economic data and dovish central banks WATCHING Growth • Ten-year rates in Canda and the U.S. also Sectors declined meaningfully during the quarter • Slowing global economic growth with the Canada risk of a recession • The U.S. yield curve inverted, making the Best Performing • In Canada, the outlook for GDP growth is yield on the 3-month treasury bill higher • Information Technology .............. +20.2% expected to slow to 1.5% in 2019 from 1.8% than the yield on a 10-year government • Pipelines .............................................. +19.7% in 2018 bond. This is unusual and draws more attention to the risk of a recession in the U.S. • Momentum in the U.S. also expected Worst Performing to moderate, with GDP growth for 2019 Markets • Materials ................................................ +8.5% projected at 2.5% from 2.9% in 2018 • Total return for the S&P/TSX Composite • Consumer Discretionary ................ +9.8% Inflation Index in Q1 was 13.3%, recapturing all the U.S. losses of 2018. The S&P 500 Index returned • North American inflation remains well Best Performing 13.6% in US$ and 11.2% in CDN$ contained, with Canadian CPI expected • Information Technology ............... +19.9% • The S&P 500 also made a strong recovery to come in at 1.7% in 2019 and U.S. CPI • Real Estate .......................................... +17.5% from the widespread decline witnessed last forecast to be 1.9% for 2019 quarter Worst Performing Interest Rates • Declining bond yields in Canada produced • Health Care .......................................... +6.6% • 10-year bond yields in Germany and Japan a quarterly return of 3.9% for the Universe • Financials .............................................. +8.6% have turned negative, raising concerns of Bond Index global growth source: Bloomberg, as at March 31, 2019 THINKING Growth Interest Rates •e economicWhil growth will moderate in • Both the Bank of Canada and the U.S. • Resolution to the China-U.S. trade war has 2019, it’s too early to call for a recession Federal Reserve are expected to be been largely discounted by equity markets • If growth in China has stabilized and shows • Economic data and management patient with rate hikes due to slower signs of improvement from government commentary suggests a recession is not growth expectations and a benign inflation stimulus, this will serve as a catalyst for imminent environment stocks in 2019 Inflation Markets • Unless the inflation rate picks up • After a strong rally in Q1, equity markets will significantly, the U.S. Federal Reserve has require stable to good data points on the given indications that rates will be on hold economy and solid earnings reports from for the rest of 2019 companies for the rally to continue S&P/TSX TR vs S&P/TSX High Dividend TR vs LFA Composite TR 115 110 105 100 95 90 Mar–18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 S&P/TSX TR S&P/TSX High Dividend TR LFA Composite TR source: Bloomberg experience counts... managing private clients’ money for 80 years LF-PiT_PRINT_apr12-2019.indd 1 2019-04-15 2:33 PM Strong dividend growth continues — over 44% of the companies increased dividends by a weighted average of 4.1% DOING Strategy Fixed Income Equities • Focus on risk management in the JOV Leon Frazer Bond Fund • Positions that have performed well may portfolios and finding good quality be trimmed in order to reduce exposure • Emphasis remains on governments and businesses with sound balance sheets and to provide cash to purchase new quality rated corporates and attractive dividend characteristics positions • To reduce volatility, the duration (interest • We have identified several stocks which rate sensitivity) remains shorter than that we wish to have exposure to. New of the benchmark positions will increase both stock and JOV Leon Frazer Preferred Fund sector diversification, leading to reduced volatility • Continue to have a balance of rate resets and fixed rate perpetuals to mitigate volatility in interest rates 2019 Dividend Performance Summary Canadian Dividend Portfolio Top 5 Dividend Growers Number of companies in the equity portfolio 27 Gildan Activewear 19.1% Number of companies that declared an increased dividend 12 Canadian National Railway 18.1% % of companies that declared an increased dividend 44.4% Suncor Energy 16.7% Weighted average of dividend increases 4.1% Canadian National Resources 11.9% Consumer Price Index increase (YoY*) 1.5% Toronto Dominion Bank 10.4% Equity portfolio dividend yield** 4.2% Top 5 Dividend Yielders S&P/TSX dividend yield 2.9% Vermilion Energy 8.3% Income Stability Portfolio Freehold Royalties 7.5% Number of companies in the equity portfolio 24 Russel Metals 6.5% Number of companies that declared an increased dividend 11 Enbridge 6.1% % of companies that declared an increased dividend 45.8% BCE 5.4% Weighted average of dividend increases 3.9% Consumer Price Index increase (YoY*) 1.5% Equity portfolio dividend yield*** 3.7% S&P/TSX dividend yield 2.9% * Statistics Canada, as at February 28, 2019 ** The dividend yield is based on the Leon Frazer Canadian Dividend Fund using the target weight for cash *** The dividend yield is based on the Leon Frazer Income Stability Fund using the target weight for cash Leon Frazer Points in Time: Q1 2019 page 2 LF-PiT_PRINT_apr12-2019.indd 2 2019-04-15 2:33 PM A Closer Look: Canadian Tire Corporation Canadian Tire Fact Sheet: Trading Symbol: CTC.A Market Cap (Mil): $9,452 Dividend Yield: 2.9% Dividend Growth YoY: 15.3% Equities Sector: Consumer Discretionary • Positions that have performed well may be trimmed in order to reduce exposure and to provide cash to purchase new positions • We have identified several stocks which Introduction Future Growth Opportunities we wish to have exposure to. New • Canadian Tire is a family of businesses that includes a retail segment, • Grow new product pipeline through owned and national brands positions will increase both stock and a financial services division and CT Real Estate Investment Trust • Helly Hansen acquisition opens opportunity for international sector diversification, leading to reduced • Founded in 1922, Canadian Tire has been operating as one of footprint and strengthens the company’s ability to distribute current volatility Canada’s most recognized and trusted brands for over 95 years and future owned brands • Operates ~1,700 retail and gasoline outlets across Canada and • Focus on eCommerce opportunity and drive customer traffic and around the world develop customer connections through Triangle Rewards data insights • Retail banners include PartSource, SportChek, Mark’s, Atmosphere, Sports Experts and Hockey Life Core Business is Retail Strengths 2018 Revenue Retail ........................................................................... $12.8B • One of the most iconic brands in Canada, with a store network that serves over 90% of Canada’s population Canadian Tire ........................................................ $7.2B Petroleum .............................................................. $2.0B • More than 80% of the population shops at Canadian Tire stores every year, with the vast majority of Canadians located 15 minutes FGL Sports ............................................................. $2.0B from a Canadian Tire store Mark’s ........................................................................ $1.2B • Loyalty program, Triangle Rewards, has over 11 million members and Helly Hansen ........................................................ $0.3B 2.1 million active cardholders Financial Services .................................................... $1.3B • Portfolio of owned brands (Motomaster, Mastercraft Woods, CT REIT ........................................................................ $0.5B CANVAS, PADERNO, NOMA, Helly Hansen) provide competitive advantage and platform for growth 5-Year Annualized Financial Metrics • Superior real estate locations and national store network Revenue growth ......................................................... 3.6% • Strong balance sheet and credit rating EBITDA growth ............................................................ 6.6% • Prudent capital allocation framework that has delivered consistent EPS growth ................................................................... 9.0% annual dividend growth for over 30 years Dividend per share growth ................................. 20.2% • Network of dealer-owned stores enables focus on local community and needs source: Bloomberg, December 31, 2018 Canadian Tire Corporation Dividend Increase and Share Price Appreciation Mar. 31, 2019 $200 $5 Canadian Tire $180 Corporation’s Share Price $4 $160 Footprint Dividend $140 Dividend Price $3 $120 Share $100 $2 $80 $60 $1 $40 $20 $0 Mar–09 Mar–10 Mar–11 Mar–12 Mar–13 Mar–14 Mar–15 Mar–16 Mar–17 Mar–18 Mar–19 source: Bloomberg source: www.corp.canadiantire.ca, December 2018 Leon Frazer Points in Time: Q1 2019 page 3 LF-PiT_PRINT_apr12-2019.indd 3 2019-04-15 2:33 PM Message from the CEO We are pleased to share some exciting news about Leon Frazer & Gil joins us from Industrial Alliance Investment Management, where he Associates. Last June, Douglas Kee announced his plans to retire this was responsible for the management of $2.7 billion in assets, primarily spring. As Managing Director and Chief Investment Officer, Doug has in dividend-focused mandates. Gil brings 30 years of investment been a key member of the Leon Frazer investment
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