BMO Global Dividend September 2015 Sri Iyer, Managing Director, - PowerPoint PPT Presentation

BMO Global Dividend September 2015 Sri Iyer, Managing Director, Systematic Strategies

Stability, Vision, Results  Trust and stewardship Guardian Capital Profile  Long-term investors • Servicing Investors Since 1962  Client focused Clients • 129 Institutional clients At Guardian Capital, we value our • $23.2 Billion * clients’ trust and view stewardship of their assets as our primary responsibility. Strategies We invest with the confidence that • Equity Strategies comes from a highly disciplined • Fixed Income Strategies investment process and a • Income Strategies constant awareness of risk and • Direct** / Indirect Real Estate fiduciary responsibility. Team Our strength is our culture, enabling our stability and a long- • 28 Investment Professionals term focus. • 38 Management and Administrative Associate s * Guardian Capital LP as at June 30 th , 2015 ** Through Guardian Capital Real Estate Inc. 1

Top-Down Architecture: What it means to you  Region, country, size and style has diminished as alpha sources  Industry groups and sectors now at the forefront of alpha generation  Bottom-up stock selection is key 40% Monthly Top-Down Dispersion as Fraction of Total 35% 30% 25% Dispersion 20% 15% 10% 5% 0% Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Industry Group Sector Style Size Country Region 2 Sources: MSCI World - Morgan Stanley

Dividends : The Largest Contributor to Total Return  Long-term trend 66%  Dividends have been the largest contributor to total returns and ERP over the long- term  This secular trend is expected to continue  Dividend as an asset class calls for a routine quality MSCI World, Figures provided are in USD Date Range: 31/12/1969 – 09/03/2015 assessment of cash flow sustainability of a company MSCI Total Return Indices are calculated With Gross Dividends: Gross total return indices reinvest as much as possible of a company’s dividend distributions. The reinvested amount is equal to the total dividend amount distributed to persons residing in the country of the dividend-paying company. Gross total return indices do not, however, include any tax credits. 3 MSCI Country Indexes: MSCI Canada, MSCI UK, MSCI US, MSCI Japan, MSCI Germany MSCI Australia Date Range: 31/12/1969 - 09/03/2015, Base Currency

Comparing Fundamentals Globally: Relative  Common factors across 10 global sectors  Applied to over 3000 stocks  Rates of Change of Fundamentals (Delta)  By using a set of common factors, we focus on sectors regardless of geography.  Each of 10 sectors has its own model, allowing Guardian to buy best-in-class stocks within each sector.  By comparing rates-of-change in company fundamentals we are able to see through the differences in accounting standards globally. 4

GPS: Empirical evidence Performance of dividend payers within Broad U.S Market Index Factor Rank IC Cumulative performance Earnings growth coupled with Dividends performs best   Top Quintile Dividend Growers (red) out performed Companies with high payout ratios Top quintile Earnings growers (green) almost uniformly underperform • • avoiding payout tails is important for investors reward a growing and stable payout of earnings sustainability of dividends • strategies ( Orange and Blue) that combine top quartile dividend and earnings growth significantly out perform single factor approaches 5

Comparing Fundamentals Globally: Intrinsic Intrinsic: Cash Flow Unlike bonds, the cash flows that equity investors anticipate receiving must be estimated and thus are less certain. Equity Duration • Intrinsic Value • Cash flow Value • Terminal Value • Market to Model Ratio • Cash flow weight Our main thesis – stock prices revert around a Beta captured by:  consistent cash flow  reduced estimation error  and a risk adjusted forward looking discount rate 6

Philosophy: How to capture the jump from bonds to stocks Dividend growth is a significant rowth factor for long term returns and  Yield carry and stock depends on consistent earnings selection as alpha drivers growth  Quality over Quantity through Emphasis on dividend ayout balance sheet management growth and sustainability through a combination of A Globally competitive revenue relative and intrinsic ustainability stream and margin efficiency to sustain strong ROE and dividends valuations across different Global factor Traditional buckets Mature Growth GPS  Avoid yield for yield sake by looking at a stocks Steady Growth cash flow visibility and estimation risk of terminal value Rapidly Increasing Growth Early Stage Investable Universe: All stocks in MSCI ACWI and REITs that pay dividends regardless of where they are on the evolutionary chart 7

Three Primary Dividend Classes High Yield Dividend Payers Dividend Growers Dividend Achievers Low Yield High Growth Low Growth ⁻ High yield, stable cash flow, modest dividend growth 1. Dividend ⁻ Cash flow allocated primarily to dividends and balance for Payers debt re-placement and capex ⁻ Low to Median yield, good cash flow growth, solid dividend growth 2. Dividend ⁻ Cash flow allocated evenly to dividends and re-investment for Growers further growth, uses buybacks also. ⁻ Lower yields, steady cash flow growth, residual policy for dividends 3. Dividend ⁻ Cash flow allocated primarily to re-investment for growth and meet Achievers 8 payout targets, uses buybacks significantly

Portfolio Review – BMO Global Dividend As at August 31 st , 2015 GICS SECTOR Weight Dividend Yield Portfolio Benchmark* Portfolio Benchmark* Financials 16.33% 20.82% 3.76% 3.10% Consumer Staples 14.63% 9.92% 3.53% 2.78% Health Care 13.63% 13.64% 2.86% 1.89% Industrials 13.10% 10.72% 2.91% 2.60% Consumer Discretionary 10.27% 13.16% 2.63% 1.83% Telecomm Service 9.64% 3.38% 4.44% 4.20% Information Technology 7.54% 13.31% 2.73% 1.65% Energy 5.50% 6.82% 5.71% 4.09% Materials 4.53% 4.67% 3.33% 2.99% Utilities 4.77% 3.16% 5.22% 4.43% Overall 3.52% 2.62% *Benchmark: 100% MSCI World 9 Source: Thomson Eikon

Portfolio Review – BMO Global Dividend As at August 31 st , 2015 Energy Financials Healthcare Industrials Consumer Discr. Weight Yield Weight Yield Weight Yield Weight Yield Weight Yield Portfolio 5.5% 5.7% Portfolio 16.3% 3.8% Portfolio 13.6% 2.9% Portfolio 13.1% 2.9% Portfolio 10.3% 2.6% Benchmark 6.8% 4.1% Benchmark 20.8% 3.1% Benchmark 13.6% 1.9% Benchmark 10.7% 2.6% Benchmark 13.2% 1.8% Williams Companies Westpac Banking Corp Teva Pharmaceutical Waste Management Walt Disney Co Total Wells Fargo & Co Sonic Healthcare Ltd Sydney Airport Holdings Ltd VF Corp Royal Dutch Shell Swedbank Pfizer Republic Services Inc Starbucks Corp Pembina Pipeline Corp Sumitomo Mitsui Financial Group Novartis Raytheon Co Six Flags Entertainment Corp Kinder Morgan Spirit Realty Capital Merck & Co Inc Lockheed Martin Corp Prosiebensat 1 Media Keyera Corp Skandinaviska Enskilda Banken Medtronic Illinois Tool Works Newell Rubbermaid Eni Spa Royal Bank Of Canada Johnson & Johnson General Dynamics Corp McDonald's Corp Conocophillips Prudential Glaxosmithkline Ferrovial Macys Chevron Corp Munich RE Gilead Sciences Inc FANUC Corp Genuine Parts Co BP Mitsubishi UFJ Financial Group Bayer CSX Corp Fuji Heavy Industries Ltd Legal & General Group Plc Astrazeneca BAE Systems Daimler Ag JPMorgan Chase & Co Amgen Goldman Sachs Abbvie Daiwa Securities Biomed Realty Trust AXA ANZ Banking Group Ltd Utilities Telecom Materials Information Tech Consumer Staples Weight Yield Weight Yield Weight Yield Weight Yield Weight Yield Portfolio 4.8% 5.2% Portfolio 9.6% 4.4% Portfolio 4.5% 3.3% Portfolio 7.5% 2.7% Portfolio 14.6% 3.5% Benchmark 3.2% 4.4% Benchmark 3.4% 4.2% Benchmark 4.7% 3.0% Benchmark 13.3% 1.7% Benchmark 9.9% 2.8% SSE Verizon Communications Lyondellbasell Industries Texas Instruments Unilever National Grid Telstra Corporation Dow Chemical STMicroelectronics Reynolds American Duke Energy Corp Swisscom BASF SE Seagate Technology Procter & Gamble Co Ameren Corp Proximus Air Products And Chemicals Microsoft Corp Philip Morris International Deutsche Telekom Intel Corp Nestle AT&T DH Corp Kimberly-Clark Corp ADP Imperial Tobacco Group Apple Inc Dr Pepper Snapple Group British American Tobacco Plc Anheuser-Busch InBev 10 Altria Group Source: Thomson Eikon