This document discusses strategies for generating income in a low yield, high stress environment. It begins by outlining Picton Mahoney Asset Management's services and investment principles. It then discusses the risks associated with rising interest rates and recommends hedged income strategies, including high quality high yield bonds and investment grade financials. The document provides examples of long and short positions and outlines the objectives of the Picton Mahoney Income Opportunities Fund, which aims to generate returns of 6-8% with lower volatility than high yield indexes.

1. LowYields. HIGH STRESS.
Winter 2013

2. Picton Mahoney Asset Management -
Canada’s trusted hedge fund source
At Picton Mahoney Asset Management
(PMAM) we manage over $7.0 billion in
assets for investors through three lines of
investment solutions
• Authentic hedge fund strategies
• Sub-advisory services
• Institutional long-only mandates
Our Founding Principles:
• Authenticity
• Transparency
• Capacity
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3. Investors need to ask themselves some
“what if” questions regarding their portfolio
• What if stock markets continue to rally?
• What if interest rates rise?
• What if stock/sector leadership change continues?
If you don’t like the answers you are getting to these questions then it is time
to reconsider your positioning and/or the investment tools you are using
to build your portfolio
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4. Investment OutlookInvestment Outlook
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Low Yields. HIGH STRESS.
The price of perfection. What happens when the era of
low, low rates comes to an end!?

5. Market Summary – top 3 calls for 2013
• Inflection point for interest rates
• Rotation trade out of bonds into stocks
• Return of the credit pickers market
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6. Business case for hedged income, the
three risks
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Rate Risk:
• Dollar value loss of a 1% increase in rates is at the highest in history
Price Risk:
• Investment grade priced to perfection with longest duration, lowest yield
and highest price in history
Credit Risk:
• Default rates are low today at just over 2%, but through cycle they’ve
averaged almost 5%

7. Government bonds: no gain, all pain
• “This time is different”—equities 1999/2000, oil 2008, “safe” bonds now?
7Source: Picton Mahoney Asset Management, CIBC Research, Treasury Direct, Bureau of Economic Analysis

8. 1994, The Great Bond Massacre
• Today, while we don’t expect a dramatic sell off in Government bonds,
they are 30% more sensitive to a rise in rates than 1994
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(30.0%)
(25.0%)
(20.0%)
(15.0%)
(10.0%)
(5.0%)
0.0%
5.0%
10.0%
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
8.50%
9.00%Jan-94
Feb-94
Mar-94
Apr-94
May-94
Jun-94
Jul-94
Aug-94
Sep-94
Oct-94
Nov-94
Dec-94
Indicative%Losson10Yr
%Yield
10Yr Long BondYield Indicative % Loss on 10Yr
Source: Bloomberg, Bank of America Merrill Lynch

9. Sensitivity analysis, visualize the pain
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Source: Bloomberg, Picton Mahoney Asset Management
(30.0%)
(25.0%)
(20.0%)
(15.0%)
(10.0%)
(5.0%)
0.0%
5.0%
10.0%
15.0%
20.0%
0.0% 0.5% 1.0% 1.5% 1.7% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5%
PercentageChangeinPrice
Yield %
Change in Market Value at VariousYields
Current US 10Year Note—T 1 5∕8 % of 2022
1% Increase inYield
Increase to 200 Year Avg yield
$ Loss: ($25.00)
$ Loss: ($9.00)

10. Speaking of sensitivities, we’ve done well
when Government’s have sold off
• Outperformed 97% of the time! PM Income Opportunities Fund Class A
since inception (December 2009)
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Source: BofA Merrill Lynch Global
Research, Picton Mahoney Asset
Management Estimates
(2.0%)
(1.0%)
0.0%
1.0%
2.0%
3.0%
4.0%
1 2 3 4 5 6 7 8 9 10111213141516171819202122232425262728293031323334353637383940414243444546474849505152535455565758596061626364656667
Overperformance/(Underperformance)%
Weeks When the 10-Year Experienced Negative Performance
Our Outperformance In WeeksWhen the 10Year US Gov't Bond Was Negative
2010 2011 2012

11. Can’t beat the relative value in High
Yield
• High Yield (HY) affords the best risk reward within fixed income - but it
will be a credit-pickers market
• High-end of the HY market (BB’s &B’s) remains our highest conviction outright
call with:
• Still-attractive valuations
• Good carry
• Low default risk
• See excellent short side opportunity in pockets of high yield (especially ETF
held bonds)
• Prefer long/short to managed and managed to passive—but manage your
manager
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12. High Yield remains the relative winner
• High yield spreads remain in-line with historical averages and are
attractive given low default expectations
Source: BofA Merrill Lynch Global Research 12
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
0
400
800
1200
1600
2000
DefaultRate(%)
Spread(Bps)
Global HY Spread to Worst vs Global Default Rate
Global HY Spread to Worst
Long Term Average HY Spread
Global Default Rate

13. Bringing it to a trade –
summary recommendations
Strategy Level Picks:
• Higher quality High Yield – B to BB
• Investment Grade financials
• Levered loans
• Credit driven equity ideas
Strategy Level Pans:
• Government, Investment Grade and other rate sensitive mandates
• Passive ETF strategies
• ETF held high yield bonds
• CCC rated corporate bonds
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14. Pull it all together, maximizing return and
minimizing risk
• Fund is right for today’s times – stability and returns
• Objectives & Targets:
• Maximize total return = 6 - 8% net of fees
• Generate a sustainable distribution = 5% paid monthly
• Preserving capital = Less volatile than high yield and stocks
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15. PMAM’s Income Investment Process
• Powerful combination of credit and equity analytics
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16. Deep portfolio management team
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TradingCredit Research
David Picton
President
James Lawson
Chief Investment
Officer
Phil Mesman
Lead Portfolio Manager
Ashley Kay
Head Trader/Strategist
Sam Goddard
Trader
Sam Acton
Credit Analyst
Kyle Marta
Credit Analyst
Phil Porat
Credit Analyst
Other PMAM Team Members
2 Traders
3 Portfolio Managers
5 Quantitative Analysts
10 Fundamental Analysts

17. Our basic hedge fund strategy
• Defensive income necessitates a value focus
• Long:
• Securities showing positive fundamental change, lower valuations and
higher quality scores
• Short:
• Securities showing negative fundamental change, higher valuation and
lower quality scores
• Portfolio construction / risk control used to design portfolios that
trade-off exposure to desired traits with specified volatility
targets
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18. Strategy Examples
Longs:
• Flint Energy (URS) 7.5% of 2019
• Viterra Inc. (GLENLN) 6.406% of 2021
• Sherritt International Corp. (SCN) 7.5% of 2015
• Financials
Shorts:
• Meg Energy Corporation (MEGCN) 6 3/8s of 2023
• First Data Corporation (FDC) 6.75% of 2020
• Fortescue Metals Group (FMGAU) 7.0% of 2015
• Aimia (Aeroplan) Inc. (AIMCN) 5.6% of 2019
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19. PMAM Income Opportunities Fund
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The inception date of the Class A Units of the fund is December 31, 2009. Performance and Performance Analysis data is presented since inception for Class A Units of the Fund. Performance data is
compared a blended benchmark of 50% Merrill Lynch CDN HY Index & 50% Merrill Lynch US Master II (A) Index (CAD). The composition of the Funds’ portfolio will significantly differ from the benchmark
due to the investment strategy employed. Please see “Investment Strategies” in the Confidential Offering Memorandum for more details. The Merrill Lynch Canadian Broad Market Index is provided for
information purposes only. Commissions, trailing commissions, management fees and expenses all may be associated with fund investments. This is for information only and is not an offer or solicitation to sell
units of the fund. Complete information relating to the funds, including risk factors, is contained in the Confidential Offering Memorandum. This fund is not guaranteed, its values change frequently and past
performance may not be repeated. Please see “Risk Factors” in the Confidential Offering Memorandum for more details.
Targets:
• 6-8% annual return;
net of fees
• Generate a
sustainable
distribution = 5%
per year
• Half the volatility of
the Canadian High
Yield Index

20. Firm level advantages
• Weekly pricing & Liquidity
• Sold by Offering Memorandum
• A Class 2/20 model & F Class 1/20 model
• 5% initial distribution & 5% hurdle rate
• High-water mark calculated weekly
• We are partnered with top notch service providers:
• Prime Brokers – Goldman Sachs, Scotia Capital Inc.,
• Canadian Legal Counsel – McMillan LLP
• Auditor – PricewaterhouseCoopers LLP
• Administrator – Citigroup Global Transaction Services
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