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About this podcast

Dave Richardson sits down with Habib Subjally, our Senior Portfolio Manager and Head of Global Equities in London, to talk about the effects of technological advancements in our industry, the importance of social capital and how trust plays a large role in the structure of his team.

Transcript

Dave Richardson

Welcome to Personally Invested. I'm your host, Dave Richardson. On this podcast, we want to introduce you to some of the top investment managers around the world. Through our discussions, we will get insights into how they manage their portfolios, but in addition, understand the personalities, the character traits, the philosophies and the behaviours that make them so successful, not just in terms of their careers, but also for their investors.

We will also investigate some of the emerging trends in the Canadian investment landscape, an exploration of how technology, government regulation and competition will dramatically alter the investment environment over the next decade.

My first guest, Habib Subjally, is a perfect place to start. I could quote many legendary investors who believe that optimism is an essential trait of successful investors and investment managers. In my first role in the industry, I worked in a call centre. We were trained to always smile on the phone when we were speaking to customers. Our supervisors even hung mirrors up so we could look in the mirror and make sure that we were smiling when we were speaking to people. They said that the customer can feel your smile over the phone line. I've met few people like Habib in work or even throughout my life. He is always smiling and perpetually optimistic. You will feel it through the audio of our conversation as we explore how his attitude affects his investment strategy, and has led to the development of a very special culture on his global investment team and led to some incredible results.

Habib, I've had the pleasure of spending quite a bit of time with you over the last few years, since you and the team joined RBC Global Asset Management. One of the things that's remarkable about you is you're one of the few people I know who every time I meet them they just have this big smile on their face. I know I have a firm belief that some of the best investors in the world are optimistic people, to find businesses that are going to grow and produce value for the shareholders, and ultimately for investors who invest in your fund, you're looking for those entrepreneurs, for those business leaders that have that optimism, that can drive that growth.

So, I'm wondering, how does that optimistic view of the world feed into your investment philosophy and how you manage money now over a couple of decades now?

Habib Subjally

Hi, Dave. Thanks for having me on the show. I guess I am an optimist by nature, and when one stops to think about it, there's a good reason to be optimistic. Even though I think I suspect human nature is actually to be quite pessimistic and fearful of the future because it's uncertain and uncertainty kind of creates anxiety and fear, but when one looks back at history, there's been this steady path of development and growth and improvement in our standard of living, and of course each continent and each country and the world at times has had blips in that... has gone through some dark times. But by and large, the world is a much better place now than it was 50 years ago, and 70 years ago, and so on. And I just look at it in my own lifetime, I mean, as a child, trying to just listen to music, you had to actually sort of go out and buy some vinyl or a tape, and then it was 8-track, and then there's cassette tapes and then CDs, and now of course you just stream the stuff on your phone. You listen to anything you want to, whenever you want to, wherever you want to. That's a huge improvement, and it's the same improvements we've seen in medicine and food and things like that.

So I think it stands to human ingenuity – human beings are wired to try and improve their quality of life and the way they live and I think that's such a strong trend. It's absolutely... it makes sense to be optimistic about the future.

Dave Richardson

And does that view of things help you as an investment manager?

Habib Subjally

Oh, definitely. I think it's so easy... as an investor, first of all, what we're trying to do is predict the future, see where these businesses are going to be in five, ten, fifteen, twenty years' time. And, of course, it's very easy to find what can go wrong. There's a ton of stuff that can go wrong because we can look back in history and all the things that have gone wrong, and we can find those things and project those into the future.

But human beings also have this ability to get things right and to innovate and find new ways and tastes change and preferences change. I mean, you know, just look at... I'm not a scientist, but I look at what's happening with semiconductor technology is just astonishing. You know, what you can do on a phone nowadays. It's stuff that you carry around in your pocket. It's amazing. If you had said this to someone 30 years ago they would've laughed at you.

Dave Richardson

Yeah. And so when you're out working with companies, and trying to identify the next trends, that view of the world, does it help you identify the winners from the losers? Or is that even a relevant question?

Habib Subjally

Well, yeah, you know, entrepreneurs are always... they're real optimists. And I think that's the... it's a really infectious thing about seeing entrepreneurs. You have so many... in other walks of life, you know... again, human nature is that we look at the future with a degree of anxiety. When we look at the past – because there's certainty and we're all very proud of our national path, our individual path, and things like that, but always apprehensive about the future.

Entrepreneurs are somewhat different. They seem to look back at the past and they find all sorts of fault with that, and say, you know, "That's terrible. We can improve things for the future. It's going to be so much better." It really is quite... it's a privilege of my role that we see so many entrepreneurs and so many optimists. It's wonderful. They have real imagination.

Dave Richardson

Now, not only has the world evolved, but certainly this industry has evolved since you became a part of it. How does technology and the evolution of the industry play a role in what you and the team are doing day-to-day right now?

Habib Subjally

Well, that's a pretty profound question, Dave, because, you know, I'm an accountant by training, and I was recruited into this industry as an analyst because people thought that if I knew how accounts are put together, I'd be able to interpret them and decipher them and figure that out, and that was my role for many years. In those days, every time I wanted to look to look at a company I would go down to the library, and young people today would laugh at that. You know, library? What are you...? The library? Yeah, we used to have a library where we used to have a file full of the last five years' annual reports and quarterly reports and I'd get hold of this file every time I wanted to look at a company, and come back to my desk, and if the file didn't exist and someone would send a telex and a telegram or fax off to something... that makes me sound really old, but it wasn't that long ago. <laughs> And, you know, it would take two, three, four weeks to get all this information, and then I'd go to my desk and I'd fire up the spreadsheet, and like a good accountant I'd set out for the last five years for each quarter I'd set up a profit and loss account, a balance sheet and a cash flow statement, and I'd start tapping these numbers in. And it would take me the best while for a week just to gather the information. And only then would I know whether this business was growing or shrinking, whether its margins were increasing or decreasing, whether it was generating cash or burning cash, how good they were at managing their working capital and so on and so forth.

And so this is a week's hard work before you can draw any conclusions about the business. Not just that, but at this stage, I haven't even looked at this company's other five, ten, fifteen global competitors. So, if you worked really hard in those days and built up these spreadsheets and maintained them and you had other colleagues – you work as part of a team – and you all did this, you could figure which were the best companies that were growing fastest, that were reaching inflection points, and were doing something different and were more profitable or had better returns than their peer group, so you got paid for working really, really hard, and there was a real advantage of that, and that was, like 25 years ago, 20 years ago.

But over the years as computers have come out and we're using technology more effectively in finance, and of course accounting regulations have changed, and now a company in Tokyo can release results, or Kuala Lumpur can release results, and they tend to be an IFRS and they get translated and into databases, and now I get all the analysis that used to take me a week to do? That gets done in seconds and onto my iPhone wherever I am in the world.

So I would say that financial analysis that I was initially recruited to do has got industrialized, if not commoditized. And I could look at only so many companies in a week or in a month, in a year, whereas, using big databases, you can analyze thousands of companies in seconds.

Dave Richardson

So that changes the way you... well, it instantly changes the way you can approach your role, and you can start to add value in so many different ways now. What's been the biggest way that you've changed your approach with the advent of this technology that makes you so much more efficient?

Habib Subjally

It's no longer enough just to analyze the financial results that a company produces. We now have to understand what drives those financial results, what causes those financial results. This is why we now need to do a lot of our work now, the amount of time I spend on financial analysis because it's industrialized is very little now. I spend – and the team, too – we spend a huge amount of time on analyzing extra-financial information. Rather than stuff related to the company, we're spending time related to the business. Now, it's a subtle difference here. We spend a lot of time on things like corporate culture, human capital, social capital, how engaged a business's employees are, the diversity of those employees, whether they have a sense of purpose or not, the way a business discharges its environmental/social governance responsibilities.

These are all the hallmarks of a great business. If a business gets these things right, then they tend to produce interesting products, better products than their competitors, market them better, get them to their customers better, delight their customers. This leads to growing market shares and revenues and profits, and it leads to a much more sustainable business over time. If we can analyze the underlying business and those extra-financial factors, this is what drives future financial returns.

Dave Richardson

And this is how you've been able to drive the investment success that you had here at RBC, and where you were before?

Habib Subjally

Absolutely. I think this is... we learned fairly early on that just financial analysis was really, really hard to add value with, so certainly in the last 12, 13 years, we have now focused on analyzing extra-financial information. The problem is, this extra-financial information, you can't figure out a company's corporate culture or a business's corporate culture by looking it up on the Bloomberg screen or some other data source. You know, you had to go and find this.

Dave Richardson

Yeah, and then this is what you refer to as kind of the human element of investing...

Habib Subjally

Absolutely.

Dave Richardson

...and it's because your philosophy would be – I think you describe it as you want to be a business-owner, not just a stock-purchaser.

Habib Subjally

Absolutely. I think the great thing about a business is that businesses invest capital up front. Right? So, there's human capital, there's financial capital, there's physical capital. And a great business takes that capital, that investment up front, and produces multiples of that into the future. Poor businesses take that capital and destroy it, right?

Dave Richardson

Yes.

Habib Subjally

So, our kind of task is to find those great businesses that invest up front, so short term pain and long term gain. If you can find those businesses, you want to be there for the ride. You want to invest in the business as an owner. We are happy to see the short term pain, the investment phase, because we want to be along for that long term gain as that investment unfolds into greater returns. And most businesses don't just invest up front on day one, there is a constant reinvestment of returns and that, for us, is... that just compounds up into the future, and that's really why, when we find a great business, we tend to want to own it for the long term.

Dave Richardson

And you typically are more of a buy-and-hold than someone who's trading in and out of positions.

Habib Subjally

Absolutely. I think if you can find a great business... the market is still very fixated on short term profits. And, if I may... see, as an accountant, we get so fixated by profits and cash flows, and if you ask most finance people, you know, "What makes a great business?" they'll say... they'll give you a financial ratio. They'll give you a number like EPS or EPS growth or cash flow conversion or return on invested capital. Well, you know, I've been asking successful entrepreneurs what makes their business a great business for many years now, and they've never given me an answer that says it's a financial metric like EPS or cash flow or return on invested capital; it's always some derivative of their people. It's always about, "Well, it's our people, it's our know-how, it's our ability to generate new products, it's our ability to delight our customers, it's our reputation with our customers, or reputation with our regulators, or the loyalty of our suppliers." It's those sorts of things. And this is why we spend our time focusing on those matters.

Dave Richardson

And so I would take it that that is why you're such a strong proponent of evaluating ESG or environment, social and governance factors in a business, because that is really that human element, how a company treats its employees, how a company thinks about the environment, or the world as a whole, how they ethically manage their business through proper governance. Is that the tie-in there?

Habib Subjally

Exactly. Exactly. The environmental, social and governance part, it's such an important part of all of these extra-financial things that we look at. Because as businesses move away from physical capital, where you own factories and mines and my factory's faster and better than my competitor's, to be honest that gap is no longer that important, because anyone else can build a new factory that's faster, but the key is how you operate those factories and what you do with those factories. It's what people call, academics are now calling social capital becomes more important. You could rebuild a great business and you can rebuild their factories and their people and all of that, you wouldn't get that business. And you can apply this to so many other businesses. You could take Amazon and you could rebuild their warehouses and their server... data centres and things like that, you wouldn't get Amazon. You could even hire people with the same kind of qualifications. You wouldn't get Amazon. Right? There's something about their culture, the way they make decisions, and the way they execute, and how they take risks, and how they deal with failure and how they learn from failure, and get better and stronger. That's what makes Amazon, and that's what makes great businesses.

See, the way – and this all sounds very subjective and nebulous, but on the team we've developed a framework over the years to analyze this. And we think of it, as a good accountant would, I suppose, we use this term: contingent assets and contingent liabilities. These are borrowed terms from accounting language. But, see, an owner of a business can generate profits by borrowing. It's very easy for a manager to borrow from, say, his employees. If you've got training and development budgets, that saving improves your profits on day one. Now your employees might be a bit disenchanted, unhappy, they feel devalued, knowing their boss isn't investing in them, isn't training them, developing them, but his profits went up. And, you know, sooner or later maybe your best employees will start looking for another job. So maybe you can borrow from your customers. If you fire all of your customer service people, again, your profits go up on day one. But your customers will suffer worse service levels.

It might take them a while to figure out that this is systematic now. This isn't just a one-off, it's not that firm that's having a bad day. And sooner or later, they're going to start looking for a different supplier. You can borrow from the future by cutting R&D. Again, your profits will go up on day one. You may not have any new products in a few years' time, but, hey, that's going to be someone else's problem. But you've borrowed from the environment by not cleaning up after yourself. You can borrow from society by miss-selling your products, whatever they are, and selling them to the wrong customers who don't need them, by overcharging and not paying your taxes.

These things create in our view contingent liabilities. The contingent liability creates short term financial profit. And that's what everyone gets focused on. But thankfully there are other businesses who do invest in their people, their customers, their suppliers, the future, their environment, their society, and so on. And we know that this investment is not for free. It does impact profit.

But the key is that the market values in dollar of profits, whether it's generated from borrowing or after investing, costs the same – and that's the inefficiency that we are so focused on on exploiting. This is why ESG and other extra-financial factors are an alpha source for us. It helps us identify great wealth-creating businesses.

Dave Richardson

Yeah. I was out with one of the team members this morning, Neil Abbott, and we were at a company, and we won't disclose the name of the company, but effectively they work with farmers in emerging markets, and the question was asked about there's lots of strikes at the shipping ports in some of these countries where they work, and how do you get around that, because it's a massive risk for the business, and the answer from the CEO was initially, well, we work with the farmers. And you think... right away, you go, "Wait a minute. The CEO should be focused on profitability, not about these softer issues." But the rationale behind it was they've worked over decades with these farmers and built relationships and invested in those relationships, genuinely helped the farmers – and this is a core part of their philosophy and culture. So everyone in the society knows the impact of this business. So when the ports are on strike, their goods and services go out.

Habib Subjally

Yeah.

Dave Richardson

Because they've worked... they've been such a great part of the community, and so that investment may have cost them a little bit along the way, but today it gives them a competitive advantage that makes it a special business.

Habib Subjally

Exactly. I think this is such an important point, and there's plenty of examples like this, because this is clearly a management team who are thinking for the long term. You know, if you're only thinking to the next quarter's earnings, you would not invest in those farmers, you would not... you know, you'd gouge them for everything you can, you'd rip 'em off, you'd maximize your profits over the quarter, but then you don't have a supply chain, right?

And similarly, as owners of a business, we are delighted that they are investing in their communities and in their supply chain, because it leads to a much more sustainable business. Now, this is a business where you know they're going to be around, they're going to have the loyalty of supply going into the next decade. And, you know, when we invest in a business, when you pay 20, 25 times earnings for a business, you are discounting the profits for many years ahead, so it makes sense to do that.

Dave Richardson

Now, culture is not just important to you with respect to the businesses that you invest in, but it's also a very big part of the way you and your team manage money, and I think one of the most important things I've learned from getting to know you, you're very much not about this is me, this is not Habib's fund, this is not my fund, this is my team's fund. This is our team. We manage this money together.

And can you talk about... it's hard to describe in a short period of time, I've had the privilege of sitting in with your team, and it's such an incredible experience the way you operate together, the unique culture. But talk about the team element of investment management, and how you've built that culture and made it sustainable.

Habib Subjally

This is a key point, and it's sort of fairly on in my investing career, I realized that there's no way – especially as a global investor – there's no way you can do this single-handed. It's just not possible. There are too many companies, too many countries, too many currencies, too many industries; trying to understand what's going on in semiconductors one day to then figuring out what's going on in software and in retail and in... you know, luxury and so on, it's just... you know, you either end up doing it very badly or you end up killing yourself – or probably both, right? So, it's very simple: this is a team sport. It's a difference between, say, playing golf and playing soccer, right? Or football as we in Europe call it. Golf is between you and the course. As long as you have enough clubs in your bag, it's an individual sport, and you only have yourself to blame and there you go.

But when playing football or soccer, it's a team sport. You have your goalkeeper, he's never going to score you any goals. But try playing without one. I don't care how talented you are, how good your team is, you're going to lose a lot of games. So you need some structure, you need specialists. Your wingers who go up and down... you know, if you just look at what your winger does over the course of a game, he just runs up and down the side of the pitch, and you think, oh, that's crazy. But look at it in the context of a game, it makes a lot of sense.

So this is why when you build a team, especially with global investors, you need different specialists. But having... Again, I'm coming back to the sports analogy. Just having 11 star players on a pitch doesn't make a team. You need a team that understands, has a clear philosophy, everyone buys into that, that covers for each other, that backs each other. Someone makes a mistake, someone slips, someone else is in place to figure that out, and we all work as a team.

And those are the two things that we have really taken to heart when building our team. We need specialists, so we have some eight people who are dedicated to industry specialisms. One person will be financials, to do consumers and so on, and then we have three rocket scientists, if you will, doing portfolio construction, that manage risk. Think of them as the defence. Right? They make sure we don't concede any goals, any unintended goals. And myself. I don't know where I fit into this analogy, but that's a different issue.

So we have the right structure, the right skill set on the team. But then we also need the right culture, and I think that the culture – if you ask me what differentiates us, I mean, frankly, we use the same databases and computers and information sources as anyone else, so I think what differentiates us is our culture, and there are three things I would say about our culture. One is that we are genuinely a meritocracy. There is complete transparency. Everyone on the team has access to all information and anyone can challenge anything. We have a whiteboard in our meeting room, and anyone can go and write the name of a stock on the whiteboard, and that has to be reviewed. It's simple. But in terms of what happens when someone's away from the office, but that's a different fact.

Dave Richardson

But it really is – and sorry to break in – but it really is something that is special about the team. When I got to experience in walking back with Neil today, and we saw some numbers and we also saw some of the other softer issues, the human side of the company, and he's thinking already as we're walking back, because he's going to come in front of the whole team and present his view of the company, and again, as I witnessed it, it is such an open and comfortable discussion. People respectfully raised challenges and issues because – and everyone listens to each objection that's raised – because they know it's coming from a place of trying to identify the absolute best investment for the fund.

Habib Subjally

And this kind of brings me to the second point I was going to make about a culture of the team, is that it is a culture of a real team. This is not individual star players. It is a team. And for us, success is not that someone had a great call, and someone had to defend their view, it's about getting to the right judgement. That's the thing that's important. And even if that means that someone else says, "Gosh, I hadn't thought about that. I need to reconsider my view," we would much rather change our mind and get it right than stick to something out of some sort of mistaken sense of pride or anything like that about self-image. It is the culture is very much driven about the team outcome and team result and what we produce.

It was really important, when we came to RBC, that we had a similar culture across the firm and that the compensation structure that we have in place actually supports that, that it is based on team outcomes that everyone gets evaluated and paid. So I think that that's definitely a key point.

The third part of the culture that I really wanted to emphasize was that it is a culture of continuous improvement. Now, the market is a humbling place. I think everyone knows that. Especially us. Anyone who's been doing it this long, you realize how tough it is to make forecasts into the future. But every decision we have made in the last 11 years since we've been together has been recorded in a database. Even if that is that we looked at a stock and decided to pass on it because we didn't like the underlying business or we didn't like the valuation or whatever, so we never invested a dollar of capital in that business. Even that judgement gets recorded, so we have a long history of the decisions we've made.

Roughly a couple of times of year we go back and we analyze the data in that database, and we spend a little bit of time looking at the decisions that worked out well, because those are the ones we want to repeat, but we spend a lot more time focusing on the things that didn't quite work out. The mistakes.

Dave Richardson

Yeah.

Habib Subjally

And it's really important for us to figure out why we made those mistakes. Some are... many are... you could never forecast what happened, because, you know, regulations change, politics change, technology changes. You couldn't have forecast those things.

But many of those things, perhaps we should've thought about, because the mistakes we make are errors of judgement. We are forecasting where this business is going to be in five, ten, fifteen, twenty years' time, and those forecasts are very susceptible to emotion, to fear and greed, optimism and pessimism. As human beings we all get impacted by that, so we need a culture where it's fine to admit to yourself why you were too optimistic or too pessimistic, and then share that with the other 11 people in the room. That's not easy in many competitive, high-pressured kind of environments that we all work in, but I think if it's something that I'm really proud of, it's that we do have that culture where we can reflect and share and learn and improve, and then these learnings get embedded in the collective memory of the team.

So we help ourselves prevent each other from making mistakes and we learn from each other's mistakes and we get better and stronger.

Dave Richardson

And that's what builds the trust, as well, over time.

Habib Subjally

Absolutely. Without trust, this whole thing breaks down, it completely breaks down, so I think that the culture of the team is really important.

Dave Richardson

How do you, as the leader of the team – and you've built this incredible culture within the team that's working on the investment products that you're managing – how do you mesh that and have it fit into a much bigger corporate culture, and maintain that culture in the face of a much bigger beast that's always around you?

Habib Subjally

Yeah. That's... <laughs> ...that's a very good question. Look, as a team, we have to maintain our own identity and our own culture, and that's really important. But the choice of our environment around us – and this is why coming to RBC GAM was such a big decision for us – that you need to... the host culture has to be sympathetic to this, and has to support this, and it would be very difficult for us – and, look, there are many great firms out there, but some of them have a very individualistic kind of culture, some have a shorter term culture, some have a much more aggressive culture. That just wouldn't have been right for us – and so it was really important that we went to the right host culture. We did a lot of due diligence, probably as much due diligence as they did on us...

Dave Richardson

Yes.

Habib Subjally

...before this... sort of this marriage got kind of consummated, that it works, and I think we've come to the right place for us where there is a long term culture, there is a culture of continuous learning and learning from your mistakes. There is this culture of intellectual humility, and I think that was really important.

Dave Richardson

And that humility combined with that focus on culture and teamwork, and if we go back to the start of our discussion, that optimism, is the hallmark of you as an investment manager, if I was to put it into four words. Who was your influence? Who were your influences early in your career that helped you build this philosophy and ultimately build such a successful team?

Habib Subjally

If I go back right to the beginning, I'll go back to my accounting days, actually, when I was in Audit. First of all, Audit was wonderful, where you could go into different businesses. You know, every couple of weeks you'd be in a different business, and you had a chance to sort of walk around their business and ask lots of dumb questions, and learn about that business. You kind of get a sense of, oh, wow, this is a really cool business, and initially it depended on their offices and what kind of furniture they had, and all of that, but after a while it was just... it was the culture of the people that you realized, gosh! This is a really great business! And they may work in a dump of an office really, but this is a great business. And those sorts of things. And you could go next week to another business in a similar industry that you think, God, I'd hate to work here, because it's just so process-driven and so hierarchical and, you know, there's no kind of imagination, diversity of thought here.

And it's those sorts of things that really kind of inspire you to say, wow, there's so many different ways of doing things. In the short term, sort of businesses in the same industry kind of have very similar results. But over the long term, boy, do they have different... end up in different places.

Dave Richardson

Habib, thank you very much for the time today.

Habib Subjally

It's a real pleasure. Thank you again for having me on the show.

Dave Richardson

Thank you for joining us. Look for future episodes of this podcast at www.rbcgam.com.

Disclosure

This report has been provided by RBC Global Asset Management (RBC GAM) for informational purposes only and may not be reproduced, distributed or published without the written consent of RBC Global Asset Management Inc. (RBC GAM Inc.). In Canada, this report is provided by RBC GAM Inc. (including Phillips, Hager & North Investment Management). In the United States, this report is provided by RBC Global Asset Management (U.S.) Inc., a federally registered investment adviser. In Europe this report is provided by RBC Global Asset Management (UK) Limited, which is authorised and regulated by the UK Financial Conduct Authority. In Asia, this document is provided by RBC Investment Management (Asia) Limited, to professional, institutional investors and wholesale clients only and not to the retail public. RBC Investment Management (Asia) Limited is registered with the Securities and Futures Commission (SFC) in Hong Kong.

RBC GAM is the asset management division of Royal Bank of Canada (RBC) which includes RBC GAM Inc., RBC Global Asset Management (U.S.) Inc., RBC Global Asset Management (UK) Limited, RBC Investment Management (Asia) Limited, and BlueBay Asset Management LLP, which are separate, but affiliated subsidiaries of RBC.

This report has not been reviewed by, and is not registered with any securities or other regulatory authority, and may, where appropriate, be distributed by the above-listed entities in their respective jurisdictions. Additional information about RBC GAM may be found at www.rbcgam.com.

This report is not intended to provide legal, accounting, tax, investment, financial or other advice and such information should not be relied upon for providing such advice. The investment process as described in this report may change over time. The characteristics set forth in this report are intended as a general illustration of some of the criteria considered in selecting securities for client portfolios. Not all investments in a client portfolio will meet such criteria. RBC GAM takes reasonable steps to provide up-to-date, accurate and reliable information, and believes the information to be so when printed. RBC GAM reserves the right at any time and without notice to change, amend or cease publication of the information.

Any investment and economic outlook information contained in this report has been compiled by RBC GAM from various sources. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied, is made by RBC GAM, its affiliates or any other person as to its accuracy, completeness or correctness. RBC GAM and its affiliates assume no responsibility for any errors or omissions.

All opinions and estimates contained in this report constitute RBC GAM's judgment as of the indicated date of the information, are subject to change without notice and are provided in good faith but without legal responsibility. Interest rates and market conditions are subject to change.

Return estimates are for illustrative purposes only and are not a prediction of returns. Actual returns may be higher or lower than those shown and may vary substantially over shorter time periods. It is not possible to invest directly in an unmanaged index.

A note on forward-looking statements This report may contain forward-looking statements about future performance, strategies or prospects, and possible future action. The words "may," "could," "should," "would," "suspect," "outlook," "believe," "plan," "anticipate," "estimate," "expect," "intend," "forecast," "objective" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties about general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.