Perfect Storm 2015 has proven to be a challenging investment environment, as the third quarter saw a sharp decline in equity prices in general and in health care stocks in particular, in which we have significant investments. As of the end of September, the Capital Ideas Fund is now up 3.06% 1 for the year while the TSX Total Return Index is down -7.02% 2 . Year-to-date our returns are decent, but we were up 13.50% 3 at the end of the second quarter. Thus, while still up for the year, the Capital Ideas Fund dropped approximately 9.2% in value for the third quarter. This is very frustrating indeed. Concordia Healthcare The drop in the value of Concordia Health (CXR) from roughly $110 a share in the middle of September to $57 at the end of the month explains most of the drop in the fund in September. The Capital Ideas fund fell -7.03% 1 in September while the TSX Total Return Index was down -3.67% 2 . Excluding CXR, the fund would have been down -1.78% 1 in September. So what happened? First of all, we have owned the stock since its IPO, and our average cost is $10.90 per share. Today’s pr ice is approximately $50.00 per share. Thus, we are sitting on a roughly five bagger today, even after its sudden fall. If we include the stock we have sold over the past year as it has soared above $80 a share, we are probably closer to a seven bagger. The stock, which had been trading at $90 at the beginning of September, began to move higher as the market started to anticipate that the company was getting close to making a significant acquisition. Sure enough, CXR announced in mid-September that it was acquiring Amdipharm at an attractive valuation subject to financing. So far, everything looked great. At the same time that CXR was announcing its deal, however, the US Health Care sector was correcting sharply, and US Secretary of State Hillary Clinton VOLUME XXXIII OCTOBER 2015 INVESTMENT ISSUES • STRATEGIES • INSIGHTS FROM DONVILLE KENT

2 ROE REPORTER | DKAM announced her intention to crack down on pharmaceutical companies that were over-charging their clients. CXR was therefore trying to complete its financing as its stock, along with that of the rest of the healthcare sector, was falling sharply. This was a perfect storm. As the stock was falling, investors who had bought the stock on margin started getting margin calls. The sell-off of CXR stock accelerated further, not because there was anything wrong with the company, but because those who had bought the stock on margin had no choice. They had to sell. So, where to from here? CXR has completed its equity issue and its underlying businesses are strong. But we also know the company is carrying more debt than we would like. Going forward, we think the stock is still quite undervalued but the company will need to address its debt issue somewhere down the road. This could mean that the company raises more equity or puts itself up for sale. Regardless, at current valuations, I think the company is worth a lot more than $50 a share. On our numbers, CXR trades on 4.8x 2016 Cash Earnings and 1.1x BVPS, while earning a 24% ROE. Thoughts on Healthcare Notwithstanding the recent sharp correction in healthcare stocks, we continue to view the sector as one of the gr eat growth arenas in today’s stock market. The lack of growth in many Western countries can be explained by an aging population profile, which means that the demand for most items provided by the health care system, from drugs to outpatient services, will grow sharply in the coming years. The healthcare sector offers some of the highest margin and highest growth companies on the TSX. Following the correction, many of these companies including CXR, are trading at below market PE ratios. While share price volatility of the past few months has been a bit overwhelming, the underlying growth profile of the sector in general, and the companies we own in particular, has not changed. Final Thoughts It’s been a tough quarter. For the past two years many of the sell -offs in key sectors of the stock market occurred in sectors in which we had little or no investments. The third quarter was the first time in a while we saw a sharp correction in a sector in which we are a significant investor. I remain committed to the health care sector because I can see that the growth opportunities are immense, while valuations are reasonable. This might mean

3 ROE REPORTER | DKAM that you and I will need to endure a bit more volatility in the future than we did in the past, but I am pretty certain the rewards will be worth it. Thanks as always to my wonderful team and my patient investors. Write me if you want to chat – J.P. Donville Jason@donvillekent.com 1 Time weighted rates of return for Class A Series 1, net of all fees and expenses as of September 30, 2015 2 S&P TSX Composite Total Return Index is the Net Total Return version of the S&P/TSX Composite Index 3 Time weighted rates of return for Class A Series 1, net of all fees and expenses as of June 30, 2015 DISCLAIMER Readers are advised that the material herein should be used solely for informational purposes. Donville Kent Asset Management Inc. (DKAM) does not purport to tell or suggest which investment securities members or readers should buy or sell for themselves. Readers should always conduct their own research and due diligence and obtain professional advice before making any investment decision. DKAM will not be liable for any loss or damage caused by a reader's reliance on information obtained in any of our newsletters, presentations, special reports, email correspondence, or on our website. Our readers are solely responsible for their own investment decisions. The information contained herein does not constitute a representation by the publisher or a solicitation for the purchase or sale of securities. Our opinions and analyses are based on sources believed to be reliable and are written in good faith, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. All information contained in our newsletters, presentations or on our website should be independently verified with the companies mentioned. The editor and publisher are not responsible for errors or omissions. Past performance does not guarantee future results. Unit value and investment returns will fluctuate and there is no assurance that a fund can maintain a specific net asset value. The fund is available to investors eligible to invest under a prospectus exemption, such as accredited investors. Prospective investors should rely solely on the Fund's offering documentation, which outlines the risk factors in making a decision to invest. The S&P/TSX Composite Total Return Index ("the index") is similar to the DKAM Capital Ideas Fund LP ("the fund") in that both include publicly traded Canadian equities of various market capitalizations across several industries, and reflect both movements in the stock prices as well as reinvestment of dividend income. However, there are several differences between the fund and the index, as the fund can invest both long and short, can utilize leverage, can take concentrated positions in single equities, and may invest in companies that have smaller market capitalizations then those that are included in the index. In addition, the index does not include any fees or expenses whereas the fund data presented is net of all fees and expenses. The source of the index data is S&P/Capital IQ. DKAM receives no compensation of any kind from any companies that are mentioned in our newsletters or on our website. Any opinions expressed are subject to change without notice. The DKAM Capital Ideas Fund, employees, writers, and other related parties may hold positions in the securities that are discussed in our newsletters, presentations or on our website.