Short and Sweet This newsletter is going to be short and sweet. The Fund is doing well thus far this year and I believe it is well positioned for the remainder of 2017. The Canadian and US economies are performing admirably and employment is surprisingly strong. Leading economic indicators in Canada, the US and most nations in the world suggest that “good times” should continue for at least another year. This does not mean that the world is without risks. It never is. Issues ranging from the political situation in North Korea to the evolving trade picture between Canada and the US are always looming, and it’s difficult to quantify this risk until something happens. However, no matter what the future holds, we believe the best way to invest is in high ROE companies. Why high ROE companies? A key characteristic of virtually all high ROE companies is high margins. A company’s profit margin is a tangible measure of the moat that it has built around it. To continue with this analogy, high margin businesses are like fortresse s or castles with deep moats and strong walls. It’s a very protective place to be in both good times and bad. This dedicated focus on high ROE companies is partly responsible for our performance. In the first quarter of 2017, the Capital Ideas Fund rose 8.4% 1 versus the TSX Composite Total Return Index, which rose 2.4% 2 . Since inception (October 1 st , 2008), the Capital Ideas Fund has delivered an annual return of 21.3% 1 net of all fees and expenses versus the TSX Composite Total Return Index, which has delivered an annual return of 6.5% 2 . VOLUME XXXIX APRIL 2017 INVESTMENT ISSUES • STRATEGIES • INSIGHTS FROM DONVILLE KENT

2 ROE REPORTER | DKAM Labor pains The past few months have seen a wave of articles and books addressing the impact of technology, automation, artificial intelligence and algorithms on employment. Some of these articles naturally flow from the ideas expounded by pundits who are still trying to understand the surprise election of Donald Trump and continue to ask “how and why did this happen?”. But much of the literature is beginning to move beyond the well-known thesis that is centered on lost manufacturing jobs in the rust belt. Jobs are starting to quietly disappear elsewhere and technology appears to be the culprit. Technology, in its various labor minimizing forms, first came to the world of agriculture centuries ago and then to manufacturing in the 1970s. However, over the past 10-15 years, technology has started to have a very similar effect on what is now North America’s “bread and butter” area of employment, namely the service industries. Thus, while the headlines for years have spoken of the hollowing out of the manufacturing sector, we are now contending with an unexpected rise in unemployment in retail, media and the financial services industries, to name a few. Many of these industries employ large numbers of what I refer to as ‘middlemen’. The boo k industry is a prime example of this point. The book industry used to be filled with a number of intermediaries or middlemen that worked in book stores, small publishing houses, distribution houses, etc. Today, a great majority of people no longer buy books the way we used to and consequently bookstores and all of the other types of tangential services in the book business that once employed a legion of middlemen have disappeared. Even the big-box chains that put the independently owned book stores out of business are becoming scarcer. So too are the jobs. Financial services and banking is another area that is undergoing rapid change. Before starting Donville Kent Asset Management in 2007, I had worked in the institutional finance area for more than 15 years. Since I left, I estimate that employment in this segment of the banking industry has decreased by 50-75%. Most big financial companies now employ significantly fewer brokers, traders, analysts, custodians and administrators than they did ten years ago. These are middlemen. Nobody is going to sympathize with an unemployed investment analyst who used to make $500,000 a year and can’t find work. If you are them, however, times are tough and aren’t likely to get better. Technology is here to stay. Ther e is a lot more “invisible” unemployment in this industry than many realize. Media has arguably faced an even sharper drop in employment. Literally as I am writing this newsletter, layoffs at ESPN are making headlines on my screen. On a more personal level, two members of my family were journalists. I say

3 ROE REPORTER | DKAM were . One of my friends was a researcher for one of the top investigative journalist shows in Canada. She lost her job two years ago and hasn’t worked in her field since. The internet has eliminated a large number of middle men from the media industry, and many aren’t really trained for anything else. Those jobs haven’t been outsourced to China or India. They have been outsourced to technology and they are not coming back. Implications for investing and for life The idea of building a moat around your career is important but not easy to do. The people who have lost their jobs in media, finance and publishing were generally well educated. They didn’t see it coming because technology moves quickly and not in a straight line (think S curves). They built a moat and then that moat suddenly disappeared. When one has built a career around a certain skill set and the industry that places value on that skillset suddenly disappears as one turns 50, it’s reall y, really difficult to become something else. In investing, our ability to find moats is a little easier. The analytical framework I use gives me some sense of which companies and industries have the best moats today and which moats are strengthening or weakening. That is how I try to position the portfolio. I try to buy reasonably priced companies in industries with strong and strengthening moats. I want you and I to be the Kings and Queens of some very strong castles. Final thoughts We live in a fascinating but turbulent time. Surround yourself with good people, and don’t lose track of the stuff that really matters. The people who work at Donville Kent are part of my moat and yours too. They are smart, honest and hardworking. Thank you Jordan, Ali, Jesse, Dominika, Chris and James. Finally, to my investors, thank you for your ongoing support.

4 ROE REPORTER | DKAM All estimates, projections and calculations have been generated by DKAM. This does not constitute advice for personal investments but rather a breakdown of how Donville Kent approaches stock analysis. 1 Time weighted rates of return for Class A Series 1, net of all fees and expenses as of March 31 st , 2016. 2 S&P TSX Composite Total Return Index is the Net Total Return version of the S&P/TSX Composite Index. 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 Bloomberg. 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.