Diversified Royalty Corp. AIR MILES Royalty Acquisition Investor Presentation August 25, 2017
Legal Disclaimer Notice The contents of this presentation are for information purposes only. This presentation does not constitute an offer to sell secu rities of Diversified Royalty Corp. (the “Company” or “DIV”) or any other entity and it is not soliciting an offer to buy any such securities. This presentation is not, and under no circumstances is it to be construed as, a prospectus, offering memorandum, advertisement or public offering of any securities referred to herein. This presentation includes market share information, industry data and forecasts obtained from independent industry publications, market research, analyst reports, company filings and reports, and other publicly available sources. Although DIV believes these sources to be generally reliable, market, industry and company data is subject to interpretation and cannot be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey or report. Accordingly, the accuracy and completeness of this data is not guaranteed. DIV has not independently verified any of the data from third party sources referred to in this presentation nor ascertained the underlying assumptions relied upon by such sources.. No representation, warranty or undertaking, express or implied, is or will be made and no responsibility or liability is or will be accepted by the Company or any of its affiliates or associates or their respective directors, officers, employees, partners, agents, securityholders or advisors as to, or in relation to, the accuracy or completeness of the information contained herein. This document may contain product names, trade names, trademarks and services marks of the Company and of other entities and organizations, all of which are the properties of their respective owners. All dollar amounts herein are expressed in Canadian dollars unless otherwise indicated. Forward-Looking Information and Statements This presentation contains “forward - looking statements” and “forward - looking information” within the meaning of applicable securities laws (collectively, “forward - looking information”) that involve known and unknown risks, uncertainties and other factors, that may cause actual results, performance or achievements or industry results, to be materially different from any future results, performance or achievements or industry results expressed or implied by such forward- looking information. Forward- looking information is identified by the use of terms and phrases such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “will”, “would”, and similar terms and phrases, including references to assumptions. Such information may involve, but is not limited to, comments with respect to strategies, expectations, planned operations or future actions. Forward-looking information in this presentation includes, without limitation, statements with respect to: the completion of the AIR MILES acquisition, the terms thereof and the expected timing therefor; the means by which DIV expects to finance the AIR MILES acquisition; DIV’s objective to use its remaining cash on hand combined with additional debt financing to fund its next trademark and royalty acquisition by the end of 2017; DIV’s board of directors’ current plan to maintain DIV’s annual dividend at $0.2225 per share; the expectation that DIV will obtain a new debt in connection with the AIR MILES acquisition and the amount thereof; the terms of the licences and the royalty payable to DIV following closing of the AIR MILES acquisition; the amount and terms of the contingent consideration; the accretive nature of the AIR MILES acquisition; forecasts by LoyaltyOne, Co . (“LoyaltyOne’) with respect to the future performance of the AIR MILES program; and DIV’s expectation that the royalty will grow at the rate of inflation over time. Forward-looking information contained in this presentation is based on certain key expectations and assumptions made by the Company, including, without limitation, the following: LoyaltyOne will continue to operate the AIR MILES program in Canada in a manner consistent with past practice; the Canadian and U.S. economies will continue to grow moderately over the next 12 to 24 months; that interest rates will not increase dramatically over the next 12 to 24 months; that DIV’s existing royalty partners will continue to make royalty payments to DIV as and when required; that the bus ine sses of DIV’s royalty partners will not experience material negative results; that DIV will continue to grow its portfolio in a manner similar to what has already been established; that tax rates and tax laws will not change significantly in Canada and the U.S.; that more small to medium private and public companies will continue to require access to alternative sources of capital; and that DIV will have the ability to raise required equity and/or debt financing on acceptable terms; that access to capital markets will remain relatively stable; and that capital markets will perform with normal levels of volatility. Although the forward-looking information contained in this presentation is based upon what the Comp any’s management believes to be reasonable assumptions, the Company cannot assure that actual results will be consistent with such information. Forward- looking information reflects current expectations of the Company’s management regarding future events and operating perf ormance as of the date of this presentation. Such information involves significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking information including, without limitation: the AIR MILES acquisition may not close on the terms or in accordance with the timing currently expected, or at all; DIV may not complete any further trademark and royalty acquisitions in 2017; debt and other financing may not be available to DIV in connection with any further trademark and royalty acquisitions completed in 2017 on terms acceptable to DIV; that the new debt for the AIR MILES acquisition may not complete on the terms currently contemplated or at all; the AIR MILES acquisition man not be accretive; the AIR MILES acquisition may not be successful; the licences to be acquired man not continue to generate royalty revenues similar to those generated in the past and may not grow at currently expected rates; that LoyaltyOne may not continue to operate the AIR MILES program in Canada in a manner consistent with past practice or at all; the relative speculative and illiquid nature of an investment in DIV; DIV’s ability to manage future growth; the limi ted diversification in DIV’s existing investments; dependence on the operations, assets and financial health of royalty partners; limited ability to exercise control or direction over royalty partners; potential defaults by royalty partners; DIV ’s ability to enforce on any default by a royalty partner; competition with other investment entities; tax matters; DIV’s ability to pay dividends in the future and the timing and amount of those dividends; reliance on key personnel; dilution of shar eholders’ interest through future financings; and general economic and political conditions. Although DIV has attempted to identify important factors that could cause actual results to differ materially from those contained in the forward-looking information and statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Although DIV believes that the assumptions and factors used in preparing, and the expectations contained in, the forward-looking information contained in this presentation are reasonable, undue reliance should not be placed on such information, and no assurance or guarantee can be given that such forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. For additional information with respect to these risks, uncertainties and assumptions, please refer to the “Risk Factors” sec tio n in each of DIV’s annual information form dated March 28, 2017 and in DIV’s other public filings available on SEDAR at www.sedar.com. The forward-looking information contained in this presentation is made as of the date hereof, and DIV does not undertake to update any forward-looking information that is contained or referenced herein except in accordance with applicable securities laws. All subsequent written and oral forward-looking information attributable to DIV or persons acting on its behalf is expressly qualified in its entirety by this cautionary statement. . 2
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