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S E P T E M B E R 2 0 1 5 EXEMPLAR CANADIAN FOCUS PORTFOLIO

Experience. Intelligent Investing.

The Exemplar Canadian Focus Portfolio had a negative return of -1.16% for the month of September, but remains positive YTD at 4.57% vs. -7.02% for the S&P TSX.

Chair Yellen failed to raise interest rates as she worried that “recent global economic and fi nancial developments may restrain economic activity somewhat and are likely to put further downward pressure on infl ation in the near term.” Was Yellen worried about the state of the currency and equity markets, or the global economy? Equity markets reacted to the lack of certainty with heightened volatility and quickly revisited previous August lows. Subsequently released disappointing economic data convinced investors there will be no need to raise rates until sometime in 2016 and markets staged a relief rally. With the threat of a stronger U.S. currency diminished for the present, a ‘Dash for Trash’ rally lifted oversold commodity and cyclical stocks off their quarter-end bottom. What happens next?

It would certainly make sense for investors to start rotating into more cyclical sectors as the current cycle matures. I just don’t think the time for such a rotation has arrived just yet. If Yellen does not feel confi dent the economy can absorb a measly 25 bps rise in interest rates, how can investors start betting on the healthy progression of this cycle?

Thus, I am staying with the view that present environment will continue to reward the NIFTY FIFTY style of investing. Companies delivering consistent earnings growth will be rewarded with premium valuations. Just look at Nike and Constellation Brands making new highs after delivering solid earnings beat. Their generous multiples did not stop investors from fl ocking to the stocks. Then there is Yum! Brands - the stock got crushed after the company missed estimates. In Canada similar forces are at work. Alimentation stock made a new high after a surprising beat

Unless otherwise stipulated Exemplar Portfolio returns are net of all fees, in Canadian dollars, refl ect class “F” shares and assume reinvestment of all distributions. Commissions, trailing commissions, management fees and expenses all may be associated with Exemplar Portfolio investments. Please read the full prospectus before investing. Except as otherwise noted the indicated rates of return are the historical annual compounded total returns including changes in share or unit value and the reinvestment of all dividends or distributions and do not take into account the sales, redemption, distribution, or optional charges or income tax payable by the unitholder or shareholder that would have reduced returns. Exemplar Portfolios are not insured or guaranteed by Canada Deposit Insurance Corporation (CDIC) or any other insurer. Exemplar Portfolios are subject to risks of loss of capital and income and their values change frequently. Past performance may not be repeated. Shares of the Portfolio are highly speculative and involve a high degree of risk. You may lose a substantial portion or even all of the money you invest in a Portfolio.

despite currency headwinds, while fl at results at Jean Coutu caused the stock to languish despite its signifi cantly lower valuation. Recent stock market weakness gave me the opportunity to start deploying the large cash hoard accumulated in both mutual funds. Despite my shopping spree, I have not made much of a dent in the cash stash, as I have decided to exit most of the pharma stock positions. There will be no shortage of unfavorable headlines (a la Clinton price gouging comments) during the hotly contested US presidential election race. In Canada, the sector looks even worse thanks to the botched Concordia equity raise and its pending bond fi nancing. So apart from making very short-term trades from both the long and short side, I will revisit this sector at a future date. The Portfolio only has a 3.51% weighting in health care stocks.

The October 19th Canadian election remains the last hurdle in my quest to get cash invested during the seasonal weakness. Not fully trusting current polls, I will remain somewhat defensively positioned until the election results are safely in the rear view mirror. In the interim I am looking for opportunities to add to my U.S. positions on weak days, while covering many of my profi table short positions. Not since 2008 has there been such opportunity to profi t from short positions - mainly in the resource sector. Teck, Major Drilling, Potash and First Quantum are some of the more profi table short positions I have recently covered.

Thank you for your continued interest in the Fund. For further information, please contact your regional Arrow Capital Management representative.

Sincerely,

Veronika HirschPortfolio ManagerArrow Capital Management Inc.