MONTHLY NEWSLETTER

Fund Overview

Credit Strategies Fund Metrics Fund Performance (net of all fees and expenses)1

Year Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec YTD

2015 0.52% 1.54% 0.15% 0.55% 0.52% -0.11% 0.06% -0.95% 2.29%

2014 0.44% 1.32% 0.87% 0.85% 0.48% 0.41% 0.01% 0.09% -0.28% 0.33% 0.10% -0.27% 4.44%

2013 1.12% 0.42% 0.43% 0.52% 0.54% -2.52% 0.53% 0.21% 0.00% 1.18% 0.92% 0.94% 4.33%

2012 0.53% 0.36% -0.43% 1.33% 1.61% 0.89% 1.59% 1.06% 0.54% 1.03%

10.69%*

8.83%

Growth of $1000 Since Inception - (Mar 1, 2012 - Aug 31,2015)

Ratings reflect portfolio holdings as of Aug 31, 2015⁵

21.29% 13.72% 6.93%

Lawrence Park Asset Management Ltd. 15 York Street, 4th Floor, Toronto, Ontario, Canada M5J 0A3 www.lawrenceparkam.com

XCB:XCB CN EQUITY │BGCI: Barclays Global Corporate Index

Annualized Return

Volatility4

Sharpe Ratio4

2.29% 1.30%

2.54%

5.67% 3.74% 1.93%

0.45

Metric LPCSF XCB 2 BGCI 3

YTD Return

Total Return since

Inception1

Risk and Return Metrics

August, 2015

The Lawrence Park Credit Strategies Fund is a global credit strategy. Utilizing our extensive global experience, the managers invest primarily in domestic

and global investment grade corporate bonds with currency and rate hedges in place to protect against interest rate volatility. The Fund is actively managed

across a number of relative value and trading strategies, and is based on the founding principles of delivering capital preservation, low volatility and

consistent returns.

-1.19%

3.27% 2.06%

1.80 0.83

Canada 51%

Europe 16%

United States 31%

Asset Holdings by Region 3

0% 10% 20% 30% 40% 50%

AA

AA

AA

BB

BB

BB

1,000

1,020

1,040

1,060

1,080

1,100

1,120

1,140

1,160

1,180

1,200

1,220

1,240LPCSF XCB BGCI

Corporate Bond Index Corporate Spread Index

$1,213

$

$1,069

$1,137

2 3

1

July/August Newsletter

It’s been a challenging year for investing in global markets. Volatility is on the rise, commodity prices

have crashed, and emerging markets have been fragile. Global stock markets began the year strongly

but have since fallen back. Against this backdrop, interest rates have remained persistently low, aided

by Central Bank easing in Canada, Europe and Asia even as the US Federal Reserve has moved to a

tightening bias and sits at the precipice of hiking rates. But low rates have not been enough to make

bond or equity investors happy. Since a sharp January rally to start the year, the Canadian Bond Index

has lost 2% while the TSX has lost roughly 5%.

Fixed income is not the diversifier it used to be. Yields are eye-wateringly low, particularly after

allowing for management fees, and while rates have not trended higher there has been sufficient

volatility to make bond fund returns disappointing. And the recent poor performance of bonds during

down months in stocks has left investors scratching their heads.

First Principles: The case for Investment Grade Credit

Investors we speak to are dealing with a conundrum. They either cannot eliminate fixed income from

their portfolios (due to investment guidelines) or are unwilling to (due to concerns over equity

volatility). Most are looking to diversify their fixed income. Traditional fixed income strategies

generally fall in two camps: long-duration government-heavy bond funds which offer little yield but have

performed well in recent years due to falling rates, and High Yield strategies which rely on careful name

selection and timing to avoid default losses.

Investment Grade Credit strategies can bridge the gap between long duration and high yield. The

Investment Grade funds offered by Lawrence Park utilize low duration which minimizes their exposure

to interest rates. Our funds involve little of the default risk

associated with High Yield. Standard and Poor’s publishes a

multi-year history of default rates among bonds rated both

Investment Grade and High Yield. The difference during

distressed periods can be dramatic. Default rates among High

Yield bonds have been known to rise as high as 10%, while

Investment Grade bond defaults have never risen above 0.5%

(see graph).

Low default rates don’t mean you completely avoid price fluctuations on your portfolio. Bonds can

trade down prior to maturity for any number of reasons; perceived impairment of the company,

deteriorating sentiment in a particular sector, or a higher prevailing cost of capital in the market.

However the expectation of realized losses is far lower with an investment grade bond, as it is highly

expected to eventually mature at par.

Our strategies remove a large source of the month-to-month volatility in a generic fixed income fund

(interest rates), while maintaining a credit risk profile which remains very strong throughout the

economic cycle. Add to that an active management strategy that takes advantage of market

0

2

4

6

8

10

12

% D

efa

ult

Rat

e

Year

Investment Grade

High Yield

Source: S&P Ratings Direct

Default Rates in High Yield tend to spike during recessions

inefficiencies to generate additional gains, best-ideas selection from global markets by our team of

experienced portfolio managers, and the opportunity for upside through participation in cyclical credit

rallies, and you have a product which offers a superior risk-reward profile to many cash and bond

alternatives.

The Credit Cycle

Prior to August most market participants, if polled, would suggest the market had been ticking along in

2015; no spectacular gains but no material losses either. August was a wakeup call; with the MSCI

World Equity index trading down over 6.5% in US dollar terms, reducing the YTD gain of 4% to a YTD loss

of 2.5%.

In fact, credit markets have been in a secular decline since mid-2014, roughly in line with the end of the

Fed’s QE program. The JP Morgan US Liquid credit spread Index (JULI) widened from a low of 121bp in

June 2014 to a high of 202bp in August 2015 which translates to approximately a 6.5% drop in the

implied price of a generic 10 year corporate bond. That’s almost a 70% widening of credit spreads in 14

months.

It’s not unusual for credit spreads to widen ahead of an interest rate tightening cycle, or to commence

widening well ahead of a stock market selloff. The widening is primarily technical: investment grade

fundamentals remain sound and default rates remain near historic lows. In a recent research piece,

Wells Fargo wrote “history shows that corporate

credit spreads tend to struggle in the 3-6 months

prior to the first rate hike as investors anticipate

tighter monetary policy. Typically, credit spreads

tend to stabilize once the rate hiking cycle begins

and remain steady until tighter monetary policy

starts to slow the economy.1” While the recent

selloff in in credit has made creating outsized

returns more challenging, our active management

approach allowed us to protect capital and accumulate risk at more attractive levels. At current market

prices we prefer a credit strategy to a traditional bond strategy, which effectively owns risk near the

lows in global interest rates.

August Volatility

For the most part, the performance of our fund in August was within reason given the heavy losses

incurred in many asset classes. We did sustain some losses in the energy and pipelines sector, despite

our efforts to neutralize our exposure by shorting expensive Canadian dollar bonds against cheaper US

dollar long bonds. Illiquid markets drove the pricing relationship to extreme levels during August, and

our energy sector positions account for roughly half the losses in the portfolio for the month. We

remain bullish that these inconsistencies will correct themselves over time.

1 Wells Fargo Credit Connections, 17 July 2015.

120

130

140

150

160

170

180

190

200

210

Credit spread widening since June 2014

Source: JP Morgan

2013 Taper Tantrum

FED Removal of QE

(Dec ’13 – Oct’14)

Credit Spreads at a 3 year wide

Trading Themes

The summer months are always challenging given the lack of trading opportunities. New issue markets

were largely closed during August, and secondary trade volumes were down substantially. In calm

markets you would wait it out and generate positive accruals; while in disrupted markets you would

normally look for opportunities to generate trading gains due to dislocated bond prices. However, the

lack of liquidity in July and August made it difficult to generate trading gains. We have seen a pickup in

market liquidity since Labour Day and anticipate active markets now through to mid-December.

One notable trade was a new Capital note issued by Royal Bank of Scotland in US dollars. The bonds

pay an 8% coupon for 10 years and were trading up as much as 3% from par in secondary trading. In

tandem with the new issue RBS called a number of legacy preferred shares at par allowing us to realize

gains on some of these securities that we purchased below par. Followers of Lawrence Park will know

that Royal Bank of Scotland has long been a favourite credit of ours, and we continue to see profitable

opportunities in the name.

Conclusion

As we write this newsletter, the US Federal Reserve is pondering whether to raise rates for the first time

in almost a decade. Regardless of whether the rate hike comes in September or later, it is clear we are

moving into a new phase of the recovery cycle. We anticipate the next few years will be a period of

higher volatility and fewer discernable trends. Many assets classes will be subject to price volatility, and

explorers, producers, manufacturers, sellers, hedgers and investors alike will need to adapt and re-price

their activities. Credit spreads (with interest rate exposures hedged) are near their recent wides and

should provide an attractive investing point. Investors would do well to consider now if their portfolios

are as robust as they could be.

As always, we welcome your questions and comments.

The Lawrence Park Team

Please Read The Following:

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Auditor KPMG

Administrator CI Investments Inc, RBC Investor Services

Legal BLG

High Water Mark Permanent

FundServ CIG6451 (B),CIG6453 (G);CIG6455(H);CIG6456 (I)

Prime Brokers Deutsche Bank, Scotia Capital,TD Securities

Minimums $25,000 (B,H);$150,000 (G); $500,000 (I)

Management Fee 1.25% (H,I); 1.50% (G); 2.00% (B)

Performance Fee 10% (I); 15% (G), 20% (B,H)

Launch Date March 1, 2012

Subscription Monthly

Redemption Monthly, 45 days notice

Fund Lawrence Park Credit Strategies Fund

Structure Canadian Mutual Fund Trust

Portfolio Managers Andrew Torres, Jason Crowley

Current and prospective investors should note that the Fund utilizes long and short positions in both domestic and international fixed-income products, and may incorporate

leverage and derivative overlays. Fund performance may deviate significantly from benchmark indices shown.

Lawrence Park Asset Management Ltd. is registered with the Ontario Securities commission as a Portfolio Manager, Investment Fund Manager and Exempt Market Dealer. The Lawrence

Park Credit Strategies Fund is available in Canada to Accredited or Qualified Investors only. Please consult your advisor.

All return figures for the Lawrence Park Credit Strategies Fund (the “Fund” or “LPCSF”) are based on the A Series units and are net of management fees, performance fees,

trailing commissions (if any) and Fund expenses. Other series may have different fees and redemption terms. Monthly returns are based on monthly NAV calculations by RBC

Investor Services.

BGCI refers to the Barclays Global Corporate Index. Returns for this benchmark are calculated as excess monthly returns, or the difference between total returns of the security

and an implied Treasury portfolio matching the term-structure profile of that security. Returns are calculated in Canadian dollars, assuming currency exposures on non-Canadian

holdings are fully hedged. In the opinion of the portfolio managers, this index represents a valid benchmark for the Credit Strategies Fund on the basis it is a) based on a global

portfolio of publically traded corporate bonds, b) expressed in Canadian Dollars, and c) assumes currency and interest rate risk have been hedged from the portfolio.

The XCB is an index-based ETF that replicates the FTSE TMX Canada All Corporate Index, a benchmark index of Canadian Dollar corporate bonds published by PC Bond Analytics.

The Fund has a high % of its assets in C$ corporate bonds, and thus the FTSE TMX Canada All Corporate is a relevant index for comparing risk and return in the Fund. The FTSE

TMX Canada All Corporate Index has a high component of interest rate risk, whereas the Fund has a low component of interest rate risk.

Volatility and Sharpe calculations are based on monthly returns since inception, calculated by the Manager. The risk-free rate used for the Sharpe ratio calculation is 1.00%,

approximately equal to the average Canadian 3 month T-bill rate over the past 12 months. All comparisons to the benchmark are since inception of the Fund, March 1, 2012,

unless noted otherwise.

The Fund’s returns are not guaranteed, its value changes frequently, and past performance may not be repeated. No representations or warranties of any kind are intended or

should be inferred with respect to the economic return or the tax consequences from an investment in the Fund. Potential qualified investors should read the Fund’s offering

memorandum carefully prior to investing.

Ratings and Regional Breakdowns reflect the end of the month portfolio composition on a Total Exposure basis. Total Exposure is equal to the total directional long positions,

plus total directional short positions, excluding hedges & cash. Investors should note that because the portfolio is turned over frequently, current composition may differ

materially from the numbers stated herein.