MANAGEMENT RESPONSIBILITY FOR FINANCIAL REPORTING

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2 MANAGEMENT RESPONSIBILITY FOR FINANCIAL REPORTING The accompanying audited annual financial statements have been prepared by Barometer Capital Management Inc. in its capacity as the manager (the Manager ) of the Barometer Group of Funds (the Funds ). The Manager is responsible for the information and representations contained in these financial statements. The Manager maintains appropriate processes to ensure that relevant and reliable financial information is produced. The audited annual financial statements have been prepared in accordance with International Financial Reporting Standards and include certain amounts that are based on estimates and judgements made by the Manager. The significant accounting policies which the Manager believes are appropriate for the Funds are described in Note 3 to the financial statements. On behalf of the Manager of the Funds. Gregory Guichon Gregory Guichon Chairman and Chief Executive Officer March 5, 2018

3 Deloitte LLP Bay Adelaide East 8 Adelaide Street West Suite 200 Toronto ON M5H 0A9 Tel: Fax: INDEPENDENT AUDITOR S REPORT To the Unitholders of Barometer Disciplined Leadership Tactical Income Growth Fund Barometer Disciplined Leadership Equity Fund Barometer Disciplined Leadership Balanced Fund (collectively referred to as the Funds ) We have audited the accompanying financial statements of the Funds, which comprise the statements of financial position as at and December 31, 2016, and the statements of comprehensive income, statements of changes in net assets attributable to holders of redeemable units and statements of cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

4 Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Funds as at and December 31, 2016, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards. Chartered Professional Accountants Licensed Public Accountants March 5, 2018 Page 2

5 TABLE OF CONTENTS Independent Auditor s Report Barometer Disciplined Leadership Tactical Income Growth Fund Statements of Financial Position 1 Statements of Comprehensive Income 2 Statements of Changes in Net Assets Attributable to Holders of Redeemable Units 3 Statements of Cash Flows 4 Schedule of Investment Portfolio 5 6 Fund Specific Notes to Financial Statements 7 9 Barometer Disciplined Leadership Equity Fund Statements of Financial Position 10 Statements of Comprehensive Income 11 Statements of Changes in Net Assets Attributable to Holders of Redeemable Units 12 Statements of Cash Flows 13 Schedule of Investment Portfolio Fund Specific Notes to Financial Statements Barometer Disciplined Leadership Balanced Fund Statements of Financial Position 19 Statements of Comprehensive Income 20 Statements of Changes in Net Assets Attributable to Holders of Redeemable Units 21 Statements of Cash Flows 22 Schedule of Investment Portfolio Fund Specific Notes to Financial Statements Notes to Financial Statements 28 43

6 BAROMETER DISCIPLINED LEADERSHIP TACTICAL INCOME GROWTH FUND Statements of Financial Position* As at and ASSETS Current assets Cash and cash equivalents (Note 3(k)) $ 554,796 $ 3,756,157 Interest and dividends receivable 357,935 28,326 Receivable for investments sold 1,039,179 Subscriptions receivable 813,014 29,273 Forward contracts 1,914,271 Investments, at fair value (Cost: $202,503,657; 2016: $190,148,302) 199,248, ,359, ,928, ,173,160 LIABILITIES Current liabilities Redemptions payable 1,356, ,757 Management fees payable (Note 6) 267, ,585 Distributions payable 132, ,714 Futures contracts 659,628 Forward contracts 148,371 Accounts payable and accrued liabilities 194, ,458 1,949,953 2,219,513 Net assets attributable to holders of redeemable units $ 201,978,183 $ 250,953,647 Number of redeemable units outstanding (Note 5) Class A 12,040,740 16,068,732 Class F 8,787,618 8,605,979 Net assets attributable to holders of redeemable units per class Class A $ 117,476,700 $ 160,898,783 Class F 84,501,483 90,054,864 Net assets attributable to holders of redeemable units per unit Class A $ 9.76 $ Class F Approved on behalf of the Manager, Gregory Guichon Gregory Guichon Director, Barometer Capital Management Inc. *All amounts are denoted in Canadian dollars. The accompanying notes form an integral part of these financial statements

7 BAROMETER DISCIPLINED LEADERSHIP TACTICAL INCOME GROWTH FUND Statements of Comprehensive Income* For the years ended and Income Interest for distribution purposes $ 268,113 $ 479,951 Dividend income 136,520 1,670,533 Securities lending revenue (Note 3(l)) 72 21,557 Net realized gain (loss) on sale of investments (Notes 10) 19,067,795 15,779,411 Net realized gain (loss) on future and forward contracts (Note 10) 66,385, ,876 Net change in unrealized gain (loss) on financial assets and liabilities (Note 10) (59,796,990) (1,267,452) Foreign exchange gain (loss) on cash (144,680) (92,756) Other income 20,780 43,529 25,936,836 17,511,649 Expenses Management fees (Note 6) 3,805,558 5,352,140 Custodian fees 8,396 23,563 Operating expenses (Note 3(q)) 1,259,300 1,778,717 Commissions and other portfolio transaction costs (Note 3(m)) 25, ,767 Audit fees 35,511 34,286 Legal fees 29,266 33,677 Independent review committee fees 11,991 11,895 Interest and borrowing fees 7,462 5,175,296 7,600,507 Comprehensive income (loss) before taxes $ 20,761,540 $ 9,911,142 Withholding tax 3, ,329 Increase (decrease) in net assets attributable to holders of redeemable units $ 20,757,912 $ 9,748,813 Increase (decrease) in net assets attributable to holders of redeemable units per class Class A $ 11,683,253 $ 5,498,730 Class F 9,074,659 4,230,588 Class I 19,495 Weighted average of redeemable units outstanding during the year Class A 13,308,890 20,013,881 Class F 8,298,723 10,065,895 Class I 101,256 Increase (decrease) in net assets attributable to holders of redeemable units per unit Class A $ 0.88 $ 0.27 Class F Class I 0.19 *All amounts are denoted in Canadian dollars. The accompanying notes form an integral part of these financial statements

8 BAROMETER DISCIPLINED LEADERSHIP TACTICAL INCOME GROWTH FUND Statements of Changes in Net Assets Attributable to Holders of Redeemable Units* For the years ended and 2016 Net assets Increase (decrease) Net assets attributable in net assets attributable to holders of Sale of Reinvestment attributable Distribution Redemption of to holders of redeemable units, redeemable of to holders of to redeemable redeemable units, beginning of year units distributions redeemable units unitholders units end of year 2017 Class A $ 160,898,783 $ 6,172,339 $ 11,807,112 $ 11,683,253 $ (14,530,417) $ (58,554,370) $ 117,476,700 Class F 90,054,864 19,607,351 11,286,344 9,074,659 (15,749,842) (29,771,893) 84,501,483 $ 250,953,647 $ 25,779,690 $ 23,093,456 $ 20,757,912 $ (30,280,259) $ (88,326,263) $ 201,978, Class A $ 234,671,185 $ 12,572,947 $ 7,312,068 $ 5,498,730 $ (8,871,415) $ (90,284,732) $ 160,898,783 Class F 120,698,225 29,006,348 3,212,351 4,230,588 (4,469,447) (62,623,201) 90,054,864 Class I 948,717 19,495 (37,964) (930,248) $ 356,318,127 $ 41,579,295 $ 10,524,419 $ 9,748,813 $ (13,378,826) $ (153,838,181) $ 250,953,647 *All amounts are denoted in Canadian dollars. The accompanying notes form an integral part of these financial statements

9 BAROMETER DISCIPLINED LEADERSHIP TACTICAL INCOME GROWTH FUND Statements of Cash Flows* For the years ended and Cash provided by (used in): Operating activities Increase (decrease) in net assets attributable to holders of redeemable units $ 20,757,912 $ 9,748,813 Adjustments for: Net realized (gain) loss on investment transactions (19,067,795) (15,779,411) Net realized (gain) loss on future and forward contracts (66,385,226) (876,876) Change in unrealized (gain) loss on financial assets and liabilities 59,796,990 1,267,452 Commissions and other portfolio transaction costs 25, ,767 Change in non-cash balances: Interest and dividends receivable (329,609) 388,438 Receivable for investments sold (1,039,179) Management fees payable (77,422) (153,526) Accounts payable and accrued liabilities (424,135) 180,872 Proceeds from sale of investments 288,835, ,312,881 Purchase of investments (215,817,013) (221,794,781) 66,275, ,652,629 Financing activities Proceeds from issue of redeemable units 24,995,949 41,769,805 Amount paid on redemption of redeemable units (87,223,822) (154,974,470) Distributions paid to holders of redeemable units, net of reinvested distributions (7,249,248) (2,931,115) (69,477,121) (116,135,780) Increase (decrease) in cash and cash equivalents during the year (3,201,361) (3,483,151) Cash and cash equivalents, beginning of year 3,756,157 7,239,308 Cash and cash equivalents, end of year $ 554,796 $ 3,756,157 Supplemental information: Interest paid $ 3,498 $ 7,462 Interest received $ 45,000 $ 651,907 Dividends received, net of withholding taxes $ 26,395 $ 1,724,686 *All amounts are denoted in Canadian dollars. The accompanying notes form an integral part of these financial statements

10 BAROMETER DISCIPLINED LEADERSHIP TACTICAL INCOME GROWTH FUND Schedule of Investment Portfolio* As at NUMBER OF AVERAGE FAIR % OF NET SHARES/UNITS INVESTMENTS OWNED COST VALUE ASSET VALUE BRITISH EQUITIES 720,000 GLENCORE PLC $ 4,561,969 $ 4,754, CANADIAN EQUITIES 92,200 CANADIAN NATURAL RESOURCES LTD. 3,996,870 4,141, ,800 CANADIAN PACIFIC RAILWAY LTD. 5,939,418 5,925, ,800 MANULIFE FINANCIAL CORP. 3,599,160 3,534, ,500 NATIONAL BANK OF CANADA 5,858,745 5,738, ,700 SUNCOR ENERGY INC. 5,339,768 5,570, ,200 THE BANK OF NOVA SCOTIA 3,979,392 3,909, ,713,353 28,820, U.S. EQUITIES 52,600 ABBVIE INC. 6,640,376 6,368, ,200 AMERICAN EXPRESS CO. 6,049,085 5,868, ,700 APPLE INC. 3,334,301 3,114, ,700 BANK OF AMERICA CORP. 5,673,995 5,532, ,000 BLACKROCK INC. 6,670,983 6,431, ,500 CATERPILLAR INC. 6,643,295 6,806, ,800 CITIGROUP INC. 5,331,433 5,105, ,200 D.R. HORTON INC. 6,231,261 6,023, ,100 EASTMAN CHEMICAL CO. 5,319,550 5,230, ,200 FEDEX CORP. 5,474,500 5,373, ,300 INTEL CORP. 5,557,699 5,334, ,800 JPMORGAN CHASE & CO. 6,298,346 6,132, ,400 LOCKHEED MARTIN CORP. 4,730,687 4,582, ,700 MARATHON PETROLEUM CORP. 6,254,850 6,088, ,600 MARRIOTT INTERNATIONAL INC. 5,592,641 5,539, ,500 MCDONALD'S CORP. 5,702,183 5,495, ,700 MICROSOFT CORP. 5,741,738 5,536, ,400 MORGAN STANLEY 6,667,095 6,398, ,600 NEXA RESOURCES SA 4,321,660 4,728, ,700 NORTHROP GRUMMAN CORP. 6,225,205 6,032, ,600 OCCIDENTAL PETROLEUM CORP. 6,076,992 6,142, ,500 OWENS CORNING 6,555,174 6,618, ,700 RAYTHEON CO. 4,294,908 4,162, ,400 REGIONS FINANCIAL CORP. 4,175,493 4,054, ,300 ROCKWELL AUTOMATION INC. 5,032,807 4,990, ,400 THE BOEING CO. 6,625,001 6,424, ,700 UNION PACIFIC CORP. 4,032,467 3,979, ,100 UNITEDHEALTH GROUP INC. 6,326,939 6,099, ,700 VISA INC. 6,233,826 6,095, ,500 WYNN RESORTS LTD. 5,413,845 5,382, ,228, ,674, *All amounts are denoted in Canadian dollars

11 BAROMETER DISCIPLINED LEADERSHIP TACTICAL INCOME GROWTH FUND Schedule of Investment Portfolio* As at AVERAGE FAIR % OF NET INVESTMENTS OWNED (continued) COST VALUE ASSET VALUE TOTAL INVESTMENTS OWNED $ 202,503,657 $ 199,248, COMMISSIONS AND OTHER PORTFOLIO TRANSACTION COSTS (Note 3 (m)) (66,398) NET INVESTMENTS OWNED $ 202,437, ,248, UNREALIZED GAIN (LOSS), FOREIGN EXCHANGE FORWARD CONTRACTS (Schedule 1) 1,914, OTHER ASSETS, NET 814, NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS $ 201,978, Schedule 1 Unrealized gain (loss) on foreign exchange forward contracts The Fund held the following foreign exchange forward contracts as at (in Canadian dollars): Counterparty Currency code Amounts sold Currency code Amounts bought Maturity date Unrealized gain/(loss) Credit Suisse Group AG USD (3,500,000) CAD 4,456,963 January 10, 2018 $ 75,572 Credit Suisse Group AG USD (31,500,000) CAD 40,276,845 January 10, ,326 Credit Suisse Group AG USD (26,000,000) CAD 33,020,000 January 10, ,524 Credit Suisse Group AG USD (30,200,000) CAD 38,147,130 January 10, ,985 Credit Suisse Group AG USD (8,700,000) CAD 11,070,7500 January 10, ,864 $ 1,914,271 *All amounts are denoted in Canadian dollars

12 BAROMETER DISCIPLINED LEADERSHIP TACTICAL INCOME GROWTH FUND Fund Specific Notes to Financial Statements Risk Management The investment objective of the Barometer Disciplined Leadership Tactical Income Growth Fund (the Fund ) is to achieve tax-efficient returns through exposure to a portfolio that generates income, dividends and long-term capital growth by investing in a combination of equity and fixed income securities of issuers located anywhere in the world, including those in emerging markets. Exposure may be direct or indirect from any combination of holdings such as equity and fixed income securities, investments in other mutual funds and derivatives. The Fund was established under a master declaration of trust dated January 1, 2013 (the Master Declaration of Trust ). The Manager may minimize potential adverse effects of financial instruments risk on the Fund s performance by, but not limited to, regular monitoring of the Fund s positions and market events, diversification of the investment portfolio by asset type, country, sector, term to maturity within the constraints of the stated investment objective of the Fund, and through the use of derivatives to hedge certain risk exposures. Please refer to Note 8 for a general discussion on management of financial instrument risks. Character Conversion Tax Implication The Income Tax Act (Canada) was amended by adding rules that remove the tax advantages of investment strategies that employ derivatives, such as a forward agreement, which would otherwise result in a conversion of ordinary income into capital gains. The Forward Agreement was wound up on December 18, With the windup of the Forward Agreement, the Fund used the proceeds to directly invest in the securities that it was indirectly exposed to through the Reference Fund. The Reference Fund refers to the Barometer Global Tactical Yield and Equity Fund. Concentration risk The following table represents the Fund's sector concentration as at and 2016: Percentage of net assets attributable to holders of redeemable units Portfolio by Category December 31, 2016 Industrials Financials Consumer Discretionary Energy Information Technology Materials Health Care Utilities 1.7 Fixed Income 3.7 Consumer Staples 3.8 Total investments Cash and cash equivalents Other assets less liabilities 1.1 (0.6) Total net asset value The accompanying notes form an integral part of these financial statements

13 BAROMETER DISCIPLINED LEADERSHIP TACTICAL INCOME GROWTH FUND Fund Specific Notes to Financial Statements Credit risk As at, the Fund had no significant investments in debt instruments. As at December 31, 2016, the Fund invested in debt instruments with the following S&P Global s credit ratings: Debt instruments by credit rating* Percentage of net assets attributable to holders of redeemable units December 31, 2016 BB+ 0.6 NR 1.3 *Excludes cash and cash equivalents. Currency risk The Fund had the following currency exposure (in Canadian dollars): Exposure Currency Monetary Non-monetary Total United States Dollar $ (118,085,377) $ 165,674,239 $ 47,588,862 United Kingdom Pound Sterling 4,754,225 4,754,225 (118,085,377) 170,428,464 52,343,087 Percentage of net assets attributable to holders of redeemable units (58.5) December 31, 2016 United States Dollar $ (61,852,033) $ 156,500,103 $ 94,648,070 Percentage of net assets attributable to holders of redeemable units (24.6) As at, had the Canadian dollar strengthened or weakened by 5% in relation to all currencies, with all other variables held constant, net assets attributable to holders of redeemable units of the Fund would have decreased or increased, respectively, by approximately $2,617,154 (December 31, 2016 $4,732,403). In practice, actual trading results may differ from the sensitivity analysis and the difference could be material. The amounts in the above table are based on the fair value of the Fund s financial instruments (including cash and cash equivalents and due to/from broker), as well as the underlying principal amounts of forward currency contracts, as applicable. Other financial assets (including interest and dividends receivable and receivable for investments sold) and financial liabilities (including payable for investments purchased) that were denominated in foreign currencies did not expose the Fund to significant currency risk. Futures risk Futures contracts represent standardized contracts traded on a futures exchange. Futures contracts are either bought or sold, and short selling does not occur because there is no contract borrowed in order to sell the futures contracts as the exchange cash settles the margin position each day. This results in minimal counterparty risk, as the risk that each party faces is against the futures clearing house. The clearing house sets futures margin requirements that all counterparties must settle each day with cash in order to meet the terms of each contract. The accompanying notes form an integral part of these financial statements

14 BAROMETER DISCIPLINED LEADERSHIP TACTICAL INCOME GROWTH FUND Fund Specific Notes to Financial Statements Futures risk (continued) As at and 2016, the following percentage of the Fund s net assets attributable to holders of redeemable units were comprised of investments in futures contracts: December 31, 2016 Futures contracts (19.2) Interest rate risk The following was the Fund s exposure to debt instruments by maturity, and the impact (increase or decrease) on net assets attributable to holders of redeemable units had the yield curve shifted in parallel by 25 basis points ( Sensitivity ), with all other variables held constant (in Canadian dollars): Debt instruments by maturity date* December 31, 2016 Less than 1 year $ $ 1-3 years 3-5 years Greater than 5 years 9,292,563 $ $ 9,292,563 Sensitivity 139,109 *Excludes cash and cash equivalents and preferred shares as applicable. The above sensitivity analysis assumes no changes in default risk, liquidity risk or other market risk. In practice, actual trading results may differ from the above sensitivity analysis and the difference could be material. Other price risk As at, 99% (December 31, %) of the Fund s net assets attributable to holders of redeemable units were comprised of net equity investments that were traded on North American stock exchanges. If equity prices on the North American stock exchanges had increased or decreased by 10% as at year end, with all other factors remaining constant, net assets attributable to holders of redeemable units could possibly have increased or decreased, respectively, by approximately $19,924,894 (December 31, 2016 $23,587,477). In practice, the actual results may differ from this sensitivity analysis and the difference could be material. Securities lending For the years ended and 2016, the following tables present a breakdown of the gross and net income earned from securities lending transactions: December 31, 2016 Amount Percentage Amount Percentage Gross Income (net of withholding tax) $ $ 35, Net Income , Difference $ $ 14, The difference between the gross and net income earned was paid to CIBC Mellon Global Securities Services Company, the securities lending program manager. Soft dollar commissions A portion of brokerage commissions paid was used to cover research and market data services, termed soft dollar commissions. The value of the research and market data services included in the commissions paid by the Fund to those brokers for the year ended was $29,304 (December 31, 2016 $51,798). The accompanying notes form an integral part of these financial statements

15 BAROMETER DISCIPLINED LEADERSHIP EQUITY FUND Statements of Financial Position* As at and ASSETS Current assets Cash and cash equivalents (Note 3(k)) $ 604,754 $ 757,322 Interest and dividends receivable 3,372 14,555 Subscriptions receivable 10,500 2,078 Forward contracts 302,811 Investments, at fair value (Cost: $27,390,429; 2016: $28,512,575) 30,600,438 30,886,461 31,521,875 31,660,416 LIABILITIES Current liabilities Redemptions payable 84,728 Management fees payable (Note 6) 37,048 39,940 Futures contracts 9,036 Forward contracts 9,426 Accounts payable and accrued liabilities 48,205 48,332 85, ,462 Net assets attributable to holders of redeemable units $ 31,436,622 $ 31,468,954 Number of redeemable units outstanding (Note 5) Class A 1,100,129 1,408,151 Class F 1,240,204 1,206,439 Net assets attributable to holders of redeemable units per class Class A $ 14,425,739 $ 16,682,531 Class F 17,010,883 14,786,423 Net assets attributable to holders of redeemable units per unit Class A $ $ Class F Approved on behalf of the Manager, Gregory Guichon Gregory Guichon Director, Barometer Capital Management Inc. *All amounts are denoted in Canadian dollars. The accompanying notes form an integral part of these financial statements

16 BAROMETER DISCIPLINED LEADERSHIP EQUITY FUND Statements of Comprehensive Income* For the years ended and Income Interest for distribution purposes $ 1,721 $ 12,110 Dividend income 245, ,439 Securities lending revenue (Note 3(l)) 40,986 83,657 Net realized gain (loss) on sale of investments (Note 10) 2,784,224 2,875,485 Net realized gain (loss) on future and forward contracts (Note 10) 71,893 (340,544) Net change in unrealized gain (loss) on financial assets and liabilities (Note 10) 1,158,584 (258,420) Foreign exchange gain (loss) on cash (2,662) (28,653) 4,300,062 2,673,074 Expenses Management fees (Note 6) 497, ,691 Custodian fees 10,762 13,218 Operating expenses (Note 3(q)) 116, ,210 Commissions and other portfolio transaction costs (Note 3(m)) 251, ,232 Audit fees 19,368 18,755 Legal fees 2,990 5,081 Independent review committee fees 5,995 5, ,839 1,080,134 Comprehensive income (loss) before taxes $ 3,395,223 $ 1,592,940 Withholding tax 16,330 25,917 Increase (decrease) in net assets attributable to holders of redeemable units $ 3,378,893 $ 1,567,023 Increase (decrease) in net assets attributable to holders of redeemable units per class Class A $ 1,527,979 $ 716,997 Class F 1,850, ,026 Weighted average of redeemable units outstanding during the year Class A 1,215,715 1,506,960 Class F 1,288,675 1,403,729 Increase (decrease) in net assets attributable to holders of redeemable units per unit Class A $ 1.26 $ 0.48 Class F *All amounts are denoted in Canadian dollars. The accompanying notes form an integral part of these financial statements

17 BAROMETER DISCIPLINED LEADERSHIP EQUITY FUND Statements of Changes in Net Assets Attributable to Holders of Redeemable Units* For the years ended and 2016 Net assets Increase (decrease) Net assets attributable in net assets attributable to holders of Sale of attributable Redemption of to holders of redeemable units, redeemable to holders of redeemable redeemable units, beginning of year units redeemable units units end of year 2017 Class A $ 16,682,531 $ 2,786,930 $ 1,527,979 $ (6,571,701) $ 14,425,739 Class F 14,786,423 5,670,228 1,850,914 (5,296,682) 17,010,883 $ 31,468,954 $ 8,457,158 $ 3,378,893 $ (11,868,383) $ 31,436, Class A $ 17,449,480 $ 4,555,031 $ 716,997 $ (6,038,977) $ 16,682,531 Class F 17,082,536 5,434, ,026 (8,580,608) 14,786,423 $ 34,532,016 $ 9,989,500 $ 1,567,023 $ (14,619,585) $ 31,468,954 *All amounts are denoted in Canadian dollars. The accompanying notes form an integral part of these financial statements

18 BAROMETER DISCIPLINED LEADERSHIP EQUITY FUND Statements of Cash Flows* For the years ended and Cash provided by (used in): Operating activities Increase (decrease) in net assets attributable to holders of redeemable units $ 3,378,893 $ 1,567,023 Adjustments for: Net realized (gain) loss on investment transactions (2,784,224) (2,875,485) Net realized (gain) loss on future and forward contracts (71,893) 340,544 Change in unrealized (gain) loss on financial assets and liabilities (1,158,584) 258,420 Commissions and other portfolio transaction costs 251, ,232 Change in non-cash balances: Interest and dividends receivable 11,183 (453) Receivable for investments sold 991,233 Payable for investments purchased (1,259,680) Management fees payable (2,892) (2,958) Accounts payable and accrued liabilities (127) 10,520 Proceeds from sale of investments 116,041, ,203,436 Purchase of investments (112,313,223) (156,688,277) 3,351,807 1,881,555 Financing activities Proceeds from issue of redeemable units 8,448,736 10,217,125 Amount paid on redemption of redeemable units (11,953,111) (15,001,176) (3,504,375) (4,784,051) Increase (decrease) in cash and cash equivalents during the year (152,568) (2,902,496) Cash and cash equivalents, beginning of year 757,322 3,659,818 Cash and cash equivalents, end of year $ 604,754 $ 757,322 Supplemental information: Interest paid $ 793 $ 2,557 Interest received $ 117 $ 9,105 Dividends received, net of withholding taxes $ 240,169 $ 303,069 *All amounts are denoted in Canadian dollars. The accompanying notes form an integral part of these financial statements

19 BAROMETER DISCIPLINED LEADERSHIP EQUITY FUND Schedule of Investment Portfolio* As at NUMBER OF AVERAGE FAIR % OF NET SHARES/UNITS INVESTMENTS OWNED COST VALUE ASSET VALUE CANADIAN EQUITIES 331,100 BIG BLOCKCHAIN INTELLIGENCE GROUP INC. $ 777,116 $ 496, ,100 BOMBARDIER INC. 828, , ,600 CANOPY GROWTH CORP. 846,641 1,475, ,700 COTT CORP. 831, , ,955 GOLDMONEY INC. 722, , ,700 LITHIUM AMERICAS CORP. 889, , ,500 SPIN MASTER CORP. 527, , ,600 WASTE CONNECTIONS INC. 759, , ,182,622 6,748, U.S. EQUITIES 7,800 ABBVIE INC. 736, , ,100 ADOBE SYSTEMS INC. 789, , ,300 CITIZENS FINANCIAL GROUP INC. 869, , ,300 COMERICA INC. 889, , ,000 D.R. HORTON INC. 709, , ,200 E*TRADE FINANCIAL CORP. 866,765 1,067, ,200 ELDORADO RESORTS INC. 882, , ,214 FAIRFAX AFRICA HOLDINGS CORP. 399, , ,884 FLIR SYSTEMS INC. 680, , ,700 FORTIVE CORP. 802, , ,000 INTEL CORP. 842, , ,800 IRHYTHM TECHNOLOGIES INC. 902,774 1,108, ,000 MARRIOTT INTERNATIONAL INC. 815, , ,500 NVIDIA CORP. 621, , ,300 OVERSTOCK.COM INC. 843,864 1,144, ,500 SALESFORCE.COM INC. 766, , ,900 SANTANDER CONSUMER USA HOLDINGS INC. 847, , ,600 SVB FINANCIAL GROUP. 863,991 1,053, ,300 T. ROWE PRICE GROUP INC. 813, , ,000 TENCENT HOLDINGS LTD. 822, , ,600 THE CHARLES SCHWAB CORP. 865, , ,600 TRIMBLE NAVIGATION LTD. 556, , ,600 TWITTER INC. 779, , ,800 UNITED RENTALS INC. 806,714 1,033, ,000 WYNN RESORTS LTD. 816, , ,000 XPO LOGISTICS INC. 842,329 1,032, ,500 ZYNGA INC. 774, , ,207,807 23,851, *All amounts are denoted in Canadian dollars

20 BAROMETER DISCIPLINED LEADERSHIP EQUITY FUND Schedule of Investment Portfolio* As at AVERAGE FAIR % OF NET INVESTMENTS OWNED (continued) COST VALUE ASSET VALUE TOTAL INVESTMENTS OWNED $ 27,390,429 $ 30,600, COMMISSIONS AND OTHER PORTFOLIO TRANSACTION COSTS (Note 3(m)) (28,122) NET INVESTMENTS OWNED $ 27,362,307 30,600, UNREALIZED GAIN (LOSS), FOREIGN EXCHANGE FORWARD CONTRACTS (Schedule 1) 302, OTHER ASSETS, NET 533, NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS $ 31,436, Schedule 1 Unrealized gain (loss) on foreign exchange forward contracts The Fund held the following foreign exchange forward contracts as at (in Canadian dollars): Counterparty Currency code Amounts sold Currency code Amounts bought Maturity date Unrealized gain/(loss) Credit Suisse Group AG USD (5,700,000) CAD 7,258,483 January 10, 2018 $ 123,075 Credit Suisse Group AG USD (4,000,000) CAD 5,080,000 January 10, ,697 Credit Suisse Group AG USD (2,100,000) CAD 2,652,615 January 10, ,780 Credit Suisse Group AG USD (1,600,000) CAD 2,056,752 January 10, ,830 Credit Suisse Group AG USD (375,000) CAD 482,325 January 10, ,890 Credit Suisse Group AG USD (800,000) CAD 1,018,000 January 10, ,539 $ 302,811 *All amounts are denoted in Canadian dollars

21 BAROMETER DISCIPLINED LEADERSHIP EQUITY FUND Fund Specific Notes to Financial Statements Risk Management The investment objective of the Barometer Disciplined Leadership Equity Fund (the Fund ) is to achieve long-term capital appreciation by investing primarily in equity securities without geographic restrictions. The Fund s holdings are not restricted by market capitalization size or sector. However, due to the Trustee s strict liquidity requirements, the Trustee will focus the Fund s investments in actively traded securities. The Fund was established under a master declaration of trust dated January 1, 2014 (the Master Declaration of Trust ). The Manager may minimize potential adverse effects of financial instruments risk on the Fund s performance by, but not limited to, regular monitoring of the Fund s positions and market events, diversification of the investment portfolio by asset type, country, sector, term to maturity within the constraints of the stated investment objective of the Fund, and through the use of derivatives to hedge certain risk exposures. Please refer to Note 8 for a general discussion on management of financial instrument risks. Concentration risk The following table represents the Fund's sector concentration as at and 2016: Percentage of net assets attributable to holders of redeemable units Portfolio by Category December 31, 2016 Information Technology Financials Consumer Discretionary Industrials Health Care Consumer Staples 2.4 Materials Energy 23.1 Utilities 2.4 Total investments Cash and cash equivalents Other assets less liabilities 0.7 (0.4) Total net asset value Credit risk As at and 2016, the Fund had no significant investments in debt instruments. Currency risk The Fund had the following currency exposure (in Canadian dollars): Exposure Currency Monetary Non-monetary Total United States Dollar $ (18,080,426) $ 23,851,944 $ 5,771,518 Percentage of net assets attributable to holders of redeemable units (57.5) December 31, 2016 United States Dollar $ (5,809,718) $ 14,611,240 $ 8,801,522 Percentage of net assets attributable to holders of redeemable units (18.5) The accompanying notes form an integral part of these financial statements

22 BAROMETER DISCIPLINED LEADERSHIP EQUITY FUND Fund Specific Notes to Financial Statements Currency risk (continued) As at, had the Canadian dollar strengthened or weakened by 5% in relation to all currencies, with all other variables held constant, net assets attributable to holders of redeemable units of the Fund would have decreased or increased, respectively, by approximately $288,576 (December 31, 2016 $440,076). In practice, actual trading results may differ from the sensitivity analysis and the difference could be material. The amounts in the above table are based on the fair value of the Fund s financial instruments (including cash and cash equivalents and due to/from broker), as well as the underlying principal amounts of forward currency contracts, as applicable. Other financial assets (including interest and dividends receivable and receivable for investments sold) and financial liabilities (including payable for investments purchased) that were denominated in foreign currencies did not expose the Fund to significant currency risk. Futures risk Futures contracts represent standardized contracts traded on a futures exchange. Futures contracts are either bought or sold, and short selling does not occur because there is no contract borrowed in order to sell the futures contracts as the exchange cash settles the margin position each day. This results in minimal counterparty risk, as the risk that each party faces is against the futures clearing house. The clearing house sets futures margin requirements that all counterparties must settle each day with cash in order to meet the terms of each contract. As at and 2016, the following percentage of the Fund s net assets attributable to holders of redeemable units were comprised of investments in futures contracts: December 31, 2016 Futures contracts (2.1) Interest rate risk The majority of the Fund s financial assets and liabilities were non-interest bearing. As at and 2016, the Fund was not subject to significant amounts of risk due to fluctuations in the prevailing levels of market interest rates. Other price risk As at, 97% (December 31, %) of the Fund s net assets attributable to holders of redeemable units were comprised of net equity investments that were traded on North American stock exchanges. If equity prices on the North American stock exchanges had increased or decreased by 10% as at year end, with all other factors remaining constant, net assets attributable to holders of redeemable units could possibly have increased or decreased, respectively, by approximately $3,060,044 (December 31, 2016 $3,088,646). In practice, the actual results may differ from this sensitivity analysis and the difference could be material. Securities lending For the years ended and 2016, the following tables present a breakdown of the gross and net income earned from securities lending transactions: December 31, 2016 Amount Percentage Amount Percentage Gross Income (net of withholding tax) $ 68, $ 139, Net Income 40, , Difference $ 27, $ 55, The difference between the gross and net income earned was paid to CIBC Mellon Global Securities Services Company, the securities lending program manager. The accompanying notes form an integral part of these financial statements

23 BAROMETER DISCIPLINED LEADERSHIP EQUITY FUND Fund Specific Notes to Financial Statements Soft dollar commissions A portion of brokerage commissions paid was used to cover research and market data services, termed soft dollar commissions. The value of the research and market data services included in the commissions paid by the Fund to those brokers for the year ended was $7,354 (December 31, 2016 $4,780). The accompanying notes form an integral part of these financial statements

24 BAROMETER DISCIPLINED LEADERSHIP BALANCED FUND Statements of Financial Position* As at and ASSETS Current assets Cash and cash equivalents (Note 3(k)) $ 2,487,414 $ 2,513,044 Interest and dividends receivable 497, ,829 Receivable for investments sold 120,950 Subscriptions receivable 85,624 55,885 Forward contracts 403,108 Investments, at fair value (Cost: $97,088,749; 2016: $82,130,310) 107,643,180 91,669, ,237,911 94,673,061 LIABILITIES Current liabilities Redemptions payable 89, Management fees payable (Note 6) 122, ,024 Performance fees payable (Note 6) 305,805 1,042,213 Distributions payable 42, Future contracts 49,698 Forward contracts 33,386 Accounts payable and accrued liabilities 71,416 45, ,646 1,276,863 Net assets attributable to holders of redeemable units $ 110,605,265 $ 93,396,198 Number of redeemable units outstanding (Note 5) Class A 3,882,015 3,685,258 Class F 5,398,764 4,538,294 Class I 273, ,586 Net assets attributable to holders of redeemable units per class Class A $ 44,287,105 $ 40,160,275 Class F 62,937,005 50,092,139 Class I 3,381,155 3,143,784 Net assets attributable to holders of redeemable units per unit Class A $ $ Class F Class I Approved on behalf of the Manager, Gregory Guichon Gregory Guichon Director, Barometer Capital Management Inc. *All amounts are denoted in Canadian dollars. The accompanying notes form an integral part of these financial statements

25 BAROMETER DISCIPLINED LEADERSHIP BALANCED FUND Statements of Comprehensive Income* For the years ended and Income Interest for distribution purposes $ 1,183,051 $ 1,097,297 Dividend income 2,341,822 1,272,504 Securities lending revenue (Note 3(l)) 6,237 3,845 Net realized gain (loss) on sale of investments (Note 10) 6,328,193 3,799,624 Net realized gain (loss) on future and forward contracts (Note 10) (645,528) (433,764) Net change in unrealized gain (loss) on financial assets and liabilities (Note 10) 1,529,772 6,131,854 Foreign exchange gain (loss) on cash 71,233 19,242 Other income 2,362 3,486 10,817,142 11,894,088 Expenses Management fees (Note 6) 1,558,197 1,228,663 Performance fees (Note 6) 305,807 1,042,213 Custodian fees 16,268 15,060 Operating expenses (Note 3(q)) 221, ,324 Commissions and other portfolio transaction costs (Note 3(m)) 384, ,093 Audit fees 19,368 18,755 Legal fees 7,065 9,318 Independent review committee fees 5,995 5,947 2,518,030 2,671,373 Comprehensive income (loss) before taxes $ 8,299,112 $ 9,222,715 Withholding tax 89,122 79,082 Increase (decrease) in net assets attributable to holders of redeemable units $ 8,209,990 $ 9,143,633 Increase (decrease) in net assets attributable to holders of redeemable units per class Class A $ 3,188,837 $ 3,838,123 Class F 4,708,829 4,897,208 Class I 312, ,302 Weighted average of redeemable units outstanding during the year Class A 4,007,082 3,471,057 Class F 5,044,771 4,013,424 Class I 273, ,661 Increase (decrease) in net assets attributable to holders of redeemable units per unit Class A $ 0.80 $ 1.11 Class F Class I *All amounts are denoted in Canadian dollars. The accompanying notes form an integral part of these financial statements

26 BAROMETER DISCIPLINED LEADERSHIP BALANCED FUND Statements of Changes in Net Assets Attributable to Holders of Redeemable Units* For the years ended and 2016 Net assets Increase (decrease) Net assets attributable in net assets attributable to holders of Sale of Reinvestment attributable Distribution Redemption to holders of redeemable units, redeemable of to holders of to of redeemable redeemable units, beginning of year units distributions redeemable units unitholders units end of year 2017 Class A $ 40,160,275 $ 14,276,847 $ 1,025,610 $ 3,188,837 $ (1,200,306) $ (13,164,158) $ 44,287,105 Class F 50,092,139 25,214,169 1,226,295 4,708,829 (1,525,675) (16,778,752) 62,937,005 Class I 3,143,784 81, ,324 (81,888) (74,952) 3,381,155 $ 93,396,198 $ 39,491,016 $ 2,333,792 $ 8,209,990 $ (2,807,869) $ (30,017,862) $ 110,605, Class A $ 33,228,416 $ 15,098,234 $ 895,199 $ 3,838,123 $ (1,045,864) $ (11,853,833) $ 40,160,275 Class F 34,275,108 20,933,061 1,019,655 4,897,208 (1,216,561) (9,816,332) 50,092,139 Class I 3,570,593 85, ,302 (87,757) (833,034) 3,143,784 $ 71,074,117 $ 36,031,295 $ 2,000,534 $ 9,143,633 $ (2,350,182) $ (22,503,199) $ 93,396,198 *All amounts are denoted in Canadian dollars. The accompanying notes form an integral part of these financial statements

27 BAROMETER DISCIPLINED LEADERSHIP BALANCED FUND Statements of Cash Flows* For the years ended and Cash provided by (used in): Operating activities Increase (decrease) in net assets attributable to holders of redeemable units $ 8,209,990 $ 9,143,633 Adjustments for: Net realized (gain) loss on investment transactions (6,328,193) (3,799,624) Net realized (gain) loss on future and forward contracts 645, ,764 Change in unrealized (gain) loss on financial assets and liabilities (1,529,772) (6,131,854) Commissions and other portfolio transaction costs 384, ,093 Change in non-cash balances: Interest and dividends receivable (62,806) (122,025) Receivable for investments sold (120,950) Management fees payable 17,916 22,122 Performance fees payable (736,408) 944,839 Accounts payable and accrued liabilities 25,671 (927) Proceeds from sale of investments 200,456, ,215,332 Purchase of investments (210,088,208) (142,040,271) (9,126,656) (19,127,918) Financing activities Proceeds from issue of redeemable units 39,461,277 36,001,671 Amount paid on redemption of redeemable units (29,928,699) (22,712,465) Distributions paid to holders of redeemable units, net of reinvested distributions (431,552) (368,408) 9,101,026 12,920,798 Increase (decrease) in cash and cash equivalents during the year (25,630) (6,207,120) Cash and cash equivalents, beginning of year 2,513,044 8,720,164 Cash and cash equivalents, end of year $ 2,487,414 $ 2,513,044 Supplemental information: Interest paid $ 4,679 $ 693 Interest received $ 1,219,961 $ 1,028,757 Dividends received, net of withholding taxes $ 2,152,983 $ 1,137,627 *All amounts are denoted in Canadian dollars. The accompanying notes form an integral part of these financial statements

28 BAROMETER DISCIPLINED LEADERSHIP BALANCED FUND Schedule of Investment Portfolio* As at PAR VALUE $ /NUMBER OF AVERAGE FAIR % OF NET SHARES/UNITS INVESTMENTS OWNED COST VALUE ASSET VALUE CANADIAN EQUITIES 151,600 ALGONQUIN POWER & UTILITIES CORP. $ 2,113,198 $ 2,131, ,100 ALTUS GROUP LTD. 2,775,909 2,773, ,100 BANK OF MONTREAL PREFERRED SHARES 4.40% 2,075,251 2,118, ,100 BROOKFIELD INFRASTRUCTURE PARTNERS LP PREFERRED SHARES 5% 2,802,500 2,863, ,000 BROOKFIELD RENEWABLE PARTNERS LP PREFERRED SHARES 5% 2,500,000 2,544, ,000 CANADIAN IMPERIAL BANK OF COMMERCE PREFERRED SHARES 4.40% 1,450,000 1,479, ,600 CANADIAN PACIFIC RAILWAY LTD. 2,900,938 2,893, ,300 CARGOJET INC. 1,628,955 1,659, ,100 CI FINANCIAL CORP. 2,139,051 2,205, ,000 ENBRIDGE INC. PREFERRED SHARES 5.15% 2,250,000 2,310, ,900 LABRADOR IRON ORE ROYALTY CORP. 2,894,171 4,077, ,700 NATIONAL BANK OF CANADA 2,841,045 2,991, ,400 PEMBINA PIPELINE CORP. PREFERRED SHARES 4.90% 2,810,000 2,824, ,400 POLARIS INFRASTRUCTURE INC. 1,540,898 2,545, ,800 QUEBECOR INC. 2,232,420 2,199, ,200 SUN LIFE FINANCIAL INC. 2,813,161 2,915, ,000 SUNCOR ENERGY INC. 2,776,373 3,092, ,700 TECK RESOURCES LTD. 2,783,103 2,816, ,200 TFI INTERNATIONAL INC. 2,820,669 2,931, ,800 WESTSHORE TERMINALS INVESTMENT CORP. 1,882,669 1,887, ,300 WHITECAP RESOURCES INC. 2,845,040 2,893, ,875,351 54,154, CANADIAN FIXED INCOME 2,000,000 CARGOJET INC. 4.65% 31DEC21 2,000,000 2,312, ,925,000 ENBRIDGE INC % 27SEP77 1,930,267 1,916, ,500,000 FIERA CAPITAL CORP. 5% 30JUN23 1,500,000 1,532, ,000,000 HYDRO ONE LTD. 4% 30SEP27 999,000 1,115, ,760,000 PARKLAND FUEL CORP. 6% 21NOV22 1,771,368 1,840, ,500,000 PREMIUM BRANDS HOLDINGS CORP. 4.60% 31DEC23 2,500,000 2,837, ,700,635 11,554, *All amounts are denoted in Canadian dollars

29 BAROMETER DISCIPLINED LEADERSHIP BALANCED FUND Schedule of Investment Portfolio* As at PAR VALUE $ /NUMBER OF AVERAGE FAIR % OF NET SHARES/UNITS INVESTMENTS OWNED (continued) COST VALUE ASSET VALUE U.S. EQUITIES 2,300 ALPHABET INC. $ 2,935,838 $ 3,013, ,200 ANTHEM INC. 2,624,450 3,155, ,300 APPLE INC. 1,806,455 2,817, ,400 BANK OF AMERICA CORP. 2,659,719 3,045, ,800 BLACKROCK INC. 3,168,840 3,087, ,700 CATERPILLAR INC. 2,652,047 3,294, ,200 INTEL CORP. 2,666,316 2,901, ,700 LOCKHEED MARTIN CORP. 2,858,053 3,095, ,800 MICROSOFT CORP. 2,526,459 3,834, ,400 RAYTHEON CO. 1,989,410 2,681, ,400 THE HOME DEPOT INC. 2,737,413 2,705, ,500 VALERO ENERGY CORP. 2,524,134 3,279, ,200 VISA INC. 2,499,944 3,169, ,649,078 40,078, U.S. FIXED INCOME 1,400,000 GFL ENVIRONMENTAL INC % 01FEB21 1,863,685 1,855, TOTAL INVESTMENTS OWNED 97,088, ,643, COMMISSIONS AND OTHER PORTFOLIO TRANSACTION COSTS (Note 3(m)) (71,986) NET INVESTMENTS OWNED $ 97,016, ,643, UNREALIZED GAIN (LOSS), FOREIGN EXCHANGE FORWARD CONTRACTS (Schedule 1) 403, OTHER ASSETS, NET 2,558, NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS $ 110,605, Schedule 1 Unrealized gain (loss) on foreign exchange forward contracts The Fund held the following foreign exchange forward contracts as at (in Canadian dollars): Counterparty Currency code Amounts sold Currency code Amounts bought Maturity date Unrealized gain/(loss) Credit Suisse Group AG USD (8,450,000) CAD 10,760,382 January 10, 2018 $ 182,452 Credit Suisse Group AG USD (9,400,000) CAD 11,987,820 January 10, ,656 $ 403,108 *All amounts are denoted in Canadian dollars

30 BAROMETER DISCIPLINED LEADERSHIP BALANCED FUND Fund Specific Notes to Financial Statements Risk Management The investment objective of the Barometer Disciplined Leadership Balanced Fund (the Fund ) is to achieve longterm capital appreciation by investing primarily in equity and fixed income securities without geographic restrictions. The Fund s holdings are not restricted by market capitalization size or sector. However, due to the Trustee s strict liquidity requirements, the Trustee will focus the Fund s investments in actively traded equity and income securities. The Fund was established under a master declaration of trust dated January 1, 2015 (the Master Declaration of Trust ). The Manager may minimize potential adverse effects of financial instruments risk on the Fund s performance by, but not limited to, regular monitoring of the Fund s positions and market events, diversification of the investment portfolio by asset type, country, sector, term to maturity within the constraints of the stated investment objective of the Fund, and through the use of derivatives to hedge certain risk exposures. Please refer to Note 8 for a general discussion on management of financial instrument risks. Concentration risk The following table represents the Fund's sector concentration as at and 2016: Percentage of net assets attributable to holders of redeemable units Portfolio by Category December 31, 2016 Industrials Financials Information Technology Energy Fixed Income Utilities Materials Consumer Discretionary Health Care 2.9 Real Estate 2.5 Consumer Staples 1.7 Total investments Cash and cash equivalents Other assets less liabilities 0.4 (1.0) Total net asset value Credit risk As at and 2016, the Fund invested in debt instruments with the following S&P Global s credit ratings: Debt instruments by credit rating* Percentage of net assets attributable to holders of redeemable units BBB- 1.7 BB- 1.7 B- 1.7 NR 7.0 *Excludes cash and cash equivalents

31 BAROMETER DISCIPLINED LEADERSHIP BALANCED FUND Fund Specific Notes to Financial Statements Credit risk (continued) Debt instruments by credit rating* Percentage of net assets attributable to holders of redeemable units December 31, 2016 BBB+ 2.8 BBB 2.4 BB+ 5.2 BB- 4.7 B 1.5 B- 2.2 NR 5.0 *Excludes cash and cash equivalents. Currency risk The Fund had the following currency exposure (in Canadian dollars): Exposure Currency Monetary Non-monetary Total United States Dollar $ (21,082,191) $ 41,934,140 $ 20,851,949 Percentage of net assets attributable to holders of redeemable units (19.1) December 31, 2016 United States Dollar $ (20,347,921) $ 40,990,516 $ 20,642,595 Percentage of net assets attributable to holders of redeemable units (21.8) As at, had the Canadian dollar strengthened or weakened by 5% in relation to all currencies, with all other variables held constant, net assets attributable to holders of redeemable units of the Fund would have decreased or increased, respectively, by approximately $ 1,042,597 (December 31, 2016 $1,032,130). In practice, actual trading results may differ from the sensitivity analysis and the difference could be material. The amounts in the above table are based on the fair value of the Fund s financial instruments (including cash and cash equivalents and due to/from broker), as well as the underlying principal amounts of forward currency contracts, as applicable. Other financial assets (including interest and dividends receivable and receivable for investments sold) and financial liabilities (including payable for investments purchased) that were denominated in foreign currencies did not expose the Fund to significant currency risk. Futures risk Futures contracts represent standardized contracts traded on a futures exchange. Futures contracts are either bought or sold, and short selling does not occur because there is no contract borrowed in order to sell the futures contracts as the exchange cash settles the margin position each day. This results in minimal counterparty risk, as the risk that each party faces is against the futures clearing house. The clearing house sets futures margin requirements that all counterparties must settle each day with cash in order to meet the terms of each contract. As at and 2016, the following percentage of the Fund s net assets attributable to holders of redeemable units were comprised of investments in futures contracts: December 31, 2016 Futures contracts (3.9)

32 BAROMETER DISCIPLINED LEADERSHIP BALANCED FUND Fund Specific Notes to Financial Statements Interest rate risk The following was the Fund s exposure to debt instruments by maturity, and the impact (increase or decrease) on net assets attributable to holders of redeemable units had the yield curve shifted in parallel by 25 basis points ( Sensitivity ), with all other variables held constant (in Canadian dollars): Debt instruments by maturity date* December 31, 2016 Less than 1 year $ $ 2,626, years 3-5 years 6,008,051 6,818,821 Greater than 5 years 7,401,453 12,747,770 $ 13,409,504 $ 22,192,696 Sensitivity 13, ,191 *Excludes cash and cash equivalents and preferred shares as applicable. The above sensitivity analysis assumes no changes in default risk, liquidity risk or other market risk. In practice, actual trading results may differ from the above sensitivity analysis and the difference could be material. Other price risk As at, 85% (December 31, %) of the Fund s net assets attributable to holders of redeemable units were comprised of net equity investments that were traded on North American stock exchanges. If equity prices on the North American stock exchanges had increased or decreased by 10% as at year end, with all other factors remaining constant, net assets attributable to holders of redeemable units could possibly have increased or decreased, respectively, by approximately $9,423,368 (December 31, 2016 $6,947,661). In practice, the actual results may differ from this sensitivity analysis and the difference could be material. Securities lending For the years ended and 2016, the following tables present a breakdown of the gross and net income earned from securities lending transactions: December 31, 2016 Amount Percentage Amount Percentage Gross Income (net of withholding tax) $ 10, $ 6, Net Income 6, , Difference $ 4, $ 2, The difference between the gross and net income earned was paid to CIBC Mellon Global Securities Services Company, the securities lending program manager. Soft dollar commissions A portion of brokerage commissions paid was used to cover research and market data services, termed soft dollar commissions. The value of the research and market data services included in the commissions paid by the Fund to those brokers for the year ended was $7,073 (December 31, 2016 $10,296)

33 BAROMETER GROUP OF FUNDS Notes to Financial Statements 1. FUND ORGANIZATION AND NATURE OF OPERATIONS The Barometer Disciplined Leadership Tactical Income Growth Fund (renamed effective January 1, 2016, formerly, Barometer Disciplined Leadership High Income Fund), Barometer Disciplined Leadership Equity Fund and Barometer Disciplined Leadership Balanced Fund (collectively the Funds or Barometer Group of Funds, individually, a Fund ) are governed by a master declaration of trust (the Master Declaration of Trust ) made by the manager of the Funds, and a regulation for each Fund (each a Regulation ). Pursuant to the Master Declaration of Trust, the Funds are governed by the laws of the province of Ontario. The address of the Fund s registered office is 1 University Avenue, Suite 1800, P.O. Box 25, Toronto ON M5J 2P1. Barometer Capital Management Inc. is the trustee, manager and portfolio advisor ( Barometer, Trustee, Manager, or Portfolio Advisor ) of the Funds. The Funds are subject to certain investment restrictions and practices contained in securities legislation, including National Instrument Mutual Funds ( NI ). These restrictions and practices are designed, in part, to ensure that the investments of the Funds are diversified and relatively liquid and to ensure the proper administration of the Funds, in accordance with the respective securities legislation. The Funds are managed in accordance with these restrictions and practices, subject to specific deviations approved by applicable securities regulators. These annual financial statements were approved by the Manager for issue on March 5, BASIS OF PRESENTATION These annual financial statements have been prepared in compliance with International Financial Reporting Standards ( IFRS ) as published by the International Accounting Standards Board ( IASB ) applicable to the preparation of annual financial statements. The annual financial statements are prepared on a fair value basis for financial assets and liabilities, which are carried at fair value through profit or loss ( FVTPL ). Other financial assets and liabilities and nonfinancial assets and liabilities are recorded at cost. These annual financial statements are presented in Canadian dollars, the functional and presentation currency of the Funds. The policies applied in these annual financial statements are based on IFRS issued and outstanding as of. Expenses directly attributable to a class are charged directly to that class. Income, realized and unrealized gains and losses from investment transactions and other expenses are allocated proportionately to each class based upon the relative net asset value of each class. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Current adoptions and accounting standards issued but not yet adopted Adoption of Amendments to IAS 7: Statement of Cash Flows ( IAS 7 ): IAS 7 requires disclosures related to changes in liabilities arising from financing activities for annual periods beginning on or after January 1, The redeemable units issued by the Fund are classified as financial liabilities in accordance with IAS 32, as they do not meet the definition of puttable instruments to be classified as equity in accordance with IAS 32 for financial reporting purposes. Regardless of their classification for financial reporting purposes under IAS 32, the Fund's units are considered liabilities for the purposes of the IAS 7 disclosures. A reconciliation, including changes from cash flows and any non-cash changes, between the beginning and end of year balance for the Fund's liability for Net assets attributable to holders of redeemable units is presented in the Statement of Changes in Net Assets Attributable to Holders of Redeemable units. The following new standards and amendments to existing standards were issued by the IASB: The final version of IFRS 9, Financial Instruments, was issued by the IASB in July, 2014 and will replace IAS 39 Financial Instruments: Recognition and Measurement (IAS 39). IFRS 9 introduces a model for classification and measurement, a single, forward-looking expected loss impairment model and a substantially reformed approach to hedge accounting. The new single, principle based approach for determining the classification of financial assets is driven by cash flow characteristics and the business model in which an asset is held. The new model also results in a single impairment model being applied to all financial instruments, which will require more timely recognition of expected credit losses

34 BAROMETER GROUP OF FUNDS Notes to Financial Statements 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (a) Current adoptions and accounting standards issued but not yet adopted (continued) It also includes changes in respect of an entity s own credit risk in measuring liabilities elected to be measured at fair value, so that gains caused by the deterioration of an entity s own credit risk on such liabilities are no longer recognised in profit or loss. IFRS 9 is effective for annual years beginning on or after January 1, The Funds have completed an assessment of the impact of IFRS 9 and have noted that the implementation of the new standard will require an additional note disclosure and will not impact the carrying values of the financial instruments in the financial statements. (b) Valuation of investments The fair value of financial assets and financial liabilities traded in active markets (such as marketable securities and publicly traded derivatives) are based on market prices at the close of trading on the reporting date. In accordance with the provisions of the Funds simplified prospectus, investment positions are valued based on the last traded market price for the purpose of determining the net assets attributable to holders of redeemable units per unit for subscriptions and redemptions. For financial reporting purposes, the Funds use the last traded market price for both financial assets and financial liabilities where the last traded price falls within that day's bid-ask spread. In circumstances where the last traded price is not within the bid-ask spread, the Manager determines the point within the bid-ask spread that is most representative of fair value based on the specific facts and circumstances. When the Funds hold derivatives with offsetting market risks, they use mid-market prices as a basis for establishing fair values for the offsetting risk positions and apply this mid-market price to the net open position, as appropriate. The fair value of financial assets and financial liabilities that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. The Funds use a variety of methods and make assumptions that are based on market conditions existing at each Statement of Financial Position date. Valuation techniques used include the use of comparable recent arm's-length transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants. Investments in warrants that are liquid and traded on an active stock market have been measured at fair value. Warrants not on an active exchange are valued using a recognized fair value model, being the Black- Scholes Model. (c) Classification The Funds classify their investments in debt and equity securities and derivatives as financial assets and financial liabilities at FVTPL. This category has two sub-categories: (i) Financial assets and financial liabilities held for trading ( HFT ): A financial asset or financial liability is classified as HFT if it is acquired or incurred principally for the purpose of selling or repurchasing in the near term or if on initial recognition is part of a portfolio of identifiable financial investments that are managed together and for which there is evidence of a recent actual pattern of short-term profit taking. Derivatives and warrants are also categorized as HFT. The Funds do not classify any derivatives as hedges in a hedging relationship. (ii) Financial assets and financial liabilities designated at FVTPL at inception: Financial assets and financial liabilities designated at FVTPL at inception are financial instruments that are not classified as HFT but are managed, and their performance is evaluated on a fair value basis in accordance with the Funds documented investment strategy. The Funds recognize financial instruments at fair value upon initial recognition, plus transaction costs in the case of financial instruments measured at amortized cost. Purchases and sales of financial assets are recognized on their trade date. The Funds investments have been designated at FVTPL. The Funds obligation for net assets attributable to holders of redeemable units is presented at the redemption amount. All other financial assets and financial liabilities are measured at amortized cost. Under this method, financial assets and financial liabilities reflect the amount required to be received or paid, discounted, when appropriate, at the contract's effective interest rate. The Funds accounting policies for measuring the fair value of their investments and derivatives are identical to those used in measuring its Trading NAV (as defined in Note 5) for transactions with unitholders. Refer to Note 11 for classification analysis

35 BAROMETER GROUP OF FUNDS Notes to Financial Statements 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (d) Financial instruments Investments measured at fair value are classified into one of three fair value hierarchy levels, based on the lowest level input that is significant to the fair value measurement in its entirety. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The three fair value hierarchy levels are as follows: Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices), and; Level 3 Inputs for the asset or liability that are not based on observable market data (unobservable inputs). Financial instruments classified as Level 2 investments are valued based on observable market inputs provided by an independent reputable pricing services company and they provide these inputs based on recent transactions and quotes received from market participants and through incorporating observable market data and using standard market convention practices. Refer to Note 9 for fair value measurements analysis. The Funds financial instruments may include cash and cash equivalents, short-term deposits, bank overdraft, investments, forward contracts, receivables for units issued, receivables for investments sold, receivable for hedges, distributions, interest and dividends receivable, accrued management and advisory fees, accrued expenses, payable for units redeemed, payable for distributions, payable for investments purchased, and payable for hedges. Investments and forward contracts are at fair value based on the policies described earlier and later respectively. All other financial instruments are carried at cost, as they closely approximate their fair value, given their short-term nature. (e) Offsetting financial instruments Financial assets and financial liabilities are offset and the net amount reported in the Statements of Financial Position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. In the normal course of business the Funds enter into various master netting agreements or similar agreements that do not meet the criteria for offsetting in the Statements of Financial Position but still allow for the related amounts to be offset in certain circumstances, such as bankruptcy or termination of the contracts. The Fund does not have any collateral amounts to offset against its financial instruments. (f) Recognition/Derecognition The Funds recognize financial assets or financial liabilities designated as trading securities on the trade date the date they commit to purchase or sell short the instruments. From this date any gains and losses arising from changes in fair value of the assets or liabilities are recognized in the Statements of Comprehensive Income. Other financial assets are derecognized when the contractual rights to the cash flows from the asset expire, or when the financial asset is transferred, and substantially all the risks and rewards of ownership of the asset are transferred to another entity. The Funds derecognize financial liabilities when, and only when, the Funds obligations are discharged, cancelled or they expire. On derecognition of a financial asset, the difference between the carrying amount of the asset (or the portion thereof allocated) and consideration received is recognized as profit and loss. (g) Derivative transactions Derivative contracts are marked to market on the valuation date and the resultant gains and losses, both realized and unrealized, are recognized in the Statements of Comprehensive Income

36 BAROMETER GROUP OF FUNDS Notes to Financial Statements 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (h) Futures contracts Futures contracts are valued, to the extent possible, in accordance with the Master Declaration of Trust based on external pricing sources as of the close of business on the relevant business day. When available, closing prices will be obtained from broker-dealers and exchanges; however, such prices may be adjusted if a more accurate value can be obtained from recent trading activity or by incorporating other relevant information that may not have been reflected in pricing obtained from external sources. (i) Written call options The premium received upon writing a call option is recorded as a deferred credit. Upon expiry of a call or when the option is exercised by its holder, the premium is recognized as a gain and is included in Net realized gain (loss) on sale of investments in the Statements of Comprehensive Income. (j) Forward contracts Forward contracts may be used by the Funds to hedge against currency fluctuations. Upon closing of a forward contract, the gain or loss is included in Net realized gain (loss) on futures and forward contracts in the Statements of Comprehensive Income. Outstanding settlement amounts on the closing of forward contracts are included in assets or liabilities as Forward contracts in the Statements of Financial Position. (k) Cash and cash equivalents Cash and cash equivalents are comprised of cash on deposit, short-term debt instruments with original terms to maturity of less than 90 days, at the time of purchase, and bank overdrafts, as applicable. (l) Securities lending A Fund may lend portfolio securities in order to earn additional revenue, which is disclosed in the Statement of Comprehensive Income. Each such Fund will have entered into a securities lending program with its custodian, CIBC Mellon Global Securities Services Company. The aggregate market value of all securities loaned by the Fund cannot exceed 50% of the fair value assets of that Fund. The minimum allowable collateral is 102% of the fair value of the securities on loan as per the requirements of National Instrument Investment Funds. The value of securities loaned and collateral received from securities lending as at, if applicable, is disclosed in the Fund Specific Notes to the Financial Statements at the end of each Fund's respective Financial Statements. The Fund is indemnified by CIBC Mellon Global Securities Services Company for any collateral credit or market loss. As such, the credit risk associated with securities lending is considered minimal. (m) Commissions and other portfolio transaction costs Commissions and other portfolio transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of an investment, which include fees and commissions paid to agents, advisors, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Such costs are expensed and are included in Commissions and other portfolio transaction costs in the Statements of Comprehensive Income. (n) Cost of investments The cost of investments represents the amount paid for each security and is determined on an average cost basis excluding commissions and other portfolio transaction costs. (o) Investment transactions and revenue recognition Investment transactions are accounted for on the trade date. Interest income is accrued daily and dividend income is recognized on the ex-dividend date. Realized gains and losses from investment transactions are calculated on an average cost basis. The Interest for distribution purposes shown on the Statements of Comprehensive Income represents the coupon interest received by the Funds accounted for on an accrual basis. The Funds do not amortize premiums paid or discounts received on the purchase of fixed income securities except for zero coupon bonds which are amortized on a straight line basis

37 BAROMETER GROUP OF FUNDS Notes to Financial Statements 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (o) Investment transactions and revenue recognition (continued) Net realized gain (loss) on sale of investments including foreign exchange adjustments and Net change in unrealized gain (loss) on financial assets and liabilities are determined on an average cost basis. Average cost does not include amortization of premiums or discounts on fixed income securities with the exception of zero coupon bonds. (p) Income tax The Funds qualify as mutual fund trusts under the Income Tax Act (Canada) (the Tax Act ). Each of the Fund s net income and net realized capital gains are required to be distributed such that the Funds are not liable for income tax. It is the intention of the Funds to distribute all of their net income and net realized capital gains on an annual basis. Accordingly, no tax provisions have been recorded. Non-capital losses are applied against taxable income of future years. Currently, the Funds have used all their non-capital losses carry forward amounts. Net capital losses are available to be applied against capital gains of future years, as listed below, and do not expire: Non-capital losses Year Barometer Disciplined Leadership Tactical Income Barometer Disciplined Barometer Disciplined Growth Fund Leadership Equity Fund Leadership Balanced Fund $ $ $ Net capital losses $ $ 122,698 $ 631,145 (q) Operating expenses The Manager has the power to incur and pay for any charges or expenses which, in the opinion of the Manager, are necessary or incidental to, or proper for, carrying out any of the purposes of the Master Declaration of Trust. These expenses include, without limitation, all fees and expenses relating to the management and administration of the Funds and are paid out of the Funds assets. The Funds are responsible for any income or excise taxes and brokerage commissions on portfolio transactions. Each class of each Fund is allocated its own expenses and its proportionate share of the Fund s expenses that are common to all classes. Operating expenses may include legal fees, audit fees, taxes, brokerage commissions, banking fees and servicing costs. The Manager may absorb some or all of these expenses. The allocated expenses are reflected in the Statements of Comprehensive Income. (r) Translation of foreign currency The functional and presentation currency of the Funds is the Canadian dollar. The fair value of foreign investments and other assets and liabilities denominated in foreign currencies are translated into Canadian dollars at the exchange rates prevailing at 12:00 pm Eastern Standard Time on each valuation day. Purchases and sales of foreign securities denominated in foreign currencies and the related income are translated into Canadian dollars at rates of exchange prevailing on the respective dates of such transactions. (s) Net assets attributable to holders of redeemable units per unit The Net assets attributable to holders of redeemable units per unit is calculated by dividing the net assets attributable to holders of redeemable units of a particular class of units by the total number of units of that particular class outstanding at the end of the year as shown in the Statements of Financial Position

38 BAROMETER GROUP OF FUNDS Notes to Financial Statements 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (t) Increase (decrease) in net assets attributable to holders of redeemable units per unit Increase (decrease) in net assets attributable to holders of redeemable units per unit is based on the increase (decrease) in net assets attributable to holders of redeemable units attributed to each class of units, divided by the Weighted average number of redeemable units outstanding during the year, of that class, as shown in the Statements of Comprehensive Income. 4. USE OF JUDGEMENT The preparation of financial statements requires the Manager to use judgement in applying its accounting policies and to make estimates and assumptions about the future. The following discusses the most significant accounting judgements and estimates that the Funds have made in preparing the financial statements: Classification and measurement of investments and application of the fair value option: In classifying and measuring financial instruments held by the Funds, the Manager is required to make significant judgements about whether or not the business of the Funds is to invest on a total return basis for the purpose of applying the fair value option for financial assets under IAS 39. The most significant judgements made include the determination that certain investments are held-for-trading and that the fair value option can be applied to those which are not. 5. REDEEMABLE UNITS OF THE FUNDS Each Fund is authorized to issue an unlimited number of redeemable units in different classes, each of which represents an equal, undivided, beneficial interest in the net assets attributable to holders of redeemable units of the Fund. Each class of units of a Fund has its own fees and expenses that are tracked separately (refer to Note 3(q)). Each unit entitles the holder to one vote and to participate equally with respect to any and all distributions made by a Fund. Each of the Class A, Class F and Class I units is offered by each Fund per the simplified prospectus. Each unit of a class of a Fund is issued at a price equal to the net asset value per unit of that class of the Fund. The net asset value per unit of each class is generally calculated by the Manager as at 4:00 pm Eastern Standard Time on each valuation date or at such other time as the Manager may establish from time to time, unless the TSX closes earlier or the determination of the net asset value has been suspended (Trading NAV). Redeemable units of a class of a Fund may be acquired on any valuation date. The Manager may accept or reject any subscription for units of a class of a Fund in whole or in part. To subscribe for redeemable units of a class of a Fund, an investor must submit a completed subscription agreement to the Manager or their dealer. Units of a Fund surrendered for redemption prior to 3:00 pm on each valuation day will be redeemed at the redemption price per unit of a class equal to the net asset value per unit calculated on the valuation date in accordance with the Master Declaration of Trust. A short-term trading fee of up to 2% of the redemption price (excluding any sales charge) may be charged if units are redeemed within 90 days of their purchase date. The fee payable will be deducted from the redemption proceeds and such fees will be retained by the Fund. The Trustee, in its sole discretion, may waive the short-term trading fee

39 BAROMETER GROUP OF FUNDS Notes to Financial Statements 5. REDEEMABLE UNITS OF THE FUNDS (continued) Unitholder transactions for the years ended and 2016 are summarized as follows: Redeemable Subscription of Redemption of Redeemable units, beginning redeemable redeemable Reinvestments units, end of 2017 of year units units of units year Barometer Disciplined Leadership Tactical Income Growth Fund Class A 16,068, ,944 (5,831,948) 1,193,012 12,040,740 Class F 8,605,979 1,868,194 (2,831,366) 1,144,811 8,787,618 Barometer Disciplined Leadership Equity Fund Class A 1,408, ,758 (532,780) 1,100,129 Class F 1,206, ,012 (412,247) 1,240,204 Barometer Disciplined Leadership Balanced Fund Class A 3,685,258 1,291,410 (1,187,469) 92,816 3,882,015 Class F 4,538,294 2,242,789 (1,491,260) 108,941 5,398,764 Class I 272,586 (6,293) 6, , Barometer Disciplined Leadership Tactical Income Growth Fund Class A 23,219,779 1,271,767 (9,162,899) 740,085 16,068,732 Class F 11,574,703 2,831,608 (6,113,398) 313,066 8,605,979 Class I 101,685 (101,685) Barometer Disciplined Leadership Equity Fund Class A 1,530, ,805 (526,067) 1,408,151 Class F 1,464, ,234 (722,056) 1,206,439 Barometer Disciplined Leadership Balanced Fund Class A 3,280,639 1,460,216 (1,141,810) 86,213 3,685,258 Class F 3,368,554 2,005,969 (933,358) 97,129 4,538,294 Class I 344,441 (79,815) 7, ,586 Capital disclosure The capital of each Fund is represented by issued and redeemable units. The units are entitled to distributions, if any, and to payment of a proportionate share based on the Fund s net asset value per unit upon redemption. The Funds have no restrictions or specific capital requirements on the subscriptions and redemptions of units. The relevant movements are shown on the Statements of Changes in Net Assets Attributable to Holders of Redeemable Units. In accordance with its investment objectives and strategies, and the risk management practices outlined in Note 8, each of the Funds intend to invest the subscriptions received in appropriate investments while maintaining sufficient liquidity to meet redemptions, such liquidity being augmented by short-term borrowings or disposal of investments where necessary

40 BAROMETER GROUP OF FUNDS Notes to Financial Statements 6. RELATED PARTY TRANSACTIONS Management fees Management fees are paid to the Manager from the Class A units and Class F units of each Fund equal to a fixed percentage of the net asset value of that class of units, as follows: Class A units Class F units Disciplined Leadership Tactical Income Growth Fund 1.95% 0.95% Disciplined Leadership Equity Fund 1.95% 0.95% Disciplined Leadership Balanced Fund 1.95% 0.95% The management fee for each class of units of a Fund is calculated based on the previous day s ending net asset value. The management fee is calculated daily and paid monthly. Holders of Class I units of a Fund pay a negotiated management fee directly to Barometer, priced primarily based on the size of their investment. The management fee is paid monthly. Performance fees A performance fee is charged to the net assets attributable to holders of redeemable Class A and Class F unitholders and is paid to the Manager, for services as investment adviser. The fee is equal to 20% of the amount by which the net asset value per unit of that class at the end of the year exceeds the annual target net asset value per unit of that class, multiplied by the number of outstanding units of that class at the end of that year, plus applicable taxes. Refer to the Funds simplified prospectus for the annual target benchmark for each Fund. The performance fee for each class of units of a Fund are calculated and accrued daily, and paid annually at the end of each year, or upon redemption. Performance fees, if any for Class I units of the Fund are calculated as described above but will be paid directly to the Portfolio Advisor by the Class I unitholder. 7. DISTRIBUTIONS The Funds intend to distribute sufficient net income and net realized capital gains, if any, to unitholders in each calendar year to ensure that the Funds are not liable for income tax under Part I of the Tax Act after taking into account any loss carry forwards and capital gain refunds. Distributions to which unitholders are entitled shall be determined by the Manager. All distributions are made on a pro rata basis to each registered unitholder, determined as of the close of business on the date of the distribution. 8. MANAGEMENT OF FINANCIAL INSTRUMENT RISKS In the normal course of business, the Funds are exposed to a variety of financial risks: credit risk, liquidity risk and market risk (including currency risk, interest rate risk and other price risk). The value of investments within the Funds portfolios can fluctuate on a daily basis as a result of changes in interest rates, economic conditions, the market, and company news related to specific securities within the Funds. The level of risk depends on each Fund s investment objective and the type of securities it invests in. Please refer to the Fund Specific Notes to the Financial Statements at the end of each Fund s respective Financial Statement. The Manager may minimize potential adverse effects of financial instruments risk on the Funds performance by, but not limited to, regular monitoring of the Funds positions, market events, diversification of the investment portfolio by asset type, country, sector, term to maturity within the constraints of the stated investment objective of each Fund, and through the use of derivatives to hedge certain risk exposures

41 BAROMETER GROUP OF FUNDS Notes to Financial Statements 8. MANAGEMENT OF FINANCIAL INSTRUMENT RISKS (continued) (a) Concentration risk A relatively high concentration of assets in a single or small number of issuers may reduce the diversification and liquidity of a Fund and increase its volatility. As a result of reduced liquidity, the Funds ability to satisfy redemption requests may be reduced. It may also result in a concentration in specialized industries or market sectors. Investment in a Fund will therefore involve greater risk and volatility than investing in a mutual fund that has a broadly based investment portfolio since the performance of one particular industry or market could significantly and adversely affect the overall performance of the Fund. (b) Credit risk Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with a Fund. Where a Fund invests in debt instruments and derivatives, this represents the main concentration of credit risk. The market value of debt instruments and derivatives includes consideration of the credit worthiness of the issuer, and accordingly, represents the maximum credit risk exposure of a Fund. All transactions executed by a Fund in listed securities are settled/paid for upon delivery using an approved broker. The risk of default is considered minimal, as delivery of securities sold is only made once the broker has received payment. Payment is made on a purchase once the securities have been received by the broker. The trade will fail if either party fails to meet its obligation. (c) Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Currency risk arises from financial instruments (including cash and cash equivalents) that are denominated in a currency other than Canadian dollars, which represents the functional currency of a Fund. A Fund may enter into forward contracts for hedging purposes to reduce its foreign currency exposure, or to establish exposure to foreign currencies. (d) Derivative risk A derivative is a contract that derives its value from the performance of an underlying entity. This underlying entity can be an asset, index, or interest rate, and is often called the underlying. Derivatives can be used for a number of purposes, including insuring against price movements for hedging, increasing exposure to price movements for speculation or getting access to otherwise hard to trade assets or markets. Some of the more common derivatives include forwards, futures, options, swaps, and variations of these such as collateralized debt obligations, credit default swaps, and mortgage-backed securities. Most derivatives are traded over-the-counter or on an exchange. The Funds may also use exchange traded futures for hedging purposes. A forward contract is a customized agreement created between two parties where the buyer agrees to buy from the seller, what is called the underlying asset at a future date. Forward contracts do not trade on a centralized exchange and are therefore regarded as over-the-counter instruments. Each forward contract is specifically created between two parties. On a forward contract, no money exchanges between parties initially, and the counterparty is involved to settle the contract. Therefore, there is a counterparty credit risk involved with forward contracts. If the counterparty defaults between the initial agreement date and the delivery date, a Fund may have a loss. The Funds only enter into forward contracts with large financial institutions in order to mitigate the counterparty risk. (e) Equity risk Companies issue equities or stocks to help finance their operations and future growth. If the Fund purchases equities, it becomes part owner in the underlying companies. A company s outlook, market activity and the larger economic picture influence the price of its stock. For example, when the economy is expanding, the outlook for many companies will also be positive and the value of their stocks should rise. Generally, the opposite is also true. The greater the potential reward, that is the increase in value of a stock, the greater the potential risk. Typically, this is the case for small companies, start-ups and companies in emerging sectors

42 BAROMETER GROUP OF FUNDS Notes to Financial Statements 8. MANAGEMENT OF FINANCIAL INSTRUMENT RISKS (continued) (e) Equity risk (continued) The Fund's equity risk is reflected in the investments held, as shown in the Schedule of Investment Portfolio. The sensitivity of the investment portfolio to changes in market conditions is disclosed in Other price risk below. Certain convertible securities may also be subject to fixed income risk. (f) Foreign investment risk A Fund may invest in securities sold outside Canada, including emerging markets. The value of foreign securities, and the share prices of a Fund that holds them, may fluctuate more than Canadian investments for several reasons such as the following: (i) (ii) (iii) (iv) (v) Companies outside Canada may not be subject to the regulations, standards, reporting practices and disclosure requirements that apply in Canada; Some foreign markets may not be as well-regulated as Canadian and United States markets, and their laws might make it difficult to protect investor rights; Political instability, possible corruption, social unrest or diplomatic developments in foreign countries, especially emerging market countries, could negatively affect the value of a Fund s securities; The possibility exists that foreign securities may be highly taxed or that government-imposed exchange controls may prevent a Fund from taking money out of the foreign country, and; Companies in emerging markets are often relatively small, and may have limited operating histories, product lines, markets and financial resources; and, such companies are often traded only through foreign stock exchanges. (g) Interest rate risk Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or fair values of financial instruments. Interest rate risk arises when a Fund invests in interest-bearing financial instruments. A Fund is exposed to the risk that the value of such financial instruments will fluctuate due to changes in the prevailing levels of market interest rates. There is minimal sensitivity to interest rate fluctuations on any cash and cash equivalents, invested at short-term market interest rates. (h) Liquidity risk Liquidity risk is defined as the risk that the Fund may not be able to settle or meet its obligation on time or at a reasonable price. To manage the risk, the Fund s exposure to liquidity risk is concentrated in the daily cash redemptions of units. The Fund primarily invests in securities that are traded in active markets and can be readily disposed. The Fund may employ the use of derivatives to moderate certain risk exposures. There is no guarantee that a market will exist for some derivatives and it is possible that the exchanges may impose limits on trading of derivatives. (i) Other price risk Other price risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk). All investments represent a risk of loss of capital. The Manager aims to moderate this risk through a careful selection and diversification of securities and other financial instruments in accordance with the limits of each Fund s investment objectives and strategy. Except for written options and securities sold short, the maximum risk resulting from financial instruments is determined by the fair value of the financial instruments. Possible losses from written options and securities sold short can be unlimited. Each Fund s overall market positions are monitored on a regular basis by the Manager. Financial instruments held by a Fund are susceptible to market price risk arising from uncertainties about future prices of the instruments

43 BAROMETER GROUP OF FUNDS Notes to Financial Statements 8. MANAGEMENT OF FINANCIAL INSTRUMENT RISKS (continued) (j) Regulatory risk Some industries, such as financial services, health care and telecommunications are heavily regulated and may receive government funding. Investments in these sectors may be substantially affected by changes in government policy, such as increased regulation, ownership restrictions, and deregulation or reduced government funding. The value of a mutual fund that buys these investments may rise and fall substantially due to changes in these factors. The following table presents the Funds regulatory sectors, as it relates to its exposure to the financial services, energy, defense, health care, telecommunication industries and utilities as at and 2016: Percentage of net assets attributable to holders of redeemable units December 31, 2016 % % Barometer Disciplined Leadership Tactical Income Growth Fund Barometer Disciplined Leadership Equity Fund Barometer Disciplined Leadership Balanced Fund (k) Systemic risk The Funds may be exposed to the risk of the collapse of an entire financial system or entire market. There are risks imposed by the interdependency in a system or market, where the failure of a single entity or cluster of entities can cause a cascading failure. An investment in units of a class of each Fund is subject to various risk factors. For complete details of the associated risks refer to each Fund s simplified prospectus. 9. CLASSIFICATION OF FINANCIAL INSTRUMENTS FAIR VALUE MEASUREMENTS The following table summarizes the levels within the fair value hierarchy in which the fair value measurements of the Funds investments fall as of : Assets Barometer Disciplined Leadership Tactical Income Growth Fund Level 1 Level 2 Level 3 Total Common Stock $ 199,248,941 $ $ $ 199,248,941 Cash and cash equivalents 554, ,796 Forward contracts 1,914,271 1,914,271 $ 199,803,737 $ 1,914,271 $ $ 201,718,008 Barometer Disciplined Leadership Equity Fund Common Stock $ 30,103,788 $ 496,650 $ $ 30,600,438 Cash and cash equivalents 604, ,754 Forward contracts 302, ,811 $ 30,708,542 $ 799,461 $ $ 31,508,003 Barometer Disciplined Leadership Balanced Fund Common Stock $ 94,233,676 $ $ $ 94,233,676 Cash and cash equivalents 2,487,414 2,487,414 Fixed Income 5,149,875 8,259,629 13,409,504 Forward contracts 403, ,108 $ 101,870,965 $ 8,662,737 $ $ 110,533,702 There were no significant transfers between levels during the year

44 BAROMETER GROUP OF FUNDS Notes to Financial Statements 9. CLASSIFICATION OF FINANCIAL INSTRUMENTS FAIR VALUE MEASUREMENTS (continued) The primary input used in the valuation of level 2 investments are recent transactions completed by market participants, as compiled by reputable pricing sources such as Bloomberg. The following table summarizes the levels within the fair value hierarchy in which the fair value measurements of the Funds investments fall as of December 31, 2016: Assets Barometer Disciplined Leadership Tactical Income Growth Fund Level 1 Level 2 Level 3 Total Common Stock $ 11,782,223 $ $ $ 11,782,223 Cash and cash equivalents 3,756,157 3,756,157 Forward Purchase Agreement 237,577, ,577,181 $ 15,538,380 $ 237,577,181 $ $ 253,115,561 Barometer Disciplined Leadership Equity Fund Common Stock $ 30,886,461 $ $ $ 30,886,461 Cash and cash equivalents 757, ,322 $ 31,643,783 $ $ $ 31,643,783 Barometer Disciplined Leadership Balanced Fund Common Stock $ 69,476,606 $ $ $ 69,476,606 Cash and cash equivalents 2,513,044 2,513,044 Fixed Income 22,192,697 22,192,697 $ 71,989,650 $ 22,192,697 $ $ 94,182,347 Liabilities Barometer Disciplined Leadership Tactical Income Growth Fund Forward Contracts $ $ 148,371 $ $ 148,371 Futures Contracts 659, ,628 $ 659,628 $ 148,371 $ $ 807,999 Barometer Disciplined Leadership Equity Fund Forward Contracts $ $ 9,426 $ $ 9,426 Futures Contracts 9,036 9,036 $ 9,036 $ 9,426 $ $ 18,462 Barometer Disciplined Leadership Balanced Fund Forward Contracts $ $ 33,386 $ $ 33,386 Futures Contracts 49,698 49,698 $ 49,698 $ 33,386 $ $ 83,084 There were no significant transfers between levels during the year. The primary input used in the valuation of level 2 investments are recent transactions completed by market participants, as compiled by reputable pricing sources such as Bloomberg

45 BAROMETER GROUP OF FUNDS Notes to Financial Statements 10. NET GAIN (LOSS) ON FINANCIAL ASSETS AND LIABILITIES AT FVTPL (a) Net gain (loss) on financial assets and liabilities at FVTPL The following table presents the net gains (losses) on financial instruments for the years ended December 31, 2017 and 2016: Barometer Disciplined Leadership Tactical Income Growth Fund Net realized gain (loss) on financial assets and liabilities: Held for trading $ (274,418) $ 809,607 Designated at fair value through profit or loss (Note 10(b)) 85,727,439 15,846,680 85,453,021 16,656,287 Net change in unrealized gain (loss) on financial assets and liabilities: Held for trading 2,722, ,596 Designated at fair value through profit or loss (62,519,260) (2,084,048) (59,796,990) (1,267,452) Net gain (loss) $ 25,656,031 $ 15,338,835 Barometer Disciplined Leadership Equity Fund Net realized gain (loss) on financial assets and liabilities: Held for trading $ 58,479 $ (350,541) Designated at fair value through profit or loss 2,797,638 2,885,482 2,856,117 2,534,941 Net change in unrealized gain (loss) on financial assets and liabilities: Held for trading 321,273 95,489 Designated at fair value through profit or loss 837,311 (353,909) 1,158,584 (258,420) Net gain (loss) $ 4,014,701 $ 2,276,521 Barometer Disciplined Leadership Balanced Fund Net realized gain (loss) on financial assets and liabilities: Held for trading $ (683,853) $ (425,149) Designated at fair value through profit or loss 6,366,518 3,791,009 5,682,665 3,365,860 Net change in unrealized gain (loss) on financial assets and liabilities: Held for trading 486,192 (97,459) Designated at fair value through profit or loss 1,043,580 6,229,313 1,529,772 6,131,854 Net gain (loss) $ 7,212,437 $ 9,497,714 The realized gain (loss) on financial assets and liabilities at FVTPL represents the difference between the carrying amount of the financial assets and liabilities at the beginning of the reporting year, or the transaction price if it was purchased during the reporting year, and its sale or settlement price. The unrealized gain (loss) represents the difference between the carrying amount of a financial asset and liability at the beginning of the reporting year, or the transaction price if it was purchased during the reporting year, and its carrying amount at the end of the reporting year

46 BAROMETER GROUP OF FUNDS Notes to Financial Statements 10. NET GAIN (LOSS) ON FINANCIAL ASSETS AND LIABILITIES AT FVTPL (continued) (b) Settlement of Forward Purchase Agreement The Barometer Disciplined Leadership Tactical Income Growth Fund had entered into a forward contract in order to provide a return similar to what would be achieved by an investment directly in units of a specified underlying investment in the Barometer Global Tactical Yield and Equity Fund (the Reference Fund ). The Fund had entered into a forward purchase agreement (the Forward Agreement ) with a Canadian chartered bank (the Counterparty ). The Counterparty was the Bank of Montreal rated AA by the Dominion Bond Rating Services, and was not a related party. On December 18, 2017, the Forward Agreement was settled in its entirety, which triggered a realized gain of $66,659,644. All gains realized from the settlement of the Forward Agreement were included in the Net realized gain (loss) on futures and forward contracts in the Statement of Comprehensive Income. 11. FINANCIAL INSTRUMENTS BY CATEGORY The following tables present the carrying amounts of the Funds financial instruments by category as at and Barometer Disciplined Leadership Tactical Income Growth Fund Financial instruments Financial at FVTPL designated instruments at HFT at inception amortized cost Total Assets Cash and cash equivalents $ $ $ 554,796 $ 554,796 Interest and dividends receivable 357, ,935 Receivable for investments sold 1,039,179 1,039,179 Subscriptions receivable 813, ,014 Forward contracts 1,914,271 1,914,271 Investments, at fair value 199,248, ,248,941 $ 1,914,271 $ 199,248,941 $ 2,764,924 $ 203,928,136 Liabilities Redemptions payable $ $ $ 1,356,198 $ 1,356,198 Management fees payable 267, ,163 Distributions payable 132, ,269 Accounts payable and accrued liabilities 194, ,323 $ $ $ 1,949,953 $ 1,949,953 December 31, 2016 Assets Cash and cash equivalents $ $ $ 3,756,157 $ 3,756,157 Interest and dividends receivable 28,326 28,326 Subscriptions receivable 29,273 29,273 Investments, at fair value 249,359, ,359,404 $ $ 249,359,404 $ 3,813,756 $ 253,173,160 Liabilities Redemptions payable $ $ $ 253,757 $ 253,757 Management fees payable 344, ,585 Distributions payable 194, ,714 Futures contracts 659, ,628 Forward contracts 148, ,371 Accounts payable and accrued liabilities 618, ,458 $ 807,999 $ $ 1,411,514 $ 2,219,

47 BAROMETER GROUP OF FUNDS Notes to Financial Statements 11. FINANCIAL INSTRUMENTS BY CATEGORY (continued) Barometer Disciplined Leadership Equity Fund Financial instruments Financial at FVTPL designated instruments at HFT at inception amortized cost Total Assets Cash and cash equivalents $ $ $ 604,754 $ 604,754 Interest and dividends receivable 3,372 3,372 Subscriptions receivable 10,500 10,500 Forward contracts 302, ,811 Investments, at fair value 30,600,438 30,600,438 $ 302,811 $ 30,600,438 $ 618,626 $ 31,521,875 Liabilities Management fees payable $ $ $ 37,048 $ 37,048 Accounts payable and accrued liabilities 48,205 48,205 $ $ $ 85,253 $ 85,253 December 31, 2016 Assets Cash and cash equivalents $ $ $ 757,322 $ 757,322 Interest and dividends receivable 14,555 14,555 Subscriptions receivable 2,078 2,078 Investments, at fair value 30,886,461 30,886,461 $ $ 30,886,461 $ 773,955 $ 31,660,416 Liabilities Redemptions payable $ $ $ 84,728 $ 84,728 Management fees payable 39,940 39,940 Futures contracts 9,036 9,036 Forward contracts 9,426 9,426 Accounts payable and accrued liabilities 48,332 48,332 $ 18,462 $ $ 173,000 $ 191,

48 BAROMETER GROUP OF FUNDS Notes to Financial Statements 11. FINANCIAL INSTRUMENTS BY CATEGORY (continued) Barometer Disciplined Leadership Balanced Fund Financial instruments Financial at FVTPL designated instruments at HFT at inception amortized cost Total Assets Cash and cash equivalents $ $ $ 2,487,414 $ 2,487,414 Interest and dividends receivable 497, ,635 Receivable for investments sold 120, ,950 Subscriptions receivable 85,624 85,624 Forward contracts 403, ,108 Investments, at fair value 107,643, ,643,180 $ 403,108 $ 107,643,180 $ 3,191,623 $ 111,237,911 Liabilities Redemptions payable $ $ $ 89,810 $ 89,810 Management fees payable 122, ,940 Performance fees payable 305, ,805 Distributions payable 42,675 42,675 Accounts payable and accrued liabilities 71,416 71,416 $ $ $ 632,646 $ 632,646 December 31, 2016 Assets Cash and cash equivalents $ $ $ 2,513,044 $ 2,513,044 Interest and dividends receivable 434, ,829 Subscriptions receivable 55,885 55,885 Investments, at fair value 91,669,303 91,669,303 $ $ 91,669,303 $ 3,003,758 $ 94,673,061 Liabilities Redemptions payable $ $ $ 647 $ 647 Management fees payable 105, ,024 Performance fees payable 1,042,213 1,042,213 Distributions payable Futures contracts 49,698 49,698 Forward contracts 33,386 33,386 Accounts payable and accrued liabilities 45,745 45,745 $ 83,084 $ $ 1,193,779 $ 1,276, INDEMNIFICATION OF THE MANAGER The Funds, under the terms of their Master Declaration of Trust shall indemnify the Manager, their principals and their respective affiliates from all claims that may arise for mistakes of judgement or for action or inaction or for losses due to such mistakes, action or inaction so long as they acted honestly and not in bad faith and reasonably believed that their conduct was in the best interests of the Funds. 13. SIGNIFICANT EVENTS DURING THE YEAR Effective December 27, 2017, Roy Scaini resigned from his position as a Director and Chief Executive Officer of Barometer Capital Management Inc. 14. SUBSEQUENT EVENTS Effective January 18, 2018, Gregory Guichon was appointed as the Chief Executive Officer of Barometer Capital Management Inc

49 Notice: The commentaries contained herein are provided as a general source of information and should not be considered personal investment advice or an offer or solicitation to buy or sell securities. Every effort has been made to ensure that the material contained in these commentaries is accurate at the time of publication. However, the Manager cannot guarantee its accuracy or completeness and accepts no responsibility for any loss arising from any use of or reliance on the information contained herein. Disciplined Leadership Approach is a trade-mark of Barometer Capital Management Inc.

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