A N N U A L F I N A N C I A L S T A T E M E N T S

Transcription

1 A N N U A L F I N A N C I A L S T A T E M E N T S AUDITED ANNUAL FINANCIAL STATEMENTS DECEMBER 2017 EXEMPLAR GROWTH AND INCOME FUND EXEMPLAR INVESTMENT GRADE FUND EXEMPLAR LEADERS FUND EXEMPLAR PERFORMANCE FUND EXEMPLAR TACTICAL CORPORATE BOND FUND

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3 EXEMPLAR GROWTH AND INCOME FUND Statements of Financial Position As at As at December 31, December 31, ASSETS Current assets Financial assets designated at fair value through profit and loss $21,671,889 $11,531,290 Financial assets held for trading Warrants at fair value - 44,381 Unrealized gain on forward currency contracts 127,920 32,083 Cash and cash equivalents 2,737,271 1,029,568 Margin deposit 85, ,457 Accrued dividends receivable 30,993 9,331 Receivable for securities sold 754, ,230 Receivable for units issued 65,781 49,760 25,474,559 13,806,100 LIABILITIES Current liabilities Financial liabilities held for trading Investments sold short - 63,855 Unrealized loss on forward currency contracts 13,096 - Payable for securities purchased 474, ,127 Accrued dividends payable Payable for units redeemed 10,812 18,360 Other liabilities (Note10) 33,203 21, , ,612 Net assets attributable to holders of redeemable units $24,943,379 $13,028,488 Continued on next page. The accompanying notes are an integral part of these financial statements. 2

4 EXEMPLAR GROWTH AND INCOME FUND Statements of Financial Position As at As at December 31, December 31, Continued from previous page. Net assets attributable to holders of redeemable units Series A $10,811,870 $3,849,743 Series AN $1,469,708 $1,757,300 Series F $2,309,251 $918,546 Series FN $8,580,515 $5,196,260 Series I $1,069,039 $927,236 Series L $464,543 $265,948 Series LN $238,453 $113,455 Number of redeemable units outstanding (Note7) Series A 1,017, ,276 Series AN 138, ,085 Series F 219,985 88,998 Series FN 793, ,600 Series I 102,227 90,330 Series L 44,531 26,060 Series LN 22,287 10,852 Net assets attributable to holders of redeemable units per unit Series A $10.63 $10.43 Series AN $10.64 $10.45 Series F $10.50 $10.32 Series FN $10.81 $10.61 Series I $10.46 $10.26 Series L $10.43 $10.21 Series LN $10.70 $10.45 Approved on behalf of the Board of Directors of Arrow Capital Management Inc., the Manager of the Fund: James L. McGovern Robert W. Maxwell James L. McGovern, Director Robert W. Maxwell, Director The accompanying notes are an integral part of these financial statements. 3

5 EXEMPLAR GROWTH AND INCOME FUND Statements of Comprehensive Income For the years ended December 31, $ $ (Note 14) INCOME Net gains (losses) on investments and derivatives Interest income 10,014 2,129 Dividend income 403, ,070 Dividend expense on short sales (6,005) (6,778) Securities lending income (net) (Note 9) 47, Net realized gain (loss) on investments and derivatives 2,709, ,192 Net change in unrealized appreciation (depreciation) in value of investments and derivatives 295, ,281 Net gains (losses) on investments and derivatives 3,459,454 1,511,587 Other income items: Interest on cash 403 3,979 Foreign exchange gain (loss) (190,684) (29,554) Net change in unrealized foreign exchange gain (loss) (15,821) (868) Total income (net) 3,253,352 1,485,144 EXPENSES Securityholder reporting fees 129, ,297 Management fees (Note 10) 277, ,391 Interest expense 3,190 2,369 Audit fees 20,593 17,943 Legal fees 4,873 6,468 Independent Review Committee fees 5,590 4,600 Custodial fees 1,825 1,121 Security borrowing expenses 231 1,766 Commissions and other portfolio transaction costs (Note 11) 186, ,238 Withholding tax expense 11,324 - Harmonized sales tax 26,810 12,882 Total expenses before manager absorption 668, ,075 Less: expenses absorbed by manager (Note 10) (107,806) (121,606) Total expenses after manager absorption 560, ,469 Increase (decrease) in net assets attributable to holders of redeemable units 2,693,021 1,170,675 Increase (decrease) in net assets attributable to holders of redeemable units (Note 13) Series A 1,005, ,830 Series AN 183, ,596 Series F 241, ,453 Series FN 1,033, ,678 Series I 150,026 99,042 Series L 51,732 20,716 Series LN 26,384 9,360 Increase (decrease) in net assets attributable to holders of redeemable units per unit (Note 13) Series A Series AN Series F Series FN Series I Series L Series LN The accompanying notes are an integral part of these financial statements. 4

6 EXEMPLAR GROWTH AND INCOME FUND Statements of Changes in Net Assets Attributable to Holders of Redeemable Units For the years ended December 31, $ $ Net assets attributable to holders of redeemable units at beginning of year Increase (decrease) in net assets attributable to holders of redeemable units Series A 3,849,743 3,822,151 Series AN 1,757, ,601 Series F 918,546 1,179,853 Series FN 5,196,260 3,225,373 Series I 927, ,903 Series L 265,948 84,886 Series LN 113,455 51,178 13,028,488 9,587,945 Series A 1,005, ,830 Series AN 183, ,596 Series F 241, ,453 Series FN 1,033, ,678 Series I 150,026 99,042 Series L 51,732 20,716 Series LN 26,384 9,360 2,693,021 1,170,675 Distributions to holders of redeemable units From net investment income Series A (54,454) - Series AN (8,781) - Series F (15,134) - Series FN (57,120) - Series I (7,499) - Series L (2,440) - Series LN (1,227) - (146,655) - Return of capital Series A (47,347) - Series AN (22,035) - Series F (15,465) - Series FN (99,764) - Series I (18,928) - Series L (3,082) - Series LN (2,229) - (208,850) - From net realized gains on investments and derivatives Series A (905,746) (206,108) Series AN (129,202) (96,856) Series F (218,533) (72,430) Series FN (799,678) (330,507) Series I (105,738) (67,706) Series L (38,547) (12,473) Series LN (20,250) (5,917) (2,217,694) (791,997) Total distributions to holders of redeemable units (2,573,199) (791,997) Continued on next page. The accompanying notes are an integral part of these financial statements. 5

7 EXEMPLAR GROWTH AND INCOME FUND Statements of Changes in Net Assets Attributable to Holders of Redeemable Units For the years ended December 31, $ $ Continued from previous page. Redeemable unit transactions Proceeds from redeemable units issued Series A 9,764, ,213 Series AN 856,627 1,350,811 Series F 2,154, ,241 Series FN 3,267,060 3,354,041 Series I - - Series L 163, ,908 Series LN 100,763 64,300 Reinvestments of distributions to holders of redeemable units Series A 887, ,391 Series AN 155,619 96,232 Series F 184,678 65,986 Series FN 941, ,661 Series I 132,165 67,706 Series L 29,689 7,911 Series LN 21,557 4,862 Redemption of redeemable units Series A (3,687,401) (622,734) Series AN (1,323,243) (84,084) Series F (941,406) (964,557) Series FN (901,349) (1,830,986) Series I (8,223) (7,709) Series L (1,849) - Series LN - (10,328) Net increase (decrease) from redeemable unit transactions 11,795,069 3,061,865 Net increase (decrease) in net assets attributable to holders of redeemable units 11,914,891 3,440,543 Series A 10,811,870 3,849,743 Series AN 1,469,708 1,757,300 Series F 2,309, ,546 Series FN 8,580,515 5,196,260 Series I 1,069, ,236 Series L 464, ,948 Series LN 238, ,455 Net assets attributable to holders of redeemable units at end of year 24,943,379 13,028,488 The accompanying notes are an integral part of these financial statements. 6

8 EXEMPLAR GROWTH AND INCOME Statements of Cash Flows For the years ended December 31, $ $ (Note 14) Cash flows from (used in) operating activities Increase (decrease) in net assets attributable to holders of redeemable units 2,693,021 1,170,675 Adjustment for: Unrealized foreign exchange (gain) loss on cash (14,141) (2,062) Net realized (gain) loss on investments and derivatives (2,709,386) (901,192) Non-cash income from underlying funds (108,934) (69,721) Net change in unrealized (appreciation) depreciation in value of investments and derivatives (295,194) (445,281) Purchase of investments (187,671,226) (106,110,608) Proceeds on sale of investments 180,277, ,526,662 Change in accrued dividends receivable (21,662) 1,181 Change in accrued dividends payable (227) 227 Change in other liabilities 12,160 5,919 Change in margin deposit 333,675 (419,457) Net cash from (used in) operating activities (7,504,739) (2,243,657) Cash flows from (used in) financing activities Proceeds from redeemable units issued 15,696,726 5,664,094 Redemption of redeemable units (6,277,092) (3,392,845) Distributions paid to holders of redeemable units, net of reinvested distributions (221,333) (42,248) Net cash from (used in) financing activities 9,198,301 2,229,001 Net Increase (decrease) in cash 1,693,562 (14,656) Cash at beginning of the year 1,029,568 1,042,162 Unrealized foreign exchange gain (loss) on cash 14,141 2,062 Cash at end of the year 2,737,271 1,029,568 Supplemental information: Interest received* 10,417 6,108 Dividends received, net of withholding tax* 370, ,251 Interest paid* 3,190 2,369 *Included as part of cash flows from operating activities The accompanying notes are an integral part of these financial statements. 7

9 EXEMPLAR GROWTH AND INCOME FUND Schedule of Investment Portfolio As at December 31, 2017 Equities - Long % No. of Average Fair Security Name Currency Shares/Units Cost ($) Value ($) Consumer Discretionary % Arcos Dorados Holdings Inc., Class A* USD 6,800 88,200 88,468 BYD Company Limited, Class H HKD 7,500 86,153 82,174 Canada Goose Holdings Inc. CAD 2,500 78,392 99,275 Lululemon Athletica Inc.* USD 1, , ,939 Magna International Inc. CAD 1, , ,860 Melco Resorts & Entertainment Limited, ADR USD 2,600 86,217 94,909 Park Lawn Corporation CAD 7, , ,090 Potbelly Corporation USD 5,100 78,989 78,852 Quebecor Inc., Class B CAD 7, , ,900 Red Rock Resorts, Inc., Class A* USD 2,000 70,960 84,822 RH USD ,586 97,529 Spin Master Corp. CAD 1,500 72,194 81,030 Stars Group Inc. (The)* CAD 3, , ,375 Tapestry, Inc. USD 3, , ,829 1,569,059 1,636,052 Consumer Staples % Alimentation Couche-Tard Inc., Class B CAD 3, , ,565 Andrew Peller Limited, Class A CAD 4,500 61,075 70,200 Corby Spirit and Wine Limited* CAD 2,200 46,860 50,842 Goodfood Market Corp.* CAD 17,000 36,670 41,990 Jamieson Wellness Inc. CAD 11, , ,910 Liquor Stores N.A. Ltd. CAD 10, , ,800 Neptune Technologies & Bioressources Inc.* CAD 50,000 74, ,000 Wal-Mart Stores, Inc. USD 1, , , ,401 1,040,849 Energy % Bellatrix Exploration Ltd.* CAD 20,200 46,579 43,430 Cameco Corporation CAD 4,400 57,825 51,084 Canadian Natural Resources Limited CAD 3, , ,204 Cenovus Energy Inc. CAD 5,000 56,407 57,400 Enerplus Corporation CAD 20, , ,200 Freehold Royalties Ltd. CAD 15, , ,750 Gran Tierra Energy Inc. CAD 30,200 95, ,982 Husky Energy Inc. CAD 6, , ,825 Inter Pipeline Ltd. CAD 10, , ,300 NexGen Energy Ltd.* CAD 10,000 33,787 32,100 Noble Corporation PLC USD 12,100 68,655 68,748 NuVista Energy Ltd. CAD 10,000 86,484 80,200 Parex Resources Inc. CAD 4,100 67,013 74,456 Parkland Fuel Corporation CAD 6, , ,840 Pembina Pipeline Corporation CAD 8, , ,080 Spartan Energy Corp. CAD 13,000 92,326 93,470 STEP Energy Services Ltd. CAD 10, , ,600 Suncor Energy Inc. CAD 5, , ,750 TransCanada Corporation* CAD 5, , ,490 Whitecap Resources Inc. CAD 19, , ,050 Yangarra Resources Ltd. CAD 20,000 91,824 99,400 3,040,194 3,074,359 Financials % Bank of America Corporation USD 4, , ,427 Bank of Nova Scotia (The) CAD 2, , ,240 Charles Schwab Corporation (The) USD 1,000 66,856 64,572 Citizens Financial Group, Inc. USD 2,000 98, ,538 ECN Capital Corp. CAD 35, , ,550 Element Fleet Management Corp. CAD 10, ,643 95,000 GMP Capital Inc.* CAD 40, , ,200 IGM Financial Inc. CAD 3, , ,450 8

10 EXEMPLAR GROWTH AND INCOME FUND Schedule of Investment Portfolio As at December 31, 2017 JPMorgan Chase & Co. USD 1, , ,424 Manulife Financial Corporation CAD 7, , ,540 Royal Bank of Canada CAD 3, , ,950 Toronto-Dominion Bank (The) CAD 3, , ,950 VersaBank CAD 7,500 45,722 45,525 Westaim Corporation (The) CAD 12,500 40,214 38,875 1,878,457 1,916,241 Health Care % Anthem, Inc. USD , ,135 Editas Medicine, Inc. USD 1,200 39,157 46,353 Sarepta Therapeutics, Inc.* USD 1,200 73,983 83,927 Teladoc, Inc.* USD 1,400 60,767 61,329 Valeant Pharmaceuticals International, Inc. CAD 2,000 52,033 52, , ,144 Industrials % Air Canada CAD 10, , ,800 Bombardier Inc., Class B CAD 25,000 80,480 75,750 Canadian National Railway Company CAD 4, , ,600 Canadian Pacific Railway Limited CAD , ,830 Chorus Aviation Inc. CAD 12, , ,625 FedEx Corporation USD , ,469 Finning International Inc. CAD 3,000 95,458 95,160 Hardwoods Distribution Inc. CAD 2,000 39,975 40,400 Maxar Technologies Ltd. CAD 2, , ,840 Morneau Shepell Inc. CAD 3,000 63,796 66,900 New Flyer Industries Inc. CAD 1,500 77,927 81,000 Northrop Grumman Corporation USD , ,736 SNC-Lavalin Group Inc. CAD 3, , ,675 Spirit Airlines, Inc. USD ,046 50,739 Textron Inc. USD 1,100 75,514 78,247 United Technologies Corporation USD ,473 64,142 WesternOne Inc.* CAD 50,900 70,505 77,368 2,118,999 2,141,281 Information Technology % BlackBerry Limited CAD 3,500 53,017 49,140 CGI Group Inc., Class A CAD 1, , ,450 Cree, Inc.* USD 1,600 73,501 74,696 FireEye, Inc. USD 2,900 52,936 51,763 Legend Power Systems Inc. CAD 60,000 38,980 45,000 Microsoft Corporation USD 2, , ,048 Twitter, Inc. USD 4, , , , ,819 Materials % Agnico Eagle Mines Limited CAD 3, , ,140 Agrium Inc. CAD 2, , ,450 Air Products and Chemicals, Inc. USD 1, , ,498 Albemarle Corporation USD , ,530 Franco-Nevada Corporation CAD 2, , ,920 Labrador Iron Ore Royalty Corporation CAD 6, , ,200 Lithium Americas Corp.* CAD 50, , ,000 Louisiana-Pacific Corporation USD 2,400 83,166 79,221 Lundin Mining Corporation CAD 20, , ,200 Methanex Corporation CAD 1, , ,624 North American Nickel Inc. CAD 123,400 11,822 9,255 Packaging Corporation of America USD 1, , ,531 Sherritt International Corporation CAD 33,800 43,825 58,136 Sociedad Quimica y Minera de Chile S.A. ADR USD 2, , ,959 Venator Materials PLC USD 3, , ,658 2,408,411 2,734,322 9

11 EXEMPLAR GROWTH AND INCOME FUND Schedule of Investment Portfolio As at December 31, 2017 Real Estate % Dream Hard Asset Alternatives Trust CAD 7,500 45,401 47,475 European Commercial REIT CAD 22,000 99,000 79, , ,675 Utilities % Brookfield Renewable Partners L.P. CAD 3, , ,954 Emera Incorporated CAD 10, , ,800 Maxim Power Corp. CAD 50, , , , ,254 13,821,414 14,441,996 Funds - Long % No. of Average Fair Security Name Currency Shares Cost ($) Value ($) Exemplar Investment Grade Fund ETF CAD 50,000 1,000,500 1,001,250 Exemplar Tactical Corporate Bond Fund Class I CAD 228,894 2,305,829 2,262,444 Health Care Select Sector SPDR Trust USD 4, , ,715 ishares 20+ Year Treasury Bond ETF USD 3, , ,121 ishares Russell 2000 ETF* USD 6,000 1,174,404 1,149,853 ishares S&P/TSX Capped Energy ETF CAD 10, , ,700 ishares S&P/TSX Global Gold Index ETF* CAD 35, , ,050 Materials Select Sector SPDR Trust USD 4, , ,562 SPDR Gold Shares* USD 3, , ,284 VanEck Vectors Junior Gold Miners ETF USD 4, , ,766 VanEck Vectors Oil Services ETF* USD 6, , ,842 Vanguard REIT ETF USD 1, , ,306 7,273,705 7,229,893 Commissions and other portfolio transaction costs (8,391) - Total Investments % 21,086,728 21,671,889 Derivatives (see schedule of derivative instruments) % 114,824 Cash and Other Net Assets (Liabilities) % 3,156,666 Net Assets Attributable to Holders of Redeemable Units % 24,943,379 *Denotes all or part of securities on loan Schedule of Derivative Instruments Forward Currency Contracts % Purchased Sold Credit Contract Maturity Unrealized Notional Value Notional Value Counterparty Currency ($) Currency ($) Rating Rate Date Gain/(Loss) ($) BNY Mellon CAD 2,191,312 USD (1,725,000) A ,021 BNY Mellon CAD 892,228 USD (700,000) A ,341 BNY Mellon CAD 1,089,983 USD (850,000) A ,550 BNY Mellon CAD 2,568,242 USD (2,000,000) A ,281 BNY Mellon CAD 1,083,762 USD (850,000) A ,329 BNY Mellon CAD 2,012,566 USD (1,600,000) A ,398 Unrealized Gains 127,920 BNY Mellon USD 800,000 CAD (1,018,680) A (13,096) Unrealized Losses (13,096) Total Forward Currency Contracts 114,824 10

12 EXEMPLAR GROWTH AND INCOME FUND NOTES TO THE FINANCIAL STATEMENTS FUND SPECIFIC INFORMATION The investment objective of the Exemplar Growth and Income Fund is to achieve long term growth and preservation of capital. The Fund will invest up to all of its assets in a diversified mix of other mutual funds (in order to gain indirect exposure to securities that the Fund would otherwise directly invest in), and may also invest in common shares, preferred shares, treasury bills, short-term notes, debentures, and bonds. The Fund invests primarily in Canadian securities. RISK MANAGEMENT The Fund s overall risk management program seeks to maximize the returns derived for the level of risk to which the Fund is exposed and seeks to minimize potential adverse effects on the Fund's financial performance. All investments present a risk of loss of capital. The maximum loss of capital on long equity and bond investments is limited to the fair value of those positions. The maximum loss on equities and debt sold short can be unlimited. The management of these risks is carried out by the Manager in accordance with the Fund s Declaration of Trust. A general discussion of financial risk management for the Exemplar Funds appears as Note 4: FINANCIAL INSTRUMENTS RISK MANAGEMENT. Credit Risk As of December 31, 2017, and 2016 the Fund did not hold any interest-bearing securities, and therefore was not subject to significant interest rate risk. The Fund may participate in securities lending up to a maximum of 50% of the aggregate net asset value of the Fund, excluding the collateral held in respect to such loans, and is exposed to counterparty risk on all such loans, if any. The credit risk related to the securities lending program is limited as the Fund holds a minimum collateral equal to 102% of the fair value of the loaned securities. The collateral and loaned securities are marked to market on each valuation date. All counterparties have a credit rating equivalent to a Moody s credit rating of not less than Aa3. There are risks involved in dealing with custodians or brokers who settle trades with regard to the segregation of assets. It is expected that all securities and other assets deposited with custodians or brokers will be clearly identified as being assets of the Fund. Therefore, the Fund should not be exposed to credit risk with respect to such parties. However, it may not always be possible to achieve this segregation, so the portfolio of the Fund may experience increased exposure to credit risk associated with the applicable custodians or brokers. The Fund is exposed to counterparty credit risk on margin on deposit, cash held at the broker and receivables for securities sold. The Fund s brokerage agreement requires cash collateral up to 150% of the fair value of securities sold short. The Fund's prime brokerage services are provided by BMO Nesbitt Burns which has a credit rating of A1 (2016: Aa3) as rated by Moody's bond rating services. Cash collateral has been provided to BMO Nesbitt Burns in accordance with terms of derivative transaction agreements and is presented as Margin deposits in the Statements of Financial Position. The Fund is exposed to counterparty credit risk on cash and other receivable balances. The Fund s broker and custodial services are provided by CIBC Mellon Trust Company which has a credit rating as rated by Moody's bond rating services of A1 (2016: A1). The Fund is exposed to credit risk on cash deposits held at TD Canada Trust which has a credit rating as rated by Moody s bond rating services of Aa2 (2016: Aa1). Liquidity Risk All of the Fund s liabilities are typically due in less than 3 months. Redeemable units are redeemable on demand at the holder s option. However, holders of these instruments typically retain them for a longer period. Market Risk The following include sensitivity analyses that show how the net assets attributable to holders of redeemable units would have been affected by a reasonably possible change in the relevant risk variable at each reporting date. In practice, the actual results may differ and the differences could be material. 11

13 EXEMPLAR GROWTH AND INCOME FUND NOTES TO THE FINANCIAL STATEMENTS FUND SPECIFIC INFORMATION (a) Currency Risk The table below indicates the Fund s exposure to other currencies as at December 31, 2017 and 2016 in Canadian dollar terms. The table also illustrates the potential impact on the net assets attributable to holders of redeemable units if the Canadian dollar had strengthened or weakened by 10% in relation to each of the other currencies, with all other variables held constant. Non-monetary items include equities, funds and warrants. Monetary items include forward currency contracts, cash, margin deposit and other current receivables and payables. December 31, 2017 Exposure Impact on net assets attributable to holders of redeemable units % of net assets attributable to holders of redeemable units (26.5%) 28.5% 2.0% (2.7%) 2.8% 0.2% December 31, 2016 Exposure Impact on net assets attributable to holders of redeemable units Monetary Non- Monetary Total Monetary Non- Monetary Total Currency $ $ $ $ $ $ United States Dollar - Long 3,238,959 7,015,041 10,254, , ,504 1,025,400 United States Dollar - Short (10,123,864) - (10,123,864) (1,012,386) - (1,012,386) Hong Kong Dollar - Long 222,282 82, ,456 22,228 8,217 30,445 Japanese Yen - Long 51,928-51,928 5,193-5,193 Total (6,610,695) 7,097, ,520 (661,069) 709,721 48,652 Monetary Non- Monetary Total Monetary Non- Monetary Total Currency $ $ $ $ $ $ United States Dollar - Long 2,296,606 1,546,536 3,843, , , ,315 United States Dollar - Short (2,748,178) (15,487) (2,763,665) (274,818) (1,549) (276,367) Total (451,572) 1,531,049 1,079,477 (45,157) 153, ,948 % of net assets attributable to holders of redeemable units (3.5%) 11.8% 8.3% (0.3%) 1.2% 0.8% (b) Interest Rate Risk As at December 31, 2017 and 2016 the Fund did not hold any interest-bearing securities, and therefore was not subject to significant interest rate risk. (c) Price Risk The Fund's policy is to manage price risk through diversification and selection of investments within specified limits established by the investment restrictions within the prospectus, as summarized below. To achieve the investment objective, the Manager utilizes the following allocation guidelines: 30-90% equity securities, 10-50% fixed income securities and 0-50% money market instruments. Fixed income securities may include investment grade, non-investment grade and distressed fixed income securities, issued by Canadian or non-canadian corporations, trusts and international agencies and governments. The Fund is also permitted to invest in convertible bonds and debentures, loans, preferred shares, exchange traded funds and equities. The Fund may also hold cash. To achieve these target ranges, the Fund may invest in either individual securities or the Manager may invest up to 100% of the assets of the Fund in underlying funds. The Fund may invest in foreign securities to an extent that will vary from time to time but is not typically expected to exceed 49% of its assets at the time that foreign securities are purchased, however, as the Fund intends to invest certain of its assets in securities of other investment funds that may themselves invest in foreign securities, the actual exposure of the Fund to investments in foreign securities may exceed this amount. 12

14 EXEMPLAR GROWTH AND INCOME FUND NOTES TO THE FINANCIAL STATEMENTS FUND SPECIFIC INFORMATION As at December 31, 2017, the impact on net assets of the Fund due to a 5% change in market prices of equity and fund securities is $1,083,595 (2016: $575,591) (all other variables held constant). Concentration Risk Concentration risk arises as a result of the concentration of exposures within the same category, whether it is geographical location, product type, industry sector or counterparty type. The following is a summary of the Fund's concentration risk as of December 31, 2017 and 2016: December 31, 2017 December 31, 2016 Market Segment Long (%) Short (%) Long (%) Short (%) Consumer Discretionary Consumer Staples Energy Financials (0.4) Funds Health Care (0.1) Industrials Information Technology Materials Real Estate Telecommunication Services Utilities Derivatives 0.6 (0.1) Totals 87.5 (0.1) 88.9 (0.5) FAIR VALUE MEASUREMENT A general discussion of fair value measurement for the Exemplar Funds appears as Note 5: FINANCIAL INSTRUMENTS FAIR VALUE MEASUREMENT. The following table illustrates the classification of the Fund's assets and liabilities measured at fair value within the fair value hierarchy as at December 31, 2017 and 2016: December 31, 2017 Level 1 Level 2 Level 3 Total $ $ $ $ Financial assets Equities 14,441, ,441,996 Funds 4,967,449 2,262,444-7,229,893 Derivatives - 127, ,920 19,409,445 2,390,364-21,799,809 Financial liabilities Derivatives - (13,096) - (13,096) - (13,096) - (13,096) Total 19,409,445 2,377,268-21,786,713 13

15 EXEMPLAR GROWTH AND INCOME FUND NOTES TO THE FINANCIAL STATEMENTS FUND SPECIFIC INFORMATION December 31, 2016 Level 1 Level 2 Level 3 Total $ $ $ $ Assets Equities 5,702, ,702,445 Funds 37,170 5,791,675-5,828,845 Derivatives 44,381 32,083-76,464 5,783,996 5,823,758-11,607,754 Liabilities Equities sold short (63,855) - - (63,855) (63,855) - - (63,855) Total 5,720,141 5,823,758-11,543,899 All fair value measurements above are recurring. The carrying values of all of the Fund s financial instruments not carried at FVTPL approximate their fair values due to their short-term nature. Fair values are classified as level 1 when the related security or derivative is actively traded and a quoted price is available. If an instrument classified as level 1 subsequently ceases to be actively traded, it is transferred out of level 1. In such cases, instruments are reclassified into level 2, unless the measurement of its fair value requires the use of significant unobservable inputs, in which case it would be classified as level 3. The Manager is responsible for performing the fair value measurements included in the financial statements of the Fund, including level 3 measurements if any. The Manager obtains pricing from a third party pricing vendor which is monitored and reviewed daily by the Manager. In addition, at each financial reporting date, the Manager reviews and approves all level 3 fair value measurements, if applicable. a) Equities and Funds The Fund's equity positions and some investments in funds are classified as Level 1 as the securities are actively traded on a recognized exchange and a quoted price is available. Equity positions which have resale restrictions but otherwise trade on the market are classified as Level 2. Funds that do not trade on an exchange are valued by valuation agents and are classified as Level 2. b) Derivatives Derivatives consist of warrants and forward currency contracts. Warrants are valued using models and valuation techniques commonly used in the industry, including inputs such as underlying stock price, restrictions on exercise and days to expiry. Exchange traded warrants are classified as Level 1. When the inputs that are significant to valuation are generally observable, the warrants are classified as level 2. Forward currency contracts are valued based primarily on the contract notional amount and the difference between the contract rate and the forward market rate for the same currency, adjusted for counterparty risk. Forward currency contracts are classified as Level 2. As at December 31, 2017, the Fund did not hold any level 3 financial instruments. There were no transfers between levels 1, 2 and 3 during the years ended December 31, 2017 and Financial Instruments by Category The following table presents the net gains (losses) on financial instruments at FVTPL by category for the years ended December 31, 2017 and

16 EXEMPLAR GROWTH AND INCOME FUND NOTES TO THE FINANCIAL STATEMENTS FUND SPECIFIC INFORMATION Net realized gains / (losses) Net change in unrealized gains / (losses) Interest income Interest expense Dividend income Dividend expense Securities lending income December 31, 2017 $ $ $ $ $ $ $ $ Financial assets at FVTPL: Designated as FVTPL 2,459, ,031 10, ,150-47,715 3,125,049 HFT 252,014 82, ,756 2,711, ,773 10, ,150-47,715 3,459,805 Financial liabilities at FVTPL: Designated as FVTPL HFT (1,767) 7, (6,005) - (352) Total 2,709, ,193 10, ,150 (6,005) 47,715 3,459,453 Total Net realized gains / (losses) Net change in unrealized gains / (losses) Interest income Interest expense Dividend income Dividend expense Securities lending income December 31, 2016 $ $ $ $ $ $ $ $ Financial asset at FVTPL: Designated as FVTPL 963, ,807 2, , ,542,223 HFT 10,852 32, ,935 Financial liabilities at FVTPL: 974, ,890 2, , ,585,158 HFT (73,184) 6, (6,778) - (73,571) Total (73,184) 6, (6,778) - (73,571) Total 901, ,281 2, ,070 (6,778) 693 1,511,587 15

17 EXEMPLAR INVESTMENT GRADE FUND Statements of Financial Position As at As at December 31, December 31, ASSETS Current assets Financial assets designated at fair value through profit and loss $147,194,996 $57,282,929 Financial assets held for trading Options at fair value - long - 105,735 Unrealized gain on swap contracts 1,627, ,424 Unrealized gain on futures contracts - long 201,221 - Unrealized gain on futures contracts - short 219, ,896 Unrealized gain on forward currency contracts Cash and cash equivalents 1,235,322 2,992,269 Margin deposits 1,071,828 1,075,998 Accrued dividends receivable 41,978 11,785 Accrued interest receivable 929, ,896 Receivable for securities sold 3, ,451 Receivable for redeemable units issued 368, , ,894,198 63,039,403 LIABILITIES Current liabilities Financial liabilities held for trading Options at fair value - short - 23,893 Unrealized loss on swap contracts - 153,188 Unrealized loss on futures contracts - long - 106,435 Unrealized loss on futures contracts - short - 4,510 Unrealized loss on forward currency contracts 18,657 - Margin loan 616, ,921 Payable for securities purchased 390,572 - Accrued interest payable - 8,859 Payable for redeemable units redeemed 173, ,934 Other liabilities (Note 10) 157,830 65,156 1,357, ,896 Net assets attributable to holders of redeemable units $151,536,859 $62,188,507 Net assets attributable to holders of redeemable units Series A $32,007,181 $14,183,535 Series AI $4,575,260 $2,549,060 Series AN $5,292,300 $3,180,116 Series F $84,466,716 $34,960,710 Series FI $5,446,419 $4,103,761 Series FN $15,980,560 $3,149,854 Series I $5,521 $5,266 Series G $1,759,517 $56,205 Series ETF $2,003,385 $- Continued on next page. The accompanying notes are an integral part of these financial statements. 16

18 EXEMPLAR INVESTMENT GRADE FUND Statements of Financial Position Continued from previous page. As at As at December 31, December 31, Number of redeemable units outstanding (Note 7) Series A 3,281,116 1,459,186 Series AI 500, ,643 Series AN 515, ,815 Series F 8,506,130 3,554,196 Series FI 584, ,032 Series FN 1,545, ,722 Series I Series G 137,568 4,176 Series ETF 100,000 - Net assets attributable to holders of redeemable units per unit Series A $9.75 $9.72 Series AI $9.14 $9.28 Series AN $10.26 $10.10 Series F $9.93 $9.84 Series FI $9.32 $9.41 Series FN $10.34 $10.10 Series I $10.72 $10.41 Series G - USD $10.18 $10.02 Series ETF $20.03 $- USD/CAD Foreign Exchange Rate $ $ Approved on behalf of the Board of Directors of Arrow Capital Management Inc., the Manager of the Fund: James L. McGovern Robert W. Maxwell James L. McGovern, Director Robert W. Maxwell, Director The accompanying notes are an integral part of these financial statements. 17

19 EXEMPLAR INVESTMENT GRADE FUND Statements of Comprehensive Income For the years ended December 31, $ $ (Note 14) INCOME Net gains (losses) on investments and derivatives Interest income 3,514,648 2,184,149 Interest expense on short sales (189,142) (69,579) Dividend income 324, ,828 Securities lending income (net) (Note 9) 942 2,264 Net realized gain (loss) on investments and derivatives 1,264, ,227 Net change in unrealized appreciation (depreciation) in value of investments and derivatives 596,697 2,131,243 Net gains (losses) on investments and derivatives 5,511,727 4,600,132 Other income items: Interest on cash 9,134 5,734 Foreign exchange gain (loss) (599,978) (93,355) Net change in unrealized foreign exchange gain (loss) (11,738) (56,335) Total income (net) 4,909,145 4,456,176 EXPENSES Securityholder reporting fees 303, ,394 Management fees (Note 10) 1,053, ,627 Interest expense 2,636 2,680 Audit fees 22,495 19,272 Legal fees 4,873 6,945 Independent Review Committee fees 5,590 4,600 Custodial fees 10,841 4,835 Commissions and other portfolio transaction costs (Note 11) 43,451 29,509 Commissions on Futures (Note 11) 28,164 28,164 Harmonized sales tax 105,808 43,589 Total expense before manager absorption 1,580, ,615 Less: expenses absorbed by manager (Note 10) (123,518) (163,537) Total expenses after manager absorption 1,457, ,078 Increase (decrease) in net assets attributable to holders of redeemable units 3,451,869 3,734,098 Increase (decrease) in net assets attributable to holders of redeemable units (Note 13) Series A 669, ,545 Series AI 105, ,859 Series AN 135, ,880 Series F 2,138,078 2,095,711 Series FI 179, ,169 Series FN 288, ,018 Series I ,665 Series G (69,025) 2,251 Series ETF 3,309 - Series A Series AI Series AN Series F Series FI Series FN Series I Series G (0.77) 0.49 Series ETF The accompanying notes are an integral part of these financial statements. 18

20 EXEMPLAR INVESTMENT GRADE FUND Statements of Changes in Net Assets Attributable to Holders of Redeemable Units For the years ended December 31, Net assets attributable to holders of redeemable units at beginning of year $ $ Series A 14,183,535 14,295,352 Series AI 2,549,060 1,801,322 Series AN 3,180,116 1,990,671 Series F 34,960,710 34,249,772 Series FI 4,103,761 2,308,105 Series FN 3,149,854 1,429,487 Series I 5,266 - Series G 56,205 62,349 Series ETF ,188,507 56,137,058 Increase (decrease) in net assets attributable to holders of redeemable units Series A 669, ,545 Series AI 105, ,859 Series AN 135, ,880 Series F 2,138,078 2,095,711 Series FI 179, ,169 Series FN 288, ,018 Series I ,665 Series G (69,025) 2,251 Series ETF 3,309-3,451,869 3,734,098 Distributions to holders of redeemable units From net investment income Series A (501,152) (174,385) Series AI (72,533) (27,654) Series AN (92,956) (30,622) Series F (1,715,498) (437,458) Series FI (129,093) (52,332) Series FN (241,422) (39,398) Series I (101) (64) Series G (25,069) (882) Series ETF - - (2,777,824) (762,795) From net realized gains on investments and derivatives Series A - (251,232) Series AI - (37,310) Series AN - (58,182) Series F - (538,981) Series FI - (53,593) Series FN - (54,551) Series I - (88) Series G - (836) Series ETF (994,773) Return of capital Series A (192,751) - Series AI (96,218) (35,116) Series AN - - Series F (141,883) - Series FI (100,854) (37,830) Series FN - - Series I - - Series G (5,918) - Series ETF - - (537,624) (72,946) Total distributions to holders of redeemable units (3,315,448) (1,830,514) Continued on next page. The accompanying notes are an integral part of these financial statements. 19

21 EXEMPLAR INVESTMENT GRADE FUND Statements of Changes in Net Assets Attributable to Holders of Redeemable Units For the years ended December 31, Continued from previous page $ $ Redeemable unit transactions Proceeds from redeemable units issued Series A 22,598,225 4,377,618 Series AI 2,319,227 1,034,447 Series AN 3,261,123 1,548,014 Series F 62,405,436 19,445,259 Series FI 1,955,217 2,413,642 Series FN 14,169,011 1,934,790 Series I - 505,016 Series G 1,785,095 33,591 Series ETF 2,000,076 - Reinvestments of distributions to holders of redeemable units Series A 553, ,275 Series AI 58,691 29,126 Series AN 82,397 86,756 Series F 790, ,194 Series FI 54,394 39,229 Series FN 214,010 78,049 Series I Series G 18,229 1,089 Series ETF - - Redemption of redeemable units Series A (5,303,309) (5,287,638) Series AI (288,942) (356,614) Series AN (1,274,340) (541,401) Series F (13,970,230) (20,334,787) Series FI (616,213) (722,629) Series FN (1,599,712) (351,541) Series I - (510,415) Series G - (41,357) Series ETF - - Net increase (decrease) from redeemable unit transactions 89,211,931 4,147,865 Net increase (decrease) in net assets attributable to holders of redeemable units 89,348,352 6,051,449 Series A 32,007,181 14,183,535 Series AI 4,575,260 2,549,060 Series AN 5,292,300 3,180,116 Series F 84,466,716 34,960,710 Series FI 5,446,419 4,103,761 Series FN 15,980,560 3,149,854 Series I 5,521 5,266 Series G 1,759,517 56,205 Series ETF 2,003,385 - Net assets attributable to holders of redeemable units at end of year 151,536,859 62,188,507 The accompanying notes are an integral part of these financial statements. 20

22 EXEMPLAR INVESTMENT GRADE FUND Statements of Cash Flows For the years ended December 31, $ $ (Note 14) Cash flows from (used in) operating activities Increase (decrease) in net assets attributable to holders of redeemable units 3,451,869 3,734,098 Adjustment for: Unrealized foreign exchange (gain) loss on cash (10,454) (55,919) Net realized (gain) loss on investments and derivatives (1,264,573) (137,227) Net change in unrealized (appreciation) depreciation in value of investments and derivatives (596,697) (2,131,243) Purchase of investments (788,423,249) (336,369,713) Proceeds on sale of investments and derivatives 699,419, ,796,050 Change in accrued interest receivable (505,740) (16,712) Change in accrued dividend receivable (30,193) 115 Change in accrued interest payable (8,859) (5,989) Change in other liabilities 92,674 4,975 Change in margin deposits 4,170 1,747,989 Change in margin loan 319,737 10,879 Net cash from (used in) operating activities (87,552,140) (422,697) Cash flows from (used in) financing activities Proceeds from redeemable units issued (Note 1) 107,374,008 28,773,760 Redemption of redeemable units (20,045,088) (25,689,898) Distributions paid to holders of redeemable units, net of reinvested distributions (1,544,181) (828,644) Net cash from (used in) financing activities 85,784,739 2,255,218 Net Increase (decrease) in cash (1,767,401) 1,832,521 Cash at beginning of the year 2,992,269 1,103,829 Unrealized foreign exchange gain (loss) on cash 10,454 55,919 Cash at end of the year 1,235,322 2,992,269 Supplemental information: Interest received* 3,018,042 2,173,171 Dividends received* 293, ,943 Interest and dividends paid* 191,778 78,248 *Included as part of cash flows from operating activities The accompanying notes are an integral part of these financial statements. 21

23 EXEMPLAR INVESTMENT GRADE FUND Schedule of Investment Portfolio As at December 31, 2017 Equities - Long % No. of Average Fair Security Name Currency Shares/Units Cost ($) Value ($) Bank of Montreal, Preferred, 5.20%, Class B, Series 16 (2) CAD 43,000 1,075,430 1,075,000 Bank of Montreal, Preferred, Class 'B', Series '25', Variable Rate, Perpetual (2) CAD 85,800 1,850,505 1,954,524 Bank of Montreal, Preferred, Series '40', Variable Rate, Perpetual (2) CAD 17, , ,470 Bank of Montreal, Preferred, Class 'B', Series '42', Variable Rate, Perpetual (2) CAD 69,000 1,723,668 1,758,810 Bank of Nova Scotia (The), Preferred, Series 20, Variable Rate (1)(2) CAD 1,400 35,042 34,958 Bank of Nova Scotia, Preferred, Series '32', Variable Rate, Perpetual (1)(2) CAD 61,400 1,359,261 1,413,428 Bank of Nova Scotia (The), Preferred, Series 19, Variable Rate (2) CAD 53,000 1,329,240 1,323,410 Bank of Nova Scotia (The), Preferred, Series 21, Variable Rate (2) CAD 76,000 1,885,560 1,884,800 Canadian Imperial Bank of Commerce, Preferred, Series '45', Variable Rate, Perpetual (2) CAD 40,000 1,001,073 1,020,000 Enbridge Inc., Preferred, Series L, Variable Rate (2) USD 6, , ,835 Enbridge Inc., Preferred, Series 'B', Variable Rate, Perpetual (2) CAD 60,600 1,111,864 1,133,220 Toronto-Dominion Bank (The), Preferred, Series S, Variable Rate (1)(2) CAD 14, , ,930 Toronto-Dominion Bank (The), Preferred, Series Y, Variable Rate (1)(2) CAD 39, , ,685 Toronto-Dominion Bank (The), Preferred, Series 16, Variable Rate (2) CAD 62,000 1,550,000 1,591,540 14,911,297 15,180,610 Fixed Income - Long % Maturity Coupon Par Average Fair Security Name Date Rate (%) Currency Value ($) Cost ($) Value ($) Corporate Bonds % Alimentation Couche-Tard Inc. (2) CAD 3,000,000 3,008,880 2,986,203 Anheuser-Busch InBev Finance Inc. (2) CAD 4,418,000 4,657,825 4,542,182 AT&T Inc., Series 'Maple', Restricted CAD 4,618,000 4,919,899 4,778,523 Bank of Montreal, Variable Rate (2) CAD 4,111,000 4,197,991 4,153,588 Bell Canada, (2) CAD 1,051,000 1,144,886 1,145,282 Bruce Power L.P., Restricted (3) CAD 4,628,000 4,724,815 4,662,241 Canadian Imperial Bank of Commerce, Variable Rate (2) CAD 5,347,000 5,484,187 5,396,461 Canadian Natural Resources Ltd CAD 2,720,000 2,789,442 2,775,604 Cominar REIT CAD 4,249,000 4,304,341 4,307,125 Cominar REIT, Series '7' CAD 2,000,000 2,047,480 2,008,361 Enbridge Inc., Variable Rate (2) CAD 4,679,000 4,679,000 4,663,223 Enbridge Inc. Discount Note CAD 3,900,000 3,860,142 3,860,142 Fairfax Financial Holdings Ltd. (2) USD 3,617,000 4,990,945 4,910,556 Fairfax Financial Holdings Ltd CAD 2,100,000 2,372,307 2,315,935 First Capital Realty Inc. (2) CAD 3,559,000 3,949,744 3,802,897 Ford Credit Canada Co., Floating Rate CAD 5,000,000 5,010,346 5,036,150 Ford Credit Canada Co CAD 5,341,000 5,351,310 5,322,501 Ford Credit Canada Company CAD 1,400,000 1,390,144 1,389,923 Goldman Sachs Group Inc. (The) (3) CAD 1,808,000 1,868,387 1,861,248 Goldman Sachs Group Inc. (The), Variable Rate, Restricted (2) CAD 5,541,000 5,486,604 5,432,201 Goldman Sachs Group Inc. (The), Floating Rate (2) USD 2,000,000 2,536,500 2,518,642 Inter Pipeline Ltd. (2) CAD 5,295,000 5,750,742 5,658,070 MCAP Commercial L.P CAD 2,402,000 2,417,037 2,406,641 Merrill Lynch & Co. Inc., Variable Rate (2) CAD 13,086,000 13,071,075 12,921,902 Molson Coors International L.P. (3) (2) CAD 4,969,000 4,906,514 4,899,618 Molson Coors International LP, Series 2 (2) CAD 300, , ,386 Morgan Stanley, Floating Rate (2) USD 1,339,000 1,686,337 1,697,502 Morgan Stanley, Floating Rate (3) (2) USD 2,179,000 2,845,229 2,785,532 Morgan Stanley, Restricted CAD 7,220,000 7,159,568 7,186,257 RioCan REIT CAD 1,441,000 1,443,439 1,427,999 Shaw Communications Inc CAD 2,500,000 2,583,850 2,544,958 Shaw Communications Inc. (2) CAD 675, , ,101 SmartCentres REIT, Series 'R', Floating Rate CAD 1,500,000 1,500,000 1,502,835 TransCanada Trust, Series '2017-A', Variable Rate (2) CAD 6,182,000 6,186,941 6,175,429 Wells Fargo & Company CAD 4,000,000 3,940,480 3,905, ,319, ,014,386 Commissions and other portfolio transaction costs (3,279) - Total Investments % 148,227, ,194,996 Derivatives (see schedule of derivative instruments) % 2,029,881 Cash and Other Net Assets (Liabilities) % 2,311,982 Net Assets Attributable to Holders of Redeemable Units % 151,536,859 22

24 EXEMPLAR INVESTMENT GRADE FUND Schedule of Investment Portfolio As at December 31, 2017 Schedule of Derivative Instruments Futures Contracts - Long % Contract Expiry No. of Notional Unrealized Security Name Size Date Currency Contracts Value ($) Gain/(Loss) ($) Canadian Dollar Futures 1, USD ,650, ,221 Futures Contracts - Short % Contract Expiry No. of Notional Unrealized Security Name Size Date Currency Contracts Value ($) Gain/(Loss) ($) Canada 5 Year Bond Futures 1, CAD (41) (4,894,990) 46,980 Canada 10 Year Bond Futures 1, CAD (131) (17,658,800) 161,440 US 5 Year Treasury Note Futures 1, USD (25) (3,650,456) 11, ,468 Swaps % Notional Average Unrealized Security Name Currency Value ($) Cost ($) Gain/(Loss) ($) 3-Month CDOR, 9/27/2019, % Interest Rate Swap CAD 6,720, ,295 3-Month CDOR, 9/27/2021, % Interest Rate Swap CAD 9,181, ,001 3-Month CDOR, 9/1/2019,1.075% Interest Rate Swap CAD 5,500,000-83,994 3-Month CDOR, 9/1/2019, % Interest Rate Swap CAD 2,300,000 3,387 34,081 3-Month CDOR, 9/1/2021,1.3225% Interest Rate Swap CAD 21,850, ,229 3-Month CDOR, 6/1/2022,1.3925% Interest Rate Swap CAD 3,350, ,783 3-Month CDOR, 8/23/2022, 1.855% Interest Rate Swap CAD 9,550, ,466 3,387 1,627,849 Forward Currency Contracts - (0.01%) Purchased Sold Credit Contract Maturity Unrealized Counterparty Currency Notional Value ($) Currency Notional Value ($) Rating Rate ($) Date Gain/(Loss) ($) BNY Mellon USD 1,398,000 CAD (1,775,916) A (18,657) Total forward currency contracts (18,657) Total Derivative Instruments at Fair Value 3,387 2,029,881 (1) Convertible (2) Callable (3) Restricted 23

25 EXEMPLAR INVESTMENT GRADE FUND NOTES TO THE FINANCIAL STATEMENTS FUND SPECIFIC INFORMATION The investment objective of the Exemplar Investment Grade Fund is to generate income and capital preservation by investing in a diversified portfolio of primarily North American investment grade corporate bonds. RISK MANAGEMENT The Fund s overall risk management program seeks to maximize the returns derived for the level of risk to which the Fund is exposed and seeks to minimize potential adverse effects on the Fund's financial performance. All investments present a risk of loss of capital. The maximum loss of capital on long equity, options, interest rate swaps, credit default swaps and debt securities is limited to the fair value of those positions. The maximum loss on equities, options and debt sold short can be unlimited and the maximum loss on futures contracts is the notional contract value of those positions. The management of these risks is carried out by the Manager and Portfolio Sub-Advisor in accordance with the Fund s Declaration of Trust. The Fund's use of leverage and borrowings can increase the Fund's exposure to these risks, which in turn can also increase the potential returns the Fund can achieve. The Portfolio Sub-Advisor uses leverage against assets with satisfactory liquidity characteristics in order to increase return on capital subject to market conditions. A general discussion of financial risk management for the Exemplar Funds appears as Note 4: FINANCIAL INSTRUMENTS RISK MANAGEMENT. Credit Risk The analysis below summarizes the credit quality of the Fund's debt portfolio at December 31, 2017 and Percentage of total debt securities Credit Rating* December 31, 2017 December 31, 2016 % % AAA - - AA - - A BBB Below BBB Not Rated Total * Credit ratings are obtained from Standard & Poor's, Moody's and / or Dominion Bond Rating Service. The Fund is exposed to counterparty credit risk on swaps, and futures contracts. The counterparties to the Fund s swaps are Bank of America and JP Morgan Chase & Co. which have credit ratings as rated by Moody s bond rating services of A3 and A3, respectively (2016: Baa1 and A3, respectively). Futures contracts are exchange traded. Cash collateral has been provided to JP Morgan Chase & Co. in accordance with terms of derivative transaction agreements and is presented as Margin deposits in the Statements of Financial Position. The Fund is exposed to counterparty credit risk on cash, margin deposits and other receivable balances. The Fund s broker and custodial services are provided by CIBC Mellon Trust Company which has a credit rating as rated by Moody's bond rating services of A1 (2016: A1). The Fund is exposed to credit risk on cash deposits held at TD Canada Trust which has a credit rating as rated by Moody s bond rating services of Aa2 (2016: Aa1). The Fund may participate in securities lending up to a maximum of 50% of the aggregate net asset value of the Fund, excluding the collateral held in respect to such loans, and is exposed to counterparty risk on all such loans, if any. The credit risk related to the securities lending program is limited as the Fund holds a minimum collateral equal to 102% of the fair value of the loaned securities. The collateral and loaned securities are marked to market on each valuation date. 24