audited financial statements december 2013 · short: proceeds fair value % of total net assets long...

CONTENTS

Management’s Statement on Financial Reporting 2

Independent Auditor’s Report 3

Exemplar Leaders Fund 4

Exemplar Global Infrastructure Fund 15

Exemplar Timber Fund 24

Exemplar Yield Fund 31

Exemplar Global Agriculture Fund 41

Notes to the Financial Statements 49

Fund Information 59

2

MANAGEMENT’S STATEMENT ON FINANCIAL REPORTING

March 28, 2014

TO THE UNITHOLDERS AND TRUSTEE OF EXEMPLAR LEADERS FUND, EXEMPLAR GLOBAL INFRASTRUCTURE FUND,

EXEMPLAR TIMBER FUND, EXEMPLAR YIELD FUND AND EXEMPLAR GLOBAL AGRICULTURE FUND (COLLECTIVELY THE

“FUNDS”)

BluMont Capital Corporation (the “Manager”) is responsible for the accompanying financial statements and all information in this

report. The financial statements have been approved by the Board of Directors of the Manager. The financial statements have been

prepared in accordance with accounting principles generally accepted in Canada and, where appropriate, reflect management’s

judgment and best estimates.

Management has established systems of internal control that provide assurance that assets are safeguarded from loss or

unauthorized use and produce reliable accounting records for the preparation of financial information. The systems of internal

control meet management’s responsibilities for the integrity of the financial statements.

The Board of Directors of the Manager meets with management and the auditors to discuss the Funds’ financial reporting and

internal controls. The Board of Directors reviews the results of the audits by the auditors and their audit report. The external auditor

has unrestricted access to the Board of Directors.

The Manager recognizes its responsibility to conduct the Funds’ affairs in the best interest of the unitholders.

On December 2, 2013, Arrow Capital Management Inc. (“Arrow”) acquired all the outstanding shares of BluMont Capital, resulting in

a change of control of BluMont Capital. As Arrow intends to amalgamate with BluMont Capital on or about April 1, 2014, continuing

under the name “Arrow Capital Management Inc.”, at a special meeting of unitholders on November 27, 2013, the unitholders of the

Funds approved a change of manager.

“James L. McGovern” “Robert W. Maxwell”

James L. McGovern

Managing Director & CEO

Robert W. Maxwell

Managing Director & CFO

3

INDEPENDENT AUDITOR’S REPORT

TO THE UNITHOLDERS AND TRUSTEE OF EXEMPLAR LEADERS FUND, EXEMPLAR GLOBAL INFRASTRUCTURE FUND,

EXEMPLAR TIMBER FUND, EXEMPLAR YIELD FUND AND EXEMPLAR GLOBAL AGRICULTURE FUND (COLLECTIVELY THE

“FUNDS”)

We have audited the accompanying financial statements of each of the Funds, which comprise each Fund’s statement of

investments and other net assets as at December 31, 2013 and each Fund’s statements of net assets, operations and changes in net

assets as at and for the periods as indicated in note 1, and the related notes, which comprise 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 Canadian

generally accepted accounting principles, 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 audit 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 each of our audits is sufficient and appropriate to provide a basis for our

audit opinion.

Opinion

In our opinion, the financial statements of each of the Funds present fairly, in all material respects, each Fund’s financial position, the

results of each of their operations and the changes in each of their net assets as at and for the periods as indicated in note 1, in

accordance with Canadian generally accepted accounting principles.

Chartered Professional Accountants, Licensed Public Accountants

Toronto, Ontario

March 28, 2014

4

STATEMENT OF NET ASSETS

As at December 31,

EXEMPLAR LEADERS FUND

2013 2012

ASSETS

Long positions at fair value*

Canadian equities $ 20,897,564 $ 16,504,547

U.S. equities 9,017,710 5,844,890

Global equities 1,991,281 119,700

31,906,555 22,469,137

Cash and broker deposits 3,348,032 3,064,261

Accrued investment income 86,619 88,380

Accounts receivable:

Receivable from investment sales 525,322 585,856

Subscriptions receivable 26,697 5,500

Total Assets 35,893,225 26,213,134

LIABILITIES

Short positions at fair value**

Canadian equities 512,526 548,076

U.S. equities 735,573 346,394

1,248,099 894,470

Accounts payable:

Fees and operating expenses 73,512 55,277

Performance fees payable 663,461 7,117

Dividends payable 4,080 237

Redemptions payable 7,000 29,215

Payable for investment purchases 1,188,500 622,918

Total Liabilities 3,184,652 1,609,234

NET ASSETS REPRESENTING UNITHOLDERS' EQUITY

Series A 25,434,446 19,492,313

Series F 7,274,127 5,111,587

$ 32,708,573 $ 24,603,900

NUMBER OF UNITS OUTSTANDING (Note 4)

Series A 648,874 640,599

Series F 181,509 164,685

NET ASSETS PER UNIT (Note 8)

Series A $ 39.20 $ 30.43

Series F $ 40.08 $ 31.04

*Long positions, at cost $ 22,752,122 $ 19,753,222

**Proceeds on short positions $ (1,312,453) $ (986,326)

Approved by the Board of Directors of BluMont Capital Corporation


James L. McGovern


Robert W. Maxwell


The accompanying notes are an integral part of these financial statements.

5

STATEMENT OF OPERATIONS

For the years ended December 31,


2013 2012

INVESTMENT INCOME

Dividends $ 725,092 $ 679,118

Less: Foreign withholding taxes 20,238 9,750

704,854 669,368

Interest 17,032 21,502

721,886 690,870

EXPENSES (Notes 6 and 7)

Management fees 496,907 427,436

Performance fees 663,461 7,117

Dividends on investments sold short 9,554 237

General operating expenses 268,448 234,273

Audit fees 20,464 12,020

Legal fees 1,673 3,463

Trustees' fees 1,557 1,384

Securityholders’ reporting costs 43,639 42,178

1,505,703 728,108

Less: Expenses absorbed by the Manager 21,530 59,804

1,484,173 668,304

NET INVESTMENT INCOME (LOSS) (762,287) 22,566

NET REALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS 1,498,231 (25,859)

TRANSACTION COSTS (Notes 2(I) and 7) (23,965) (34,406)

NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS 6,411,016 2,007,911

EXCHANGE GAIN (LOSS) ON FOREIGN CURRENCIES AND OTHER NET ASSETS 59,284 (3,457)

NET GAIN ON INVESTMENTS AND TRANSACTION COSTS 7,944,566 1,944,189

NET INCREASE IN NET ASSETS FROM OPERATIONS

Series A 5,645,385 1,526,931

Series F 1,536,895 439,824

$ 7,182,280 $ 1,966,755

NET INCREASE IN NET ASSETS FROM OPERATIONS PER UNIT (Note 2(VI))

Series A $ 8.78 $ 2.42

Series F $ 8.98 $ 2.89


6

STATEMENT OF CHANGES IN NET ASSETS

For the years ended December 31,


2013 2012

Net Assets, Beginning of Year

Series A $ 19,492,313 $ 16,932,909

Series F 5,111,587 4,367,496

24,603,900 21,300,405

Net Increase in Net Assets from Operations

Series A 5,645,385 1,526,931

Series F 1,536,895 439,824

7,182,280 1,966,755

From Capital Unit Transactions: (Note 4)

Proceeds from issue of units

Series A 3,191,865 3,371,541

Series F 901,272 1,559,324

4,093,137 4,930,865

Consideration paid for redemptions of units

Series A (2,895,117) (2,339,068)

Series F (275,627) (1,255,057)

(3,170,744) (3,594,125)

Net Assets, End of Year

Series A 25,434,446 19,492,313

Series F 7,274,127 5,111,587

$ 32,708,573 $ 24,603,900


7


STATEMENT OF INVESTMENTS AND OTHER NET ASSETS As at December 31, 2013

Number of

Shares

Long: Avg Cost

Short: Proceeds

Fair

Value

% of Total

Net Assets

LONG POSITIONS

Canadian Equities

Energy

Canyon Services Group Inc. 10,000 $ 114,534 $ 119,900

DeeThree Exploration Limited 36,000

231,204

343,440

Enterprise Group Inc., Subscription Receipts 160,000

115,200

124,800

OneRoof Energy Inc., Subscription Receipts2 130,000

312,000

312,000

Pan Orient Energy Corporation 63,800

248,591

123,772

RMP Energy Inc. 82,000

227,169

460,020

ZCL Composites Inc. 60,000

196,870

430,800

1,445,568

1,914,732 5.9

Basic Materials

Falco Pacific Resources Inc., Restricted2 234,000

70,200

88,920

Falco Pacific Resources Inc., Warrants, 11/7/20152 117,000

-

-

Noranda Income Fund 136,000

699,737

735,760

769,937

824,680 2.5

Industrials

Bombardier Inc. 'B' 62,000

296,735

285,820

Boyd Group Income Fund 11,400

128,033

377,112

CERF Inc. 42,400

114,194

123,808

CERF Inc., Warrants, 1/25/20152 41,000

-

-

DirectCash Payments Inc. 23,900

510,915

435,219

Flyht Aerospace Solutions Limited 1,700,500

521,515

782,230

Flyht Aerospace Solutions Limited, Warrants, 6/18/20142 230,000

-

36,800

Horizon North Logistics Inc. 132,400

421,417

1,310,760

Rocky Mountain Dealerships Inc. 13,000

150,653

165,360

WestJet Airlines Limited 43,000

708,775

1,196,690

2,852,237

4,713,799 14.4

Consumer Discretionary

Magna International Inc. 26,500

1,225,539

2,307,355

Martinrea International Inc. 26,300

192,084

204,877

Transat A.T. Inc. 'B' 20,000

117,958

252,000

1,535,581

2,764,232 8.4

Consumer Staples

Liquor Stores NA Limited 13,500

210,907

189,810

Neptune Technologies & Bioressources Inc. 487,500

1,111,981

1,462,500

1,322,888

1,652,310 5.0

8



Number of

Shares

Long: Avg Cost

Short: Proceeds

Fair

Value

% of Total

Net Assets

Health Care

Acasti Pharma Inc. 408,132 $ 541,416 $ 530,572

Acasti Pharma Inc., Warrants, 12/3/20182 205,000

-

-

Catamaran Corporation 2,800

87,225

141,148

NeuroBioPharm Inc. Class 'A'2 13,395

754

1,340

NeuroBioPharm Inc., Warrants, 4/12/20142 26,790

-

-

VentriPoint Diagnostics Limited, Warrants, 7/10/20142 300,000

-

-

VentriPoint Diagnostics Limited, Warrants, 5/1/20142 150,000

-

-

629,395

673,060 2.1

Financials

Alaris Royalty Corporation 67,200

1,085,174

1,999,200

Element Financial Corporation 21,900

182,325

306,162

Inovalis REIT 65,400

654,000

578,790

Northwest International Healthcare Property REIT 70,000

140,000

141,400

Partners Real Estate Investment 21,100

125,100

112,885

Tricon Capital Group Inc. 23,000

144,689

177,330

2,331,288

3,315,767 10.1

Information Technology

Baylin Technologies Inc. 30,200

241,600

217,440

Cortex Business Solutions Inc. 1,840,000

386,000

285,200

Cortex Business Solutions Inc., Warrants, 4/4/20162 600,000

24,000

-

Espial Group Inc. 38,000

15,314

27,360

Espial Group Inc., Restricted2 144,000

100,800

103,680

Espial Group Inc., Warrants, 11/15/20142 72,000

-

-

GuestLogix Inc. 78,300

87,834

87,695

Sensio Technologies Inc., Restricted2 1,040,000

104,000

98,800

Sensio Technologies Inc., Warrants, 9/30/20152 1,040,000

-

-

Sierra Wireless Inc. 47,400

416,962

1,207,279

Spectra7 Microsystems Inc., Restricted2 182,000

100,100

114,660

Symbility Solutions Inc. 353,000

152,206

150,024

VendTek Systems Inc. 353,950

178,187

10,619

WebTech Wireless Inc. 1,459,950

566,687

510,983

Wi-LAN Inc. 140,000

717,844

497,000

3,091,534

3,310,740 10.1

Telecommunication Services

BCE Inc. 25,000

889,157

1,150,000 3.5

Utilities

Capital Power Corporation 22,300

483,559

474,544

Emera Inc. 3,400

98,090

103,700

581,649

578,244 1.8

Total Canadian Equities - Long

15,449,234

20,897,564 63.8

9



Number of

Shares

Long: Avg Cost

Short: Proceeds

Fair

Value

% of Total

Net Assets

U.S. Equities

Basic Materials

KapStone Paper and Packaging Corporation 12,801 $ 314,455 $ 760,503

Plum Creek Timber Company Inc. 8,200

390,396

405,283

704,851

1,165,786 3.6

Industrials

Hexcel Corporation 6,199

279,094

294,585

Norfolk Southern Corporation 7,400

509,402

730,306

788,496

1,024,891 3.1

Consumer Staples

Philip Morris International Inc. 13,500

793,419

1,250,633 3.8

Health Care

Gilead Sciences Inc. 11,200

211,752

894,766

Intuitive Surgical Inc. 700

267,368

285,748

Varian Medical Systems Inc. 1,700

128,856

140,477

WellPoint Inc. 28,400

1,721,606

2,789,507

2,329,582

4,110,498 12.6


Microsoft Corporation 15,300

447,054

608,798

NetApp Inc. 9,700

388,469

424,340

835,523

1,033,138 3.2

Utilities

National Fuel Gas Company 5,700

347,710

432,764 1.3

Total U.S. Equities - Long

5,799,581

9,017,710 27.6

Global Equities

Netherlands

LyondellBasell Industries NV 'A' 20,000

1,322,449

1,707,110 5.2

United Kingdom

Vodafone Group PLC ADR 6,800

209,868

284,171 0.9

Total Global Equities - Long

1,532,317

1,991,281 6.1

Total Long Positions Including Transaction Costs

22,781,132

31,906,555 97.5

Transaction Costs

(29,010)

- -

Total Long Positions Before Transaction Costs

22,752,122

31,906,555 97.5

10



Number of

Shares

Long: Avg Cost

Short: Proceeds

Fair

Value

% of Total

Net Assets

SHORT POSITIONS

Canadian Equities

Energy

Trican Well Service Limited (25,000) $ (357,685) $ (324,750) (1.0)

Basic Materials

iShares S&P/TSX Global Gold Index Fund (19,200)

(302,836)

(187,776) (0.6)

Total Canadian Equities - Short

(660,521)

(512,526) (1.6)

U.S. Equities


Tesla Motors Inc. (4,600)

(650,877)

(735,573) (2.2)

Total Short Positions Including Transaction Costs

(1,311,398)

(1,248,099) (3.8)

Transaction Costs

(1,055)

- -

Total Short Positions Before Transaction Costs

(1,312,453)

(1,248,099) (3.8)

TOTAL INVESTMENT PORTFOLIO

$ 21,439,669

30,658,456 93.7

Other Assets, Net of Liabilities1

2,050,117 6.3

TOTAL NET ASSETS REPRESENTING UNITHOLDERS' EQUITY

$ 32,708,573 100.0

1 This amount is comprised of cash and broker deposits plus accrued investment income plus accounts receivable less accounts payable.

2 Private and illiquid securities.


11


SUMMARY OF INVESTMENT PORTFOLIO As at December 31,

SECTOR MIX % of Total Net Assets

GEOGRAPHIC MIX % of Total Net Assets

2013 2012 2013 2012

Long Positions

Long Positions

Energy 5.9 10.6 Canada 63.8 67.1

Basic Materials 6.1 5.4 U.S. 27.6 23.7

Industrials 22.7 17.0 Netherlands 5.2 -

Consumer Discretionary 8.4 6.2 United Kingdom 0.9 0.5

Consumer Staples 8.8 5.1 Other Assets, Net of Liabilities 6.3 12.3

Health Care 14.7 15.0

Financials 10.1 9.1 Short Positions

Information Technology 13.3 16.2 Canada (1.6) (2.2)

Telecommunication Services 4.4 4.5 U.S. (2.2) (1.4)

Utilities 3.1 2.2

Other Assets, Net of Liabilities 6.3 12.3

% of Total Net Assets Short Positions

ASSET MIX

Basic Materials (0.6) (0.9) 2013 2012

Energy (1.0) -

Consumer Discretionary (2.2) - Long Positions

Industrials - (1.3)

Information Technology - (1.4) Canadian Equities 63.8 67.1

U.S. Equities 27.6 23.7

Global Equities 6.1 0.5


Short Positions

Canadian Equities (1.6) (2.2)

U.S. Equities (2.2) (1.4)


12

EXEMPLAR LEADERS FUND DISCUSSION OF FINANCIAL INSTRUMENTS RISK MANAGEMENT (Note 3)

December 31, 2013

A. FINANCIAL RISK MANAGEMENT

The investment objective of the Exemplar Leaders Fund is to maximize absolute returns on investments through securities selection and

asset allocation. The Fund focuses on achieving growth of capital through superior securities selection and pursues a long-term investment

program with the aim of generating capital gains. The Fund attempts to reduce volatility through diversifying the portfolio across both

economic sectors and market capitalizations (company size and liquidity). The Fund invests primarily in equity and equity-related securities

of North American companies. The Fund may also invest in international companies.

To achieve the investment objective of the Fund, the Manager: (i) makes long term investments of securities of issuers which the Manager

believes present the greatest opportunity for capital appreciation; and (ii) manages the portfolio’s sector allocation, increasing and

decreasing exposure to different sectors of the market as appropriate.

The Fund’s overall risk management program seeks to minimize the potentially adverse effect of risk on the Fund’s financial performance in a

manner consistent with the Fund’s investment objective. The Manager manages the potential effects of these financial risks on the Fund’s

performance by employing and overseeing professional and experienced investment advisors that monitor the Fund’s investments and

market events on a daily basis.

A general discussion of financial risk management for the Exemplar Funds appears as Note 3: FINANCIAL INSTRUMENTS RISK MANAGEMENT

on page 52.

B. CREDIT RISK

As at December 31, 2013 and 2012, the Fund had no investments in debt instruments and therefore was not subject to related credit risk.

C. LIQUIDITY RISK

The Statement of Investments and Other Net Assets identifies any securities that are not traded on an active market. As of December 31,

2013, private and illiquid securities held by the Fund equaled 2.3% of the Net Assets (2012 - 0.01%). As at December 31, 2013 and 2012, all

existing liabilities of the Fund (excluding short positions) are to be settled within three months.

D. INTEREST RATE RISK

As at December 31, 2013 and 2012, the Fund did not hold any interest-bearing securities, and therefore was not subject to interest rate risk.

E. OTHER PRICE RISK

The Statement of Investments and Other Net Assets classifies securities by sector and geographic segment.

The impact on Net Assets of the Fund due to a 5 percent change in benchmark, using historical correlation between the Fund’s return as

compared to the return of the Fund’s benchmark, as December 31, 2013 and 2012, with all other variables held constant, is included in the

following table. Regression analysis has been utilized to estimate the historical correlation. The analysis uses 77 data points (2012 – 65 data

points) based on the monthly net returns of the Fund.

Impact on Net Assets

Benchmark December 31, 2013 December 31, 2012

S&P/TSX Total Return Index $1,370,577 $1,036,051

The historical correlation may not be representative of the future correlation, and accordingly the impact on Net Assets could be materially

different.

13

F. CURRENCY RISK

Currencies to which the Fund had exposure as at December 31, 2013 and 2012 are as follows:

As at December 31, 2013 As at December 31, 2012

Currency Financial Instruments % of Net Assets Financial Instruments % of Net Assets

United States Dollar (long) $12,421,398 38.0% $6,406,981 26.0%

United States Dollar (short) $(735,573) (2.25)% $(346,394) (1.4)%

The amounts in the above table are based on the fair value of the Fund’s financial instruments (including cash and cash equivalents). Other

financial assets and financial liabilities that are denominated in foreign currencies do not expose the Fund to significant currency risk.

As at December 31, 2013, if the Canadian dollar had strengthened or weakened by 5 percent in relation to all currencies, with all other -

variables held constant, Net Assets would have decreased or increased, respectively, by approximately $584,291 (2012 – $303,029).

In practice, the actual trading results may differ from this sensitivity analysis and the difference could be material.

G. FAIR VALUE ESTIMATION

The following table analyzes the Fund’s financial assets and liabilities within the fair value hierarchy measured at fair value.

December 31, 2013

Level 1 ($) Level 2 ($) Level 3 ($) Total ($)

Assets

Equity securities - long 31,150,352 754,863 1,340 31,906,555

Total Assets 31,150,352 754,863 1,340 31,906,555

Liabilities

Equity securities - short (1,248,099) - - (1,248,099)

Total Liabilities (1,248,099) - - (1,248,099)

December 31, 2012


Assets

Equity securities - long 22,467,797 - 1,340 22,469,137

Total Assets 22,467,797 - 1,340 22,469,137

Liabilities

Equity securities - short (894,470) - - (894,470)

Total Liabilities (894,470) - - (894,470)

Investments whose values are based on quoted market prices in active markets, and therefore classified within level 1, include active listed

equities. The Manager does not adjust the quoted price for these instruments.

Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer

quotations or alternative pricing sources supported by observable inputs are classified within level 2. As at December 31, 2013, the Fund

held investments that qualified as level 2 which included restricted equities and warrants. As level 2 investments include positions that are

not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-

transferability, which are generally based on available market information.

Investments classified within level 3 have significant unobservable inputs, as they trade infrequently. As observable prices are not available

for these securities, the Manager has used its best judgment to derive the fair value. The Manager considers original transaction price, recent

transactions in the same or similar instruments and completed third-party transactions in comparable instruments and adjusts the prices as

deemed necessary. The level 3 amount consists of one private equity position and warrants.

As of December 31, 2013, if relevant market-related inputs increased or decreased by 50%, with all other variables remaining constant, Net

Assets would have possibly increased or decreased by approximately $670 (December 31, 2012 – $670).

14

The following table presents the movement in level 3 instruments for the years ended December 31, 2013 and 2012 by class of financial

instrument.

Equity Securities ($)

December 31, 2013 December 31, 2012

Opening balance 1,340 -

Net purchases and sales - -

Net transfers in (out) - 1,504

Realized gain (loss) (749) (11,550)

Unrealized appreciation 749 11,386

Closing balance 1,340 1,340

There were no transfers between Levels 1 and 2 during the years ended December 31, 2013 and 2012. The net change in unrealized

appreciation/depreciation for level 3 financial instruments held as of December 31, 2013 was $nil (December 31, 2012 - $11,386).


15

STATEMENT OF NET ASSETS As at December 31,

EXEMPLAR GLOBAL INFRASTRUCTURE FUND

2013 2012

ASSETS


U.S. equities $ 10,285,639 $ 5,100,263

Global equities 11,162,893 12,205,763

21,448,532 17,306,026

Cash and broker deposits 421,041 288,072


Subscriptions receivable 4,003 315

Total Assets 21,907,769 17,634,995

LIABILITIES

Accounts payable:

Performance fees payable 294,455 115,255


Redemptions payable - 52,274

Total Liabilities 354,058 211,932

NET ASSETS REPRESENTING UNITHOLDERS’ EQUITY

Series A 14,626,360 11,484,603

Series F 6,927,351 5,938,460

$ 21,553,711 $ 17,423,063


Series A 1,254,819 1,142,890

Series F 592,197 594,559


Series A $ 11.66 $ 10.05

Series F $ 11.70 $ 9.99




James L. McGovern


Robert W. Maxwell



16

STATEMENT OF OPERATIONS For the years ended December 31,


2013 2012

INVESTMENT INCOME

Dividends $ 770,844 $ 691,171


609,214 556,980

Interest 3,513 11,515

612,727 568,495



Performance fees 294,455 115,255


Audit fees 20,464 20,611


Trustees' fees 1,043 843


Interest - 26

853,135 683,542


751,168 574,703

NET INVESTMENT LOSS (138,441) (6,208)

NET REALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS 574,921 (93,880)


NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS 3,123,896 428,203


NET GAIN ON INVESTMENTS AND TRANSACTION COSTS 3,741,283 323,415


Series A 2,371,621 193,190

Series F 1,231,221 124,017

$ 3,602,842 $ 317,207

NET INCREASE IN NET ASSETS FROM OPERATIONS PER UNIT(Note 2(VI))

Series A $ 2.06 $ 0.21

Series F $ 2.10 $ 0.18


17

STATEMENT OF CHANGES IN NET ASSETS For the years ended December 31,


2013 2012


Series A $ 11,484,603 $ 2,029,629

Series F 5,938,460 3,155,153

17,423,063 5,184,782


Series A 2,371,621 193,190

Series F 1,231,221 124,017

3,602,842 317,207



Series A 3,901,870 11,074,699

Series F 1,461,194 7,031,118

5,363,064 18,105,817


Series A (3,007,643) (1,712,497)

Series F (1,650,285) (4,285,252)

(4,657,928) (5,997,749)

Reinvestment of distributions

Series A 341,396 278,851

Series F 182,303 189,162

523,699 468,013

From Distributions to Unitholders:

From return of capital

Series A (465,487) (379,269)

Series F (235,542) (275,738)

(701,029) (655,007)


Series A 14,626,360 11,484,603

Series F 6,927,351 5,938,460

$ 21,553,711 $ 17,423,063


18



Number of

Shares

Avg

Cost

Fair

Value

% of Total

Net Assets

U.S. Equities

Energy

Anadarko Petroleum Corporation 3,800 $ 319,103 $ 320,431

Chesapeake Energy Corporation 27,872

577,153

804,370

Crosstex Energy Limited Partnership 13,225

273,227

388,135

Energy Transfer Partners Limited Partnership 11,051

513,634

672,870

Enterprise Products Partners Limited Partnership 11,885

581,415

837,897

Kinder Morgan Energy Partners Limited Partnership 8,147

697,268

698,683

MarkWest Energy Partners Limited Partnership 10,220

654,678

718,667

Plains All American Pipeline Limited Partnership 13,050

656,681

718,401

Spectra Energy Corporation 9,710

340,883

367,783

Tesoro Logistics Limited Partnership 15,525

697,607

864,059

5,311,649

6,391,296 29.7

Industrials

Genesee & Wyoming Inc. 'A' 4,875

419,408

497,806

Navios Maritime Partners Limited Partnership 18,418

287,384

374,463

TAL International Group Inc. 6,360

269,862

387,854

Waste Connections Inc. 13,220

413,639

613,190

Waste Management Inc. 16,458

599,963

785,081

1,990,256

2,658,394 12.3


American Tower Corporation 2,770

226,871

235,021

DuPont Fabros Technology Inc. 11,252

262,618

295,532

SBA Communications Corporation 'A' 7,388

441,202

705,396

930,691

1,235,949 5.7

Total U.S. Equities

8,232,596

10,285,639 47.7

Global Equities

Brazil

Companhia Energetica de Minas Gerais SA ADR 37,512

407,817

310,333

Ultrapar Participacoes SA Spon ADR 19,045

374,117

478,545

781,934

788,878 3.7

Chile

Empresa Nacional de Electricidad SA ADR 8,257

426,500

391,242

Enersis SA ADR 15,105

298,426

240,608

724,926

631,850 2.9

Columbia

Ecopetrol SA ADR 9,277

433,926

378,905 1.8

19



Number of

Shares

Avg

Cost

Fair

Value

% of Total

Net Assets

France

Orange SA ADR 29,358 $ 386,685 $ 384,918

Total SA ADR 10,618

523,473

692,346

Veolia Environnement ADR 21,627

269,218

376,234

1,179,376

1,453,498 6.7

Germany

RWE AG ADR 3,908

159,046

152,718 0.7

Hong Kong

China Mobile (Hong Kong) Limited ADR 7,020

365,343

390,332

CNOOC Limited ADR 2,667

533,865

531,744

899,208

922,076 4.3

Indonesia

PT Telekomunikasi Indonesia Tbk ADR 4,215

130,593

160,771 0.7

Italy

ENI SpA ADR 11,501

509,164

591,181 2.7

Philippines

Philippine Long Distance Telephone Company ADR 936

68,500

59,847 0.3

Republic of Marshall Islands

Seaspan Corporation 25,026

405,304

610,734

Teekay Corporation 10,639

301,683

542,912

706,987

1,153,646 5.4

Mexico

Grupo Aeroportuario del Sureste SAB de CV ADR 2,208

233,326

292,664 1.4

Russia

Mobile TeleSystems OJSC ADR 13,502

241,213

310,694

OAO LUKOIL ADR 3,845

231,438

257,950

472,651

568,644 2.6

South Africa

MTN Group Limited ADR 5,500

110,321

122,408

Sasol Limited ADR 16,968

815,357

891,866

925,678

1,014,274 4.7

20



Number of

Shares

Avg

Cost

Fair

Value

% of Total

Net Assets

South Korea

Korea Electric Power Corporation ADR 34,204 $ 343,461 $ 603,758

KT Corporation ADR 18,100

260,955

286,199

604,416

889,957 4.1

Spain

Telefonica SA ADR 42,163

688,094

732,143 3.4

Switzerland

Transocean Limited 7,220

368,145

379,341 1.8

Taiwan

Chunghwa Telecom Company Limited ADR 12,645

382,796

416,292 1.9

United Kingdom

National Grid PLC ADR 3,513

172,146

243,895

Vodafone Group PLC ADR 7,952

219,598

332,313

391,744

576,208 2.7

Total Global Equities

9,660,510

11,162,893 51.8

Total Positions Including Transaction Costs

17,893,106

21,448,532 99.5

Transaction Costs

(5,812)

- -

Total Positions Before Transaction Costs

$ 17,887,294

21,448,532 99.5

Other Assets Net of Liabilities 1

105,179 0.5


$ 21,553,711 100.0

1This amount is comprised of cash and broker deposits plus accrued investment income plus subscriptions receivable less accounts payable.


21





2013 2012 2013 2012

Energy 49.1 29.1 U.S. 47.7 29.3

Industrials 21.5 11.2 Argentina - 0.8

Telecommunication Services 20.6 39.1 Brazil 3.7 6.7

Utilities 8.3 19.9 Chile 2.9 4.9

Other Assets, Net of Liabilities 0.5 0.7 Colombia 1.8 4.1

France 6.7 7.4

Germany 0.7 0.9

Hong Kong 4.3 3.2

ASSET MIX % of Total Net Assets Indonesia 0.7 0.9

2013 2012 Italy 2.7 3.2

Philippines 0.3 -

U.S. Equities 47.7 29.3 Mexico 1.4 3.3

Global Equities 51.8 70.0 Norway - 2.1

Other Assets, Net of Liabilities 0.5 0.7 Republic of Marshall Islands 5.4 4.8

Russia 2.6 2.9

South Africa 4.7 3.3

South Korea 4.1 10.3

Spain 3.4 3.2

Switzerland 1.8 2.7

Taiwan 1.9 3.2

United Kingdom 2.7 2.1



22


DISCUSSION OF FINANCIAL INSTRUMENTS RISK MANAGEMENT (Note 3)

December 31, 2013


The investment objective of the Exemplar Global Infrastructure Fund is primarily to maximize risk adjusted long-term returns and secondarily

to achieve a high level of income. The Fund focuses on achieving growth of capital through securities selection and pursues a long-term

investment program with the aim of generating capital gains. The Fund seeks to provide a moderate level of volatility and a low degree of

correlation to other asset classes through diversifying across a relatively concentrated group of global infrastructure stocks.

To achieve the investment objectives of the Fund, the investment advisor: (i) makes long term investments of securities of issuers which the

investment advisor believes present the greatest opportunity for capital appreciation; and (ii) manages the portfolio’s sector allocation,

increasing and decreasing exposure to different sectors of the market as appropriate.





A general discussion of financial risk management for the Fund appears as Note 3: FINANCIAL INSTRUMENTS RISK MANAGEMENT on page

52.

B. CREDIT RISK


C. LIQUIDITY RISK


2013 and 2012, all of the Fund’s portfolio holdings traded on active markets. As at December 31, 2013 and 2012, all existing liabilities of the

Fund are to be settled within three months.



E. OTHER PRICE RISK

The Statement of Investments and Other Net Assets classifies securities by market and geographic segment.

The impact on Net Assets of the Fund due to a 5 percent change in market prices for equity securities as at December 31, 2013 and 2012,

with all other variables held constant, is presented in the following table.



5% Increase $1,072,427 $865,301

5% Decrease $(1,072,427) $(865,301)

F. CURRENCY RISK




United States Dollar $21,468,275 99.6% $17,562,027 100.8%



23

As at December 31, 2013, if the Canadian dollar had strengthened or weakened by 5 percent in relation to all currencies, with all other

variables held constant, Net Assets would have increased or decreased, respectively, by approximately $1,073,414 (2012 - $878,101).



The following table analyzes the Fund’s financial assets and liabilities within the fair value hierarchy measured at fair value at December 31,

2013 and 2012.

December 31, 2013


Assets

Equity Securities 21,448,532 - - 21,448,532

December 31, 2012


Assets




There were no transfers between levels during the years ended December 31, 2013 and 2012.


24


EXEMPLAR TIMBER FUND

2013 2012

ASSETS


Canadian equities $ 2,099,237 $ 421,026

U.S. equities 23,449,299 3,961,600

Global equities 853,501 154,412

26,402,037 4,537,038


Accrued investment income 18,809 347

Subscriptions receivable 53,031 35,000

Total Assets 27,031,431 5,129,779

LIABILITIES

Accounts payable:

Performance fees payable 67,734 -



Payable for investment purchases - 125,358



Series A 9,309,040 1,672,073

Series F 12,975,475 2,890,280

Series I 1,347,066 -

Series L 3,224,446 413,470

$ 26,856,027 $ 4,975,823


Series A 612,700 140,458

Series F 842,042 241,415

Series I 121,696 -

Series L 216,038 35,331


Series A $ 15.19 $ 11.90

Series F $ 15.41 $ 11.97

Series I $ 11.07 $ -

Series L $ 14.93 $ 11.70




James L. McGovern


Robert W. Maxwell



25

STATEMENT OF OPERATIONS For the year ended December 31, 2013 and for the period from June 7, 2012 to December 31, 2012

EXEMPLAR TIMBER FUND†

2013 2012

INVESTMENT INCOME

Dividends $ 365,256 $ 37,210


310,638 31,445

Interest 12,462 2,545

323,100 33,990



Performance Fees 67,734 -


Audit fees 20,464 17,363


Trustees' fees 708 48


681,643 160,174


575,189 35,062

NET INVESTMENT LOSS (252,089) (1,072)

NET REALIZED GAIN ON INVESTMENT TRANSACTIONS 506,819 7,323


NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS 4,328,319 465,892

EXCHANGE LOSS ON FOREIGN CURRENCIES AND OTHER NET ASSETS (27,819) (3,675)

NET GAIN ON INVESTMENTS AND TRANSACTION COSTS 4,799,149 467,811


Series A 1,511,100 143,482 Series F 2,355,840 295,886

Series I 144,224 -

Series L 535,896 27,371

$ 4,547,060 $ 466,739


Series A $ 3.12 $ 2.12

Series F $ 3.26 $ 2.18

Series I $ 1.56 $ -

Series L $ 3.12 $ 1.71 †The Fund was launched on June 7, 2012.


26

STATEMENT OF CHANGES IN NET ASSETS For the year ended December 31, 2013 and for the period from June 7, 2012 to December 31, 2012

EXEMPLAR TIMBER FUND†

2013 2012


Series A 1,672,073 -

Series F 2,890,280 -

Series I - -

Series L 413,470 -

$ 4,975,823 $ -


Series A 1,511,100 143,482

Series F 2,355,840 295,886

Series I 144,224 -

Series L 535,896 27,371

4,547,060 466,739



Series A 7,282,211 1,528,641

Series F 11,179,749 2,634,245

Series I 1,208,231 -

Series L 2,459,178 386,099

22,129,369 4,548,985


Series A (1,123,440) (50)

Series F (3,335,838) (39,851)

Series I (2,471) -

Series L (177,702) -

(4,639,451) (39,901)


Series A 145,597 -

Series F 151,047 -

Series I 14,718 -

Series L 56,302 -

367,664 -


From return of capital

Series A (178,501) -

Series F (265,602) -

Series I (17,636) -

Series L (62,698) -

(524,437) -


Series A 9,309,040 1,672,073

Series F 12,975,475 2,890,280

Series I 1,347,066 -

Series L 3,224,446 413,470

$ 26,856,027 $ 4,975,823

†The Fund was launched on June 7, 2012.


27


STATEMENT OF INVESTMENTS AND OTHER NET ASSETS

As at December 31, 2013

Number of

Shares

Average

Cost

Fair

Value

% of Total

Net Value

Canadian Equities

Basic Materials

Canfor Corporation 33,500 $ 621,404 $ 888,420

International Forest Products Limited 'A' 21,100

214,038

282,107

West Fraser Timber Company Limited 9,000

698,862

928,710

Total Canadian Equities

1,534,304

2,099,237 7.8

U.S. Equities

Basic Materials

Boise Cascade Company 37,523

1,097,750

1,175,861

Deltic Timber Corporation 13,676

936,581

983,360

Domtar Corporation 12,103

853,856

1,214,135

Glatfelter 7,592

127,901

222,976

Greif Inc. 'A' 8,585

448,838

478,080

International Paper Company 40,917

1,775,965

2,132,825

KapStone Paper and Packaging Corporation 43,777

1,103,158

2,600,775

Louisiana-Pacific Corporation 61,309

1,095,325

1,206,726

MeadWestvaco Corporation 46,999

1,667,400

1,844,137

Packaging Corp of America 20,985

880,156

1,412,285


1,991,120

2,047,814

Pope Resources Limited Partnership 1,702

101,506

117,657

Rock-Tenn Company 'A' 14,834

1,245,384

1,656,092

Sonoco Products Company 3,000

89,494

133,089

Wausau Paper Corporation 4,135

37,685

55,710

13,452,119

17,281,522 64.4

Industrials

Universal Forest Products Inc. 17,523

667,767

971,160 3.6

Financials

Potlatch Corporation 28,684

1,238,656

1,272,513

Rayonier Inc. 33,592

1,843,327

1,503,464

Weyerhaeuser Company 72,107

2,134,708

2,420,640

5,216,691

5,196,617 19.3

Total U.S. Equities

19,336,577

23,449,299 87.3

Global Equities

Brazil

Fibria Celulose SA - ADR 68,720

745,189

853,501 3.2


745,189

853,501 3.2

Total Portfolio Including Transaction Costs

21,616,070

26,402,037 98.3

Transaction Costs

(8,244)

- -

Total Portfolio Before Transaction Costs

$ 21,607,826

26,402,037 98.3

Other Assets Net of Liabilities 1

453,990 1.7


$ 26,856,027 100.0

1This amount is comprised of cash and broker deposits plus accrued investment income plus subscriptions receivable less accounts payable.


28





2013 2012 2013 2012

Basic Materials 72.2 66.2 Canada 7.8 8.5

Consumer Discretionary - 3.7 U.S. 87.3 79.6

Financials 19.3 21.3 Brazil 3.2 3.1

Industrials 6.8 - Other Assets, Net of Liabilities 1.7 8.8


ASSET MIX % of Total Net Assets

2013 2012

Canadian Equities 7.8 8.5





29



December 31, 2013


The investment objective of the Exemplar Timber Fund is to provide capital appreciation by investing primarily in a diversified portfolio of

the shares of companies operating in the financing, plantation and management of forests and wooded regions and/or the processing,

production and distribution of timber and other services and products directly derived from wood.

To achieve the investment objectives of the Fund, the investment sub-advisor will (i) invest in shares of companies operating in the

financing, plantation and management of forests and wooded regions and/or the processing, production and distribution of timber and

other services and products directly derived from wood; (ii) invest across all geographical sectors; (iii) invest in at least four major regions of

the world (such as North America, Asia, Europe and Latin America) and no single country or region will represent more than 40% of the

assets of the Fund and no continent more than 60% of assets of the Fund; (iv) diversify across developed and developing timber markets; (v)

diversify across softwoods, hardwoods, and different age classes; (vi) invest in exchange traded funds; and (vii) invest in private placements

or other illiquid equity or debt securities as permitted by securities regulations.






52.

B. CREDIT RISK


C. LIQUIDITY RISK


2013 and 2012, all of the Fund’s portfolio holdings traded on active markets. As at December 31, 2013 and 2012, all existing liabilities of the

Fund are to be settled within three months.



E. OTHER PRICE RISK






5% Increase $1,320,102 $226,852

5% Decrease $(1,320,102) $(226,852)

30

F. CURRENCY RISK







As at December 31, 2013 and 2012, if the Canadian dollar had strengthened or weakened by 5 percent in relation to all currencies, with all

other variables held constant, Net Assets would have increased or decreased, respectively, by approximately $1,214,618 (2012 - $212,501).




December 31, 2013


Assets


December 31, 2012


Assets




There were no transfers between levels during the years ended December 31, 2013 and 2012.


31


EXEMPLAR YIELD FUND

2013 2012

ASSETS


Canadian equities $ 5,469,579 $ 4,048,347

Canadian bonds 822,384 517,009

U.S. equities 2,950,930 1,635,797

Global equities 513,709 1,086,788

9,756,602 7,287,941



Accounts receivable:

Receivable from investment sales - 89,716

Subscriptions receivable 262,166 -

Total Assets 10,656,060 8,254,454

LIABILITIES

Accounts payable:



Payable for investment purchases - 26,845



Series A 5,603,897 5,385,846

Series F 2,029,973 530,377

Series I 2,361,050 2,064,214

Series L 241,562 230,408

$ 10,236,482 $ 8,210,845


Series A 533,469 539,036

Series F 187,233 52,664

Series I 220,993 203,495

Series L 22,998 23,043


Series A $ 10.50 $ 9.99

Series F $ 10.84 $ 10.07

Series I $ 10.68 $ 10.14

Series L $ 10.50 $ 10.00




James L. McGovern


Robert W. Maxwell



32

STATEMENT OF OPERATIONS For the year ended December 31, 2013 and for the period from June 7, 2012 to December 31, 2012

EXEMPLAR YIELD FUND†

2013 2012

INVESTMENT INCOME

Dividends $ 411,930 $ 111,410


377,158 109,282

Interest 54,420 20,161

431,578 129,443




Audit fees 40,823 17,391


Trustees' fees 694 78


Interest - 11

386,515 241,026


177,486 62,302

NET INVESTMENT INCOME (LOSS) 254,092 67,141

NET REALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS 648,808 (199,982)


NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS 171,575 168,905


NET GAIN (LOSS) ON INVESTMENTS AND TRANSACTION COSTS 816,847 (56,891)


Series A 615,884 (63,621) Series F 103,673 2,301

Series I 316,721 69,086

Series L 34,661 2,484

$ 1,070,939 $ 10,250


Series A $ 1.27 $ (0.21)

Series F $ 1.27 $ 0.05

Series I $ 1.53 $ 0.34

Series L $ 1.11 $ 0.15 †The Fund was launched on June 7, 2012.


33

STATEMENT OF CHANGES IN NET ASSETS For the year ended December 31, 2013 and for the period from June 7, 2012 to December 31, 2012

EXEMPLAR YIELD FUND

2013 2012


Series A 5,385,846 -

Series F 530,377 -

Series I 2,064,214 -

Series L 230,408 -

$ 8,210,845 $ -


Series A 615,884 (63,621)

Series F 103,673 2,301

Series I 316,721 69,086

Series L 34,661 2,484

1,070,939 10,250



Series A 1,038,261 274,584

Series F 2,095,061 304,665

Series I - 2,000,000

Series L 171,355 197,712

3,304,677 2,776,961

Units issued upon fund merger (Note 1(II))

Series A - 6,076,812

Series F - 657,878

Series I - -

Series L - 33,454

6,768,144


Series A (1,425,945) (898,418)

Series F (697,983) (433,540)

Series I (19,884) (4,872)

Series L (186,837) -

(2,330,649) (1,336,830)


Series A 332,124 72,341

Series F 72,493 10,368

Series I 207,207 40,282

Series L 14,552 473

626,376 123,464


From investment income

Series A (193,712) (2,550)

Series F (33,024) (255)

Series I (98,700) (947)

Series L (12,497) (91)

$ (337,933) $ (3,843)

Continued on the next page.

34

STATEMENT OF CHANGES IN NET ASSETS - CONTINUED For the year ended December 31, 2013 and for the period from June 7, 2012 to December 31, 2012

EXEMPLAR YIELD FUND†

2013 2012

From realized gains

Series A $ (148,561) $ (73,302)

Series F (40,624) (11,040)

Series I (108,508) (39,335)

Series L (10,080) (3,624)

(307,773) (127,301)


Series A 5,603,897 5,385,846

Series F 2,029,973 530,377

Series I 2,361,050 2,064,214

Series L 241,562 230,408

$ 10,236,482 $ 8,210,845

†The Fund was launched on June 7, 2012.


35

EXEMPLAR YIELD FUND



Number of Shares/

Par Value

Average

Cost

Fair

Value

% of Total

Net Assets

Canadian Equities


Temple Hotels Inc. 32,000 $ 185,553 $ 183,360 1.8

Energy

Canyon Services Group Inc. 9,000

90,896

107,910

Mart Resources Inc. 173,000

233,528

209,330

324,424

317,240 3.1

Basic Materials

Noranda Income Fund 100,000

498,058

541,000 5.3

Industrials

DirectCash Payments Inc. 22,400

500,290

407,904

Horizon North Logistics Inc. 39,700

278,566

393,030

Rocky Mountain Dealerships Inc. 11,500

138,569

146,280

917,425

947,214 9.3

Financials

Alaris Royalty Corporation 17,300

404,308

514,675

Brookfield Office Properties Inc. 11,000

179,758

224,840

Crombie Real Estate Investment Trust 7,600

99,733

102,600

Inovalis Real Estate Investment Trust 60,600

581,467

536,310

Northwest International Healthcare Property Real Estate Investment Trust 70,000

140,000

141,400

Partners Real Estate Investment Trust 60,000

352,064

321,000

Pure Industrial Real Estate Trust 60,500

290,378

286,770

Tricon Capital Group Inc. 21,000

158,697

161,910

2,206,405

2,289,505 22.4


BCE Inc. 9,000

388,497

414,000 4.0


Wi-LAN Inc. 74,000

282,021

262,700 2.6

Utilities

Capital Power Corporation 9,000

187,479

191,520

TransAlta Corporation 24,000

370,777

323,040

558,256

514,560 5.0

Total Canadian Equities

5,360,639

5,469,579 53.5

36

EXEMPLAR YIELD FUND



Number of Shares/

Par Value

Average

Cost

Fair

Value

% of Total

Net Assets

Canadian Bonds

Fairfax Financial Holdings Limited, 7.5%, 8/19/2019 250,000 $ 287,125 $ 282,937

Gibson Energy Inc., 7.0%, 8/15/2020 100,000

98,633

103,374

Kirkland Lake Gold Inc., 6.000%, Convertible Bond, 6/30/2017 250,000

226,875

157,500

Paramount Resources Limited, 7.625%, 12/4/2019 50,000

50,375

50,550

Videotron Limited, 7.125%, 1/15/2020 212,000

233,200

228,023

Total Canadian Bonds

896,208

822,384 8.0

U.S. Equities

Basic Materials


485,958

484,362 4.7

Energy

BP Prudhoe Bay Royalty Trust 5,000

390,720

423,215

MarkWest Energy Partners Limited Partnership 6,300

377,947

443,014

Tesoro Logistics Limited Partnership 3,000

133,104

166,968

901,771

1,033,197 10.1

Industrials

Norfolk Southern Corporation 2,500

204,885

246,725

TAL International Group Inc. 5,000

219,065

304,917

423,950

551,642 5.4

Financials

Education Realty Trust Inc. 38,000

417,593

355,990

WP Carey Inc. 4,400

298,774

286,995

716,367

642,985 6.3


Microsoft Corporation 6,000

171,297

238,744 2.3

Total U.S. Equities

2,699,343

2,950,930 28.8

Global Equities

Switzerland

Nestle SA ADR 2,600

187,079

203,207 2.0

United Kingdom

Royal Dutch Shell PLC 'A' ADR 4,100

290,055

310,502 3.0


477,134

513,709 5.0

Total Positions Including Transaction Costs

9,433,324

9,756,602 95.3

Transaction Costs

(17,202)

- -

Total Positions Before Transaction Costs

$ 9,416,122

9,756,602 95.3

Other Assets, Net of Liabilities 1

479,880 4.7


$ 10,236,482 100.0

1This amount is comprised of cash and broker deposits plus accrued investment income plus accounts receivable less accounts payable. The accompanying notes are an integral part of these financial statements.

37

EXEMPLAR YIELD FUND




2013 2012 2013 2012

Energy 16.2 6.7 Canada 61.5 55.6

Basic Materials 10.0 11.9 U.S. 28.8 19.9

Consumer Staples 2.0 - France - 5.0

Consumer Discretionary 1.8 - Norway - 5.3

Industrials 14.7 16.4 South Korea - 3.0

Financials 28.7 26.0 Switzerland 2.0 -

Information Technology 4.9 9.8 United Kingdom 3.0 -

Telecommunication Services 4.0 6.7 Other Assets, Net of Liabilities 4.7 11.2

Utilities 5.0 5.0

Canadian Bonds 8.0 6.3



2013 2012

Canadian Equities 53.5 49.3

Canadian Bonds 8.0 6.3





38

EXEMPLAR YIELD FUND


December 31, 2013


The investment objective of the Exemplar Yield Fund is to provide consistent and tax efficient monthly income and capital appreciation by

investing in a diversified portfolio primarily consisting of Canadian equity, global equity, Canadian corporate bonds, income trusts and REITs.

To achieve the investment objectives of the Fund, the investment advisor: (i) will actively manage the asset allocation of the Fund; (ii) will

make concentrated investments primarily in Canadian equities, global equities, Canadian corporate bonds, income trusts and REITs; (iii) will

invest up to 30% of the assets of the Fund in foreign securities; and (iv) may hold all or portion of the Fund’s assets in cash or money market

securities while seeking investment opportunities or for defensive purposes.






52.

B. CREDIT RISK

As at December 31, 2013 and 2012, the Fund invested in debt instruments with the following credit ratings:

Percentage of Net Assets (%)

Debt Instruments by Credit Rating As at December 31, 2013 As at December 31, 2012

B 0.5% -%

BB 3.2% 2.8%

BBB 2.8% 3.5%

Not Rated 1.5% -%

C. LIQUIDITY RISK

The following table outlines estimated cash flows associated with the maturities of the Fund’s financial assets and liabilities as of:

December 31, 2013

Less than 1 year ($) 1 – 3 years ($) 3 – 5 years ($) Beyond 5 years ($) No maturity date ($)

Financial Assets

Equities - - - - 8,934,218

Bonds - - 157,500 664,884 -

Other receivables 326,151 - - - -

Cash and cash equivalents 573,307 - - - -

Total 899,458 - 157,500 664,884 8,934,218

Liabilities

Other liabilities (419,578) - - - -

Total (419,578) - - - -

39

December 31, 2012

Less than 1 year ($) 1 – 3 years ($) 3 – 5 years ($) Beyond 5 years ($) No maturity date ($)

Financial Assets

Equities - - - - 6,770,932

Bonds - - - 517,009 -

Other receivables 132,957 - - - -

Cash and cash equivalents 833,556 - - - -

Total 966,513 - - 517,009 6,770,932

Liabilities

Other liabilities (43,609) - - - -

Total (43,609) - - - -


As at December 31, 2013 and 2012, the Fund held the following interest-bearing securities:

Financial Instruments

Debt Instruments by Maturity As at December 31, 2013 As at December 31, 2012

Less than 1 year - -

3-5 years $157,500 -

Greater than 5 years $664,884 $517,009

As at December 31, 2013, if the yield curve shifted in parallel by 25 basis points, with all other variables held constant, Net Assets would have

increased or decreased, respectively, by approximately $544 (2012 - $301).


E. OTHER PRICE RISK





Benchmark December 31, 2013 December 31, 2012

5% Increase $446,711 $338,547

5% Decrease $(446,711) $(338,547)

F. CURRENCY RISK








variables held constant, Net Assets would have increased or decreased, respectively, by approximately $173,577 (2012 - $142,611).


40



December 31, 2013


Assets


Bonds - 822,384 - 822,384

December 31, 2012


Assets


Bonds - 517,009 - 517,009



Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer

quotations or alternative pricing sources supported by observable inputs are classified within level 2. These include bonds. As level 2

investments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to

reflect illiquidity and/or non-transferability, which are generally based on available market information.

There were no transfers between levels during the year ended December 31, 2013 and for the period since inception to December 31, 2012.


41


EXEMPLAR GLOBAL

AGRICULTURE FUND

2013

ASSETS


Canadian equities $ 101,364

U.S. equities 457,705

Global equities 193,215

752,284

Cash and broker deposits 21,536

Accrued investment income 844

Total Assets 774,664

LIABILITIES

Accounts payable:

Fees and operating expenses 1,392

Payable for investment purchases 14,166

Total Liabilities 15,558


Series A 62,193

Series F 696,913

$ 759,106


Series A 5,849

Series F 65,044


Series A $ 10.63

Series F $ 10.71

*Long positions, at cost $ 699,383



James L. McGovern


Robert W. Maxwell



42

STATEMENT OF OPERATIONS For the period from July 10, 2013 to December 31, 2013

EXEMPLAR GLOBAL

AGRICULTURE FUND

2013

INVESTMENT INCOME

Dividends $ 7,770

Less: Foreign withholding taxes 1,220

6,550

Interest 689

7,239


Management fees 4,396

General operating expenses 64,824

Audit fees 21,325

Legal fees 1,673

Trustees' fees 9

Securityholders’ reporting costs 500

Interest -

92,727

Less: Expenses absorbed by the Manager 85,629

7,098

NET INVESTMENT INCOME 141

NET REALIZED GAIN ON INVESTMENT TRANSACTIONS -

TRANSACTION COSTS (Notes 2(I) and 7) (253)

NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS 52,901

EXCHANGE GAIN ON FOREIGN CURRENCIES AND OTHER NET ASSETS 392

NET GAIN ON INVESTMENTS AND TRANSACTION COSTS 53,040


Series A 2,268 Series F 50,913

$ 53,181


Series A $ 1.05

Series F $ 0.84


43

STATEMENT OF CHANGES IN NET ASSETS For the period from July 10, 2013 to December 31, 2013

EXEMPLAR GLOBAL

AGRICULTURE FUND

2013

Net Assets, Beginning of Period

Series A -

Series F -

$ -


Series A 2,268

Series F 50,913

53,181



Series A 79,343

Series F 646,000

725,343


Series A (19,418)

Series F -

(19,418)

Net Assets, End of Period

Series A 62,193

Series F 696,913

$ 759,106


44

EXEMPLAR GLOBAL AGRICULTURAL FUND



Number of

Shares

Average

Cost

Fair

Value

% of Total

Net Assets

Canadian Equities

Industrials

AG Growth International Inc. 675 $ 24,739 $ 30,078 4.0

Basic Materials

Agrium Inc. 370 33,563 35,946

Potash Corporation of Saskatchewan Inc. 1,010 36,229 35,340

69,792 71,286 9.4

Total Canadian Equities 94,531 101,364 13.4

U.S. Equities

Energy

Solazyme Inc. 2,218 26,551 25,661 3.4

Consumer Staples

Archer-Daniels-Midland Company 840 31,416 38,766

Calavo Growers, Inc. 875 25,125 28,099

Ingredion Inc. 388 26,355 28,254

The Hillshire Brands Company 550 19,854 19,557

The JM Smucker Company 150 16,463 16,531

Tyson Foods Inc. 'A' 440 12,524 15,655

WhiteWave Foods Company - Class A 650 12,431 15,856

144,168 162,718 21.4

Financials

Gladstone Land Corporation 995 16,336 17,056 2.2

Industrials

AGCO Corporation 575 32,580 36,190

Deere & Company 390 33,332 37,875

65,912 74,065 9.8

Basic Materials

CF Industries Holdings Inc. 195 38,235 48,317

CVR Partners Limited Partnership 1,355 31,358 23,716

E. I. du Pont de Nemours and Company 335 19,559 23,144

Monsanto Company 370 38,467 45,855

Terra Nitrogen Company Limited Partnership 30 6,822 4,501

The Mosaic Company 650 35,705 32,672

170,146 178,205 23.5

Total U.S. Equities 423,113 457,705 60.3

45

EXEMPLAR GLOBAL AGRICULTURAL FUND



Number of

Shares

Average

Cost

Fair

Value

% of Total

Net Assets

Global Equities

Bermuda

Bunge Limited 400 $ 30,760 $ 34,925

Cosan Limited 'A' 2,045 33,717 29,835

Total Bermuda 64,477 64,760 8.5

Brazil

BRF - Brasil Foods SA ADR 1,155 25,518 25,607 3.4

Luxembourg

Adecoagro SA 3,050 21,154 26,238 3.4

Switzerland

Nestle SA ADR 540 37,312 42,205

Syngenta AG ADR 405 33,531 34,405

70,843 76,610 10.1

Total Global Equities 181,992 193,215 25.4

Total Portfolio Including Transaction Costs 699,636 752,284 99.1

Transaction Costs (253) - -

Total Portfolio Before Transaction Costs $ 699,383 752,284 99.1

Other Assets Net of Liabilities 1 6,822 0.9

TOTAL NET ASSETS REPRESENTING UNITHOLDERS' EQUITY $ 759,106 100.0

1This amount is comprised of cash and broker deposits plus accrued investment income less accounts payable.


46

EXEMPLAR GLOBAL AGRICULTURE FUND




2013

2013

Energy

3.4 Canada

13.4

Basic Materials

37.4 U.S.

60.3

Industrials

13.8 Bermuda

8.5

Financials

2.2 Brazil

3.4

Consumer Staples

42.3 Luxemburg

3.4

Other Assets, Net of Liabilities

0.9 Switzerland

10.1


0.9


2013

Canadian Equities

13.4

U.S. Equities

60.3

Global Equities

25.4


0.9


47

EXEMPLAR GLOBAL AGRICULTURE FUND


December 31, 2013


The investment objective of the Exemplar Global Agriculture Fund is to provide capital appreciation by investing primarily in a diversified

portfolio of the shares of companies operating in the agribusiness sector including, but not limited to, global companies involved in the

production, processing, transporting, trading and marketing of soft commodities such as grains, meat, fish, and forestry products, as well as

those that supply products and services (including seeds, fertilizers, crop nutrients, agricultural equipment and water) to the agricultural

industry.

To achieve the investment objectives of the Fund, the portfolio advisor: (a) may invest in shares of companies operating Agribusiness that

derive at least 50% of their gross income or net profits, directly or indirectly, from the production, processing and distribution of agricultural

products, packaged foods and meats, as well as the business operators and suppliers of equipment and materials; (b) may invest across all

geographical sectors; (c) will diversify across developed and emerging markets; (d) may invest in exchange traded funds; and (e) may invest

in private placements or other illiquid equity or debt securities as permitted by securities regulations.






52.

B. CREDIT RISK

As at December 31, 2013 the Fund had no investments in debt instruments and therefore was not subject to related credit risk.

C. LIQUIDITY RISK


2013, all of the Fund’s portfolio holdings traded on active markets. As at December 31, 2013, all existing liabilities of the Fund are to be

settled within three months.


As at December 31, 2013 the Fund did not hold any interest-bearing securities, and therefore was not subject to interest rate risk.

E. OTHER PRICE RISK


The impact on Net Assets of the Fund due to a 5 percent change in market prices for equity securities as at December 31, 2013, with all other

variables held constant, is presented in the following table.


5% Increase $37,614

5% Decrease $(37,614)

F. CURRENCY RISK

Currencies to which the Fund had exposure as at December 31, 2013 are as follows:


Currency Financial Instruments % of Net Assets

United States Dollar $651,697 85.9%

48




variables held constant, Net Assets would have increased or decreased, respectively, by approximately $32,585.



The following table analyzes the Fund’s financial assets and liabilities within the fair value hierarchy measured at fair value at December 31,

2013.

December 31, 2013


Assets

Equity Securities 752,284 - - 752,284



There were no transfers between levels since inception to December 31, 2013.


49

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2013

1. THE FUNDS

(I) The Funds

Exemplar Leaders Fund, Exemplar Global Infrastructure Fund, Exemplar Timber Fund, Exemplar Yield Fund and Exemplar Global Agriculture

Fund (the “Funds”) are unincorporated open-ended mutual fund trusts created under the laws of the Province of Ontario pursuant to a

declaration of trust dated August 27, 2007, as amended from time to time (the "Declaration of Trust").

BluMont Capital Corporation (“BluMont Capital”) is the Manager and Investment Advisor of the Funds. On December 2, 2013, Arrow Capital

Management Inc. (“Arrow”) acquired all the outstanding shares of BluMont Capital, resulting in a change of control of BluMont Capital. As

Arrow intends to amalgamate with BluMont Capital on or about April 1, 2014, continuing under the name “Arrow Capital Management Inc.”,

at a special meeting of unitholders on November 27, 2013, the unitholders of the Funds approved a change of manager.

The financial statements of Exemplar Leaders Fund and Exemplar Global Infrastructure Fund are as at and for the years ended December 31,

2013 and December 31, 2012.

On May 31, 2012, BluMont Capital launched the Exemplar Timber Fund and Exemplar Yield Fund which commenced operations on June 7,

2012. The statements of investments and other net assets of the Exemplar Timber Fund and Exemplar Yield Fund are prepared as at

December 31, 2013, the statements of net assets are as at December 31, 2013 and 2012, and the statements of operations and statement of

changes in net assets are for the year ending December 31, 2013 and for the period from June 7, 2012 (commencement of operations) to

December 31, 2012.

On June 28, 2013, BluMont Capital launched the Exemplar Global Agriculture Fund which commenced operations on July 10, 2013. The

statements of net assets and of investments and other net assets of the Exemplar Global Agriculture Fund are prepared as at December 31,

2013 and the statements of operations and statement of changes in net assets, are for the period from July 10, 2013 (commencement of

operations) to December 31, 2013.

The Manager is responsible for the management and control of the business and affairs of the Funds on a day-to-day basis. The Manager

acts as the manager of other funds.

(II) Fund Merger

Effective September 14, 2012, Exemplar Market Neutral Portfolio (the “Portfolio”) merged into Exemplar Yield Fund. The Manager afforded

unitholders of the Portfolio the ability to participate in the wind-up of the Portfolio by way of an in-kind transfer of their investment to the

Exemplar Yield Fund. The termination of the Portfolio did not occur on a tax-deferred basis.

Details relating to the merger are as follows:

Conversion Ratios

Net Assets acquired

by the Fund

Units issued

by the Fund

Portfolio

Series A

Portfolio

Series B

Portfolio

Series F

Portfolio

Series G

Portfolio

Series L

Series A 6,076,812 593,203 0.8928 0.8523 - - -

Series F 657,878 63,930 - - 0.9015 0.8583 -

Series L 33,454 3,261 - - - - 0.9587

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These financial statements are presented in accordance with Canadian Generally Accepted Accounting Principles (“GAAP”). A summary of

the significant accounting policies is summarized below.

(I) Valuation of Investments

Investments are recorded at their fair value, determined as follows:

The fair value of financial instruments which are actively traded, are measured based on the bid price for long positions and ask

price for short positions.

50

A reconciliation as at December 31 between a Fund’s net assets per unit for financial reporting (“Net Assets”) and the Fund’s net

asset value for purposes other than financial reporting, such as subscriptions and redemptions, (“Net Asset Value”) has been

provided in Note 8. The Funds continue to use the last traded price for investments and securities sold short for Net Asset Value

valuations.

Transaction costs, such as brokerage commissions, incurred in the purchase and sale of securities by a Fund are charged to net

increase (decrease) in net assets from operations in the year. Accordingly, these costs are expensed and are included in

“Transaction Costs” in the Statement of Operations.

Securities listed upon a recognized public stock exchange are valued at their bid/ask prices on the financial statement date.

Securities with no bid/ask prices are valued at their closing sale prices. Securities not listed upon a recognized public stock

exchange are valued using valuation techniques, on such basis and in such manner established by the Manager.

Short-term investments including notes and money market instruments are carried at fair value, measured at closing bid prices.

The difference between fair value and the average cost is shown as the net change in unrealized appreciation (depreciation) of

investments.

When a Fund sells a security short, it will borrow that security from a broker to complete the sale. The Fund will incur a loss as a

result of a short sale if the price of the borrowed security increases between the date of the short sale and the date on which the

Fund closes out its short position by buying that security. The Fund will realize a gain if that security declines in price between

those dates.

The maximum gain that a Fund can realize on a short position is the proceeds received, while the loss that could be realized is

unlimited.

There can be no assurance that a Fund will be able to close out a short position at an acceptable time or price. Until the Fund

replaces a borrowed security it will maintain a margin account with a broker containing cash and liquid securities.

Short positions are valued based on the cost that would be incurred to close out the position at the last ask price as of every

Valuation Day (as defined below).

(II) Investment Transactions and Income Recognition

Investment transactions are accounted for as of the trade date. Income and expenses are recorded on an accrual basis. Dividend

income and expense is recorded on the ex-dividend date. Interest income and expense is recorded daily as it is earned or accrued.

Realized gains and losses from security transactions are calculated using the average cost basis.

(III) Valuation of Fund Units

The Funds’ units are issued and redeemed at the Net Asset Value per unit, which is determined as of the close of Valuation Day. A

“Valuation Day” is any day that the Toronto Stock Exchange is open for business or such other trading day or days as the Manager

may determine.

The Net Asset Value per unit of a Fund is determined by dividing the total fair value of the Fund’s Net Asset Value by the number

of units outstanding.

For each Fund unit sold, the Fund receives an amount equal to the Net Asset Value per unit on the date of sale, which is included

in unitholders’ equity. Units are redeemable at the option of the unitholders at their Net Asset Value on any Valuation Day. For

each unit redeemed, the number of issued and outstanding units is reduced and the equity in the Fund is reduced by the related

Net Asset Value on the date of redemption.

(IV) Foreign Currency Translation

Assets, including fair value of investments and liabilities denominated in foreign currencies, are converted to Canadian dollars at

the rates of exchange established on each Valuation Day.

Purchases and sales of investments, dividends and interest income and expense denominated in foreign currencies are converted

into Canadian dollars at the rates of exchange prevailing on the respective dates of such transactions.

Realized exchange gains (losses) on investments are included in “Net Realized Gain (Loss) on Investment Transactions” in the

Statement of Operations.

51

Unrealized exchange gains (losses) on investments are included in “Net Change in Unrealized Appreciation (Depreciation) of

Investments” in the Statement of Operations.

Realized and unrealized exchange gains (losses) on assets (other than investments), liabilities and investment income

denominated in foreign currencies are included in “Exchange Gain (Loss) on Foreign Currencies and Other Net Assets” in the

Statement of Operations.

(V) Use of Estimates

These financial statements, prepared in accordance with Canadian generally accepted accounting principles, include estimates

and assumptions made by management that affect the reported amounts of certain assets and liabilities and disclosure of

contingent liabilities, at the date of the financial statements, and the reported amounts of certain revenue and expenses during

the year. Actual results could differ from these estimates.

(VI) Increase (Decrease) in Net Assets from Operations Per Unit

Increase (Decrease) in Net Assets from Operations per Unit amount is determined by dividing the Net Increase (Decrease) in Net

Assets from Operations by the weighted average number of units outstanding during the year.

(VII) Future accounting standards

Canadian investment entities will be required to prepare their financial statements in accordance with International Financial

Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), for fiscal years beginning on or

after January 1, 2014. As a result, the Funds will report their financial results for the interim period ending June 30, 2014, prepared

on an IFRS basis. It will also provide comparative data on an IFRS basis, including an opening balance sheet as at January 1, 2013

(“transition date”).

The differences between the Funds’ accounting policies under Canadian GAAP and IFRS requirements will result in measurement

and recognition differences on transition to IFRS. The net impact of these differences will be recorded in the increase/decrease in

net assets attributable to redeemable shareholders.

(VIII) Significant accounting changes resulting from our adoption of IFRS

Based on the Manager’s assessment of the accounting differences between GAAP and IFRS, the following areas of difference were

identified. The areas listed below should not be considered a comprehensive list of impacts of adopting IFRS, but rather the most

significant of certain key changes. The Manager has not identified any changes that will impact Net Asset Value per unit as a

result of the transition to IFRS.

The framework for fair valuation is set out under IFRS 13 Fair Value Measurement (“IFRS 13”), which includes the requirements for

the measurement and disclosure of fair value. If an asset or liability measured at fair value has a bid price and an ask price, the

standard requires valuation to be based on a price within the bid-ask spread that is most representative of fair value. The standard

allows the use of midmarket pricing or other pricing conventions that are used by market participants as a practical means for fair

value measurements within a bid-ask spread. Thus this standard will impact the Net Assets per unit compared to current

standards, and may also result in the elimination of the differences between the Net Assets per unit and Net Asset Value per unit

at the financial statement reporting date. See Note 8 for the impact of this change on a per unit basis. While IFRS does not require

interest income to be disclosed for debt instruments measured at Fair Value through Profit or Loss, when interest income is

disclosed, IFRS requires that the effective interest rate method of calculating accrued interest be used rather than the straight-line

amortization method. The Manager is assessing the impact of this change to the Funds’ financial statements.

Where a Fund holds controlling interest in an investment, it is the Manager’s expectation that the Fund will qualify as an

Investment Entity in accordance with IFRS 10 Consolidated Financial Statements. As such, the Fund will not be required to

consolidate its investments, but rather to hold the investments at Fair Value through Profit or Loss regardless of whether those

investments are controlled. If the Fund fair values the investments it controls, it may be required to make additional financial

statement disclosures on its controlled investments in accordance with IFRS 12 Disclosure of Interests in Other Entities (“IFRS 12”).

IFRS 12 also requires additional disclosures if the Fund is determined to qualify as an investment entity without having all of the

typical characteristics of an investment entity.

52

The criteria contained within IAS 32 Financial Instruments: Presentation (“IAS 32”) will result in the classification of the unitholders’

equity as a liability within each Fund’s Statement of Net Assets, unless all conditions required for equity classification are met. The

Manager is currently assessing each Fund’s unitholder structure to determine classification under IAS 32.

Under IFRS, cash flows statement is one of the primary financial statements required to be presented. The Funds will therefore be

presenting cash flows statements in their set of financial statements in accordance with the presentation requirements in IAS 7

Statement of Cash Flows (“IAS 7”).

3. FINANCIAL INSTRUMENTS RISK MANAGEMENT

In the normal course of business, the Funds are exposed to a variety of financial risks: credit risk, liquidity risk and market risk (including

interest rate risk, other price risk and currency risk) that could result in a reduction in the value of a Fund’s Net Asset Value. The value of

investments within a Fund’s portfolio can fluctuate on a daily basis as a result of changes in interest rates, economic conditions and market

and company news related to specific securities within the Fund. The level of risk depends on each Fund’s investment objective and the

types of securities it invests in. Please refer to Discussion of Financial Risk Management (an addendum to Note 3 on pages 12, 22, 29, 38 and

47 of this report) for each Fund’s specific risk disclosure.

(I) 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 fair value of

debt instruments and derivatives includes consideration of the credit worthiness of the issuer, and accordingly, represents the

maximum credit risk exposure of the Fund.

All transactions executed by a Fund in listed securities are settled/paid for upon delivery using approved brokers. 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.

(II) Liquidity Risk

Liquidity risk is defined as the risk that a fund may not be able to settle or meet its obligations on time or at a reasonable price.

The Funds are exposed to daily cash redemptions of redeemable units. The units of a Fund are issued and redeemed daily at the

Fund’s Net Asset Value per unit at the option of the unitholder.

Liquidity risk is managed by investing the majority of a Fund’s assets in investments that are traded in an active market and can be

readily disposed. In accordance with securities regulations, a Fund must maintain at least 90% of assets in liquid investments (i.e.

investments that are traded in an active market and can be readily disposed of). In addition, a Fund aims to retain sufficient cash

and cash equivalent positions to maintain liquidity, and has the ability to borrow up to 5% of its Net Asset Value for the purpose of

funding redemptions.

The Funds may, from time to time, invest in securities that are not traded in an active market and may be illiquid. Such

investments are identified as private and restricted securities in each Fund’s Statement of Investments and Other Net Assets.

The Funds 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.

(III) 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 the Funds invest 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.

53

(IV) 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 of the Funds moderates this risk through a careful selection and

diversification of securities and other financial instruments within the limits of each Fund’s investment objectives and strategy.

The maximum risk resulting from financial instruments is determined by the fair value of the financial instruments, unless a Fund

holds short positions in financial instruments, as further described below. Each Fund’s overall market positions are monitored on a

daily basis by the Manager. Financial instruments held by the Funds are susceptible to market price risk arising from uncertainties

about future prices of the instruments.

Each Fund has the ability to take short positions. There are risks associated with short selling, namely that the securities will rise in

value or not decline enough to cover the Fund’s costs, or that market conditions will cause difficulties in the sale or repurchase of

the securities.

(V) 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 the Funds. The Funds may enter into foreign exchange

contracts for hedging purposes to reduce its foreign currency exposure, or to establish exposure to foreign currencies.

(VI) Fair Value Estimation

The Funds classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making

the measurements. The fair value hierarchy has the following levels:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is,

as prices) or indirectly (that is, derived from prices).

Level 3 - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety is determined on the

basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of

an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that

require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the

significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to

the asset or liability.

The determination of what constitutes ‘observable’ requires significant judgment by the Manager. The Manager considers

observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not

proprietary, and provided by independent sources that are actively involved in the relevant market.

4. UNIT TRANSACTIONS

Units issued and outstanding represent the capital of the Funds. The Funds are authorized to issue an unlimited number of units. Units of the

Funds are issued and redeemed at the then current Net Asset Value per unit at the option of the unitholder. Unitholders are entitled to

distributions when declared. Distributions on units of the Funds are reinvested in additional units of that Fund or at the option of the

unitholder, paid in cash. The characterization of the distributions is based on management’s estimate of the actual income for the year. The

Funds have no restrictions or specific capital requirements on the subscription and redemption of units, other than minimum subscription

requirements. Each Fund’s Statement of Changes in Net Assets identifies changes in the Fund’s capital during the year. The Manager

manages the capital of the Funds in accordance with each Fund’s investment objectives, including managing its liquidity in order to be able

to meet redemptions as discussed in Note 3.

54

As of December 31, 2013, the number of units owned by Arrow for each Fund is summarized as follows:

Fund Number of units Amount ($) % of Net Assets

Exemplar Yield Fund – Series F 135,385 1,470,692 14.37%

As of December 31, 2013, the number of units owned by BluMont Capital for each Fund is summarized as follows:


Exemplar Yield Fund – Series A 4,365 45,938 0.45%

Exemplar Yield Fund – Series F 483 5,252 0.05%

As of December 31, 2012, the number of units owned by BluMont Capital for each Fund is summarized as follows:


Exemplar Yield Fund – Series A 4,078 40,823 0.50%

Exemplar Yield Fund – Series F 458 4,616 0.06%

The number of units issued and redeemed at the Net Asset Value is summarized as follows:

Exemplar Leaders Fund – December 31, 2013

Units Outstanding

at Beginning

of Year

Units Issued

for Cash

Units

Issued on Reinvestment of

Distributions

Units

Redeemed

Units Issued and

Outstanding

at End of Year

Series A 640,599 91,987 - (83,712) 648,874

Series F 164,685 24,755 - (7,931) 181,509

Exemplar Leaders Fund – December 31, 2012

Units Outstanding

at Beginning

of Year

Units Issued

for Cash

Units


Distributions

Units

Redeemed

Units Issued and

Outstanding

at End of Year

Series A 608,002 108,752 - (76,155) 640,599

Series F 155,153 49,116 - (39,584) 164,685

Exemplar Global Infrastructure Fund – December 31, 2013

Units Outstanding

at Beginning

of Year

Units Issued

for Cash

Units


Distributions

Units

Redeemed

Units Issued and

Outstanding

at End of Year

Series A 1,142,890 354,648 31,057 (273,776) 1,254,819

Series F 594,559 133,274 16,583 (152,219) 592,197

Exemplar Global Infrastructure Fund – December 31, 2012

Units Outstanding

at Beginning

of Year

Units Issued

for Cash

Units


Distributions

Units

Redeemed

Units Issued and

Outstanding

at End of Year

Series A 201,781 1,084,764 27,961 (171,616) 1,142,890

Series F 320,984 691,690 19,071 (437,186) 594,559

Exemplar Timber Fund – December 31, 2013

Units Outstanding

at Beginning

of Year

Units Issued

for Cash

Units


Distributions

Units

Redeemed

Units Issued and

Outstanding

at End of Year

Series A 140,458 543,295 10,535 (81,588) 612,700

Series F 241,415 826,880 10,860 (237,113) 842,042

Series I - 120,509 1,430 (243) 121,696

Series L 35,331 189,452 4,139 (12,884) 216,038

55

Exemplar Timber Fund – December 31, 2012

Units Outstanding

at Beginning

of Year

Units Issued

for Cash

Units


Distributions

Units

Redeemed

Units Issued and

Outstanding

at End of Year

Series A - 140,462 - (4) 140,458

Series F - 244,902 - (3,487) 241,415

Series L - 35,331 - 35,331

Exemplar Yield Fund – December 31, 2013

Units Outstanding

at Beginning

of Year

Units Issued

for Cash

Units


Distributions

Units

Redeemed

Units Issued and

Outstanding

at End of Year

Series A 539,036 98,588 31,587 (135,742) 533,469

Series F 52,664 192,403 6,719 (64,553) 187,233

Series I 203,495 - 19,352 (1,854) 220,993

Series L 23,043 16,471 1,389 (17,905) 22,998

Exemplar Yield Fund – December 31, 2012

Units Outstanding

at Beginning

of Year

Units Issued

for Cash

Units Issued

Upon Fund Merger

(Note1(II))

Units

Issued on

Reinvestment of

Distributions

Units

Redeemed

Units Issued and

Outstanding

at End of Year

Series A - 27,263 593,203 7,198 (88,628) 539,036

Series F - 30,394 63,930 1,025 (42,685) 52,664

Series I - 200,000 - 3,971 (476) 203,495

Series L - 19,735 3,261 47 - 23,043

Exemplar Global Agriculture Fund – December 31, 2013

Units Outstanding

at Beginning

of Period

Units Issued

for Cash

Units


Distributions

Units

Redeemed

Units Issued and

Outstanding

at End of Year

Series A - 7,864 - (2,015) 5,849

Series F - 65,044 - - 65,044

5. INCOME TAXES

As at December 31, 2013, the Funds qualified as mutual fund trusts. The Funds are subject to tax under the Income Tax Act (Canada) (the

“Act”) on all of their taxable income for the year (including net taxable capital gains) and are permitted a deduction in computing taxable

income for all amounts which are paid or payable in the year to its unitholders. It is the policy of each Fund, to the extent practicable, to

distribute to the unitholders all income of the Fund for the year (or period) so that it generally will not pay any Canadian federal income tax

under Part I of the Act. Accordingly no provision for income taxes has been made in these financial statements.

As of December 31, 2013, the Funds had unused capital or non-capital losses as noted below. The benefits of these losses have not been

recognized in the financial statements.

Non-Capital Loss* Capital Loss**

Exemplar Leaders Fund $94,035 nil

Exemplar Global Infrastructure Fund nil $95,507

Exemplar Timber Fund $26,979 $3,833

Exemplar Yield Fund nil $3,395

Exemplar Global Agriculture Fund $101 nil

* Non-capital losses can be offset against income in future years for up to 20 years.

** Net Capital losses can be carried forward indefinitely for offset against gains in future periods.

56

6. RELATED PARTY TRANSACTIONS

Under the terms of agreement between the Funds and the Manager, and in return for investment management and administrative services,

the Manager receives monthly management fees from each Fund. Management fees are calculated and accrued daily and paid monthly and

are subject to HST (and any other applicable taxes). The management fee rates are as follows:

Fund Series A Units Series F Units Series L Units

Exemplar Leaders Fund 1.80% 0.80% n/a

Exemplar Global Infrastructure Fund 2.00% 1.00% n/a

Exemplar Timber Fund 2.25% 1.25% 2.50%

Exemplar Yield Fund 2.00% 1.00% 2.25%

Exemplar Global Agriculture Fund 2.25% 1.25% 2.50%

In addition, the Funds (except in the case of Exemplar Yield Fund) pay the Manager an annual performance fee (the “Performance Fee”),

equal to 20% of the amount by which the Funds outperform their respective indices. The Performance Fee is calculated and accrued daily

and paid annually on a calendar year basis and is subject to HST (and any other applicable taxes). If the performance of a series of a Fund in

any year is less than the performance of the indices described below (the “Return Deficiency”), then no Performance Fee will be payable in

any subsequent year until the performance of the applicable series, on a cumulative basis calculated from the first of such subsequent years,

has exceeded the amount of the Return Deficiency.

Exemplar Leaders Fund

The Exemplar Leaders Fund will pay BluMont Capital an annual Performance Fee equal to a percentage of the average net asset value of

Series A units and Series F units of the Fund. Such percentage will be equal to 20% of the difference by which the return in the net asset

value per unit of the applicable series from January 1 to December 31 exceeds the greater of: (i) 0%; and (ii) the percentage return of the

S&P/TSX Composite Total Return Index for the same period. For the year ended December 31, 2013, the Fund accrued $663,461 in

Performance Fees (2012 – $7,117).

Exemplar Global Infrastructure Fund

A Performance Fee will be payable in all circumstances where the performance of the Exemplar Global Infrastructure Fund exceeds that of

the Macquarie Global Infrastructure Index 100, even in circumstances where the overall performance of the Fund has declined. For the year

ended December 31, 2013, the Fund accrued $294,455 in Performance Fees (2012 – $115,255).

Exemplar Timber Fund

A Performance Fee will be payable in all circumstances where the performance of the Exemplar Timber Fund exceeds that of the S&P Global

Timber and Forestry Total Return Index, even in circumstances where the overall performance of the Fund has declined. For the year ended

December 31, 2013, the Fund accrued $67,734 in Performance Fees (2012 – nil).

Exemplar Global Agriculture Fund

A Performance Fee will be payable in all circumstances where the performance of the Exemplar Global Agriculture Fund exceeds that of the

S&P Global Agribusiness Index, even in circumstances where the overall performance of the Fund has declined. For the period ended

December 31, 2013, no performance fees were charged to the Fund.

The Manager may, on its own accord, pay for certain operating expenses of the Funds in order to maintain each Fund’s management

expense ratio at a competitive level. These absorptions may be terminated at any time by the Manager, and at the Manager’s direction may

be continued indefinitely. The absorbed amounts are shown in the Statement of Operations.

7. FEES AND OPERATING EXPENSES

Each Fund is responsible for the payment of all fees and expenses including, but not limited to, brokerage commissions on portfolio

transactions, all regulatory filing fees, registrar and transfer agent fees, audit, accounting, administration (including overhead costs from the

Manager), record keeping and legal fees and expenses, custody and safekeeping charges, all taxes, and all other fees relating to the purchase

and sale of the assets of the Fund. The Manager may, at its own discretion, waive or absorb all or some of the expenses of the Funds. There

were no soft dollar commissions for the Funds during the year.

57

The total brokerage commissions paid by the Funds with respect to security transactions for the years ended December 31 were:

2013 2012

Exemplar Leaders Fund 23,965 34,406

Exemplar Global Infrastructure Fund 5,482 5,777

Exemplar Timber Fund 8,170 1,729

Exemplar Yield Fund 30,690 23,755

Exemplar Global Agriculture Fund 253 n/a

8. RECONCILIATION OF NET ASSET VALUE PER UNIT TO NET ASSETS PER UNIT


Per Unit ($)

Net Asset Value

Bid/Ask

Adjustment Net Assets

Exemplar Leaders Fund - Series A $39.34 $(0.14) $39.20

Exemplar Leaders Fund - Series F $40.22 $(0.14) $40.08

Exemplar Global Infrastructure Fund - Series A $11.66 $0.00 $11.66

Exemplar Global Infrastructure Fund - Series F $11.70 $0.00 $11.70

Exemplar Timber Fund - Series A $15.20 $(0.01) $15.19

Exemplar Timber Fund - Series F $15.42 $(0.01) $15.41

Exemplar Timber Fund - Series I $11.08 $(0.01) $11.07

Exemplar Timber Fund - Series L $14.94 $(0.01) $14.93

Exemplar Yield Fund - Series A $10.52 $(0.02) $10.50

Exemplar Yield Fund - Series F $10.86 $(0.02) $10.84

Exemplar Yield Fund - Series I $10.70 $(0.02) $10.68

Exemplar Yield Fund - Series L $10.52 $(0.02) $10.50

Exemplar Global Agriculture Fund - Series A $10.64 $(0.01) $10.63

Exemplar Global Agriculture Fund - Series F $10.72 $(0.01) $10.71


Per Unit ($)

Net Asset Value

Bid/Ask

Adjustment Net Assets

Exemplar Leaders Fund - Series A $30.57 $(0.14) $30.43

Exemplar Leaders Fund - Series F $31.20 $(0.16) $31.04

Exemplar Global Infrastructure Fund - Series A $10.05 $0.00 $10.05

Exemplar Global Infrastructure Fund - Series F $9.99 $0.00 $9.99

Exemplar Timber Fund - Series A $11.91 $(0.01) $11.90

Exemplar Timber Fund - Series F $11.97 $0.00 $11.97

Exemplar Timber Fund - Series L $11.70 $0.00 $11.70

Exemplar Yield Fund - Series A $10.01 $(0.02) $9.99

Exemplar Yield Fund - Series F $10.09 $(0.02) $10.07

Exemplar Yield Fund - Series I $10.16 $(0.02) $10.14

Exemplar Yield Fund - Series L $10.02 $(0.02) $10.00

58

8. SUBSEQUENT EVENT

On February 18, 2014, BluMont Capital announced that it has entered into an agreement to sell the management

agreements, pending regulatory approval, for Exemplar Global Infrastructure Fund, Exemplar Timber Fund and Exemplar

Global Agriculture Fund to Sprott Asset Management LP. A unitholder meeting was held on March 25, 2014 and the

unitholders approved the change of manager. The transaction is expected to close on or around March 31, 2014. Capital

Innovations will continue to sub-advise the Exemplar Global Infrastructure Fund, Exemplar Timber Fund and Exemplar Global

Agriculture Fund during and after the transition period.

59

FUND INFORMATION

MANAGER AND PRINCIPAL DISTRIBUTOR

BluMont Capital Corporation

36 Toronto Street

Suite 750

Toronto, ON M5C 2C5

Telephone: (416) 323-0477

Fax: (416) 323-3199

Toll Free: 1 (877) 327-6048

REGISTRAR

Citigroup Fund Services Canada, Inc.

100-5900 Hurontario Street

Mississauga, ON L5R 0E8

PRIME BROKER

BMO Nesbitt Burns

1 First Canadian Place, 6th Floor

Toronto, ON M5X 1H3

AUDITOR

PricewaterhouseCoopers LLP

PwC Tower

18 York Street, Suite 2600

Toronto, ON M5J 0B2

BluMont Capital 36 Toronto Street, Suite 750, Toronto, Ontario T:416.323.0477 1.877.327.6048 F:416.323.3199exemplarfunds.com arrow-capital.com

ACFFS_E

audited financial statements december 2013 · short: proceeds fair value % of total net assets long...

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