INTERIM FINANCIAL STATEMENTS JUNE 2014 · The accompanying financial statements have been prepared by Arrow Capital Management Inc. (“Arrow” or the “Manager” of the ... Canadian

INTERIM FINANCIAL STATEMENTS JUNE 2014EXEMPLAR CANADIAN FOCUS PORTFOLIO | EXEMPLAR DIVERSIFIED PORTFOLIO l

S E M I - A N N U A L R E P O R T

CONTENTS

Management’s Responsibility for Financial Reporting 2

Notice to Shareholders 3

Exemplar Canadian Focus Portfolio 4

Exemplar Diversified Portfolio 18

Notes to the Financial Statements 29

Portfolio Information 39

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1

CONTENTS

Management’s Responsibility for Financial Reporting 2

Notice to Shareholders 3

Exemplar Canadian Focus Portfolio 4

Exemplar Diversified Portfolio 18

Notes to the Financial Statements 29

Portfolio Information 39

2

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

August 25, 2014

TO THE SHAREHOLDERS OF EXEMPLAR CANADIAN FOCUS PORTFOLIO AND EXEMPLAR DIVERSIFIED PORTFOLIO (COLLECTIVELY THE “PORTFOLIOS”)

The accompanying financial statements have been prepared by Arrow Capital Management Inc. (“Arrow” or the “Manager” of the

Portfolios), and approved by the Board of Directors of the Manager. The Manager is responsible for the information and

representations contained in these financial statements.

The Manager maintains appropriate processes to ensure that reliable financial information is produced. The financial statements

have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and include certain amounts that are

based on estimates and judgments. The significant accounting policies which management believes are appropriate for the

Portfolios are described in Note 2 to the financial statements.

Prior to December 2, 2013, the manager of the Portfolios was BluMont Capital Corporation (“BluMont”). On December 2, 2013, Arrow

acquired all the outstanding shares of BluMont, resulting in a change of control of BluMont. On April 1, 2014, Arrow and BluMont

amalgamated, continuing under the name “Arrow Capital Management Inc.”. At a special meeting of shareholders on November 27,

2013, the shareholders of the Portfolios approved a change of manager from BluMont to Arrow.

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

James L. McGovern

Managing Director & CEO

Robert W. Maxwell

Managing Director & CFO

3

NOTICE TO SHAREHOLDERS The auditor of the Portfolios has not reviewed these interim financial statements.

The Manager of the Portfolios appoints an independent auditor to audit the Portfolios’ annual financial statements. Applicable

securities laws require that if an auditor has not reviewed the Portfolios’ interim financial statements, this must be disclosed in an

accompanying notice.

4

EXEMPLAR CANADIAN FOCUS PORTFOLIO STATEMENTS OF FINANCIAL POSITION Unaudited

Note June 30,

2014 December 31,

2013 January 1,

2013

Assets

Current assets Financial assets designated at fair value through profit or loss $ 72,264,213 $ 66,184,068 $ 51,062,557Cash 6,552,370 9,472,309 12,813,474Margin deposits 1,924,856 1,339,364 1,098,521Subscriptions receivable 147,329 88,620 45,000Receivable for securities sold 323,424 113,474 -Interest receivable 26,977 29,782 57,448Dividends receivable 73,912 105,107 152,397Income tax receivable - 21,162 22,098

81,313,081 77,353,886 65,251,495 Liabilities

Current liabilities

Financial liabilities held for trading 719,515 1,058,358 1,044,233Accrued liabilities

Fees and operating expenses payable 6 141,351 140,060 121,557Performance fee payable 6 1,581,557 3,445,751 25,966Redemptions payable 159,707 88,669 33,201Payable for investments purchased 852,539 635,926 126,733Dividends payable 432 4,701 2,509Distributions payable - 57,590 55,012

3,455,101 5,431,055 1,409,211

Net assets attributable to holders of redeemable shares Series A 45,707,091 50,885,858 45,069,711Series F 27,031,527 16,981,360 12,333,505Series L 5,119,362 4,055,613 2,090,940Series R - - 4,348,128

$ 77,857,980 $ 71,922,831 $ 63,842,284Number of shares outstanding 5

Series A 2,428,072 2,946,850 3,191,673Series F 1,360,507 937,084 837,836Series L 385,876 333,295 209,212Series R - - 367,742

Net assets attributable to holders of redeemable shares per share

Series A $ 18.82 $ 17.27 $ 14.12Series F $ 19.87 $ 18.12 $ 14.72Series L $ 13.27 $ 12.17 $ 9.99Series R $ - $ - $ 11.82

Approved by the Board of Directors of Arrow Capital Management Inc.


James L. McGovern


Robert W. Maxwell


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

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EXEMPLAR CANADIAN FOCUS PORTFOLIO STATEMENTS OF COMPREHENSIVE INCOME For the periods ended June 30, Unaudited

Note 2014 2013

Income Net gains on investments and derivatives

Interest for distribution purposes $ 96,699 $ 180,920 Dividend income 547,515 652,835 Dividend expense on short sales (4,616) (10,468)Net realized gain (loss) on investments and derivatives 2,969,567 (412,414) Net change in unrealized appreciation in value of investments and derivatives 5,564,066 6,566,291

Net gains on investments and derivatives 9,173,231 6,977,164

Other income items Gain (loss) on foreign currency (74,028) 48,848Total income (net) 9,099,203 7,026,012 Expenses Management fees 6 521,106 457,244 Performance fees 6 1,428,851 777,811 Securityholder reporting costs 222,007 200,652 Audit fees 8,086 12,510 Independent review committee fees 3,705 9,642 Legal fees 8,498 183Custodial fees 4,500 1,842Income tax expense 22,008 -Withholding tax 3,103 2,568Harmonized sales tax 233,547 164,262Commissions and other portfolio transaction costs 6 26,087 35,733 Total expense before manager absorption 2,481,498 1,662,447 Less: expenses absorbed by manager 33,553 15,342Total expenses after manager absorption 2,467,127 1,647,105 Increase in net assets attributable to holders of redeemable shares 6,632,076 5,378,907

Increase in net assets attributable to holders of redeemable shares 7

Series A 4,238,590 3,818,283Series F 1,998,277 1,067,198Series L 395,209 182,473Series R - 310,953

$ 6,632,076 $ 5,378,907 Increase in net assets attributable to holders of redeemable shares per share 7

Series A $ 1.51 $ 1.25Series F $ 1.89 $ 1.29Series L $ 1.10 $ 0.76Series R $ - $ 0.93


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EXEMPLAR CANADIAN FOCUS PORTFOLIO STATEMENTS OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE SHARES For the periods ended June 30, Unaudited

Note 2014 2013

Net assets attributable to holders of redeemable shares at beginning of period Series A $ 50,885,858 $ 45,069,711Series F 16,981,360 12,333,505Series L 4,055,613 2,090,940Series R - 4,348,128

71,922,831 63,842,284 Increase in net assets attributable to holders of redeemable shares Series A 4,238,590 3,818,283Series F 1,998,277 1,067,198Series L 395,209 182,473Series R - 310,953 6,632,076 5,378,907

Redeemable share transactions Proceeds from redeemable shares issued Series A 2,794,811 1,834,418Series F 9,717,241 2,161,125Series L 798,173 750,464 13,310,225 4,746,007Shares issued (redeemed) upon share exchange 1(II) Series A - 3,936,364Series R - (3,936,364)

- -Redemption of redeemable shares Series A (12,212,168) (6,480,368)Series F (1,665,351) (2,388,076)Series L (129,633) (95,970)Series R - (722,717) (14,007,152) (9,687,131)Net decrease from redeemable share transactions (696,927) (4,941,124)Net increase in net assets attributable to holders of redeemable shares 5,935,149 437,783

Net assets attributable to holders of redeemable shares at end of period Series A 45,707,091 48,178,408Series F 27,031,527 13,173,752Series L 5,119,362 2,927,907

$ 77,857,980 $ 64,280,067


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EXEMPLAR CANADIAN FOCUS PORTFOLIO STATEMENTS OF CASH FLOWS For the periods ended June 30, Unaudited

2014 2013

Cash flows from (used in) operating activities Increase in net assets attributable to holders of redeemable shares $ 6,632,076 $ 5,378,907Adjustments for:

(Gain) loss on foreign currency 74,028 (48,848)Net realized (gain) loss on investments and derivatives (2,969,567) 412,414Net change in unrealized appreciation in value of investments and derivatives (5,564,066) (6,566,291)(Increase) decrease in margin deposits (585,492) 596,123(Increase) decrease in interest receivable 2,805 (19,268)Decrease in dividends receivable 31,195 2,388Decrease in income tax receivable 21,162 -(Decrease) in dividends payable (4,269) (1,444)Increase (decrease) in fees and operating expenses payable 1,291 (8,625)Increase (decrease) in performance fees payable (1,864,194) 840,957Purchase of investments (16,854,247) (23,291,999)Proceeds from sales of investments 18,975,555 28,869,166

Net cash from (used in) operating activities (2,103,723) 6,163,480

Cash flows from (used in) financing activities Distributions to holders of redeemable shares, net of reinvested distributions (57,590) (55,012)Proceeds from redeemable shares issued 13,251,516 8,630,841Amount paid on redemption of redeemable shares (13,936,114) (13,395,163)Net cash from (used in) financing activities (742,188) (4,819,334)

Net increase (decrease) in cash (2,845,911) 1,344,146

Cash, beginning of period 9,472,309 12,813,474Gain (loss) on foreign currency (74,028) 48,848Cash, end of period $ 6,552,370 $ 14,206,468

Interest received* $ 99,504 $ 161,652Dividends received, net of withholding tax* $ 575,607 $ 652,655Dividends paid* $ (8,885) $ (11,912)

*Included as part of cash flows from operating activities


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EXEMPLAR CANADIAN FOCUS PORTFOLIO SCHEDULE OF INVESTMENT PORTFOLIO As at June 30, 2014 Unaudited

Number of Shares/Par Value Cost

Carrying Value

LONG POSITIONS Canadian Equities

Energy

AltaGas Limited 4,300 $ 205,355 $ 211,044Bankers Petroleum Limited 30,700 181,833 209,374Bellatrix Exploration Limited 84,500 372,483 782,470Black Diamond Group Limited 34,100 441,665 1,170,312Canacol Energy Limited 202,200 1,597,064 1,405,290Canadian Energy Services & Technology Corporation 5,800 178,065 193,836Canadian Natural Resources Limited 10,600 482,359 519,718DeeThree Exploration Limited 23,500 256,680 267,900Enterprise Group Inc. 243,300 243,875 218,970Gibson Energy Inc. 58,000 1,117,368 1,974,320Keyera Corporation 29,900 1,291,160 2,350,439Pembina Pipeline Corporation 6,100 238,952 280,051Prairiesky Royalty Limited 3,500 110,265 135,800RMP Energy Inc. 99,200 558,261 936,448Raging River Exploration Inc. 13,600 123,686 147,560Spartan Energy Corporation 25,900 105,195 104,636Tamarack Valley Energy Limited 1,900 11,066 12,236Tourmaline Oil Corporation 8,400 362,805 472,584 7,878,137 11,392,988

Basic Materials

B2Gold Corporation 20,000 63,399 62,200CCL Industries Inc. 'B' 12,200 932,888 1,253,550Canam Group Inc. 29,000 415,339 388,600Franco-Nevada Corporation 1,600 89,642 98,000Intertape Polymer Group Inc. 500 6,264 5,920Lundin Mining Corporation 29,200 167,915 171,404Osisko Gold Royalties LT-W/I 10,800 159,970 173,340Primero Mining Corporation 10,800 81,357 92,340Stella-Jones Inc. 62,400 782,138 1,828,320 2,698,912 4,073,674

Industrials

Badger Daylighting Inc. 114,600 953,579 4,028,190Boyd Group Income Fund 118,800 1,371,971 5,193,936Canadian National Railway Company 29,800 1,075,305 2,068,120Dirtt Environmental Solutions Limited 112,000 329,753 396,480Newalta Corporation 1,200 23,852 25,716K-Bro Linen Inc. 8,500 288,579 331,585Stantec Inc. 11,500 404,341 759,920WSP Global Inc. 6,200 210,000 234,298 4,657,380 13,038,245

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Carrying Value

Consumer Discretionary

Amaya Gaming Group Inc. 91,400 $ 731,798 $ 2,112,254AutoCanada Inc. 44,200 1,085,811 3,493,126BRP Inc. Subordinate Voting Shares 17,700 505,365 465,510Canadian Tire Corporation Limited 'A' 10,700 901,463 1,095,359Cineplex Inc. 18,500 627,411 766,825DHX Media Limited 559,600 1,288,143 3,754,916Gildan Activewear Inc. 10,500 483,710 660,135Linamar Corporation 7,700 359,363 484,715Magna International Inc. 12,400 850,130 1,424,264Performance Sports Group Ltd 25,500 283,363 468,180Sirius XM Canada Holdings Inc. 81,900 510,821 573,300The Intertain Group Limited 4,000 26,120 27,320The Intertain Group Limited, Subscription Receipts 90,000 630,000 630,000 8,283,498 15,955,904

Consumer Staples

Alimentation Couche-Tard Inc. 'B' 85,800 1,410,289 2,507,934Clearwater Seafoods Income Fund 14,100 118,218 122,952High Liner Foods Inc. 28,700 634,863 697,410Loblaw Companies Limited 3,200 150,862 152,384The Jean Coutu Group (PJC) Inc. 'A' 13,900 259,817 314,974 2,574,049 3,795,654

Health Care

Knight Therapeutics Inc. 60,000 236,589 324,000Valeant Pharmaceuticals International Inc. 23,900 1,147,395 3,225,066 1,383,984 3,549,066

Financials

Altus Group Limited 6,600 123,610 151,404CI Financial Corporation 51,300 1,340,890 1,798,065Callidus Capital Corporation 15,000 249,389 268,500Carfinco Financial Group Inc. 51,200 503,292 439,296Counsel Corporation 45,400 117,060 88,530Element Financial Corporation 56,100 656,981 756,228Royal Bank of Canada 6,900 494,174 526,332Tricon Capital Group Inc. 55,300 410,238 435,211 3,895,634 4,463,566

Information Technology

Avigilon Corporation 55,100 1,243,164 1,310,829BSM Technologies Inc. 80,300 234,702 192,720CGI Group Inc. 'A' 16,400 590,076 620,248Constellation Software Inc. 4,000 632,457 1,087,840MacDonald, Dettwiler & Associates Limited 20,200 1,157,354 1,760,026Open Text Corporation 15,800 527,996 808,960

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Carrying Value

Information Technology - continued

Sandvine Corporation 79,900 $ 257,499 $ 287,640The Descartes Systems Group Inc. 80,000 492,675 1,223,200 5,135,923 7,291,463

Telecommunication Services

BCE Inc. 16,400 479,944 793,760Total Canadian Equities - Long 36,987,461 64,354,320

Canadian Bonds

Epsilon Energy Limited, 7.750%, March 31, 2017 1,400,000 1,400,000 1,540,000Boyd Group Income Fund, 5.750%, Convertible Debenture, December 31, 2017 250,000 250,000 472,500Total Canadian Bonds 1,650,000 2,012,500

U.S. Equities


CBS Corporation 'B' 800 55,123 53,070Priceline Group Incorporated 300 392,869 385,281Starbucks Corporation 300 25,086 24,782The Goodyear Tire & Rubber Company 9,200 257,446 272,841Viacom Inc. 'B' 3,300 269,882 305,544 1,000,406 1,041,518

Consumer Staples

CVS Caremark Corporation 1,800 106,280 144,831Clorox Company 2,300 224,186 224,421Colgate-Palmolive Company 224,186 115,092 131,015Mondelez International Inc. 224,421 233,944 345,296Pinnacle Foods Inc 200 6,771 7,025 686,273 852,588

Industrials

Honeywell International Inc. 1,900 197,143 188,535Textron Inc. 2,800 80,832 114,455United Parcel Service Inc. "B" 100 10,948 10,960 288,923 313,950

Health Care

AbbVie Inc. 200 12,077 12,051Allergan Inc. 1,500 264,106 270,977Gilead Sciences Inc. 6,000 446,329 531,066WellPoint Inc. 1,400 136,832 160,831 859,344 974,925

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Carrying Value

Financials

Prudential Financial Inc. 2,800 $ 234,450 $ 265,347


T-Mobile US Inc. 400 14,513 14,356Verizon Communications Inc. 200 10,613 10,447 25,126 24,803


Blackhawk Network Holdings Inc. Class B 600 15,588 17,198Google Inc. Class A 1,200 707,941 749,001Yahoo! Inc. 3,900 150,839 146,262 874,368 912,461

Index Equivalents

iShares US Fundamental Index ETF 4,500 104,482 121,185Total U.S. Equities 4,073,372 4,506,777

Global Equities

British Virgin Islands

Michael Kors Holdings Limited 4,300 339,633 406,947

Ireland

Jazz Pharmaceuticals PLC 200 30,864 31,388

Netherlands

LyondellBasell Industries NV 'A' 6,800 540,150 708,878

Switzerland

Tyco International Limited 5,000 186,180 243,403Total Global Equities - Long 1,096,827 1,390,616Total Long Positions Including Transaction Costs 43,807,660 72,264,213Transaction Costs (23,006) -Total Long Positions Before Transaction Costs 43,784,654 72,264,213

SHORT POSITIONS Canadian Equities

Energy

Trican Well Service Limited (600) (8,767) (10,338)

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Carrying Value

Basic Materials

Fortress Paper Limited (18,000) $ (134,157) $ (56,160)Total Canadian Equities - Short (142,924) (66,498)

U.S. Equities

Index Equivalents

PowerShares QQQ Trust Series 1 (Nasdaq 100) (1,200) (112,891) (120,305)iShares Russell 2000 ETF (4,200) (515,252) (532,712)Total U.S. Equities - Short (628,143) (653,017)Total Short Positions Including Transaction Costs (771,067) (719,515)Transaction Costs (476) -Total Short Positions Before Transaction Costs (771,543) (719,515)TOTAL INVESTMENT PORTFOLIO $ 43,013,111 $ 71,544,698 The accompanying notes are an integral part of these financial statements.

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EXEMPLAR CANADIAN FOCUS PORTFOLIO DISCUSSION OF NOTE 4: FINANCIAL INSTRUMENTS JUNE 30, 2014 UNAUDITED

The investment objective of the Exemplar Canadian Focus Portfolio (the “Portfolio”) is to achieve superior capital appreciation over

both short and long term horizons primarily through the selection and management of a concentrated group of long and short

positions in Canadian equity securities and equity derivative securities.

The Portfolio’s overall risk management program seeks to maximize the returns derived for the level of risk to which the Portfolio is

exposed and seeks to minimize potential adverse effects on the Portfolio's financial performance. All investments present a risk of

loss of capital. The maximum loss of capital on long equity and debt securities is limited to the fair value of those positions. The

maximum loss on equities and debt sold short can be unlimited and the maximum loss on forward currency contracts is the notional

contract value of those positions.

The management of these risks is carried out by the Manager and Portfolio Advisor in accordance with Portfolio’s prospectus.

The Portfolio's use of leverage and borrowings can increase the Portfolio's exposure to these risks, which in turn can also increase

the potential returns the Portfolio can achieve. The Portfolio Advisor manages these exposures on a daily basis in accordance with

investment restrictions that have been established by the Portfolio to manage the overall potential exposure. The Portfolio will

generally not use leverage in excess of 20% of its Net Asset Value.

A general discussion of risks associated with financial instruments for the Exemplar Portfolios is contained in Note 4: FINANCIAL

INSTRUMENTS on page 33.

CREDIT RISK

The analysis below summarizes the credit quality of the Portfolio's debt portfolio at June 30, 2014, December 31, 2013 and January 1, 2013.

Percentage of total debt securities

Credit Rating* As at June 30, 2014 As at December 31, 2013 As at January 1, 2013Not Rated 100.0% 100.0% 100.0%Total 100.0% 100.0% 100.0%

* Credit ratings are obtained from Standard & Poor’s, Moody’s and/or Dominion Bond Rating Service. Where multiple ratings were obtained for a security, the lowest rating has been used.

LIQUIDITY RISK

All of the Portfolio’s liabilities are typically due in less than 3 months, except performance fees which are accrued daily and payable

annually on December 31.

MARKET RISK

The following include sensitivity analyses that show how the net assets attributable to holders of redeemable shares 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.

A. CURRENCY RISK

The tables below indicate the Portfolio’s exposure to USD as at June 30, 2014, December 31, 2013 and January 1, 2013, in Canadian

dollar terms. The tables also illustrate the potential impact on the net assets attributable to holders of redeemable shares if the

Canadian dollar had strengthened or weakened by 10% in relation to USD, with all other variables held constant. Non-monetary

assets are comprised of equity positions. Monetary assets include cash, fixed income securities and other current receivables and

payables.

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June 30, 2014 Exposure Impact on net assets attributableto holders of redeemable shares

Currency Monetary Non-Monetary Total Monetary Non-Monetary TotalUnited States Dollar - Long $2,771,069 $5,659,119 $8,430,188 $277,107 $565,912 $843,019United States Dollar - Short - (653,017) (653,017) (65,302) (65,302)Total $2,771,069 $5,006,102 $7,777,171 $277,107 $500,610 $777,717% of net assets attributable to holders of redeemable shares 3.6% 6.6% 10.2% 0.3% 0.7% 1.0%

December 31, 2013 Exposure Impact on net assets attributableto holders of redeemable shares

Currency Monetary Non-Monetary Total Monetary Non-Monetary TotalUnited States Dollar - Long $475,200 $7,077,622 $7,552,822 $47,520 $707,762 $748,886United States Dollar - Short - (63,963) (63,963) - (6,396) (6,396)Total $475,200 $7,013,659 $7,488,859 $47,520 $701,366 $748,886% of net assets attributable to holders of redeemable shares 0.7% 9.8% 10.5% 0.1% 1.0% 1.1%

January 1, 2013 Exposure Impact on net assets attributableto holders of redeemable shares

Currency Monetary Non-Monetary Total Monetary Non-Monetary TotalUnited States Dollar - Long $2,041,372 $3,044,536 $5,085,908 $204,137 $304,454 $508,591United States Dollar - Short - (155,551) (155,551) - (15,555) (15,555)Total $2,041,372 $2,888,985 $4,930,357 $204,137 $288,899 $493,036% of net assets attributable to holders of redeemable shares 3.2% 4.5% 7.7% 0.3% 0.5% 0.8%

B. INTEREST RATE RISK

The table below summarizes the Portfolio's exposure to interest rate risk as at June 30, 2014, December 31, 2013 and January 1,

2013. The table also illustrates the potential impact, or sensitivity, on the net assets attributable to holders of redeemable shares if

the prevailing levels of market interest rates changed by 1.0%, assuming a parallel shift in the yield curve with all other variables held

constant.

Total Exposure

Term to Maturity June 30, 2014 December 31, 2013 January 1, 20131-3 years $1,540,000 - -3 -5 years 472,500 2,023,000 3,830,534Greater than 5 years - 196,000 252,000Total $2,012,500 $2,219,000 $4,082,534Sensitivity: Total $ sensitivity $1,278 $2,023 $9,281Total % sensitivity 0.0% 0.0% 0.0%

C. PRICE RISK

The Portfolio's policy is to manage price risk through diversification and selection of investments within specified limits established

by the investment restrictions within the Portfolio’s prospectus, as summarized below.

The Portfolio invests predominantly in large and mid capitalization companies. The Portfolio may also invest in bonds and other

debt instruments if warranted by financial conditions. The Portfolio does not specialize in any one industry other than to

concentrate investments in those industries that offer the best opportunities for exceptional returns at each stage of the economic

and market cycle. The Portfolio may also invest in options, including put options or call options either in respect of a specific security

or in respect of a stock exchange index as a means to reduce volatility.

The Portfolio may engage in short selling of securities which the Manager believes are overvalued, especially securities of issuers

with deteriorating fundamentals and weak balance sheets. Short positions of index securities such as exchange traded funds may

also be employed for capital preservation and hedging purposes. Short selling positions will not in total exceed 40% of the Net Asset

Value of the Portfolio.

15

The Portfolio holds cash and invests in short term securities for the purpose of preserving capital and/or maintaining liquidity, based

upon the Manager’s ongoing evaluation of current and anticipated economic and market conditions. The Portfolio may also invest

in foreign securities of the same type and characteristics as described above.

The Portfolio may use derivatives for hedging and non-hedging purposes as permitted by applicable securities laws. The Portfolio

may enter into securities lending, repurchase and reverse repurchase transactions to generate additional income or as a short-term

cash management tool.

The impact on net assets of the Portfolio due to a 5% change in market prices of equity securities with all other variables held

constant, is presented in the following table.

Impact on net assets attributable to holders of redeemable shares

June 30, 2014 December 31, 2013 January 1, 2013

5% Increase $3,476,610 $3,256,286 $2,500,913

5% Decrease $(3,476,610) $(3,256,286) $(2,500,913)

The Portfolio engages in short selling activities, wherein it borrows securities and sells them to third parties. Until the Portfolio covers

its short sales, it is exposed to market risk to the extent that subsequent market fluctuations may require purchasing securities sold

short at prices which may be significantly higher than the fair value reflected on the financial statements.

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 Portfolio's concentration risk:

Market Segment % of net assets attributable to holders of redeemable shares

June 30, 2014 December 31, 2013 January 1, 2013Long Positions Energy 14.7% 9.8% 15.9%Basic Materials 6.1% 4.7% 8.3%Industrials 17.5% 16.8% 11.2%Consumer Discretionary 22.3% 18.3% 4.9%Consumer Staples 6.2% 6.6% 3.3%Health Care 6.0% 8.2% 5.6%Financials 6.0% 11.2% 10.5%Index Equivalents 0.2% 0.3% 0.1%Information Technology 10.6% 10.8% 5.6%Telecommunication Services 1.0% 2.3% 6.2%Utilities - - 1.9%Corporate Bonds 2.6% 3.0% 6.4%

Short Positions Energy - - (0.7)%Basic Materials (0.1)% (0.3)% (0.2)%Industrials - - (0.5)%Consumer Discretionary - (0.1)% -Consumer Staples - - (0.2)%Financials - (0.6)% -Index Equivalents (0.8)% (0.5)% -

16

FAIR VALUE MEASUREMENT

The following table illustrates the classification of the Portfolio's assets and liabilities measured at fair value within the fair value

hierarchy as at June 30, 2014, December 31, 2013 and January 1, 2013:

As at June 30, 2014 Level 1 Level 2 Level 3 Total

Financial assets at FVTPL Equities $70,251,713 - - $70,251,713Bonds - 2,012,500 - 2,012,500Total 70,251,713 2,012,500 - 72,264,213 Financial liabilities at FVTPL Equities sold short (719,515) - - (719,515)Total $(719,515) - - $(719,515)

As at December 31, 2013 Level 1 Level 2 Level 3 Total

Financial assets at FVTPL Equities $63,965,068 $- $- $63,965,068Bonds - 2,219,000 - 2,219,000Total 63,965,068 2,219,000 - 66,184,068 Financial liabilities at FVTPL Equities sold short (1,058,358) - - (1,058,358)Total $(1,058,358) $- $- $(1,058,358)

As at January 1, 2013 Level 1 Level 2 Level 3 Total

Financial assets at FVTPL Equities $46,980,023 $- $- $46,980,023Bonds - 4,082,534 - 4,082,534Total 46,980,024 4,082,534 - 51,062,557 Financial liabilities at FVTPL Equities sold short (1,044,233) - - (1,044,233)Total $(1,044,233) $- $- $(1,044,233)

All fair value measurements above are recurring. The carrying values of all of the Portfolio’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 Portfolio Advisor is responsible for performing the fair value measurements included in the financial statements of the Portfolio,

including Level 3 measurements, if any. The Portfolio Advisor obtains pricing from a third party pricing vendor which is monitored

and reviewed daily by the finance department.

As at June 30, 2014, December 31, 2013 and January 1, 2013, the Portfolio did not hold any Level 3 financial instruments. There were

no transfers between Levels 1, 2, and 3 during the periods.

a) Equities

The Portfolio's equity positions are classified as Level 1 as each security is actively traded and a reliable price is observable.

b) Bonds

The Portfolio's bond holdings are comprised of Canadian corporate bonds. Bond pricing is obtained from bid and ask prices

provided by independent security pricing services or recognized investment dealers. Bond prices may be derived by using models

which include inputs such as interest rate curves, credit spreads and volatilities. The inputs that are significant to valuation are

generally observable and therefore the Fund's bonds have been classified as Level 2.

17

Financial Instruments by Category

The following table presents the net gains (losses) on financial instruments at FVTPL by category for the periods ended June 30, 2014

and 2013.

Net realized gains /(losses) Net unrealized gains /(losses)

June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2013Financial assets at FVTPL:

Designated as FVTPL $3,132,339 $(215,500) $5,566,542 $6,469,634 Financial liabilities at FVTPL:

HFT (162,772) (196,914) (2,476) 96,657Total: $2,969,567 $(412,414) $5,564,066 $6,566,291

The accompanying notes are an integral part of these financial statements

18

EXEMPLAR DIVERSIFIED PORTFOLIO STATEMENTS OF FINANCIAL POSITION Unaudited

Note June 30,

2014 December 31,

2013 January 1,

2013

Assets

Current assets Financial assets held for trading

Futures contracts - Long $ 1,088,129 $ 827,257 $ -Futures contracts - Short 218,927 539,609 234,847Options 37,503 - -

Cash 18,157,196 18,206,299 32,163,178Margin deposits 13,836,330 15,416,586 9,384,285Subscriptions receivable 473,995 82,752 140,001

33,812,080 35,072,503 41,922,311 Liabilities

Current liabilities

Financial liabilities held for trading Futures contracts - Long - - 5,631Options 446,571 - -

Accrued liabilities Fees and operating expenses payable 6 50,922 62,322 79,582Redemptions payable 76,908 42,691 71,218

574,401 105,013 156,431

Net assets attributable to holders of redeemable shares Series A 7,256,670 12,977,312 20,891,798Series F 18,132,587 15,529,710 15,852,770Series I 6,552,299 5,130,434 3,769,947Series L 1,296,123 1,330,034 1,251,365

$ 33,237,679 $ 34,967,490 $ 41,765,880Number of shares outstanding 5

Series A 709,555 1,196,227 2,084,878Series F 1,678,217 1,362,244 1,522,164Series I 666,214 498,211 406,869Series L 143,515 138,538 140,658


Series A $ 10.23 $ 10.85 $ 10.02Series F $ 10.80 $ 11.40 $ 10.41Series I $ 9.84 $ 10.30 $ 9.27Series L $ 9.03 $ 9.60 $ 8.90



James L. McGovern


Robert W. Maxwell



19

EXEMPLAR DIVERSIFIED PORTFOLIO STATEMENTS OF COMPREHENSIVE INCOME For the periods ended June 30, Unaudited

Note 2014 2013


Interest for distribution purposes $ 98,850 $ 181,847 Net realized gain (loss) on futures (1,156,950) 2,895,340Net change in unrealized appreciation (depreciation) in value of futures (59,810) 550,180Net realized loss on investments and derivatives (173,468) - Net change in unrealized depreciation in value of investments and derivatives (208,962) -

Net gains on investments and derivatives (1,500,340) 3,627,367

Other income items Gain on foreign currency 811 6,161Total income (net) (1,499,529) 3,633,528 Expenses Management fees 6 206,511 287,841 Performance fees 6 - 4,184 Securityholder reporting costs 102,256 141,504 Audit fees 8,086 12,510 Custodial fees 2,499 1,203Legal fees 9,393 183Independent review committee fees 3,204 6,250 Harmonized sales tax 38,507 49,718Commissions and other portfolio transaction costs 6 181,989 195,000 Total expenses before manager absorption 552,445 698,393 Less: expenses absorbed (recovered) by manager 30,559 45,853Total expense after manager absorption (recovery) 521,886 652,540 Increase (decrease) in net assets attributable to holders of redeemable shares (2,021,415) 2,980,988

Increase (decrease) in net assets attributable to holders of redeemable shares 7

Series A (756,851) 1,348,723Series F (944,568) 1,223,506Series I (239,404) 322,782Series L (80,592) 85,977

$ (2,021,415) $ 2,980,988

Increase (decrease) in net assets attributable to holders of redeemable shares per share 7 Series A $ (0.75) $ 0.73Series F $ (0.58) $ 0.79Series I $ (0.41) $ 0.76Series L $ (0.57) $ 0.62


20

EXEMPLAR DIVERSIFIED PORTFOLIO STATEMENTS OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE SHARES For the periods ended June 30, Unaudited

2014 2013

Net assets attributable to holders of redeemable shares at beginning of period Series A $ 12,977,312 $ 20,891,798Series F 15,529,710 15,852,770Series I 5,130,434 3,769,947Series L 1,330,034 1,251,365

34,967,490 41,765,880 Increase (decrease) in net assets attributable to holders of redeemable shares Series A (756,851) 1,348,723Series F (944,568) 1,223,506Series I (239,404) 322,782Series L (80,592) 85,977 (2,021,415) 2,980,988

Redeemable share transactions Proceeds from redeemable shares issued Series A 317,082 2,279,211Series F 7,400,943 4,193,603Series I 1,727,152 325,171Series L 103,500 51,500 9,548,677 6,849,485Redemption of redeemable shares Series A (5,280,873) (7,286,508)Series F (3,853,498) (4,343,462)Series I (65,883) (28,727)Series L (56,819) (62,214) (9,257,073) (11,720,911)Net increase (decrease) from redeemable share transactions 291,604 (4,871,426)Net increase (decrease) in net assets attributable to holders of redeemable shares (1,729,811) (1,890,438)

Net assets attributable to holders of redeemable shares at end of period Series A 7,256,670 17,233,224Series F 18,132,587 16,926,417Series I 6,552,299 4,389,173Series L 1,296,123 1,326,628

$ 33,237,679 $ 39,875,442


21

EXEMPLAR DIVERSIFIED PORTFOLIO STATEMENTS OF CASH FLOWS For the periods ended June 30, Unaudited

2014 2013

Cash flows used in operating activities Increase (decrease) in net assets attributable to holders of redeemable shares $ (2,021,415) $ 2,980,988Adjustments for:

Gain on foreign currency (811) (6,161)Net realized loss on investments and derivatives 173,468 -Net change in unrealized depreciation in value of investments and derivatives 208,962 -Net change in unrealized (appreciation) depreciation in value of futures 59,810 (550,180)(Increase) decrease in margin deposits 1,580,256 (3,969,711)(Decrease) in fees and operating expenses payable (11,400) (9,606)Purchase of investments (317,374) -Proceeds from sales of investments 344,012 -

Net cash from (used in) operating activities 15,508 (1,554,670)

Cash flows used in financing activities Proceeds from redeemable shares issued 9,157,434 6,714,533Amount paid on redemption of redeemable shares (9,222,856) (11,599,726)Net cash used in financing activities (65,422) (4,885,193)

Net decrease in cash (49,914) (6,439,863)

Cash, beginning of period 18,206,299 32,163,178Gain on foreign currency 811 6,161Cash, end of period $ 18,157,196 $ 25,729,476

Interest received* $ 98,850 $ 181,847 *Included as part of cash flows from operating activities


22

EXEMPLAR DIVERSIFIED PORTFOLIO SCHEDULE OF INVESTMENT PORTFOLIO As at June 30, 2014 Unaudited

Number of contracts

Notional Value

Contract Size

Carrying Value

FUTURES CONTRACTS – LONG

Bond Futures 90-Day Bank Bill Futures December 2014 250 $ 48,194,198 10,000 $ 20,866Australia 10 Year Bond Futures September 2014 72 8,734,935 1,000 133,770Bank Acceptance Futures December 2014 1 246,978 2,500 -Canada 10 Year Bond Futures September 2014 111 5,103,126 1,000 85,840Euro-Bond Futures September 2014 66 14,182,340 1,000 169,765Long Gilt Futures September 2014 35 7,025,600 1,000 (10,371)US 10 Year Note (CBT) September 2014 48 6,414,137 1,000 13,810US 5 Year Note (CBT) September 2014 27 3,443,340 1,000 1,860US Long Bond Futures September 2014 30 4,393,656 1,000 24,621 440,161

Commodity Futures Brent Crude Futures September 2014 29 3,469,585 1,000 43,033LME Nickel Futures September 2014 3 365,872 6 5,355LME Zinc Futures September 2014 27 1,597,569 25 41,154Cocoa Futures September 2014 156 5,207,661 10 64,598Copper Futures September 2014 5 427,489 25,000 4,203Gasoline RBOB Futures August 2014 20 2,729,067 42,000 (2,843)Lean Hogs Futures August 2014 12 680,630 40,000 14,006Live Cattle Futures August 2014 76 4,870,484 40,000 233,651Natural Gas Futures March 2015 4 173,841 10,000 (10,675)Natural Gas Futures September 2014 3 142,198 10,000 (7,751)NY Harbour ULSD Futures August 2014 13 1,734,258 42,000 (44,635)Palladium Futures September 2014 10 900,109 100 4,927Soybean Futures November 2014 34 2,100,227 5,000 (125,777)WTI Crude Futures December 2014 27 2,945,234 1,000 50,858 270,104

Currency Futures AUD/USD Currency Futures September 2014 26 4,494,021 100,000 11,760British Pound Currency Futures September 2014 109 12,432,711 62,500 170,001CHF Currency Futures September 2014 12 1,807,424 125,000 21,358Euro FX Currency Futures September 2014 8 1,462,337 125,000 13,145Euro/JPY Futures September 2014 10 1,825,837 125,000 1,516Mexican Peso Futures September 2014 76 3,106,425 500,000 9,115 226,895

Index Futures SPI 200 Futures September 2014 27 3,639,336 25 754S&P/TSX 60 IX Futures September 2014 26 2,602,443 200 36,486Dax Index Futures September 2014 9 3,242,608 25 (20,534)Hang Seng Index Futures July 2014 15 2,386,915 50 32,638Nikkei 225 (SGX) Futures September 2014 16 1,276,084 500 (1,112)Nasdaq 100 E-Mini Futures September 2014 39 3,197,957 20 51,735S&P500 E-mini Futures September 2014 44 4,585,682 50 51,002 150,969Futures Contracts - Long 1,088,129

23


Number of contracts

Notional Value

Contract Size

Carrying Value

FUTURES CONTRACTS – SHORT

Bond Futures 10 Year Mini Japanese Government Bond Futures September 2014 (35) $ 5,370,467 100,000 $ (17,698) Commodity Futures Canola Futures (WCE) November 2014 (291) 2,663,134 20 23,344Coffee 'C' Futures September 2014 (3) 210,295 37,500 (4,624)Coffee Robusta 10-Tonne Futures September 2014 (24) 516,526 10 (8,156)Corn Futures December 2014 (93) 2,110,996 5,000 95,066Cotton No.2 Futures December 2014 (73) 2,864,372 50,000 131,047Crude Palm Oil Futures September 2014 (117) 2,359,210 25 33,596Euro-Bobl Futures September 2014 (53) 9,926,218 1,000 (42,397)Gold 100 Oz Futures August 2014 (10) 1,411,308 100 (74,985)LME Primary Aluminum Futures September 2014 (9) 454,218 25 (2,529)Platinum Futures October 2014 (3) 237,462 50 (4,035)Rubber Futures TCOM November 2014 (91) 999,495 5,000 (69,078)Silver Futures September 2014 (10) 1,123,922 5,000 (6,699)Soybean Oil Futures December 2014 (75) 1,880,765 60,000 21,298Sugar #11 (World) October 2014 (30) 646,016 112,000 (1,686)Wheat Futures (CBT) September 2014 (98) 3,020,913 5,000 66,082White Sugar (LIF) October 2014 (10) 255,092 50 7,510 163,754

Currency Futures 3 Months Euro Euribor Futures September 2014 (7) 2,553,492 2,500 (128)90 Day Sterling Futures December 2014 (86) 19,462,385 1,250 (10,043)Canadian Dollar Currency Futures September 2014 (24) 2,397,899 100,000 (43,321)Euro/CHF Futures September 2014 (49) 8,948,020 125,000 22,432EURO/GBP Futures September 2014 (103) 18,840,006 125,000 123,961Japanese Yen Currency Futures September 2014 (18) 2,373,174 12,500,000 (20,030) 72,871Futures Contracts - Short 218,927Total Futures Portfolio $1,307,056


24


Number of Options Cost

Carrying Value

OPTIONS POSITIONS – LONG S&P 500 E-mini Futures Aug/1830 PO 100 $ 34,984 $ 30,692S&P 500 E-mini Futures Jul/1780 PO 116 77,384 6,811Total Options - Purchased 112,368 37,503

OPTIONS POSITIONS – SHORT S&P 500 E-mini Futures Jul/1950 WCO (3) (3,391) (2,642)S&P 500 E-mini Futures Sep/1950 WCO (3) (7,105) (6,525)S&P 500 E-mini Futures Dec/1950 WCO (3) (10,616) (10,168)S&P 500 E-mini Futures Mar/1950 WCO (3) (13,603) (13,211)S&P 500 E-mini Futures Jul/1880 WCO (6) (13,560) (24,260)S&P 500 E-mini Futures Sep/1880 WCO (6) (20,013) (29,465)S&P 500 E-mini Futures Dec/1880 WCO (6) (26,058) (35,069)S&P 500 E-mini Futures Mar/1880 WCO (6) (30,877) (40,514)S&P 500 E-mini Futures Sep/1860 WCO (14) (50,358) (81,081)S&P 500 E-mini Futures Dec/1850 WCO (14) (61,737) (98,829)S&P 500 E-mini Futures Mar/1860 WCO (14) (75,156) (104,807)Total Options - Written (312,474) (446,571)Total Options Portfolio $ (200,106) $ (409,068)


25

EXEMPLAR DIVERSIFIED PORTFOLIO DISCUSSION OF NOTE 4: FINANCIAL INSTRUMENTS JUNE 30, 2014 UNAUDITED

The investment objective of the Exemplar Diversified Portfolio (the “Portfolio”) is to seek superior long term absolute and risk-

adjusted returns with the potential for low correlation to global equity and fixed-income market returns through the selection and

management of long and short positions in a globally diversified portfolio of futures, options, forward contracts and other financial

derivative instruments on agricultural and soft commodities, metals, energies, currencies, interest rates and equity indices.

The Portfolio's overall risk management program seeks to maximize the returns derived for the level of risk to which the Portfolio is



maximum loss on equities 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 Portfolio’s

prospectus.


the potential returns the Portfolio can achieve. The Portfolio Sub-Advisor manages these exposures on a daily basis in accordance

with investment restrictions that have been established by the Portfolio to manage the overall potential exposure. Futures and

forward contracts and investments to which the Portfolio may have exposure at any time may be substantially larger than the actual

amount invested with the result that the Portfolio will be exposed to a form of notional leverage. The notional leverage of the

Portfolio, excluding futures on government securities and Euro dollars, is generally between 0% and 300% and can never go above

500%. The notional leverage of the Portfolio, including futures on government securities and Euro dollars, is typically around 300%

but from time to time may be as high as 1,000%. No form of cash leverage is permitted and in the case of government securities and

Euro dollars, futures positions are restricted to those that are based on investment grade government securities and Euro dollars.



CREDIT RISK

As at June 30, 2014, December 31, 2013 and January 1, 2013, the Portfolio had no investments in debt instruments and therefore

was not subject to related credit risk. The Portfolio holds derivatives, however the risk of default is considered minimal as the

counterparty to all listed securities transactions are exchange clearinghouses. The trade will fail if the exchange clearinghouse fails

to meet its obligation.

LIQUIDITY RISK



MARKET RISK

A. CURRENCY RISK

The table below indicates the foreign currencies to which the Portfolio had significant exposure at June 30, 2014, December 31, 2013

and January 1, 2013, in Canadian dollar terms. The table also illustrates the potential impact on the net assets attributable to holders

of redeemable shares 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 assets are comprised of non-financial options and futures positions. Monetary

assets include cash, margin deposits, financial options and futures positions, and other current receivables and payables.

26

June 30, 2014 Exposure Impact on net assets attributableto holders of redeemable shares

Currency Monetary Non-Monetary Total Monetary Non-Monetary TotalAustralian Dollar $26,040 $155,566 $181,606 $2,604 $15,557 $18,161British Pound Sterling 39,660 115,304 154,963 3,966 11,530 15,496Euro Currency 582,383 106,355 688,738 58,238 10,636 68,874Hong Kong Dollar (107,321) 32,621 (74,700) (10,732) 3,262 (7,470)Japanese Yen 291,212 (86,237) 204,975 29,121 (8,624) 20,497Malaysian Ringgit 102,183 33,538 135,721 10,218 3,354 13,572Swiss Franc (33,790) 22,169 (11,621) (3,379) 2,217 (1,162)United States Dollar (758,296) 285,523 (472,773) (75,830) 28,552 (47,278)Total $142,071 $664,839 $806,909 $14,206 $66,484 $80,690% of net assets attributable to holders of redeemable shares 0.4% 2.0% 2.4% 0.0% 0.2% 0.2%

December 31, 2013 Exposure Impact on net assets attributableto holders of redeemable shares

Currency Monetary Non-Monetary Total Monetary Non-Monetary TotalAustralian Dollar $15,995 $86,280 $102,275 $1,600 $8,628 $10,228British Pound Sterling (79,491) 93,800 14,309 (2,829) 285 (2,544)Euro Currency 411,012 75,619 486,631 41,101 7,562 48,663Hong Kong Dollar (81,508) 48,302 (33,206) (7,949) 9,380 1,431Japanese Yen 441,315 234,105 675,420 (8,151) 4,830 (3,321)Malaysian Ringgit 88,219 9,766 97,985 44,132 23,410 67,542Swiss Franc (28,285) 2,846 (25,439) 8,822 977 9,799United States Dollar 355,500 505,869 861,369 35,550 50,587 86,137Total $1,122,757 $1,056,587 $2,179,344 $112,276 $105,659 $217,935% of net assets attributable to holders of redeemable shares 3.2% 3.0% 6.2% 0.3% 0.3% 0.6%

January 1, 2013 Exposure Impact on net assets attributableto holders of redeemable shares

Currency Monetary Non-Monetary Total Monetary Non-Monetary TotalAustralian Dollar $(167,960) $157,743 $(10,217) $(16,796) $15,774 $(1,022)British Pound Sterling (8,923) (6,657) (15,580) (892) (666) (1,558)Euro Currency 534,307 154,395 688,702 53,431 15,439 68,870Hong Kong Dollar 88,579 (6,006) 82,573 8,858 (601) 8,257Japanese Yen (40,267) 159,203 118,936 (4,027) 15,920 11,893Malaysian Ringgit 55,841 (148,517) (92,676) 5,584 (14,852) (9,268)South African Rand 61,047 - 61,047 6,105 - 6,105Swiss Franc (33,119) 109 (33,010) (3,312) 11 (3,301)United States Dollar (2,397,189) (476,961) (2,874,150) (239,719) (47,696) (287,415)Total $(1,907,684) $(166,691) $(2,074,375) $(190,768) $(16,671) $(207,439)% of net assets attributable to holders of redeemable shares (4.6)% (0.4)% (5.0)% (0.5)% (0.0)% (0.5)%


As at June 30, 2014, December 31, 2013 and January 1, 2013 the Portfolio did not hold any interest-bearing securities, and therefore

was not subject to significant interest rate risk.

C. PRICE RISK


by the investment restrictions within the prospectus, as summarized below.

The core investment strategy of the Portfolio is based on a risk budgeting strategy of allocating capital to markets and utilizing that

capital based on the amount of risk premium being priced into markets. As a result of this allocation methodology, generally 50% of

27

the portfolio risk budget is allocated to globally-traded industrial and agricultural commodity futures markets, and 50% is allocated

to global currency, treasury debt and equity index futures markets.

The Portfolio transacts on highly liquid exchanges globally that may include, but are not limited to, all futures exchanges in the

United States and Canada, the London Metals Exchange (LME), Euronext-LIFFE (LIFFE), the Eurex Deutschland (EUREX), the

International Petroleum Exchange of London Limited (IPE), the Singapore International Monetary Exchange (SIMEX), the Sydney

Futures Exchange Ltd. (SFE) and the Tokyo Commodities Exchange (TCE).

The Portfolio also has the ability to take short positions, in total not exceeding 40% of the Net Asset Value of the Portfolio.

The Portfolio may hold cash or invest in short term securities for the purpose of preserving capital and/or maintaining liquidity,

based upon the portfolio manager’s ongoing evaluation of current and anticipated economic and market conditions.

As at June 30, 2014, December 31, 2013 and January 1, 2013, if the Portfolio's relevant benchmark index, New Edge Commodity

Trading Index (CAD), had increased or decreased by 10%, with all other variables constant, the net assets attributable to holders of

redeemable shares of the Portfolio would have increased or decreased as follows:

Impact on net assets attributableto holders of redeemable shares

Benchmark June 30, 2014 December 31, 2013 January 1, 2013

New Edge Commodity Trading Index 12.6% 12.8% 12.7%

CONCENTRATION RISK




Market Segment % of net assets attributable

to holders of redeemable shares

June 30, 2014 December 31, 2013 January 1, 2013Long Positions Commodity Futures 0.8% (0.3)% (0.3)%Currency Futures 0.7% 0.4% (0.5)%Index Futures 0.5% 2.3% 0.8%Bond Futures 1.3% (0.1)% -Index Options 0.1% - -

Short Positions Commodity Futures 0.5% 0.7% (0.4)%Currency Futures 0.2% 0.5% 1.4%Bond Futures (0.1)% 0.5% - Index Options (1.3)% - -


All fair value measurements are recurring. The carrying values of all of the Portfolio’s financial instruments not carried at FVTLP

approximate their fair values due to their short-term nature. Fair values are classified as Level 1 when the related security or




The Portfolio Sub-Advisor is responsible for performing the fair value measurements included in the financial statements of the

Portfolio, including Level 3 measurements if any. The Portfolio Sub-Advisor obtains pricing from a third party pricing vendor which

is monitored and reviewed daily by the finance department.

As at June 30, 2014, December 31, 2013 and January 1, 2013, all of the Portfolio’s investments were classified as Level 1. There were

no transfers between levels 1, 2 and 3.

Derivative assets and liabilities consist of options and futures contracts which are exchange traded.

28

Financial Instruments By Category


and 2013.


June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2013Financial assets at FVTPL:

HFT $(1,361,955) $2,895,340 $498,481 $784,488 Financial liabilities at FVTPL:

HFT 31,537 - (767,253) (234,308)Total: $(1,330,418) $2,895,340 $(268,772) $550,180 The accompanying notes are an integral part of these financial statements.

29

NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2014 UNAUDITED 1. THE PORTFOLIOS

(I) The Portfolios

Exemplar Portfolios Ltd. (the “Company”) is a mutual fund corporation incorporated under the Business Corporations Act

(Ontario). The Company was incorporated on March 18, 2008.

The address of the Portfolios’ registered office is 36 Toronto Street, Suite 750, Toronto, Ontario, M5C 2C5.

These financial statements reflect the financial position of each of the classes of the Company: Exemplar Canadian Focus

Portfolio (the “Canadian Focus Portfolio”) and Exemplar Diversified Portfolio (the “Diversified Portfolio”), individually a

"Portfolio" and collectively the "Portfolios".

Arrow Capital Management Inc. is the manager (“Arrow” or the “Manager”) of the Portfolios. Prior to December 2, 2013, the

manager of the Portfolios was BluMont Capital Corporation (“BluMont”). On December 2, 2013, Arrow acquired all the

outstanding shares of BluMont, resulting in a change of control of BluMont. On April 1, 2014, Arrow and BluMont

amalgamated, continuing under the name “Arrow Capital Management Inc.”. At a special meeting of shareholders on

November 27, 2013, the shareholders of the Portfolios approved a change of manager from BluMont to Arrow.

Arrow is the portfolio advisor “Portfolio Advisor” of the Canadian Focus Portfolio. Integrated Managed Futures Corp.

(“IMFC”) is the investment sub-advisor “Investment Sub-Advisor” of the Diversified Portfolio.

(II) Share Exchange

On June 12, 2013, all outstanding Series R Shares of the Canadian Focus Portfolio were exchanged for Series A Shares of

the Canadian Focus Portfolio. The elimination of Series R Shares allowed for increased economies of scale for operating

expenses and eliminated the administrative and regulatory costs of operating two separate series that are essentially

identical. The Series A Shares and Series R Shares are identical in terms of investment returns, management fees and

operating expense rates and the exchange occurred on a tax deferred basis.

Details relating to the Canadian Focus Portfolio share exchange are as follows:

Net Assets acquired by Series A Shares $3,936,364

Series A Shares issued 259,196

Series R Shares redeemed 309,738

Exchange Ratio 0.8368

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Basis of Presentation and Adoption of IFRS

These interim financial statements have been prepared in compliance with International Financial Reporting Standards

(“IFRS”) applicable to the preparation of interim financial statements, including IAS 34 and IFRS 1. The Portfolios adopted

this basis of accounting in 2014 as required by Canadian securities legislation and the Canadian Accounting Standards

Board. Previously, the Portfolios prepared their financial statements in accordance with Canadian generally accepted

accounting principles as defined in Part V of the CPA Handbook ("Canadian GAAP"). The Portfolios have consistently

applied the accounting policies used in the preparation of their opening IFRS statement of financial position at January 1,

2013 and throughout all periods presented, as if these policies had always been in effect. The financial statements have

been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial

liabilities (including derivative financial instruments) at fair value through profit or loss.

Note 8 discloses the impact of the transition to IFRS on the Portfolios’ reported financial position, financial performance

and cash flows, including the nature and effect of significant changes in accounting policies from those used in the

Portfolios' financial statements for the year ended December 31, 2013 prepared under Canadian GAAP.

30

The policies applied in these interim financial statements are based on IFRS issued and outstanding as of August 25, 2014,

which is the date on which the interim financial statements were authorized for issue by the Manager. Any subsequent

changes to IFRS that are given effect in the Portfolio’s annual financial statements for the year ending December 31, 2014

could result in restatement of these interim financial statements, including the transition adjustments recognized on

transition to IFRS.

b) Financial Instruments

The Portfolios recognize financial instruments at fair value upon initial recognition, plus transaction costs in the case of

financial instruments not measured at fair value through profit and loss (“FVTPL”). Regular way purchases and sales of

financial assets are recognized at their trade date. The Portfolios’ long investment positions are designated at FVTPL. The

Portfolios’ short investment positions, futures contracts and options are classified as held for trading (“HFT”) and are

measured at FVTPL. The Portfolios’ obligation for net assets attributable to holders of redeemable shares is presented at

the redemption amount. All other financial assets and liabilities are measured at amortized cost. Under this method,

financial assets and liabilities reflect the amount required to be received or paid, discounted, when appropriate, at the

contract’s effective interest rate. The Portfolios’ accounting policies for measuring the fair value of their investments and

derivatives are substantially similar to those used in measuring its net asset value ("NAV") for transactions with

shareholders. There were no differences between the net asset value attributable to holders of redeemable shares used

for reporting purposes under IFRS and that used for transactions with shareholders.

Realized gains and losses on sale of investments and unrealized appreciation or depreciation in investments are

determined on an average cost basis. Realized gains and losses on securities sold short and unrealized appreciation or

depreciation on securities sold short are calculated with reference to the average proceeds of the related securities.

Average cost does not include amortization of premiums or discounts on fixed income securities.

Interest for distribution purposes shown on the statements of comprehensive income represents the coupon interest

received by a Portfolio accounted for on an accrual basis.

Dividend income and expense is recognized in the statement of comprehensive income on the ex-dividend date.

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a

legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize

the asset and settle the liability simultaneously. In the normal course of business, the Portfolios enter into various master

netting agreements or similar agreements that do not meet the criteria for offsetting in the statement of financial position

but still allow for the related amounts to be set off in certain circumstances, such as bankruptcy or termination of the

contracts.

c) Financial Instruments - Fair Value Measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between

market participants at the measurement date. The fair value of financial assets and liabilities traded in active markets is

based on quoted market prices at the close of trading on the reporting date. The Portfolio uses the last traded market

price for securities where the last traded price falls within the bid-ask spread. In circumstances where the last traded price

is not within the bid-ask spread, the Manager determines the point within the bid-ask spread that is most representative

of fair value based on the specific facts and circumstances. The fair value of bonds is determined using mid-market pricing

derived from bid and ask prices provided by independent security pricing services or recognized investment dealers. The

fair value of futures contracts is based on the settlement price assigned by the exchange. Gains and losses arising from

changes in the fair value of financial assets or liabilities are presented in the statement of comprehensive income. The

Portfolios' policy is to recognize transfers into and out of the fair value hierarchy levels as of the date of the event or

change in circumstances giving rise to the transfer.

The fair value of financial assets and liabilities that are not traded in an active market is determined using valuation

techniques. The Portfolios may use a variety of methods and make assumptions that are based on market conditions

existing at each reporting date. Valuation techniques include the use of comparable recent arm’s length transactions,

reference to other instruments that are substantially the same and other commonly used methods by market participants

which make the maximum use of observable inputs.

31

d) Impairment of Financial Assets

At each reporting date, each Portfolio assesses whether there is objective evidence that a financial asset at amortized cost

is impaired. If such evidence exists, the Portfolio recognizes an impairment loss as the difference between the amortized

cost of the financial asset and the present value of future cash flows discounted using the assets original effective interest

rate. Impairment losses on financial assets at amortized cost are reversed in subsequent periods if the amount of the loss

decreases and the decrease can be related objectively to an event occurring after the impairment was recognized.

e) Foreign Currency Translation

The Portfolios’ functional and presentation currency is the Canadian dollar.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates

that transactions occur. Foreign currency assets and liabilities denominated in a foreign currency are translated into the

functional currency using the exchange rate prevailing at the measurement date. Foreign exchange gains and losses

relating to cash are presented as ‘Gain (loss) on foreign currency’ and those relating to other financial assets and liabilities

are presented within ‘Net realized gain (loss) on investments and derivatives’ and ‘Net change in unrealized appreciation

(depreciation) in value of investments and derivatives’ in the statement of comprehensive income.

f) Cash

Cash is comprised of deposits with financial institutions.

g) Margin Deposit

Cash collateral provided by each Portfolio is identified in that Portfolio’s statement of financial position as ‘Margin deposit’.

h) Forward Currency Contracts

Each Portfolio may enter into forward currency contracts for purposes of minimizing currency exposure or to establish an

exposure to a particular currency. The value of forward currency contracts entered into by a Portfolio is recorded as the

difference between the contract rate and the current forward rates at the measurement date, applied to the contract's

notional amount and adjusted for counterparty risk. The change in the fair value of forward currency contracts is included

in ‘Net change in unrealized appreciation (depreciation) in value of investments and derivatives’ in the statement of

comprehensive income. Upon closing of a contract, the gain or loss is included in ‘Net realized gain (loss) on investments

and derivatives’ in the statement of comprehensive income.

i) Futures Contracts

Futures contracts are contractual obligations to buy or sell financial instruments or commodities on a future date at a

specified price established in an organized market. Subsequent to initial recognition, changes in fair value are presented

in ‘Net change in unrealized appreciation (depreciation) in value of futures’ in the statement of comprehensive income.

When futures contracts are closed out, the gain or loss is included in ‘Net realized gain (loss) on futures’ in the statement of

comprehensive income.

j) Commissions and Other Portfolio Transaction Costs

Commissions and other portfolio transaction costs are incremental costs that are directly attributable to the acquisition or

disposal of an investment, which include fees and commissions paid to agents, advisors, brokers and dealers. Such costs

are expensed when incurred.

k) Income and Expense Allocation

The net assets of each series of each Portfolio are computed by calculating the value of that series’ proportionate share of

that Portfolio’s assets less that series’ proportionate share of that Portfolio’s common liabilities less series specific liabilities,

if any. Expenses directly attributable to a series are charged to that series. Other income, expenses and gains/losses are

allocated based on a reasonable allocation methodology which will include allocations based on the assets of the

Portfolios or the number of shareholders in the Portfolios or other methodology the Manager determines is fair.

32

l) Increase (Decrease) in Net Assets Attributable to Holders of Redeemable Shares per Share

The increase (decrease) in net assets attributable to holders of redeemable shares per share is calculated by dividing the

increase (decrease) in net assets attributable to the class divided by the weighted average number of shares outstanding

in that class during the period. Refer to Note 7 for the calculation.

m) Taxation

Each Portfolio is a class of shares of the Corporation. Income, expenses and capital gains and losses of each Portfolio are

consolidated, as a single entity, in determining the Corporation’s taxable income and amount of taxes payable as a whole.

Any taxes payable or recoverable by the Corporation are allocated to the Portfolios and their various series’.

The Corporation qualifies as a mutual fund corporation under the Income Tax Act (Canada) (the “Tax Act”). The general

income tax rules associated with a public corporation apply to a mutual fund corporation with the exception that taxes

payable on net realized capital gains are refundable when its shares are redeemed or when it pays capital gains dividends

out of its capital gains dividend account to its shareholders, such that in substance the Corporation is not taxable on

capital gains. Similarly, the Corporation is subject to Part IV tax on dividends received from Canadian corporations,

however, they are refundable once paid to shareholders. As a result, the Corporation does not record income taxes related

to capital gains and dividends from Canadian corporations.

Interest and foreign income are taxed at normal corporate rates applicable to mutual fund corporations and can be

reduced by permitted deductions for tax purposes. All of the Corporation’s expenses including management fees and

operating expenses will be taken into account in determining its overall tax liability, if any.

As of December 31, 2013, the Corporation has accumulated the following non-capital losses available for utilization

against net income for tax purposes in future years and capital losses available for utilization against capital gains. The tax

benefit of the non-capital losses has not been reflected in the financial statements.

Non-Capital Loss* Capital Loss**

$9,866,690 $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.

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The preparation of financial statements requires management to use judgment in applying its accounting policies and to make

estimates and assumptions about the future. The following discusses the most significant accounting judgments and estimates that

the Manager has made in preparing the financial statements:

Use of Estimates

Fair Value measurement of derivatives and securities not quoted in an active market

The Portfolios may hold financial instruments that are not quoted in active markets, including derivatives. Fair value of such

instruments is determined using valuation techniques and may be determined using reputable pricing sources (such as pricing

agencies) or indicative prices from market makers. Broker quotes as obtained from the pricing sources may be indicative and not

executable or binding. Where no market data is available, a Portfolio may value positions using its own models, which are usually

based on valuation methods and techniques generally recognized as standard within the industry. The models used to determine

fair values are validated and periodically reviewed by experienced personnel of the Manager, independent of the party that created

them.

Models use observable data, to the extent practicable. However, areas such as credit risk (both own and counterparty), volatilities

and correlations require the Manager to make estimates. Changes in assumptions about these factors could affect the reported fair

values of financial instruments. The Portfolios consider observable data to be market data that is readily available, regularly

distributed and updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in

the relevant market. Refer to Note 5 for further information about the fair value measurement of the Portfolio's financial

instruments.

33

Use of Judgments

Classification and Measurement of Investments and Application of the Fair Value Option

In classifying and measuring financial instruments held by the Portfolios, the Manager is required to make significant judgments

about whether or not the business of the Portfolios is to invest on a total return basis for the purpose of applying the fair value

option for financial assets under IAS 39, Financial Instruments - Recognition and Measurement (IAS 39). The most significant

judgments made include the determination that certain investments are held-for-trading and that the fair value option can be

applied to those which are not.

4. FINANCIAL INSTRUMENTS

In the normal course of business, each Portfolio is exposed to a variety of financial risks: credit risk, liquidity risk and market risk

(including interest rate risk, other price risk and currency risk). Please refer to Discussion of Financial Instruments (an addendum to

Note 4 on pages 13 and 25 of this report) for each Portfolio’s specific risk disclosure.

(I) Credit Risk

The Portfolios may be exposed to credit risk, which is the risk that one party to a financial instrument will cause a financial loss for

the other party by failing to discharge an obligation. Where a Portfolio invests in debt instruments and derivatives, this represents

the main concentration of credit risk.

All transactions in listed securities are settled or paid for upon delivery using approved brokers. The credit risk related to the

associated receivables is considered limited, 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. However, there are risks involved in dealing with custodians or prime brokers who settle trades and in rare

circumstances, the securities and other assets deposited with the custodian or broker may be exposed to credit risk with regard to

such parties. In addition, there may be practical problems or time delays associated with enforcing a Portfolio's rights to its assets in

the case of an insolvency of any such party. The Portfolios are also exposed to counterparty credit risk on cash, margin deposits and

other receivable balances.

(II) Liquidity Risk

Liquidity risk is the risk that a Portfolio will encounter difficulty in meeting obligations associated with financial liabilities. Each

Portfolio is exposed to cash redemptions and as such, retains sufficient cash to fund anticipated redemptions. The Portfolios aim to

retain sufficient cash to maintain adequate liquidity including coverage of obligations related to short sales and all current liabilities.

In addition, each Portfolio generally invests in securities that are highly liquid and where there is an observable market price that is

quoted by multiple dealers.

(III) Market Risk

The Portfolios’ investments are subject to market risk which is the risk that the fair value or future cash flows of a financial instrument

will fluctuate because of changes in market prices.

A. Currency Risk

The Portfolios invest in financial instruments and enter into transactions that are denominated in currencies other than

the Canadian dollar. Consequently, the Portfolios are exposed to currency risk, which is the risk that the fair value or future

cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Portfolios may enter

into foreign exchange currency contracts to reduce their foreign currency exposure.

B. Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of

changes in market interest rates. A Portfolio may hold securities with fixed interest rates that expose that Portfolio to fair

value interest rate risk.

34

C. Price Risk

The Portfolios are exposed to price risk, which is the risk that the fair value or future cash flows of a financial instrument

will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk). The

Portfolios’ investments are subject to the risk of changes in the prices of equity securities, bonds and derivatives.

(IV) Concentration Risk



(V) Capital Risk Management

Shares issued and outstanding are considered to be the capital of the Portfolios. The Portfolios do not have any specific capital

requirements on the subscription and redemption of shares, other than certain minimum subscription requirements. Shareholders

are entitled to require payment of the net asset value per share of a Portfolio for all or any of the shares of such shareholder by

giving written notice to the Manager. The written notice is irrevocable and must be received no later than 4:00 p.m., EST, on the

valuation day upon which the shares are to be redeemed (a "Redemption Date"). The redeeming shareholder will receive payment in

respect of any shares surrendered for redemption on or before the 3rd business day immediately following a Redemption Date,

subject to the Manager’s right to suspend redemptions in certain circumstances.

(VI) Fair Value Measurement

Each Portfolio classifies fair value measurements within a hierarchy which gives the highest priority to unadjusted quoted prices in

active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of

the fair value hierarchy are:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that a Portfolio can access at the

measurement date,

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either

directly or indirectly; and

Level 3: Inputs that are unobservable for the asset or liability.

If inputs of different levels are used to measure an asset's or liability's fair value, the classification within the hierarchy is based on the

lowest level input that is significant to the fair value measurement.

5. REDEEMABLE SHARES

During the periods ended June 30, 2014 and, 2013, the number of shares issued, redeemed and outstanding was as follows:

Canadian Focus Portfolio – for the period ended June 30, 2014

Redeemable shares

outstanding at beginning of the period

Redeemable shares issued

Redeemable shares redeemed

Redeemable shares issued and outstanding

at end of the period

Series A 2,946,850 156,598 675,376 2,428,072 Series F 937,084 511,449 88,026 1,360,507 Series L 333,295 63,079 10,498 385,876


Redeemable shares outstanding at

beginning of the period


Redeemable Shares issued upon Share

Exchange

Redeemable Shares redeemed upon Share

Exchange


Redeemable shares issued and

outstanding at end of the period

Series A 3,191,673 122,497 259,196 - (432,768) 2,140,598 Series F 837,836 139,219 - - (153,867) 823,188 Series L 209,212 70,888 - - (9,165) 270,935 Series R 367,742 - - (309,738) (58,004) -

35

Diversified Portfolio – for the period ended June 30, 2014

Redeemable shares






Series A 1,196,227 31,052 (517,724) 709,555 Series F 1,362,244 674,573 (358,600) 1,678,217 Series I 498,211 174,720 (6,717) 666,214 Series L 138,538 11,078 (6,101) 143,515


Redeemable shares






Series A 2,084,878 219,262 (696,901) 1,607,239 Series F 1,522,164 386,406 (397,828) 1,510,742 Series I 406,869 33,572 (2,963) 437,478 Series L 140,658 5,649 (6,728) 139,579

6. RELATED PARTY TRANSACTIONS

The Manager is responsible for making decisions relating to the investment of the Portfolios’ assets and providing key management

personnel.

The Arrow Diversified Fund owns 41,748 Series F Shares of the Diversified Portfolio, with a market value of $450,878. This represents 1.4% of

net assets of the Diversified Portfolio.

As of June 30, 2014, the number of shares owned by Arrow for each Portfolio is summarized as follows:

Portfolio Number of Shares Amount % of Net Assets

Canadian Focus Portfolio – Series A 529 $9,956 0.0%Canadian Focus Portfolio – Series F 4,768 $94,740 0.0%Diversified Portfolio – Series A 500 $5,115 0.0%Diversified Portfolio – Series F 4,500 $48,600 0.0%


Portfolio Number of Shares Amount % of Net Assets

Canadian Focus Portfolio – Series A 522 $8,003 0.0%Canadian Focus Portfolio – Series F 4,699 $75,203 0.1%Diversified Portfolio – Series A 500 $5,361 0.0%Diversified Portfolio – Series F 4,500 $50,417 0.1%

Management Fee and Performance Bonus

The management fee paid to the Manager by the Canadian Focus Portfolio is 1.65% per annum on Series A, 0.65% per annum on

Series F Shares and 1.95% on Series L Shares. The management fee paid to the Manager by the Diversified Portfolio is 2.00% per

annum on Series A Shares, 1.00% per annum on Series F Shares and 2.30% on Series L Shares.

No portion of the management fee charged to a Portfolio is borne by Series I Shares of the Portfolios. A holder of Series I Shares of a

Portfolio pays a negotiated management fee directly to the Manager.

Each Portfolio will pay to the Manager in respect of each fiscal year of the Portfolio ended December 31 a performance bonus per

Share (the “Performance Bonus”) equal to 20% of the amount by which the Adjusted Net Asset Value per Share at the end of the

fiscal year exceeds the highest year end Adjusted Net Asset Value per Share previously achieved. For these purposes, “Adjusted Net

Asset Value per Share” of any series of shares of a Portfolio means the Net Asset Value per share of that series at the end of a fiscal

year without giving effect to the accrual of any Performance Bonus, plus the aggregate amount of all distributions previously

declared on a per Share basis in respect of such series of Shares. The Performance Bonus for a Portfolio is calculated and accrued

36

each day the Net Asset Value of the Portfolio is calculated, but is only payable at the end of the fiscal year of the Portfolio based on

the actual annual performance of the Portfolio.

Notwithstanding the foregoing, no Performance Bonus is payable with respect to any fiscal year of a Portfolio unless the Adjusted

Net Asset Value per Share at the end of such fiscal year exceeds the Net Asset Value per share at the end of the preceding year (or on

the date the Shares are first issued), plus the aggregate amount of all distributions previously declared on a per share basis, by a

minimum of 6%.

The Performance Bonus is estimated and accrued each Valuation Date, calculated as at the end of each fiscal year-end of the

Portfolios and paid within 15 business days thereafter.

Each Portfolio is responsible for all operating expenses incurred by or on behalf of that Portfolio. If the Manager provides any of

these services, it shall be entitled to fees for such services not exceeding fees charged by arm’s length third parties for the provision

of similar services.

The Portfolio Advisor and Portfolio Sub-Advisor will be remunerated by the Manager out of the Management Fee and the

Performance Bonus.

Accrued management fees and performance fees (plus HST) included on the statement of financial positions are as follows:


Management Fees Performance Fees Management Fees Performance Fees Management Fees Performance Fees

Canadian Focus Portfolio $97,382 $1,581,557 $98,748 $3,445,751 $78,357 $25,966

Diversified Portfolio $34,127 - $43,592 - $55,606 -

Brokerage Commissions

Total commissions paid to dealers for the periods ended June 30, 2014 and 2013 in connection with portfolio transactions were as

follows:

June 30, 2014 June 30, 2013

Canadian Focus Portfolio $26,087 $35,733Diversified Portfolio $67,811 -

7. INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE SHARES PER SHARE

The increase (decrease) in net assets attributable to holders of redeemable shares per share for the periods ended June 30, 2014 and

2013 is calculated as follows:

June 30, 2014

Increase (decrease) in net

assets attributable to holders of redeemable shares

Weighted average shares outstanding during the period

Increase (decrease) in net assets attributable to holders of

redeemable shares per share

Canadian Focus Portfolio – Series A $4,238,590 2,810,306 $1.51 Canadian Focus Portfolio – Series F $1,998,277 1,059,579 $1.89 Canadian Focus Portfolio – Series L $395,209 357,685 $1.10 Diversified Portfolio – Series A $(756,851) 1,012,482 $(0.75) Diversified Portfolio – Series F $(944,568) 1,635,878 $(0.58) Diversified Portfolio – Series I $(239,404) 588,431 $(0.41) Diversified Portfolio – Series L $(80,592) 142,345 $(0.57)

37

June 30, 2013






Canadian Focus Portfolio – Series A 3,818,283 3,058,203 1.25 Canadian Focus Portfolio – Series F 1,067,198 829,257 1.29 Canadian Focus Portfolio – Series L 182,473 241,142 0.76 Canadian Focus Portfolio – Series R 310,953 335,241 0.93 Diversified Portfolio – Series A 1,348,723 1,859,436 0.73 Diversified Portfolio – Series F 1,223,506 1,540,852 0.79 Diversified Portfolio – Series I 322,782 423,498 0.76 Diversified Portfolio – Series L 85,977 139,912 0.62

8. TRANSITION TO IFRS

The effect of the Portfolios’ transition to IFRS is summarized in this note as follows:

Transition Elections

The only voluntary exemption adopted by the Portfolios upon transition was the ability to designate a financial asset or financial

liability at fair value through profit and loss upon transition to IFRS. All financial assets designated at FVTPL upon transition (see

Note 2) were previously carried at fair value under Canadian GAAP as required by Accounting Guideline 18, Investment Companies.

Revaluation of Investments at FVTPL

Under Canadian GAAP, the Portfolios measured the fair values of their investments in accordance with Section 3855, Financial

Instruments - Recognition and Measurement, which required the use of bid prices for long positions and ask prices for short

positions, to the extent such prices are available. Under IFRS, the Portfolios measure the fair values of their investments using the

guidance in IFRS 13, Fair Value Measurement (IFRS 13), which requires that if an asset or a liability has a bid price and an ask price,

then its fair value is to be based on a price within the bid-ask spread that is most representative of fair value. It also allows the use of

mid-market pricing or other pricing conventions that are used by market participants as a practical expedient for fair value

measurements within a bid-ask spread.

Reconciliation of Equity and Comprehensive Income as Previously Reported Under Canadian GAAP to IFRS

Canadian Focus Portfolio

Equity December 31, 2013 June 30, 2013 January 1, 2013Equity as reported under Canadian GAAP $71,771,247 $63,996,059 $63,678,256Revaluation of investments at FVTPL 151,584 284,008 164,028Net assets attributable to holders of redeemable shares $71,922,831 $64,280,067 $63,842,284

Comprehensive income For the year ended December 31, 2013

For the 6 months ended June 30, 2013

Comprehensive income as reported under Canadian GAAP $14,428,815 $5,258,927Revaluation of investments at FVTPL (12,444) 119,980Increase (decrease) in net assets attributable to holders of redeemable shares $14,416,371 $5,378,907

Diversified Portfolio

Equity December 31, 2013 June 30, 2013 January 1, 2013Equity as reported under Canadian GAAP $34,988,549 $39,976,513 $41,935,339Revaluation of investments at FVTPL (21,059) (101,071) (169,459)Net assets attributable to holders of redeemable shares $34,967,490 $39,875,442 $41,765,880

38



Comprehensive income as reported under Canadian GAAP $3,194,008 $2,912,600Revaluation of investments at FVTPL 148,400 68,388Increase (decrease) in net assets attributable to holders of redeemable shares $3,342,408 $2,980,988

Classification of redeemable shares issued by the Portfolios

Under Canadian GAAP, the Portfolios accounted for their redeemable shares as equity. The features of each Portfolio’s redeemable

shares are not identical and consequently the shares, do not meet the conditions to be classified as equity. As a result, the Portfolios

obligations for net assets attributable to holders of redeemable shares are financial liabilities under IFRS, presented at the

redemption amounts.

Statement of cash flows

Under Canadian GAAP, the Portfolios were exempt from providing a Statement of Cash Flows. IAS 1 requires that a Statement of

Cash Flows be presented as part of a complete set of financial statements. As such, the Portfolios have presented a Statement of

Cash Flows in the interim financial statements for the periods ended June 30, 2014 and June 30, 2013.

9. FUTURE ACCOUNTING CHANGES IFRS 9, Financial Instruments

The final version of IFRS 9, Financial Instruments, was issued by the International Accounting Standards Board (“IASB”) in July 2014

and will replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 introduces a model for classification and

measurement, a single, forward-looking ‘expected loss’ impairment model and a substantially reformed approach to hedge

accounting. The new single, principle based approach for determining the classification of financial assets is driven by cash flow

characteristics and the business model in which an asset is held. The new model also results in a single impairment model being

applied to all financial instruments, which will require more timely recognition of expected credit losses. It also includes changes in

respect of own credit risk in measuring liabilities elected to be measured at fair value, so that gains caused by the deterioration of an

entity’s own credit risk on such liabilities are no longer recognized in profit or loss. IFRS 9 is effective for annual periods beginning

on or after January 1, 2018, however is available for early adoption. In addition, the own credit changes can be early applied in

isolation without otherwise changing the accounting for financial instruments. The Portfolios are in the process of assessing the

impact of IFRS 9 and have not yet determined when they will adopt the new standard.

39

PORTFOLIO INFORMATION

MANAGER AND PRINCIPAL DISTRIBUTOR

Arrow Capital Management Inc.

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

CUSTODIAN/PRIME BROKERS

RBC Investor Services Trust

155 Wellington Street West, 2nd Floor

Toronto, ON M5V 3L3

BMO Nesbitt Burns

1 First Canadian Place, 6th Floor

Toronto, ON M5X 1H3

Newedge USA, LLC

550 W. Jackson Blvd., Suite 400

Chicago, IL 60661

RBC Capital Markets

500 West Madison Street, Suite 2500

Chicago, IL 60661

AUDITOR

PricewaterhouseCoopers LLP

PwC Tower

18 York Street, Suite 2600

Toronto, ON M5J 0B2

ArrowCapitalManagementInc.36TorontoStreet,Suite750,Toronto,ONM5C2C5T:416323‐04771877‐327‐6043F:416323‐3199arrow‐capital.com

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

August 25, 2014

TO THE SHAREHOLDERS OF EXEMPLAR CANADIAN FOCUS PORTFOLIO AND EXEMPLAR DIVERSIFIED PORTFOLIO (COLLECTIVELY THE “PORTFOLIOS”)

The accompanying financial statements have been prepared by Arrow Capital Management Inc. (“Arrow” or the “Manager” of the

Portfolios), and approved by the Board of Directors of the Manager. The Manager is responsible for the information and

representations contained in these financial statements.

The Manager maintains appropriate processes to ensure that reliable financial information is produced. The financial statements

have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and include certain amounts that are

based on estimates and judgments. The significant accounting policies which management believes are appropriate for the

Portfolios are described in Note 2 to the financial statements.

Prior to December 2, 2013, the manager of the Portfolios was BluMont Capital Corporation (“BluMont”). On December 2, 2013, Arrow

acquired all the outstanding shares of BluMont, resulting in a change of control of BluMont. On April 1, 2014, Arrow and BluMont

amalgamated, continuing under the name “Arrow Capital Management Inc.”. At a special meeting of shareholders on November 27,

2013, the shareholders of the Portfolios approved a change of manager from BluMont to Arrow.


James L. McGovern


Robert W. Maxwell


2

NOTICE TO SHAREHOLDERS The auditor of the Portfolios has not reviewed these interim financial statements.

The Manager of the Portfolios appoints an independent auditor to audit the Portfolios’ annual financial statements. Applicable

securities laws require that if an auditor has not reviewed the Portfolios’ interim financial statements, this must be disclosed in an

accompanying notice.

3

EXEMPLAR CANADIAN FOCUS PORTFOLIO STATEMENTS OF FINANCIAL POSITION Unaudited

Note

June 30, 2014

December 31, 2013

January 1, 2013

Assets

Current assets

Financial assets designated at fair value through profit or loss $ 72,264,213 $ 66,184,068 $ 51,062,557

Cash 6,552,370

9,472,309

12,813,474

Margin deposits 1,924,856

1,339,364

1,098,521

Subscriptions receivable 147,329

88,620

45,000

Receivable for securities sold 323,424

113,474

-

Interest receivable 26,977

29,782

57,448

Dividends receivable 73,912

105,107

152,397

Income tax receivable -

21,162

22,098

81,313,081

77,353,886

65,251,495

Liabilities

Current liabilities

Financial liabilities held for trading 719,515

1,058,358

1,044,233

Accrued liabilities

Fees and operating expenses payable 6 141,351

140,060

121,557

Performance fee payable 6 1,581,557

3,445,751

25,966

Redemptions payable 159,707

88,669

33,201

Payable for investments purchased 852,539

635,926

126,733

Dividends payable 432

4,701

2,509

Distributions payable -

57,590

55,012

3,455,101

5,431,055

1,409,211

Net assets attributable to holders of redeemable shares

Series A 45,707,091

50,885,858

45,069,711

Series F 27,031,527

16,981,360

12,333,505

Series L 5,119,362

4,055,613

2,090,940

Series R -

-

4,348,128

$ 77,857,980 $ 71,922,831 $ 63,842,284

Number of shares outstanding 5

Series A 2,428,072

2,946,850

3,191,673

Series F 1,360,507

937,084

837,836

Series L 385,876

333,295

209,212

Series R -

-

367,742


Series A $ 18.82 $ 17.27 $ 14.12

Series F $ 19.87 $ 18.12 $ 14.72

Series L $ 13.27 $ 12.17 $ 9.99

Series R $ - $ - $ 11.82



James L. McGovern


Robert W. Maxwell



4

EXEMPLAR CANADIAN FOCUS PORTFOLIO STATEMENTS OF COMPREHENSIVE INCOME For the periods ended June 30, Unaudited

Note 2014 2013


Interest for distribution purposes $ 96,699 $ 180,920

Dividend income 547,515

652,835

Dividend expense on short sales (4,616)

(10,468)

Net realized gain (loss) on investments and derivatives 2,969,567

(412,414)

Net change in unrealized appreciation in value of investments and derivatives 5,564,066

6,566,291

Net gains on investments and derivatives 9,173,231

6,977,164

Other income items Gain (loss) on foreign currency

(74,028)

48,848 Total income (net)

9,099,203

7,026,012

Expenses

Management fees 6

521,106

457,244 Performance fees 6

1,428,851

777,811

Securityholder reporting costs

222,007

200,652 Audit fees

8,086

12,510

Independent review committee fees

3,705

9,642 Legal fees

8,498

183

Custodial fees

4,500

1,842 Income tax expense

22,008

-

Withholding tax

3,103

2,568 Harmonized sales tax

233,547

164,262

Commissions and other portfolio transaction costs 6

26,087

35,733 Total expense before manager absorption 2,481,498 1,662,447 Less: expenses absorbed by manager

33,553

15,342

Total expenses after manager absorption 2,467,127 1,647,105 Increase in net assets attributable to holders of redeemable shares

6,632,076

5,378,907

Increase in net assets attributable to holders of redeemable shares 7

Series A 4,238,590

3,818,283

Series F 1,998,277

1,067,198

Series L 395,209

182,473

Series R -

310,953 $ 6,632,076 $ 5,378,907

Increase in net assets attributable to holders of redeemable shares per share 7

Series A $ 1.51 $ 1.25

Series F $ 1.89 $ 1.29

Series L $ 1.10 $ 0.76

Series R $ - $ 0.93


5

EXEMPLAR CANADIAN FOCUS PORTFOLIO STATEMENTS OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE SHARES For the periods ended June 30, Unaudited

Note

2014

2013

Net assets attributable to holders of redeemable shares at beginning of period

Series A $ 50,885,858 $ 45,069,711 Series F 16,981,360

12,333,505

Series L 4,055,613

2,090,940 Series R -

4,348,128

71,922,831

63,842,284

Increase in net assets attributable to holders of redeemable shares

Series A 4,238,590

3,818,283

Series F 1,998,277

1,067,198 Series L 395,209

182,473

Series R -

310,953 6,632,076

5,378,907

Redeemable share transactions

Proceeds from redeemable shares issued

Series A 2,794,811

1,834,418

Series F 9,717,241

2,161,125 Series L 798,173

750,464

13,310,225

4,746,007 Shares issued (redeemed) upon share exchange 1(II)

Series A -

3,936,364 Series R -

(3,936,364)

-

- Redemption of redeemable shares

Series A (12,212,168)

(6,480,368) Series F (1,665,351)

(2,388,076)

Series L (129,633)

(95,970) Series R -

(722,717)

(14,007,152)

(9,687,131) Net decrease from redeemable share transactions (696,927)

(4,941,124)

Net increase in net assets attributable to holders of redeemable shares 5,935,149

437,783

Net assets attributable to holders of redeemable shares at end of period

Series A 45,707,091

48,178,408

Series F 27,031,527

13,173,752 Series L 5,119,362

2,927,907

$ 77,857,980 $ 64,280,067


6

EXEMPLAR CANADIAN FOCUS PORTFOLIO STATEMENTS OF CASH FLOWS For the periods ended June 30, Unaudited

2014

2013

Cash flows from (used in) operating activities

Increase in net assets attributable to holders of redeemable shares $ 6,632,076 $ 5,378,907 Adjustments for:

(Gain) loss on foreign currency 74,028

(48,848)

Net realized (gain) loss on investments and derivatives (2,969,567)

412,414

Net change in unrealized appreciation in value of investments and derivatives (5,564,066)

(6,566,291)

(Increase) decrease in margin deposits (585,492)

596,123

(Increase) decrease in interest receivable 2,805

(19,268)

Decrease in dividends receivable 31,195

2,388

Decrease in income tax receivable 21,162

-

(Decrease) in dividends payable (4,269)

(1,444)

Increase (decrease) in fees and operating expenses payable 1,291

(8,625)

Increase (decrease) in performance fees payable (1,864,194)

840,957

Purchase of investments (16,854,247)

(23,291,999)

Proceeds from sales of investments 18,975,555

28,869,166

Net cash from (used in) operating activities (2,103,723)

6,163,480

Cash flows from (used in) financing activities Distributions to holders of redeemable shares, net of reinvested distributions (57,590)

(55,012) Proceeds from redeemable shares issued 13,251,516

8,630,841

Amount paid on redemption of redeemable shares (13,936,114)

(13,395,163) Net cash from (used in) financing activities (742,188) (4,819,334)

Net increase (decrease) in cash (2,845,911)

1,344,146

Cash, beginning of period 9,472,309

12,813,474 Gain (loss) on foreign currency (74,028)

48,848

Cash, end of period $ 6,552,370 $ 14,206,468

Interest received* $ 99,504 $ 161,652

Dividends received, net of withholding tax* $ 575,607 $ 652,655 Dividends paid* $ (8,885) $ (11,912)



7


Number of Shares/Par Value

Cost

Carrying Value

LONG POSITIONS Canadian Equities

Energy

AltaGas Limited 4,300 $ 205,355 $ 211,044 Bankers Petroleum Limited 30,700

181,833

209,374

Bellatrix Exploration Limited 84,500

372,483

782,470 Black Diamond Group Limited 34,100

441,665

1,170,312

Canacol Energy Limited 202,200

1,597,064

1,405,290 Canadian Energy Services & Technology Corporation 5,800

178,065

193,836

Canadian Natural Resources Limited 10,600

482,359

519,718 DeeThree Exploration Limited 23,500

256,680

267,900

Enterprise Group Inc. 243,300

243,875

218,970 Gibson Energy Inc. 58,000

1,117,368

1,974,320

Keyera Corporation 29,900

1,291,160

2,350,439 Pembina Pipeline Corporation 6,100

238,952

280,051

Prairiesky Royalty Limited 3,500

110,265

135,800 RMP Energy Inc. 99,200

558,261

936,448

Raging River Exploration Inc. 13,600

123,686

147,560 Spartan Energy Corporation 25,900

105,195

104,636

Tamarack Valley Energy Limited 1,900

11,066

12,236 Tourmaline Oil Corporation 8,400

362,805

472,584

7,878,137

11,392,988

Basic Materials

B2Gold Corporation 20,000

63,399

62,200 CCL Industries Inc. 'B' 12,200

932,888

1,253,550

Canam Group Inc. 29,000

415,339

388,600 Franco-Nevada Corporation 1,600

89,642

98,000

Intertape Polymer Group Inc. 500

6,264

5,920 Lundin Mining Corporation 29,200

167,915

171,404

Osisko Gold Royalties LT-W/I 10,800

159,970

173,340 Primero Mining Corporation 10,800

81,357

92,340

Stella-Jones Inc. 62,400

782,138

1,828,320

2,698,912

4,073,674

Industrials

Badger Daylighting Inc. 114,600

953,579

4,028,190 Boyd Group Income Fund 118,800

1,371,971

5,193,936

Canadian National Railway Company 29,800

1,075,305

2,068,120 Dirtt Environmental Solutions Limited 112,000

329,753

396,480

Newalta Corporation 1,200

23,852

25,716 K-Bro Linen Inc. 8,500

288,579

331,585

Stantec Inc. 11,500

404,341

759,920 WSP Global Inc. 6,200

210,000

234,298

4,657,380

13,038,245

8



Cost

Carrying Value


Amaya Gaming Group Inc. 91,400 $ 731,798 $ 2,112,254 AutoCanada Inc. 44,200

1,085,811

3,493,126

BRP Inc. Subordinate Voting Shares 17,700

505,365

465,510 Canadian Tire Corporation Limited 'A' 10,700

901,463

1,095,359

Cineplex Inc. 18,500

627,411

766,825 DHX Media Limited 559,600

1,288,143

3,754,916

Gildan Activewear Inc. 10,500

483,710

660,135 Linamar Corporation 7,700

359,363

484,715

Magna International Inc. 12,400

850,130

1,424,264 Performance Sports Group Ltd 25,500

283,363

468,180

Sirius XM Canada Holdings Inc. 81,900

510,821

573,300 The Intertain Group Limited 4,000

26,120

27,320

The Intertain Group Limited, Subscription Receipts 90,000

630,000

630,000

8,283,498

15,955,904

Consumer Staples

Alimentation Couche-Tard Inc. 'B' 85,800

1,410,289

2,507,934 Clearwater Seafoods Income Fund 14,100

118,218

122,952

High Liner Foods Inc. 28,700

634,863

697,410 Loblaw Companies Limited 3,200

150,862

152,384

The Jean Coutu Group (PJC) Inc. 'A' 13,900

259,817

314,974

2,574,049

3,795,654

Health Care

Knight Therapeutics Inc. 60,000

236,589

324,000 Valeant Pharmaceuticals International Inc. 23,900

1,147,395

3,225,066

1,383,984

3,549,066

Financials

Altus Group Limited 6,600

123,610

151,404 CI Financial Corporation 51,300

1,340,890

1,798,065

Callidus Capital Corporation 15,000

249,389

268,500 Carfinco Financial Group Inc. 51,200

503,292

439,296

Counsel Corporation 45,400

117,060

88,530 Element Financial Corporation 56,100

656,981

756,228

Royal Bank of Canada 6,900

494,174

526,332 Tricon Capital Group Inc. 55,300

410,238

435,211

3,895,634

4,463,566


Avigilon Corporation 55,100

1,243,164

1,310,829 BSM Technologies Inc. 80,300

234,702

192,720

CGI Group Inc. 'A' 16,400

590,076

620,248 Constellation Software Inc. 4,000

632,457

1,087,840

MacDonald, Dettwiler & Associates Limited 20,200

1,157,354

1,760,026 Open Text Corporation 15,800

527,996

808,960

9



Cost

Carrying Value

Information Technology - continued

Sandvine Corporation 79,900 $ 257,499 $ 287,640 The Descartes Systems Group Inc. 80,000

492,675

1,223,200

5,135,923

7,291,463


BCE Inc. 16,400

479,944

793,760 Total Canadian Equities - Long

36,987,461

64,354,320

Canadian Bonds

Epsilon Energy Limited, 7.750%, March 31, 2017 1,400,000

1,400,000

1,540,000 Boyd Group Income Fund, 5.750%, Convertible Debenture, December 31, 2017 250,000

250,000

472,500

Total Canadian Bonds

1,650,000

2,012,500

U.S. Equities


CBS Corporation 'B' 800

55,123

53,070 Priceline Group Incorporated 300

392,869

385,281

Starbucks Corporation 300

25,086

24,782 The Goodyear Tire & Rubber Company 9,200

257,446

272,841

Viacom Inc. 'B' 3,300

269,882

305,544

1,000,406

1,041,518

Consumer Staples

CVS Caremark Corporation 1,800

106,280

144,831 Clorox Company 2,300

224,186

224,421

Colgate-Palmolive Company 224,186

115,092

131,015 Mondelez International Inc. 224,421

233,944

345,296

Pinnacle Foods Inc 200

6,771

7,025

686,273

852,588

Industrials

Honeywell International Inc. 1,900

197,143

188,535 Textron Inc. 2,800

80,832

114,455

United Parcel Service Inc. "B" 100

10,948

10,960

288,923

313,950

Health Care

AbbVie Inc. 200

12,077

12,051 Allergan Inc. 1,500

264,106

270,977

Gilead Sciences Inc. 6,000

446,329

531,066 WellPoint Inc. 1,400

136,832

160,831

859,344

974,925

10



Cost

Carrying Value

Financials

Prudential Financial Inc. 2,800 $ 234,450 $ 265,347


T-Mobile US Inc. 400

14,513

14,356 Verizon Communications Inc. 200

10,613

10,447

25,126

24,803


Blackhawk Network Holdings Inc. Class B 600

15,588

17,198 Google Inc. Class A 1,200

707,941

749,001

Yahoo! Inc. 3,900

150,839

146,262

874,368

912,461

Index Equivalents

iShares US Fundamental Index ETF 4,500

104,482

121,185 Total U.S. Equities

4,073,372

4,506,777

Global Equities

British Virgin Islands

Michael Kors Holdings Limited 4,300

339,633

406,947

Ireland

Jazz Pharmaceuticals PLC 200

30,864

31,388

Netherlands

LyondellBasell Industries NV 'A' 6,800

540,150

708,878

Switzerland

Tyco International Limited 5,000

186,180

243,403 Total Global Equities - Long

1,096,827

1,390,616

Total Long Positions Including Transaction Costs

43,807,660

72,264,213 Transaction Costs

(23,006)

-

Total Long Positions Before Transaction Costs

43,784,654

72,264,213

SHORT POSITIONS Canadian Equities

Energy

Trican Well Service Limited (600)

(8,767)

(10,338)

11



Cost

Carrying Value

Basic Materials

Fortress Paper Limited (18,000) $ (134,157) $ (56,160) Total Canadian Equities - Short

(142,924)

(66,498)

U.S. Equities

Index Equivalents

PowerShares QQQ Trust Series 1 (Nasdaq 100) (1,200)

(112,891)

(120,305) iShares Russell 2000 ETF (4,200)

(515,252)

(532,712)

Total U.S. Equities - Short

(628,143)

(653,017) Total Short Positions Including Transaction Costs

(771,067)

(719,515)

Transaction Costs

(476)

- Total Short Positions Before Transaction Costs

(771,543)

(719,515)

TOTAL INVESTMENT PORTFOLIO

$ 43,013,111 $ 71,544,698 The accompanying notes are an integral part of these financial statements.

12

EXEMPLAR CANADIAN FOCUS PORTFOLIO DISCUSSION OF NOTE 4: FINANCIAL INSTRUMENTS JUNE 30, 2014 UNAUDITED

The investment objective of the Exemplar Canadian Focus Portfolio (the “Portfolio”) is to achieve superior capital appreciation over

both short and long term horizons primarily through the selection and management of a concentrated group of long and short

positions in Canadian equity securities and equity derivative securities.

The Portfolio’s overall risk management program seeks to maximize the returns derived for the level of risk to which the Portfolio is



maximum loss on equities and debt sold short can be unlimited and the maximum loss on forward currency contracts is the notional

contract value of those positions.

The management of these risks is carried out by the Manager and Portfolio Advisor in accordance with Portfolio’s prospectus.


the potential returns the Portfolio can achieve. The Portfolio Advisor manages these exposures on a daily basis in accordance with

investment restrictions that have been established by the Portfolio to manage the overall potential exposure. The Portfolio will

generally not use leverage in excess of 20% of its Net Asset Value.



CREDIT RISK

The analysis below summarizes the credit quality of the Portfolio's debt portfolio at June 30, 2014, December 31, 2013 and January 1, 2013.

Percentage of total debt securities

Credit Rating* As at June 30, 2014 As at December 31, 2013 As at January 1, 2013 Not Rated 100.0% 100.0% 100.0% Total 100.0% 100.0% 100.0%

* Credit ratings are obtained from Standard & Poor’s, Moody’s and/or Dominion Bond Rating Service. Where multiple ratings were obtained for a security, the lowest rating has been used.

LIQUIDITY RISK



MARKET RISK

The following include sensitivity analyses that show how the net assets attributable to holders of redeemable shares 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.

A. CURRENCY RISK

The tables below indicate the Portfolio’s exposure to USD as at June 30, 2014, December 31, 2013 and January 1, 2013, in Canadian

dollar terms. The tables also illustrate the potential impact on the net assets attributable to holders of redeemable shares if the

Canadian dollar had strengthened or weakened by 10% in relation to USD, with all other variables held constant. Non-monetary

assets are comprised of equity positions. Monetary assets include cash, fixed income securities and other current receivables and

payables.

13

June 30, 2014 Exposure Impact on net assets attributable to holders of redeemable shares

Currency Monetary Non-Monetary Total Monetary Non-Monetary Total United States Dollar - Long $2,771,069 $5,659,119 $8,430,188 $277,107 $565,912 $843,019 United States Dollar - Short - (653,017) (653,017) (65,302) (65,302) Total $2,771,069 $5,006,102 $7,777,171 $277,107 $500,610 $777,717 % of net assets attributable to holders of redeemable shares 3.6% 6.6% 10.2% 0.3% 0.7% 1.0%

December 31, 2013 Exposure Impact on net assets attributable to holders of redeemable shares

Currency Monetary Non-Monetary Total Monetary Non-Monetary Total United States Dollar - Long $475,200 $7,077,622 $7,552,822 $47,520 $707,762 $748,886 United States Dollar - Short - (63,963) (63,963) - (6,396) (6,396) Total $475,200 $7,013,659 $7,488,859 $47,520 $701,366 $748,886 % of net assets attributable to holders of redeemable shares 0.7% 9.8% 10.5% 0.1% 1.0% 1.1%

January 1, 2013 Exposure Impact on net assets attributable to holders of redeemable shares

Currency Monetary Non-Monetary Total Monetary Non-Monetary Total United States Dollar - Long $2,041,372 $3,044,536 $5,085,908 $204,137 $304,454 $508,591 United States Dollar - Short - (155,551) (155,551) - (15,555) (15,555) Total $2,041,372 $2,888,985 $4,930,357 $204,137 $288,899 $493,036 % of net assets attributable to holders of redeemable shares 3.2% 4.5% 7.7% 0.3% 0.5% 0.8%


The table below summarizes the Portfolio's exposure to interest rate risk as at June 30, 2014, December 31, 2013 and January 1,

2013. The table also illustrates the potential impact, or sensitivity, on the net assets attributable to holders of redeemable shares if

the prevailing levels of market interest rates changed by 1.0%, assuming a parallel shift in the yield curve with all other variables held

constant.

Total Exposure

Term to Maturity June 30, 2014 December 31, 2013 January 1, 2013 1-3 years $1,540,000 - - 3 -5 years 472,500 2,023,000 3,830,534 Greater than 5 years - 196,000 252,000 Total $2,012,500 $2,219,000 $4,082,534 Sensitivity: Total $ sensitivity $1,278 $2,023 $9,281 Total % sensitivity 0.0% 0.0% 0.0%

C. PRICE RISK


by the investment restrictions within the Portfolio’s prospectus, as summarized below.

The Portfolio invests predominantly in large and mid capitalization companies. The Portfolio may also invest in bonds and other

debt instruments if warranted by financial conditions. The Portfolio does not specialize in any one industry other than to

concentrate investments in those industries that offer the best opportunities for exceptional returns at each stage of the economic

and market cycle. The Portfolio may also invest in options, including put options or call options either in respect of a specific security

or in respect of a stock exchange index as a means to reduce volatility.

The Portfolio may engage in short selling of securities which the Manager believes are overvalued, especially securities of issuers

with deteriorating fundamentals and weak balance sheets. Short positions of index securities such as exchange traded funds may

also be employed for capital preservation and hedging purposes. Short selling positions will not in total exceed 40% of the Net Asset

Value of the Portfolio.

14

The Portfolio holds cash and invests in short term securities for the purpose of preserving capital and/or maintaining liquidity, based

upon the Manager’s ongoing evaluation of current and anticipated economic and market conditions. The Portfolio may also invest

in foreign securities of the same type and characteristics as described above.

The Portfolio may use derivatives for hedging and non-hedging purposes as permitted by applicable securities laws. The Portfolio

may enter into securities lending, repurchase and reverse repurchase transactions to generate additional income or as a short-term

cash management tool.

The impact on net assets of the Portfolio due to a 5% change in market prices of equity securities with all other variables held

constant, is presented in the following table.



5% Increase $3,476,610 $3,256,286 $2,500,913

5% Decrease $(3,476,610) $(3,256,286) $(2,500,913)

The Portfolio engages in short selling activities, wherein it borrows securities and sells them to third parties. Until the Portfolio covers

its short sales, it is exposed to market risk to the extent that subsequent market fluctuations may require purchasing securities sold

short at prices which may be significantly higher than the fair value reflected on the financial statements.

CONCENTRATION RISK






Long Positions Energy 14.7% 9.8% 15.9%

Basic Materials 6.1% 4.7% 8.3% Industrials 17.5% 16.8% 11.2% Consumer Discretionary 22.3% 18.3% 4.9% Consumer Staples 6.2% 6.6% 3.3% Health Care 6.0% 8.2% 5.6% Financials 6.0% 11.2% 10.5% Index Equivalents 0.2% 0.3% 0.1% Information Technology 10.6% 10.8% 5.6% Telecommunication Services 1.0% 2.3% 6.2% Utilities - - 1.9% Corporate Bonds 2.6% 3.0% 6.4%

Short Positions Energy - - (0.7)%

Basic Materials (0.1)% (0.3)% (0.2)% Industrials - - (0.5)% Consumer Discretionary - (0.1)% - Consumer Staples - - (0.2)% Financials - (0.6)% - Index Equivalents (0.8)% (0.5)% -

15


The following table illustrates the classification of the Portfolio's assets and liabilities measured at fair value within the fair value

hierarchy as at June 30, 2014, December 31, 2013 and January 1, 2013:

As at June 30, 2014 Level 1 Level 2 Level 3 Total

Financial assets at FVTPL Equities $70,251,713 - - $70,251,713 Bonds - 2,012,500 - 2,012,500 Total 70,251,713 2,012,500 - 72,264,213 Financial liabilities at FVTPL Equities sold short (719,515) - - (719,515) Total $(719,515) - - $(719,515)

As at December 31, 2013 Level 1 Level 2 Level 3 Total

Financial assets at FVTPL Equities $63,965,068 $- $- $63,965,068 Bonds - 2,219,000 - 2,219,000 Total 63,965,068 2,219,000 - 66,184,068 Financial liabilities at FVTPL Equities sold short (1,058,358) - - (1,058,358) Total $(1,058,358) $- $- $(1,058,358)

As at January 1, 2013 Level 1 Level 2 Level 3 Total

Financial assets at FVTPL Equities $46,980,023 $- $- $46,980,023 Bonds - 4,082,534 - 4,082,534 Total 46,980,024 4,082,534 - 51,062,557 Financial liabilities at FVTPL Equities sold short (1,044,233) - - (1,044,233) Total $(1,044,233) $- $- $(1,044,233)

All fair value measurements above are recurring. The carrying values of all of the Portfolio’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




The Portfolio Advisor is responsible for performing the fair value measurements included in the financial statements of the Portfolio,

including Level 3 measurements, if any. The Portfolio Advisor obtains pricing from a third party pricing vendor which is monitored

and reviewed daily by the finance department.

As at June 30, 2014, December 31, 2013 and January 1, 2013, the Portfolio did not hold any Level 3 financial instruments. There were

no transfers between Levels 1, 2, and 3 during the periods.

a) Equities

The Portfolio's equity positions are classified as Level 1 as each security is actively traded and a reliable price is observable.

b) Bonds

The Portfolio's bond holdings are comprised of Canadian corporate bonds. Bond pricing is obtained from bid and ask prices

provided by independent security pricing services or recognized investment dealers. Bond prices may be derived by using models

which include inputs such as interest rate curves, credit spreads and volatilities. The inputs that are significant to valuation are

generally observable and therefore the Fund's bonds have been classified as Level 2.

16

Financial Instruments by Category


and 2013.


June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2013 Financial assets at FVTPL:

Designated as FVTPL $3,132,339 $(215,500) $5,566,542 $6,469,634 Financial liabilities at FVTPL:

HFT (162,772) (196,914) (2,476) 96,657 Total: $2,969,567 $(412,414) $5,564,066 $6,566,291

The accompanying notes are an integral part of these financial statements

17

EXEMPLAR DIVERSIFIED PORTFOLIO STATEMENTS OF FINANCIAL POSITION Unaudited

Note

June 30, 2014

December 31, 2013

January 1, 2013

Assets

Current assets

Financial assets held for trading

Futures contracts - Long $ 1,088,129 $ 827,257 $ -

Futures contracts - Short 218,927

539,609

234,847

Options 37,503

-

-

Cash 18,157,196

18,206,299

32,163,178

Margin deposits 13,836,330

15,416,586

9,384,285

Subscriptions receivable 473,995

82,752

140,001

33,812,080

35,072,503

41,922,311 Liabilities

Current liabilities

Financial liabilities held for trading

Futures contracts - Long -

-

5,631

Options 446,571

-

-

Accrued liabilities

Fees and operating expenses payable 6 50,922

62,322

79,582

Redemptions payable 76,908

42,691

71,218

574,401

105,013

156,431

Net assets attributable to holders of redeemable shares

Series A 7,256,670

12,977,312

20,891,798

Series F 18,132,587

15,529,710

15,852,770

Series I 6,552,299

5,130,434

3,769,947

Series L 1,296,123

1,330,034

1,251,365

$ 33,237,679 $ 34,967,490 $ 41,765,880

Number of shares outstanding 5

Series A 709,555

1,196,227

2,084,878

Series F 1,678,217

1,362,244

1,522,164

Series I 666,214

498,211

406,869

Series L 143,515

138,538

140,658


Series A $ 10.23 $ 10.85 $ 10.02

Series F $ 10.80 $ 11.40 $ 10.41

Series I $ 9.84 $ 10.30 $ 9.27

Series L $ 9.03 $ 9.60 $ 8.90



James L. McGovern


Robert W. Maxwell



18

EXEMPLAR DIVERSIFIED PORTFOLIO STATEMENTS OF COMPREHENSIVE INCOME For the periods ended June 30, Unaudited

Note 2014 2013


Interest for distribution purposes $ 98,850 $ 181,847

Net realized gain (loss) on futures (1,156,950)

2,895,340

Net change in unrealized appreciation (depreciation) in value of futures (59,810)

550,180

Net realized loss on investments and derivatives (173,468)

-

Net change in unrealized depreciation in value of investments and derivatives (208,962)

-

Net gains on investments and derivatives (1,500,340)

3,627,367

Other income items Gain on foreign currency

811

6,161 Total income (net)

(1,499,529)

3,633,528

Expenses

Management fees 6

206,511

287,841 Performance fees 6

-

4,184

Securityholder reporting costs

102,256

141,504 Audit fees

8,086

12,510

Custodial fees

2,499

1,203 Legal fees

9,393

183

Independent review committee fees

3,204

6,250 Harmonized sales tax

38,507

49,718

Commissions and other portfolio transaction costs 6

181,989

195,000 Total expenses before manager absorption 552,445

698,393

Less: expenses absorbed (recovered) by manager

30,559

45,853 Total expense after manager absorption (recovery) 521,886 652,540

Increase (decrease) in net assets attributable to holders of redeemable shares

(2,021,415)

2,980,988

Increase (decrease) in net assets attributable to holders of redeemable shares 7

Series A (756,851)

1,348,723

Series F (944,568)

1,223,506

Series I (239,404)

322,782

Series L (80,592)

85,977 $ (2,021,415) $ 2,980,988

Increase (decrease) in net assets attributable to holders of redeemable shares per share 7

Series A $ (0.75) $ 0.73

Series F $ (0.58) $ 0.79

Series I $ (0.41) $ 0.76

Series L $ (0.57) $ 0.62


19

EXEMPLAR DIVERSIFIED PORTFOLIO STATEMENTS OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE SHARES For the periods ended June 30, Unaudited

2014

2013

Net assets attributable to holders of redeemable shares at beginning of period

Series A $ 12,977,312 $ 20,891,798 Series F 15,529,710 15,852,770 Series I 5,130,434 3,769,947 Series L 1,330,034 1,251,365

34,967,490 41,765,880

Increase (decrease) in net assets attributable to holders of redeemable shares

Series A (756,851) 1,348,723 Series F (944,568) 1,223,506 Series I (239,404) 322,782 Series L (80,592) 85,977 (2,021,415) 2,980,988

Redeemable share transactions

Proceeds from redeemable shares issued

Series A 317,082 2,279,211 Series F 7,400,943 4,193,603 Series I 1,727,152 325,171 Series L 103,500 51,500 9,548,677 6,849,485 Redemption of redeemable shares

Series A (5,280,873) (7,286,508) Series F (3,853,498) (4,343,462) Series I (65,883) (28,727) Series L (56,819) (62,214) (9,257,073) (11,720,911) Net increase (decrease) from redeemable share transactions 291,604 (4,871,426) Net increase (decrease) in net assets attributable to holders of redeemable shares (1,729,811) (1,890,438)

Net assets attributable to holders of redeemable shares at end of period

Series A 7,256,670 17,233,224 Series F 18,132,587 16,926,417 Series I 6,552,299 4,389,173 Series L 1,296,123 1,326,628

$ 33,237,679 $ 39,875,442


20

EXEMPLAR DIVERSIFIED PORTFOLIO STATEMENTS OF CASH FLOWS For the periods ended June 30, Unaudited

2014

2013

Cash flows used in operating activities

Increase (decrease) in net assets attributable to holders of redeemable shares $ (2,021,415) $ 2,980,988 Adjustments for:

Gain on foreign currency (811)

(6,161)

Net realized loss on investments and derivatives 173,468

-

Net change in unrealized depreciation in value of investments and derivatives 208,962

-

Net change in unrealized (appreciation) depreciation in value of futures 59,810

(550,180)

(Increase) decrease in margin deposits 1,580,256

(3,969,711)

(Decrease) in fees and operating expenses payable (11,400)

(9,606)

Purchase of investments (317,374)

-

Proceeds from sales of investments 344,012

-

Net cash from (used in) operating activities 15,508 (1,554,670)

Cash flows used in financing activities Proceeds from redeemable shares issued 9,157,434

6,714,533 Amount paid on redemption of redeemable shares (9,222,856)

(11,599,726)

Net cash used in financing activities (65,422) (4,885,193)

Net decrease in cash (49,914)

(6,439,863)

Cash, beginning of period 18,206,299

32,163,178 Gain on foreign currency 811

6,161

Cash, end of period $ 18,157,196 $ 25,729,476

Interest received* $ 98,850 $ 181,847



21


Number of contracts

Notional Value

Contract Size

Carrying Value

FUTURES CONTRACTS – LONG

Bond Futures

90-Day Bank Bill Futures December 2014 250 $ 48,194,198 10,000 $ 20,866 Australia 10 Year Bond Futures September 2014 72 8,734,935 1,000

133,770

Bank Acceptance Futures December 2014 1 246,978 2,500

- Canada 10 Year Bond Futures September 2014 111 5,103,126 1,000

85,840

Euro-Bond Futures September 2014 66 14,182,340 1,000

169,765 Long Gilt Futures September 2014 35 7,025,600 1,000

(10,371)

US 10 Year Note (CBT) September 2014 48 6,414,137 1,000

13,810 US 5 Year Note (CBT) September 2014 27 3,443,340 1,000

1,860

US Long Bond Futures September 2014 30 4,393,656 1,000

24,621

440,161

Commodity Futures

Brent Crude Futures September 2014 29 3,469,585 1,000

43,033 LME Nickel Futures September 2014 3 365,872 6

5,355

LME Zinc Futures September 2014 27 1,597,569 25

41,154 Cocoa Futures September 2014 156 5,207,661 10

64,598

Copper Futures September 2014 5 427,489 25,000

4,203 Gasoline RBOB Futures August 2014 20 2,729,067 42,000

(2,843)

Lean Hogs Futures August 2014 12 680,630 40,000

14,006 Live Cattle Futures August 2014 76 4,870,484 40,000

233,651

Natural Gas Futures March 2015 4 173,841 10,000

(10,675) Natural Gas Futures September 2014 3 142,198 10,000

(7,751)

NY Harbour ULSD Futures August 2014 13 1,734,258 42,000

(44,635) Palladium Futures September 2014 10 900,109 100

4,927

Soybean Futures November 2014 34 2,100,227 5,000

(125,777) WTI Crude Futures December 2014 27 2,945,234 1,000

50,858

270,104

Currency Futures

AUD/USD Currency Futures September 2014 26 4,494,021 100,000

11,760

British Pound Currency Futures September 2014 109 12,432,711 62,500

170,001 CHF Currency Futures September 2014 12 1,807,424 125,000

21,358

Euro FX Currency Futures September 2014 8 1,462,337 125,000

13,145 Euro/JPY Futures September 2014 10 1,825,837 125,000

1,516

Mexican Peso Futures September 2014 76 3,106,425 500,000

9,115

226,895

Index Futures

SPI 200 Futures September 2014 27 3,639,336 25

754 S&P/TSX 60 IX Futures September 2014 26 2,602,443 200

36,486

Dax Index Futures September 2014 9 3,242,608 25

(20,534) Hang Seng Index Futures July 2014 15 2,386,915 50

32,638

Nikkei 225 (SGX) Futures September 2014 16 1,276,084 500

(1,112) Nasdaq 100 E-Mini Futures September 2014 39 3,197,957 20

51,735

S&P500 E-mini Futures September 2014 44 4,585,682 50

51,002

150,969

Futures Contracts - Long

1,088,129

22


Number of contracts

Notional Value

Contract Size

Carrying Value

FUTURES CONTRACTS – SHORT

Bond Futures

10 Year Mini Japanese Government Bond Futures September 2014 (35) $ 5,370,467 100,000 $ (17,698)

Commodity Futures

Canola Futures (WCE) November 2014 (291) 2,663,134 20

23,344

Coffee 'C' Futures September 2014 (3) 210,295 37,500

(4,624) Coffee Robusta 10-Tonne Futures September 2014 (24) 516,526 10

(8,156)

Corn Futures December 2014 (93) 2,110,996 5,000

95,066 Cotton No.2 Futures December 2014 (73) 2,864,372 50,000

131,047

Crude Palm Oil Futures September 2014 (117) 2,359,210 25

33,596 Euro-Bobl Futures September 2014 (53) 9,926,218 1,000

(42,397)

Gold 100 Oz Futures August 2014 (10) 1,411,308 100

(74,985) LME Primary Aluminum Futures September 2014 (9) 454,218 25

(2,529)

Platinum Futures October 2014 (3) 237,462 50

(4,035) Rubber Futures TCOM November 2014 (91) 999,495 5,000

(69,078)

Silver Futures September 2014 (10) 1,123,922 5,000

(6,699) Soybean Oil Futures December 2014 (75) 1,880,765 60,000

21,298

Sugar #11 (World) October 2014 (30) 646,016 112,000

(1,686) Wheat Futures (CBT) September 2014 (98) 3,020,913 5,000

66,082

White Sugar (LIF) October 2014 (10) 255,092 50

7,510

163,754

Currency Futures

3 Months Euro Euribor Futures September 2014 (7) 2,553,492 2,500

(128) 90 Day Sterling Futures December 2014 (86) 19,462,385 1,250

(10,043)

Canadian Dollar Currency Futures September 2014 (24) 2,397,899 100,000

(43,321) Euro/CHF Futures September 2014 (49) 8,948,020 125,000

22,432

EURO/GBP Futures September 2014 (103) 18,840,006 125,000

123,961 Japanese Yen Currency Futures September 2014 (18) 2,373,174 12,500,000

(20,030)

72,871 Futures Contracts - Short

218,927

Total Futures Portfolio

$1,307,056


23


Number of Options

Cost

Carrying Value

OPTIONS POSITIONS – LONG

S&P 500 E-mini Futures Aug/1830 PO 100 $ 34,984 $ 30,692

S&P 500 E-mini Futures Jul/1780 PO 116 77,384

6,811 Total Options - Purchased

112,368

37,503

OPTIONS POSITIONS – SHORT

S&P 500 E-mini Futures Jul/1950 WCO (3) (3,391)

(2,642) S&P 500 E-mini Futures Sep/1950 WCO (3) (7,105)

(6,525)

S&P 500 E-mini Futures Dec/1950 WCO (3) (10,616)

(10,168) S&P 500 E-mini Futures Mar/1950 WCO (3) (13,603)

(13,211)

S&P 500 E-mini Futures Jul/1880 WCO (6) (13,560)

(24,260) S&P 500 E-mini Futures Sep/1880 WCO (6) (20,013)

(29,465)

S&P 500 E-mini Futures Dec/1880 WCO (6) (26,058)

(35,069) S&P 500 E-mini Futures Mar/1880 WCO (6) (30,877)

(40,514)

S&P 500 E-mini Futures Sep/1860 WCO (14) (50,358)

(81,081) S&P 500 E-mini Futures Dec/1850 WCO

(14) (61,737)

(98,829)

S&P 500 E-mini Futures Mar/1860 WCO (14) (75,156)

(104,807) Total Options - Written

(312,474)

(446,571)

Total Options Portfolio

$ (200,106) $ (409,068)


24

EXEMPLAR DIVERSIFIED PORTFOLIO DISCUSSION OF NOTE 4: FINANCIAL INSTRUMENTS JUNE 30, 2014 UNAUDITED

The investment objective of the Exemplar Diversified Portfolio (the “Portfolio”) is to seek superior long term absolute and risk-

adjusted returns with the potential for low correlation to global equity and fixed-income market returns through the selection and

management of long and short positions in a globally diversified portfolio of futures, options, forward contracts and other financial

derivative instruments on agricultural and soft commodities, metals, energies, currencies, interest rates and equity indices.

The Portfolio's overall risk management program seeks to maximize the returns derived for the level of risk to which the Portfolio is



maximum loss on equities 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 Portfolio’s

prospectus.


the potential returns the Portfolio can achieve. The Portfolio Sub-Advisor manages these exposures on a daily basis in accordance

with investment restrictions that have been established by the Portfolio to manage the overall potential exposure. Futures and

forward contracts and investments to which the Portfolio may have exposure at any time may be substantially larger than the actual

amount invested with the result that the Portfolio will be exposed to a form of notional leverage. The notional leverage of the

Portfolio, excluding futures on government securities and Euro dollars, is generally between 0% and 300% and can never go above

500%. The notional leverage of the Portfolio, including futures on government securities and Euro dollars, is typically around 300%

but from time to time may be as high as 1,000%. No form of cash leverage is permitted and in the case of government securities and

Euro dollars, futures positions are restricted to those that are based on investment grade government securities and Euro dollars.



CREDIT RISK

As at June 30, 2014, December 31, 2013 and January 1, 2013, the Portfolio had no investments in debt instruments and therefore

was not subject to related credit risk. The Portfolio holds derivatives, however the risk of default is considered minimal as the

counterparty to all listed securities transactions are exchange clearinghouses. The trade will fail if the exchange clearinghouse fails

to meet its obligation.

LIQUIDITY RISK



MARKET RISK

A. CURRENCY RISK

The table below indicates the foreign currencies to which the Portfolio had significant exposure at June 30, 2014, December 31, 2013

and January 1, 2013, in Canadian dollar terms. The table also illustrates the potential impact on the net assets attributable to holders

of redeemable shares 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 assets are comprised of non-financial options and futures positions. Monetary

assets include cash, margin deposits, financial options and futures positions, and other current receivables and payables.

25

June 30, 2014 Exposure Impact on net assets attributable to holders of redeemable shares

Currency Monetary Non-Monetary Total Monetary Non-Monetary Total Australian Dollar $26,040 $155,566 $181,606 $2,604 $15,557 $18,161 British Pound Sterling 39,660 115,304 154,963 3,966 11,530 15,496 Euro Currency 582,383 106,355 688,738 58,238 10,636 68,874 Hong Kong Dollar (107,321) 32,621 (74,700) (10,732) 3,262 (7,470) Japanese Yen 291,212 (86,237) 204,975 29,121 (8,624) 20,497 Malaysian Ringgit 102,183 33,538 135,721 10,218 3,354 13,572 Swiss Franc (33,790) 22,169 (11,621) (3,379) 2,217 (1,162) United States Dollar (758,296) 285,523 (472,773) (75,830) 28,552 (47,278) Total $142,071 $664,839 $806,909 $14,206 $66,484 $80,690 % of net assets attributable to holders of redeemable shares 0.4% 2.0% 2.4% 0.0% 0.2% 0.2%

December 31, 2013 Exposure Impact on net assets attributable to holders of redeemable shares

Currency Monetary Non-Monetary Total Monetary Non-Monetary Total Australian Dollar $15,995 $86,280 $102,275 $1,600 $8,628 $10,228 British Pound Sterling (79,491) 93,800 14,309 (2,829) 285 (2,544) Euro Currency 411,012 75,619 486,631 41,101 7,562 48,663 Hong Kong Dollar (81,508) 48,302 (33,206) (7,949) 9,380 1,431 Japanese Yen 441,315 234,105 675,420 (8,151) 4,830 (3,321) Malaysian Ringgit 88,219 9,766 97,985 44,132 23,410 67,542 Swiss Franc (28,285) 2,846 (25,439) 8,822 977 9,799 United States Dollar 355,500 505,869 861,369 35,550 50,587 86,137 Total $1,122,757 $1,056,587 $2,179,344 $112,276 $105,659 $217,935 % of net assets attributable to holders of redeemable shares 3.2% 3.0% 6.2% 0.3% 0.3% 0.6%

January 1, 2013 Exposure Impact on net assets attributable to holders of redeemable shares

Currency Monetary Non-Monetary Total Monetary Non-Monetary Total Australian Dollar $(167,960) $157,743 $(10,217) $(16,796) $15,774 $(1,022) British Pound Sterling (8,923) (6,657) (15,580) (892) (666) (1,558) Euro Currency 534,307 154,395 688,702 53,431 15,439 68,870 Hong Kong Dollar 88,579 (6,006) 82,573 8,858 (601) 8,257 Japanese Yen (40,267) 159,203 118,936 (4,027) 15,920 11,893 Malaysian Ringgit 55,841 (148,517) (92,676) 5,584 (14,852) (9,268) South African Rand 61,047 - 61,047 6,105 - 6,105 Swiss Franc (33,119) 109 (33,010) (3,312) 11 (3,301) United States Dollar (2,397,189) (476,961) (2,874,150) (239,719) (47,696) (287,415) Total $(1,907,684) $(166,691) $(2,074,375) $(190,768) $(16,671) $(207,439) % of net assets attributable to holders of redeemable shares (4.6)% (0.4)% (5.0)% (0.5)% (0.0)% (0.5)%


As at June 30, 2014, December 31, 2013 and January 1, 2013 the Portfolio did not hold any interest-bearing securities, and therefore

was not subject to significant interest rate risk.

C. PRICE RISK


by the investment restrictions within the prospectus, as summarized below.

The core investment strategy of the Portfolio is based on a risk budgeting strategy of allocating capital to markets and utilizing that

capital based on the amount of risk premium being priced into markets. As a result of this allocation methodology, generally 50% of

26

the portfolio risk budget is allocated to globally-traded industrial and agricultural commodity futures markets, and 50% is allocated

to global currency, treasury debt and equity index futures markets.

The Portfolio transacts on highly liquid exchanges globally that may include, but are not limited to, all futures exchanges in the

United States and Canada, the London Metals Exchange (LME), Euronext-LIFFE (LIFFE), the Eurex Deutschland (EUREX), the

International Petroleum Exchange of London Limited (IPE), the Singapore International Monetary Exchange (SIMEX), the Sydney

Futures Exchange Ltd. (SFE) and the Tokyo Commodities Exchange (TCE).

The Portfolio also has the ability to take short positions, in total not exceeding 40% of the Net Asset Value of the Portfolio.

The Portfolio may hold cash or invest in short term securities for the purpose of preserving capital and/or maintaining liquidity,

based upon the portfolio manager’s ongoing evaluation of current and anticipated economic and market conditions.

As at June 30, 2014, December 31, 2013 and January 1, 2013, if the Portfolio's relevant benchmark index, New Edge Commodity

Trading Index (CAD), had increased or decreased by 10%, with all other variables constant, the net assets attributable to holders of

redeemable shares of the Portfolio would have increased or decreased as follows:


Benchmark June 30, 2014 December 31, 2013 January 1, 2013

New Edge Commodity Trading Index 12.6% 12.8% 12.7%

CONCENTRATION RISK






Long Positions Commodity Futures 0.8% (0.3)% (0.3)%

Currency Futures 0.7% 0.4% (0.5)% Index Futures 0.5% 2.3% 0.8% Bond Futures 1.3% (0.1)% - Index Options 0.1% - -

Short Positions Commodity Futures 0.5% 0.7% (0.4)%

Currency Futures 0.2% 0.5% 1.4% Bond Futures (0.1)% 0.5% - Index Options (1.3)% - -


All fair value measurements are recurring. The carrying values of all of the Portfolio’s financial instruments not carried at FVTLP

approximate their fair values due to their short-term nature. Fair values are classified as Level 1 when the related security or




The Portfolio Sub-Advisor is responsible for performing the fair value measurements included in the financial statements of the

Portfolio, including Level 3 measurements if any. The Portfolio Sub-Advisor obtains pricing from a third party pricing vendor which

is monitored and reviewed daily by the finance department.

As at June 30, 2014, December 31, 2013 and January 1, 2013, all of the Portfolio’s investments were classified as Level 1. There were

no transfers between levels 1, 2 and 3.

Derivative assets and liabilities consist of options and futures contracts which are exchange traded.

27

Financial Instruments By Category


and 2013.

Net realized gains /(losses) Net unrealized gains /(losses) June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2013

Financial assets at FVTPL: HFT $(1,361,955) $2,895,340 $498,481 $784,488

Financial liabilities at FVTPL:

HFT 31,537 - (767,253) (234,308) Total: $(1,330,418) $2,895,340 $(268,772) $550,180 The accompanying notes are an integral part of these financial statements.

28

NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2014 UNAUDITED 1. THE PORTFOLIOS

(I) The Portfolios

Exemplar Portfolios Ltd. (the “Company”) is a mutual fund corporation incorporated under the Business Corporations Act

(Ontario). The Company was incorporated on March 18, 2008.

The address of the Portfolios’ registered office is 36 Toronto Street, Suite 750, Toronto, Ontario, M5C 2C5.

These financial statements reflect the financial position of each of the classes of the Company: Exemplar Canadian Focus

Portfolio (the “Canadian Focus Portfolio”) and Exemplar Diversified Portfolio (the “Diversified Portfolio”), individually a

"Portfolio" and collectively the "Portfolios".

Arrow Capital Management Inc. is the manager (“Arrow” or the “Manager”) of the Portfolios. Prior to December 2, 2013, the

manager of the Portfolios was BluMont Capital Corporation (“BluMont”). On December 2, 2013, Arrow acquired all the

outstanding shares of BluMont, resulting in a change of control of BluMont. On April 1, 2014, Arrow and BluMont

amalgamated, continuing under the name “Arrow Capital Management Inc.”. At a special meeting of shareholders on

November 27, 2013, the shareholders of the Portfolios approved a change of manager from BluMont to Arrow.

Arrow is the portfolio advisor “Portfolio Advisor” of the Canadian Focus Portfolio. Integrated Managed Futures Corp.

(“IMFC”) is the investment sub-advisor “Investment Sub-Advisor” of the Diversified Portfolio.

(II) Share Exchange

On June 12, 2013, all outstanding Series R Shares of the Canadian Focus Portfolio were exchanged for Series A Shares of

the Canadian Focus Portfolio. The elimination of Series R Shares allowed for increased economies of scale for operating

expenses and eliminated the administrative and regulatory costs of operating two separate series that are essentially

identical. The Series A Shares and Series R Shares are identical in terms of investment returns, management fees and

operating expense rates and the exchange occurred on a tax deferred basis.

Details relating to the Canadian Focus Portfolio share exchange are as follows:

Net Assets acquired by Series A Shares $3,936,364

Series A Shares issued 259,196

Series R Shares redeemed 309,738

Exchange Ratio 0.8368

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Basis of Presentation and Adoption of IFRS

These interim financial statements have been prepared in compliance with International Financial Reporting Standards

(“IFRS”) applicable to the preparation of interim financial statements, including IAS 34 and IFRS 1. The Portfolios adopted

this basis of accounting in 2014 as required by Canadian securities legislation and the Canadian Accounting Standards

Board. Previously, the Portfolios prepared their financial statements in accordance with Canadian generally accepted

accounting principles as defined in Part V of the CPA Handbook ("Canadian GAAP"). The Portfolios have consistently

applied the accounting policies used in the preparation of their opening IFRS statement of financial position at January 1,

2013 and throughout all periods presented, as if these policies had always been in effect. The financial statements have

been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial

liabilities (including derivative financial instruments) at fair value through profit or loss.

Note 8 discloses the impact of the transition to IFRS on the Portfolios’ reported financial position, financial performance

and cash flows, including the nature and effect of significant changes in accounting policies from those used in the

Portfolios' financial statements for the year ended December 31, 2013 prepared under Canadian GAAP.

29

The policies applied in these interim financial statements are based on IFRS issued and outstanding as of August 25, 2014,

which is the date on which the interim financial statements were authorized for issue by the Manager. Any subsequent

changes to IFRS that are given effect in the Portfolio’s annual financial statements for the year ending December 31, 2014

could result in restatement of these interim financial statements, including the transition adjustments recognized on

transition to IFRS.

b) Financial Instruments

The Portfolios recognize financial instruments at fair value upon initial recognition, plus transaction costs in the case of

financial instruments not measured at fair value through profit and loss (“FVTPL”). Regular way purchases and sales of

financial assets are recognized at their trade date. The Portfolios’ long investment positions are designated at FVTPL. The

Portfolios’ short investment positions, futures contracts and options are classified as held for trading (“HFT”) and are

measured at FVTPL. The Portfolios’ obligation for net assets attributable to holders of redeemable shares is presented at

the redemption amount. All other financial assets and liabilities are measured at amortized cost. Under this method,

financial assets and liabilities reflect the amount required to be received or paid, discounted, when appropriate, at the

contract’s effective interest rate. The Portfolios’ accounting policies for measuring the fair value of their investments and

derivatives are substantially similar to those used in measuring its net asset value ("NAV") for transactions with

shareholders. There were no differences between the net asset value attributable to holders of redeemable shares used

for reporting purposes under IFRS and that used for transactions with shareholders.

Realized gains and losses on sale of investments and unrealized appreciation or depreciation in investments are

determined on an average cost basis. Realized gains and losses on securities sold short and unrealized appreciation or

depreciation on securities sold short are calculated with reference to the average proceeds of the related securities.

Average cost does not include amortization of premiums or discounts on fixed income securities.

Interest for distribution purposes shown on the statements of comprehensive income represents the coupon interest

received by a Portfolio accounted for on an accrual basis.

Dividend income and expense is recognized in the statement of comprehensive income on the ex-dividend date.

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a

legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize

the asset and settle the liability simultaneously. In the normal course of business, the Portfolios enter into various master

netting agreements or similar agreements that do not meet the criteria for offsetting in the statement of financial position

but still allow for the related amounts to be set off in certain circumstances, such as bankruptcy or termination of the

contracts.

c) Financial Instruments - Fair Value Measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between

market participants at the measurement date. The fair value of financial assets and liabilities traded in active markets is

based on quoted market prices at the close of trading on the reporting date. The Portfolio uses the last traded market

price for securities where the last traded price falls within the bid-ask spread. In circumstances where the last traded price

is not within the bid-ask spread, the Manager determines the point within the bid-ask spread that is most representative

of fair value based on the specific facts and circumstances. The fair value of bonds is determined using mid-market pricing

derived from bid and ask prices provided by independent security pricing services or recognized investment dealers. The

fair value of futures contracts is based on the settlement price assigned by the exchange. Gains and losses arising from

changes in the fair value of financial assets or liabilities are presented in the statement of comprehensive income. The

Portfolios' policy is to recognize transfers into and out of the fair value hierarchy levels as of the date of the event or

change in circumstances giving rise to the transfer.

The fair value of financial assets and liabilities that are not traded in an active market is determined using valuation

techniques. The Portfolios may use a variety of methods and make assumptions that are based on market conditions

existing at each reporting date. Valuation techniques include the use of comparable recent arm’s length transactions,

reference to other instruments that are substantially the same and other commonly used methods by market participants

which make the maximum use of observable inputs.

30

d) Impairment of Financial Assets

At each reporting date, each Portfolio assesses whether there is objective evidence that a financial asset at amortized cost

is impaired. If such evidence exists, the Portfolio recognizes an impairment loss as the difference between the amortized

cost of the financial asset and the present value of future cash flows discounted using the assets original effective interest

rate. Impairment losses on financial assets at amortized cost are reversed in subsequent periods if the amount of the loss

decreases and the decrease can be related objectively to an event occurring after the impairment was recognized.

e) Foreign Currency Translation

The Portfolios’ functional and presentation currency is the Canadian dollar.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates

that transactions occur. Foreign currency assets and liabilities denominated in a foreign currency are translated into the

functional currency using the exchange rate prevailing at the measurement date. Foreign exchange gains and losses

relating to cash are presented as ‘Gain (loss) on foreign currency’ and those relating to other financial assets and liabilities

are presented within ‘Net realized gain (loss) on investments and derivatives’ and ‘Net change in unrealized appreciation

(depreciation) in value of investments and derivatives’ in the statement of comprehensive income.

f) Cash

Cash is comprised of deposits with financial institutions.

g) Margin Deposit

Cash collateral provided by each Portfolio is identified in that Portfolio’s statement of financial position as ‘Margin deposit’.

h) Forward Currency Contracts

Each Portfolio may enter into forward currency contracts for purposes of minimizing currency exposure or to establish an

exposure to a particular currency. The value of forward currency contracts entered into by a Portfolio is recorded as the

difference between the contract rate and the current forward rates at the measurement date, applied to the contract's

notional amount and adjusted for counterparty risk. The change in the fair value of forward currency contracts is included

in ‘Net change in unrealized appreciation (depreciation) in value of investments and derivatives’ in the statement of

comprehensive income. Upon closing of a contract, the gain or loss is included in ‘Net realized gain (loss) on investments

and derivatives’ in the statement of comprehensive income.

i) Futures Contracts

Futures contracts are contractual obligations to buy or sell financial instruments or commodities on a future date at a

specified price established in an organized market. Subsequent to initial recognition, changes in fair value are presented

in ‘Net change in unrealized appreciation (depreciation) in value of futures’ in the statement of comprehensive income.

When futures contracts are closed out, the gain or loss is included in ‘Net realized gain (loss) on futures’ in the statement of

comprehensive income.

j) Commissions and Other Portfolio Transaction Costs

Commissions and other portfolio transaction costs are incremental costs that are directly attributable to the acquisition or

disposal of an investment, which include fees and commissions paid to agents, advisors, brokers and dealers. Such costs

are expensed when incurred.

k) Income and Expense Allocation

The net assets of each series of each Portfolio are computed by calculating the value of that series’ proportionate share of

that Portfolio’s assets less that series’ proportionate share of that Portfolio’s common liabilities less series specific liabilities,

if any. Expenses directly attributable to a series are charged to that series. Other income, expenses and gains/losses are

allocated based on a reasonable allocation methodology which will include allocations based on the assets of the

Portfolios or the number of shareholders in the Portfolios or other methodology the Manager determines is fair.

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l) Increase (Decrease) in Net Assets Attributable to Holders of Redeemable Shares per Share

The increase (decrease) in net assets attributable to holders of redeemable shares per share is calculated by dividing the

increase (decrease) in net assets attributable to the class divided by the weighted average number of shares outstanding

in that class during the period. Refer to Note 7 for the calculation.

m) Taxation

Each Portfolio is a class of shares of the Corporation. Income, expenses and capital gains and losses of each Portfolio are

consolidated, as a single entity, in determining the Corporation’s taxable income and amount of taxes payable as a whole.

Any taxes payable or recoverable by the Corporation are allocated to the Portfolios and their various series’.

The Corporation qualifies as a mutual fund corporation under the Income Tax Act (Canada) (the “Tax Act”). The general

income tax rules associated with a public corporation apply to a mutual fund corporation with the exception that taxes

payable on net realized capital gains are refundable when its shares are redeemed or when it pays capital gains dividends

out of its capital gains dividend account to its shareholders, such that in substance the Corporation is not taxable on

capital gains. Similarly, the Corporation is subject to Part IV tax on dividends received from Canadian corporations,

however, they are refundable once paid to shareholders. As a result, the Corporation does not record income taxes related

to capital gains and dividends from Canadian corporations.

Interest and foreign income are taxed at normal corporate rates applicable to mutual fund corporations and can be

reduced by permitted deductions for tax purposes. All of the Corporation’s expenses including management fees and

operating expenses will be taken into account in determining its overall tax liability, if any.

As of December 31, 2013, the Corporation has accumulated the following non-capital losses available for utilization

against net income for tax purposes in future years and capital losses available for utilization against capital gains. The tax

benefit of the non-capital losses has not been reflected in the financial statements.

Non-Capital Loss* Capital Loss**

$9,866,690 $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.

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The preparation of financial statements requires management to use judgment in applying its accounting policies and to make

estimates and assumptions about the future. The following discusses the most significant accounting judgments and estimates that

the Manager has made in preparing the financial statements:

Use of Estimates

Fair Value measurement of derivatives and securities not quoted in an active market

The Portfolios may hold financial instruments that are not quoted in active markets, including derivatives. Fair value of such

instruments is determined using valuation techniques and may be determined using reputable pricing sources (such as pricing

agencies) or indicative prices from market makers. Broker quotes as obtained from the pricing sources may be indicative and not

executable or binding. Where no market data is available, a Portfolio may value positions using its own models, which are usually

based on valuation methods and techniques generally recognized as standard within the industry. The models used to determine

fair values are validated and periodically reviewed by experienced personnel of the Manager, independent of the party that created

them.

Models use observable data, to the extent practicable. However, areas such as credit risk (both own and counterparty), volatilities

and correlations require the Manager to make estimates. Changes in assumptions about these factors could affect the reported fair

values of financial instruments. The Portfolios consider observable data to be market data that is readily available, regularly

distributed and updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in

the relevant market. Refer to Note 5 for further information about the fair value measurement of the Portfolio's financial

instruments.

32

Use of Judgments

Classification and Measurement of Investments and Application of the Fair Value Option

In classifying and measuring financial instruments held by the Portfolios, the Manager is required to make significant judgments

about whether or not the business of the Portfolios is to invest on a total return basis for the purpose of applying the fair value

option for financial assets under IAS 39, Financial Instruments - Recognition and Measurement (IAS 39). The most significant

judgments made include the determination that certain investments are held-for-trading and that the fair value option can be

applied to those which are not.

4. FINANCIAL INSTRUMENTS

In the normal course of business, each Portfolio is exposed to a variety of financial risks: credit risk, liquidity risk and market risk

(including interest rate risk, other price risk and currency risk). Please refer to Discussion of Financial Instruments (an addendum to

Note 4 on pages 13 and 25 of this report) for each Portfolio’s specific risk disclosure.

(I) Credit Risk

The Portfolios may be exposed to credit risk, which is the risk that one party to a financial instrument will cause a financial loss for

the other party by failing to discharge an obligation. Where a Portfolio invests in debt instruments and derivatives, this represents

the main concentration of credit risk.

All transactions in listed securities are settled or paid for upon delivery using approved brokers. The credit risk related to the

associated receivables is considered limited, 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. However, there are risks involved in dealing with custodians or prime brokers who settle trades and in rare

circumstances, the securities and other assets deposited with the custodian or broker may be exposed to credit risk with regard to

such parties. In addition, there may be practical problems or time delays associated with enforcing a Portfolio's rights to its assets in

the case of an insolvency of any such party. The Portfolios are also exposed to counterparty credit risk on cash, margin deposits and

other receivable balances.

(II) Liquidity Risk

Liquidity risk is the risk that a Portfolio will encounter difficulty in meeting obligations associated with financial liabilities. Each

Portfolio is exposed to cash redemptions and as such, retains sufficient cash to fund anticipated redemptions. The Portfolios aim to

retain sufficient cash to maintain adequate liquidity including coverage of obligations related to short sales and all current liabilities.

In addition, each Portfolio generally invests in securities that are highly liquid and where there is an observable market price that is

quoted by multiple dealers.

(III) Market Risk

The Portfolios’ investments are subject to market risk which is the risk that the fair value or future cash flows of a financial instrument

will fluctuate because of changes in market prices.

A. Currency Risk

The Portfolios invest in financial instruments and enter into transactions that are denominated in currencies other than

the Canadian dollar. Consequently, the Portfolios are exposed to currency risk, which is the risk that the fair value or future

cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Portfolios may enter

into foreign exchange currency contracts to reduce their foreign currency exposure.

B. Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of

changes in market interest rates. A Portfolio may hold securities with fixed interest rates that expose that Portfolio to fair

value interest rate risk.

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C. Price Risk

The Portfolios are exposed to price risk, which is the risk that the fair value or future cash flows of a financial instrument

will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk). The

Portfolios’ investments are subject to the risk of changes in the prices of equity securities, bonds and derivatives.

(IV) Concentration Risk



(V) Capital Risk Management

Shares issued and outstanding are considered to be the capital of the Portfolios. The Portfolios do not have any specific capital

requirements on the subscription and redemption of shares, other than certain minimum subscription requirements. Shareholders

are entitled to require payment of the net asset value per share of a Portfolio for all or any of the shares of such shareholder by

giving written notice to the Manager. The written notice is irrevocable and must be received no later than 4:00 p.m., EST, on the

valuation day upon which the shares are to be redeemed (a "Redemption Date"). The redeeming shareholder will receive payment in

respect of any shares surrendered for redemption on or before the 3rd business day immediately following a Redemption Date,

subject to the Manager’s right to suspend redemptions in certain circumstances.

(VI) Fair Value Measurement

Each Portfolio classifies fair value measurements within a hierarchy which gives the highest priority to unadjusted quoted prices in

active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of

the fair value hierarchy are:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that a Portfolio can access at the

measurement date,

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either

directly or indirectly; and

Level 3: Inputs that are unobservable for the asset or liability.

If inputs of different levels are used to measure an asset's or liability's fair value, the classification within the hierarchy is based on the

lowest level input that is significant to the fair value measurement.

5. REDEEMABLE SHARES

During the periods ended June 30, 2014 and, 2013, the number of shares issued, redeemed and outstanding was as follows:


Redeemable shares






Series A 2,946,850 156,598 675,376 2,428,072 Series F 937,084 511,449 88,026 1,360,507 Series L 333,295 63,079 10,498 385,876


Redeemable shares outstanding at

beginning of the period


Redeemable Shares issued upon Share

Exchange

Redeemable Shares redeemed upon Share

Exchange


Redeemable shares issued and

outstanding at end of the period

Series A 3,191,673 122,497 259,196 - (432,768) 2,140,598 Series F 837,836 139,219 - - (153,867) 823,188 Series L 209,212 70,888 - - (9,165) 270,935 Series R 367,742 - - (309,738) (58,004) -

34


Redeemable shares






Series A 1,196,227 31,052 (517,724) 709,555 Series F 1,362,244 674,573 (358,600) 1,678,217 Series I 498,211 174,720 (6,717) 666,214 Series L 138,538 11,078 (6,101) 143,515


Redeemable shares






Series A 2,084,878 219,262 (696,901) 1,607,239 Series F 1,522,164 386,406 (397,828) 1,510,742 Series I 406,869 33,572 (2,963) 437,478 Series L 140,658 5,649 (6,728) 139,579

6. RELATED PARTY TRANSACTIONS

The Manager is responsible for making decisions relating to the investment of the Portfolios’ assets and providing key management

personnel.

The Arrow Diversified Fund owns 41,748 Series F Shares of the Diversified Portfolio, with a market value of $450,878. This represents 1.4% of

net assets of the Diversified Portfolio.


Portfolio Number of Shares Amount % of Net Assets Canadian Focus Portfolio – Series A 529 $9,956 0.0% Canadian Focus Portfolio – Series F 4,768 $94,740 0.0% Diversified Portfolio – Series A 500 $5,115 0.0% Diversified Portfolio – Series F 4,500 $48,600 0.0%


Portfolio Number of Shares Amount % of Net Assets Canadian Focus Portfolio – Series A 522 $8,003 0.0% Canadian Focus Portfolio – Series F 4,699 $75,203 0.1% Diversified Portfolio – Series A 500 $5,361 0.0% Diversified Portfolio – Series F 4,500 $50,417 0.1%

Management Fee and Performance Bonus

The management fee paid to the Manager by the Canadian Focus Portfolio is 1.65% per annum on Series A, 0.65% per annum on

Series F Shares and 1.95% on Series L Shares. The management fee paid to the Manager by the Diversified Portfolio is 2.00% per

annum on Series A Shares, 1.00% per annum on Series F Shares and 2.30% on Series L Shares.

No portion of the management fee charged to a Portfolio is borne by Series I Shares of the Portfolios. A holder of Series I Shares of a

Portfolio pays a negotiated management fee directly to the Manager.

Each Portfolio will pay to the Manager in respect of each fiscal year of the Portfolio ended December 31 a performance bonus per

Share (the “Performance Bonus”) equal to 20% of the amount by which the Adjusted Net Asset Value per Share at the end of the

fiscal year exceeds the highest year end Adjusted Net Asset Value per Share previously achieved. For these purposes, “Adjusted Net

Asset Value per Share” of any series of shares of a Portfolio means the Net Asset Value per share of that series at the end of a fiscal

year without giving effect to the accrual of any Performance Bonus, plus the aggregate amount of all distributions previously

declared on a per Share basis in respect of such series of Shares. The Performance Bonus for a Portfolio is calculated and accrued

35

each day the Net Asset Value of the Portfolio is calculated, but is only payable at the end of the fiscal year of the Portfolio based on

the actual annual performance of the Portfolio.

Notwithstanding the foregoing, no Performance Bonus is payable with respect to any fiscal year of a Portfolio unless the Adjusted

Net Asset Value per Share at the end of such fiscal year exceeds the Net Asset Value per share at the end of the preceding year (or on

the date the Shares are first issued), plus the aggregate amount of all distributions previously declared on a per share basis, by a

minimum of 6%.

The Performance Bonus is estimated and accrued each Valuation Date, calculated as at the end of each fiscal year-end of the

Portfolios and paid within 15 business days thereafter.

Each Portfolio is responsible for all operating expenses incurred by or on behalf of that Portfolio. If the Manager provides any of

these services, it shall be entitled to fees for such services not exceeding fees charged by arm’s length third parties for the provision

of similar services.

The Portfolio Advisor and Portfolio Sub-Advisor will be remunerated by the Manager out of the Management Fee and the

Performance Bonus.

Accrued management fees and performance fees (plus HST) included on the statement of financial positions are as follows:


Management Fees Performance Fees Management Fees Performance Fees Management Fees Performance Fees

Canadian Focus Portfolio $97,382 $1,581,557 $98,748 $3,445,751 $78,357 $25,966

Diversified Portfolio $34,127 - $43,592 - $55,606 -

Brokerage Commissions

Total commissions paid to dealers for the periods ended June 30, 2014 and 2013 in connection with portfolio transactions were as

follows:

June 30, 2014 June 30, 2013

Canadian Focus Portfolio $26,087 $35,733 Diversified Portfolio $67,811 -

7. INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE SHARES PER SHARE

The increase (decrease) in net assets attributable to holders of redeemable shares per share for the periods ended June 30, 2014 and

2013 is calculated as follows:

June 30, 2014






Canadian Focus Portfolio – Series A $4,238,590 2,810,306 $1.51 Canadian Focus Portfolio – Series F $1,998,277 1,059,579 $1.89 Canadian Focus Portfolio – Series L $395,209 357,685 $1.10 Diversified Portfolio – Series A $(756,851) 1,012,482 $(0.75) Diversified Portfolio – Series F $(944,568) 1,635,878 $(0.58) Diversified Portfolio – Series I $(239,404) 588,431 $(0.41) Diversified Portfolio – Series L $(80,592) 142,345 $(0.57)

36

June 30, 2013






Canadian Focus Portfolio – Series A 3,818,283 3,058,203 1.25 Canadian Focus Portfolio – Series F 1,067,198 829,257 1.29 Canadian Focus Portfolio – Series L 182,473 241,142 0.76 Canadian Focus Portfolio – Series R 310,953 335,241 0.93 Diversified Portfolio – Series A 1,348,723 1,859,436 0.73 Diversified Portfolio – Series F 1,223,506 1,540,852 0.79 Diversified Portfolio – Series I 322,782 423,498 0.76 Diversified Portfolio – Series L 85,977 139,912 0.62

8. TRANSITION TO IFRS

The effect of the Portfolios’ transition to IFRS is summarized in this note as follows:

Transition Elections

The only voluntary exemption adopted by the Portfolios upon transition was the ability to designate a financial asset or financial

liability at fair value through profit and loss upon transition to IFRS. All financial assets designated at FVTPL upon transition (see

Note 2) were previously carried at fair value under Canadian GAAP as required by Accounting Guideline 18, Investment Companies.

Revaluation of Investments at FVTPL

Under Canadian GAAP, the Portfolios measured the fair values of their investments in accordance with Section 3855, Financial

Instruments - Recognition and Measurement, which required the use of bid prices for long positions and ask prices for short

positions, to the extent such prices are available. Under IFRS, the Portfolios measure the fair values of their investments using the

guidance in IFRS 13, Fair Value Measurement (IFRS 13), which requires that if an asset or a liability has a bid price and an ask price,

then its fair value is to be based on a price within the bid-ask spread that is most representative of fair value. It also allows the use of

mid-market pricing or other pricing conventions that are used by market participants as a practical expedient for fair value

measurements within a bid-ask spread.

Reconciliation of Equity and Comprehensive Income as Previously Reported Under Canadian GAAP to IFRS

Canadian Focus Portfolio

Equity December 31, 2013 June 30, 2013 January 1, 2013 Equity as reported under Canadian GAAP $71,771,247 $63,996,059 $63,678,256 Revaluation of investments at FVTPL 151,584 284,008 164,028 Net assets attributable to holders of redeemable shares $71,922,831 $64,280,067 $63,842,284



Comprehensive income as reported under Canadian GAAP $14,428,815 $5,258,927 Revaluation of investments at FVTPL (12,444) 119,980 Increase (decrease) in net assets attributable to holders of redeemable shares $14,416,371 $5,378,907

Diversified Portfolio

Equity December 31, 2013 June 30, 2013 January 1, 2013 Equity as reported under Canadian GAAP $34,988,549 $39,976,513 $41,935,339 Revaluation of investments at FVTPL (21,059) (101,071) (169,459) Net assets attributable to holders of redeemable shares $34,967,490 $39,875,442 $41,765,880

37



Comprehensive income as reported under Canadian GAAP $3,194,008 $2,912,600 Revaluation of investments at FVTPL 148,400 68,388 Increase (decrease) in net assets attributable to holders of redeemable shares $3,342,408 $2,980,988

Classification of redeemable shares issued by the Portfolios

Under Canadian GAAP, the Portfolios accounted for their redeemable shares as equity. The features of each Portfolio’s redeemable

shares are not identical and consequently the shares, do not meet the conditions to be classified as equity. As a result, the Portfolios

obligations for net assets attributable to holders of redeemable shares are financial liabilities under IFRS, presented at the

redemption amounts.

Statement of cash flows

Under Canadian GAAP, the Portfolios were exempt from providing a Statement of Cash Flows. IAS 1 requires that a Statement of

Cash Flows be presented as part of a complete set of financial statements. As such, the Portfolios have presented a Statement of

Cash Flows in the interim financial statements for the periods ended June 30, 2014 and June 30, 2013.

9. FUTURE ACCOUNTING CHANGES IFRS 9, Financial Instruments

The final version of IFRS 9, Financial Instruments, was issued by the International Accounting Standards Board (“IASB”) in July 2014

and will replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 introduces a model for classification and

measurement, a single, forward-looking ‘expected loss’ impairment model and a substantially reformed approach to hedge

accounting. The new single, principle based approach for determining the classification of financial assets is driven by cash flow

characteristics and the business model in which an asset is held. The new model also results in a single impairment model being

applied to all financial instruments, which will require more timely recognition of expected credit losses. It also includes changes in

respect of own credit risk in measuring liabilities elected to be measured at fair value, so that gains caused by the deterioration of an

entity’s own credit risk on such liabilities are no longer recognized in profit or loss. IFRS 9 is effective for annual periods beginning

on or after January 1, 2018, however is available for early adoption. In addition, the own credit changes can be early applied in

isolation without otherwise changing the accounting for financial instruments. The Portfolios are in the process of assessing the

impact of IFRS 9 and have not yet determined when they will adopt the new standard.

38

PORTFOLIO INFORMATION

MANAGER AND PRINCIPAL DISTRIBUTOR

Arrow Capital Management Inc.

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

CUSTODIAN/PRIME BROKERS

RBC Investor Services Trust

155 Wellington Street West, 2nd Floor

Toronto, ON M5V 3L3

BMO Nesbitt Burns

1 First Canadian Place, 6th Floor

Toronto, ON M5X 1H3

Newedge USA, LLC

550 W. Jackson Blvd., Suite 400

Chicago, IL 60661

RBC Capital Markets

500 West Madison Street, Suite 2500

Chicago, IL 60661

AUDITOR

PricewaterhouseCoopers LLP

PwC Tower

18 York Street, Suite 2600

Toronto, ON M5J 0B2

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Documents

INTERIM FINANCIAL STATEMENTS JUNE 2014 · The accompanying financial statements have been prepared by Arrow Capital Management Inc. (“Arrow” or the “Manager” of the ... Canadian