Experience. Intelligent Investing.

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EXEMPLAR PERFORMANCE FUND

The Exemplar Performance Fund was up 0.40% for the month of March, ending Q1 in positive territory returning 6.17%.
Given a reasonably volatile first quarter, I have reiterated and updated my previous commentary:
During the past few weeks I have been asked one question more frequently than any other: what could derail the stock market
run? It is a difficult question to answer, as market derailments are usually caused by problems investors are not yet aware of.
However, I can think of plenty of issues likely to cause meaningful market volatility.
1. Predicting the timing of the Feds next rate increase remains investors primary preoccupation. If I were forced to make a
timing prediction for the rate lift-off, I would have to pick September 2015. Chair Yellen has been deliberate in her efforts
to prepare markets for the eventual rate rise. I think she would only make THE DECISION to increase rates if she felt markets
were ready to accept the tightening. Judging by the markets overreaction to every economic data point and every word
uttered by the Fed, investors are not ready for a June hike.
2. Current consensus has the U.S. equity market in overvalued territory, and thus ripe for a downdraft. The rise in PE ratios
is occurring against expectations of declining earnings, mainly due to a decline in profits earned abroad (because of U.S.
currency strength). I would expect markets to eventually start adjusting for the f/ex impact. Another possibility would have
markets rewarding companies which exceed expectations regardless of f/ex. In other words, we could evolve into a market
of stocks, where stock selection trumps macro developments.
3. GREXIT - current bailout negotiations are difficult and there is a distinct possibility that they might fail. If the Greek government
resorted to a referendum, there is a good chance Greek citizens would choose exit from the euro region. I give this outcome
a very low probability, but it would cause plenty of uncertainty as investors deal with the ramifications.
4. Lack of oil price recovery, or worse, another meaningful decline in oil price would prolong economic hardship in Russia. The
appalling murder of Boris Nemtsov right near Kremlin might act as a catalyst for the dissident movement to gain traction. I
am not sure what combination of circumstances could destabilize Putins government, but the fact that no one believes it
to be possible is a risk in itself.
5. Increased frequency and severity of terrorist attacks could distract political leaders from urgent economic problems.
Unfortunately, these are just a few of the most obvious issues (to me) markets might have to deal with. Please allow me to
borrow BMOs Brian Belskis terminology to conclude that we will most likely live in Chronic Uncertainty for many years to come.
I still believe there are good reasons for markets to continue higher by the end of the year. The current steep energy price decline
should eventually act as a global fiscal stimulus. I expect the economy to re-accelerate in the second half of 2015, with some
progress made even in lagging Europe - on the back of lower energy costs and a significantly devalued Euro-currency. However,
U.S. consumers will remain the major beneficiary of rising employment, strong currency and favorable energy environment.
Thus, my preference is to focus on U.S. companies serving lower-income customers who benefit disproportionately from the
savings at the gas pump and have a much higher propensity to spend these savings.
Canadian markets are currently more difficult to figure out as the length and magnitude of current oil price weakness remains a
significant unknown. I will most likely broaden my focus when I have some certainty the oil price is on the mend. At that point,
there should be opportunities in more cyclical industries and companies which have suffered from poor sentiment and lack of
investor interest - while benefiting from the lower energy environment.
Finally, I would like to highlight one portfolio holding in the Fund, The Boyd Group which remains one of the largest positions.
Their recent fourth quarter report demonstrates why I continue to like the company. While Canadian same-store sales were flat,
same-store sales in the U.S. increased 8.6%. In fact the company was able to grow U.S. sales by more than 48% y/y as a result
of numerous acquisitions, strong organic growth, gains in market share, as well as currency translation gains. If that were not

36 Toronto Street, Suite 750 Toronto, Ontario Canada M5C 2C5 Tel: 416.323.0477 Tel: 1.877.327.6048 Fax: 416.323.3199 www.arrow-capital.com

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MARCH 2015

EXEMPLAR PERFORMANCE FUND

enough, the company has been increasing its dividend regularly in recent years. The stock is not cheap, but I think it is reasonably
valued relative to its recent growth and near-term growth potential. Boyd Groups balance sheet is well positioned for additional
consolidation, having completed financing in September 2014.
Boyd Group (see below chart from Bloomberg) is the poster child for my current strategy of focusing on Canadian companies
with foreign operations, as they benefit not only from stronger U.S. economic growth but rising U.S. currency as well. In fact it
is possible the European economy will exceed Canadian growth over the next couple of quarters, so for now am I am happy to
include companies with some European operations.

Source: Bloomberg

Thank you for your continued interest in the Fund. For further information, please contact your regional Arrow Capital
Management representative.
Sincerely,
Veronika Hirsch
Portfolio Manager
Arrow Capital Management Inc.

Unless otherwise stipulated Exemplar Funds returns are net of all fees, in Canadian dollars, reflect class A units and assume
reinvestment of all distributions. Commissions, trailing commissions, management fees and expenses all may be associated
with mutual fund investments. Please read the full prospectus before investing. Except as otherwise noted the indicated rates of
return are the historical compounded total returns including changes in share or unit value and the reinvestment of all dividends
or distributions and do not take into account the sales, redemption, distribution, optional charges or income tax payable by the
unitholder or shareholder that would have reduced returns. Mutual funds are not insured or guaranteed by Canada Deposit
Insurance Corporation (CDIC) or any other insurer. Mutual funds are subject to risks of loss of capital and income and their values
change frequently. Past performance may not be repeated.
^ Indices are denoted in US dollars.
36 Toronto Street, Suite 750 Toronto, Ontario Canada M5C 2C5 Tel: 416.323.0477 Tel: 1.877.327.6048 Fax: 416.323.3199 www.arrow-capital.com

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