Experience. Intelligent Investing.

A U G U S T 2 0 1 5
The Exemplar Canadian Focus Portfolio had a
negative return of -2.40% for the month of August,
but remains positive YTD at 5.80% vs. -3.47% for the
S&P TSX.
August was a difficult month for markets around the
globe, as investors came to realize that the Chinese
economy will stay weaker for longer than was
previously believed. Economists have been writing
for several years about China undergoing structural
changes, but consensus had robust growth
resuming sometime in the near future. In August
that belief evaporated. In fact, I have heard several
executives with significant Chinese experience
opine that Chinese growth will NEVER return to its
prior peak. This is obviously disappointing news
from the second largest economy, especially since
the world is mired in a very anemic growth cycle.
The effect will be especially damaging for Canada,
which relies on China for its resource exports. The
Canadian dollar, being tied to commodity prices,
came under pressure along with other commodity
currencies, taking equity markets for a spill.
The current weak environment reinforces my belief
that investors will continue to flock to those few
companies which have maintained profitability
and GROWTH. Investors will seek out companies
capable of improving their competitive advantage
as this will assure their relative pricing power and
profitability in a market of declining expectations.
Companies with a proven track record of successful
industry consolidation fit the bill and will continue
to be accorded premium valuations.

EXEMPLAR CANADIAN FOCUS PORTFOLIO

Chair Yellen finally makes THE liftoff decision and
thus allows markets to calm down and eventually
rally into the year-end.
It is not very often I get to discuss my short positions.
They became valuable and profitable in August
and my only regret was that I did not accumulate
larger positions. The shorts I have in individual
companies are intended to generate profits while
ETF shorts are intended to lower portfolio volatility.
All my shorts were profitable in August but I will
only mention two of them. There is my sentimental
favorite RSX (Market Vector Russias ETF), which
works when oil price is under pressure, as the
Russian economy is almost entirely dependent
on energy exports. The other short position I have
mentioned in a previous commentary as the most
frustrating short EVER! Despite six consecutive
quarters of declining earnings, Deere stock would
hang in, supported by the corporate buy-back. I
nearly gave up on Deere but decided to wait for
one last earnings report before throwing in the
towel. On August 21st, Deere cut profit forecast,
citing lower farm and energy spending and I got
my chance to take profits! This short story finally
had a happy ending!!!
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.

If I were Chair Yellen (we do share the last name

in a different language) I would raise rates in
September and state my intention to wait until
markets (meaning currency markets) stabilize
before evaluating further action in 2016. Bill Gross
wrote that the FED may have missed the window
of opportunity to start normalizing rates and is now
doomed to self-inflicted financial instability. I hope
Unless otherwise stipulated Exemplar Portfolio returns are net of all fees, in Canadian dollars, reflect class F shares and assume
reinvestment of all distributions. Commissions, trailing commissions, management fees and expenses all may be associated with
Exemplar Portfolio investments. Please read the full prospectus before investing. Except as otherwise noted the indicated rates
of return are the historical annual 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, or optional charges or income tax
payable by the unitholder or shareholder that would have reduced returns. Exemplar Portfolios are not insured or guaranteed by
Canada Deposit Insurance Corporation (CDIC) or any other insurer. Exemplar Portfolios are subject to risks of loss of capital and
income and their values change frequently. Past performance may not be repeated. Shares of the Portfolio are highly speculative
and involve a high degree of risk. You may lose a substantial portion or even all of the money you invest in a Portfolio.
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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