AnnuAl RepoRt 2010 - ROI Capitalroicapital.ca/downloads/PP_AR_DEC_2010_Final.pdf · Corporate & Shareholder Information .....50. 1 ROI Pooled Funds The accompanying financial statements

roicapital.ca

As at December 31, 2010

AnnuAl RepoRt 2010

ROI Pooled Funds

Table of Contents

Management’s Responsibility for Financial Reporting ...........................................................1

Independent Auditor’s Report ...............................................................................................2

ROI High Yield Private Placement Fund ..............................................................................3

Statement of Investments ........................................................................................3

Statement of Net Assets ..........................................................................................5

Statement of Operations ..........................................................................................6

Statement of Changes in Net Assets ........................................................................7

Statement of Cash Flows .........................................................................................8

ROI Private Placement Fund .................................................................................................9

Statement of Investments ........................................................................................9

Statement of Net Assets ........................................................................................11

Statement of Operations ........................................................................................12

Statement of Changes in Net Assets ......................................................................13

Statement of Cash Flows .......................................................................................14

ROI Strategic Private Placement Fund ................................................................................15

Statement of Investments ......................................................................................15





ROI Institutional Private Placement Fund ..........................................................................21

Statement of Investments ......................................................................................21





Notes to Financial Statements .............................................................................................26

Corporate & Shareholder Information ..................................................................................50

1 ROI Pooled Funds

The accompanying financial statements have been prepared and approved by Return On Innovation Management Ltd.,

the manager of the Fund. The Fund’s manager is responsible for the information and representations contained in

these financial statements.

Return On Innovation Management Ltd. maintains appropriate processes to ensure that relevant and reliable financial

information is produced. The financial statements have been prepared in accordance with accounting principles generally

accepted in Canada and include certain amounts that are based on estimates and judgments. The significant accounting

policies, which management believes are appropriate for the Fund, are described in note 3 to the financial statements.

PricewaterhouseCoopers LLP is the external auditor of the Fund. They have audited the financial statements in

accordance with Canadian generally accepted auditing standards to enable them to express to the unitholders their

opinion on the financial statements. Their report is set out on the next page.

Management’s Responsibility for Financial Reporting

March 31, 2011

John Sterling David Dundas

Chief Executive Officer Chief Financial Officer

Return On Innovation Return On Innovation

Management Ltd. Management Ltd.

2ROI Pooled Funds

To the Unitholders of ROI High Yield Private Placement Fund, ROI Private Placement Fund, ROI Strategic Private Placement Fund, ROI Institutional Private Placement Fund (collectively, the Funds)

We have audited the accompanying financial statements of each of the Funds, which comprise the statements of investments as at December 31, 2010, the statements of net assets as at December 31, 2010 and December 31, 2009 and the statements of operations, changes in net assets and cash flows for the periods indicated in note 1 of the financial statements, and the related notes including a summary of significant accounting policies.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of the financial statements of each of the Funds in accordance with Canadian generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial statements of each of the Funds based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform an audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements of the Funds present fairly, in all material respects, the financial position of each of the Funds as at December 31, 2010 and December 31, 2009 and the results of each of their operations, the changes in each of their net assets and each of their cash flows for the periods indicated in note 1 of the financial statements in accordance with Canadian generally accepted accounting principles.

Chartered Accountants, Toronto, Canada,

Licensed Public Accountants March 31, 2011

“PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

Independent Auditor’s Report

ROI High Yield Private Placement Fund3

Par value $ Average cost Fair valueDescription (or number of shares) $ $

Common Share Portfolio – 51.50% Energy – 2.12% Crew Energy Inc. 401,000 6,541,720 7,651,080 6,541,720 7,651,080Materials – 23.08% Canfor Corp. 993,148 10,259,219 11,023,943Hudbay Minerals Inc. 661,000 7,481,550 11,878,170Ivanhoe Mines Ltd. 683,159 7,503,652 15,562,362Ivanhoe Mines Ltd., Rights, January 2011 683,159 – 915,433Lundin Mining Corp. 1,249,730 7,602,031 9,048,045Osisko Mining Corp. 573,019 7,146,975 8,297,315Silver Wheaton Corp. 419,328 8,445,266 16,324,439Sino-Forest Corp., Class ‘A’ 450,275 7,576,810 10,477,899 56,015,503 83,527,606Industrials – 4.66% FirstService Corp. 300,000 8,088,000 9,015,000Stantec Inc. 283,015 7,391,224 7,848,006 15,479,224 16,863,006Consumer Discretionary – 2.73% Viterra Inc. 47,687 439,107 442,535Westport Innovations Inc. 516,000 10,289,040 9,442,800 10,728,147 9,885,335Financials – 3.57% Dundee Corp., Class ‘A’ 632,201 8,994,230 12,928,510 8,994,230 12,928,510Technology – 15.34% Celestica Inc. 1,022,834 8,982,766 9,839,663CGI Group Inc., Class ‘A’ 641,729 7,482,881 11,018,487MacDonald, Dettwiler and Associates Ltd. 204,247 7,723,625 10,318,558Open Text Corp. 164,487 7,167,424 7,502,252Research In Motion Ltd. 142,959 7,582,031 8,288,763SXC Health Solutions Corp. 200,000 7,888,000 8,502,000 46,826,727 55,469,723 Total Common Share Portfolio 144,585,551 186,325,260 Private Investment Portfolio – 29.19% Limited Partnerships – 6.54% 1900 Dickson Street LP 6,124,813 5,269,024 6,160,756219 Laurier Avenue West LP 6,970,064 6,157,662 6,307,1442810 Matheson Boulevard LP 3,043,835 2,729,461 3,295,020310 Hoffer Drive LP 675,922 613,368 675,922402 McDonald Street LP 1,358,687 1,244,078 998,881460 Two Nations Fredericton Inc., LP 1,600,531 1,453,987 1,850,38649 Ontario Street LP 2,672,731 2,272,757 3,012,308651 Henderson Drive LP 1,500,767 1,369,203 1,344,504 21,109,540 23,644,921

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

Statement of Investments


ROI High Yield Private Placement Fund 4

Debt – 22.65% Mortgages – 20.72% 2139654 Ontario (Novo Plastic), September 2013 1,377,034 1,377,034 1,375,24496 Spadina Avenue Inc., January 2015 2,000,000 2,000,000 2,016,400Dartmouth Crossing Hotel Ownership Trust et. al., December 2014 1,098,829 1,098,829 1,126,629Edmonton Cy Lodging Co., June 2013 2,982,107 2,982,107 3,032,206Frontenac Shopping Centre Inc., November 2014 1,000,000 1,000,000 1,007,400Hastings (Bancroft) Investments Inc., February 2020 1,500,000 1,500,000 1,517,250Main Lanes (Alexandria) Investments Inc., February 2020 1,500,000 1,500,000 1,517,250Northumberland Shopping Centre Inc., October 2013 11,000,000 11,000,000 11,000,000Plazacorp Property Holdings Inc. (Bedford Commons), August 2020 5,850,000 5,850,000 5,741,600Plazacorp Property Holdings Inc. (Granite Dr.), September 2020 4,000,000 4,000,000 3,891,720Plazacorp Property Holdings Inc. (Silverfox Plaza), November 2020 2,153,500 2,153,500 2,153,500Priyance Hospitality Inc., March 2011 2,178,658 2,178,658 2,178,658Sadler (Almonte) Investments Inc., February 2020 1,500,000 1,500,000 1,517,250Skyline – 66 Temperance Inc., May 2013 2,700,000 2,700,000 2,700,000Societe En Commandite G.H., July 2013 980,056 980,056 989,269SPN Group Inc., June 2015 500,000 500,000 500,000Whiterock 219 Laurier Avenue West Ottawa Inc., September 2017 22,721,089 22,721,089 22,721,089Whiterock 580 Grande Allee Inc., November 2016 3,993,231 3,993,231 3,993,231Whiterock Girouard St-Joseph Quebec Inc., April 2014 5,950,000 5,950,000 5,950,000 74,984,504 74,928,696Senior Secured Debenture – 1.03% Spinrite Limited Partnership, November 2012 3,713,993 3,713,993 3,713,993 3,713,993 3,713,993Subordinated Secured Debentures – 0.90% Asset Engineering Group LP, December 2011 25,000 25,000 5,000Centra Acquisition Inc., October 2012 395,355 395,355 395,355Clicksquared Inc., March 2013 1,941,061 1,941,061 1,797,810Lind Equipment Ltd., November 2013 1,018,393 1,018,393 1,019,412Vickers-Warnick Financial Ltd., April 2013 44,525 44,525 32,919 3,424,334 3,250,496Total Private Investment Portfolio 103,232,371 105,538,106 Convertible Bond – 1.46% Whiterock REIT, Series ‘F’, Convertible Debenture, 6.00%, July 2012 5,200,605 4,510,422 5,278,614 4,510,422 5,278,614Investment in Underlying Fund – 17.00% ROI Strategic Private Placement Fund, Series R 523,459 56,960,919 61,466,164 56,960,919 61,466,164Total Investments – 99.15% 309,289,263 358,608,144

Short-Term Investment – 0.10% CIBC Mellon Trust Demand Deposit, Variable Rate 353,793 353,793 353,793Total Portfolio – 99.25% 309,643,056 358,961,937

Transaction Costs included in Securities Cost – – Unrealized Gain on Forward Contract – 0.33% [note 9] 1,187,495Other Assets, Net of Liabilities – 0.42% 1,512,869Net Assets 361,662,301



Statement of Investments – cont’d



2010 2009 $ $

Assets

Cash – 19,495 Investments at fair value (cost $309,289,263; 2009 $119,270,007) 358,608,144 120,803,775 Short-term investments (cost $353,793; 2009 $3,111,311) 353,793 3,111,311 Interest receivable 765,244 321,546 Subscriptions receivable 2,836,279 2,238,837 Receivable for investments sold 22,450 309,567 Prepaid expenses [note 7] – 530,833 Unrealized gain on forward contract [note 9] 1,187,495 31,832,391 HST receivable 47,077 – 363,820,482 159,167,755

Liabilities

Distributions payable 337,541 195,549 Bank overdraft 15,438 – Unearned venture capital income 8,837 13,819 Performance fees payable 392,577 223,536 Redemptions payable 846,320 45,878 Accrued expenses 557,468 279,250 2,158,181 758,032 Net Assets 361,662,301 158,409,723

Series Net Assets [note 6] Class A 170,786,866 74,699,913 Class 5 12,509,007 2,547,166 Class 7 76,479,099 34,659,672 Class F 32,468,327 11,877,686 Class F-5 3,093,520 288,886 Class F-7 14,541,192 9,894,538 Class O 38,294,882 11,873,841 Class R 13,489,408 12,568,021

Net Assets per Unit [note 6 and 10] Class A 132.79 125.07 Class 5 109.20 107.85 Class 7 100.01 101.17 Class F 137.89 128.38 Class F-5 114.25 111.29 Class F-7 104.93 104.62 Class O 138.66 128.75 Class R 129.74 118.45


Statement of Net Assets

As at December 31


2010 2009 $ $

Investment Income

Interest 294,068 80,276 Dividends 66,100 – Distributions received from underlying funds 397,190 – Securities lending income [note 12] 262,590 74,225 Interest income from private investments 4,686,850 2,245,865 5,706,798 2,400,366

Expenses

Audit fees 124,090 39,461 Custodian fees 67,151 50,674 Forward contract fees – 80,706 Independent review committee 1,587 4,791 Legal fees 10,293 33,514 Management fees [note 7] 2,568,641 1,196,409 Operating services 287,761 105,812 Performance fees [note 7] 3,573,936 891,710 Shareholder reporting costs 36,150 46,677 Transfer agent 66,377 40,679 Total expenses 6,735,986 2,490,433 Net Investment Loss (1,029,188) (90,067)Realized and Unrealized Gain (Loss) on Investments Net realized gain (loss) on sale of investments 3,010,649 (11,775,819)Transaction costs (2,399,976) (437,833)Change in unrealized appreciation in value of investments 47,785,113 33,817,854 Change in unrealized depreciation on value of forward contracts (30,644,896) (12,961,572)Net gain on investments 17,750,890 8,642,630 Increase in Net Assets from Operations 16,721,702 8,552,563 Increase in Net Assets from Operations Per Series Class A 6,992,768 3,976,142 Class 5 362,955 129,825 Class 7 3,254,060 2,139,383 Class F 1,476,440 698,544 Class F-5 97,503 17,462 Class F-7 875,520 763,002 Class O 1,536,227 661,195 Class R 2,126,229 167,010 Increase in Net Assets from Operations Per Unit Class A 7.59 8.23 Class 5 6.32 7.31 Class 7 5.85 6.91 Class F 9.34 9.73 Class F-5 7.85 8.41 Class F-7 7.42 8.26 Class O 9.92 9.71 Class R 10.84 13.44


Statement of Operations

For the years ended December 31


Series ($)

A 5 7 F F-5 F-7 O R Total

Increase in Net Assets from Operations 6,992,768 362,955 3,254,060 1,476,440 97,503 875,520 1,536,227 2,126,229 16,721,702

Distributions to Unitholders

From net investment income – – – – – – – – – From capital gains – – – – – – – – – From return of capital – (315,775) (4,105,149) – (68,557) (860,251) – – (5,349,732) – (315,775) (4,105,149) – (68,557) (860,251) – – (5,349,732)Capital Unit Transactions

Sales of units 110,987,214 11,105,371 53,744,548 24,318,444 2,972,850 6,423,673 29,977,390 47,130,014 286,659,504 Units issued on reinvestment of distributions – 126,122 1,693,193 – 24,459 184,654 – – 2,028,428 Units redeemed (21,893,029) (1,316,832) (12,767,225) (5,204,243) (221,621) (1,976,942) (5,092,576) (48,334,856) (96,807,324) 89,094,185 9,914,661 42,670,516 19,114,201 2,775,688 4,631,385 24,884,814 (1,204,842) 191,880,608 Increase in Net Assets for the Year 96,086,953 9,961,841 41,819,427 20,590,641 2,804,634 4,646,654 26,421,041 921,387 203,252,578

Net Assets – Beginning of Year 74,699,913 2,547,166 34,659,672 11,877,686 288,886 9,894,538 11,873,841 12,568,021 158,409,723

Net Assets – End of Year 170,786,866 12,509,007 76,479,099 32,468,327 3,093,520 14,541,192 38,294,882 13,489,408 361,662,301

Statement of Changes in Net Assets

For the year ended December 31, 2010

Series ($)

A 5 7 F F-5 F-7 O R Total

Increase in Net Assets from Operations 3,976,142 129,825 2,139,383 698,544 17,462 763,002 661,195 167,010 8,552,563


From net investment income – – – – – – – – – From capital gains – – – – – – – – – From return of capital – (94,150) (2,243,264) – (10,567) (664,079) – – (3,012,060) – (94,150) (2,243,264) – (10,567) (664,079) – – (3,012,060)Capital Unit Transactions

Sales of units 37,139,980 1,546,333 15,828,791 6,927,071 329,250 2,998,630 5,679,116 12,400,000 82,849,171 Units issued on reinvestment of distributions – 24,148 651,704 – 2,563 191,551 – – 869,966 Units redeemed (11,505,893) (648,566) (7,636,282) (3,433,643) (101,229) (4,162,929) (746,088) – (28,234,630) 25,634,087 921,915 8,844,213 3,493,428 230,584 (972,748) 4,933,028 12,400,000 55,484,507 Increase (Decrease) in Net Assets for the Year 29,610,229 957,590 8,740,332 4,191,972 237,479 (873,825) 5,594,223 12,567,010 61,025,010

Net Assets – Beginning of Year 45,089,684 1,589,576 25,919,340 7,685,714 51,407 10,768,363 6,279,618 1,011 97,384,713

Net Assets – End of Year 74,699,913 2,547,166 34,659,672 11,877,686 288,886 9,894,538 11,873,841 12,568,021 158,409,723




2010 2009 $ $

Cash Provided By (Used In) Operating Activities Increase in net assets from operations 16,721,702 8,552,563 Non-cash items Net realized and unrealized loss on investments (20,150,866) (9,080,463) Net change in non-cash balances related to operations 329,969 (660,864)Prepaid expenses 439,483 (530,833)Proceeds from the sale of marketable securities 366,766,928 79,033,951 Proceeds from the sale of private debenture investments 7,977,935 9,176,624 Purchase of marketable securities (482,637,045) (119,765,555)Purchase of private investments (76,358,907) (19,479,643) (186,910,801) (52,754,220)

Financing Activities Proceeds from issuance of units 286,062,062 83,011,718 Amounts redeemed (96,006,882) (28,648,761)Distributions paid (5,207,740) (3,037,477)Reinvestment of distributions 2,028,428 869,966 186,875,868 52,195,446

Decrease in Cash During the Year (34,933) (558,774)Cash – Beginning of Year 19,495 578,269 Cash (Bank Overdraft) – End of Year (15,438) 19,495


Statement of Cash Flows


ROI Private Placement Fund9


Common Share Portfolio – 88.53% Energy – 11.99% Celtic Exploration Ltd. 796,818 9,875,707 14,119,615 Crew Energy Inc. 488,152 8,767,500 9,313,940 Petrobank Energy & Resources Ltd. 193,464 7,461,906 8,830,355 26,105,113 32,263,910Materials – 26.61% Canfor Corp. 946,000 8,137,580 10,500,600 Hudbay Minerals Inc. 754,000 8,505,120 13,549,380 Quadra FNX Mining Ltd. 632,378 8,984,778 10,567,036 Sino-Forest Corp., Class ‘A’ 509,855 9,113,316 11,864,326 Teck Resources Ltd., Class ‘B’ 407,260 8,422,616 25,095,361 43,163,410 71,576,703Industrials – 7.25% FirstService Corp. 321,000 8,787,480 9,646,050 Stantec Inc. 355,855 8,941,566 9,867,859 17,729,046 19,513,909Consumer Discretionary – 9.87% Cott Corp. 1,112,642 9,312,814 9,935,893 Gildan Activewear Inc. 254,778 6,022,929 7,212,765 Westport Innovations Inc. 513,000 9,305,820 9,387,900 24,641,563 26,536,558Financials – 6.07% Dundee Corp., Class ‘A’ 798,153 11,403,622 16,322,229 11,403,622 16,322,229Technology – 26.74% Celestica Inc. 1,387,563 11,401,475 13,348,356 CGI Group Inc., Class ‘A’ 868,679 9,113,324 14,915,217 MacDonald, Dettwiler and Associates Ltd. 270,512 8,321,730 13,666,266 Open Text Corp. 200,000 9,280,000 9,122,000 Research In Motion Ltd. 197,683 9,665,381 11,461,660 SXC Health Solutions Corp. 221,225 8,879,409 9,404,275 56,661,319 71,917,774 Total Common Share Portfolio 179,704,073 238,131,083




ROI Private Placement Fund 10


Private Investment Portfolio – 24.11%Mortgages – 24.11% 96 Spadina Avenue Inc., January 2015 9,000,000 9,000,000 9,073,800Edmonton Cy Lodging Co., June 2013 5,964,213 5,964,213 6,064,412First Gulf Brantford Shopping Centres Limited, June 2011 1,200,000 1,200,000 1,260,120Frontenac Shopping Centre Inc., November 2014 9,300,000 9,300,000 9,368,820Hastings (Bancroft) Investments Inc., February 2020 1,728,221 1,728,221 1,748,096Jardine Henderson Realty, March 2011 254,450 254,450 254,450Main Lanes (Alexandria) Investments Inc., February 2020 1,475,460 1,475,460 1,492,428Northumberland Shopping Centre Inc., October 2013 11,000,000 11,000,000 11,000,000Plazacorp Property Holdings Inc. (Bedford Commons), August 2020 3,900,000 3,900,000 3,827,733Plazacorp Property Holdings Inc. (Granite Dr.), September 2020 2,892,000 2,892,000 2,813,714Sadler (Almonte) Investments Inc., February 2020 1,096,319 1,096,319 1,108,927SPN Group Inc., June 2015 500,000 500,000 500,000Taline Investments Inc., et. al., August 2013 6,856,400 6,856,400 6,856,400Whiterock 580 Grande Allee Inc., November 2016 9,483,925 9,483,925 9,483,925Total Private Investment Portfolio 64,650,988 64,852,825 Investment in Underlying Fund – 1.93% ROI High Yield Private Placement Fund, Series R 39,981 5,046,884 5,186,949 5,046,884 5,186,949Total Investments – 114.57% 249,401,945 308,170,857

Short-Term Investment – 0.05% CIBC Mellon Trust Demand Deposit, Variable Rate 127,375 127,375 127,375Total Portfolio – 114.62% 249,529,320 308,298,232

Transaction Costs included in Securities Cost – – Unrealized Loss on Forward Contract [note 9] – (15.83%) (42,584,394)Other Assets, Net of Liabilities – 1.21% 3,266,585 Net Assets 268,980,423





2010 2009 $ $

Assets Cash – 26,467 Investments at fair value (cost $249,401,945; 2009 $111,080,929) 308,170,857 129,793,559 Short-term investments (cost $127,375; 2009 $2,535,175) 127,375 2,535,175 Interest and dividends receivable 577,882 155,787 Subscriptions receivable 3,259,442 843,211 Receivable for investments sold 36,824 26,668 Prepaid expenses [note 7] – 492,917 HST receivable 30,088 – 312,202,468 133,873,784

Liabilities Distributions payable 116,024 77,628 Accrued expenses 416,887 302,280 Performance fees payable – 56,284 Redemptions payable 104,740 115,545 Unrealized loss on forward contract [note 9] 42,584,394 5,116,766 43,222,045 5,668,503 Net Assets 268,980,423 128,205,281

Series Net Assets [note 6] Class A 163,712,223 77,250,584 Class F 20,052,874 5,790,765 Class 6 30,065,447 25,551,101 Class F-6 8,670,104 3,637,663 Class O 44,470,381 15,974,058 Class R 2,009,394 1,110

Net Assets per Unit [note 6 and 10] Class A 114.19 109.27 Class F 117.00 110.80 Class 6 99.48 100.15 Class F-6 102.14 101.68 Class O 118.98 111.90 Class R 116.62 109.16



As at December 31


2010 2009 $ $

Investment Income Interest – 84 Dividends 301,396 – Securities lending income [note 12] 346,809 134,295 Private investment interest income 2,499,113 737,016 3,147,318 871,395

Expenses Audit fees 93,430 32,528 Custodian fees 52,184 44,681 Forward contract fees – 151,764 Independent review committee 1,606 4,435 Legal fees 13,629 22,085 Management fees [note 7] 2,641,511 1,187,982 Operating services 335,398 128,033 Performance fees [note 7] 385,427 578,184 Shareholder reporting costs 36,341 50,062 Transfer agent 63,221 31,714 Total expenses 3,622,747 2,231,468 Expenses waived/paid by manager [note 7] (62,665) – Net Investment Loss (412,764) (1,360,073)Realized and Unrealized Gain (Loss) on Investments Net realized gain (loss) on sale of investments 6,957,380 (1,857,269)Change in unrealized appreciation in value of investments 40,056,282 28,803,714 Change in unrealized depreciation on value of forward contracts (37,467,628) (20,138,644)Net gain on investments 9,546,034 6,807,801 Increase in Net Assets from Operations 9,133,270 5,447,728 Increase in Net Assets from Operations Per Series Class A 5,315,150 2,586,315 Class F 685,344 341,794 Class 6 1,219,368 1,075,366 Class F-6 330,276 180,750 Class O 1,574,848 929,284 Class R 8,284 334,219 Increase in Net Assets from Operations Per Unit Class A 4.93 5.47 Class F 6.26 6.74 Class 6 4.42 5.25 Class F-6 5.56 6.37 Class O 7.16 7.35 Class R 8.68 8.47





Series ($)

A F 6 F-6 O R Total

Increase in Net Assets from Operations 5,315,150 685,344 1,219,368 330,276 1,574,848 8,284 9,133,270


From net investment income – – – – – – – From capital gains – – – – – – – From return of capital – – (1,408,414) (308,682) – – (1,717,096) – – (1,408,414) (308,682) – – (1,717,096)Capital Unit Transactions

Sales of units 107,459,393 18,485,672 11,999,099 6,202,141 33,857,964 2,000,000 180,004,269 Units issued on reinvestment of distributions – – 401,341 112,871 – – 514,212 Units redeemed (26,312,904) (4,908,907) (7,697,048) (1,304,165) (6,936,489) – (47,159,513) 81,146,489 13,576,765 4,703,392 5,010,847 26,921,475 2,000,000 133,358,968 Increase in Net Assets for the Year 86,461,639 14,262,109 4,514,346 5,032,441 28,496,323 2,008,284 140,775,142

Net Assets – Beginning of Year 77,250,584 5,790,765 25,551,101 3,637,663 15,974,058 1,110 128,205,281 Net Assets – End of Year 163,712,223 20,052,874 30,065,447 8,670,104 44,470,381 2,009,394 268,980,423



Series ($)

A F 6 F-6 O R Total

Increase in Net Assets from Operations 2,586,315 341,794 1,075,366 180,750 929,284 334,219 5,447,728


From net investment income – – – – – – – From capital gains – – – – – – – From return of capital – – (1,043,652) (145,423) – – (1,189,075) – – (1,043,652) (145,423) – – (1,189,075)Capital Unit Transactions

Sales of units 56,811,713 4,127,320 14,833,500 2,187,725 6,206,555 8,233,500 92,400,313 Units issued on reinvestment of distributions – – 356,868 42,797 – – 399,665 Units redeemed (17,950,694) (3,176,000) (6,952,355) (870,979) (1,793,616) (12,873,543) (43,617,187) 38,861,019 951,320 8,238,013 1,359,543 4,412,939 (4,640,043) 49,182,791 Increase (Decrease) in Net Assets for the Year 41,447,334 1,293,114 8,269,727 1,394,870 5,342,223 (4,305,824) 53,441,444

Net Assets – Beginning of Year 35,803,250 4,497,651 17,281,374 2,242,793 10,631,835 4,306,934 74,763,837 Net Assets – End of Year 77,250,584 5,790,765 25,551,101 3,637,663 15,974,058 1,110 128,205,281




2010 2009 $ $

Cash Provided By (Used In)

Operating Activities Increase in net assets from operations 9,133,270 5,447,728 Non-cash items Net realized and unrealized loss on investments (9,546,034) (6,807,801) Net change in non-cash balances related to operations (306,891) (7,720)Prepaid expenses 395,792 (492,917)Proceeds from the sale of marketable securities 283,289,792 96,675,832 Proceeds from the sale of private debenture investments 878,344 180,077 Purchase of marketable securities (366,031,972) (132,242,542)Purchase of private investments (47,092,000) (10,500,000) (129,279,699) (47,747,343)

Financing Activities Proceeds from issuance of units 177,588,038 91,780,102 Amounts redeemed (47,170,318) (43,511,284)Distributions paid (1,678,700) (1,192,586)Reinvestment of distributions 514,212 399,665 129,253,232 47,475,897

Decrease in Cash During the Year (26,467) (271,446)Cash – Beginning of Year 26,467 297,913 Cash – End of Year – 26,467




ROI Strategic Private Placement Fund15


Common Share Portfolio – 73.57% Consumer Discretionary – 5.61% Cott Corp. 529,982 4,444,409 4,732,739Viterra Inc. 229,865 2,004,423 2,133,147 6,448,832 6,865,886Energy – 5.52% Crew Energy Inc. 223,500 3,896,310 4,264,380Petrobank Energy & Resources Ltd. 54,602 2,417,231 2,492,221 6,313,541 6,756,601Financials – 5.50% Dundee Corp., Class ‘A’ 329,230 4,717,198 6,732,754 4,717,198 6,732,754Industrials – 6.37% Stantec Inc. 160,688 4,418,920 4,455,878WestJet Airlines Ltd. 238,088 2,763,296 3,340,375 7,182,216 7,796,253Materials – 35.47% Canfor Corp. 502,743 5,439,679 5,580,447Consolidated Thompson Iron Mines Ltd. 233,797 2,929,476 3,294,200Eldorado Gold Corp. 306,692 3,625,881 5,670,735Equinox Minerals Ltd. 847,000 4,880,290 5,175,170Ivanhoe Mines Ltd. 237,053 3,463,414 5,400,067Ivanhoe Mines Ltd., Rights, January 2011 237,053 – 317,651Quadra FNX Mining Ltd. 339,477 4,868,636 5,672,661Semafo Inc. 389,772 3,901,587 4,190,049Sino-Forest Corp., Class ‘A’ 159,450 3,369,166 3,710,402Taseko Mines Ltd. 853,387 3,916,768 4,429,079 36,394,897 43,440,461Technology – 15.11% Celestica Inc. 490,724 4,382,213 4,720,765CGI Group Inc., Class ‘A’ 277,933 3,355,915 4,772,110Open Text Corp. 80,000 3,420,000 3,648,800MacDonald, Dettwiler and Associates Ltd. 105,761 3,596,654 5,343,046Research In Motion Ltd. 270 19,303 15,655 14,774,085 18,500,376Total Common Share Portfolio 75,830,769 90,092,331




ROI Strategic Private Placement Fund 16

Private Investment Portfolio – 31.23% Limited Partnerships – 8.24% 1900 Dickson Street LP 3,062,406 2,634,512 3,080,378219 Laurier Avenue West LP 2,323,355 2,052,554 2,102,3812810 Matheson Boulevard LP 1,638,988 1,469,710 1,774,242310 Hoffer Drive LP 225,307 204,456 225,307402 McDonald Street LP 452,896 414,693 332,961460 Two Nations Fredericton Inc., LP 533,510 484,662 616,79549 Ontario Street LP 1,336,365 1,136,378 1,506,154651 Henderson Drive LP 500,256 456,401 448,168 8,853,366 10,086,386Debt Mortgages – 22.99% 96 Spadina Avenue Inc., January 2015 1,000,000 1,000,000 1,008,200Dartmouth Crossing Hotel Ownership Trust et. al., December 2014 998,936 998,936 1,024,209Edmonton Cy Lodging Co., June 2013 1,988,071 1,988,071 2,021,471First Gulf Brantford Shopping Centres Limited, June 2011 400,000 400,000 420,040Frontenac Shopping Centre Inc., November 2014 1,000,000 1,000,000 1,007,400Hastings (Bancroft) Investments Inc., February 2020 500,000 500,000 505,750Main Lanes (Alexandria) Investments Inc., February 2020 500,000 500,000 505,750Northumberland Shopping Centre Inc., October 2013 5,000,000 5,000,000 5,000,000Plazacorp Property Holdings Inc. (Bedford Commons), August 2020 500,000 500,000 490,735Plazacorp Property Holdings Inc. (Granite Dr.), September 2020 4,000,000 4,000,000 3,891,720Plazacorp Property Holdings Inc. (Silverfox Plaza), November 2020 2,153,500 2,153,500 2,153,500Sadler (Almonte) Investments Inc., February 2020 500,000 500,000 505,750SPN Group Inc., June 2015 500,000 500,000 500,000Whiterock 141-175 Saint-Jean, November 2016 1,542,386 1,542,386 1,542,386Whiterock 219 Laurier Avenue West Ottawa Inc., September 2017 7,573,696 7,573,696 7,573,696 28,156,589 28,150,607 Total Private Investment Portfolio 37,009,955 38,236,993 Convertible Bond – 0.48% Whiterock REIT, Series ‘F’, Convertible Debenture, 6.00%, July 2012 581,395 500,000 590,116Total Investments – 105.28% 113,340,724 128,919,440

Transaction Costs included in Securities Cost – – Unrealized Loss on Forward Contract [note 9] – (5.50%) (6,729,201)Other Assets, Net of Liabilities – 0.22% 266,226 Net Assets 122,456,465






2010 2009 $ $

Assets Cash – 24 Investments at fair value (cost $113,340,724; 2009 $29,507,523) 128,919,440 35,322,894 Short-term investments (cost $nil; 2009 $555,498) – 555,498 Interest and dividends receivable 317,079 63,967 Subscriptions receivable 1,679,081 – Receivable for investments sold 4,531 532 HST receivable 12,390 – 130,932,521 35,942,915

Liabilities

Distributions payable 25,578 1,978 Bank overdraft 1,495,724 – Performance fees payable 63,528 – Redemptions payable 375 – Unrealized loss on forward contract [note 9] 6,729,201 5,091,782 Accrued expenses 161,650 11,955 8,476,056 5,105,715 Net Assets 122,456,465 30,837,200

Series Net Assets [note 6] Class A 35,917,562 4,602,643 Class F 4,860,083 84,017 Class F-MG 393,191 2,109 Class MG 9,276,519 678,679 Class O 10,540,545 624,027 Class R 61,468,565 24,845,725

Net Assets per Unit [note 6 and 10] Class A 114.25 104.56 Class F 115.88 104.90 Class F-MG 106.93 101.32 Class MG 105.17 100.84 Class O 116.71 104.71 Class R 117.42 104.77



As at December 31


2010 2009 $ $

Investment Income Interest 33,945 6,941 Dividends 27,239 – Securities lending income [note 12] 75,315 – Interest income from private investments 1,215,540 58,241 1,352,039 65,182

Expenses Audit fees 16,599 40,000 Custodian fees 12,703 31,323 Independent review committee 1,392 – Legal fees 7,637 679 Management fees [note 7] 323,923 23,692 Operating services 89,874 4,982 Performance fees [note 7] 519,331 – Shareholder reporting costs 9,031 6,989 Transfer agent 2,479 687 Total expenses 982,969 108,352 Expenses waived/paid by manager [note 7] – (82,495)Net Investment Income 369,070 39,325 Realized and Unrealized Gain (Loss) on Investments Net realized gain on sale of investments 587,844 259,804 Transaction costs (1,002,550) (217,167)Change in unrealized appreciation in value of investments 9,763,345 5,815,371 Change in unrealized depreciation on value of forward contracts (1,637,419) (5,091,782)Net gain on investments 7,711,220 766,226 Increase in Net Assets from Operations 8,080,290 805,551 Increase in Net Assets from Operations Per Series Class A 1,440,420 76,856 Class F 153,493 2,256 Class F-MG 16,850 109 Class MG 296,627 14,649 Class O 450,060 17,956 Class R 5,722,840 693,725 Increase in Net Assets from Operations Per Unit Class A 9.87 5.43 Class F 11.22 5.99 Class F-MG 10.70 5.33 Class MG 9.21 5.43 Class O 12.86 6.24 Class R 14.55 7.00




with comparative figures for the period from February 17, 2009 to December 31, 2009


Series ($)

A F F-MG MG O R Total

Increase in Net Assets from Operations 1,440,420 153,493 16,850 296,627 450,060 5,722,840 8,080,290


From net investment income – – – – – (397,204) (397,204) From capital gains – – – – (23,584) (441,426) (465,010) From return of capital – – (8,176) (168,560) – – (176,736) – – (8,176) (168,560) (23,584) (838,630) (1,038,950)Capital Unit Transactions

Sales of units 32,686,999 4,742,492 379,970 8,772,746 9,693,065 43,900,000 100,175,272 Units issued on reinvestment of distributions – – 2,438 62,856 23,584 838,630 927,508

Units redeemed (2,812,500) (119,919) – (365,829) (226,607) (13,000,000) (16,524,855) 29,874,499 4,622,573 382,408 8,469,773 9,490,042 31,738,630 84,577,925 Increase in Net Assets for the Year 31,314,919 4,776,066 391,082 8,597,840 9,916,518 36,622,840 91,619,265

Net Assets – Beginning of Year 4,602,643 84,017 2,109 678,679 624,027 24,845,725 30,837,200

Net Assets – End of Year 35,917,562 4,860,083 393,191 9,276,519 10,540,545 61,468,565 122,456,465

Series ($)

A F F-MG MG O R Total

Increase in Net Assets from Operations 76,856 2,256 109 14,649 17,956 693,725 805,551


From net investment income – – – – – (20,987) (20,987) From capital gains (16,164) (412) – – (5,878) (232,548) (255,002) From return of capital – – (81) (12,321) – – (12,402) (16,164) (412) (81) (12,321) (5,878) (253,535) (288,391)Capital Unit Transactions

Sales of units 4,744,201 112,000 2,000 674,960 795,598 25,452,000 31,780,759 Units issued on reinvestment of distributions 15,114 412 81 1,491 5,878 253,535 276,511 Units redeemed (217,364) (30,239) – (100) (189,527) (1,300,000) (1,737,230) 4,541,951 82,173 2,081 676,351 611,949 24,405,535 30,320,040 Increase in Net Assets for the Period 4,602,643 84,017 2,109 678,679 624,027 24,845,725 30,837,200

Net Assets – Beginning of Period – – – – – – –

Net Assets – End of Period 4,602,643 84,017 2,109 678,679 624,027 24,845,725 30,837,200




For the period from February 17, 2009 to December 31, 2009


2010 2009 $ $


Operating Activities Increase in net assets from operations 8,080,290 805,551 Non-cash items Net realized and unrealized loss on investments (8,713,770) (983,393) Net change in non-cash balances related to operations (56,278) (52,544)Proceeds from the sale of marketable securities 127,011,610 45,893,547 Proceeds from the sale of private debenture investments 2,095,176 532 Purchase of marketable securities (179,806,097) (68,582,181)Purchase of private investments (31,990,548) (7,115,115) (83,379,617) (30,033,603)

Financing Activities Proceeds from issuance of units 98,496,191 31,780,759 Amounts redeemed (16,524,480) (1,737,230)Distributions paid (1,015,350) (286,413)Reinvestment of distributions 927,508 276,511 81,883,869 30,033,627

Increase (Decrease) in Cash During the Period (1,495,748) 24 Cash – Beginning of Period 24 – Cash (Bank Overdraft) – End of Period (1,495,724) 24





ROI Institutional Private Placement Fund21


Private Investment Portfolio Mortgages – 44.44% 96 Spadina Avenue Inc., January 2015 3,000,000 3,000,000 3,024,600Apex Sanitation Products Ltd., October 2015 1,100,000 1,100,000 1,100,000Edmonton Cy Lodging Co., June 2013 3,131,212 3,131,212 3,183,816First Gulf Brantford Shopping Centres Limited, June 2011 100,000 100,000 105,010Frontenac Shopping Centre Inc., November 2014 3,000,000 3,000,000 3,022,200King Edward Realty Inc., March 2015 3,227,671 3,227,671 3,227,671Koffman Enterprises Limited, December 2012 331,000 331,000 331,000Northumberland Shopping Centre Inc., October 2013 4,000,000 4,000,000 4,000,000Plazacorp Property Holdings Inc. (Bedford Commons), August 2020 500,000 500,000 490,735SPN Group Inc., June 2015 500,000 500,000 500,000Whiterock 1305 Ste-Foy Inc., November 2016 3,032,360 3,032,360 3,032,360 21,922,243 22,017,392Investment in Underlying Fund – 54.53% ROI Private Capital Trust Fund, Series R 249,957 27,369,093 27,019,081 27,369,093 27,019,081Total Investments – 98.97% 49,291,336 49,036,473

Short-Term Investment – 0.50% CIBC Mellon Trust Demand Deposit, Variable Rate 248,471 248,471 248,471Total Portfolio – 99.48% 49,539,807 49,284,944Other Assets, Net of Liabilities – 0.52% 259,701Net Assets 49,544,645




ROI Institutional Private Placement Fund 22

2010 2009 $ $

Assets Cash – 464,091 Investments at fair value (cost $49,291,336; 2009 $8,939,036) 49,036,473 8,658,753 Short-term investments (cost $248,471; 2009 $nil) 248,471 – Receivables for investments sold 6,299 – Interest receivable 121,249 435,059 Subscriptions receivable 233,064 67,600 HST receivable 7,181 – 49,652,737 9,625,503

Liabilities

Distributions payable 15,804 – Payable for investments purchased 24,027 – Performance fees payable 617 – Redemptions payable 9,000 – Accrued expenses 58,644 31,525 108,092 31,525 Net Assets 49,544,645 9,593,978

Series Net Assets [note 6] Class A 25,087,886 7,645,478 Class 9 987,256 2,111 Class F 5,559,269 1,484,499 Class O 3,554,326 459,774 Class R 14,355,908 2,116

Net Assets per Unit [note 6 and 10] Class A 104.35 104.54 Class 9 104.10 104.26 Class F 103.62 104.06 Class O 103.68 104.03 Class R 105.27 104.08



As at December 31


2010 2009 $ $

Investment Income Distributions received from underlying funds 1,067,946 –Interest – 415,140 Private investment interest income 810,523 23,812 1,878,469 438,952

Expenses Audit fees 25,585 24,000 Custodian fees 50,534 31,571 Independent review committee 1,616 – Legal fees 12,500 3,520 Management fees [note 7] 252,549 56,022 Operating services 30,858 9,594 Performance fees [note 7] 23,502 11,524 Shareholder reporting costs 17,931 6,051 Transfer agent 7,887 1,143 Total expenses 422,962 143,425 Expenses waived/paid by manager [note 7] (126,515) (75,193)Net Investment Income 1,582,022 370,720 Realized and Unrealized Gain (Loss) on Investments Net realized gain on sale of investments 58,607 123,801 Change in unrealized appreciation (depreciation) in value of investments 25,420 (280,283)Net gain (loss) on investments 84,027 (156,482)Increase in Net Assets from Operations 1,666,049 214,238 Increase in Net Assets from Operations Per Series Class A 707,206 179,486 Class 9 26,893 111 Class F 154,403 25,656 Class O 106,605 8,869 Class R 670,942 116 Increase in Net Assets from Operations Per Unit Class A 5.00 4.82 Class 9 6.49 5.56 Class F 6.04 5.61 Class O 6.59 5.98 Class R 6.90 5.78





ROI Institutional Private Placement Fund 24



Series ($)

A 9 F O R Total

Increase in Net Assets from Operations 707,206 26,893 154,403 106,605 670,942 1,666,049


From net investment income (844,909) (43,929) (201,990) (154,370) (634,020) (1,879,218) From capital gains (48,196) (2,008) (8,932) (6,758) (28,070) (93,964) From return of capital – – – – – – (893,105) (45,937) (210,922) (161,128) (662,090) (1,973,182)Capital Unit Transactions

Sales of units 18,367,398 1,000,000 4,506,375 3,053,479 13,753,600 40,680,852 Units issued on reinvestment of distributions 878,373 4,189 159,582 149,377 662,090 1,853,611 Units redeemed (1,617,464) – (534,668) (53,781) (70,750) (2,276,663) 17,628,307 1,004,189 4,131,289 3,149,075 14,344,940 40,257,799 Increase in Net Assets for the Year 17,442,408 985,145 4,074,770 3,094,552 14,353,792 39,950,667

Net Assets – Beginning of Year 7,645,478 2,111 1,484,499 459,774 2,116 9,593,978

Net Assets – End of Year 25,087,886 987,256 5,559,269 3,554,326 14,355,908 49,544,645

Series ($)

A 9 F O R Total

Increase in Net Assets from Operations 179,486 111 25,656 8,869 116 214,238


From net investment income – – – – – – From capital gains (10,876) (26) (15,820) (5,702) (34) (32,458) From return of capital – – – – – – (10,876) (26) (15,820) (5,702) (34) (32,458)Capital Unit Transactions

Sales of units 8,102,912 2,000 1,462,200 450,905 2,000 10,020,017 Units issued on reinvestment of distributions 10,876 26 13,338 5,702 34 29,976 Units redeemed (636,920) – (875) – – (637,795) 7,476,868 2,026 1,474,663 456,607 2,034 9,412,197 Increase in Net Assets for the Period 7,645,478 2,111 1,484,499 459,774 2,116 9,593,978

Net Assets – Beginning of Period – – – – – –

Net Assets – End of Period 7,645,478 2,111 1,484,499 459,774 2,116 9,593,978


For the period from February 17, 2009 to December 31, 2009


2010 2009 $ $


Operating Activities Increase in net assets from operations 1,666,049 214,238 Non-cash items Net realized and unrealized gain (loss) on investments (84,027) 156,482 Net change in non-cash balances related to operations 352,093 (403,534)Proceeds from the sale of marketable securities 22,453,068 7,426,266 Proceeds from the sale of private debenture investments 23,928 – Purchase of marketable securities (44,172,989) (13,141,500)Purchase of private investments (18,846,171) (3,100,000) (38,608,049) (8,848,048)

Financing Activities Proceeds from issuance of units 40,515,388 9,952,416 Amounts redeemed (2,267,663) (637,795)Distributions paid (1,957,378) (32,458)Reinvestment of distributions 1,853,611 29,976 38,143,958 9,312,139

Increase (Decrease) in Cash During the Year (464,091) 464,091 Cash – Beginning of Year 464,091 – Cash – End of Year – 464,091




with comparative figures for the period February 17, 2009 to December 31, 2009

26ROI Pooled Funds

1. THE FUNDS

The ROI High Yield Private Placement Fund, the ROI Private

Placement Fund, the ROI Strategic Private Placement Fund and

the ROI Institutional Private Placement Fund (the “Funds”) are

open-ended mutual fund trusts established under the laws of Ontario

pursuant to Declarations of Trust. Each of the Funds is authorized

to issue an unlimited number of units, issuable in series, which

are redeemable at the option of the unitholders at their respective

current net asset value per unit (“NAVPU”). Return On Innovation

Management Ltd. (the “Manager”) is the Manager and Trustee of the

Funds and Return On Innovation Advisors Ltd. (the “Advisor”) is the

adviser to the Manager.

The ROI High Yield Private Placement Fund has eight series –

Series A, 5, 7, F, F-5, F-7, O and R. The initial net asset value

(“NAV”) of all Series was $100. The ROI Private Placement Fund has

six series – Series A, F, 6, F-6, O and R. The initial NAV of all Series

was $100. The ROI Strategic Private Placement Fund has six series –

Series A, F, F-MG, MG, O and R. The initial NAV of all Series

was $100. The ROI Institutional Private Placement Fund has five

series – Series A, 9, F, O and R. The initial NAV of all Series was $100.

The Series of the Funds were established on the following dates:

Series A, F, O, Series F-5, F-7, 5, 7 Series 6, F-6 Series F-MG, MG Series 9 Series R

ROI High Yield Private Placement Fund

January 3, 2007 January 3, 2007 March 26, 2008

ROI Private Placement Fund

March 11, 2008 March 11, 2008 November 11, 2008

ROI Strategic Private Placement Fund

February 17, 2009 February 17, 2009 February 17, 2009

ROI Institutional Private Placement Fund

February 17, 2009 February 17, 2009 February 17, 2009

The financial statements of each of the Funds include the statements

of investments as at December 31, 2010, the statements of net assets

as at December 31, 2010 and 2009 and the statements of operations,

cash flows and changes in net assets for the years ended December 31,

2010 and 2009, except for ROI Strategic Private Placement Fund and

ROI Institutional Private Placement Fund, which are for the period

from February 17, 2009 to December 31, 2009.

2. INVESTMENT OBJECTIVES AND STRATEGY

OF THE FUND


The Fund’s investment objective is to provide investors with a high

after-tax current yield and long-term capital appreciation. The Fund’s

investment strategy is to obtain exposure to a portfolio of investments,

which consist primarily of higher-yield private investments and/or

equity securities issued by businesses seeking non-bank financing

loans. The Fund invests in a forward contract (see note 9), which

provides the Fund with a return referenced to and directly correlated

with the return of the ROI Private Trust (the Trust managed by the

Manager). Although the Fund has exposure to the ROI Private Trust,

neither the Fund nor its unitholders have any ownership interest in the

ROI Private Trust. In addition to exposure to the ROI Private Trust,

the Fund will hold common shares in the common share portfolio (see

note 9) and holds a certain portion of its assets directly in high-yield

private placements or in cash or cash equivalents, such as short-term

government debt. The Fund can also invest in other ROI Funds.


The Fund’s investment objective is to provide investors with a high

after-tax current yield and long-term capital appreciation. The Fund’s

investment strategy is to obtain exposure to a portfolio of investments,

which consist primarily of senior private investments and/or equity

securities issued by businesses seeking non-bank financing loans.

The Fund invests in a forward contract (see note 9), which provides

the Fund with a return referenced to and directly correlated with the

return of the ROI Private Capital Trust (also managed by the Manager).

Although the Fund has exposure to the ROI Capital Private Trust,

neither the Fund nor its unitholders will have any ownership interest

in the ROI Private Capital Trust. In addition to exposure to the

ROI Private Capital Trust, the Fund holds common shares in the

common share portfolio (see note 9) and may hold a certain portion of

its assets directly in high-yield private placements or in cash or cash

equivalents, such as short-term government debt. The Fund can also

invest in other ROI Funds.


The Fund’s investment objective is to provide investors with a

nominal after-tax current yield and long-term capital appreciation.

The Fund’s investment strategy is to obtain exposure to a portfolio

of investments, which consist primarily of private investments and/or

equity securities issued by businesses seeking non-bank financing.

The Fund invests in a forward contract (see note 9), which provides

the Fund with a return referenced to and directly correlated with

the return of the ROI Strategic Capital Trust (also managed by the

Manager). Although the Fund has exposure to the ROI Strategic

Capital Trust, neither the Fund nor its unitholders will have any

ownership interest in the ROI Strategic Capital Trust.

Notes To Financial Statements

December 31, 2010

27 ROI Pooled Funds


In addition to exposure to the ROI Strategic Capital Trust, the Fund

holds common shares in the common share portfolio (see note 9) and

may hold a certain portion of its assets directly in private investments

or in cash or cash equivalents, such as short-term government debt.

The Fund can also invest in other ROI Funds.


The Fund’s investment objective is to provide unitholders with a high

current yield and potential for some long-term capital appreciation.

The Fund’s investment strategy is to obtain exposure to a portfolio

of investments, which consist primarily of senior private placement

of capital in debt obligations and/or equity securities issued by

businesses seeking non-bank financing.

Through the forward contracts, the ROI High Yield Private

Placement Fund, ROI Private Placement Fund and ROI Strategic

Private Placement Fund strategy are also able to generate

distributions to investors that consist primarily of capital gains and

returns of capital and, to a lesser extent, ordinary investment income.

Return of capital distributions are generally not subject to tax,

although a return of capital distribution reduces the adjusted cost base

of the units held by an investor. Distributions that are designated as

capital gains will generally be taxed at a lower rate than distributions

of interest and other investment income. The Fund can also invest in

other ROI Funds.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These financial statements are prepared in accordance with Canadian

generally accepted accounting principles (“GAAP”). The significant

accounting policies followed by the Funds are as follows:

Valuation of Series and Units

A NAV is calculated for each series of units of the Funds daily.

The NAV of a particular series of units is computed by calculating

the value of the series’ proportionate share of the assets and liabilities

of the Funds common to all series, less the liabilities of the Funds

attributable only to that series. Expenses directly attributable to a

series are charged to that series. Other expenses, investment income,

realized and unrealized capital, and foreign exchange gains and losses

are allocated proportionately to each series based upon the relative net

assets of each series.

Units of the Funds are offered for sale on a continuous basis and

may be purchased or redeemed on any valuation date at the NAV

per series. A valuation date is each day on which the Toronto Stock

Exchange is open for business. The NAVPU of a series for the

purposes of subscription or redemption is computed by dividing the

NAV of the Funds attributable to the series by the total number of

units of the series of the Funds outstanding at such time.

Investment Valuation

Short-term investments represent overnight cash deposits.

Marketable securities are recorded at fair value, established as the

closing bid price for the security on the recognized exchange on which

it is publicly traded. Where securities are not traded on that date,

a valuation adjustment may be applied.

Investments which are not publicly traded or other assets for which

no public market exists are valued at estimated fair value. The fair

values of investments are determined using an appropriate valuation

methodology after considering: the history and nature of the business;

operating results and financial conditions; independent valuations

of the business; contractual rights relating to the investment;

public market comparable transactions and recent multiples, where

applicable, and other pertinent considerations. The process of

valuing private investments for which no published market or market

observable factors exist is subject to inherent uncertainties and the

resulting values may differ from values which would have been used

had a ready market existed for those investments. These differences

could be material to the fair values of the investments.

Securities and other assets for which market quotations are, in the

opinion of the Advisor, inaccurate, unreliable, not reflective of all

available material information or not readily available are valued at

their fair value, as determined by the Advisor. Fair value represents

the amount of consideration that would be agreed upon in an arm’s

length transaction between knowledgeable, willing parties who are

under no compulsion to act. The valuation procedures relating to

private company investments include preparation by management,

on at least a quarterly basis, of a comprehensive report which

includes a recommendation for the carrying value of the private

company investments.

Forward Contracts

The forward contracts are valued at an amount equal to the gain or loss

that would be realized if the position was to be closed out. On cash

settlement, the fair value of the forward contract shall equal the

difference between the fair value of the Funds’ common share portfolio

and the NAV of the number of units of the reference funds (ROI Private

Trust – reference fund to ROI High Yield Private Placement Fund,

ROI Private Capital Trust – reference fund to ROI Private Placement

Fund and ROI Strategic Capital Trust – reference fund to ROI Strategic

Private Placement Fund) specified in the forward contracts.

Investment Transactions, Income Recognition and

Transaction Costs

Investment transactions are accounted for on the trade date.

Interest income is recognized on an accrual basis. Dividend income

is recognized on the ex-dividend date. Realized gains and losses from

the sales of investments and unrealized appreciation (depreciation) in

28ROI Pooled Funds


the value of investments are calculated with reference to the average

cost of the related investments, which exclude brokerage commissions

and other trading expenses.

Transaction costs, such as brokerage commissions, incurred in the

purchase and sale securities by the Funds are recognized in the

statements of operations.

Increase (Decrease) in Net Assets from Operations per Unit

Increase (decrease) in net assets from operations per unit is based on

the increase (decrease) in net assets from operations attributable to

the series, divided by the weighted average number of such series

outstanding during the period.

Cash

Cash comprises cash on deposit.

Loans and Receivables

Initially recognized at fair value and subsequently measured at amortized

cost which approximates fair value due to their short-term nature.

Other Financial Liabilities

Initially recognized at fair value and subsequently measured at amortized

cost which approximates fair value due to their short-term nature.

Income Taxes

The Funds qualify as mutual fund trusts within the meaning of the

Income Tax Act (Canada) (the “Act”). For tax purposes, the Funds

have a tax year end of December 15. In each tax year, the Funds will

distribute sufficient net taxable income and net capital gains, which

will result in the Funds not paying tax under Part I of the Act.

In addition, income taxes payable on net realized capital gains are

refundable on a formula basis when units of the Funds are redeemed.

Performance Fees

For the ROI High Yield Private Placement Fund, the Manager is

entitled to receive a performance fee equal to the greater of (a) up to

0.70% of the weighted NAV of each series (the “floating performance

fee”) as determined in the Manager’s sole discretion, and (b) up to the

aggregate of 25% of the increase in the NAVPU of each series over

the relevant period (after deducting all management fees and other

expenses charged to the Fund and adding any distributions of income

and capital during the relevant period) as determined in the Manager’s

sole discretion (the “fixed performance fee”), calculated daily and

payable monthly or upon redemption. The fixed performance fee is

subject to a “high water mark,” which ensures that the relevant series

regains any decline in the NAVPU (after adjustments for distributions

of income and capital during the relevant period) before fixed

performance fees will be charged in any subsequent 12-month period.

If the relevant series fails to attain or exceed the “high water mark”

during any 12-month period, a fixed performance fee will be payable

in any subsequent month based on the increase in the series NAVPU

from the date following the end of any such 12-month period to the

end of the relevant period.

For the ROI Private Placement Fund and the ROI Strategic Private

Placement Fund, the Manager is entitled to receive a performance fee

equal to the aggregate of up to 25% as determined in the Manager’s

sole discretion of the increase in the NAVPU of each series over the

relevant period. For the ROI Institutional Private Placement Fund,

the Manager will receive a performance fee equal to the aggregate

of up to 20% as determined in the Manager’s sole discretion of the

increase in the NAVPU of each series over the relevant period.

The performance fee is calculated daily and payable monthly or upon

redemption. The increase in the NAVPU of each series will reflect

a deduction of all management fees and other expenses charged to

the Funds and an increase for any distributions of income and capital

during the relevant period. The performance fee is subject to a

“high water mark,” which ensures that the relevant series regains any

decline in the NAVPU (after adjustments for distributions of income

and capital during the relevant period) before performance fees will

be charged in any subsequent 12-month period. If the relevant series

fails to attain or exceed the “high water mark” during any 12-month

period, a performance fee will be payable in any subsequent month

based on the increase in the series NAVPU from the date following

the end of any such 12-month period to the end of the relevant period.

Accounting Estimates

The preparation of financial statements in accordance with Canadian

GAAP requires management to make estimates and assumptions that

affect the reported amounts of assets and liabilities at the date of the

financial statements and the amounts of income and expense during

the reporting period. Actual results could differ from those estimates.

4. FINANCIAL INSTRUMENTS

The Fund’s financial instruments consist primarily of cash/bank

overdraft, short-term investments, marketable securities, private

investments, convertible bonds, investments in underlying funds,

interest and dividends receivable, HST receivable, subscriptions

receivable, receivable for investment sold, distributions payable,

performance fees payable, redemptions payable, accrued expenses,

bank overdraft and unrealized gain (loss) on forward contracts.

The investments in private companies consist of debt and equity

instruments. These investments are typically illiquid. The Funds

seek to reduce the risks typically associated with such investments by

diversifying the investment portfolio by investing in companies that

are in differing stages of development in a variety of high-growth-

potential industries and by working with investee companies through,

among other things, providing business advice and other services,

aiding in the recruitment process and helping in the process of raising

additional capital.

29 ROI Pooled Funds



Assets

December 2010

$

Investments held for trading 360,149,432

Cash –

Receivables 3,671,050

Liabilities

Financial liabilities 2,149,344


Assets

December 2010

$


Cash –


Liabilities

Financial liabilities 637,651


Assets

December 2010

$


Cash –


Liabilities

Financial liabilities 1,746,855


Assets

December 2010

$


Cash –

Receivables 367,793

Liabilities



Assets

December 2009

$


Cash 19,495


Liabilities



Assets

December 2009

$


Cash 26,467


Liabilities



Assets

December 2009

$


Cash 24

Receivables 64,499

Liabilities



Assets

December 2009

$


Cash 464,091

Receivables 502,659

Liabilities


Financial Instruments

30ROI Pooled Funds


Interest and other receivables are designated as loans and receivables.

Distributions payable, performance fees payable and redemptions

payable are designated as other financial liabilities. The carrying

value of these financial assets and liabilities approximates their fair

value due to their short-term nature.

The Funds’ activities expose them to a variety of financial risks:

credit risk, liquidity risk, market risk (including interest rate risk,

currency risk and other price risk) and valuation risk of private

investments. The Manager and the Advisor seek to minimize

potential adverse effects of these risks on the Funds’ performance by

employing professional experience, daily monitoring of the Funds’

positions and market events, by diversifying the investment portfolios

within the constraints of the investment objectives and, for private

investments, by structuring investments to provide the Funds with

the maximum protection in the event of problems with the issuer of

the security.

Credit Risk

Credit risk is the risk that the counterparty to a financial instrument

will fail to discharge an obligation or commitment that it has entered

into with the Funds. The Funds’ investments in debt instruments

and derivatives represent the main concentration of credit risk.

The fair value of debt instruments and derivatives includes

consideration of the creditworthiness of the issuer.

The ROI High Yield Private Placement Fund, ROI Private

Placement Fund and ROI Strategic Private Placement Fund are

each exposed to credit risk through forward contracts (see note 9).

The risks of forward contracts arise from the potential inability of

the counterparties to meet the terms of the contracts. The maximum

credit risk exposure is the aggregate of all contracts with a positive

value as disclosed in the statement of investments.

All transactions in listed securities are settled upon delivery using

approved brokers. The risk of default is considered minimal, as

delivery of securities sold is only made once the Funds have received

payment. Payment is made on a purchase once the securities have

been received by the Funds. Should either party not meet its

obligation, the trade will fail.

The credit risk related to interest and dividends receivable is subject

to the creditworthiness of the underlying investees. As of December 31,

2010, no allowance for doubtful accounts has been provided for.

The Funds and the ROI Private Trust, ROI Capital Private Trust and

ROI Strategic Capital Trust (see note 2) invest in debt obligations

that are secured, unsecured or subordinated to senior creditors.

The risks of debt obligations arise from the potential inability of

the issuer to make payments on the debt securities. The inability

of the issuer to meet its obligations will affect the fair value of the

investment and the Funds may suffer a loss.


The Fund invests in debt instruments and has entered into a forward

contract (see note 9). As at December 31, 2010, the Fund held

22.65% (2009 – 22.34%) of its net assets in debt securities through

its private investment portfolio and 0.33% (2009 – 20.09%) of its net

assets in a forward contract.





its private investment portfolio and (15.83%) (2009 – 3.99%) of its

net assets in a forward contract.





its private investment portfolio and 5.50% (2009 – 16.51%) of its net

assets in a forward contract.


The Fund invests in debt instruments. As at December 31, 2010,

the Fund held 44.44% (2009 – 32.26%) of its net assets in debt

securities through its private investment portfolio.

Liquidity Risk

Liquidity risk is the risk that the Funds will encounter difficulties in

meeting obligations associated with financial liabilities. The Funds’

exposure to liquidity risk is concentrated in the daily cash redemptions

of units. The Funds primarily invest in securities that are traded in

active markets and can be readily disposed. In addition, the Funds retain

sufficient cash and cash equivalent positions to maintain liquidity.

An illiquid asset is a security or other position that may not be disposed

of quickly in the normal course of business. While investments in

illiquid assets can present above-average growth opportunities, they

can be difficult to value and/or sell at the time and price preferred

by the Funds.

The liquidity risk associated with the daily cash redemptions of units

is managed in three ways: (1) maintaining a portion of the Funds’

portfolios in cash, marketable securities and short-term investments;

(2) through new subscriptions; and (3) the monthly repayment of

principal and interest on the Funds’ private investments.

31 ROI Pooled Funds


ROI High Yield Private Placement Fund December 31, 2010 Within 1 to 3 to Over No specific 1 year 3 years 5 years 5 years date TotalAssets

Cash – – – – – – Interest receivable $765,244 – – – – $765,244 Unrealized gain on forward contract – – $1,187,495 – – 1,187,495 Subscriptions receivable 2,836,279 – – – – 2,836,279 Receivable for investments sold 22,450 – – – – 22,450HST receivable 47,077 – – – – 47,077 Private investments 2,183,658 $15,056,208 21,600,429 $43,052,890 $23,644,921 105,538,106 Investment in underlying fund 61,466,164 – – – – 61,466,164 Short-term investments 353,793 – – – – 353,793 Marketable securities 186,325,260 – – – – 186,325,260 Convertible bond – 5,278,614 – – – 5,278,614

$253,999,925 $20,334,822 $22,787,924 $43,052,890 $23,644,921 $363,820,482 Liabilities

Performance fees payable $392,577 – – – – $392,577 Redemptions payable 846,320 – – – – 846,320 Distributions payable 337,541 – – – – 337,541 Bank overdraft 15,438 – – – – 15,438 Accrued expenses 557,468 – – – – 557,468

$2,149,344 – – – – $2,149,344

ROI High Yield Private Placement Fund December 31, 2009 Within 1 to 3 to Over No specific 1 year 3 years 5 years 5 years date TotalAssets

Cash $19,495 – – – – $19,495 Interest receivable 321,546 – – – – 321,546 Unrealized gain on forward contract – – $31,832,391 – – 31,832,391 Subscriptions receivable 2,238,837 – – – – 2,238,837 Receivable for investments sold 309,567 – – – – 309,567 Private investments 4,912,849 $7,773,966 12,308,271 – $10,398,075 35,393,161 Investment in underlying fund 24,843,604 – – – – 24,843,604 Short-term investments 3,111,311 – – – – 3,111,311 Marketable securities 56,337,010 – – – – 56,337,010 Convertible bond – 4,230,000 – – – 4,230,000

$92,094,219 $12,003,966 $44,140,662 – $10,398,075 $158,636,922 Liabilities

Performance fees payable $223,536 – – – – $223,536 Redemptions payable 45,878 – – – – 45,878 Distributions payable 195,549 – – – – 195,549 Accrued expenses 279,250 – – – – 279,250

$744,213 – – – – $744,213


As at December 31, 2010, the Fund held 29.19% (2009 – 22.34%)

of net assets in private investments which are considered illiquid.

It also had 70.07% (2009 – 55.89%) of net assets in cash, marketable

securities and short-term investments that are traded in active

markets and can be readily disposed of.

The following table summarizes the maturity profile, as at

December 31, 2010 and December 31, 2009, of financial instruments

by contractual maturity or expected cash flow dates.

32ROI Pooled Funds


ROI Private Placement Fund December 31, 2010 Within 1 to 3 to Over No specific 1 year 3 years 5 years 5 years date TotalAssets

Cash – – – – – – Interest and dividends receivable $577,882 – – – – $577,882 Subscriptions receivable 3,259,442 – – – – 3,259,442 HST receivable 30,088 – – – – 30,088 Receivable for investments sold 36,824 – – – – 36,824 Private investments 1,514,570 $23,920,812 $18,942,620 $20,474,823 – 64,852,825 Investment in underlying funds 5,186,949 – – – – 5,186,949 Short-term investments 127,375 – – – – 127,375 Marketable securities 238,131,083 – – – – 238,131,083

$248,864,213 $23,920,812 $18,942,620 $20,474,823 – $312,202,468 Liabilities

Performance fees payable – – – – – – Redemptions payable $104,740 – – – – $104,740 Distributions payable 116,024 – – – – 116,024 Unrealized loss on forward contract – – $42,584,394 – – 42,584,394 Accrued expenses 416,887 – – – – 416,887

$637,651 – $42,584,394 – – $43,222,045

ROI Private Placement Fund December 31, 2009 Within 1 to 3 to Over No specific 1 year 3 years 5 years 5 years date TotalAssets

Cash $26,467 – – – – $26,467 Interest receivable 155,787 – – – – 155,787 Subscriptions receivable 843,211 – – – – 843,211 Receivable for investments sold 26,668 – – – – 26,668 Private investments – $8,209,142 $10,093,950 – – 18,303,092 Investment in underlying funds 10,160,854 – – – – 10,160,854 Short-term investments 2,535,175 – – – – 2,535,175 Marketable securities 101,329,613 – – – – 101,329,613

$115,077,775 $8,209,142 $10,093,950 – – $133,380,867 Liabilities

Performance fees payable $56,284 – – – – $56,284 Redemptions payable 115,545 – – – – 115,545 Distributions payable 77,628 – – – – 77,628 Unrealized loss on forward contract – – $5,116,766 – – 5,116,766 Accrued expenses 302,280 – – – – 302,280

$551,737 – $5,116,766 – – $5,668,503





securities and short-term investments that are traded

in active markets and can be readily disposed of.




33 ROI Pooled Funds











ROI Strategic Private Placement Fund December 31, 2010 Within 1 to 3 to Over No specific 1 year 3 years 5 years 5 years date TotalAssets

Interest and dividends receivable $317,079 – – – – $317,079 Subscriptions receivable 1,679,081 – – – – 1,679,081 HST receivable 12,390 – – – – 12,390 Receivable for investments sold 4,531 – – – – 4,531 Private investments 420,040 $7,021,471 $3,539,809 $17,169,287 $10,086,386 38,236,993 Marketable securities 90,092,331 – – – – 90,092,331 Convertible bonds 590,116 – – – – 590,116

$93,115,568 $7,021,471 $3,539,809 $17,169,287 $10,086,386 $130,932,521 Liabilities

Performance fees payable $63,528 – – – – $63,528 Bank overdraft 1,495,724 – – – – 1,495,724Redemptions payable 375 – – – – 375 Distributions payable 25,578 – – – – 25,578 Unrealized loss on forward contract – – – $6,729,201 – 6,729,201 Accrued expenses 161,650 – – – – 161,650

$1,746,855 – – $6,729,201 – $8,476,056

ROI Strategic Private Placement Fund December 31, 2009 Within 1 to 3 to Over No specific 1 year 3 years 5 years 5 years date TotalAssets

Cash $24 – – – – $24 Interest receivable 63,967 – – – – 63,967 Receivable for investments sold 532 – – – – 532 Private investments – $420,040 $1,999,468 – $4,932,281 7,351,789 Short-term investments 555,498 – – – – 555,498 Marketable securities 27,471,105 – – – – 27,471,105 Convertible bond – 500,000 – – – 500,000

$28,091,126 $920,040 $1,999,468 – $4,932,281 $35,942,915 Liabilities

Distributions payable $1,978 – – – – $1,978 Unrealized loss on forward contract – – – $5,091,782 – 5,091,782 Accrued expenses 11,955 – – – – 11,955

$13,933 – – $5,091,782 – $5,105,715

34ROI Pooled Funds











ROI Institutional Private Placement Fund December 31, 2010 Within 1 to 3 to Over No specific 1 year 3 years 5 years 5 years date TotalAssets

Cash – – – – – – Interest receivable $121,249 – – – – $121,249 Subscriptions receivable 233,064 – – – – 233,064 HST receivable 7,181 – – – – 7,181 Receivables for investments sold 6,299 – – – – 6,299 Private investments 105,010 $3,674,551 $17,906,831 $331,000 – 22,017,392 Short-term investments 248,471 – – – – 248,471 Investments in underlying funds 27,019,081 – – – – 27,019,081

$27,740,355 $3,674,551 $17,906,831 $331,000 – $49,652,737 Liabilities

Performance fees payable $617 – – – – $617 Redemptions payable 9,000 – – – – 9,000 Distributions payable 15,804 – – – – 15,804 Payable for investments purchased 24,027 – – – – 24,027 Accrued expenses 58,644 – – – – 58,644

$108,092 – – – – $108,092

ROI Institutional Private Placement Fund December 31, 2009 Within 1 to 3 to Over No specific 1 year 3 years 5 years 5 years date TotalAssets

Cash $464,091 – – – – $464,091 Interest receivable 435,059 – – – – 435,059 Subscriptions receivable 67,600 – – – – 67,600 Private investments – $105,010 $3,000,000 – – 3,105,010 Investment in underlying funds 5,553,743 – – – – 5,553,743

$6,520,493 $105,010 $3,000,000 – – $9,625,503 Liabilities

Performance fees payable – – – – – – Redemptions payable – – – – – – Distributions payable – – – – – – Payable for investments purchased – – – – – – Accrued expenses $31,525 – – – – $31,525

$31,525 – – – – $31,525

Market Risk

Market risk comprises three main components: interest rate risk,

foreign currency risk and other price risk.

As at December 31, 2010, the Funds held the following percentages

of net assets in equities: ROI High Yield Private Placement Fund –

51.50% (2009 – 35.56%), ROI Private Placement Fund – 88.54%

(2009 – 79.04%), ROI Strategic Private Placement Fund – 73.57%

(2009 – 89.08%) and ROI Institutional Private Placement Fund –

nil% (2009 – nil%).

35 ROI Pooled Funds


While the Funds have significant equity holdings in their common

share portfolios, the fair value fluctuations are driven by the forward

contract (see note 9).

Interest Rate Risk

Interest rate risk arises on fixed interest-bearing financial instruments

held by the Funds. The Funds are exposed to the risk that the

value of interest-bearing financial instruments will fluctuate due

to fluctuations in the prevailing levels of market interest rates.

If interest rates increase, the value of these securities will fall.

Conversely, a decrease in interest rates will lead to an increase in the

value of these securities. The Funds may also hold securities which

earn variable rates of interest. A decrease in interest rates will lead to

a decrease in interest earned on these securities.


As at December 31, 2010, had the prevailing interest rates raised

or lowered by 1%, with all other variables held constant, net assets

would have decreased or increased, respectively, by approximately

$6,030,447 (2009 – $1,256,003). The Fund held 1.46% (2009 –

2.67%) of its net assets in convertible bonds, which are subject to risk

of fluctuations in the prevailing levels of market interest rates and

0.11% (2009 – 1.96%) of its net assets in short-term investments,

which earn a variable rate of interest.





$2,252,114 (2009 – $952,787). The Fund held 0.05% (2009 –

1.98%) of its net assets in short-term investments, which earn a

variable rate of interest.





$1,268,186 (2009 – $378,890). The Fund held 0.48% (2009 –

1.62%) of its net assets in convertible bonds, which are subject to

risk of fluctuations in the prevailing levels of market interest rates

and nil% (2009 – 1.80%) of its net assets in short-term investments,

which earn a variable rate of interest.





$1,407,195 (2009 – $260,479).

The private investments held by the Funds generate interest income

with varying rates of interest: ROI High Yield Private Placement

Fund – 3.90% to 15.50%, ROI Private Placement Fund – 4.82% to

8.75%, ROI Strategic Private Placement Fund – 4.82% to 12.00%

and ROI Institutional Private Placement Fund – 4.82% to 9.00%.

Currency Risk

Currency risk is the risk that the value of a financial instrument

will fluctuate due to changes in foreign exchange rates. Currency

risk arises from financial instruments (including cash) that are

denominated in a currency other than Canadian dollars, which

represents the functional currency of the Funds.

The Funds may enter into foreign exchange contracts for hedging

purposes to reduce their foreign currency exposure, or to establish

exposure to foreign currencies.

The Funds invest primarily in Canadian securities. As at

December 31, 2010 and December 31, 2009, the Funds did not have

any significant exposure to currency risk.

Other Price Risk

Other price risk is the risk that the value of financial instruments

will fluctuate as a result of changes in market prices (other than those

arising from interest rate risk or currency risk), whether caused by

factors specific to an individual investment, its issuer, or all factors

affecting all instruments traded in a market or market segment.

All equity securities present a risk of loss of capital. The Manager

and the Advisor moderate this risk through careful selection of

securities and other financial instruments within the parameters of

the investment strategy. The maximum risk resulting from financial

instruments is equivalent to their fair value.

When a mutual fund invests in the securities of another mutual fund

(referred to in this context as an “underlying mutual fund”), the

mutual fund has the same risks as the underlying mutual fund in

which it invests. Equities are susceptible to market price risk arising

from uncertainties about future prices of those instruments.


As at December 31, 2010, 52.96% (2009 – 35.56%) of the Fund’s net

assets were traded on the Canadian stock exchange. The Fund is not

exposed to other price risk on its common share portfolio, given the

nature of the forward contract (note 9).


As at December 31, 2010, 88.53% (2009 – 79.04%) of the Fund’s net

assets were traded on the Canadian stock exchange. The Fund is not

exposed to other price risk on its common share portfolio, given the

nature of the forward contract (note 9).


As at December 31, 2010, 74.05% (2009 – 89.08%) of the Fund’s

net assets represents underlying investments, which were traded on

the Canadian stock exchange. The Fund is not exposed to other price

risk on its common share portfolio, given the nature of the forward

contract (note 9).


As at December 31, 2010 and December 31, 2009, the Fund did not

have any exposure to other price risk.

36ROI Pooled Funds


Valuation Risk of Private Investments

The process of valuing investments for which no published market

exists is based on inherent uncertainties and will be influenced by the

time required to assess the impact of any particular event on value

from time to time. The resulting values may differ from values that

would have been used had a ready market existed for the investments.

This valuation process is subjective to a degree and, to the extent that

these valuations are inaccurate, investors in the Funds may gain a

benefit or suffer a loss when they purchase or redeem units.

The total amounts of the changes in fair value, recognized in

net income during the year that was estimated using a valuation

technique based on assumptions that are not supported by observable

market prices or rates, are as follows: ROI High Yield Private

Placement Fund – increase of $1,763,973 (2009 – increase of

$1,536,176); ROI Private Placement Fund – increase of $336,077

(2009 – decrease of $134,240); ROI Strategic Private Placement

Fund – increase of $989,831 (2009 – increase of $696,769); and

ROI Institutional Private Placement Fund $90,131 (2009 –

increase of $5,010).

5. FAIR VALUE HIERARCHY

During 2009, CICA Handbook Section 3862, Financial Instruments

– Disclosures (“Section 3862”), was amended to include enhanced

disclosures about inputs to fair value measurement, including their

classification within a hierarchy that prioritizes the inputs to fair value

measurement. The hierarchy 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 Unadjusted quoted prices in active markets for identical

assets or liabilities;

Level 2 Inputs other than quoted prices that are observable for the

asset or liability either directly or indirectly; and

Level 3 Inputs that are not based on observable market data.

If different levels of inputs are used to measure a financial instrument’s

fair value, the classification within the hierarchy is based on the lowest

level input that is significant to the fair value measurement.

The following tables illustrate the classification of the Funds’ financial

instruments within the fair value hierarchy as at December 31, 2010

and 2009:

ROI High Yield Private Placement Fund Assets at fair value as at December 31, 2010 Level 1 Level 2 Level 3 TotalMarketable securities $247,791,424 – – $247,791,424 Short-term investments 353,793 – – 353,793 Private investments – – $105,538,106 105,538,106 Convertible bond – $5,278,614 – 5,278,614 Unrealized gain on forward contract – – 1,187,495 1,187,495 $248,145,217 $5,278,614 $106,725,601 $360,149,432

ROI High Yield Private Placement Fund Assets at fair value as at December 31, 2009 Level 1 Level 2 Level 3 TotalMarketable securities $81,180,614 – – $81,180,614 Short-term investments 3,111,311 – – 3,111,311 Private investments – – $35,393,161 35,393,161 Convertible bond – $4,230,000 – 4,230,000 Unrealized gain on forward contract – – 31,832,391 31,832,391 $84,291,925 $4,230,000 $67,225,552 $155,747,477

ROI Private Placement Fund Assets at fair value as at December 31, 2010 Level 1 Level 2 Level 3 TotalMarketable securities $243,318,032 – – $243,318,032 Short-term investments 127,375 – – 127,375 Private investments – – $64,852,825 64,852,825 $243,445,407 – $64,852,825 $308,298,232

Liabilities at fair value as at December 31, 2010 Level 1 Level 2 Level 3 TotalUnrealized loss on forward contract – – $42,584,394 $42,584,394

37 ROI Pooled Funds


ROI Private Placement Fund Assets at fair value as at December 31, 2009 Level 1 Level 2 Level 3 TotalMarketable securities $111,490,467 – – $111,490,467 Short-term investments 2,535,175 – – 2,535,175 Private investments – – $18,303,092 18,303,092 $114,025,642 – $18,303,092 $132,328,734


ROI Strategic Private Placement Fund Assets at fair value as at December 31, 2010 Level 1 Level 2 Level 3 TotalMarketable securities $90,092,331 – – $90,092,331 Private investments – – $38,236,993 38,236,993 Convertible bond – $590,116 – 590,116 $90,092,331 $590,116 $38,236,993 $128,919,440


ROI Strategic Private Placement Fund Assets at fair value as at December 31, 2009 Level 1 Level 2 Level 3 TotalMarketable securities $27,471,105 – – $27,471,105 Short-term investments 555,498 – – 555,498 Private investments – – $7,351,789 7,351,789 Convertible bond – $500,000 – 500,000 $28,026,603 $500,000 $7,351,789 $35,878,392


ROI Institutional Private Placement Fund Assets at fair value as at December 31, 2010 Level 1 Level 2 Level 3 TotalInvestments in underlying fund $27,019,081 – – $27,019,081 Short-term investment 248,471 – – 248,471 Private investments – – $22,017,392 22,017,392 $27,267,552 – $22,017,392 $49,284,944

ROI Institutional Private Placement Fund Assets at fair value as at December 31, 2009 Level 1 Level 2 Level 3 TotalInvestments in underlying fund $5,553,743 – – $5,553,743 Private investments – – $3,105,010 3,105,010 $5,553,743 – $3,105,010 $8,658,753

38ROI Pooled Funds


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 is

reclassified as Level 3. There were no transfers between levels during

the year.

Marketable Securities

The Funds’ marketable securities are classified as Level 1 when

the security is actively traded and a reliable quote is available.

Marketable securities include publicly traded equities and

investments in publicly available mutual funds.

Short-Term Investments

The Funds’ short-term investments are classified as Level 1 as they

represent overnight cash deposits and are considered to be equivalent

to cash.

Convertible Bonds

The Funds’ convertible bonds investments are classified as Level 2

when they are valued using observable inputs, including interest rates

curves, credit spreads and volatilities.

Private Investments

The Funds’ private investments are classified as Level 3 as the

determination of fair value requires significant unobservable data

and the application of valuation techniques. Private investments

include investments which are not publicly traded or other assets for

which no public market exists.

Forward Contracts

The Funds’ forward contracts are classified as Level 3 as the

determination of fair values are based on the reference funds which

invest only in private investments.

The following is a reconciliation of Level 3 fair value measurements

for the periods ended December 31, 2010 and 2009:

ROI High Yield Private Placement Fund Year endedDecember 31, 2010

Fair value measurements using Level 3 inputs Private InvestmentsBalance at December 31, 2009 $35,393,161 Purchases 76,358,907 Sales and principal payments (7,977,935)Change in unrealized gain 1,763,973 Balance at December 31, 2010 $105,538,106 Unrealized Gain on Forward ContractBalance at December 31, 2009 $31,832,391 Change in unrealized loss (30,644,896)

Balance at December 31, 2010 $1,187,495

The change in unrealized gain for private investments still held at

December 31, 2010 is $2,543,746.

ROI High Yield Private Placement Fund Year endedDecember 31, 2009

Fair value measurements using Level 3 inputs Private InvestmentsBalance at December 31, 2008 $24,578,325 Purchases 18,515,171 Sales and principal payments (9,236,511)Change in unrealized gain 1,536,176 Balance at December 31, 2009 $35,393,161 Unrealized Gain on Forward ContractBalance at December 31, 2008 $44,793,964 Change in unrealized loss (12,961,573)

Balance at December 31, 2009 $31,832,391


December 31, 2009 is $1,506,233.

ROI Private Placement Fund Year endedDecember 31, 2010

Fair value measurements using Level 3 inputs Private InvestmentsBalance at December 31, 2009 $18,303,092 Purchases 47,092,000 Sales and principal payments (878,344)Change in unrealized gain 336,077 Balance at December 31, 2010 $64,852,825 Unrealized Gain (Loss) on Forward ContractBalance at December 31, 2009 ($5,116,766)Change in unrealized loss (37,467,628)

Balance at December 31, 2010 ($42,584,394)


December 31, 2010 is $343,374.

ROI Private Placement Fund Year endedDecember 31, 2009

Fair value measurements using Level 3 inputs Private InvestmentsBalance at December 31, 2008 $8,117,409 Purchases 10,500,000 Sales and principal payments (180,077)Change in unrealized loss (134,240)Balance at December 31, 2009 $18,303,092 Unrealized Gain (Loss) on Forward ContractBalance at December 31, 2008 $15,021,878 Change in unrealized loss (20,138,644)


The change in unrealized loss for private investments still held at December 31, 2009 is $134,240.

39 ROI Pooled Funds

ROI Strategic Private Placement Fund Year endedDecember 31, 2010

Fair value measurements using Level 3 inputs Private InvestmentsBalance at December 31, 2009 $7,351,789 Purchases 31,990,548 Sales and principal payments (2,095,176)Change in unrealized gain 989,832 Balance at December 31, 2010 $38,236,993 Unrealized Loss on Forward ContractBalance at December 31, 2009 ($5,091,782)Change in unrealized loss (1,637,419)


The change in unrealized gain for private investments still held at December 31, 2010 is $1,079,947.

ROI Strategic Private Placement Fund Period endedDecember 31, 2009

Fair value measurements using Level 3 inputs Private InvestmentsBalance at December 31, 2008 – Purchases $6,655,552 Sales and principal payments (532)Change in unrealized gain 696,769 Balance at December 31, 2009 $7,351,789 Unrealized Loss on Forward ContractBalance at December 31, 2008 – Change in unrealized loss ($5,091,782)


The change in unrealized gain for private investments still held at December 31, 2009 is $696,769.

ROI Institutional Private Placement Fund Year endedDecember 31, 2010

Fair value measurements using Level 3 inputs Private InvestmentsBalance at December 31, 2009 $3,105,010 Purchases 18,846,171 Sales and principal payments (23,928)Change in unrealized gain 90,139 Balance at December 31, 2010 $22,017,392


ROI Institutional Private Placement Fund Period endedDecember 31, 2009

Fair value measurements using Level 3 inputs Private InvestmentsBalance at December 31, 2008 – Purchases $3,100,000 Change in unrealized gain 5,010 Balance at December 31, 2009 $3,105,010



For disclosure regarding sensitivity analysis on private investments, refer to note 4.

6. CAPITAL UNITS

The capital of the Funds is represented by issued redeemable units

with no par value. Unitholders are entitled to distributions, if any,

and to payment of a proportionate share based on the series’ NAVPU

upon redemption. The Funds have no restrictions or specific capital

requirements on the subscription and redemption of units other than

the minimum subscription requirements. Capital movements are

shown on the statements of changes in net assets. In accordance with

their investment strategies and risk management policies, the Funds

invest their subscriptions while maintaining sufficient liquidity to

meet redemptions.

The authorized capital of the Funds consists of an unlimited number

of units without nominal or par value. The unitholders have the

right under the Funds’ Declarations of Trust to require the Funds to

repurchase their units at their current NAV.

Some distributions made by the Funds are automatically reinvested in

additional units at the current NAVPU, without an acquisition charge

at the discretion of the unitholders. Unitholders may withdraw from

the automatic reinvestment plan by written notice to the Manager.

The Funds are mutual fund trusts which derive their capital from

investor subscriptions in the Funds. The objective of the Manager

and the Advisor is to invest the Funds’ capital in order to provide a

return to unitholders in accordance with the objectives and strategy

of the Funds. The Funds are not subject to any externally imposed

capital requirements.

40ROI Pooled Funds


ROI Private Placement Fund Year ended December 31, 2010

Series A Series F Series 6 Series F-6 Series O Series R

# of units # of units # of units # of units # of units # of units

Balance – Beginning of Year 706,959 52,263 255,118 35,777 142,750 10

Issued:

For cash 960,916 161,625 120,028 60,772 290,023 17,220

On reinvestment of distributions – – 4,023 1,107 – –

Repurchased for cash (234,239) (42,503) (76,947) (12,773) (59,024) –

Balance – End of Year 1,433,636 171,385 302,223 84,883 373,750 17,230

ROI Private Placement Fund Year ended December 31, 2009

Series A Series F Series 6 Series F-6 Series O Series R


Balance – Beginning of Year 345,474 43,260 173,125 22,392 101,747 42,824

Issued:

For cash 529,986 38,506 147,641 21,545 57,403 78,967

On reinvestment of distributions – – 3,559 422 – –

Repurchased for cash (168,501) (29,503) (69,207) (8,582) (16,400) (121,781)

Balance – End of Year 706,959 52,263 255,118 35,777 142,750 10

ROI High Yield Private Placement Fund Year ended December 31, 2010

Series A Series 5 Series 7 Series F Series F-5 Series F-7 Series O Series R

# of units # of units # of units # of units # of units # of units # of units # of units

Balance – Beginning of Year 597,265 23,618 342,597 92,520 2,596 94,577 92,223 106,105

Issued:

For cash 857,101 101,870 532,165 181,363 26,226 61,036 221,819 382,695

On reinvestment of distributions – 1,158 16,858 – 216 1,761 – –

Repurchased for cash (168,192) (12,100) (126,914) (38,415) (1,962) (18,794) (37,860) (384,824)

Balance – End of Year 1,286,173 114,547 764,706 235,468 27,076 138,580 276,181 103,976

ROI High Yield Private Placement Fund Year ended December 31, 2009

Series A Series 5 Series 7 Series F Series F-5 Series F-7 Series O Series R

# of units # of units # of units # of units # of units # of units # of units # of units

Balance – Beginning of Year 385,987 15,045 255,606 64,761 477 103,928 52,728 10

Issued:

For cash 306,726 14,422 155,658 55,818 3,005 28,689 45,533 106,095

On reinvestment of distributions – 226 6,430 – 23 1,839 – –

Repurchased for cash (95,448) (6,075) (75,097) (28,059) (909) (39,879) (6,038) –

Balance – End of Year 597,265 23,618 342,597 92,520 2,596 94,577 92,223 106,105

Changes in issued units per series are summarized as follows:

41 ROI Pooled Funds

ROI Strategic Private Placement Fund Year ended December 31, 2010

Series A Series F Series F-MG Series MG Series O Series R


Balance – Beginning of Year 44,021 801 21 6,730 5,959 237,154

Issued:

For cash 295,492 42,212 3,633 84,357 86,152 392,881

On reinvestment of distributions – – 23 607 202 7,159

Repurchased for cash (25,144) (1,074) – (3,491) (1,998) (113,714)

Balance – End of Year 314,369 41,939 3,677 88,203 90,316 523,480


ROI Strategic Private Placement Fund Year ended December 31, 2009

Series A Series F Series F-MG Series MG Series O Series R


Balance – Beginning of Year – – – – – –

Issued:

For cash 45,962 1,087 20 6,716 7,771 247,371

On reinvestment of distributions 145 4 1 15 56 2,433

Repurchased for cash (2,086) (290) – (1) (1,868) (12,650)

Balance – End of Year 44,021 801 21 6,730 5,959 237,154

ROI Institutional Private Placement Fund Year ended December 31, 2009

Series A Series 9 Series F Series O Series R

# of units # of units # of units # of units # of units

Balance – Beginning of Year – – – – –

Issued:

For cash 79,160 20 14,146 4,365 20

On reinvestment of distributions 104 – 128 55 –

Repurchased for cash (6,129) – (8) – –

Balance – End of Year 73,135 20 14,266 4,420 20

ROI Institutional Private Placement Fund Year ended December 31, 2010

Series A Series 9 Series F Series O Series R

# of units # of units # of units # of units # of units

Balance – Beginning of Year 73,135 20 14,266 4,420 20

Issued:

For cash 174,272 9,424 42,922 28,943 130,758

On reinvestment of distributions 8,364 40 1,527 1,428 6,266

Repurchased for cash (15,350) – (5,067) (508) (667)

Balance – End of Year 240,421 9,484 53,648 34,283 136,377

42ROI Pooled Funds


7. MANAGEMENT FEES AND OPERATING EXPENSES


The Manager is responsible for the day-to-day management of

the Fund. In consideration, the Manager is entitled to receive a

management fee based on the average NAV of the Fund, calculated

daily and payable monthly at the following annualized rates:

Series A, 5 and 7 – 1.30%; Series F, F-5, F-7, O and R – nil%.

In addition, the Manager is entitled to a performance fee of up to

the aggregate of 25% of the increase in the NAVPU of each series

(excluding Series R) over the relevant year (after deducting all

management fees and other expenses charged to the Fund), calculated

daily and payable monthly. During the year ended December 31, 2010,

the Fund incurred $2,568,641 (2009 – $1,196,409) in management

fees and $3,573,936 (2009 – $891,710) in performance fees.






Series A and 6 – 1.60%; Series F and F-6 – 0.60%; Series O and

R – nil%. In addition, the Manager is entitled to a performance fee

of up to the aggregate of 25% of the increase in the NAVPU of each

series (excluding Series R) over the relevant year (after deducting all



the Fund incurred $2,641,511 (2009 – $1,187,982) in management

fees and $385,427 (2009 – $578,184) in performance fees.






Series A and MG – 1.50%; Series F and F-MG – 0.50%; Series O and

R – nil%. In addition, the Manager is entitled to a performance fee

of up to the aggregate of 25% of the increase in the NAVPU of each

series (excluding Series R) over the relevant year (after deducting all



the Fund incurred $323,923 (2009 – $23,692) in management fees

and $519,331 (2009 – $nil) in performance fees.






Series A – 1.50%; Series F – 0.50%; Series I, O and R – nil%.

In addition, the Manager is entitled to a performance fee of up to

the aggregate of 25% of the increase in the NAVPU of each series

(excluding Series R) over the relevant year (after deducting all



the Fund incurred $252,549 (2009 – $56,022) in management fees

and $23,502 (2009 – $11,524) in performance fees.

The Advisor is responsible for managing the investment portfolios.

The Advisor is compensated by the Manager.

The operating expenses of the Funds, which include, but are

not limited to, legal, audit, custodial, transfer agency and fund

administration expenses and the cost of financial statements and other

reports, are the direct responsibility of the Funds. The Manager

pays certain of these expenses on behalf of the Funds and is then

reimbursed by the Funds.

The Manager may waive or absorb certain expenses of the Funds.

The decision to do so is reviewed annually and determined at the

sole discretion of the Manager. The Manager intends to continue

this reduction for the foreseeable future, but reserves the right to

discontinue this practice at any time without notice.

In the prior year, subject to applicable regulatory requirements,

the ROI High Yield Private Placement Fund and the ROI Private

Placement Fund arranged to prepay a portion of the annual expenses

applicable to a series in exchange for a discount from the Manager.

During the year ended December 31, 2010, all prepaid amounts

were repaid.

ROI Capital Ltd., an affiliate of the Manager, may be paid work fees

(“work fees”) by companies in which the Funds invest. The work

fees are paid for work done in connection with the financing of such

companies. Such financing work may include sourcing investment

opportunities, structuring investments, due diligence and preparation

of loan participation agreements or other investment documentation.

For the year ended December 31, 2010, the work fees paid to

ROI Capital Ltd. as a result of investments of the Funds totalled

approximately: ROI High Yield Private Placement Fund $2,685,758

(2009 – $550,123); ROI Private Placement Fund $3,433,244

(2009 – $886,521); ROI Strategic Private Placement Fund

$1,111,416 (2009 – $159,950); and ROI Institutional Private

Placement Fund $134,634 (2009 – $98,231).

In addition, ROI Capital may be paid a monitoring fee or commitment,

renewal, extension, discharge, prepayment or other administrative fee

by companies in which the Funds invest. For the financial year ended

December 31, 2010, such fees paid to ROI Capital Ltd. as a result of

investments of the Funds totalled approximately: ROI High Yield

Private Placement Fund $190,289 (2009 – $172,762); ROI Private

Placement Fund $30,772 (2009 – $13,077); ROI Strategic Private

Placement Fund $7,041 (2009 – $46,140); and ROI Institutional

Private Placement Fund $2,250 (2009 – $42).

43 ROI Pooled Funds

8. SALES CHARGES

The sales charge incurred by unitholders is dependent on the purchase

option selected at the time of purchase. Series A, 5, 6, 7, 9 and MG

may be purchased by one of three options: the Initial Sales Charge

Option (“ISC”), Low Load Sales Charge Option (“LL”) or Super Low

Load Sales Charge Option (“SLL”). Under the ISC Option,

a negotiable fee of up to 5% of the purchase price is payable by

Series A, 5, 6, 7, 9 and MG investors to their dealer. No redemption

fee is payable when investors redeem Series A, 5, 6, 7, 9 or MG units

purchased under the ISC Option (subject to a short-term trading fee,

where applicable). Under the LL and SLL Options, no fee is payable

by Series A, 5, 6, 7, 9 and MG investors to their dealer. Investors may

be subject to a redemption fee if they redeem Series A, 5, 6, 7, 9 or

MG units purchased under the LL or SLL Options, depending upon

how long they have held the units to be redeemed.

No sales charges are payable in respect of Series F, F-5, F-7, F-6,

F-MG, O and R units of the Funds.

Investors may switch units of one series into units of another series

within a Fund or between Funds, if they meet the requirements for

the new series that they wish to switch into. A fee may be payable at

the time investors switch Series A, 5, 6, 7, 9 or MG units, depending

upon how long they have held the units to be switched.

9. FORWARD CONTRACTS


The Fund has entered into a forward purchase and sale contract

with a Canadian chartered bank (the “Counterparty”) that has a

maturity date of January 16, 2017. The Fund has purchased and

pledged to the Counterparty the common share portfolio listed on the

statement of investments. Under the terms of the forward contract,

the Counterparty has agreed to pay the Fund an amount equal to the

redemption proceeds of the number of units of the ROI Private Trust

Series O specified in the forward contract, in exchange for the Fund

common share portfolio at fair market value. As at December 31, 2010,

the NAV of the ROI Private Trust was $187,513,972 (2009 –

$88,169,402), consisting mainly of private placement investments

with a fair value of $184,062,974 (2009 – $84,060,747).


The Fund has entered into a forward purchase and sale contract with

a Canadian chartered bank (the “Counterparty”) that has a maturity

date of May 6, 2013. The Fund has purchased and pledged to the

Counterparty the common share portfolio listed on the statement

of investments. Under the terms of the forward contract, the

Counterparty has agreed to pay the Fund an amount equal to the

redemption proceeds of the number of units of the ROI Private Capital

Trust Series A specified in the forward contract, in exchange for the Fund


the NAV of the ROI Private Capital Trust was $222,566,934

(2009 – $96,212,847), consisting mainly of private placement

investments with a fair value of $219,509,691 (2009 – $97,253,754).


The Fund has entered into a forward purchase and sale contract with

a Canadian chartered bank (the “Counterparty”) that has a maturity

date of March 25, 2019. The Fund has purchased and pledged to the

Counterparty the common share portfolio listed on the statement of

investments. Under the terms of the forward contract, the Counterparty

has agreed to pay the Fund an amount equal to the redemption

proceeds of the number of units of the ROI Strategic Capital Trust

Series A specified in the forward contract, in exchange for the Fund


the NAV of the ROI Strategic Capital Trust was $83,366,372

(2009 – $22,379,323), consisting mainly of private placement

investments with a fair value of $82,741,125 (2009 – $22,027,760).

The common share portfolios subject to the forward contracts are

agreed to between the Funds and the Counterparty and is pledged

to the Counterparty as security for the Funds’ obligations under

the forward contract. In order to permit the Funds to pay monthly

distributions, redemptions of units, operating expenses or other

liabilities of the Funds, the terms of the forward contract provide

that the forward contract may be settled in whole or in part at any

time prior to the settlement date by the Funds, either in cash or

by tendering to the Counterparty securities in the common share

portfolios at the Funds’ discretion.

The Funds are exposed to the credit risk of the Counterparty. If the

Counterparty to the forward contract is unable to meet the terms

of the forward contract, a loss may occur. The Counterparty to the

forward contract has a credit rating of AA. The creditworthiness of

the Counterparty was reviewed prior to entering into the forward

contract and is monitored on a regular basis. The fees on the forward

contract are paid by the Funds.


44ROI Pooled Funds


ROI Private TrustPrivate Investments Cost Fair Value Units

%

Limited Partnerships

181, 191 & 195 The West Mall LP $12,901,752 $18,036,163 14,708,371 9.62%

300, 302 & 304 The East Mall LP 8,106,930 8,234,287 9,168,240 4.39%

401 & 405 West Mall LP 6,129,064 9,516,285 7,233,235 5.07%

80 Whitehall Drive LP 1,128,738 1,264,848 1,322,312 0.67%

Bayfield Retail (2009) LP 1,813,900 2,068,495 1,870,000 1.10%

Bayfield Mill Woods Limited Partnership 2,570,500 2,572,885 2,650,000 1.37%

$32,650,884 $41,692,963 36,952,158 22.23%

Debt – Mortgages

2088013 Ont. Inc. (Empire Communities – Brampton) $18,777,561 $18,777,561 18,777,561 10.01%

2154580 Ontario Inc. (LCHD) 1,549,806 1,549,806 1,549,806 0.83%

2176847 Ontario Inc. (Decorstone) 555,195 555,195 555,195 0.30%

4171624 Canada Inc. (Quality Hotel and Suites) 995,920 995,920 995,920 0.53%

6750915 Canada Inc. (CBIA) 2,766,529 1,839,235 2,766,529 0.98%

9126-7393 Quebec Inc. (Gym-max & Conference Centre) 497,960 497,960 497,960 0.27%

Applewood II Hotel Holdings Inc. & Combo Construction Limited

1,034,513 1,034,513 1,034,513 0.55%

Bedford Commons 2 Property Holdings Inc. 1,800,000 1,800,000 1,800,000 0.96%

Blackwood Realty Fund LP 1,000,000 1,011,600 1,000,000 0.54%

Digital Specialty Chemicals Limited 838,182 853,012 906,364 0.45%

Distinctive Design Furniture Inc. 1,050,000 210,000 1,050,000 0.11%

Empire (Estates of Wyndance) Ltd. 2,834,750 2,834,750 2,834,750 1.51%

Empire Fovere Inc. 4,064,317 4,064,317 4,064,317 2.17%

Hilldale Gardens Developments Ltd. 7,500,000 7,500,000 7,500,000 4.00%

IBRANS Developments Ltd. 1,800,000 1,801,260 1,800,000 0.96%

Marquee Hotels, Brampton Inc. 3,980,000 3,980,000 3,980,000 2.12%

Masterfile Corporation 335,664 332,173 335,664 0.18%

McCowan Manufacturing Ltd. 4,750,000 3,323,575 4,750,000 1.77%

MMS Investments Inc. 6,035,137 6,035,137 6,035,137 3.22%

2139654 Ontario Inc. (Novo Plastic Jr.) 3,111,448 3,181,145 3,111,448 1.70%

Parkbridge Lifestyles Communities Inc. 7,500,000 7,500,000 7,500,000 4.00%

Pier 27 Toronto (North) Inc. 2,000,000 2,028,200 2,000,000 1.08%

PQB Shopping Centre Inc. 1,500,000 1,500,000 1,500,000 0.80%

Prowinko Canada Ltd. 5,000,000 5,000,000 5,000,000 2.67%

Reefer Mississauga 667,500 665,898 667,500 0.36%

Reefer Sales & Service (Toronto) Inc. 1,408,000 1,407,296 1,408,000 0.75%

Roybridge Holdings Ltd. 6,712,395 6,815,095 6,712,395 3.63%

Skyline 66 – Temperance Inc. 9,300,000 9,300,000 9,300,000 4.96%

St. Jacobs Country Inn Inc. 7,500,000 7,500,000 7,500,000 4.00%

Strathroy Land Corporation (Villarboit) 4,800,000 4,800,000 4,800,000 2.56%

Summit Energy LP 2,689,277 2,689,277 2,689,277 1.43%

Uxbridge Industrial Ltd. 1,272,832 1,272,832 1,272,832 0.68%

Villamark Inc. 7,350,000 7,350,000 7,350,000 3.92%

Whiterock 200 Ste-Foy Inc. 4,500,000 4,500,000 4,500,000 2.40%

$127,476,986 $124,505,757 127,545,168 66.40%

The private investments held by the reference funds as at December 31, 2010 are as follows:

45 ROI Pooled Funds


ROI Private Capital Trust Private Investments Cost Fair Value Units

%


181, 191 & 195 The West Mall LP $4,227,939 $5,910,499 4,819,973 2.66%

300, 302 & 304 The East Mall LP 1,389,759 1,411,592 1,571,698 0.63%

Bayfield Retail (2009) LP 1,813,900 2,068,495 1,870,000 0.93%

7,431,598 9,390,586 8,261,671 4.22%

Debt – Mortgages

1710 Kingsway Holdings Inc. 5,644,226 5,644,226 5,644,226 2.54%

2088013 Ont. Inc. (Empire Communities – Brampton) 6,697,330 6,697,330 6,697,330 3.01%

2154580 Ontario Inc. (LCHD) 1,937,253 1,937,253 1,937,253 0.87%


7013094 Canada Inc. (Quality Inn Hotels Montreal) 3,530,846 3,566,154 3,530,846 1.60%



1,034,513 1,034,513 1,034,513 0.46%



Clarion Hotel Gatineau 4,116,235 4,154,928 4,116,235 1.87%


Empire Fovere Inc. 4,064,317 4,064,317 4,064,317 1.83%

Infante Bros. General Contractors Limited 3,137,052 3,210,773 3,137,052 1.44%

Instorage (10345 Keele St.) 6,505,653 6,505,653 6,505,653 2.92%

Instorage (144 Norseman St.) 5,447,640 5,447,640 5,447,640 2.45%

Instorage (605 Alden Rd.) 6,122,967 6,122,967 6,122,967 2.75%

Instorage (81 Arrow Rd.) 7,505,135 7,505,135 7,505,135 3.37%

Instorage Kennedy 7,418,605 7,418,605 7,418,605 3.33%

Isabella Developments Inc. 3,982,564 3,982,564 3,982,564 1.79%

Marquee Hotels Ltd. 4,964,161 5,014,796 4,964,161 2.25%


MMV Financial Inc. 13,236,116 13,236,116 13,236,116 5.95%

Palm Holdings Inc. 11,500,000 11,500,000 11,500,000 5.17%

ROI Private TrustPrivate Investments Cost Fair Value Units

%

Subordinated Secured Debentures

Asset Engineering Group LP $2,000,000 $400,000 2,000,000 0.21%

Centra Acquisition Inc. 17,464,254 17,464,254 17,464,254 9.31%

$19,464,254 $17,864,254 19,464,254 9.53%

$179,592,124 $184,062,974 183,961,580 98.16%

Private Investments – 98.16% $184,062,974 Short-Term Investments – 1.18% 2,218,694 Other Assets, Net of Liabilities – 0.66% 1,232,304 Net Assets as at December 31, 2010: $187,513,972

46ROI Pooled Funds

ROI Private Capital Trust Private Investments Cost Fair Value Units

%



Best Western Dawson Creek (Pomeroy Lodging LP) 11,137,896 11,137,896 11,137,896 5.00%

Best Western Prince George (Pomeroy Lodging LP) 2,014,300 2,014,300 2,014,300 0.91%

Holiday Inn Express Grande Prairie (Pomeroy Lodging LP) $9,301,328 $9,301,328 9,301,328 4.18%

Motel 6 (Pomeroy Lodging LP) 4,443,309 4,443,309 4,443,309 2.00%

Pomeroy Inn & Suites Chetwynd (Pomeroy Lodging LP) 4,858,018 4,858,018 4,858,018 2.18%

Pomeroy Inn & Suites Dawson Creek (Pomeroy Lodging LP) 9,479,060 9,479,060 9,479,060 4.26%

Pomeroy Inn & Suites Fort St. John (Pomeroy Lodging LP) 6,931,563 6,931,563 6,931,563 3.11%

Pomeroy Inn & Suites Grimshaw (Pomeroy Lodging LP) 2,665,986 2,665,986 2,665,986 1.20%

Ramada Grande Prairie Clairmont (Pomeroy Lodging LP) 7,168,539 7,168,539 7,168,539 3.22%


Roybridge Holdings Ltd. 5,389,514 5,471,974 5,389,514 2.46%

Skyline 66 – Temperance Inc. 1,000,000 1,000,000 1,000,000 0.45%

Strathroy Land Corporation (Villarboit) 3,200,000 3,200,000 3,200,000 1.44%


Villamark Inc. 2,650,000 2,650,000 2,650,000 1.19%

Whiterock 200 Ste-Foy Inc. 4,500,000 4,500,000 4,500,000 2.02%

$209,022,688 $209,519,105 209,022,688 94.14%

Subordinated Secured Debentures – 0.90%

Asset Engineering Group LP $3,000,000 $600,000 3,000,000 0.27%

$219,454,286 $219,509,691 220,284,359 98.63%

Private Investments – 98.63% $219,509,691 Short-Term Investments – 0.88% 1,906,732 Other Assets, Net of Liabilities – 0.52% 1,150,511 Net Assets as at December 31, 2010: $222,566,934


47 ROI Pooled Funds


ROI Strategic Capital Trust Private Investments Cost Fair Value Units

%


181, 191 & 195 The West Mall LP $4,663,809 $6,519,829 5,316,877 7.82%

300, 302 & 304 The East Mall LP 2,084,639 2,117,388 2,357,547 2.54%

401 & 405 West Mall LP 6,129,064 9,516,285 7,233,235 11.42%

310 Henderson LP 5,641,913 7,455,180 6,034,310 8.94%

80 Whitehall Drive LP 1,128,738 1,264,848 1,322,312 1.52%

Bayfield Mill Woods Limited Partnership 2,570,500 2,572,885 2,650,000 3.09%

$22,218,663 $29,446,415 24,914,281 35.32%

Debt – Mortgages

1162117 Ontario Ltd. (Magnum) $1,800,000 $1,800,000 1,800,000 2.16%

2088013 Ont. Inc. (Empire Communities – Brampton) 4,172,791 4,172,791 4,172,791 5.01%

310 Henderson Senior 4,088,432 4,057,360 4,088,432 4.87%




1,034,513 1,034,513 1,034,513 1.24%




Empire Fovere Inc. 623,696 623,696 623,696 0.75%

Hilldale Gardens Developments Ltd. 5,200,000 5,200,000 5,200,000 6.24%

JB Sons Hospitality Corp. 3,400,000 3,400,000 3,400,000 4.08%

Marquee Hotels Ltd. 2,422,511 2,447,220 2,422,511 2.94%

Marquee Hotels, Brampton Inc. 3,980,000 3,980,000 3,980,000 4.77%




PQB Shopping Centre Inc. 500,000 500,000 500,000 0.60%


Roybridge Holdings Ltd. 636,943 646,688 636,943 0.78%

St. Jacobs Country Inn Inc. 7,500,000 7,500,000 7,500,000 9.00%


$53,223,328 $53,294,710 53,223,328 63.93%

$75,441,991 $82,741,125 78,137,610 99.25%

Private Investments – 99.25% $82,741,125 Short-Term Investments – 0.09% 72,905 Other Assets, Net of Liabilities – 0.66% 552,342 Net Assets as at December 31, 2010: $83,366,372

48ROI Pooled Funds

10. RECONCILIATION OF PRICING NAV TO GAAP

NET ASSETS

In accordance with Accounting Guideline 18, Investment Companies,

investments are deemed to be categorized as held for trading,

and are required to be recorded at fair value as defined in CICA

Handbook Section 3855 “Financial Instruments – Recognition and

Measurement.” Section 3855 requires that the fair value of financial

instruments which are traded in active markets be measured based on

the bid price for long securities and the ask price for short securities

(Net Assets). For the purposes of calculating its NAVPU for

purchases and redemptions, the Funds will continue to measure the

fair value of financial instruments which are traded in active markets

based on the last traded price for the day, but will apply Canadian

GAAP for the purposes of its financial statements.

The following tables present the reconciliation between net asset

value and net assets. Comparative figures are for December 31, 2009.

ROI High Yield Private Placement FundPer Unit $

2010 2009

SeriesNet Asset

ValueNet Assets

Net Asset Value

Net Assets

A 132.79 132.79 125.07 125.07

5 109.20 109.20 107.85 107.85

7 100.01 100.01 101.17 101.17

F 137.89 137.89 128.38 128.38

F-5 114.25 114.25 111.29 111.29

F-7 104.93 104.93 104.62 104.62

O 138.66 138.66 128.75 128.75

R 129.74 129.74 118.45 118.45

ROI Private Placement FundPer Unit $

2010 2009

SeriesNet Asset

ValueNet Assets

Net Asset Value

Net Assets

A 114.19 114.19 109.27 109.27

F 117.00 117.00 110.80 110.80

6 99.48 99.48 100.15 100.15

F-6 102.14 102.14 101.68 101.68

O 118.98 118.98 111.90 111.90

R 116.62 116.62 109.16 109.16


ROI Strategic Private Placement FundPer Unit $

2010 2009

SeriesNet Asset

ValueNet Assets

Net Asset Value

Net Assets

A 114.25 114.25 104.56 104.56

F 115.88 115.88 104.90 104.90

F-MG 106.93 106.93 101.32 101.32

MG 105.17 105.17 100.84 100.84

O 116.71 116.71 104.71 104.71

R 117.42 117.42 104.77 104.77

ROI Institutional Private Placement FundPer Unit $

2010 2009

SeriesNet Asset

ValueNet Assets

Net Asset Value

Net Assets

A 104.35 104.35 104.54 104.54

9 104.10 104.10 104.26 104.26

F 103.62 103.62 104.06 104.06

O 103.68 103.68 104.03 104.03

R 105.27 105.27 104.08 104.08

49 ROI Pooled Funds


11. INCOME TAXES

Non-capital losses are available to be carried forward for 20 years.

Capital losses for income tax purposes may be carried forward

indefinitely and applied against capital gains realized in future

years. The non-capital losses may be utilized to reduce future years’

taxable income and expire up to 2029 for the ROI High Yield Private

Placement Fund and ROI Private Placement Fund. No benefit has

been recognized for these unused losses in these financial statements.

As at December 31, 2010, the Funds had non-capital and net capital

losses available from the December 15, 2010 tax year ended as follows.

ROI High Yield Private Placement Fund 2010 2009Non-Capital Losses $686,216 $686,216

Net Capital Losses $8,039,194 $8,039,194

ROI Private Placement Fund 2010 2009Non-Capital Losses $1,382,140 $1,382,140

Net Capital Losses $2,759,527 $2,759,527

ROI Strategic Private Placement Fund 2010 2009Non-Capital Losses Nil Nil

Net Capital Losses Nil Nil

ROI Institutional Private Placement Fund 2010 2009Non-Capital Losses Nil Nil

Net Capital Losses Nil Nil

12. SECURITIES LENDING

The ROI High Yield Private Placement Fund, ROI Private Placement

Fund and ROI Strategic Private Placement Fund lend portfolio

securities from time to time in order to earn additional income.

The aggregate market value of all securities loaned cannot exceed

100% of the net assets of the Funds. The Funds receive collateral in

the form of debt obligations issued by the U.S. Treasury against the

loaned securities and maintain such collateral in an amount equal

to or greater than 105% of the market value of the loaned securities

during the period of the loan. At December 31, 2010, certain

securities shown on the statements of net assets had been loaned as

part of the securities lending program. The following table shows

the market value of the securities loaned and the market value of the

collateral for such loans. Under the terms of the program, the Funds

may instruct that securities be returned within three days.

13. COMPARATIVE FINANCIAL STATEMENTS

Certain 2009 comparative figures have been reclassified from

statements previously presented to conform to the presentation

of the 2010 financial statements.

14. EXEMPTION FROM REGULATORY FILING

Under the exemption in Section 2.11 of NI 81-106, the Funds

have not and will not be filing their financial statements with

regulatory authorities.

Fund Market Value $ Collateral Value $ROI High Yield Private Placement Fund 185,782,584 195,562,300ROI Private Placement Fund 238,441,431 246,818,229ROI Strategic Private Placement Fund 89,916,296 93,514,852

50ROI Pooled Funds

Corporate & Shareholder Information

Sales Head Office

ROI Capital Ltd.

37 Front Street East

4th Floor

Toronto ON

M5E 1B3

Auditor

PricewaterhouseCoopers LLP

Suite 3000, Box 82

Royal Trust Tower, TD Centre

Toronto ON

M5K 1G8

Legal Counsel

Borden Ladner Gervais LLP

World Exchange Plaza

100 Queen Street, Suite 1100

Ottawa ON

K1P 1J9

Client Services & Back Office

ROI Capital Ltd.

c/o Citigroup Funds Services Canada Inc.

2920 Matheson Boulevard East

Mississauga ON

L4W 5J4

ROI Capital Ltd. 37 Front Street East, 4th Floor, Toronto, Ontario M5E 1B3

Phone: 416 361-6162 Fax: 416 361-3013

roicapital.ca

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