INTERIM MANAGEMENT REPORT OF FUND PERFORMANCE Period Ended June 30, 2016 MARQUEST MONEY MARKET FUND

Transcription

1 INTERIM MANAGEMENT REPORT OF FUND PERFORMANCE Period Ended June 30, 2016 MARQUEST MONEY MARKET FUND

2 MARQUEST MONEY MARKET FUND A NOTE ON FORWARD-LOOKING STATEMENTS This report contains forward looking statements. These statements primarily relate to assessments of future economic and market conditions. Such information has been included to assist readers with assessing recent developments in the Fund s operating climate and possible future developments that may affect Fund performance. All forward looking statements are based on management s current beliefs and assumptions which are subject to numerous risks and uncertainties. Statements with respect to future economic and market conditions are based on management s beliefs and assumptions with respect to a range of factors, including market conditions generally and within the sectors in which the Fund s investments operate. While management considers such beliefs and assumptions to be reasonable based on information currently available to it, no assurance can be given that such beliefs and assumptions will prove to be correct. As a result, these forward looking statements would typically include words such as anticipates, believes, intended or estimated. Events or circumstances may cause actual results to differ materially from those expressed or implied by such forward looking statements as a result of numerous known and unknown risks and uncertainties, including, but not limited to, those associated with economic and market conditions, political stability and other risks identified in the Fund s prospectus. Most of these factors are beyond the control of the Fund and its Manager. Neither the Fund nor its Manager assumes any obligation to update any of the forward looking statements made in this report.

3 MARQUEST MONEY MARKET FUND This interim management report of fund performance contains financial highlights but does not contain the complete interim financial statements of the Marquest Money Market Fund (the Fund ). You can get a copy of the interim financial statements at your request, and at no cost, from the manager Marquest Asset Management Inc. (the Manager ) by calling , by writing to us at Suite 4420, 161 Bay Street, PO Box 204, Toronto, Ontario, M5J 2S1 or by visiting our website at or SEDAR at Securityholders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. Management Discussion of Fund Performance Results of Operations As at June 30, 2016, the Fund s total NAV was $2,192,721, a decrease of 6.74% since the prior year end (December 2015: $2,351,091). The change is primarily due to net redemptions of $158,370. The Bank of Canada has not made any policy changes and the overnight interest rate in Canada remains at 0.50%. The Fund s composition continued to favour higher yielding instruments in order to boost returns in a continued period of low interest rates. As of June 30, 2016, the Fund composition was as follows: 43.23% Bankers Acceptances, 33.47% Discount Commercial Paper, 19.45% Canada Treasury Bills and 3.65% Bearer Deposit Notes. We expect to maintain an overweighting in high quality Corporate Notes and Bankers Acceptances in order to provide an attractive yield to investors. During the period, the Fund s Class A and F units generated returns of 0.16% and 0.21% respectively. Recent Developments The slow growth economic environment has caused monetary policy makers to maintain an accommodative monetary policy and resist moving to raise interest rates. A key factor for monetary authorities in determining a change in policy continues to be labour market conditions. Two factors that continue to depress labour demand is global competition, which remains intense as countries attempt to increase their domestic growth by expanding exports, and the acceleration in the adoption of new technologies that increase the productivity of the existing labour force. The recovery in the cyclical sectors of the stock market suggests the economy is preparing for a reacceleration in growth which may tighten labour conditions and set the stage for the long awaited increase in interest rates. For now, interest rates are likely to remain low until a catalyst for tighter labour markets unfolds. Related Party Transactions Marquest Asset Management Inc. is the Manager ( the Manager ) of the Fund. The Manager is also the trustee of the Fund and is responsible for certain aspects of the day-to-day administration. The Manager of the Fund is responsible for managing all of the Fund s activities, including investment advisory and portfolio management services under a Management Agreement. The Management Agreement is subject to automatic renewal for additional one year terms. The Management Agreement may be terminated during its term if the Manager defaults in its performance of any of its duties or obligations thereunder and if the holders pass a resolution at a meeting of holders terminating the Management Agreement as a result of such default. Further, the holders of a Fund may, by resolution passed at a meeting of holders at least 180 days before the end of the initial term or each anniversary thereof, elect not to renew the Management Agreement, whereupon the Management Agreement will not be renewed beyond its existing term. The Manager must give the holders and the Trustee at least 180 days' notice of its intention not to renew a Management Agreement. Management fees are paid by each class at the rates set out under Management Fees below. During the period, $3,820 in management fees (including HST) was paid to the Manager. The Fund reimbursed the Manager for operating costs (including HST) incurred in administering the Fund of approximately $1,274. 1

4 MARQUEST MONEY MARKET FUND Financial Highlights The following tables show selected key financial information about the Fund and are intended to help you understand the Fund's financial performance for the past five years andf the most recent interim period. The information is derived from the Fund s unaudited interim and audited annual financial statements. Marquest Money Market Fund (Class A)** Net Assets per Unit ($) (1) 2016* Net assets, beginning of the year (2) Increase (decrease) from operations: Total revenue Total expenses (0.02) (0.04) (0.04) (0.05) (0.05) (0.04) Realized gains (losses) for the year Unrealized gains (losses) for the year Total increase (decrease) from operations (2) Distributions: From income (excluding dividends) (0.02) (0.04) (0.08) (0.07) (0.06) (0.08) From dividends From capital gains Return of capital Total annual distributions (3) (0.02) (0.04) (0.08) (0.07) (0.06) (0.08) Net assets at December 31 st of year shown Notes: (1) This information is derived from the Fund s audited annual and unaudited interim financial statements. The Fund adopted IFRS on January 1, 2014 and restated the year ended December 31, 2013 under IFRS. Previously, the Fund prepared its financial statements in accordance with Canadian GAAP. Under Canadian GAAP, the Fund measured the fair values of its investments in accordance with CICA Handbook Section 3855 which required the use of bid prices for long positions and ask prices for short positions. Under IFRS, the Fund measures the fair value of its investments using the guidance in IFRS 13 which allows the fund to use the closing price for its investments. Accordingly, the opening net assets as at January 1, 2013 reflect the adjusted figure in accordance with IFRS. (2) Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units outstanding over the financial period. (3) Distributions were paid in cash or re-invested in additional units of the Fund. *The financial information is for the six-month period ending June 30, **Class A units were first issued on August 10,

5 MARQUEST MONEY MARKET FUND Financial Highlights (continued) Marquest Money Market Fund (Class F)** Net Assets per Unit ($) (1) 2016* 2015 Net assets, beginning of the year (2) Increase (decrease) from operations: Total revenue Total expenses (0.02) (0.02) Realized gains (losses) for the year - - Unrealized gains (losses) for the year - - Total increase (decrease) from operations (2) Distributions: From income (excluding dividends) (0.02) (0.75) From dividends - - From capital gains - - Return of capital - - Total annual distributions (3) (0.02) (0.75) Net assets at December 31 st of year shown Notes: (1) This information is derived from the Fund s audited annual and unaudited interim financial statements. (2) Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units outstanding over the financial period. (3) Distributions were paid in cash or re-invested in additional units of the Fund. *The financial information is for the six-month period ending June 30, **Class F units were first issued on March 3, $

6 MARQUEST MONEY MARKET FUND Financial Highlights (continued) Ratios and Supplemental Data Class A** 2016* Total net asset value (000's) (1) $ 2,184 $ 2,346 $ 3,125 $ 4,388 $ 6,382 $ 9,104 Number of units outstanding (1) 218, , , , , ,380 Management expense ratio (2) 0.44% 0.44% 0.41% 0.44% 0.44% 0.34% Management expense ratio before waivers or absorption (5) 8.89% 6.50% 6.50% 4.92% 3.41% 2.98% Trading expense ratio (3) Portfolio turnover rate (4) Net asset value per unit (1) $ $ $ $ $ $ Class F*** 2016* 2015 Total net asset value (000's) (1) $ 9 $ 5 Number of units outstanding (1) Management expense ratio (2) 0.36% 0.29% Management expense ratio before waivers or absorption 7.30% 4.24% Trading expense ratio (3) - - Portfolio turnover rate (4) - - Net asset value per unit (1) $ $ Notes: (1) The information is provided as at December 31st of the year shown. (2) Management expense ratio is based on total expenses (excluding commissions and other portfolio transaction costs) for the stated period and is expressed as an annualized percentage of daily average net asset value during the period. (3) The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net assets during the period. (4) The Fund's portfolio turnover rate indicates how actively the Fund's portfolio adviser manages its portfolio investments. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher a Fund's portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of a Fund. (5) Waivers and absorption of certain expenses associated with the Fund are at the Manager's discretion and may be terminated at any time. *The financial information is for the six-month period ending June 30, **Class A units were first issued on August 10, ***Class F units were first issued on March 3,

7 MARQUEST MONEY MARKET FUND Management Fees The Management fees for each applicable class are calculated daily and are based on the Fund s ending total NAV per class; cumulative daily totals are then paid on a weekly basis. The Manager uses these management fees to pay sales and trailing commissions to registered dealers on the distribution of the Fund units, as well as for the general investment management expenses. As a percentage of Management fees Maximum Annual Management Fee Rate (%) Sales & Trailer Commissions (%) Investment Advisory and Portfolio Management Services (%) Class A Units 0.50% 28.27% 71.73% Class F Units 0.20% 0.00% % Past Performance The performance information shown assumes that all distributions made by the Fund in the years shown were reinvested in additional securities of the Fund. The performance information does not take into account sales, redemptions, distributions or other optional charges that would have reduced returns or performance. How the Fund has performed in the past does not necessarily indicate how it will perform in the future. Performance differences between classes of units are mainly attributable to management fees charged to each class. Year-by-Year Returns The following bar chart shows the Fund s annual Class A units performance for each of the years shown, and illustrates how the Fund s performance has changed from year to year. In percentage terms, the bar chart shows how much an investment made on the first day of each financial year would have grown or decreased by the last day of each financial year. Class A * Inception date for Class A units was August 10,

8 MARQUEST MONEY MARKET FUND Past Performance (continued) Class F * Inception date for Class F units was July 17,

9 MARQUEST MONEY MARKET FUND Summary of Investment portfolio The tables below provide information about the investment portfolio of the Fund, including a breakdown of the Fund s portfolio into subgroups and the Top 25 positions held by the Fund as a percentage of NAV. The Fund held less than 25 holdings as at the end of the period. Total Net Asset Value: $ 2,192,721 Asset Mix % of Fund's Net Asset Value Bankers Acceptance 43.22% Discount Commercial Paper 33.47% Treasury Bills 19.45% Bearer Deposit Notes 3.65% Cash 0.17% Net Other Assets (Liabilities) 0.04% % Top 25 Holdings % of Fund's Net Asset Value 1 The Toronto-Dominion Bank, 0.84%, 05/07/ % 2 Nestle Capital Canada Ltd., 0.75%, 25/08/ % 3 Bank of Nova Scotia, 0.82%, 26/08/ % 4 Canadian Imperial Bank of Commerce, 0.74%, 02/08/ % 5 National Bank of Canada, 0.77%, 11/08/ % 6 Daimler Canada Finance Inc., 0.90%, 06/09/ % 7 Royal Bank of Canada, 0.80%, 15/08/ % 8 Canadian Treasury Bill, 0.50%, 22/09/ % 9 Inter Pipeline Corridor Inc., 0.89%, 16/08/ % 10 Canadian Treasury Bill, 0.42%, 14/07/ % 11 Canadian Treasury Bill, 0.49%, 11/08/ % 12 FortisBC Energy Inc., 0.87%, 03/08/ % 13 Hydro One, 0.75%, 21/07/ % 14 Vancouver City Savings Credit Union, 0.95%, 05/07/ % 15 Cash 0.17% 99.96% This summary of investment portfolio may change due to the ongoing portfolio transactions of the Fund and a quarterly update is available at The weightings of the positions are calculated based on total NAV of the portfolio as at June 30, The Fund does not hold short positions. The prospectus and other information of Marquest Money Market Fund are available on the internet 7

10 TORONTO 161 Bay Street Suite 4420, P.O. Box 204 Toronto, ON M5J 2S1 Phone Toll Free MONTREAL 1155 Robert-Bourassa Boulevard Suite 905 Montreal, QC H3B 3A7 Phone Toll Free VANCOUVER 1055 West Hastings Suite 300 Vancouver, BC V6E 2E9 Phone CLIENT SERVICES Phone Toll free

11 MARQUEST CORPORATE CLASS FUNDS LTD. MARQUEST SHORT TERM INCOME FUND (CORPORATE CLASS) INTERIM MANAGEMENT REPORT OF FUND PERFORMANCE Period Ended June 30, 2016

12 MARQUEST CORPORATE CLASS FUNDS LTD. MARQUEST SHORT TERM INCOME FUND (CORPORATE CLASS) A NOTE ON FORWARD-LOOKING STATEMENTS This report contains forward looking statements. These statements primarily relate to assessments of future economic and market conditions. Such information has been included to assist readers with assessing recent developments in the Fund s operating climate and possible future developments that may affect Fund performance. All forward looking statements are based on management s current beliefs and assumptions which are subject to numerous risks and uncertainties. Statements with respect to future economic and market conditions are based on management s beliefs and assumptions with respect to a range of factors, including market conditions generally and within the sectors in which the Fund s investments operate. While management considers such beliefs and assumptions to be reasonable based on information currently available to it, no assurance can be given that such beliefs and assumptions will prove to be correct. As a result, these forward looking statements would typically include words such as anticipates, believes, intended or estimated. Events or circumstances may cause actual results to differ materially from those expressed or implied by such forward looking statements as a result of numerous known and unknown risks and uncertainties, including, but not limited to, those associated with economic and market conditions, political stability and other risks identified in the Fund s prospectus. Most of these factors are beyond the control of the Fund and its Manager. Neither the Fund nor its Manager assumes any obligation to update any of the forward looking statements made in this report.

13 MARQUEST CORPORATE CLASS FUNDS LTD. MARQUEST SHORT TERM INCOME FUND (CORPORATE CLASS) This interim management report of fund performance contains financial highlights but does not contain the complete interim financial statements of the Marquest Corporate Class Funds Ltd. - Marquest Short Term Income Fund (Corporate Class) (the Fund ). You can get a copy of the interim financial statements at your request, and at no cost, from the manager Marquest Asset Management Inc. (the Manager ) by calling , by writing to us at Suite 4420, 161 Bay Street, PO Box 204, Toronto, Ontario, M5J 2S1 or by visiting our website at or SEDAR at Securityholder may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. Management Discussion of Fund Performance Results of Operations As at June 30, 2016 the Fund s total NAV was $603,842, a decrease of 53.32% since the prior year end (December 2015: $1,293,494). The change is primarily due to net redemptions of $691,930. The Bank of Canada has not made any policy changes and the overnight interest rate in Canada remains at 0.50%. The Fund s composition continued to favour higher yielding instruments in order to boost returns in a continued period of low interest rates. As of June 30, 2016, the Fund composition was as follows: 39.86% Bankers Acceptances, 42.99% Discount Commercial Paper, 37.06% Canada Treasury Bills and 10.76% Bearer Deposit Notes. We expect to maintain an overweighting in high quality Corporate Notes and Bankers Acceptances in order to provide an attractive yield to investors. The Fund s Series A shares return during the period was 0.26% net of fees and expenses. Recent Developments The slow growth economic environment has caused monetary policy makers to maintain an accommodative monetary policy and resist moving to raise interest rates. A key factor for monetary authorities in determining a change in policy continues to be labour market conditions. Two factors that continue to depress labour demand is global competition, which remains intense as countries attempt to increase their domestic growth by expanding exports, and the acceleration in the adoption of new technologies that increase the productivity of the existing labour force. The recovery in the cyclical sectors of the stock market suggests the economy is preparing for a reacceleration in growth which may tighten labour conditions and set the stage for the long awaited increase in interest rates. For now, interest rates are likely to remain low until a catalyst for tighter labour markets unfolds. Taxation of Switch Fund Shares On March 22, 2016, the federal government announced in its budget that, beginning after September 2016, an exchange of shares of a mutual fund corporation that results in the holder of such shares switching between funds will be considered for income tax purposes to be a disposition at fair market value (the 2016 Budget Proposal ). The 2016 Budget Proposal will not apply to a switch where the shares received in exchange differ only in respect of management fees or expenses to be borne by investors and otherwise derive their value from the same portfolio or fund within the mutual fund corporation. Accordingly, if the 2016 Budget Proposal is enacted into law, the conversion by a holder of Shares of one Corporate Fund to Shares of another Corporate Fund may result in that holder realizing a capital gain or a capital loss. On August 3, 2016, the Department of Finance released an updated version of the Legislative Proposals Relating to Income Tax, Sales Tax and Excise Duties which changed the effective date of the proposal to January 1,

14 MARQUEST CORPORATE CLASS FUNDS LTD. MARQUEST SHORT TERM INCOME FUND (CORPORATE CLASS) Related Party Transactions Marquest Asset Management Inc. is the Manager ( the Manager ) of the Fund. The Manager of the Fund is responsible for managing all of the Fund s activities, including investment advisory and portfolio management services under a Management Agreement. The Management Agreement is subject to automatic renewal for additional one year terms. The Management Agreement may be terminated during its term if the Manager defaults in its performance of any of its duties or obligations thereunder and if the holders pass a resolution at a meeting of holders terminating the Management Agreement as a result of such default. Further, the holders of a Fund may, by resolution passed at a meeting of holders at least 180 days before the end of the initial term or each anniversary thereof, elect not to renew the Management Agreement, whereupon the Management Agreement will not be renewed beyond its existing term. The Manager must give the holders at least 180 days' notice of its intention not to renew a Management Agreement. Management fees are paid by each series at the rates set out under Management Fees below. During the period, $1,410 in management fees (including HST) was paid to the Manager. The Fund reimbursed the Manager for operating costs (including HST) incurred in administering the Fund of approximately $471. 2

15 MARQUEST CORPORATE CLASS FUNDS LTD. MARQUEST SHORT TERM INCOME FUND (CORPORATE CLASS) Financial Highlights The following tables show selected key financial information about the Fund and are intended to help you understand the Fund's financial performance for the past five years and the most recent interim period. The information is derived from the Fund s unaudited interim and audited annual financial statements. Marquest Short Term Income Fund - Corporate Class (Series A)** Net Assets per Share ($) (1) 2016* Net assets, beginning of the year (2) Increase (decrease) from operations: Total revenue Total expenses (0.02) (0.05) (0.04) (0.05) (0.05) (0.05) Realized gains (losses) for the year Unrealized gains (losses) for the year Total increase (decrease) from operations (2) Dividends: From income (excluding dividends) From dividends From capital gains Return of capital Total annual dividends (3) Net assets at December 31 st of year shown Notes: (1) This information is derived from the Fund s audited annual financial statements. The Fund adopted IFRS on January 1, 2014 and restated the year ended December 31, 2013 under IFRS. Previously, the Fund prepared its financial statements in accordance with Canadian GAAP. Under Canadian GAAP, the Fund measured the fair values of its investments in accordance with CICA Handbook Section 3855 which required the use of bid prices for long positions and ask prices for short positions. Under IFRS, the Fund measures the fair value of its investments using the guidance in IFRS 13 which allows the fund to use the closing price for its investments. Accordingly, the opening net assets as at January 1, 2013 reflect the adjusted figure in accordance with IFRS. (2) Net assets and dividends are based on the actual number of shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of shares outstanding over the financial period. (3) Dividends were paid in cash or re-invested in additional shares of the Fund. *The financial information is for the six-month period ending June 30, **Class A shares were first issued on June 25,

16 MARQUEST CORPORATE CLASS FUNDS LTD. MARQUEST SHORT TERM INCOME FUND (CORPORATE CLASS) Financial Highlights (continued) Ratios and Supplemental Data Series A** 2016* Total net asset value (000's) (1) $ 604 $ 1,293 $ 1,479 $ 1,319 $ 1,704 $ 2,273 Number of shares outstanding (1) 52, , , , , ,106 Management expense ratio (2) 0.43% 0.43% 0.44% 0.44% 0.44% 0.39% Management expense ratio before waivers or absorption (5) 7.64% 4.28% 7.81% 5.09% 4.52% 3.71% Trading expense ratio (3) Portfolio turnover rate (4) % % 70.68% 96.30% Net asset value per share (1) $ $ $ $ $ $ Notes: (1) The information is provided as at December 31st of the year shown. (2) Management expense ratio is based on total expenses (excluding commissions and other portfolio transaction costs) for the stated period and is expressed as an annualized percentage of daily average net asset value during the period. (3) The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net assets during the period. (4) The Fund's portfolio turnover rate indicates how actively the Fund's portfolio adviser manages its portfolio investments. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher a Fund's portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of a Fund. (5) Waivers and absorption of certain expenses associated with the Fund are at the Manager's discretion and may be terminated at any time. *The financial information is for the six-month period ending June 30, **Class A shares were first issued on June 25,

17 MARQUEST CORPORATE CLASS FUNDS LTD. MARQUEST SHORT TERM INCOME FUND (CORPORATE CLASS) Management Fees The Management fees for each applicable series are calculated daily and are based on the Fund s ending total NAV per series; cumulative daily totals are then paid on a weekly basis. The Manager uses these management fees to pay sales and trailing commissions to registered dealers on the distribution of the Fund shares, as well as for the general investment management expenses. As a percentage of Management fees Maximum Annual Management Fee Rate (%) Sales & Trailer Commissions (%) Investment Advisory and Portfolio Management Services (%) Series A Shares 0.60% 31.36% 68.64% Series F Shares 0.30% 0.00% % Past Performance The performance information shown assumes that all distributions made by the Fund in the years shown were reinvested in additional securities of the Fund. The performance information does not take into account sales, redemptions, distributions or other optional charges that would have reduced returns or performance. How the Fund has performed in the past does not necessarily indicate how it will perform in the future. Performance differences between series of shares are mainly attributable to management fees charged to each series. Year-by-Year Returns The following bar chart shows the Fund s annual Series A shares performance for each of the years shown, and illustrates how the Fund s performance has changed from year to year. In percentage terms, the bar chart shows how much an investment made on the first day of each financial year would have grown or decreased by the last day of each financial year. Series A * Inception date for Series A shares was June 25,

18 MARQUEST CORPORATE CLASS FUNDS LTD. MARQUEST SHORT TERM INCOME FUND (CORPORATE CLASS) Summary of Investment portfolio The tables below provide information about the investment portfolio of the Fund, including a breakdown of the Fund s portfolio into subgroups and the Top 25 positions held by the Fund as a percentage of NAV. The Fund held less than 25 holdings as at the end of the period. Total Net Asset Value: $ 603,842 Asset Mix % of Fund's Net Asset Value Discount Commercial Paper 42.99% Bankers Acceptance 39.86% Treasury Bills 37.06% Bearer Deposit Notes 10.76% Cash 0.10% Net Other Assets (Liabilities) % % Top 25 Holdings % of Fund's Net Asset Value 1 Canadian Treasury Bill, 0.50%, 11/08/ % 2 Nestle Capital Canada Ltd., 0.75%, 25/08/ % 3 Inter Pipeline Corridor Inc., 0.89%, 16/08/ % 4 Canadian Imperial Bank of Commerce, 0.74%, 02/08/ % 5 Vancouver City Savings Credit Union, 0.95%, 05/07/ % 6 Canadian Treasury Bill, 0.50%, 22/09/ % 7 Daimler Canada Finance Inc., 0.90%, 06/09/ % 8 National Bank of Canada, 0.77%, 11/08/ % 9 Bank of Nova Scotia, 0.82%, 26/08/ % 10 Royal Bank of Canada, 0.80%, 15/08/ % 11 Canadian Treasury Bill, 0.44%, 14/07/ % 12 Hydro One, 0.75%, 21/07/ % 13 Cash 0.10% % This summary of investment portfolio may change due to the ongoing portfolio transactions of the Fund and a quarterly update is available at The weightings of the positions are calculated based on total NAV of the portfolio as at June 30, The Fund does not hold short positions. The prospectus and other information of Marquest Short Term Income Fund (Corporate Class) are available on the internet 6

19 TORONTO 161 Bay Street Suite 4420, P.O. Box 204 Toronto, ON M5J 2S1 Phone Toll Free MONTREAL 1155 Robert-Bourassa Boulevard Suite 905 Montreal, QC H3B 3A7 Phone Toll Free VANCOUVER 1055 West Hastings Suite 300 Vancouver, BC V6E 2E9 Phone CLIENT SERVICES Phone Toll free

20 INTERIM MANAGEMENT REPORT OF FUND PERFORMANCE Period Ended June 30, 2016 MARQUEST CANADIAN BOND FUND

21 MARQUEST CANADIAN BOND FUND A NOTE ON FORWARD-LOOKING STATEMENTS This report contains forward looking statements. These statements primarily relate to assessments of future economic and market conditions. Such information has been included to assist readers with assessing recent developments in the Fund s operating climate and possible future developments that may affect Fund performance. All forward looking statements are based on management s current beliefs and assumptions which are subject to numerous risks and uncertainties. Statements with respect to future economic and market conditions are based on management s beliefs and assumptions with respect to a range of factors, including market conditions generally and within the sectors in which the Fund s investments operate. While management considers such beliefs and assumptions to be reasonable based on information currently available to it, no assurance can be given that such beliefs and assumptions will prove to be correct. Events or circumstances may cause actual results to differ materially from those expressed or implied by such forward looking statements as a result of numerous known and unknown risks and uncertainties, including, but not limited to, those associated with economic and market conditions, political stability and other risks identified in the Fund s prospectus. Most of these factors are beyond the control of the Fund and its Manager. Neither the Fund nor its Manager assumes any obligation to update any of the forward looking statements made in this report.

22 MARQUEST CANADIAN BOND FUND This interim management report of fund performance contains financial highlights but does not contain the complete interim financial statements of the Marquest Canadian Bond Fund (the Fund ). You can get a copy of the interim financial statements at your request, and at no cost, from Marquest Asset Management Inc. (the Manager ) by calling toll-free , by writing to us at Suite 4420, 161 Bay Street, PO Box 204, Toronto, Ontario, M5J 2S1 or by visiting our website at or SEDAR at Securityholders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. Management Discussion of Fund Performance Results of Operations As at June 30, 2016, the Fund s total NAV was 2,076,477, a decrease of 8.87% since the year end (December 31, 2015: $2,278,490).This change was primarily the result of net redemptions of $191,933. The Marquest Canadian Bond Fund ( Fund ) Class A returned 2.27% for the 6 months period ending June 30, The benchmark, FTSE TMX Canada Universe Bond Index ( Universe ), returned 4.05% over the same time period. In order to limit exposure to rising bond yields, the portfolio has been strategically structured with a defensive bias with a negligible weight in long-term bonds and a corresponding overweight in short-term corporates. Declining bond yields and contracting yield spreads for the first half of 2016 were beneficial for absolute returns. The Universe returns were largely driven by capital gains arising from its significantly long duration exposure, which was 7.73 years (modified duration), as at June 30, By comparison, the Fund had a duration of 4.53 years. The portfolio benefitted from an overweight in short term corporates which represented the best performing term for corporates bonds short, mid and long corporates yield spreads narrowed by 11, 2 and 5 bps, respectively. During the first half of 2016, the Canadian yield curve of bonds termed from 30 years to 2 years flattened sharply by about 40 bps, driven by a significant decline of 10-year and longer term yields, while 2-year yields were largely unchanged. Government of Canada bonds across the yield curve traded within a basis points yield range for the period, with the most significant net decline taking place in the long end, where yields fell by about 40 bps. Over the same period, the US Treasury curve flattened by 27 bps (from 30 to 2-years), the result of long bond yields falling by more than short term yields. Both Canadian and US bond markets felt the impact of falling yields in Europe and Japan on the back of their economic uncertainty and aggressive monetary policies. Bank of Canada policy was assumed to be on hold and therefore had little impact on the market, while US Fed policy was estimated to have a negligible likelihood of raising rates. Overall, Canadian corporate bonds fared well, albeit subject to a reasonable amount of volatility as investors reacted to shifting expectations of Fed rate increases. In the first quarter, investors expected higher rates and hence were less enthused about risky assets. However, in the second quarter, as employment data appeared mixed and uncertainty from overseas markets increased, probabilities of Fed hikes fell and with it, so did investors fear of risky assets. However, investors did indicate a preference for lower beta issues with shorter terms, higher credit quality and better liquidity. The portfolio was actively managed during the first half of 2016 to take advantage of spread widening opportunities of and within certain sectors. In the first quarter, better performing bonds of centrally-based provinces were swapped for underperforming bonds of some western provinces, and in the second quarter a further reduction of Ontario positions was made in favour of Quebec and Alberta positions. In the corporate bond sector, we took opportunities throughout the first half to add undervalued positions due to spread widening on the back of supply pressure included were high quality financials (insurance and deposit notes) in Q1 and lower quality autos and telecom in Q2. The defensive positioning of the portfolio was maintained throughout, with benefits to overall performance. 1

23 MARQUEST CANADIAN BOND FUND Recent Developments The defensive stance of the Fund has been maintained despite our reduced expectations of US Fed rates hikes for Half of 2016 has already passed with the Fed staying safely on the sidelines while being bombarded by a host of uncertainty from the domestic economy and global markets. Last year the Fed was laying the foundation for 3-4 rate hikes for 2016, confirmed by looking at its December Dot Plot. However, with the onslaught of challenges, including skeptical investor sentiment, Fed expectations were dialed back to 2-3 rate hikes over the next 12 months in June, according to the June Dot Plot. However, market expectations, to which we concur, are well below the Fed s, with investors expecting only one 25 bps rate hike over the next year. We don t expect much activity from the Bank of Canada either, despite relatively weak economic data. There are enough stimuli down the pipeline from fiscal policy and the Fort McMurray rebuild to afford the Bank some degree of patience. We believe the market has priced in the current environment for monetary policy and hence prospects for substantial yield declines are limited. Nonetheless, we do foresee continued yield volatility which will translate into significant bond price fluctuations given very low yields and overall long durations. We continue to believe that below market duration is appropriate given the speculative nature of the longer term bond market, where income offers minimal downside protection. Conversely, we are more comfortable owning shorter term corporates where yield spreads make up around 2/3 of corporate yields, resulting in much better downside protection. While the US economy has shown periods of inconsistency, we are not overly concerned for the veracity of the US recovery. Employment gains emerged as the most troubling domestic area during Q2 with a very weak May employment report, but there has been a pleasing rebound since. For those who have long held the belief that the strength of the US economy rests with the consumer, the leadership coming from consumption should inspire confidence. We are also seeing hints of wage gains. Clearly, trade and closely related, manufacturing, have been disappointing, but consumer consumption should be enough to generate decent GDP growth and inflation. The Canadian growth story is more troubling than that of the US. Despite the weaker Canadian dollar, exports have been disappointing; unfortunately a sustainable rebound in energy prices is not in sight. US growth will continue to support the current level of exports, but evidence of a major adjustment to the weaker currency appears to be illusive. The domestic economy has been supported by housing markets in the major centres of Vancouver and Toronto, but high prices combined with policy adjustments may take a bite out of growth. Overall, we think that GDP growth will remain weak in the near-term, but should avoid recession and monetary policy response we expect Canada s economic recovery to be a long drawn out affair. Globally, the economic picture is troubling. The Japanese economy remains stagnant, and policy officials are desperate for new measures, having exhausted fiscal and even experimental monetary policy tools talk is of helicopter drops of money into the hands of Japanese consumers. Europe continues to struggle in all but a few countries, with the ECB also digging deep into its tool box with negative rates and extensive QE. Compounding matters are deteriorating political environments in many European countries. In the developing world, energy price declines have had an inordinate impact, sewing both economic and political instability. With Government of Canada bond yields at such low levels all yields are about 1.5% or less - investing in the sector either provides inadequate income (5-years at 60 bps) or too much capital risk (30-years with a price value of a basis point of about 0.3%, i.e. the price will move by 3% for a 10 bps change in yield). Hence, we feel the preferred opportunity rests with credit investments corporate or provincial bonds, particularly of shorter maturities and higher quality where risk of yield pickup being wiped out from spread widening is reduced. 2

24 MARQUEST CANADIAN BOND FUND Related Party Transactions Marquest Asset Management Inc. is the Manager ( the Manager ) of the Fund. The Manager is also the trustee of the Fund and is responsible for certain aspects of the day-to-day administration. The Manager of the Fund has engaged Lorica Investment Counsel Inc. as the portfolio sub-advisor for the Fund, at its own cost. The Manager of the Fund is responsible for managing all of the Fund s activities, including investment advisory and portfolio management services under a Management Agreement. The Management Agreement is subject to automatic renewal for additional one year terms. The Management Agreement may be terminated during its term if the Manager defaults in its performance of any of its duties or obligations thereunder and if the holders pass a resolution at a meeting of holders terminating the Management Agreement as a result of such default. Further, the holders of a Fund may, by resolution passed at a meeting of holders at least 180 days before the end of the initial term or each anniversary thereof, elect not to renew the Management Agreement, whereupon the Management Agreement will not be renewed beyond its existing term. The Manager must give the holders and the Trustee at least 180 days' notice of its intention not to renew a Management Agreement. Management fees are paid by each class at the rates set out under Management Fees below. During the period, $11,374 in management fees (including HST) was paid to the Manager. The Fund reimbursed the Manager for operating costs (including HST) incurred in administering the Fund of approximately $5,801. 3

25 MARQUEST CANADIAN BOND FUND Financial Highlights The following tables show selected key financial information about the Fund and are intended to help you understand the Fund's financial performance for the past five years and the most recent interim period. The information is derived from the Fund s unaudited interim and audited annual financial statements. 2016* Net assets, beginning of the year (2) Increase (decrease) from operations: Total revenue Total expenses (0.04) (0.08) (0.08) (0.08) (0.08) (0.08) Realized gains (losses) for the year (0.01) (0.07) Unrealized gains (losses) for the year 0.09 (0.06) 0.19 (0.18) (0.14) 0.10 Total increase (decrease) from operations (2) (0.13) Distributions: From income (excluding dividends) (0.12) (0.08) (0.10) (0.13) (0.14) (0.16) From dividends From capital gains - (0.15) (0.03) - (0.14) (0.01) Return of capital - (0.01) (0.11) (0.11) (0.00) (0.07) Total annual distributions (3) (0.12) (0.24) (0.24) (0.24) (0.28) (0.24) Net assets at December 31 st of year shown Notes: (2) *The financial information is for the six-month period ending June 30, **Class A units were first issued on June 4, Marquest Canadian Bond Fund (Class A)** Net Assets per Unit ($) (1) (1) This information is derived from the Fund s audited annual and unaudited interim financial statements. The Fund adopted IFRS on January 1, 2014 and restated the year ended December 31, 2013 under IFRS. Previously, the Fund prepared its financial statements in accordance with Canadian GAAP. Under Canadian GAAP, the Fund measured the fair values of its investments in accordance with CICA Handbook Section 3855 which required the use of bid prices for long positions and ask prices for short positions. Under IFRS, the Fund measures the fair value of its investments using the guidance in IFRS 13 which allows the fund to use the closing price for its investments. Accordingly, the opening net assets as at January 1, 2013 reflect the adjusted figure in accordance with IFRS. Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units outstanding over the financial period. (3) Distributions were paid in cash or re-invested in additional units of the Fund. 4

26 MARQUEST CANADIAN BOND FUND Financial Highlights (continued) Marquest Canadian Bond Fund (Class F)** Net Assets per Unit ($) (1) 2016* Net assets, beginning of the year (2) Increase (decrease) from operations: Total revenue Total expenses (0.02) (0.06) (0.05) (0.05) (0.05) (0.05) Realized gains (losses) for the year (0.01) (0.07) Unrealized gains (losses) for the year 0.09 (0.14) 0.20 (0.20) (0.14) 0.12 Total increase (decrease) from operations (2) (0.11) Distributions: From income (excluding dividends) (0.12) - (0.16) (0.12) (0.13) (0.16) From dividends From capital gains - (0.01) (0.04) - (0.13) (0.01) Return of capital - (0.23) (0.04) (0.12) (0.02) (0.07) Total annual distributions (3) (0.12) (0.24) (0.24) (0.24) (0.28) (0.24) Net assets at December 31 st of year shown Notes: (1) This information is derived from the Fund s audited annual and unaudited interim financial statements. The Fund adopted IFRS on January 1, 2014 and restated the year ended December 31, 2013 under IFRS. Previously, the Fund prepared its financial statements in accordance with Canadian GAAP. Under Canadian GAAP, the Fund measured the fair values of its investments in accordance with CICA Handbook Section 3855 which required the use of bid prices for long positions and ask prices for short positions. Under IFRS, the Fund measures the fair value of its investments using the guidance in IFRS 13 which allows the fund to use the closing price for its investments. Accordingly, the opening net assets as at January 1, 2013 reflect the adjusted figure in accordance with IFRS. (2) Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units outstanding over the financial period. (3) Distributions were paid in cash or re-invested in additional units of the Fund. *The financial information is for the six-month period ending June 30, **Class F units were first issued on February 7,

27 MARQUEST CANADIAN BOND FUND Financial Highlights (continued) Ratios and Supplemental Data Class A** 2016* Total net asset value (000's) (1) $ 2,028 $ 2,231 $ 3,343 $ 5,759 $ 8,693 $ 10,254 Number of units outstanding (1) 452, , ,140 1,254,087 1,754,079 2,027,747 Management expense ratio (2) 1.63% 1.64% 1.62% 1.64% 1.65% 1.69% Management expense ratio before waivers or absorption (5) 6.91% 4.42% 3.60% 3.36% 3.20% 3.19% Trading expense ratio (3) Portfolio turnover rate (4) % % % 49.27% % 67.78% Net asset value per unit (1) $ 4.48 $ 4.50 $ 4.66 $ 4.59 $ 4.96 $ 5.06 Class F*** 2016* Total net asset value (000's) (1) $ 48 $ 47 $ 735 $ 866 $ 1,217 $ 1,190 Number of units outstanding (1) 9,830 9, , , , ,645 Management expense ratio (2) 1.00% 1.01% 1.00% 1.00% 1.00% 1.01% Management expense ratio before waivers or absorption (5) 4.25% 2.73% 2.21% 2.05% 1.94% 1.92% Trading expense ratio (3) Portfolio turnover rate (4) % % % 49.27% % 67.78% Net asset value per unit (1) $ 4.89 $ 4.89 $ 5.00 $ 4.88 $ 5.22 $ 5.27 Notes: (1) The information is provided as at December 31st of the year shown. (2) Management expense ratio is based on total expenses (excluding commissions and other portfolio transaction costs) for the stated period and is expressed as an annualized percentage of daily average net asset value during the period. (3) The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net assets during the period. (4) The Fund's portfolio turnover rate indicates how actively the Fund's portfolio adviser manages its portfolio investments. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher a Fund's portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of a Fund. (5) Waivers and absorption of certain expenses associated with the Fund are at the Manager's discretion and may be terminated at any time. *The financial information is for the six-month period ending June 30, **Class A units were first issued on June 4, ***Class F units were first issued on February 7,