Annual Financial Statements - Marquest Asset Management Inc.

Transcription

MARQUEST MUTUAL
FUNDS INC.
ANNUAL REPORT
Year ended December 31, 2015
ANNUAL REPORT 2015
TABLE OF CONTENTS
Auditor's Report
Marquest Mutual Funds Inc. - Explorer Series Fund
3
5
Marquest Mutual Funds Inc. - Energy Series Fund
12
Marquest Mutual Funds Inc. - Canadian Flex™ Series Fund
17
Marquest Mutual Funds Inc. - Resource Flex™ Series Fund
23
Marquest Mutual Funds Inc. - Flex Dividend and Income Growth™ Series Fund
28
Notes to the Financial Statements
34
Collins Barrow Toronto LLP
Collins Barrow Place
11 King Street West
Suite 700, Box 27
Toronto, Ontario
M5H 4C7 Canada
T. 416.480.0160
F. 416.480.2646
www.collinsbarrow.com
INDEPENDENT AUDITORS' REPORT
To the Shareholders of Marquest Mutual Funds Inc.
We have audited the accompanying financial statements of Marquest Mutual Funds Inc. (the “Funds”) which
comprise the statements of financial position as at December 31, 2015 and December 31, 2014, the
statements of comprehensive income, changes in net assets attributable to holders of redeemable shares
and cash flows for the year ended December 31, 2015 and 2014, and a summary of significant accounting
policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with International Financial Reporting Standards, 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.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements 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 the audit to obtain reasonable assurance about
whether the financial statements are free from material misstatements.
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 in our audits is sufficient and appropriate to provide a
basis for our audit opinion.
This office is independently owned and operated by Collins Barrow Toronto LLP
The Collins Barrow trademarks are used under License.
3
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of the
Funds as at December 31, 2015 and 2014 and the results of their financial performance and their cash flows
for the years ended December 31, 2015 and 2014, in accordance with International Financial Reporting
Standards.
Chartered Professional Accountants
Licensed Public Accountants
March 30, 2016
Toronto, Ontario
4
MARQUEST MUTUAL FUNDS INC. - EXPLORER SERIES FUND
ANNUAL AUDITED FINANCIAL STATEMENTS | December 31, 2015
STATEMENTS OF FINANCIAL POSITION (CDN $)
As at,
December 31,
2015 ($)
December 31,
2014 ($)
Assets (Note 2)
Current Assets
Investments at fair value
Cash
Other receivable
Receivable for investments sold
Refundable taxes receivable (Note 4)
Receivable from other corporate classes (Note 4)
Prepaid fees
3,578,640
1,115,502
105,467
301
1,130,631
15,027
5,945,568
9,519,381
321,221
31,597
3,421,357
204,248
16,298
13,514,102
65,451
84,300
110,931
274,489
535,171
26,075
116,466
32,004
692,544
867,089
5,410,397
12,647,013
5,399,725
6,291
4,381
12,629,773
15,620
1,620
0.31
0.35
0.31
0.59
0.63
0.55
Liabilities (Note 2)
Current Liabilities
Payable to manager
Other payables and accrued expenses
Payable on redemption of redeemable shares
Payable for investments purchased
Income taxes payable
Net assets attributable to holders of redeemable shares (Note 3)
Series A-Rollover
Series A-Regular
Series F
Net assets attributable to holders of redeemable shares per share
Series A-Rollover
Series A-Regular
Series F
Approved on behalf of the Board of Directors of Marquest Mutual Funds Inc.
"Gerry L. Brockelsby"
"Stephen J. Zamin"
Gerry L. Brockelsby
Director
Stephen J. Zamin
Director
The accompanying notes form an integral part of the financial statements
5
STATEMENTS OF COMPREHENSIVE INCOME (CDN $)
For the years ended December 31,
2015 ($)
2014 ($)
(70,186)
3,515
291
(6,334)
150,175
2,391
24,600
Income
Dividends
Interest for distribution purposes
Securities lending income
Other income
Net realized gain (loss) on sale of investments, including foreign
exchange gain (loss)
Foreign exchange gain (loss) on cash
Change in net unrealized appreciation (depreciation) on investments
(10,525,910)
(816)
5,687,552
(4,911,888)
Total Income (loss)
(6,233,353)
1,200,083
(4,856,104)
Expenses (Note 4)
Management fees
Foreign taxes withheld (Note 5)
Transaction costs (Note 6)
Operating fees
Audit fees
Custodian fees
Legal fees
Independent review committee fees
Unitholder reporting costs
185,084
81
286,817
266,668
2,554
31,019
42,283
1,096
21,735
837,337
Total Expenses
Increase (decrease) in net assets attributable to holders of redeemable shares
from operations
405,850
236,563
408,068
53,406
20,292
33,332
2,315
1,159,826
(5,749,225)
(6,015,930)
(5,739,500)
(6,772)
(2,953)
(6,008,455)
(6,760)
(715)
(0.29)
(0.29)
(0.26)
(0.27)
(0.24)
(0.24)
from operations per class
Series A-Rollover
Series A-Regular
Series F
from operations per share
Series A-Rollover
Series A-Regular
Series F
6
STATEMENTS OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE SHARES (CDN $)
2015 ($)
2014 ($)
Series A-Rollover
2015 ($)
2014 ($)
Series A-Regular
Net assets attributable to holders of redeemable shares, beginning of period
12,629,773
17,224,559
15,620
29,559
Increase (decrease) in net assets attributable to holders of redeemable
shares from operations
(5,739,500)
(6,008,455)
(6,772)
(6,760)
13,253,990
(14,744,538)
(1,490,548)
27,287,448
(25,873,779)
1,413,669
(2,557)
(2,557)
1,250
(8,429)
(7,179)
(7,230,048)
(4,594,786)
(9,329)
(13,939)
5,399,725
12,629,773
6,291
15,620
Redeemable share transactions (Note 3)
Proceeds from sale of redeemable shares
Amounts paid on redemption of redeemable shares
Net redeemable share transactions
Net Increase (decrease) in net assets attributable to holders of redeemable shares
Net assets attributable to holders of redeemable shares, end of period
2015 ($)
Series F
1,620
(2,953)
2014 ($)
2,335
2015 ($)
Total
2014 ($)
12,647,013
17,256,453
(5,749,225)
(6,015,930)
13,259,704
(14,747,095)
(1,487,391)
27,288,698
(25,882,208)
1,406,490
(715)
(7,236,616)
(4,609,440)
1,620
5,410,397
12,647,013
(715)
Net redeemable unit transactions
5,714
5,714
2,761
4,381
7
-
STATEMENTS OF CASH FLOW (CDN $)
2015 ($)
2014 ($)
(5,749,225)
(6,015,930)
Cash flows from (used in) operating activities
Increase (decrease) in net assets attributable to holders of redeemable shares from operations
Adjustments for:
Foreign exchange loss (gain) on cash
(Appreciation) depreciation on option premium
Purchases of investments
Proceeds from sale and maturity of investments
Other receivable
Refundable taxes receivable
Prepaid fees
Receivable from other corporate series
Payable to manager
Net cash from (used in) operating activities
816
10,525,910
(5,687,552)
-
(15,385,858)
16,630,468
(105,467)
1,872,671
1,271
204,248
(26,075)
(51,015)
2,230,192
6,233,353
(1,200,083)
(25,865,012)
25,400,533
170,334
(10)
(185,206)
(7,085)
(101,700)
(1,570,806)
13,259,704
(14,694,799)
(1,435,095)
27,288,698
(25,850,204)
1,438,494
(816)
795,097
321,221
1,115,502
(132,312)
453,533
321,221
1,364
(81)
-
150,175
2,391
Cash flows from (used in) financing activities
Net cash from (used in) financing activities
Foreign exchange loss(gain) on cash
Net increase (decrease) in cash
Cash (bank indebtedness) at beginning of period
Cash (bank indebtedness) at end of period
Supplementary disclosures on cash flow from operating activities:
Dividends received
Foreign taxes paid
Interest received
8
SCHEDULE OF INVESTMENT PORTFOLIO (CDN $)
As at December 31, 2015
Number of
Shares, Units
or Warrants
950,000
250,000
694,450
1,625,000
1,000,000
1,000,000
1,311,660
500,000
529,410
715,000
450,000
2,500,000
1,000,000
3,000,000
3,000,000
1,978,888
1,244,444
1,000,000
5,119,799
6,500,000
284,615
3,159,666
1,974,500
1,666,666
187,500
5,624,999
640,000
369,280
517
400,000
400,000
1,478,996
264,147
104,500
2,250,000
4,000,000
1,111,111
2,266,667
371,000
284,274
1
14,333,334
800,000
233,333
450,000
375,000
334,741
45,000
160,000
1,333,334
250,000
1,666,667
333,333
125,000
388,888
4,860,666
Expiry
Date
CANADIAN EQUITIES (64.5%)
Base Metals (34.8%)
Accord Minerals Corp. (Restricted)
Aldever Resources Inc.
ALX Uranium Corp., Warrants (Restricted)
Appalaches Resources Inc.
Argex Titanium Inc. (Restricted)
Argex Titanium Inc., Warrants (Restricted)
Avalon Rare Metals Inc.
Bayfield Ventures Corp., Warrants (Restricted)
Beacon Resources Inc.
Berkwood Resources Ltd., Warrants
Bold Ventures Inc.
Bold Ventures Inc., Warrants
Canada Carbon Inc., Warrants
Carmax Mining Corp.
Carmax Mining Corp., Warrants
Cartier Iron Corp.
Cartier Iron Corp., Warrants
Clarion Mining Corp. (Restricted)
Commerce Resources Corp.
Continental Mining And Smelting Ltd. (Restricted)
Copper Fox Metals Inc. (Restricted)
Copper North Mining Corp.
Copperbank Resources Corp., Warrants
Darnley Bay Resources Ltd., Warrants (Restricted)
Doubleview Capital Corp., Warrants
Eagleridge Minerals Ltd. (Restricted)
Explor Resources Inc., Warrants
Falco Resources Ltd.
First Metals Inc.
Gespeg Copper Resources Inc.
Gespeg Copper Resources Inc., Warrants (Restricted)
Glen Eagle Resources Inc.
Gold Reach Resources Ltd.
Gold Reach Resources Ltd., Warrants (Restricted)
Great Lakes Graphite Inc., Warrants
Honey Badger Exploration Inc., Warrants (Restricted)
Intrinsic Minerals Ltd. (Restricted)
Lamelee Iron Ore Ltd.
Laramide Resources Ltd.
Laramide Resources Ltd., Warrants (Restricted)
Leo Resources Inc.
Macdonald Mines Exploration Ltd.
Mag Copper Ltd.
MGX Minerals Inc.
Montan Mining Corp.
Montan Mining Corp., Warrants
Nemaska Lithium Inc.
Nemaska Lithium Inc., Warrants
Northern Graphite Corporation, Warrants
Rogue Resources Inc.
Rogue Resources Inc., Warrants (Restricted)
Royal Nickel Corp., Warrants
St James Resources Inc. (Restricted)
Starfield Resources Inc.
*Average cost includes transaction costs.
See accompanying notes.
9
Strike
Price
Average
Cost*
$
08/12/2016
$0.27
18/09/2017
$0.15
12/05/2016
$0.00
29/09/2016
$0.10
22/06/2017
19/06/2016
$0.06
$0.40
23/12/2016
$0.35
29/06/2016
$0.35
19/10/2019
11/12/2017
08/08/2016
$0.50
$0.15
$0.25
04/11/2016
$0.10
11/08/2017
$0.15
03/06/2016
10/11/2016
12/12/2019
$0.80
$0.12
$0.05
13/03/2018
$0.45
06/07/2017
$0.25
04/02/2017
09/07/2017
$0.28
$0.80
30/12/2015
26/08/2016
22/09/2016
11/07/2016
$0.12
$0.17
$0.17
$0.80
95,000
50,000
145,405
125,000
419,731
1
1
22,500
90,000
3
207,783
70,000
488,986
1,000,000
37,000
189,580
830,000
107,091
12
20,000
129,579
199,075
1
150,000
45,333
93,678
286,667
50,000
70,000
81,000
60,253
133,333
2
10,000
350,000
14,303
Fair
Value
$
1
45,000
1
2
35,000
1
170,516
1
1
1
7,875
3
1
90,000
3
59,367
1
1
383,985
7
35,577
94,790
9,873
2
6
1
97,859
3
15,000
133,110
26,415
2
4
1
39,667
105,735
71,666
28,000
46,667
9,000
147,286
7,200
120,000
2
1,875
5
Number of
Shares, Units
or Warrants
Expiry
Date
8,672,800
6,692,308
2,000,000
750,000
3,771,428
1,112,000
500,000
450,000
2,000,000
2,500,000
CANADIAN EQUITIES (CONT.) (64.5%)
Base Metals (cont.) (34.8%)
Superior Canadian Resources Inc.
Tamerlane Ventures Inc.
Tantalex Resources Corp.
Tantalex Resources Corp., Warrants
The Magpie Mines Inc. (Restricted)
Wallbridge Mining Co., Ltd.
Wolfden Resources Corp., Warrants (Restricted)
Ximen Mining Corp., Warrants
Xmet Inc.
Xmet Inc., Warrants (Restricted)
40,000
24,000
400,000
1,200,000
577,909
150,000
93,950
141,314
1,400,000
100,000
3,800,000
2,750,000
538,096
416,666
1,011,905
416,666
2,871,409
8,000,000
3,550,000
2,363,636
1,075,000
1,650,000
2,483,333
146,016
354,726
230,230
700,975
412,500
700,000
800,000
565,000
565,000
757,450
3,048,333
93,333
222,222
157,777
211,539
88,916
268,264
86,100
1,250,000
466,665
Precious Metals (27.8%)
Almaden Minerals Ltd., Warrants
Almadex Minerals Ltd., Warrants
Amex Exploration Inc.
Amex Exploration Inc., Warrants
Balmoral Resouces Ltd. (Restricted)
Banks Island Gold Ltd., Warrants (Restricted)
Banks Island Gold Ltd., Warrants (Restricted)
Claude Resources Inc.
Decade Resources Ltd., Warrants (Restricted)
Decade Resources Ltd., Warrants (Restricted)
Dolly Silver Corp. (Restricted)
Everton Resouces Inc.
Garibaldi Resources Corp.
Garibaldi Resources Corp. (Restricted)
Garibaldi Resources Corp., Warrants
Garibaldi Resources Corp., Warrants
Gold Bullion Development Corp.
Gold Bullion Development Corp., Warrants
Gold Bullion Development Corp., Warrants
Goldeye Explorations Ltd.
GTA Resources and Mining Inc.
Harte Gold Corp.
Harte Gold Corp., Warrants
IDM Mining Ltd., Warrants (Restricted)
Integra Gold Corp.
Marathon Gold Corp.
Metanor Resources Inc.
Metanor Resources Inc., Warrants
Metanor Resources Inc., Warrants (Restricted)
Red Pine Exploration, Warrants (Restricted)
Sandspring Resources Ltd.
Sandspring Resources Ltd., Warrants (Restricted)
Shore Gold Inc.
Solid Gold Resources Corp.
Treasury Metals Inc. (Restricted)
Treasury Metals Inc. (Restricted)
Treasury Metals Inc., Warrants (Restricted)
Veris Gold Corp., Warrants
Wesdome Gold Mines Ltd.
Yamana Gold Inc., Warrants (Restricted)
Yankee Hat Minerals Ltd.
Strike
Price
Average
Cost*
$
10
10/03/2016
$0.15
18/12/2016
30/12/2016
$0.30
$0.25
21/11/2017
$0.05
11/02/2016
11/02/2016
$2.00
$2.00
21/11/2016
$0.15
20/06/2016
16/09/2016
$0.60
$0.60
23/12/2016
29/12/2016
$0.15
$0.15
22/06/2016
22/12/2017
$0.30
$0.20
23/12/2016
30/12/2016
$0.10
$0.10
23/06/2016
19/09/2016
$0.15
$0.55
13/05/2016
27/03/2018
18/12/2017
$0.30
$0.05
$0.25
11/09/2020
$0.30
24/09/2018
16/08/2016
16/08/2016
02/12/2016
$0.55
$0.50
$0.50
$0.90
15/01/2016
$7.18
99,364
133,846
200,500
850,000
33,360
10,000
6,898,387
12,000
254,280
110,931
1
950,000
82,500
72,643
50,000
1
88,686
1
108,864
43,000
115,500
1
115,286
48,348
35,725
113,000
144,673
110,502
42,000
100,000
119,679
1
41,200
2,758,822
Fair
Value
$
9
7
40,000
1
21,874
27,800
1
10,000
3
1,881,208
15,000
1
248,501
110,225
1
27,500
69,952
54,166
1
86,142
8
4
47,273
34,938
148,500
2
120,607
33,959
24,534
1
1
81,925
1
132,554
3
46,667
111,111
109,347
1
1,502,925
Number of
Shares, Units
or Warrants
83,900
272,222
2,706,333
248,750
138,454
833,300
Expiry
Date
Strike
Price
CANADIAN EQUITIES (CONT.) (64.5%)
Oil & Gas (1.1%)
NexGen Energy Ltd.
$
Energy (0.8%)
Aldrin Resource Corp., Warrants (Restricted)
Appia Energy Corp.
Miyoshi Eisei Kogyosha K.K., Warrants
Petrolympic Ltd., Warrants (Restricted)
Uracan Resources Ltd.
12/03/2016
$0.84
10/07/2016
27/09/2016
$0.17
$0.42
TOTAL CANADIAN EQUITIES
1,038,681
187,500
Average
Cost*
UNITED STATES EQUITIES (1.6%)
Base Metals (1.6%)
Energizer Resources Inc.
Energizer Resources Inc., Warrants (Restricted)
04/05/2018
TOTAL UNITED STATES EQUITIES
Total cost and fair value of investments (66.1%)
Transaction costs (note 7)
Total investments
Other assets (net) (33.9%)
Total net assets
$0.14
63,345
Fair
Value
$
60,408
1,184,450
10,416
1,194,866
27,063
18,748
45,811
10,915,420
3,490,352
156,931
156,931
88,288
88,288
156,931
88,288
11,072,351
(2,817)
11,069,534
1,831,757
$ 12,901,291 $
3,578,640
3,578,640
1,831,757
5,410,397
PORTFOLIO CONCENTRATION (CDN $)
% of Fund's Net Assets
December 31, December 31,
2015
2014
36.40%
35.01%
1.96%
13.12%
27.78%
27.14%
33.86%
24.73%
100.00%
100.00%
Sector
Base Metals
Energy
Precious Metals
Other Assets Less Liabilities
Total
11
MARQUEST MUTUAL FUNDS INC. - ENERGY SERIES FUND
As at,
December 31,
2015 ($)
December 31,
2014 ($)
Assets (Note 2)
Current Assets
Cash
Accrued dividend receivable
Prepaid fees
185,522
200,894
332
104,448
15,027
506,223
475,858
353,548
758
26,544
204,290
16,298
1,077,296
9,034
9,034
1,758
10,432
204,290
216,480
497,189
860,816
495,092
2,097
857,983
2,833
0.22
0.28
0.29
0.38
Current Liabilities
Payable to Manager
Payable to other corporate series
Series A-Rollover
Series A-Regular
Series A-Rollover
Series A-Regular
"Stephen J. Zamin"
Gerry L. Brockelsby
Director
Stephen J. Zamin
Director
12
2015 ($)
2014 ($)
8,587
2
10
-
14,543
361
8,340
(575,470)
466,703
(100,168)
42,712
(178,376)
(112,420)
Income
Dividends
Other income
Total Income (loss)
Expenses (Note 4)
Management fees
Interest charges
Operating fees
Audit fees
Custodian fees
Legal fees
14,473
1,855
7
22,905
585
4,787
18,884
82
4,556
68,134
Total Expenses
from operations
26,241
11,188
36,264
253
1,312
7,296
174
82,728
(168,302)
(195,148)
(167,566)
(736)
(194,409)
(739)
(0.06)
(0.10)
(0.06)
(0.11)
Series A-Rollover
Series A-Regular
Series A-Rollover
Series A-Regular
13
2015 ($)
2014 ($)
Series A-Rollover
857,983
1,150,661
2015 ($)
2014 ($)
Series A-Regular
2,833
(736)
2,361
(167,566)
(194,409)
(739)
7,284
(202,609)
(195,325)
397,056
(495,325)
(98,269)
(362,891)
(292,678)
(736)
472
495,092
857,983
2,097
2,833
-
2015 ($)
Total
860,816
4,036
(2,825)
1,211
2014 ($)
1,153,022
(168,302)
(195,148)
7,284
(202,609)
(195,325)
401,092
(498,150)
(97,058)
(363,627)
(292,206)
497,189
860,816
14
2015 ($)
2014 ($)
(168,302)
(195,148)
575,470
(466,703)
(234,942)
443,055
426
99,842
1,271
(1,758)
(204,290)
(1,398)
42,671
(42,721)
178,376
(1,387,728)
1,729,377
2,534
(170,377)
(10)
(756)
161,138
(8,462)
266,223
7,284
(202,609)
(195,325)
401,092
(498,150)
(97,058)
(152,654)
353,548
200,894
169,165
184,383
353,548
9,013
2
(7)
17,077
361
-
Adjustments for:
Prepaid fees
Payable to Manager
Dividends received
Interest received
Interest paid
15
Number of Shares
833,334
3,652
166,666
95,000
1,091
6,643
430
6,098
343
1,655
34,706
402
Average
Cost*
Oil & Gas (28.3%)
Birch Lake Energy Inc.
Crew Energy Inc.
Golden Coast Energy Corp.
Petrolia Inc.
Seven Generations Energy Ltd.
Spartan Energy Corp.
Suncor Energy Inc.
Tamarack Valley Energy Ltd.
TransCanada Corp.
Whitecap Resources Inc.
$
4,167
16,581
4,167
28,500
16,511
28,432
19,862
31,862
17,038
17,539
184,659
Fair
Value
$
4,167
14,790
833
26,600
14,707
15,677
15,360
18,233
15,500
15,011
140,878
Uranium (5.7%)
Fission Uranium Corp.
43,917
28,459
Oil & Gas Services (3.3%)
Keyera Corp.
17,919
16,185
246,495
185,522
Total investments
Total net assets
246,495
(106)
246,389
311,667
558,056 $
185,522
185,522
311,667
497,189
$
2015
2014
28.33%
29.78%
3.26%
16.42%
5.72%
3.50%
0.00%
5.58%
62.69%
44.72%
100.00%
100.00%
Sector
Oil & Gas
Oil & Gas Services
Uranium
Utilities
Total
16
MARQUEST MUTUAL FUNDS INC. - CANADIAN FLEX™ SERIES FUND
As at,
December 31,
2015 ($)
December 31,
2014 ($)
Assets (Note 2)
Current Assets
Cash
Refundable taxes receivable (note 4)
Prepaid fees
456,657
36,390
1,171
100,557
594,775
903,297
111,058
1,791
16,299
1,032,445
11,069
11,069
1,856
11,871
13,727
583,706
1,018,718
470,089
14,179
99,438
878,162
33,708
4,750
102,098
7.65
7.99
9.02
8.04
8.39
8.09
9.26
Current Liabilities
Payable to Manager
Series A-Regular
Series Low load DSC
Series F
Series I
Series A-Regular
Series Low load DSC
Series F
Series I
"Stephen J. Zamin"
Gerry L. Brockelsby
Director
Stephen J. Zamin
Director
17
2015 ($)
2014 ($)
11,487
293
82
-
17,915
69
3,166
95,806
(11)
(18,818)
88,839
190,273
(171,167)
40,256
16,171
248
7,883
9
28,837
550
6,866
18,568
101
4,765
83,998
24,976
14
18,985
44,730
1,566
1,035
9,782
182
101,270
4,841
(61,014)
6,755
555
191
(2,660)
(54,913)
(2,489)
1,338
(4,950)
0.08
0.22
0.32
(0.24)
(0.45)
(0.58)
0.55
(0.45)
Income
Dividends
Distribution from investment trusts
Other income
Total Income (loss)
Expenses (Note 4)
Management fees
Interest charges
Operating fees
Audit fees
Custodian fees
Legal fees
Total Expenses
from operations
Series A-Regular
Series Low load DSC
Series F
Series I
Series A-Regular
Series Low load DSC
Series F
Series I
18
2015 ($)
2014 ($)
Series A-Regular
878,162
6,755
1,228,496
(54,913)
2015 ($)
2014 ($)
Series Low Load DSC
33,708
555
51,070
(2,489)
(414,828)
(414,828)
7,800
(303,221)
(295,421)
(20,084)
(20,084)
(14,873)
(14,873)
(408,073)
(350,334)
(19,529)
(17,362)
470,089
878,162
14,179
33,708
2015 ($)
Series F
2014 ($)
2015 ($)
Series I
2014 ($)
107,048
4,750
47,975
102,098
191
1,338
(2,660)
(4,950)
(4,941)
(4,941)
(44,563)
(44,563)
(4,750)
(43,225)
(2,660)
(4,950)
4,750
99,438
102,098
-
-
2015 ($)
Total
1,018,718
4,841
-
2014 ($)
1,434,589
(61,014)
19
(439,853)
(439,853)
7,800
(362,657)
(354,857)
(435,012)
(415,871)
583,706
1,018,718
2015 ($)
2014 ($)
4,841
(61,014)
11
-
Adjustments for:
Prepaid fees
Payable to Manager
(95,803)
18,818
(1,213,983)
1,737,608
620
(100,557)
16,299
(1,856)
(802)
365,196
(190,270)
171,167
(2,767,515)
3,216,235
1,159
(11)
(633)
(8,227)
(1,679)
359,212
(439,853)
(439,853)
7,800
(372,268)
(364,468)
(11)
(74,657)
111,058
36,390
(5,256)
116,314
111,058
12,107
(248)
(9)
19,074
(14)
-
Net decrease in cash
Dividends received
Foreign taxes paid
Interest paid
20
Number of
Shares, Units
or Warrants
500
12,635
310
1,800
339
330
3,000
600
700
22,000
873
Expiry
Date
Strike
Price
Consumer Discretionary (16.0%)
Amaya Gaming Groups Inc.
Brick Brewing Co., Ltd.
Gildan Activewear Inc.
Performance Sports Group Ltd.
Uni-Select Inc.
$
Industrial (7.3%)
Boyd Group Income Fund
Nanotech Security Corp.
New Flyer Industries Inc.
Energy (6.1%)
Cenovus Energy Inc.
Nexgen Energy Ltd., Warrants
Parkland Fuel Corp.
614
1,159
Consumer Staples (5.9%)
AGT Food & Ingredients Inc.
Clearwater Seafoods Inc.
2,200
8,565
Information Technology (5.0%)
Absolute Software Corp.
Urthecast Corp.
Average
Cost*
26/03/2016
$0.65
13,920
19,612
9,553
31,824
9,639
84,548
Fair
Value
$
8,715
25,270
12,195
24,012
23,225
93,417
19,190
4,230
15,669
39,089
21,813
3,900
16,992
42,705
13,016
18,674
31,690
12,250
2,970
20,332
35,552
11,207
12,320
23,527
20,870
13,896
34,766
17,943
17,973
35,916
16,390
12,933
29,323
411
Health Care (4.0%)
Concordia Healthcare Corp.
15,298
23,238
658
Telecommunication Services (3.4%)
Manitoba Telecom Services Inc.
17,995
19,589
400
Financials (1.4%)
Manulife Financial Corp.
8,956
8,296
Utilities (1.3%)
TransAlta Corp.
9,290
7,365
Materials (1.2%)
West Fraser Timber Co., Ltd.
5,817
6,829
272,126
301,080
7,395
15,729
19,143
42,267
9,258
14,377
20,541
44,176
19,806
20,917
40,723
23,776
13,346
37,122
24,732
27,111
1,500
130
396
200
150
Financials (7.6%)
Bank of America Corp.
Citigroup Inc.
McGraw Hill Financial Inc.
22
160
Alphabet Inc., Class A
Western Digital Corp.
190
Health Care (4.6%)
Johnson & Johnson
21
Number of
Shares, Units
or Warrants
Expiry
Date
130
100
UNITED STATES EQUITIES (CONT.) (26.6%)
Ingredion Inc.
Wal-Mart Stores Inc.
700
Energy (2.5%)
Kinder Morgan Inc.
82
Strike
Price
Average
Cost*
$
15,176
8,105
23,281
Fair
Value
$
17,307
8,515
25,822
15,391
14,508
5,140
6,838
151,534
155,577
Total investments
Total net assets
423,660
(364)
423,296
127,049
550,345 $
456,657
456,657
127,049
583,706
Starbucks Corp.
$
2015
2014
17.18%
10.90%
10.38%
19.28%
8.57%
2.30%
8.99%
5.76%
8.62%
9.56%
7.32%
2.89%
11.38%
31.54%
1.17%
14.48%
3.36%
2.86%
1.26%
0.00%
21.77%
0.43%
100.00%
100.00%
Sector
Consumer Discretionary
Consumer Staples
Energy
Financials
Healthcare
Industrials Products
Information Technology
Materials
Telecommunication Services
Utilities
Total
22
MARQUEST MUTUAL FUNDS INC. - RESOURCE FLEX™ SERIES FUND
As at,
December 31,
2015 ($)
December 31,
2014 ($)
Assets (Note 2)
Current Assets
Cash
Prepaid fees
50,214
105,684
119
26,728
182,745
239,530
46,020
442
30,067
16,298
332,357
6,213
6,213
678
6,847
7,525
176,532
324,832
176,226
306
-
324,424
408
-
2.89
3.06
-
3.92
4.08
-
Current Liabilities
Payable to Manager
Series A-Regular
Series F
Series I
Series A-Regular
Series F
Series I
"Stephen J. Zamin"
Gerry L. Brockelsby
Director
Stephen J. Zamin
Director
23
2015 ($)
2014 ($)
Income
Dividends
Other income
3,418
5
1
-
Total Income (loss)
9,590
195
6,969
(92,171)
58,224
(30,523)
(13,012)
(122,483)
(118,741)
4,876
740
7
9,236
(235)
4,653
16,831
17
3,637
39,762
11,260
3,399
24,378
(2,484)
528
7,000
93
44,174
(70,285)
(162,915)
(70,183)
(102)
-
(131,859)
(142)
(30,914)
(1.01)
(1.02)
-
(1.42)
(1.42)
(1.44)
Expenses (Note 4)
Management fees
Interest charges
Operating fees
Audit fees
Custodian fees
Legal fees
Total Expenses
per class
Series A-Regular
Series F
Series I
per share
Series A-Regular
Series F
Series I
24
2015 ($)
2014 ($)
Series A-Regular
2015 ($)
Series F
2014 ($)
324,424
500,765
(70,183)
(131,859)
(78,015)
(78,015)
128,183
(172,665)
(44,482)
(148,198)
(176,341)
(102)
(142)
176,226
324,424
306
408
408
(102)
550
(142)
2015 ($)
2014 ($)
-
2015 ($)
Series I
-
2014 ($)
Total
-
126,536
324,832
627,851
-
(30,914)
(70,285)
(162,915)
-
(95,622)
(95,622)
(78,015)
(78,015)
128,183
(268,287)
(140,104)
-
(126,536)
(148,300)
(303,019)
-
176,532
324,832
25
-
MARQUEST MUTUAL FUNDS INC. - RESOURCE FLEX™ SERIES
FUND
2015 ($)
2014 ($)
(70,285)
(162,915)
92,171
(58,224)
(45,529)
230,965
323
(26,728)
16,298
(678)
(634)
137,679
13,012
122,483
(543,868)
625,317
1,621
(10)
(293)
(11,124)
(2,354)
41,869
(78,015)
(78,015)
128,183
(268,287)
(140,104)
59,664
46,020
105,684
(98,235)
144,255
46,020
Adjustments for:
Prepaid fees
Payable to Manager
Dividends received
Interest received
Interest paid
3,741
5
(7)
26
11,211
195
-
Number of Shares
3,299
154
3,096
123
591
143
13,408
Average
Cost*
Oil & Gas (18.9%)
Spartan Energy Corp.
Suncor Energy Inc.
Tamarack Valley Energy Ltd.
TransCanada Corp.
Whitecap Resources Inc.
$
Oil & Gas Services (3.3%)
Keyera Corp.
14,120
5,220
16,177
6,110
6,263
47,890
Fair
Value
$
7,786
5,501
9,257
5,558
5,360
33,462
6,374
5,757
Uranium (6.2%)
Fission Uranium Corp.
18,771
10,995
73,035
50,214
73,035
73,035
126,318
199,353
50,214
50,214
126,318
176,532
Total investments
Total net assets
$
$
2015
2014
18.95%
43.80%
3.26%
26.13%
6.23%
3.81%
71.56%
26.26%
100.00%
100.00%
Sector
Oil & Gas
Oil & Gas Services
Uranium
Total
27
MARQUEST MUTUAL FUNDS INC. - FLEX DIVIDEND AND INCOME
GROWTH™ SERIES FUND
As at,
December 31,
2015 ($)
December 31,
2014 ($)
Assets (Note 2)
Current Assets
Cash
Prepaid fees
7,988,584
1,298,844
21,621
620,252
15,027
9,944,328
8,090,251
1,638,603
23,842
16,298
9,768,994
109,926
109,926
17,260
79,278
23,099
119,637
9,834,402
9,649,357
7,374,406
2,380,418
79,578
7,200,251
2,371,154
77,952
13.80
13.00
15.92
13.85
12.83
15.59
Current Liabilities
Payable to Manager
Payable on redemption of redeemable shares
Series A-Regular
Series F
Series I
Series A-Regular
Series F
Series I
"Stephen J. Zamin"
Gerry L. Brockelsby
Director
Stephen J. Zamin
Director
28
2015 ($)
2014 ($)
234,436
2
2,068
4,622
-
293,312
1,682
1,473
Income
Dividends
Distribution from investment trusts
Other income
108,518
(4,129)
282,072
627,589
Total Income (loss)
1,280,645
(1,027,949)
549,163
Expenses (Note 4)
Management fees
Interest charges
Operating fees
Audit fees
Custodian fees
Legal fees
Independent Review Committee fees
Total Expenses
188,490
4,801
57,581
7
328,415
25,760
6,711
47,224
1,361
25,532
685,882
207,090
355
58,392
326,922
45,270
8,830
38,887
1,528
687,274
from operations
(58,293)
(138,111)
(94,758)
34,839
1,626
(107,118)
(31,474)
481
(0.18)
0.19
0.33
(0.20)
(0.18)
0.10
Series A-Regular
Series F
Series I
Series A-Regular
Series F
Series I
29
MARQUEST MUTUAL FUNDS INC. - FLEX DIVIDEND AND INCOME GROWTH™
SERIES FUND
2015 ($)
2014 ($)
Series A-Regular
7,200,251
7,595,146
(94,758)
(107,118)
2,640,727
(2,371,814)
268,913
1,860,646
(2,148,423)
(287,777)
2015 ($)
Series F
2,371,154
2014 ($)
2,144,024
34,839
(31,474)
155,950
(181,525)
(25,575)
336,267
(77,663)
258,604
174,155
(394,895)
7,374,406
7,200,251
2015 ($)
Series I
2014 ($)
9,264
2,380,418
2015 ($)
Total
227,130
2,371,154
2014 ($)
77,952
77,471
9,649,357
9,816,641
1,626
481
(58,293)
(138,111)
-
-
2,796,677
(2,553,339)
243,338
2,196,913
(2,226,086)
(29,173)
1,626
481
79,578
30
77,952
185,045
(167,284)
9,834,402
9,649,357
MARQUEST MUTUAL FUNDS INC. - FLEX DIVIDEND AND
INCOME GROWTH™ SERIES FUND
2015 ($)
2014 ($)
(58,293)
(138,111)
Adjustments for:
Refundable taxes receviable
Prepaid fees
Receivable from other corporate series
Payable to Manager
4,129
(108,518)
(282,072)
(14,759,857)
15,252,114
2,221
(620,252)
1,271
-
(17,260)
30,648
(555,869)
(1,280,645)
1,027,949
(15,516,270)
16,744,117
7,871
(10)
43,461
409
18,306
907,077
2,796,677
(2,576,438)
220,239
2,196,913
(2,202,987)
(6,074)
(4,129)
(335,630)
1,638,603
1,298,844
901,003
737,600
1,638,603
Cash at beginning of period
Cash at end of period
Dividends received
Foreign taxes paid
Interest received
Interest paid
236,657
(4,801)
2
(7)
31
301,183
(355)
1,682
-
Number of Shares
Average
Cost*
4,720
13,687
9,640
5,500
Industrial (10.5%)
Boyd Group Income Fund
CAE Inc.
New Flyer Industries Inc.
WSP Global Inc.
109
7,040
15,500
5,493
Amaya Inc. Preferred Shares
Gildan Activewear Inc.
Liquor Stores N.A. Ltd.
Uni-Select Inc.
7,687
10,940
78,428
15,800
Energy (7.1%)
Cameco Corp.
Cenovus Energy Inc.
CWC Energy Services Corp.
Parkland Fuel Corp.
50,700
14,200
12,300
Financials (5.0%)
Edgefront REIT
Manulife Financial Corp.
Tricon Capital Group Inc.
6,007
20,705
AGT Food & Ingredients Inc.
Clearwater Seafoods Inc.
7,908
Health Care (4.5%)
Concordia Healthcare Corp.
2,400
9,217
Telecommunication Services (4.1%)
BCE Inc.
Manitoba Telecom Services Inc.
17,932
23,750
Utilities (3.8%)
Boralex Inc.
TransAlta Corp.
27,000
44,107
Absolute Software Corp.
Urthecast Corp.
2,640
$
Materials (1.4%)
West Fraser Timber Co., Ltd.
6,373
2,802
2,300
14,700
3,140
Financials (6.8%)
Bank of America Corp.
Citigroup Inc.
McGraw Hill Financial Inc.
Energy(6.2%)
Kinder Morgan Inc.
Valero Energy Corp.
32
274,468
205,467
251,748
229,295
960,978
Fair
Value
$
311,992
210,095
273,005
233,805
1,028,897
109,700
216,956
230,113
177,949
734,718
109,000
276,954
129,735
376,325
892,014
182,394
203,426
83,920
320,277
790,017
131,217
191,450
9,019
367,982
699,668
99,444
317,952
128,819
546,215
86,190
294,508
111,438
492,136
109,625
221,511
331,136
204,178
248,253
452,431
296,421
447,118
121,920
256,337
378,257
128,304
274,390
402,694
248,922
147,091
396,013
259,297
116,613
375,910
220,212
175,339
395,551
201,150
66,602
267,752
118,132
138,679
4,947,438
5,197,299
127,384
220,369
293,527
641,280
148,992
201,425
314,956
665,373
323,209
160,942
484,151
304,663
308,421
613,084
Number of Shares
Average
Cost*
2,120
3,620
UNITED STATES EQUITIES (CONT.) (28.4%)
Ingredion Inc.
Wal-Mart Stores Inc.
243
2,201
Alphabet Inc., Class A
Western Digital Corp.
2,580
Health Care (3.8%)
Johnson & Johnson
1,295
Starbucks Corp.
$
247,490
293,390
540,880
Fair
Value
$
282,239
308,250
590,489
217,835
275,392
493,227
262,618
183,598
446,216
328,333
368,136
81,172
107,987
2,569,043
2,791,285
Total investments
Total net assets
7,516,481
(6,895)
7,509,586
1,845,818
9,355,404 $
7,988,584
7,988,584
1,845,818
9,834,402
$
2015
2014
10.17%
16.12%
10.60%
6.11%
13.35%
12.50%
11.77%
13.88%
8.29%
0.00%
10.46%
24.23%
7.26%
1.34%
1.41%
1.92%
4.10%
2.90%
3.82%
4.83%
18.77%
16.17%
100.00%
100.00%
Sector
Consumer Discretionary
Consumer Staples
Energy
Financials
Healthcare
Industrials
Information Technology
Materials
Telecommunication Services
Utilities
Total
33
Marquest Mutual Funds Inc.
Notes to Financial Statements (expressed in Canadian Dollars)
For the years ended December 31, 2015 and December 31, 2014
1. THE FUNDS
Marquest Mutual Funds Inc. (the “Corporation”), was incorporated by articles of incorporation, under the laws of Ontario on September 24, 2004. In addition to ten common shares
issued upon incorporation, the Corporation has five series of mutual fund shares. The Funds are referred to individually as a “Fund” and collectively as the “Funds”. The Funds’
registered office is 161 Bay Street, Suite 4420, P.O. Box 204, Toronto, Ontario M5J 2S1. The Funds invest in Canadian and U.S. securities, Canadian and U.S. fixed income
securities, Canadian short-term debt securities and derivatives. Most of the Funds’ equity investments are listed and traded on stock exchange markets in Canada and the U.S.
although the Funds may also invest in private equity securities.
Marquest Asset Management Inc. is the manager (the “Manager”) of the Funds. The Funds’ investment activities and administration are managed by the Manager. The Funds’
custodian is RBC Investor Trust Services.
The Funds’ commencement dates of operations are as follows:
Name of Fund
Explorer Series Fund
Energy Series Fund
Canadian Flex™ Series Fund
Resource Flex™ Series Fund
Flex Dividend and Income Growth™ Series Fund
Series A-Rollover
31-Jan-05
01-May-06
-
Series A-Regular
05-Sep-08
09-Sep-10
24-Dec-07
11-Dec-07
19-May-09
Series F
24-Mar-08
06-Jan-08
05-Feb-08
13-Nov-09
Series
Low load
24-Jun-08
20-Feb-08
-
Series I
22-Aug-07
22-Aug-07
28-Oct-08
2. SIGNIFICANT ACCOUNTING POLICIES
(a)
Statement of Compliance
These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) applicable to the preparation of annual
financial statements as issued by the International Accounting Standards Board (“IASB”) and interpretations of the IFRS Interpretations Committee and as required by
Canadian securities legislation and the Canadian Accounting Standards Board.
These financial statements were authorized for issue by the Manager on March 30, 2016.
(b)
Significant accounting judgments, estimates and assumptions
The preparation of these financial statements requires the Fund Manager to make certain estimates, judgments and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these
estimates. These financial statements include estimates which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the financial
statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the
estimate is revised and future periods if the revision affects both current and future periods. These estimates are based on historical experience, current and future
economic conditions and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Critical accounting estimates
The Funds hold financial instruments that are not quoted in active markets, including derivatives. Fair values may be determined using reputable pricing vendors (for
derivatives) or indicated prices from market makers/brokers. Broker quotes as obtained from pricing sources may be indicative and not executable or binding.
Securities not listed upon a recognized public stock exchange, or securities for which a last sale or closing price are unavailable or securities for which market
quotations are, in the Manager’s opinion, inaccurate, unreliable or not reflective of all available material information, are valued at their estimated fair value, determined
by using appropriate and accepted industry valuation techniques including valuation models. The estimated fair value of a security determined using valuation models
requires the use of inputs and assumptions based on observable market data including volatility and other applicable rates or prices. The estimates include
consideration of liquidity and model inputs related to items such as credit risk (both own and counterparty’s) and volatility. Changes in assumption about these factors
could affect the reported fair value of financial instruments and the level where the instruments are disclosed in the fair value hierarchy. To assess the significance, the
Funds perform sensitivity analysis of these estimates to the fair value of the fund holdings (see Note 10).
(c)
Functional and presentation currency
These financial statements are presented in Canadian dollars (CAD) which is the Funds’ functional currency. The Funds’ subscriptions and redemptions are
denominated in Canadian dollars (CAD).
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into Canadian dollars at the prevailing rate of exchange on each
valuation date. Purchases and sales of investments, income and expenses are translated at the rate of exchange prevailing on the respective dates of such
transactions. Foreign exchange gains and losses on the sale of investments are included in "Net realized gain (loss) on sale of investments”. Unrealized foreign
exchange gains and losses are included in "Change in unrealized appreciation (depreciation) in value of investments”.
(d)
Basis of measurement
These financial statements have been prepared on a historical cost basis except for investments which are measured at fair value in the Statements of Financial
Position.
(e)
Financial instruments
The Funds recognize a financial asset or a financial liability when they become a party to the contractual provisions of the instrument. Purchases or sales of financial
assets that require delivery of assets within the time frame generally established by regulation or convention in the market place (regular way trades) are recognized on
the trade date, i.e., the date that the Fund commits to purchase or sell the asset.
The Funds classify their financial assets and financial liabilities at initial recognition into the following categories, in accordance with IAS 39 Financial Instruments:
Recognition and Measurement.
34
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial assets and liabilities at fair value through profit or loss (FVTPL)
The category of financial assets and liabilities at fair value through the profit or loss is sub-divided into:
Financial assets and liabilities held for trading: financial assets are classified as held for trading if they are acquired for the purpose of selling and/or repurchasing in the
near term. These assets are acquired principally for the purpose of generating a profit from short-term fluctuations in price. All derivatives, debentures and liabilities
from short sales of financial instruments are classified as held for trading. The Fund’s policy is not to apply hedge accounting.
Financial instruments designated as at fair value through profit or loss upon initial recognition. These financial assets and liabilities are designated upon initial
recognition on the basis that they are part of a group of financial assets which are managed and have their performance evaluated on a fair value basis, in accordance
with risk management and investment strategies of the Fund, as set out in the Fund’s simplified prospectus.
Financial assets and financial liabilities at fair value through profit or loss are recorded in the Statements of Financial Position at fair value. Fair value is the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of
financial assets and liabilities traded in active markets are based on quoted market prices at the close of trading on the reporting date. In circumstances where the
close price is not within the bid-ask spread, management will determine the point within the bid-ask spread that is most representative of fair value. All transaction costs
for such instruments are recognized directly in profit or loss.
For all other financial instruments not traded in an active market, the fair value is determined by using valuation techniques deemed to be appropriate in the
circumstances. Valuation techniques include discounted cash flow analysis and option pricing models, which considers factors such as the market value of the
underlying security, strike price, volatility and terms of the warrants or options.
Subsequent to initial recognition, all financial assets and financial liabilities at fair value through profit or loss are measured at fair value. Gains and losses arising from
changes in the fair value of the ‘financial assets or financial liabilities at fair value through profit or loss’ category are presented in the Statements of Comprehensive
Income within other net changes in fair value of financial assets and liabilities at fair value through profit or loss in the period in which they arise. Interest and dividend
earned or paid on these instruments are recorded separately in interest for distribution purposes and dividends revenue or expense.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Financial assets classified as
loans and receivables are measured at amortized cost. Transaction costs are included in the initial carrying amount of the asset.
Other financial liabilities
This category includes all financial liabilities, other than those classified at fair value through profit or loss. Financial liabilities classified as other financial liabilities are
subsequently measured at amortized cost. Transaction costs are included in the initial carrying amount of the liability.
The Funds’ financial assets include investments, cash, investment income receivable, subscriptions receivable, receivable for investments sold and due from broker.
The Company’s financial liabilities include accounts payables and accrued liabilities, redemptions payable, due to broker, management fees payable, performance fees
payable and redeemable units. Classification of these financial instruments is as follow:
FVTPL
Cash
FVTPL
Accrued interest receivable
Accrued dividends receivable
Receivable from other corporate classes
Payable on redemption of redeemable units
Payable for investments purchased
Distribution payable
Payable to other corporate classes
Payable to manager
35
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows,
based on the lowest level input that is significant to the fair value measurement as a whole:
• Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities
• Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
• Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
The breakdown into the three-level hierarchy is provided in Note 10.
Financial assets are de-recognized when the rights to receive cash flows from the investments have expired or the Funds have transferred substantially all risks and
rewards of ownership. The Funds derecognize a financial liability when its contractual obligations are discharged or cancelled, or expire. On de-recognition of a
financial asset, the difference between the carrying amount of the asset and the consideration received is recognized in the Statements of Comprehensive Income.
A financial asset at amortized cost is assessed at each reporting date to determine whether there is objective evidence of impairment. A financial asset or a group of
financial assets is ‘impaired’ if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset(s) and
that loss event(s) had an impact on the estimated future cash flows of that asset(s) that can be estimated reliably.
Objective evidence that financial assets are impaired includes significant financial difficulty of the borrower or issuer, default or delinquency by a borrower, restructuring
of the amount due on terms that the Fund would not otherwise consider, indications that a borrower or issuer will enter bankruptcy, or adverse changes in the payment
status of the borrowers.
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the
estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognized in the Statements of Comprehensive Income and reflected
in an allowance account against receivables. If an event occurring after the impairment was recognized causes the amount of impairment loss to decrease, then the
decrease in impairment loss is reversed through the Statements of Comprehensive Income.
(f)
Cash
Cash in the Statement of Financial Position comprise cash on hand and short-term deposits in banks that are readily convertible to known amounts of cash and which
are subject to an insignificant risk of changes in value, with original maturities of three months or less.
Short-term investments that are not held for the purpose of meeting short-term cash commitments and restricted margin accounts are not considered as ‘cash’.
For the purpose of the Statements of Cash Flows, cash consist of cash defined above, net of outstanding bank overdrafts when applicable.
(g)
Redeemable participating shares
Redeemable participating shares are redeemable at the shareholder’s option and are classified as other financial liabilities. They are measured at the redeemable
amount.
Net asset value per redeemable participating share of each series is calculated daily (unless such day is not a business day, in which case the last business day prior
to such day is used) (each a "valuation day") by dividing the net asset value of each series by the outstanding shares of that series. The net asset value of each series
is computed by calculating the fair value of the assets less liabilities of the series.
(h)
Provisions
A provision is recognized if, as a result of a past event, the Funds have a present legal or constructive obligation that can be estimated reliably, and it is probable that
an outflow of economic benefits will be required to settle the obligation.
(i)
Valuation of Redeemable Participating Shares
The value at which shares are issued or redeemed is the Net Asset Value per share. Net asset value per share for each series is calculated at the end of each day on
which the Funds’ Manager is open for business (“valuation day’) by dividing the net asset value (“Transactional NAV”) of each series by its outstanding shares. The net
asset value of each series is computed by calculating the value of the series’ proportionate share of the Fund’s assets less the series’ proportionate share of the Fund’s
common liabilities and less series-specific liabilities. Expenses directly attributable to a series are charged to that series while common Fund expenses are allocated to
each series in a reasonable manner as determined by the Manager. Other income and realized and unrealized gains and losses are allocated to each series of the
Fund based on that series’ pro rata share of total net asset value of that Fund. Amounts received on the issuance of shares and amounts paid on the redemption of
shares are included on the Statement of Changes in Net Assets Attributable to Holders of Redeemable Shares.
(j)
Increase (decrease) in Net Assets Attributable to Holders of Redeemable Shares From Operations Per Share
Increase (decrease) in net assets attributable to holders of redeemable shares from operations per share is based on the increase (decrease) in net assets attributable
to holders of redeemable shares from operations attributable to each series of the Fund divided by the weighted average number of shares of that series outstanding
during the year.
36
(k)
Investment Income Recognition
Dividend
Dividend income is recognized in the Statements of Comprehensive Income on the date on which the right to receive payment is established. For quoted equity
securities, this is usually the ex-dividend date. For unquoted equity securities, this is usually the date on which the shareholders approve the payment of a dividend.
Interest for distribution purposes as disclosed in the Statements of Comprehensive Income on debt securities at fair value through profit or loss is recognized on an
accrual basis and represents the coupon interest received by the Funds accounted for on an accrual basis. The Funds does not amortize premiums paid or discounts
received on the purchase of fixed income securities except for zero coupon bonds which are amortized on a straight line basis.
Distribution income from investment trust
Distributions from income trusts, mutual funds and REIT’s are recognized on the ex-distribution date and are recorded as income, capital gains or a return of capital,
based on the best information available to the Manager. Distributions from investment trusts that are treated as a return of capital for income tax purposes reduce the
average cost of the underlying investment.
Distribution on redeemable shares
Distributions on redeemable shares are presented as an expense within the Statements of Changes in Net Assets Attributable to Holders of Redeemable Shares.
Realized and unrealized gains and losses
Realized gains and losses on sale of investments, and unrealized appreciation and depreciation on investments, are calculated on an average cost basis.
(l)
Valuation of Investments
I.
II.
III.
(m)
Securities listed upon a recognized public stock exchange are valued at their close prices on the valuation date. In circumstances where the close price is not
within the bid-ask spread, management will determine the point within the bid-ask spread that is most representative of fair value. The close prices of securities
that are subject to trading restrictions are discounted by 3%.
Securities not listed upon a recognized public stock exchange, or securities for which a close price, last sale or bid price are unavailable or securities for which
market quotations are, in the Manager’s opinion, inaccurate, unreliable or not reflective of all available material information, are valued at their estimated fair
value, determined by using appropriate and accepted industry valuation techniques including valuation models. The estimated fair value of a security determined
using valuation models requires the use of inputs and assumptions based on observable market data including volatility and other applicable rates or prices. In
limited circumstances, the estimated fair value of a security may be determined using valuation techniques that are not supported by observable market data.
Warrants which do not have a quoted close price are carried at the difference between the exercise price and the quoted close price of the underlying security if
the exercise price is lower than the quoted close price.
Investment Transactions
Investment transactions are accounted for on the date the order to buy or sell is executed. Realized gains or losses from investment transactions and unrealized
appreciation or depreciation are calculated on an average cost basis.
(n)
Derivative contracts
The fair value of futures contracts fluctuates daily, and cash settlements made daily by the Funds are equal to the unrealized gains or losses on a “mark to market”
basis. The unrealized gains or losses are recorded and reported as such until the Funds close out the contract or the contract expires. Margin paid or deposited in
respect of futures contracts is reflected in the Statements of Financial Position. Any change in the margin requirement is settled daily.
Realized gains and losses on the settlement of derivative contracts, (i.e. used to gain exposure to a particular market, security or currency) are included in income
under “Income from derivatives”, in the Statements of Comprehensive Income. Unrealized gains and losses are included in “net change in unrealized appreciation
(depreciation) in value of investments”, in the Statements of Comprehensive Income.
(o)
Options
Certain Funds may write or purchase call and put options and futures and swaps. The premium received from writing a call or put option is recorded as a liability in the
Statements of Financial Position. The premium paid from purchasing a call or put option is recorded as an asset in the Statements of Financial Position. The premium
is valued at an amount equal to the fair value of the option that would have the effect of closing the position. The difference between the premium and the fair value is
shown as unrealized appreciation (depreciation) in value of investments in the Statements of Comprehensive Income.
When a written option expires, the Fund will realize a gain equal to the premium received. When a written option is closed, the Fund will realize a gain or loss equal to
the difference between the proceeds and the premium received. When a written call option is exercised, the premium received is added to the proceeds from the sale
of the underlying investment to determine the realized gain or loss.
When a written put option is exercised, the premium received will reduce the cost of the investment the Fund purchased upon exercise of the option. When a
purchased option expires, the Fund will realize a loss equal to the premium paid. When a purchased option is closed, the gain or loss the Fund will realize will be the
difference between the proceeds and the premium paid.
When a purchased put option is exercised, the premium paid is deducted from the proceeds from the sale of the underlying investments to determine the realized gain
or loss. When a purchased call option is exercised, the premium received will increase the cost of the investment the Fund purchased upon exercise of the option.
Payments received or paid upon early termination are recorded as “Income from derivatives” in the Statements of Comprehensive Income.
The gain or loss that the Fund realizes when a written or purchased option is expired, closed or exercised is recorded as “Income from derivatives” in the Statements of
Comprehensive Income.
37
(p)
Distributions to Shareholders
Distributions are recorded by the Funds on the business day immediately following record date.
(q)
Transaction Costs
Transaction costs are expensed and are included in “Transaction costs” in the Statements of Comprehensive Income. Transaction costs are incremental costs that are
directly attributable to the acquisition, issue or disposal of an investment, which include fees and commissions paid to agents, advisors, brokers, and dealers, levies by
regulatory agencies and securities exchanges, and transfer taxes and duties.
3. REDEEMABLE PARTICIPATING SHARES
The Funds are authorized to issue an unlimited number of shares as follows:
Name of Fund
Energy Series Fund
Series Available
A-Rollover, A-Regular, F
A-Rollover, A-Regular, F
A-Regular, F, Low load DSC, I
A-Regular, F, Low load DSC, I
A-Regular, F, I
During the years ended December 31, 2015 and December 31, 2014, the following shares were issued (including transfers from other series) and redeemed (including transfers to
other series):
December 31, 2015
Series A-Rollover
Series A-Regular
Series F
Energy Series Fund
Series A-Rollover
Series A-Regular
Canadian Flex ™ Series Fund
Series A
Series Low load DSC
Series F
Series I
Resource Flex ™ Series Fund
Series A
Series Low load DSC
Series F
Series I
Flex Dividend and Income Growth ™ Series Fund
Series A
Series F
Series I
December 31, 2014
Series A-Rollover
Series A-Regular
Series F
Energy Series Fund
Series A-Rollover
Series A-Regular
Canadian Flex ™ Series Fund
Series A
Series Low load DSC
Series F
Series I
Resource Flex ™ Series Fund
Series A
Series Low load DSC
Series F
Series I
Flex Dividend and Income Growth ™ Series Fund
Series A
Series F
Series I
Outstanding
beginning of
year
Shares issued
Shares redeemed
Outstanding end of
year
21,368,364
24,749
2,950
28,610,115
11,347
(32,587,657)
(6,596)
-
17,390,822
18,153
14,297
2,981,909
7,524
31,427
-
(773,007)
-
2,240,329
7,524
109,277
4,019
587
11,023
-
(47,823)
(2,245)
(587)
-
61,454
1,774
11,023
82,863
100
-
-
(21,835)
-
61,028
100
-
519,896
184,864
5,000
183,902
11,682
-
(169,525)
(13,374)
-
534,273
183,172
5,000
Outstanding
beginning of year
Shares issued
Shares redeemed
Outstanding end of
year
19,984,646
32,115
2,950
33,852,113
1,332
-
(32,468,395)
(8,698)
-
21,368,364
24,749
2,950
3,309,521
5,267
972,503
7,524
(1,300,115)
(5,267)
2,981,909
7,524
142,471
5,711
5,595
11,023
947
-
(34,141)
(1,692)
(5,008)
-
109,277
4,019
587
11,023
92,835
100
21,331
22,859
-
(32,831)
(21,331)
82,863
100
-
539,535
166,301
5,000
127,880
24,522
-
(147,519)
(5,959)
-
519,896
184,864
5,000
38
4. EXPENSES AND RELATED PARTY TRANSACTIONS
The following summarizes the annual management fee for the Funds paid per annum on average Net Asset Value:
Energy Series Fund
Series A/Rollover and
Regular
2.0%
2.0%
2.0%
2.0%
2.0%
Series Low load DSC
Series F
Series I
n/a
n/a
1.5%
n/a
n/a
1.0%
n/a
1.0%
1.0%
1.0%
n/a
n/a
Negotiated
Negotiated
Negotiated
As the Manager of the Funds, the Funds are dependent on Marquest Asset Management Inc. for administration and management of all matters relating to their operations.
The Funds bear all of their own expenses relating to their operation and the carrying on of their businesses. These items include legal and audit fees, interest, and administrative
costs relating to the issue and redemption of shares as well as the cost of financial and other reports and compliance with all applicable laws, regulations and policies. Brokerage
commissions paid on securities transactions are not considered to be part of total expenses.
The Manager has, at its discretion, the ability to waive certain expenses associated with some of the Funds. No fees were waived during the year ended December 31, 2014 and
2015.
Amounts payable to and receivable from other corporate series are non-interest bearing and due on demand. These balances arose as a result of the Explorer Series Fund
remitting the Corporation’s aggregate taxes owing on behalf of the Energy Series Fund and itself. These transactions are measured at the exchange amounts, and occur within the
normal course of business.
Included in the each of the Funds’ expenses in the Statements of Comprehensive Income, is the corresponding component of sales tax. The Harmonized Sales Tax (HST)
combines the GST rate of 5% with the provincial sales tax of certain provinces. Each Fund’s HST rate is calculated using the proportionate investment holding by unitholder’s
provincial residency as at September 30 of the prior year. HST rate are determined for expenses attributable to a Fund’s individual class/series, were applicable.
From time to time, the Manager may earn fees and commissions on securities transactions in which the Fund participates. The fees and commissions are based on standard
agreements at market prices. For the year ended December 31, 2015, approximately $828,551 (2014 - $934,503) was received by the Manager in related fees and commissions
under the standing instructions given by the IRC.
5. TAXATION AND DISTRIBUTIONS
(a)
Taxation of Open-End Mutual Fund Corporations
Under the Income Tax Act (Canada), the Corporation qualifies as a mutual fund corporation and computes its net income (loss) and net capital gains (losses) for income tax
purposes as a single entity. A mutual fund corporation is subject to a special 33 1/3% tax on taxable dividends received from corporations resident in Canada and to tax at
normal corporate rates on other income and net taxable realized capital gains for the year. The special 33 1/3% tax is refundable on payments of taxable dividends to
shareholders at the rate of $1 for each $3 of such dividend paid. All the tax on net taxable realized capital gains is refundable when the gains are distributed to shareholders
as capital gains dividends or through redemption of shares at the request of shareholders.
While the Corporation is taxed as a single legal entity, the individual mutual fund share series recognize, for accounting purposes, the impact of current and future taxes
based on the net income (loss) and increase (decrease) in net assets from realized and unrealized gains (losses), respectively, of each series. The mutual fund share series
offsets the future tax liability for refundable taxes payable with the refund expected upon payment of capital gains or ordinary dividends or upon redemption of shares. As a
result, the future tax liability for refundable taxes payable is eliminated. The mutual fund share series with negative taxable income does not recognize a tax asset for unused
tax losses as future utilization is not probable and a full valuation allowance has been recorded. Further, unused tax losses of one mutual fund share series may be used to
offset taxable income of another series. Therefore, where a mutual fund share series has positive net taxable income, the current tax liability has been offset with the
utilization of unused tax losses from other series to the extent possible. Any residual taxable income would be refundable upon payment of capital gains or ordinary
dividends by the Corporation.
b)
Losses Carried Forward
Certain Funds have accumulated net realized capital and non-capital losses. Non-capital losses may be carried forward to reduce future taxable income for up to twenty
years. There are no non-capital losses for carry forward.
c)
Withholding Taxes
Certain Funds holding foreign securities may be subject to withholding tax, which are the taxes imposed by certain foreign countries for the investment income received from
these securities. Withholding taxes are accrued based on the accrual of the related foreign investment income and are included in “Withholding taxes” on the Statements of
Comprehensive Income and “Accrued liabilities” on the Statements of Financial Position.
6. BROKERAGE COMMISSIONS ON SECURITIES TRANSACTIONS
No soft dollar services were included in the Transaction costs on the Statements of Comprehensive Income.
7. SECURITIES LENDING TRANSACTIONS
The Funds have entered into a securities lending program with its custodian, RBC Investor and Treasury Services. The aggregate fair value of all securities loaned by a Fund
cannot exceed 50% of the assets of the Fund. The Funds receive collateral of at least 105% of the value of the securities on loan. Collateral may comprise cash and/or securities.
The aggregate fair value of securities loaned and collateral held under securities lending transactions at December 31, 2015 (2014- $nil) are as follows:
December 31, 2015
Energy Series Fund
Outstanding loans
14,498 $
86,020
1,619,162
$
39
Collateral amount
15,224
90,324
1,700,123
8. FUND MERGERS
The acquisition method of accounting was adopted for the merger of mutual funds whereby the continuing fund is the acquiring fund and the terminated fund is the acquired fund.
This identification was based on aspects of the continuing fund such as investment objectives and portfolio composition.
Effective as of the close of business, as set out below, the continuing funds acquired the portfolio assets of the corresponding terminated funds in exchange for shares in the
continuing fund. The value of the shares of the continuing fund issued in connection with these mergers was equal to the fair value of the investments transferred from the
respective terminated funds.
Merger
Date
Continuing fund
Series
Net Assets
Acquired
Shares Issued
Exchange ratio
Marquest Mining 2014 - I Super Flow Through LP
10/16/2015
A-Rollover
424,072
1,188,543
72.8274
Marquest Mining Québec 2014 - I Super Flow Through LP
10/16/2015
A-Rollover
1,770,399
4,961,880
116.9979
Marquest Mining B.C 2014 - I Super Flow Through LP
10/16/2015
A-Rollover
61,858
173,369
45.0310
Marquest Mining Québec 2014 - II Super Flow Through LP
10/16/2015
A-Rollover
463,311
1,298,518
83.7754
Marquest Mining 2014 - II Super Flow Through LP
05/11/2015
A-Rollover
3,367,013
6,706,062
166.7345
Marquest Mining Québec 2014 - II Super Flow Through LP
05/11/2015
A-Rollover
7,164,625
14,269,745
128.0717
Marquest 2013 – I Mining SFT LP – National Class
02/14/2014
A-Rollover
1,271,745
1,291,636
7.2426
Marquest 2013 – I Mining SFT LP – Quebec Class
02/14/2014
A-Rollover
3,824,777
3,884,600
7.7241
Marquest Minng Quebec 2013 - I SFT LP
04/24/2014
A-Rollover
1,161,178
1,290,055
74.056
Marquest Mineralfields 2012 SFT LP
04/24/2014
A-Rollover
7,797,303
8,662,707
44.7223
Marquest Mining 2013-I SFT LP
04/24/2014
A-Rollover
828,719
920,696
69.7497
Terminating fund
Marquest Mineralfields B.C. 2012 SFT LP
04/24/2014
A-Rollover
1,162,448
1,291,466
48.0993
Marquest Mineralfields 2012-II SFT LP
04/24/2014
A-Rollover
407,408
452,626
51.7288
Marquest Minng B.C. 2013 SFT LP
05/23/2014
A-Rollover
1,255,060
1,451,944
75.2302
Marquest Energy Fields 2012 SFT LP
05/23/2014
Energy Series Fund
A-Rollover
390,747
957,479
97.206
Marquest Mining 2013 - II SFT LP
10/24/2014
A-Rollover
2,691,684
4,103,802
88.3488
Marquest Mining Quebec 2013 - II SFT LP
10/24/2014
A-Rollover
6,887,128
10,500,272
102.0534
As a result of the mergers, in accordance with the Income Tax Act (Canada), all unrealized losses and certain elected unrealized gains of the terminating funds’ portfolios were
realized on the merger date. The financial statements of the continuing funds do not include the operating results of the terminated funds prior to the merger date.
9. CAPITAL MANAGEMENT DISCLOSURES
Shares issued and outstanding represent the capital of the Funds. The Funds have no restrictions or specific capital requirements and are authorized to issue an unlimited number
of redeemable, transferable shares of each Series available, as specified in the Funds’ Simplified Prospectus. Restrictions and specific requirements on capital for each fund
Series are only applicable for minimum subscriptions as outlined in the Simplified Prospectus. The Statements of Changes in Net Assets Attributable to Holders of Redeemable
Shares and note 3 outline the relevant changes in each of the Fund’s shares for the year. In accordance with the Funds’ investment objectives, portfolio management of the
Funds’ capital will encompass appropriate investing of subscriptions and the maintenance of sufficient liquidity levels for capital redemptions.
10. FINANCIAL INSTRUMENTS
(a) Fair Value
Financial instruments of the Funds include cash, dividend receivable, accrued interest receivable, receivable for investment securities sold, receivable from other corporate
classes, accrued liabilities, payable for redeemable shares, payable for investment securities purchased, payable to other corporate class and due to manager. There are no
significant differences between the carrying values of these financial instruments and their fair values due to their short term nature. Investments are carried at their fair values as
described in note 2.
40
10. FINANCIAL INSTRUMENTS (continued)
(a) Fair Value (continued)
The following tables present the Funds’ financial instruments measured at fair value classified by the fair value hierarchy set out in IFRS 13 Fair Value Measurements as of
December 31, 2015 and December 31, 2014:
December 31, 2015
Level 1
Level 2
Level 3
Total
$
$
$
$
3,556,671
51
21,918
3,578,640
Energy Series Fund
180,522
-
5,000
185,522
456,657
-
-
456,657
50,214
-
-
50,214
7,988,584
-
-
7,988,584
Level 1
Level 2
Level 3
Total
$
$
$
$
6,748,820
2,431,132
339,429
9,519,381
446,908
28,950
-
475,858
December 31, 2014
Energy Series Fund
901,427
1,870
-
903,297
226,783
12,747
-
239,530
7,960,576
129,675
-
8,090,251
Fair values are classified as Level 1 when the related securities or derivatives are 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 values
requires the use of significant unobservable inputs, in which case it is classified as Level 3.
The Manager is responsible for performing the fair value measurements included in the financial statements of the Fund, including Level 3 measurements. The Manager obtains
pricing from a third party pricing vendor as applicable, which is monitored by the Chief Investment Officer and the Chief Compliance Officer each day. At each financial reporting
date, the Chief Financial Officer (CFO) of the Manager reviews and approves all Level 3 fair value measurements.
Realized and unrealized gains and losses related to Level 3 securities are included in the Statements of Comprehensive Income under “Net realized gain (loss) on the sale of
investments including foreign exchange gain (loss)” and “net change in unrealized appreciation (depreciation) in value of investments” respectively. Transfers in and out of Level 3
are due to the changes in the observability of market data, such as a recent new transaction or due to the passage of time, respectively. The following tables summarize the
changes in Level 3 securities for the years ended December 31, 2015 and December 31, 2014:
$
841,025
(501,596)
339,429
(317,511)
21,918
Total Level 3 value, December 31, 2013
Purchased
Transfers out
Sold
Change in unrealized appreciation (depreciation) in value
Purchased
Transfers in
Sold
Change in unrealized appreciation (depreciation) in value
Energy Series Fund
$
5,000
5,000
Certain Funds hold Level 3 securities in which there is uncertainty in estimating the fair value; stemming from current financial issues and lack of market quotations. Level 3
requires significant unobservable data in its determination of fair value. The Explorer Series Fund and the Energy Series Fund both hold private equity investments classified as
level 3.
The Explorer Series Fund and the Energy Series Fund have investments of $21,918 and $5,000 respectively in level 3 securities as at December 31, 2015. The fair value of the
securities during the year was calculated using a key number of valuation techniques and unobservable inputs which may include; financial analysis of the company’s financial
statements, financial disclosures, non-listed transaction prices, analysis of underlying commodity or sector prices and overall prevailing market and economic conditions.
The Manager estimates fair values for these securities using the best information available as of December 31, 2015 and December 31, 2014. The following tables outline the
estimates of fair values as well as ranges of these fair values using alternative assumptions that are reasonable in Management’s view. Impairment losses are reflected in the
Funds’ Statements of Comprehensive Income in the “Change in unrealized appreciation (depreciation) in value of investments”.
Securities transferred from Level 1 to Level 2 was $ nil during the year ended December 31, 2015 (2014 - $2,268,519) and were related to securities that have either been
suspended on the public market for under 12 months or that have trading frequencies so low that are not considered to be traded in an active market.
41
(a) Fair Value (continued)
Fair Value of Holdings Based On Alternative Assumptions
December 31, 2015
Fair Value as Reported
Energy Series Fund
21,918
5,000
Fair Value of Holdings Based On Alternative Assumptions
December 31, 2014
Fair Value as Reported
339,429
Potential Range of Fair Value
+25%
-25%
101,296
-
Potential Range of Fair Value
+25%
-
-25%
-
(b) Risk Management and Disclosures
The Funds’ investment activities expose them to a variety of financial risks. The schedule of investment portfolios present the securities held by the Funds as at December 31,
2015, and groups the securities by asset type, geographic region and/or market segment. Significant risks that are relevant to the Funds are discussed below. The sensitivity
analyses shown in the notes below may differ from actual trading, and the differences could be material.
The Manager seeks to minimize potential adverse effects of these risks on the Funds’ performance by employing professional, experienced portfolio advisers, daily monitoring of
the Funds’ positions and market events; by diversifying the Investment Portfolios within the constraints of the investment objectives and periodically may use derivatives to hedge
certain risk exposure. To assist in managing risks, the Manager also uses internal guidelines that identify the target exposure for each type of risk, maintains a governance
structure that oversees the Funds’ investment activities and monitors compliance with the Funds’ stated investment strategies and securities regulations.
(i) Market Risk
Foreign exchange risk
Foreign exchange risk is the risk that the value or future cash flows of a financial instrument will fluctuate due to changes in foreign exchange rates. The Funds invest in securities
and other investments that are denominated in currencies other than the Canadian dollar. Accordingly, the value of the Funds’ assets may be affected favourably or unfavourably
by fluctuations in currency rates and therefore the Funds will necessarily be subject to foreign exchange risks.
The primary purpose of the Funds’ foreign currency economic hedging activities is to protect against the volatility associated with investments and other assets and liabilities
denominated in foreign currencies in the normal course of business.
Certain Funds, in the normal course of operations will invest in securities in a foreign currency. Consequently, some of the assets and revenues are exposed to foreign exchange
fluctuations.
The tables below indicate the foreign currencies to which the Funds have significant exposure as at December 31, 2015 and December 31, 2014 in Canadian dollar terms. The
tables also illustrate the potential impact to the Funds’ net asset value, as a result of a 5% change in these currencies relative to the Canadian dollar, the functional currency, with
all other variables held constant.
December 31, 2015
Currency
Fair Value
$
% of Net Assets
attributable to holders of
redeemable units
%
Potential Impact on Net Assets
$
United States Dollars
167,140
28.63
8,357
Flex Dividend and Income Growth™ Series Fund United States Dollars
2,965,966
30.16
148,298
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments. The Funds’ are not exposed to
interest rate risk.
42
(b) Risk Management and Disclosures (continued)
(i) Market Risk (continued)
Equity and other price risk
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest
rate or foreign exchange risk). The investments of the Funds are subject to normal market fluctuations and the risks inherent in investment in financial markets. The maximum risk
resulting from financial instruments held by the Funds is equivalent to the fair value of the financial instruments. The Manager moderates this risk through a careful selection of
securities within specified limits and the Funds' market price risk is managed through diversification of the investment portfolio.
The most significant exposure to other price risk arises from the Funds’ investments in equity securities. As of December 31, 2015 and December 31, 2014, had the prices on the
respective stock exchanges for these securities raised or lowered by 10%, with all other variables held constant, net assets attributable to holders of redeemable shares would
have increased or decreased respectively as follows:
Fair Value of Investments in Equity
Securities
% of Net Assets
Attributable to Holders of
Redeemable Shares
Redeemable Shares
$
%
$
3,578,640
66.1
357,864
Energy Series Fund
185,522
37.3
18,552
456,657
78.2
45,666
50,214
28.4
5,021
7,988,584
81.2
798,858
Fair Value of Investments in Equity
Securities
% of Net Assets
Redeemable Shares
Redeemable Shares
$
%
$
9,519,381
75.3%
951,938
475,858
55.3%
47,586
903,297
88.7%
90,330
239,530
73.7%
23,953
8,090,251
83.8%
809,025
December 31, 2015
December 31, 2014
Energy Series Fund
43
(b) Risk Management and Disclosures (continued)
(i) Market Risk (continued)
(ii) Liquidity Risk
Liquidity risk is defined as the risk that the Funds will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another
financial asset.
The Funds may invest in securities, which are not actively traded on a stock exchange. The fair values of these securities may not be indicative of what the Funds could realize on
the immediate sale as it may take a significant amount of time to liquidate positions without causing a significant negative impact on the fair value. There can be no assurance that
an active trading market for these securities will exist at all times, or that the prices at which these securities trade accurately reflect their values. Additionally for net asset value
purposes, in accordance with securities regulation, the Funds must maintain at least 85% of their assets in liquid investments (i.e. investments that are traded in an active market
and can readily be disposed of).
In addition, the Funds have financial liabilities outstanding including accrued liabilities, due to manager, payable for redeemable shares redeemed, payable for investment
securities purchased and payable to other corporate series. These financial liabilities are all current and are due within 30 days. Redeemable shares are redeemable on demand
at the shareholders option. However, Management does not expect that all of the shares will be redeemed immediately as holders of these instruments typically retain them for a
longer period.
Liquidity risk is managed by investing the majority of the Fund's assets in investments that are traded in an active market and can be readily disposed of. On a weekly basis,
quantitative monitoring measures are used to screen the Funds’ portfolio for securities that may be considered for potential reclassification as illiquid In addition, the Fund aims to
retain sufficient cash to maintain liquidity. Accordingly, the Fund's liquidity risk is considered minimal.
(iii) Credit Risk
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Funds. The Funds’ exposure to
credit risk includes cash, investments, dividends receivable and receivables for investment securities sold. The Funds reduce their credit risk associated with cash by maintaining
their primary bank accounts at large international financial institutions. All transactions in listed securities are settled for upon delivery using approved brokers. The risk of default is
considered minimal, as delivery of securities sold is only made once the broker has received payment. Payment is made on a purchase once the securities have been received by
the broker. The trade will fail if either party fails to meet its obligation. The Funds do not have a significant exposure to credit risk.
(iv) Concentration Risk
Portfolio concentration risk is the risk of loss in the total value of the portfolio investments of the Fund due to an over-concentration of investments in a particular instrument, sector
or country. A summary of the Portfolio’s concentration risk by industry sector as at December 31, 2015 and December 31, 2014, is shown in Fund’s Schedule of Investment
Portfolio.)
11. RECONCILIATION OF NET ASSET VALUE
In accordance with Canadian securities regulations, a reconciliation between the net asset value and the net assets of an investment fund is required for financial reporting
periods.
For investments that are traded in an active market where quoted prices are readily and regularly available, IFRS 13, Fair Value Measurements requires that where an asset or a
liability measured at fair value has a bid price and an ask price, the price within the bid-ask spread that is most representative of fair value in the circumstances shall be used to
measure fair value regardless of where the input is categorized within the fair value hierarchy, rather than the use of closing sale prices currently used for the purpose of
determining net asset value. The Fund uses last traded close price unless the close price falls outside the bid-ask spread. As at December 31, 2015 and December 31, 2014 there
were no differences between the net asset value per share and the net asset per unit per share of the funds.
12. FUTURE ACCOUNTING PRONOUNCEMENTS
IFRS 9 Financial Instruments was issued in final form in July 2014 by the IASB and will replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 uses a single
approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an
entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. Most of the requirements in IAS 39
for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. The new standard also requires a single impairment method to be used,
replacing the multiple impairment methods in IAS 39. IFRS 9 also includes requirements relating to a new hedge accounting model, which represents a substantial overhaul of
hedge accounting which will allow entities to better reflect their risk management activities in the financial statements. The most significant improvements apply to those that
hedge non-financial risk, and so these improvements are expected to be of particular interest to non-financial institutions. IFRS 9 is effective for annual periods beginning on or
after January 1, 2018. The Manager is currently assessing the impact on the financial statements of adopting IFRS.
13. SUBSEQUENT EVENTS NOTE
On March 24, 2016, the Marquest Mutual Funds Inc., Canadian Flex Series Fund and Resource Flex Series Fund was terminated.
44
TORONTO
161 Bay Street
Suite 4420, P.O. Box 204
Toronto, ON M5J 2S1
Phone 416.777.7350
Toll Free 1.877.777.1541
MONTREAL
1155 Robert-Bourassa Boulevard
Suite 905
Montreal, QC H3B 3A7
Phone 514.227.0666
Toll Free 1.866.687.9363
VANCOUVER
1055 West Hastings
Suite 300
Vancouver, BC V6E 2E9
Phone 604.895.7281
CLIENT SERVICES
Phone 416.365.4077
Toll free 1.888.964.3533
[email protected]
WWW.MARQUEST.CA

Annual Financial Statements - Marquest Asset Management Inc.

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