semi-annual financial statements – as at jun e 30, 2016 · 2019-11-04 · semi-annual financial...

Semi-Annual Financial Statements – as at June 30, 2016

Marret High Yield Fund

Table of Contents

MARRET HIGH YIELD FUND

Financial Statements

Statements of Financial Position ............................................. 1

Statements of Comprehensive Income .................................... 3

Statements of Changes in Net Assets Attributable

to Holders of Redeemable Units ............................................. 6

Statements of Cash Flows ....................................................... 17

Schedule of Investment Portfolio ............................................. 18

Fund Specific Notes to Financial Statements ......................... 21

Notes to the Financial Statements .......................................... 31

Legal Notice ............................................................................. 40

Marret Asset Management Inc., the Manager of the Fund, appoints independent auditors to audit the Fund’s Annual Financial Statements. Under Canadian securities

laws (National Instrument 81-106), if an auditor has not reviewed the Semi-Annual Financial Statements, this must be disclosed in an accompanying notice.

The Fund’s independent auditors have not performed a review of these Semi-Annual Financial Statements in accordance with standards established by the Canadian

Institute of Chartered Accountants.

– 1 –


Semi-Annual Financial Statements as at June 30, 2016

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

Assets

Current assets

Investments

Cash

Cash held at broker

Margin

Receivable for investments sold

Receivable for unit subscriptions

Interest receivable

Dividends receivable

Other assets

Derivative assets

Liabilities

Current liabilities

Investments sold short

Bank overdraft

Due to broker

Margin

Payable for investments purchased

Payable for unit redemptions

Management fees payable

Performance fees payable

Other accrued expenses

Distributions payable to holders of redeemable units

Dividends payable on investments sold short

Interest payable on investments sold short

Derivative liabilities

Net assets attributable to holders of redeemable units

Net assets attributable to holders of redeemable units per series (Note 4):

Series A

Series A - USD

Series F

Series F - USD

Class AA

Class FF

Class FF Series 0513






Class F Series 1114

Class F Series 1214

Class F Series 0615

Class F Series 0715

Class F Series 0815

Class F Series 0915

Class F Series 1015

Class F Series 0516

Class F - USD Series 0516

Financial Statements (unaudited)

as at as at

Jun. 30, 2016 Dec. 31, 2015

20,828,461 24,811,230

939,179 607,169

1,852,600 3,700,173

96,593 -

622,052 475,543

- -

367,091 561,098

1,312 -

8,702 14,009

21,844 34,887

24,737,834 30,204,109

985,639 1,590,585

- -

- 4,090,282

- -

685,499 -

- 1,525,642

22,263 26,336

- -

27,767 33,248

- -

1,312 5,299

- -

140,558 861,437

1,863,038 8,132,829

22,874,796 22,071,280

2,238,011 7,604,059

32,024 32,375

15,831,265 9,503,548

92,987 93,740

- -

3,848,886 3,248,162

- 78,128

- 136,151

- 5,641

- 298,856

- 169,160

- 166,578

- 97,645

- 372,820

- 153,621

- 72,492

- 32,914

- 3,267

- 2,123

503,867 -

327,756 -

146M

Statements of Financial Position (in $ except for per unit amounts and units outstanding)

– 2 –



Net assets attributable to holders of redeemable units per unit:

Series A

Series A - USD

Series F

Series F - USD

Class AA

Class FF







Class F Series 1114

Class F Series 1214

Class F Series 0615

Class F Series 0715

Class F Series 0815

Class F Series 0915

Class F Series 1015

Class F Series 0516


Number of redeemable units outstanding:

Series A

Series A - USD

Series F

Series F - USD

Class AA

Class FF







Class F Series 1114

Class F Series 1214

Class F Series 0615

Class F Series 0715

Class F Series 0815

Class F Series 0915

Class F Series 1015

Class F Series 0516




as at as at

Jun. 30, 2016 Dec. 31, 2015

9.37 8.90

11.85 11.98

9.44 8.94

13.28 13.39

- -

11.08 10.50

- 10.71

- 10.49

- 10.49

- 10.50

- 10.50

- 10.50

- 8.94

- 8.94

- 8.94

- 8.94

- 8.94

- 8.94

- 8.94

9.44 -

13.26 -

238,879 854,465

2,703 2,703

1,677,030 1,062,848

7,000 7,000

- -

347,309 309,443

- 7,298

- 12,978

- 538

- 28,471

- 16,115

- 15,870

- 10,921

- 41,700

- 17,180

- 8,105

- 3,681

- 365

- 237

53,375 -

24,715 -

Statements of Financial Position (cont’d) (in $ except for per unit amounts and units outstanding)

– 3 –





Income

Net gain (loss) on investments and derivatives

Dividends

Interest for distribution purposes

Derivative income (loss)

Interest expense on investments sold short

Dividend expense on investments sold short

Net realized gain (loss) on sale of investments and derivatives

Net realized foreign exchange gain (loss) on investments and derivatives

Change in unrealized appreciation (depreciation) in value of investments and derivatives

Total net gain (loss) on investments and derivatives

Other income

Foreign exchange gain (loss) on cash

Change in unrealized foreign exchange gain (loss) on cash

Other income

Total other income

Total income

Expenses

Management fees (Note 5)

Operating fees

Performance fees (Note 5)

Fund administration expense

Audit fees

Legal fees

Trustee fees

Transfer agent fees

Custodial and administrative fees

Independent review committee fees

Unitholders reporting costs

Commissions and other portfolio transaction costs

Professional fees

Regulatory fees

Commission fees

Securities borrowing fees (Note 2)

Service expense

Other expenses

Interest expense

Withholding taxes

Total expenses

Expenses absorbed by the Manager

Increase (decrease) in net assets attributable to holders of redeemable units

2016 2015

1,775 7,503

1,419,285 1,013,843

1,302 -

(14,435) (4,643)

(17,781) (9,251)

121,902 (1,731,850)

(259,188) 373,374

611,159 1,714,466

1,864,019 1,363,442

(451,814) (38,271)

(5,298) 7,120

13 263

(457,099) (30,888)

1,406,920 1,332,554

136,132 168,272

- -

- -

- -

14,189 23,784

- 115,390

- -

- -

28,348 33,633

- -

- -

1,470 1,042

- -

1,801 947

- -

7,796 6,236

- -

5,256 14,647

18,362 6,889

722 117

214,076 370,957

- -

1,192,844 961,597

Statements of Comprehensive Income for the periods ended June 30 (in $ except for per unit amounts and number of units)

– 4 –





Increase (decrease) in net assets attributable to holders of redeemable units per series:

Series A

Series A - USD

Series F

Series F - USD

Class AA

Class FF







Class F Series 1114

Class F Series 1214

Class F Series 0615

Class F Series 0715

Class F Series 0815

Class F Series 0915

Class F Series 1015

Class F Series 0516


Increase (decrease) in net assets attributable to holders of redeemable units per unit:

Series A

Series A - USD

Series F

Series F - USD

Class AA

Class FF







Class F Series 1114

Class F Series 1214

Class F Series 0615

Class F Series 0715

Class F Series 0815

Class F Series 0915

Class F Series 1015

Class F Series 0516


2016 2015

156,478 272,101

(344) 25,240

819,393 494,268

(732) -

- 3,292

213,735 119,171

- 2,804

- 4,887

- 269

- 10,726

- 6,070

- 5,978

- 3,411

- 13,380

- -

- -

- -

- -

- -

3,983 -

331 -

0.28 0.30

(0.13) 1.14

0.58 0.32

(0.11) -

- 0.34

0.57 0.38

- 0.39

- 0.38

- 0.38

- 0.37

- 0.37

- 0.37

- 0.31

- 0.32

- -

- -

- -

- -

- -

0.07 -

0.02 -

Statements of Comprehensive Income (cont’d)for the periods ended June 30 (in $ except for per unit amounts and number of units)

– 5 –





Weighted average number of units:

Series A

Series A - USD

Series F

Series F - USD

Class AA

Class FF







Class F Series 1114

Class F Series 1214

Class F Series 0615

Class F Series 0715

Class F Series 0815

Class F Series 0915

Class F Series 1015

Class F Series 0516


2016 2015

552,961 906,975

2,703 22,352

1,425,002 1,521,542

7,000 -

- 9,987

373,654 314,462

- 7,298

- 12,978

- 717

- 28,471

- 16,115

- 15,870

- 10,921

- 41,700

- -

- -

- -

- -

- -

53,375 -

24,715 -

Statements of Comprehensive Income (cont’d)for the periods ended June 30 (in $ except for per unit amounts and number of units)

– 6 –





Series A

Net assets attributable to holders of redeemable units at the beginning of period


Distributions to holders of redeemable units

From net investment income

From net realized gains

Return of capital

Total distributions to holders of redeemable units

Redeemable unit transactions

Issue costs

Series consolidation

Proceeds from redeemable units issued

Reinvestment of distributions to holders of redeemable units

Redemption of redeemable units

Net increase (decrease) from redeemable unit transactions

Net increase (decrease) in net assets attributable to holders of redeemable units

Net assets attributable to holders of redeemable units at the end of period

Series A - USD






Return of capital



Issue costs








2016 2015

7,604,059 8,329,063

156,478 272,101

- -

- -

- -

- -

(1,131) (1,580)

- -

341,831 -

- -

(5,863,226) (251,622)

(5,522,526) (253,202)

(5,366,048) 18,899

2,238,011 8,347,962

32,375 240,523

(344) 25,240

- -

- -

- -

- -

(7) (47)

- -

- -

- -

- (24,600)

(7) (24,647)

(351) 593

32,024 241,116

Statements of Changes in Net Assets Attributable to Holders of Redeemable Units for the periods ended June 30 (in $)

– 7 –





Series F






Return of capital



Issue costs








Series F - USD






Return of capital



Issue costs








2016 2015

9,503,548 14,222,486

819,393 494,268

- -

- -

- -

- -

(2,996) (2,652)

734,882 -

5,167,385 -

- -

(390,947) (751,729)

5,508,324 (754,381)

6,327,717 (260,113)

15,831,265 13,962,373

93,740 -

(732) -

- -

- -

- -

- -

(21) -

- -

- -

- -

- -

(21) -

(753) -

92,987 -

Statements of Changes in Net Assets Attributable to Holders of Redeemable Units (cont’d) for the periods ended June 30 (in $)

– 8 –





Class AA






Return of capital



Issue costs








Class FF






Return of capital



Issue costs








2016 2015

- 129,678

- 3,292

- -

- -

- -

- -

- (17)

- -

- -

- -

- (132,953)

- (132,970)

- (129,678)

- -

3,248,162 3,390,737

213,735 119,171

- -

- -

- -

- -

(917) (645)

854,514 -

- -

- -

(466,608) (116,514)

386,989 (117,159)

600,724 2,012

3,848,886 3,392,749


– 9 –











Return of capital



Issue costs














Return of capital



Issue costs








2016 2015

78,128 78,587

- 2,804

- -

- -

- -

- -

- (15)

(78,128) -

- -

- -

- -

(78,128) (15)

(78,128) 2,789

- 81,376

136,151 136,947

- 4,887

- -

- -

- -

- -

- (27)

(136,151) -

- -

- -

- -

(136,151) (27)

(136,151) 4,860

- 141,807


– 10 –











Return of capital



Issue costs














Return of capital



Issue costs








2016 2015

5,641 7,565

- 269

- -

- -

- -

- -

- -

(5,641) -

- -

- -

- -

(5,641) -

(5,641) 269

- 7,834

298,856 300,604

- 10,726

- -

- -

- -

- -

- (59)

(298,856) -

- -

- -

- -

(298,856) (59)

(298,856) 10,667

- 311,271


– 11 –











Return of capital



Issue costs














Return of capital



Issue costs








2016 2015

169,160 170,149

- 6,070

- -

- -

- -

- -

- (32)

(169,160) -

- -

- -

- -

(169,160) (32)

(169,160) 6,038

- 176,187

166,578 167,551

- 5,978

- -

- -

- -

- -

- (32)

(166,578) -

- -

- -

- -

(166,578) (32)

(166,578) 5,946

- 173,497


– 12 –





Class F Series 1114






Return of capital



Issue costs








Class F Series 1214






Return of capital



Issue costs








2016 2015

97,645 98,309

- 3,411

- -

- -

- -

- -

- (19)

(97,645) -

- -

- -

- -

(97,645) (19)

(97,645) 3,392

- 101,701

372,820 -

- 13,380

- -

- -

- -

- -

- (73)

(372,820) -

- 375,000

- -

- -

(372,820) 374,927

(372,820) 388,307

- 388,307


– 13 –





Class F Series 0615






Return of capital



Issue costs








Class F Series 0715






Return of capital



Issue costs








2016 2015

153,621 -

- -

- -

- -

- -

- -

- -

(153,621) -

- -

- -

- -

(153,621) -

(153,621) -

- -

72,492 -

- -

- -

- -

- -

- -

- -

(72,492) -

- -

- -

- -

(72,492) -

(72,492) -

- -


– 14 –





Class F Series 0815






Return of capital



Issue costs








Class F Series 0915






Return of capital



Issue costs








2016 2015

32,914 -

- -

- -

- -

- -

- -

- -

(32,914) -

- -

- -

- -

(32,914) -

(32,914) -

- -

3,267 -

- -

- -

- -

- -

- -

- -

(3,267) -

- -

- -

- -

(3,267) -

(3,267) -

- -


– 15 –





Class F Series 1015






Return of capital



Issue costs








Class F Series 0516






Return of capital



Issue costs








2016 2015

2,123 -

- -

- -

- -

- -

- -

- -

(2,123) -

- -

- -

- -

(2,123) -

(2,123) -

- -

- -

3,983 -

- -

- -

- -

- -

(116) -

- -

500,000 -

- -

- -

499,884 -

503,867 -

503,867 -


– 16 –











Return of capital



Issue costs








Total Fund






Return of capital



Issue costs








2016 2015

- -

331 -

- -

- -

- -

- -

(75) -

- -

327,500 -

- -

- -

327,425 -

327,756 -

327,756 -

22,071,280 27,272,199

1,192,844 961,597

- -

- -

- -

- -

(5,263) (5,198)

- -

6,336,716 375,000

- -

(6,720,781) (1,277,418)

(389,328) (907,616)

803,516 53,981

22,874,796 27,326,180


– 17 –




*Dividends and interest received as well as dividends and interest paid relate to operating activities of the Fund.


Cash flows from (used in) operating activities


Adjustments for:

Net realized (gain) loss on sale of investments and derivatives

Change in unrealized (appreciation) depreciation in value of investments and derivatives

Change in unrealized foreign exchange (gain) loss on cash

Proceeds from sale and maturity of investments and derivatives

Purchase of investments and derivatives

(Increase) decrease in cash held at broker

(Increase) decrease in margin

(Increase) decrease in interest receivable

(Increase) decrease in dividends receivable

(Increase) decrease in other receivables

Increase (decrease) in due to broker

Increase (decrease) in interest payable on investments sold short

Increase (decrease) in dividends payable on investments sold short

Increase (decrease) in other liabilities

Net cash from (used in) operating activities

Cash flows from (used in) financing activities

Proceeds from issuance of redeemable units

Amounts paid on redemption of redeemable units

Distributions paid to holders of redeemable units, net of reinvested distributions

Issue costs

Net cash from (used in) financing activities

Change in unrealized foreign exchange gain (loss) on cash

Net increase (decrease) in cash

Cash (bank overdraft), beginning of period

Cash (bank overdraft), end of period

Supplementary Information:

Interest received, net of withholding tax*

Dividends received, net of withholding tax*

Interest paid*

Dividends paid*

2016 2015

1,192,844 961,597

(121,902) 1,731,850

(611,159) (1,714,466)

5,298 (7,120)

25,045,358 29,606,551

(21,103,320) (28,928,617)

1,847,573 946,166

(96,593) 1

194,007 2,659

(1,312) 1,212

5,307 36,404

(4,090,282) (565,761)

- (8,480)

(3,987) (1,667)

(9,554) (20,807)

2,252,278 2,039,522

6,336,716 375,000

(8,246,423) (1,534,137)

- -

(5,263) (5,198)

(1,914,970) (1,164,335)

(5,298) 7,120

337,308 875,187

607,169 468,676

939,179 1,350,983

1,419,285 1,016,502

463 8,598

(14,435) (13,123)

(21,768) (10,918)

Statements of Cash Flowsfor the periods ended June 30 (in $)

– 18 –



Schedule of Investment Portfolio as at June 30, 2016 (unaudited)

Percentages shown in brackets relate investments at fair value to net assets attributable to holders of redeemable units of the Fund.

CANADIAN BONDS - LONG POSITIONS

Canadian Corporate Bonds (22.58%)

455,000 Air Canada, Callable, 6.750%, 2019/10/01 (USD) 579,222 614,964

180,000 Athabasca Oil Corp., Callable, 7.500%, 2017/11/19 171,058 177,000

110,000 AuRico Gold Inc., Callable, 7.750%, 2020/04/01 (USD) 123,999 140,251

415,000 Baytex Energy Corp., Series ‘B’, Callable, 6.750%, 2021/02/17 (USD) 484,270 469,690

125,000 Bombardier Inc., 5.500%, 2018/09/15 (USD) 151,488 161,799

90,000 Canadian Natural Resources Ltd., Callable, 6.000%, 2016/08/15 (USD) 114,307 117,533

219,000 First Quantum Minerals Ltd., Callable, 7.000%, 2021/02/15 (USD) 240,765 230,410

270,000 First Quantum Minerals Ltd., Callable, 7.250%, 2022/05/15 (USD) 275,086 273,091

220,000 GFL Environmental Corp., Restricted, Callable, 7.500%, 2018/06/18 222,012 223,162

340,000 Hudbay Minerals Inc., Callable, 9.500%, 2020/10/01 (USD) 336,718 375,960

130,000 Mattamy Group Corp., Callable, 6.500%, 2020/11/15 (USD) 149,742 163,198

145,000 MEG Energy Corp., Callable, 6.500%, 2021/03/15 (USD) 143,515 147,132



65,000 Northern Blizzard Resources Inc., Callable, 7.250%, 2022/02/01 (USD) 69,514 77,371

450,000 Quebecor Media Inc., Callable, 7.375%, 2021/01/15 477,062 467,059

235,000 Sherritt International Corp., Series ‘1’, Callable, 8.000%, 2018/11/15 221,450 135,419

265,000 Sirius XM Canada Holdings Inc., Callable, 5.625%, 2021/04/23 267,216 265,000

60,000 Valeant Pharmaceuticals International Inc., Callable, 7.500%, 2021/07/15 (USD) 79,231 69,224

435,000 Videotron Ltd., Callable, 5.750%, 2026/01/15 435,000 441,489

385,000 Videotron Ltd., Restricted, Callable, 5.625%, 2025/06/15 385,147 391,380

60,000 VRX Escrow Corp., Callable, 5.875%, 2023/05/15 (USD) 68,443 63,419

5,162,610 5,166,220

Total Canadian Bonds (22.58%) 5,162,610 5,166,220

UNITED STATES BONDS - LONG POSITIONS

U.S. Corporate Bonds (59.93%)

115,000 24 Hour Holdings III LLC, Callable, 8.000%, 2022/06/01 (USD) 111,536 114,073

640,000 Activision Blizzard Inc., Callable, 5.625%, 2021/09/15 (USD) 823,950 873,163

100,000 Ally Financial Inc., Floating Rate, 3.313%, 2016/07/18 (USD) 131,438 130,091

7,000 Aramark, Callable, 5.750%, 2020/03/15 (USD) 9,311 9,385

35,000 ARC Properties Operating Partnership L.P. / ClarkAcquisition LLC, 2.000%, 2017/02/06 (USD) 46,266 45,871

100,000 Brocade Communications Systems Inc., Callable, 4.625%, 2023/01/15 (USD) 121,220 126,025

160,000 Calfrac Holdings L.P., Callable, 7.500%, 2020/12/01 (USD) 184,546 135,294

527,000 Calpine Corp., Callable, 7.875%, 2023/01/15 (USD) 713,123 726,707

400,000 Cloud Peak Energy Resources LLC / Cloud Peak Energy Finance Corp., Callable, 6.375%, 2024/03/15 (USD) 386,352 174,321

260,000 Cloud Peak Energy Resources LLC / Cloud Peak Energy Finance Corp., Callable, 8.500%, 2019/12/15 (USD) 185,239 151,228

580,000 CoreLogic Inc., Callable, 7.250%, 2021/06/01 (USD) 777,529 782,687

227,000 CSC Holdings LLC., Callable, 8.625%, 2019/02/15 (USD) 305,080 326,494

245,000 DuPont Fabros Technology L.P., Callable, 5.875%, 2021/09/15 (USD) 298,257 335,055

30,000 Endo Finance Co. (The), Callable, 5.750%, 2022/01/15 (USD) 34,305 35,413

215,000 EV Energy Partners L.P. / EV Energy Finance Corp., Callable, 8.000%, 2019/04/15 (USD) 226,754 169,214

50,000 First Data Corp., Callable, 5.750%, 2024/01/15 (USD) 63,605 64,801

910,000 First Data Corp., Callable, 6.750%, 2020/11/01 (USD) 1,242,768 1,239,445

340,000 Frontier Communications Corp., Callable, 6.875%, 2025/01/15 (USD) 388,144 372,919

205,000 Frontier Communications Corp., Series ‘WI’, Callable, 11.000%, 2025/09/15 (USD) 268,284 277,018

175,000 Global Brass & Copper Inc., Callable, 9.500%, 2019/06/01 (USD) 239,593 238,983

200,000 Halcon Resources Corp., Callable, 8.625%, 2020/02/01 (USD) 218,472 246,682

380,000 HCA Inc., Callable, 6.500%, 2020/02/15 (USD) 523,830 548,101

410,000 HD Supply Inc., Callable, 7.500%, 2020/07/15 (USD) 557,947 559,984

110,000 Hertz Corp. (The), Callable, 7.375%, 2021/01/15 (USD) 149,486 148,465

85,000 Hertz Corp. (The), Callable, 7.500%, 2018/10/15 (USD) 110,513 112,926

15,000 Hexion Inc., Callable, 10.000%, 2020/04/15 (USD) 17,660 18,294

40,000 Hexion U.S. Finance Corp., Callable, 6.625%, 2020/04/15 (USD) 46,931 43,778

30,000 Hexion US Finance Corp. / Hexion Nova Scotia Finance ULC, Callable, 8.875%, 2018/02/01 (USD) 31,973 34,051

235,000 Hughes Satellite Systems Corp., Callable, 6.500%, 2019/06/15 (USD) 330,991 331,315

No. of Shares/

Par Value Description

Average

Cost ($)

Fair

Value ($)

– 19 –




Schedule of Investment Portfolio as at June 30, 2016 (unaudited) (cont’d)

UNITED STATES BONDS - LONG POSITIONS (cont’d)

U.S. Corporate Bonds (59.93%) (cont’d)

80,000 J.C. Penney Co. Inc., 7.650%, 2016/08/15 (USD) 104,335 104,569

215,000 JBS USA LLC / JBS USA Finance Inc., Callable, 7.250%, 2021/06/01 (USD) 256,169 290,881

420,000 JBS USA LLC / JBS USA Finance Inc., Callable, 8.250%, 2020/02/01 (USD) 544,797 568,233

45,000 K Hovnanian Enterprises Inc., Callable, 9.125%, 2020/11/15 (USD) 55,261 40,100

397,000 K. Hovnanian Enterprises Inc., Callable, 7.250%, 2020/10/15 (USD) 464,360 449,318

30,000 Level 3 Financing Inc., Callable, 6.125%, 2021/01/15 (USD) 40,803 40,763

15,000 Oasis Petroleum Inc., Callable, 6.500%, 2021/11/01 (USD) 17,112 17,904

15,000 Penske Automotive Group Inc., Callable, 5.500%, 2026/05/15 (USD) 19,287 18,587

290,000 Sabine Pass LNG L.P., Callable, 7.500%, 2016/11/30 (USD) 386,253 384,665

95,000 Sirius XM Radio Inc., Callable, 6.000%, 2024/07/15 (USD) 128,121 128,065

445,000 Sprint Communications Inc., 9.000%, 2018/11/15 (USD) 601,113 618,700

520,000 Sprint Corp., 7.875%, 2023/09/15 (USD) 606,491 556,395

315,000 Sprint Nextel Corp., Callable, 6.000%, 2016/12/01 (USD) 405,705 413,369

35,000 Standard Pacific Corp., Callable, 10.750%, 2016/09/15 (USD) 45,896 46,306

113,000 Taylor Morrison Communities Inc. / Monarch Communities Inc., Callable, 5.625%, 2024/03/01 (USD) 126,454 144,062

150,000 Time Inc., Callable, 5.750%, 2022/04/15 (USD) 169,108 184,159

550,000 T-Mobile USA Inc., Callable, 6.625%, 2020/11/15 (USD) 695,308 740,536

295,000 Valeant Pharmaceuticals International Inc., Callable, 7.000%, 2020/10/01 (USD) 387,351 340,592

210,000 Whiting Petroleum Corp., Callable, 5.750%, 2021/03/15 (USD) 182,098 247,919

13,781,125 13,706,906

Total U.S. Bonds (59.93%) 13,781,125 13,706,906

INTERNATIONAL BONDS - LONG POSITIONS

International Bonds (7.48%)

55,000 Bertin SA / Bertin Finance Ltd., 10.250%, 2016/10/05 (USD) 71,771 72,802

475,000 Intelsat Jackson Holdings SA, Callable, 7.250%, 2019/04/01 (USD) 515,994 454,176

175,000 Intelsat Jackson Holdings SA, Callable, 8.000%, 2024/02/15 (USD) 230,069 225,381

55,000 JBS SA, 10.500%, 2016/08/04 (USD) 72,154 72,279

300,000 Numericable - SFR SA, Callable, 7.375%, 2026/05/01 (USD) 380,062 386,367

135,000 Numericable Group SA, Callable, 6.250%, 2024/05/15 (USD) 168,333 168,597

255,000 NXP BV / NXP Funding LLC, 3.500%, 2016/09/15 (USD) 328,982 332,233

1,767,365 1,711,835

Total International Bonds (7.48%) 1,767,365 1,711,835

Total Bonds (89.99%) 20,711,100 20,584,961

TERM LOANS

Term Loans (0.75%)

149,896 MEG Energy Corp., Term Loan, 3.750%, 2020/03/21 (USD) 162,317 172,262

162,317 172,262

Total Loans (0.75%) 162,317 172,262

CANADIAN EQUITIES - LONG POSITIONS

Canadian Equities (0.31%)

300,000 Marret High Yield Strategies Fund - 16,500

167,138 Marret Resource Corp. 136,080 54,738

47,000 Xinergy Ltd., Warrants, 2017/08/13 - -

136,080 71,238

CANADIAN EQUITIES - SHORT POSITIONS

Canadian Equities (-2.33%)

(7,600) First Quantum Minerals Ltd. (74,084) (68,932)

(14,100) Hudbay Minerals Inc. (53,939) (86,997)

(31,500) iShares S&P/TSX Capped Energy Index ETF (439,911) (378,000)

(567,934) (533,929)

Total Canadian Equities (-2.02%) (431,854) (462,691)

No. of Shares/


Average

Cost ($)

Fair

Value ($)

– 20 –



Schedule of Investment Portfolio as at June 30, 2016 (unaudited) (cont’d)

‡ Credit ratings are obtained from S&P Global Ratings, where available, otherwise ratings are obtained from: Moody’s Investors Service or Dominion Bond Rating Service.


UNITED STATES EQUITIES - SHORT POSITIONS

U.S. Equities (-1.97%)

(4,100) iShares iBoxx $ High Yield Corporate Bond ETF (447,818) (451,710)

(447,818) (451,710)

Total U.S. Equities (-1.97%) (447,818) (451,710)

Total Equities (-3.99%) (879,672) (914,401)

Total Investments (86.75%) 19,993,745 19,842,822

Investments, Long Positions 21,009,497 20,828,461

Investments, Short Positions (1,015,752) (985,639)

Less: Transaction cost (380)

Total Investments (86.75%) 19,993,365 19,842,822

Margin (0.42%) 96,593

Unrealized gain on foreign currency forward contracts (0.10%) (see Schedule A) 21,844

Unrealized loss on foreign currency forward contracts (-0.50%) (see Schedule A) (113,165)

Unrealized loss on credit default swaps contracts (-0.12%) (see Schedule B) (27,393)

Other Assets, Less Liabilities (13.35%) 3,054,095

Net Assets Attributable to Holders of Redeemable Units (100.00%) 22,874,796

Schedule A

Foreign Currency Forward Contracts (-0.40%)

Credit Rating for Settlement Currency Currency Forward Current Unrealized

Counterparty Counterparty‡ Date Buys Par Value Sells Par Value Rate Rate Gain (Loss) ($)

Bank of New York Mellon (The), New York A-1+ 2016-09-09 USD 272,000 CAD 354,158 1.302 1.301 (360)

Bank of New York Mellon (The), New York A-1+ 2016-09-09 USD 250,000 CAD 323,667 1.295 1.301 1,515

Bank of New York Mellon (The), New York A-1+ 2016-09-09 USD 68,132 CAD 88,261 1.295 1.301 359




Bank of New York Mellon (The), New York A-1+ 2016-09-09 CAD 323,667 USD 250,000 0.772 0.769 (1,515)

Bank of New York Mellon (The), New York A-1+ 2016-09-09 CAD 23,477,727 USD 18,134,000 0.772 0.769 (109,639)

Bank of New York Mellon (The), New York A-1+ 2016-09-09 CAD 270,400 USD 209,000 0.773 0.769 (1,452)

Bank of New York Mellon (The), New York A-1+ 2016-09-09 CAD 240,435 USD 185,000 0.769 0.769 (199)

Bank of New York Mellon (The), New York A-1+ 2016-09-09 CAD 1,400 USD 1,070 0.764 0.769 9

Bank of New York Mellon (The), New York A-1+ 2016-09-09 CAD 500 USD 382 0.764 0.769 3

Royal Bank of Canada A-1+ 2016-09-09 USD 3,135,000 CAD 4,058,853 1.295 1.301 18,924

Royal Bank of Canada A-1+ 2016-09-09 USD 50,000 CAD 64,226 1.285 1.301 810

Total Foreign Currency Forward Contracts Value (91,321)

Schedule B

Credit Default Swap Contracts (-0.12%)

Underlying Security

Counterparty Credit Rating‡ Notional Amount Expiry Date Fair Value ($)

Pay 1.00% quarterly times the notional amount

Receive a payment only upon a default event

of Markit CDX NA HY S26 Index Credit Suisse A-1 660,000 2021-06-20 (27,393)

Total Credit Default Swap Contracts Value (27,393)

No. of Shares/


Average

Cost ($)

Fair

Value ($)

– 21 –



Fund Specific Notes to Financial Statements (unaudited)

Financial Instruments by Category (Note 2)

The following tables present the carrying amounts of the Fund’s financial instruments by category:

as at June 30, 2016

Held for

Trading

Financial Assets/

Liabilities as FVTPL

Designated at Inception Total

Financial Assets/

Liabilities at

Amortized Cost Total

(in $) (in $) (in $) (in $) (in $)

- 20,828,461 20,828,461 - 20,828,461

- - - 939,179 939,179

- - - 1,852,600 1,852,600

- - - 96,593 96,593

- - - 622,052 622,052

- - - - -

- - - 367,091 367,091

- - - 1,312 1,312

- - - 8,702 8,702

21,844 - 21,844 - 21,844

21,844 20,828,461 20,850,305 3,887,529 24,737,834

985,639 - 985,639 - 985,639

- - - - -

- - - - -

- - - - -

- - - 685,499 685,499

- - - - -

- - - 22,263 22,263

- - - - -

- - - 27,767 27,767

- - - - -

- - - 1,312 1,312

- - - - -

140,558 - 140,558 - 140,558

1,126,197 - 1,126,197 736,841 1,863,038


Assets

Investments

Cash

Cash held at broker

Margin



Interest receivable


Other assets

Derivative assets

Liabilities


Bank overdraft

Due to broker

Margin










– 22 –




as at December 31, 2015

Held for

Trading

Financial Assets/

Liabilities as FVTPL

Designated at Inception Total

Financial Assets/

Liabilities at

Amortized Cost Total

(in $) (in $) (in $) (in $) (in $)

- 24,811,230 24,811,230 - 24,811,230

- - - 607,169 607,169

- - - 3,700,173 3,700,173

- - - - -

- - - 475,543 475,543

- - - - -

- - - 561,098 561,098

- - - - -

- - - 14,009 14,009

34,887 - 34,887 - 34,887

34,887 24,811,230 24,846,117 5,357,992 30,204,109

1,590,585 - 1,590,585 - 1,590,585

- - - - -

- - - 4,090,282 4,090,282

- - - - -

- - - - -

- - - 1,525,642 1,525,642

- - - 26,336 26,336

- - - - -

- - - 33,248 33,248

- - - - -

- - - 5,299 5,299

- - - - -

861,437 - 861,437 - 861,437

2,452,022 - 2,452,022 5,680,807 8,132,829


Assets

Investments

Cash

Cash held at broker

Margin



Interest receivable


Other assets

Derivative assets

Liabilities


Bank overdraft

Due to broker

Margin










Financial Instruments by Category (Note 2) (cont’d)

– 23 –




Net Gain (Loss) on Financial Instruments (Note 2) for the periods ended June 30 (in $)

The following table presents the net gain (loss) on financial instruments at FVTPL by category.

2016 2015

Financial Instruments at FVTPL

Held for trading 1,435,423 (1,754,106)

Designated at fair value through profit or loss 428,596 3,117,548

Total 1,864,019 1,363,442

Offsetting of Financial Instruments (Note 2)

The following tables show the net impact on the Fund’s Statements of Financial Positon if all rights to offset were exercised.

as at June 30, 2016

Amounts Eligible for Offset

Gross Assets/

(Liabilities)

Financial

Instruments

Collateral

(Received)/Paid

Net

Exposure

(in $) (in $) (in $) (in $)

Derivative assets 21,844 (21,844) - -

Derivative liabilities (140,558) 21,844 27,393 (91,321)


Amounts Eligible for Offset

Gross Assets/

(Liabilities)

Financial

Instruments

Collateral

(Received)/Paid

Net

Exposure

(in $) (in $) (in $) (in $)

Derivative assets 34,887 (4,179) - 30,708

Derivative liabilities (861,437) 4,179 - (857,258)

Interest in Non-Consolidated Structured Entities (Note 2)

The following tables present the Fund’s interest in Non-Consolidated Structured Entities.

as at June 30, 2016

Fair Value of

the Underlying Funds / ETFs

Fair Value of the Fund’s Investment

in the Underlying Funds / ETFs

Ownership in the

Underlying Funds / ETFs

Non-Consolidated Structured Entities (in $) (in $) (%)

Marret Resource Corp. 19,416,000 54,738 0.28

Marret High Yield Strategies Fund 26,751,767 16,500 0.06


Fair Value of

the Underlying Funds / ETFs

Fair Value of the Fund’s Investment

in the Underlying Funds / ETFs

Ownership in the

Underlying Funds / ETFs

Non-Consolidated Structured Entities (in $) (in $) (%)

Marret Resource Corp. 14,793,728 49,306 0.33

Marret High Yield Strategies Fund 26,764,866 13,500 0.05


– 24 –




Redeemable Unit Transactions (Note 4)for the periods ended June 30

2016 2015

Series A

Number of redeemable units at the beginning of period 854,465 925,324

Redeemable units issued for cash 38,188 -

Series consolidation - -

Redeemable units issued for reinvested distributions - -

Redeemable units redeemed (653,774) (27,265)

Number of redeemable units at the end of period 238,879 898,059

Series A - USD


Redeemable units issued for cash - -



Redeemable units redeemed - (2,157)


Series F

Number of redeemable units at the beginning of period 1,062,848 1,581,524


Series consolidation 82,187 -



Number of redeemable units at the end of period 1,677,030 1,499,230

Series F - USD

Number of redeemable units at the beginning of period 7,000 -




Redeemable units redeemed - -

Number of redeemable units at the end of period 7,000 -

Class AA

Number of redeemable units at the beginning of period - 13,710




Redeemable units redeemed - (13,710)

Number of redeemable units at the end of period - -

Class FF



Series consolidation 81,406 -







Series consolidation (7,298) -



Number of redeemable units at the end of period - 7,298


– 25 –




Redeemable Unit Transactions (Note 4) (cont’d)for the periods ended June 30

2016 2015









Number of redeemable units at the beginning of period 538 717


Series consolidation (538) -



Number of redeemable units at the end of period - 717






















Class F Series 1114







Class F Series 1214


Redeemable units issued for cash - 41,700






– 26 –





Redeemable Unit Transactions (Note 4) (cont’d)for the periods ended June 30

2016 2015

Class F Series 0615







Class F Series 0715







Class F Series 0815







Class F Series 0915

Number of redeemable units at the beginning of period 365 -






Class F Series 1015

Number of redeemable units at the beginning of period 237 -






Class F Series 0516

Number of redeemable units at the beginning of period - -







Number of redeemable units at the beginning of period - -






– 27 –




Related Party Investments (Note 7) as at June 30, 2016

Fair Value

Investments (in $)

Marret Resources Corp. 54,738

Marret High Yield Strategies Fund 16,500

as at June 30, 2015

Fair Value

Investments (in $)

Marret Resources Corp. 680,252

Marret High Yield Strategies Fund 177,000


– 28 –





Concentration Risk For Concentration Risk as at June 30, 2016, refer to the Schedule of Investment Portfolio.

The Fund’s investments were concentrated in the following segments:


% of Net Assets Attributable to

Holders of Redeemable Units

Canadian Corporate Bonds - long positions 29.98

U.S. Corporate Bonds - long positions 75.20

International Bonds - long positions 4.85

Total Bonds 110.03

Term Loans 1.81

Canadian Equities - long positions 0.58

Canadian Equities - short positions (2.56)

U.S. Equities - short positions (4.65)

Total Equities (6.63)

Total Investments 105.21

Credit Risk The Fund was invested in fixed income securities, preferred securities and derivative instruments, if any, with the following credit ratings, as per the tables below.

as at June 30, 2016

% of Net Assets Attributable to Holders of Redeemable Units

Credit Rating^* Long Short Net

AAA 0.10 - 0.10

BBB 5.78 - 5.78

Below BBB 84.96 - 84.96

Total 90.84 - 90.84


% of Net Assets Attributable to Holders of Redeemable Units

Credit Rating^* Long Short Net

AAA 0.16 - 0.16

BBB 1.48 - 1.48

Below BBB 108.59 - 108.59

Unrated 1.77 - 1.77

Total 112.00 - 112.00

^Credit ratings are obtained from S&P Global Ratings, where available, otherwise ratings are obtained from: Moody’s Investors Service or Dominion Bond Rating Service, respectively.

*Refer to Note 8 for Credit Rating Chart reference.

Financial Instruments Risks (Note 8)

– 29 –





Other Price RiskAs at June 30, 2016 and December 31, 2015, the Fund was exposed to other price risk as some of its assets were invested in equities.

As at June 30, 2016, had the global markets increased or decreased by 5% (December 31, 2015 - 5%), with all other variables held constant, net assets attributable to holders of

redeemable units of the Fund would have increased or decreased, respectively, by approximately $45,720 (December 31, 2015 - $73,124). In practice, actual results may differ from

this analysis and the difference may be material.

Currency Risk The tables below summarize the Fund’s exposure to currency risk.

as at June 30, 2016

Currency

Net Currency

Risk Investments Working Capital

Currency Risk Due

From (To) Broker

Forward Currency

Contracts Net Exposure

% of Net Assets

Attributable to

Holders of

(in $) (in $) (in $) (in $) (in $) Redeemable Units

US Dollar 18,177,611 555,253 1,215,796 (19,479,848) 468,812 2.05

Total 18,177,611 555,253 1,215,796 (19,479,848) 468,812 2.05


Currency

Net Currency

Risk Investments Working Capital

Currency Risk Due

From (To) Broker

Forward Currency

Contracts Net Exposure

% of Net Assets

Attributable to

Holders of

(in $) (in $) (in $) (in $) (in $) Redeemable Units

US Dollar 20,458,480 1,474,568 3,033,076 (24,607,485) 358,639 1.52

Total 20,458,480 1,474,568 3,033,076 (24,607,485) 358,639 1.52

As at June 30, 2016, had the Canadian dollar strengthened or weakened by 5% (December 31, 2015 - 5%) in relation to all other foreign currencies held in the Fund, with all

other variables held constant, net assets attributable to holders of redeemable units of the Fund would have decreased or increased, respectively, by approximately $23,441

(December 31, 2015 - $17,932). In practice, the actual results may differ from this analysis and the difference may be material.

Interest Rate RiskThe tables below summarize the Fund’s exposure to interest rate risk, categorized by the contractual maturity date.

as at June 30, 2016

Bonds Long (in $) Short (in $) Net (in $)

< 1 year 1,719,716 - 1,719,716

1-3 years 2,983,241 - 2,983,241

3-5 years 9,647,612 - 9,647,612

> 5 years 6,406,654 - 6,406,654

Total 20,757,223 - 20,757,223


Bonds Long (in $) Short (in $) Net (in $)

< 1 year 390,720 - 390,720

1-3 years 1,687,597 - 1,687,597

3-5 years 8,250,354 - 8,250,354

> 5 years 14,354,441 - 14,354,441

Total 24,683,112 - 24,683,112

As at June 30, 2016, had the prevailing interest rates increased or decreased by 1% (December 31, 2015 - 1%), with all other variables held constant, net assets attributable to

holders of redeemable units of the Fund would have indirectly decreased or increased, respectively, by approximately $783,030 (December 31, 2015 - $1,121,836). In practice, the

actual results may differ from this analysis and the difference may be material.

– 30 –



Fair Value Hierarchy

The tables below summarize the inputs used by the Fund in valuing the Fund’s investments and derivatives carried at fair value.

as at June 30, 2016

Level 1 (in $) Level 2 (in $) Level 3 (in $) Total (in $)

Bonds - 20,757,223 - 20,757,223

Equities 71,238 - - 71,238

Foreign forward currency contracts - 21,844 - 21,844

Total Financial Assets 71,238 20,779,067 - 20,850,305

Bonds - - - -

Equities (985,639) - - (985,639)

Foreign forward currency contracts - (113,165) - (113,165)

Credit default swaps contracts - (27,393) - (27,393)

Total Financial Liabilities (985,639) (140,558) - (1,126,197)

Total Investments (914,401) 20,638,509 - 19,724,108


Level 1 (in $) Level 2 (in $) Level 3 (in $) Total (in $)

Bonds - 24,683,112 - 24,683,112

Equities 128,118 - - 128,118

Foreign forward currency contracts - 34,887 - 34,887

Total Financial Assets 128,118 24,717,999 - 24,846,117

Bonds - - - -

Equities (1,590,585) - - (1,590,585)

Foreign forward currency contracts - (861,437) - (861,437)

Total Financial Liabilities (1,590,585) (861,437) - (2,452,022)

Total Investments (1,462,467) 23,856,562 - 22,394,095

There were no transfers between Level 1, 2 and 3 during the period ended June 30, 2016 and the year ended December 31, 2015.



– 31 –



Notes to the Financial Statements (unaudited)

1. THE FUNDThe Marret High Yield Fund (the “Fund”) is an investment trust established under the laws of the Province of Ontario and is governed by a declaration of

trust dated April 5, 2012 as amended and restated on October 31, 2014. Marret Asset Management Inc. is the manager and the trustee (the “Manager”

and the “Trustee”) of the Fund. The Fund is organized as an open-ended unincorporated trust and is authorized to issue an unlimited number of units of

multiple series and class. Under the original declaration it was contemplated that the Fund would issue Series A units (to any investors who meet the

minimum investment criteria), Series F units (available to investors who participate in fee-based programs through their registered dealer) and Series I

units (available only to institutional clients of the Manager). Under the amended and restated declaration of trust and to accommodate a merger,

two additional classes were created Class AA and Class FF. Each Series of units are available in a Canadian Dollar and U.S. Dollar class. No Series I

units have been issued through June 30, 2016. The Fund commenced operations on April 17, 2012. There was no activity from inception date to

commencement of operations. CIBC Mellon Trust Company is the custodian (the “Custodian”) of the Fund.

In December 2013, CI Financial Corp. completed its acquisition of 65% of the issued and outstanding common shares of the Manager. The effective

closing date of this transaction was November 29, 2013. CI Financial Corp. is a diversified wealth management company publicly traded on the Toronto

Stock Exchange (the “TSX”) under the symbol CIX.

The address of the Fund’s registered office is 2 Queen Street East, Twelfth Floor, Toronto, Ontario, M5C 3G7. These financial statements are authorized

for issue by the Manager on August 16, 2016.

The termination date for the Fund was December 24, 2014 (the “Termination Date”). The Fund continues after the Termination Date in order to hold a

portfolio of diversified investments.

The primary investment objective of the Fund is to provide investors with consistent positive absolute returns while maintaining low correlations with

recognized fixed income and equity index returns.

To achieve its objective, the Fund invests primarily in a broad range of public and private debt securities, both investment and non-investment grade,

including corporate bonds and bank loans, government debt and convertible debentures. The Fund may also invest in equity securities, such as common

shares, preferred shares and warrants, and utilize other financial instruments, including exchange-traded funds and credit and/or index based derivatives.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThese financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as published by the International

Accounting Standards Board (“IASB”). The following is a summary of the significant accounting policies of the Fund:

a) Classification and recognition of financial instruments

The Fund recognizes financial instruments at fair value upon initial recognition, inclusive of transaction costs in the case of financial instruments

not measured at fair value through profit or loss. Purchases and sales of financial assets are recognized at their trade date. The Fund’s investments,

investments sold short and derivative assets and liabilities are measured at fair value through profit or loss (“FVTPL”). The Fund’s obligations for net

assets attributable to holders of redeemable units are presented at the redemption amount, which approximates their fair value. All other financial

assets and liabilities are measured at amortized cost, which approximates their fair value. Under this method, financial assets and liabilities reflect the

amount required to be received or paid, discounted, when appropriate, at the effective rate of interest.

Financial assets and liabilities are offset and the net amount is presented in the Statements of Financial Position when, and only when, the Fund has a

legal right to offset the amounts and intend either to settle on a net basis or to realize the asset and settle the liability simultaneously. In the normal course

of business, the Fund enters into various master netting agreements or similar agreements that do not meet the criteria for offsetting in the Statements

of Financial Position but still allow for the related amounts to be offset in certain circumstances, such as bankruptcy or termination of the contracts.

b) Fair valuation of financial instruments

At the financial reporting date, listed securities are valued based on the last traded market price for financial assets and financial liabilities where

the last traded price falls within the day’s bid-ask spread. In circumstances where the last traded price is not within the bid-ask spread, the Manager

– 32 –



Notes to the Financial Statements (unaudited) (cont’d)

determines the point within the bid-ask spread that is most representative of fair value based on the existing market conditions. Unlisted securities are

valued based on price quotations from recognized investment dealers, or failing that, their fair value is determined by the Manager on the basis of the

latest reported information available. Fixed income securities, debentures and other debt instruments including short-term investments, are valued at

the quotation from recognized investment dealers.

c) Financial assets and liabilities at fair value

The Fund classifies its investments in equity, fixed income securities and derivatives as financial assets or financial liabilities at fair value through

profit or loss.

This category has two sub-categories: financial assets or financial liabilities held for trading and those designated at fair value through profit or loss

at inception.

Financial assets or financial liabilities held for trading

A financial asset or financial liability is classified as held for trading (“HFT”) if it is acquired or incurred principally for the purpose of selling or

repurchasing in the near term or if on initial recognition is part of a portfolio of identifiable financial investments that are managed together and

for which there is evidence of a recent actual pattern of short-term profit taking. The Fund’s derivative instruments, warrants and securities sold

short are also categorized as HFT.

Financial assets or financial liabilities designated at fair value through profit or loss at inception

Financial assets and financial liabilities designated at fair value through profit or loss at inception are financial instruments that are not classified

as HFT but are managed, and their performance is evaluated on a fair value basis in accordance with the Fund’s documented investment strategy.

The Fund’s investments excluding derivative instruments, warrants and securities sold short are designated as FVTPL.

d) Cash

Cash consists of deposits with financial institutions.

e) Cash held at broker

Cash held at broker are accounts holding cash balances and short-term highly liquid debt investments with maturities of less than three months at date

of acquisition.

f) Cost of investments

Cost of investments represents the amount paid for each security and is determined on an average cost basis excluding commissions and transaction

costs. Average cost does not include amortization of premiums or discounts on fixed income securities with the exception of zero coupon bonds.

g) Investment transactions and income recognition

Investment transactions are recorded on the trade date – the date on which the Fund commits to purchase or sell the investment. The “Interest for

distribution purposes” shown on the Statements of Comprehensive Income represents the coupon interest received by the Fund and is accounted for on

an accrual basis. The Fund 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.

Dividends and distributions from investments are recognized on the ex-dividend/ex-distribution date.

Distributions received from income trusts holdings are recorded as income, capital gains or a return of capital, based on the best information available

to the Manager. Due to the nature of these investments, actual allocations could vary from this information. Distributions from income trusts that are

treated as a return of capital for income tax purposes reduce the average cost of the underlying income trusts.

h) Functional currency

The Fund’s subscriptions and redemptions are principally denominated in Canadian dollars, which is also the Fund’s functional and presentation currency.

– 33 –



i) Foreign exchange

Foreign currency amounts are translated into the functional currency as follows: fair value of investments, foreign currency forward contracts and other

assets and liabilities at the closing rate of exchange on each business day; income and expenses, purchases and sales and settlements of investments at

the rate of exchange prevailing on the respective dates of such transactions. Foreign exchange gains (losses) relating to cash are presented as “Foreign

exchange gain (loss) on cash” and “Change in unrealized foreign exchange gain (loss) on cash” and those relating to investments and derivatives are

presented within “Net realized gain (loss) on sale of investments and derivatives” and “Change in unrealized appreciation (depreciation) in value of

investments and derivatives” in the Statements of Comprehensive Income.

j) Unit valuation

Net asset value per unit is calculated at the close of business on every valuation date as the net asset value attributable to each series of units divided by its

outstanding units at each series. A valuation date is the last business day of each month or such other business day or days as the Manager may determine.

As at June 30, 2016, December 31, 2015 and June 30, 2015, there were no differences between the NAV used for transactions with unitholders and the

net assets attributable to holders of redeemable units used for reporting purposes under IFRS.

k) Classification of units

The Fund’s units are classified as liability, because they don’t meet the “identical features” criteria and therefore violate IAS 32.16A(c).

l) Commissions and other portfolio transaction costs

Transaction costs, such as brokerage commissions, incurred in the purchase and sale of securities, are included in “Commissions and other portfolio

transaction costs” in the Statements of Comprehensive Income.

m) Allocation of income and expenses

With the exception of management fees and forward currency contracts, expenses, and gains and losses are allocated to each series on a pro rata basis

based on the net asset value attributable to each series of units.

n) Increase (decrease) in net assets attributable to holders of redeemable units per unit

“Increase (decrease) in net assets attributable to holders of redeemable units per unit” in the Statements of Comprehensive Income represents the

increase (decrease) in net assets attributable to holders of redeemable units of each series, divided by weighted average number of outstanding units

of the relevant series during the period.

o) Foreign currency forward contracts

The Fund may, from time to time, enter into foreign currency forward contracts. Foreign currency forward contracts are valued on each valuation day based

on the difference between the contract rates and the current forward rate at the measurement date applied to the contracts notional amount adjusted for

counterparty risk. All unrealized gains (losses) arising from foreign currency forward contracts are recorded as part of “Change in unrealized appreciation

(depreciation) in value of investments and derivatives” in the Statements of Comprehensive Income and “Derivative assets/liabilities” in the Statements

of Financial Position until the contracts are closed out or expire, at which time the gains (losses) are realized and reported as “Net realized gain (loss) on

sale of investments and derivatives” in the Statements of Comprehensive Income.

p) Credit default swaps

Credit default swaps are agreements to mitigate credit risk exposure to certain issuing entities (“Referenced Entity”) held by the Fund or to increase

credit risk exposure to the Referenced Entity by creating a notional investment position for the Fund. Where a notional investment position is created, the

credit risk exposure of the Fund is comparable to the exposure that would have resulted if the Fund had invested directly in the Referenced Entity. Under

a credit default swap agreement, the protection buyer, whose intention is to reduce its credit risk exposure to the Referenced Entity, pays a premium to

the protection seller, who assumes the credit risk of a default of the bond of a Referenced Entity. This premium is paid at regular intervals over the term

of the credit default swap agreement. In return for the premium paid, the protection buyer is entitled to receive from the protection seller full payment for

a loss arising from a credit default event of the Referenced Entity. A credit default event may be triggered by bankruptcy, failure to pay or restructuring

of the Referenced Entity. If a credit default event occurs, the credit default swap may be settled by either the physical delivery of the bond for proceeds

equal to par value, or a cash payment equal to the loss amount. Credit default swaps are valued based on dealer-supplied valuations.


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Changes in value of credit default swap agreements are recorded as part of “Change in unrealized appreciation (depreciation) in value of investments

and derivatives” in the Statements of Comprehensive Income. Premiums paid or received from credit default swap agreements are included in investment

income. When credit default swap agreements expire or are closed out, gains or losses are included in “Net realized gain (loss) on sale of investments

and derivatives” in the Statements of Comprehensive Income.

q) Short selling

When the Fund sells a security short, it will borrow that security from a broker, for a fee, to complete the sale. The maximum loss on securities sold

short can be unlimited. The Fund will incur a loss as a result of a short sale if the price of the borrowed security increases between the date of the short

sale and the date on which the Fund closes out its short position by buying that security. The Fund will realize a gain if the security declines in price

between those dates. The gains or losses arising from short positions are reflected in the Statements of Comprehensive Income as part of “Change in

unrealized appreciation (depreciation) in value of investments and derivatives” and fair value of short positions is reflected in the Statements of Financial

Position in “Investments sold short”. When the short position is closed out, gains or losses are realized and included in “Net realized gain (loss) on sale

of investments and derivatives” in the Statements of Comprehensive Income. Fees paid to a broker for borrowing a security are included in “Securities

borrowing fee” in the Statements of Comprehensive Income.

r) Offsetting of financial instruments

The disclosures set out in the Offsetting of Financial Instruments tables in the Fund Specific Notes to Financial Statements include foreign currency

forward contracts assets and liabilities that are subject to an enforceable master netting arrangement. Transactions with individual counterparties are

governed by separate master netting agreements. Each agreement allows for net settlement of certain open contracts where the Fund and respective

counterparty both elect to settle on a net basis. In the absence of such an election, contracts will be settled on a gross basis. However, each party to the

master netting agreement will have the option to settle all open contracts on a net basis in the event of default of the other party. All other derivative

instruments held by the Fund are settled on a gross basis.

s) Investments in associates, joint ventures, subsidiaries and structured entities

Subsidiaries are entities, including investments in other investment entities, over which the Fund has control. The Fund controls an entity when it is

exposed to, or has rights to, variable returns from its involvement with the entity, and has the ability to affect those returns through its power over

the entity. Associates and joint ventures are investments over which the Fund has significant influence or joint control. A structured entity is an entity

that has been designed so that voting or similar rights are not the dominant factors in deciding who controls the entity, or when voting rights relate to

administrative tasks only and the relevant activities are directed by means of contractual arrangements.

The Manager has determined that Exchange-traded Funds (“ETFs”) held typically by the Fund meet the definition of structured entities. The Fund accounts

for its investments in unconsolidated structured entities at fair value through profit or loss.

The Fund invests in ETFs which are disclosed on the Schedule of Investment Portfolio. These ETFs finance their operations by issuing redeemable shares

which are puttable at the holder’s option and entitle the holder to a proportional stake in each ETF’s net asset value. The ETFs are domiciled in the U.S.

and are listed on recognized public stock exchanges.

The Fund may, from time to time, invest in Underlying Funds and as a result the Fund may be subject to the terms and conditions of the respective

Underlying Funds’ offering documents and are susceptible to market price risk arising from uncertainties about future values of those Underlying Funds.

All of the Underlying Funds in the investment portfolio are managed by portfolio managers who are compensated by the respective Underlying Funds

for their services. Such compensation generally consists of an asset-based fee and is reflected in the valuation of each of the Underlying Funds, except

when the Fund invests in certain classes of the Underlying Funds where the compensation to portfolio managers is negotiated and paid outside each of

the Underlying Funds. The Underlying Funds finance their operations by issuing redeemable units that entitle the holders to an equal beneficial interest

in the Underlying Funds. The Fund can redeem its investments in the Underlying Funds on a daily basis. These investments are included in “Investments”

at fair value through profit or loss in the Statements of Financial Position. The Fund’s maximum exposure to loss from its interest in Underlying Funds is

equal to the total fair value of their investments in Underlying Funds.

Information related to Interest in Underlying Funds for the Fund appears under the Fund Specific Notes to Financial Statements, if applicable.


– 35 –



t) Issuance costs

Issue costs associated with the offering have been recorded as a reduction to unitholders’ equity during the year in which they were incurred. The amount

represents a one-time charge in connection with the offering and was paid out of the gross proceeds of the offering.

u) Return of capital

Distributions received as return of capital (“ROC”) from investments reduce the adjusted cost base (“ACB”) of the underlying investments. Distributions

received from investments are allocated initially as dividends, interest, capital gains, or ROC based on estimates of the categorization of distributions

received from the underlying issuers. These allocations may change once the final categorization of the distributions is received on an annual basis from

the underlying issuers.

v) Withholding taxes

The Fund may, from time to time, incur withholding taxes imposed by certain countries on investment income and capital gains. Such income and gains

are recorded on a gross basis and the related withholding taxes are shown separately in the Statements of Comprehensive Income.

w) Accounting standards issued but not yet adopted

IFRS 9, Financial Instruments

The final version of IFRS 9, Financial Instruments, was issued by the IASB in July 2014 and will replace IAS 39 Financial Instruments: Recognition

and Measurement. IFRS 9 introduces a model for classification and measurement, a single, forward-looking ‘expected loss’ impairment model and a

substantially reformed approach to hedge accounting. The new single, principle based approach for determining the classification of financial assets is

driven by cash flow characteristics and the business model in which an asset is held. The new model also results in a single impairment model being

applied to all financial instruments, which will require more timely recognition of expected credit losses. It also includes changes in respect of own credit

risk in measuring liabilities elected to be measured at fair value, so that gains caused by the deterioration of an entity’s own credit risk on such liabilities

are no longer recognized in profit or loss. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, however it is available for early

adoption. In addition, the own credit changes can be early applied in isolation without otherwise changing the accounting for financial instruments. The

Fund’s Manager is in the process of assessing the impact of IFRS 9 on the Fund and has not yet determined when it will adopt the new standard.

3. CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES The preparation of financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions that affect the

application of accounting policies and reported amounts of assets and liabilities at the reporting date and the reported amounts of income and expenses

during the reporting period. The following discusses the most significant accounting judgments and estimates that the Fund has made in preparing its

financial statements:

Fair value measurement of investments and derivatives not quoted in active market

The Fund may, from time to time, hold financial instruments that are not quoted in active markets, such as unlisted securities, private securities

or derivatives. Unlisted securities are valued based on price quotations from recognized investment dealers, or failing that, their fair value is

determined by the Manager on the basis of the latest reported information available. The fair value of private securities is determined by using

valuation models that may be based, in part, on assumptions that are not supported by observable market inputs. These methods and procedures

may include, but are not limited to, performing comparisons with prices of comparable or similar securities, obtaining valuation related information

from issuers and/or other analytical data relating to the investment and using other available indications of value. These values are independently

assessed by the Manager to ensure that they are reasonable. However, because of the inherent uncertainty of valuation, the estimated fair values

for these securities may be materially different from the values that would have been used had a ready market for the investment existed. The fair

values of private securities are affected by the perceived credit risks of the issuer, predictability of cash flows and the length of time to maturity.

Valuation models use observable data, to the extent practicable. However, areas such as credit risk (both own and counterparty); volatilities and

correlations require the Manager to make estimates. Changes in assumptions about these factors could affect the reported fair values of financial

instruments.

The Fund considers observable data to be market data that is readily available, regularly distributed and updated, reliable and verifiable, not

proprietary, and provided by independent sources that are actively involved in the relevant market.


– 36 –



Classification and measurement of investments and application of the fair value option

In classifying and measuring financial instruments held by the Fund, the Manager is required to make significant judgments about whether or not

the business of the Fund is to invest on a total return basis for the purpose of applying the fair value option for the financial assets under IAS 39,

Financial Instruments – Recognition and Measurement. The most significant judgment made includes the determination that the fair value option

can be applied to those investments that are not HFT.

4. REDEEMABLE UNITSUnits issued and outstanding represent the capital of the Fund.

The Manager is responsible for managing the Fund in accordance with its mandate and the affairs of the Fund.

The Fund is organized as an open-ended trust and is authorized to issue an unlimited number of units of multiple series, each of which represents a

pro rata interest in the Fund. Each whole unit of a series is entitled to one vote at all meetings of unitholders and is entitled to participate equally with

respect to any and all distributions to that series made by the Fund and distributions to that series upon the termination of the Fund.

Subscriptions

Subscriptions will be processed on the first business day of each month and such other days as the Manager may permit. Subscriptions made in a

particular month are made at a price equal to the net asset value per unit of the Fund as at the last day of the prior month.


Series within each class that have a net asset value per unit at the end of the fiscal year higher than the previous high watermark are consolidated

on the first day following the fiscal year. This combined series (Lead Series) has one ending net asset value per unit and unitholders in the series are

allocated units of the new series effective January 1 in proportion to their ending net asset value per unit. Series that do not have a net asset value

per unit at the end of the fiscal year higher than the high watermark are not normally consolidated.

Redemptions

A unitholder may surrender units for redemption as at the last business day of each month or on such other date as the Manager may in its discretion

determine from time to time (each, a “Redemption Date”). Redemption requests must be received in writing by the Manager at least 5 business days

prior to the proposed Redemption Date (the “Notice Period”). The Manager reserves the right, but shall not be obligated, to waive the Notice Period in

circumstances where it would not be to the detriment of the Fund to do so.

Upon redemption of a unit, the unitholder will receive proceeds of redemption equal to the Net Asset Value of such Unit as at the close of business

on the relevant Redemption Date, less applicable deductions and fees. Payment of the redemption amount will normally be made to the redeeming

Unitholder no later than 5 days following the Redemption Date specified for such redemption, although the Manager reserves the right to settle

redemptions up to 15 days after the Redemption Date.

Redeemable unit transactions information appears in the Fund Specific Notes to Financial Statements.

5. FEES AND OTHER EXPENSESThe Manager of the Fund, in consideration of management fees, provides management services required in day-to-day operations of the Fund and

provision of key management personnel. The Fund pays a management fee equal to 0.75% per annum for Series A and Series USD – A, and 0.25% per

annum for Series F and Series USD – F, of the net asset value of the Fund. The management fee is calculated and payable to the Manager on the last

business day of the month (plus applicable taxes).

The Manager will also receive, for each fiscal year of the Fund, a performance fee (the “Performance Fee”). The Performance Fee is calculated and

paid annually on the last day of a fiscal year (plus any applicable taxes). The Performance Fee will be calculated on a series-by-series basis within the

Fund. The amount of the Performance Fee for a given year will be an amount for each unit of the Fund then outstanding equal to 15% of the positive

amount by which the sum of (i) the net asset value per unit of that series (before deduction of any performance fee) on the last business day of the


– 37 –



applicable fiscal year and (ii) the distributions paid on such unit since the date the High Water Mark (see definition below) was established exceeds

the High Water Mark of such series plus an annualized hurdle rate of 5% (the Hurdle Rate). If no performance fee is payable for a particular year, the

hurdle rate remained at 5% per annum in the subsequent year and will not accrued from one year to the next. For units redeemed prior to the end of

a fiscal year, a Performance Fee will be payable on the relevant valuation date in respect of such redeemed unit, as if such date were the last day of

a fiscal year, in the same manner described above.

The High Water Mark for a unit means, initially, its subscription price. If on the last day of a fiscal year, the net asset value of such unit (before

deduction of the performance fee) is greater than the High Water Mark of such unit (whether or not the Hurdle Rate is exceeded), the High Water

Mark of that unit will be thereafter adjusted so as to equal the net asset value per unit on that last day of the fiscal year (calculated after deduction of

the performance fee, if any, payable on that date). The High Water Mark of a unit will also be appropriately adjusted in the event of a consolidation,

subdivision or re-designation of units.

All other reasonable expenses in connection with the administration of the Fund are paid by the Fund.

6. INCOME TAXESThe Fund qualifies as a mutual fund trust under the provisions of the Income Tax Act (Canada) and is not subject to taxes on net income, including net

realized taxable gains for the taxation year, which is paid or payable to unitholders at the end of the taxation year. However, such part of the Fund’s

taxable income and net realized capital gains that is not so paid or payable will be taxable to the Fund. Income taxes on net realized capital gains not

paid or payable will generally be recoverable by virtue of refunding provisions contained in the Income Tax Act (Canada) and provincial income tax

legislation, as redemptions occur. It is the intention of the Fund to distribute all net income and sufficient net realized capital gains so that the Fund will

not generally be liable for income taxes thereon. Since the Fund does not record income taxes, the tax benefit of capital and non-capital losses have

not been reflected in the Statements of Financial Position as deferred income tax asset.

7. RELATED PARTY TRANSACTIONSThe Fund may have direct or indirect holdings in other funds managed by the Manager as identified in the Fund Specific Notes to Financial Statements,

as applicable.

8. FINANCIAL INSTRUMENT RISK MANAGEMENTIn the normal course of business, the Fund is exposed to a variety of financial risks: credit risk, liquidity risk and market risk (including other price risk,

currency risk and interest rate risk). The Fund’s overall risk management program focuses on compliance and execution of the Fund’s investment objectives.

The Manager seeks to minimize potential adverse effects of these risks on the Fund’s performance by employing professional, experienced portfolio

advisers, daily monitoring of the Fund’s positions and market events and by diversifying the investment portfolio of the Fund within the constraints of

the investment strategy. 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 Fund’s investment activities and monitors compliance with the Fund’s stated investment strategy and

securities regulations.

Concentration Risk

Concentration risk arises as a result of the concentration of exposures within the same category, whether it is a geographical allocation, product type,

industry sector or counterparty.

Details of the Fund’s exposure to concentration risk are available in the Fund Specific Notes to Financial Statements.

Credit Risk

Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the

Fund. The main concentration of credit risk would be investments in debt instruments and derivatives. The fair value of debt instruments and derivatives

includes consideration of the credit worthiness of the issuer and therefore represents the maximum credit exposure of the Fund.


– 38 –



Credit ratings for fixed income securities, preferred securities and derivative instruments are obtained from S&P Global Ratings, where available,

otherwise ratings are obtained from: Moody’s Investors Service or Dominion Bond Rating Service, respectively. Credit ratings can be either long-term or

short-term. Short-term credit ratings are generally assigned to those obligations and derivative instruments considered short-term in nature.

The table below provides a cross-reference between the long-term credit ratings disclosed in the Credit Rating table inclusive of the short-term credit

ratings disclosed in the derivatives schedules in the Schedule of Investment Portfolio.

Credit Rating as per Credit Risk Table Credit Rating as per Derivatives Schedules

AAA/Aaa/A++ A-1+

AA/Aa/A+ A-1, A-2, A-3

A B, B-1

BBB/Baa/B++ B-2

Below BBB B-3, C, D

Unrated WR

Cash balances as disclosed in the Statements of Financial Position are maintained by the Custodian. The Manager monitors the credit worthiness of

the Custodian on a regular basis. The credit rating of the Custodian as at June 30, 2016 was A+ (December 31, 2015 – A+).

All transactions are made through approved brokers and are settled on delivery using the Fund’s prime brokers Scotia Capital Inc. and J.P. Morgan or

Custodian. The risk of default is considered minimal as delivery of investments sold is made only when the Fund has received payment. Payment is made

on purchases once the investments have been received by the Fund. Should either party not meet its obligation, the trade will fail.

The credit ratings of the Scotia Capital Inc. and J.P. Morgan as at June 30, 2016 were A+ and A-, respectively (December 31, 2015 – A+ and A-,

respectively).

Liquidity Risk

The Fund is exposed to annual and monthly cash redemptions. The Fund invests its assets in investments that are traded in an active market and can

be readily disposed of. There can be no assurance that an adequate market for the Fund’s investments will exist at all times, or that the prices at which

the underlying investments trade, accurately reflect their net asset values. All liabilities are due in less than 3 months.

Market Risk

The Fund’s investments are subject to market risk which is the risk that the fair value of future cash flows of a financial instrument will fluctuate due

to changes in market conditions.

Other Price Risk

Other price risk is the risk that the value of financial instruments will fluctuate as a result of changes in market prices (other than those arising from

currency risk or interest rate risk), whether caused by factors specific to an individual investment, its issuer or all factors affecting all instruments

traded in a market or market segment.

Currency Risk

Currency risk is the risk that the value of investments will fluctuate due to changes in foreign exchange rates. This risk arises when financial

instruments (including cash and cash equivalents) are denominated in a currency other than Canadian dollars, which represents the Fund’s

functional currency.

Interest Rate Risk

Interest rate risk arises from changes in the prevailing levels of market interest rates, resulting in fluctuations in the value of interest bearing

financial instruments.


– 39 –




Fair Value Hierarchy

The Fund classifies its financial instruments that are earned at fair value using a fair value hierarchy that prioritizes the inputs to valuation techniques

used to measure fair value into three broad levels. Inputs may be based on independent market data (observable inputs) or they are internally developed

(unobservable inputs). The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the

lowest priority to unobservable inputs.

The three levels of the hierarchy are as follows:

Level (1) - quoted prices (unadjusted) in active markets for identical assets or liabilities

Level (2) - investments with inputs other than quoted prices that are observable for the asset or liability either directly or indirectly

Level (3) - inputs for the asset or liability that are not based on observable market data (unobservable inputs)

Changes in valuation methods may result in transfers into or out of an investment level.

The Fund’s policy is to recognize transfers into and out of the fair value hierarchy levels as of the date of the event or change in circumstances giving

rise to the transfer.

Details of the Fund’s exposure to financial instruments risks including concentration risk and the fair value hierarchy classification are available in the

Fund Specific Notes to Financial Statements.

9. SOFT DOLLARS COMMISSIONSThe Fund paid no soft dollar commission during the period ended June 30, 2016 (June 30, 2015 - nil).

10. FILING EXEMPTION The Fund is relying on the exemption pursuant to Section 2.11 of National Instrument 81-106 not to file its financial statements with the applicable

provincial securities commission.

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Certain names, words, phrases, graphics or designs in this document may constitute trade names, registered or unregistered trademarks or service marks of

Marret Asset Management Inc. Marret is a trademark of Marret Asset Management Inc.

You can get additional copies of these Financial Statements, at your request, and at no cost by calling collect (416) 214-5800, by emailing [email protected],

or by asking your representative.

This document and other information about the fund is available at the Marret Asset Management Inc. website at www.marret.com.

Legal Notice

MARRET_146_SA_08/16E

2 Queen Street East, Twelfth Floor, Toronto, Ontario M5C 3G7 I www.marret.com

Tel: 416-214-5800

Fax: 647-439-6471

[email protected]

semi-annual financial statements – as at jun e 30, 2016 · 2019-11-04 · semi-annual financial...

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