Lysander-Canso Corporate Value Bond Fund

Transcription

1 Interim Financial statements (unaudited) of Lysander-Canso Corporate Value Bond Fund For the six month periods ended June 30, 2016 and 2015

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3 Table of Contents Page Statements of Financial Position...1 Statements of Comprehensive Income...2 Statements of Changes in Net Assets Attributable to Holders of Redeemable Units Statements of Cash Flows...6 Schedule of Investment Portfolio Notes to the Financial Statements

4 Interim Statements of Financial Position (unaudited) As at 30-Jun Dec-15 $ $ Assets Financial assets at fair value through profit or loss* 1,308,473,597 1,241,280,780 Cash and cash equivalents 2,611,504 10,199,452 Accrued interest and dividends 13,488,111 12,439,545 Subscriptions receivable 6,364,630 2,195,715 Due from investment dealers 9,298 - Total assets 1,330,947,140 1,266,115,492 Liabilities Redemption payable 3,802,319 6,422,066 Due to investment dealers 2,950,407 - Payable on forward exchange contracts 1,312,661 1,948,427 Accrued expenses 1,214,555 1,219,545 Total liabilities 9,279,942 9,590,038 Net assets attributable to holders of redeemable units 1,321,667,198 1,256,525,454 Net assets attributable to holders of redeemable unit, by series Series A 342,151, ,958,235 Series A5 2,625,013 2,597,454 Series F 967,872, ,036,525 Series F5 9,017,355 8,012,337 Series O - 5,920,903 Total net assets 1,321,667,198 1,256,525,454 Number of redeemable units outstanding Series A 31,226,928 32,065,761 Series A5 273, ,216 Series F 79,367,422 73,780,130 Series F5 932, ,742 Series O - 568,438 Net assets attributable to holders of redeemable units per unit Series A Series A Series F Series F Series O *Financial assets at fair value through profit or loss at cost 1,315,642,879 1,235,599,786 Signed on behalf of Lysander Funds Limited, as Manager and Trustee Director Director The accompanying notes form an integral part of the financial statements. 1

5 Interim Statements of Comprehensive Income (unaudited) For the periods ended 30-Jun Jun-15 $ $ Income Interest for distribution purposes 31,133,681 22,633,789 Dividend income 175,424 - Realized and unrealized gain (loss) on investments Net realized gain on investments sold 9,250,548 7,949,474 Net realized gain (loss) on foreign currency 16,407,410 (1,676,755) Change in appreciation (depreciation) unrealized on foreign currency 23 (90,229) Change in appreciation unrealized on forward contracts 635,766 - Change in (depreciation) unrealized on investments (12,707,914) (1,301,952) Total operating income 44,894,938 27,514,327 Expenses Management fees 6,293,966 5,206,659 Fund administration fees 459, ,752 Audit fees 144,734 49,216 Transaction costs 142,362 69,125 Custodial fees 72,256 56,809 Withholding tax 49,005 80,388 Filing fees 46,548 10,932 Legal fees 44,180 73,818 Independent review committee fees 13,715 10,046 Unitholder reporting expense 8,830 4,939 Bank charges 1,520 1,662 Total operating expenses 7,276,843 5,938,346 Increase in net assets attributable to holders of redeemable units 37,618,095 21,575,981 Increase in net assets attributable to holders of redeemable units per series Series A 9,202,997 5,982,148 Series A5 67,932 2,166 Series F 28,176,547 15,203,252 Series F5 233,041 21,174 Series O (62,422) 367,241 37,618,095 21,575,981 Increase in net assets attributable to holders of redeemable units per unit Series A Series A Series F Series F Series O (0.11) 0.39 The accompanying notes form an integral part of the financial statements. 2

6 Interim Statements of Changes in Net Assets Attributed to Holders of Redeemable Units (unaudited) For the periods ended 30-Jun Jun-15 $ $ Net assets attributable to holders of redeemable units, beginning of period 1,256,525, ,848,589 Increase in net assets attributable to holders of redeemable units 37,618,095 21,575,981 Distributions to unitholders of redeemable units From net investment income (25,891,113) (16,293,409) From management fee rebate income (41,934) (26,916) From net capital gains - - (25,933,047) (16,320,325) Redeemable unit transactions: Proceeds from redeemable units issued Series A 33,152, ,388,810 Series A5 252,624 3,111,606 Series F 171,272, ,052,607 Series F5 2,626,644 7,777,288 Series O - 2,000, ,304, ,330,311 Cost of units redeemed Series A (47,162,508) (29,932,664) Series A5 (240,880) (58,819) Series F (117,766,763) (48,442,700) Series F5 (1,773,343) (129,695) Series O (5,858,481) (6,490,080) (172,801,975) (85,053,958) Reinvested distributions Series A 4,894,890 3,468,135 Series A5 15,921 16,245 Series F 13,831,351 8,712,261 Series F5 131,518 62,777 Series O 80, ,609 18,954,569 12,367,027 Increase in net assets attributable to holders of redeemable units for the period 65,141, ,899,036 Net assets attributable to holders of redeemable units, end of period 1,321,667,198 1,200,747,625 Series A Net assets attributable to holders of redeemable units, beginning of period 347,958, ,405,499 Increase in net assets attributable to holders of redeemable units 9,202,997 5,982,148 Distributions to unitholders of redeemable units From net investment income (5,893,324) (4,121,725) From management fee rebate income (979) (849) (5,894,303) (4,122,574) Redeemable unit transactions: Proceeds from redeemable units issued 33,152, ,388,810 Cost of units redeemed (47,162,508) (29,932,664) Reinvested distributions 4,894,890 3,468,135 (9,114,971) 80,924,281 (Decrease) Increase in net assets attributable to holders of redeemable units for the period (5,806,277) 82,783,855 Net assets attributable to holders of redeemable units, end of period 342,151, ,189,354 3

7 Interim Statements of Changes in Net Assets Attributed to Holders of Redeemable Units (unaudited) For the periods ended 30-Jun Jun-15 Series A5 $ $ Net assets attributable to holders of redeemable units, beginning of period 2,597,454 5,000 Increase in net assets attributable to holders of redeemable units 67,932 2,166 Distributions to unitholders of redeemable units From net investment income (68,038) (45,651) (68,038) (45,651) Redeemable unit transactions: Proceeds from redeemable units issued 252,624 3,111,606 Cost of units redeemed (240,880) (58,819) Reinvested distributions 15,921 16,245 27,665 3,069,032 Increase in net assets attributable to holders of redeemable units for the period 27,559 3,025,547 Net assets attributable to holders of redeemable units, end of period 2,625,013 3,030,547 Series F Net assets attributable to holders of redeemable units, beginning of period 892,036, ,361,516 Increase in net assets attributable to holders of redeemable units 28,176,547 15,203,252 Distributions to unitholders of redeemable units From net investment income (19,636,020) (11,938,678) From management fee rebate income (40,955) (26,067) (19,676,975) (11,964,745) Redeemable unit transactions: Proceeds from redeemable units issued 171,272, ,052,607 Cost of units redeemed (117,766,763) (48,442,700) Reinvested distributions 13,831,351 8,712,261 67,336, ,322,168 Increase in net assets attributable to holders of redeemable units for the period 75,836, ,560,675 Net assets attributable to holders of redeemable units, end of period 967,872, ,922,191 Series F5 Net assets attributable to holders of redeemable units, beginning of period 8,012,337 5,000 Increase in net assets attributable to holders of redeemable units 233,041 21,174 Distributions to unitholders of redeemable units From net investment income (212,842) (79,746) (212,842) (79,746) Redeemable unit transactions: Proceeds from redeemable units issued 2,626,644 7,777,288 Cost of units redeemed (1,773,343) (129,695) Reinvested distributions 131,518 62, ,819 7,710,370 Increase in net assets attributable to holders of redeemable units for the period 1,005,018 7,651,798 Net assets attributable to holders of redeemable units, end of period 9,017,355 7,656,798 4

8 Interim Statements of Changes in Net Assets Attributed to Holders of Redeemable Units (unaudited) For the periods ended 30-Jun Jun-15 Series O $ $ Net assets attributable to holders of redeemable units, beginning of period 5,920,903 10,071,574 Increase in net assets attributable to holders of redeemable units (62,422) 367,241 Distributions to unitholders of redeemable units From net investment income (80,889) (107,609) (80,889) (107,609) Redeemable unit transactions: Proceeds from redeemable units issued - 2,000,000 Cost of units redeemed (5,858,481) (6,490,080) Reinvested distributions 80, ,609 (5,777,592) (4,382,471) (Decrease) in net assets attributable to holders of redeemable units for the period (5,920,903) (4,122,839) Net assets attributable to holders of redeemable units, end of period - 5,948,735 The accompanying notes form an integral part of the financial statements. 5

9 Interim Statement of Cash Flows (unaudited) For the periods ended 30-Jun Jun-15 Cash flows used in operating activities $ $ Increase in net assets attributable to holders of redeemable units 37,618,095 21,575,981 Adjustments for: Foreign exchange (gain) on cash and cash equivalents 23 1,597 Net realized (gain) on sales of investments (9,250,548) (7,949,474) Change in unrealized depreciation on investments 12,850,276 1,371,077 Change in unrealized (appreciation) depreciation on foreign currency (23) 90,229 Purchase of investments (192,209,429) (706,758,007) Proceeds from sale and maturity of investments 121,416, ,370,590 Due to investment dealers 2,950,407 36,393,059 Payable on forward exchange contracts (4,990) - Due from investment dealers (9,298) (12,684,153) Accrued expenses (635,766) 260,735 Accrued interest and dividends (1,048,566) (3,440,868) Redemptions payable (2,619,747) 970,137 Subscriptions receivable (4,168,915) (24,446,966) Net Cash used in operating activities (35,111,597) (326,246,063) Cash flows used in financing activities Distributions paid to holders of redeemable units, net of reinvested distributions (6,978,478) (3,953,298) Proceeds from issuances of redeemable units 207,304, ,330,311 Amounts paid on redemption of redeemable units (172,801,975) (85,053,958) Net cash used in financing activities 27,523, ,323,055 Foreign exchange gain (loss) on cash and cash equivalents - (91,826) (Decrease) Increase in cash and cash equivalents during the period (7,587,948) 2,076,992 Balance of cash and cash equivalents, beginning of the period 10,199,452 5,302,588 Cash and cash equivalents at the end of the financial period 2,611,504 7,287,754 The accompanying notes form an integral part of the financial statements. 6

10 Interim Schedule of Investment Portfolio (unaudited) As at June 30, Average Cost Fair Value Par Value/Number of Shares $ $ Canadian Bonds (44.34%) 69,405,000 Blackberry Ltd. 6% Nov 13, 2020 (USD) 98,416,138 93,166,925 3,226,000 BMO FRN March 29, 2018 (3M CDOR+60) 3,238,452 3,237,818 7,197,000 BNS FRN Apr 20, 2018 (Q CDOR +60) 7,225,140 7,222,476 8,420,000 BNS FRN Aug 31, 2085 (USD) (SA LIBOR +12.5) 6,980,282 6,941,830 1,770,000 Bombardier Inc. 5.75% March 15, 2022 (USD) 144A 1,977,332 1,968, ,000 Bombardier Inc. 5.75% March 15, 2022 (USD) REGS 815, ,753 13,590,000 Bombardier Inc. 6% Oct 15, 2022 (USD) 144A 15,623,937 15,292,535 13,819,000 Bombardier Inc % Jan 15, 2023 (USD) 144A 16,361,348 15,460,338 58,531,000 Bombardier Inc. 7.50% March 15, 2025 (USD) 144A 69,823,946 66,244,391 10,376,000 Cogeco Cable Inc % May 26, ,554,982 11,075,191 11,011,000 Cogeco Cable Inc % Feb 14, ,574,226 12,223,410 1,248,000 Cogeco Cable Inc. 5.15% Nov 16, ,379,052 1,378, ,000 Enbridge Inc. 3.5% Jun 10, 2024 (USD) 316, ,071 4,495,000 Enbridge Inc. 4.0% Oct 1, 2023 (USD) 5,646,178 5,816,442 7,097,000 Enbridge Inc. FRN Jun 2, 2017 (USD) (Q LIBOR +45) 8,651,228 9,072,331 13,959,000 Enbridge Inc. FRN Mar 13, 2017 (Q CDOR +45) 13,885,976 13,913,625 5,452,000 GE Capital Canada FRN Feb 15, 2022 (Q CDOR +35) 5,354,845 5,285,151 32,395,000 Kraft Canada Inc. FRN July 6, 2020 (Q CDOR +105) 32,395,000 32,363, ,000 Manufacturers Life Insurance 2.10% Jun 1,20/25 440, ,756 2,244,000 Manufacturers Life Insurance FF 2.64% Jan 15, 2020/2025 2,252,639 2,270,096 3,862,000 Manufacturers Life Insurance FF 3.181% Nov 22, 2022/2027 3,867,101 3,995,786 8,176,000 NBF FRN Jun 14, 2018 (Q CDOR + 50) 8,178,040 8,187,964 37,074,811 Postmedia Network Inc. (amort) 8.25% Aug 16, ,563,127 32,208,743 63,723,000 RBC CB FRN Mar 23, 2020 (3M CDOR + 36) 63,723,185 63,436,215 4,010,000 RBC FRN June 29, 2085(USD)(Q LIMEAN+25) 3,198,360 3,508,170 3,378,000 Shaw Communications Inc 6.75% Nov 9, ,784,800 4,236,400 9,758,000 SNC Lavalin 6.19% Jul 3, ,950,165 10,824,559 1,285,000 TD Bank FRN Feb 18, 2020 (Q CDOR +54) 1,281,788 1,285,260 10,686,000 TD Bank FRN Mar 28, 2018 (3M CDOR + 60) 10,729,796 10,723,171 1,016,000 Teck Resources Ltd. 4.5% Jan 15, 2021 (USD) 941,752 1,156, ,000 Teck Resources Ltd. 5.2% Mar 1, 2042 (USD) 372, ,075 2,693,000 Teck Resources Ltd. 5.4% Feb 1, 2043 (USD) 1,967,331 2,312,194 1,235,000 Teck Resources Ltd. 6% Aug 15, 2040 (USD) 922,545 1,132,661 5,586,000 Teck Resources Ltd % Oct 1, 2035 (USD) 4,609,970 5,232,116 10,333,000 Teck Resources Ltd. 6.25% Jul 15, 2041 (USD) 8,386,915 9,611,173 16,117,000 TransCanada Pipelines FF 6.35% May 15, 2017/67 (USD)* 19,059,848 14,886,290 2,231,900 Tuckamore Capital Management Inc. 10% Mar 23, ,231,900 1,952,913 3,906,000 Tuckamore Capital Management Inc. 10% Mar 23, 2026(RESTRICT) 3,906,000 3,417,750 27,531,000 Tuckamore Capital Management Inc. 8% Mar 23, ,531,000 27,531,000 3,834,000 Videotron Ltee Sr Notes 5.625% June 15, ,704,603 3,897,537 17,565,000 Videotron Ltee Sr Notes 6.875% Jul 15, ,882,109 18,226,916 3,274,000 VW Credit Canada Inc. 1.6% Apr 4, ,135,781 3,258,307 9,043,000 VW Credit Canada Inc. FRN (3M CDOR + 35) Apr 3, ,753,980 8,999, ,802 Yellow Pages Digital & Media Solutions Ltd 8.0% Nov 30, ,786 1,024,384 38,235,124 Yellow Pages Digital & Media Solutions Ltd 9.25% Nov30, ,148,938 39,907,911 Canadian Equities (5.46%) 601,499, ,974,526 19,501,597 Bombardier Inc. 33,750,173 37,833,098 17,533,833 Postmedia Network Canada 14,176, , ,026 Tuckamore Capital Management Inc. 403,717 46,443 1,863,200 Yellow Pages Limited 28,874,459 34,133,824 77,204,868 72,188,703 7

11 Interim Schedule of Investment Portfolio (unaudited) As at June 30, (Cont d) Average Cost Fair Value Par Value/Number of Shares $ $ Domestic Bank Loans (.55%) 2,578,186 Black Press Group Ltd TL B 1L CAD 3m BA June 28, ,552,404 2,487, ,842 Clearwater Seafoods LP TL B 1L USD 3m L+ 350 June 26, ,822 1,235,060 2,766,091 Telesat TLB Mar 28, 2019 USD (L +275) 3,073,759 3,580,416 Foreign Bank Loans (1.50%) 6,623,985 7,303,425 1,850,240 Compass Group Diversified TLB 1L USD Jun 9, 2021 (L+325) 2,013,305 2,416,003 7,636,860 Shaw Data Centre LP TL B (L+350) March 30, ,593,508 9,848,358 5,972,347 Sound Pub Hldgs TL B USD 3m L June 28, ,897,144 7,497,497 Foreign Fixed Income (35.37%) 18,503,957 19,761,858 1,497,000 CIT Group Inc. 5.5% Feb 15, 2019 Series C 1,949,252 2,042,385 17,149,000 Commerzbank 8.125% Sept 19, 2023 (144A) 21,757,735 26,122,434 39,579,000 Commerzbank AG Sub-debt FRN Dec 15, 2016 (Q CDOR +88) 38,489,318 39,480,053 3,825,000 Commerzbank Finance Mar 20, 2017(USD) ( M LIBOR -5.5) 4,188,559 4,918,276 3,453,000 Continental Resources 4.9% Jun 01, 2044 (USD) 3,189,147 3,728,366 1,178,000 Eurofima 5.15% Dec 13, ,320,538 1,316,161 7,563,000 Goldman Sachs FF 5.2% Apr 19, 2017/2022 7,904,444 7,453,830 22,252,000 Intelsat Jackson Holdings S.A. 5.5% Aug 1, 2023 (USD) 19,800,868 18,454,112 3,295,000 Intelsat Jackson Holdings S.A. 7.25% Oct 15, 2020 (USD) 3,123,560 3,075,539 5,151,000 Intelsat Jackson Holdings S.A. 7.5% Apr 1, 2021 (USD) 4,583,484 4,657,150 25,000 Lehman Bros Hldg Inc 4.85% Sep 3, ,774 1,688 35,515,000 Lloyds Bank PLC % December 16, 2016/ ,941,095 36,822,385 3,444,000 Merrill Lynch FF 5.29% May 30, 2017/2022 3,629,632 3,384,168 21,500,000 MetLife Global Funding I 2.3% April 10, 2019 (144A) USD 23,556,750 28,633,342 14,233,000 National Grid Electricity Trans FRN Jan 25, 2018(Q CDOR +86) 14,328,848 14,264,313 4,213,000 Navient Corp 4.875% Jun 17, 2019 (USD) 4,572,523 5,302,569 30,562,000 Navient Corp 5.5% Jan 25, 2023(USD) 32,863,672 35,036, ,000 Navient Corp 5.625% 1/25/ 2025 (USD) 932, , ,000 Navient Corp 5.625% Aug 1, 2033 (USD) 615, ,449 45,185,000 Navient Corp 5.875% Mar 25, 2021 (USD) 55,832,728 55,731,600 19,722,000 Navient Corp 7.25% Jan 25, 2022(USD) 24,002,456 24,533,885 5,668,000 Navient Corp 8.0% Mar 25, 2020 (USD) 6,306,974 7,553, ,000 Navient Corp 8.45% Jun 15, 2018 (USD) 294, ,338 14,649,000 Purch 3% May 22, ,873,245 19,056,884 33,662,000 Royal Bank of Scotland Group Tier % Oct 5, ,051,783 35,112,846 22,205,000 Royal Bank of Scotland PLC FRN (3M CDOR+148) Perpetual 21,061,612 22,229,315 33,441,000 Royal Bank of Scotland PLC Sub 10.50% Mar 16, 2017/22 38,482,599 35,111,077 1,676,000 Royal Bank of Scotland Sub 9.5% Mar 16, 2017/22 (USD) REGS 2,182,049 2,272,972 28,864,000 Unicredit FRN May 29, 2018 (Q CDOR +217) 29,372,073 29,226, ,202, ,526,404 8

12 Interim Schedule of Investment Portfolio (unaudited) As at June 30, (Cont d) Average Cost Fair Value Par Value/Number of Shares $ $ Mortgage Backed Securities (6.06%) 12,484,829 Concentra NHA MBS ( ) % May 1, ,473,593 12,657,451 4,864,552 I.G Investment NHA MBS FRN ( ) Feb 1,2020 (M CDOR+10) 4,855,114 4,819,934 2,274,667 ICICI Bank NHA MBS ( ) FRN Dec 1, 2016 (M CDOR +34) 2,282,674 2,275,741 3,290,798 ICICI Bank NHA MBS FRN ( ) Sept 1, 2017 (M CDOR+12) 3,292,674 3,283,754 9,029,970 MCAP Service NHA MBS FRN ( ) Apr 1, 2021 (M CDOR+48) 9,027,894 9,009,350 5,503,933 Merrill Lynch FRN NHA MBS ( ) Dec 1,2019 (M CDOR + 5) 5,469,148 5,452,540 7,925,000 Merrill Lynch FRN NHA MBS ( )Jun 1, ,886,722 7,886,722 28,068,574 Merrill Lynch NHA MBS FRN ( ) Aug 1, 2020 (MCDOR +30) 27,814,553 27,932,876 3,445,268 Merrill Lynch NHA MBS FRN ( ) Oct 1, 2020 (M CDOR+39) 3,424,769 3,427,187 1,805,495 MLFA 2002-BC2P A 6.673% May 7, ,005,345 1,998, ,418 MLML STT A % Sep 5, , , ,462 MLML 2000 BMCC 7.373% May 10, ,147,734 1,129,837 8,000 REALT B 4.70% Dec 12, ,554 8,059 Private Placements (4.05%) 79,954,026 80,143,361 9,745,000 Black Press Group Ltd. Series B 10.0% Dec 28, ,944,773 9,647, ,742 Blue Water Bridge Authority (amort) 6.41% Jul 9, ,024,432 1,042,071 5,109,000 Golf Town/Golfsmith 10.5% Jul 24, 2018 (144A) 3,513,327 2,299,914 29,282 SP LP & SP1 LP (Scotia Plaza) (amort) 3.21% Jun 15, ,446 30,138 10,088,777 Xplornet Comm Inc. 144A Sr. Sec. Series A 13.0% May 15,2017 9,972,649 10,340,996 4,474,372 Xplornet Comm Inc. 144A Sr. Sec. Series B 13.0% May 15, ,452,531 4,438,130 6,631,630 Xplornet Comm Inc. Sr. Uns. 13% Oct 25, ,840,000 6,797,421 17,313,993 Xplornet Comm Inc. Sr. Uns. 13% Oct 25, 2020 Series III 14,517,000 18,096,585 8,374 Xplornet Comm Inc. Warrants Series A May 15, A ,985 Xplornet Comm Inc. Warrants Series B May 15, A ,840 Xplornet Comm Inc. Warrants Series C Oct 25, 2023 Restricted ,517 Xplornet Comm Inc. Warrants Series D Oct 25, Preferreds (1.67%) 759 Xplornet Comm Pfd Class F 759, ,000 49,054,127 53,452, ,800 BMO 3.90% Aug 25, 2016 NC Pfd Series 25 2,807,064 2,530, ,700 BNS FRN Feb 2, 2021 Series 33 90CTB ,200,908 9,381,412 1,702,700 Purch Series C Preferred Share 9,591,586 10,211,346 23,599,558 22,123,198 Total investment portfolio (99.00%) 1,315,642,879 1,308,473,597 Cash and cash equivalents (.20%) 2,611,504 Other assets less liabilities (.80%) 10,582,097 Net assets 1,321,667,198 Foreign exchange contracts Contract amount USD $ valuation Unrealized appreciation Type Expiration date Currency CAD USD Amount (depreciation) $ $ $ $ Sell USD dollars 207,864, CAD dollars 267,206, ,518,715 (1,312,661) Total amount payable on foreign exchange contracts (1,312,661) Counterparty is CIBC with a credit rating of A+ 9

13 Notes to the financial statements for June 30, 2016 (unaudited) 1. Formation of Fund The address of the Fund s registered office is 100 York Boulevard, Suite 501, Richmond Hill, Ontario. Lysander Funds Limited (the Manager ) is the manager and trustee of the Fund and is responsible for providing or arranging the provision of all general management and administrative services required by the Fund in its day-to-day operations, including but not limited to, calculating and reporting the net asset value of the Fund and its series, preparing all offering documents, unitholder recordkeeping and other administrative services. Please refer to the Fund Specific Notes section (a) for further details about the Fund. 2. Basis of presentation These financial statements have been prepared in compliance with International Financial Reporting Standards ( IFRS ) as published by the International Accounting Standards Board ( IASB ). These semi-annual financial statements have been prepared in accordance with IAS 34-Interim Financial Reporting and do not include all of the information and disclosures required in the annual financial statements. These financial statements should be read in conjunction with the Fund s annual financial statements and accompanying note disclosures. 3. Significant accounting policies The significant accounting policies of the Fund are as follows: Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term investments in an active market with original maturities of three months or less, bank overdrafts and money market funds with daily liquidity and all highly liquid financial instruments that mature within three months of being purchased. Financial instruments The Fund accounts for its financial instruments in accordance with IAS 39, Financial instruments: recognition and measurement (IAS 39), which include cash and cash equivalents, investments at fair value through profit or loss, accrued interest, reimbursement receivable, subscriptions receivable, redemption payable, due to/from investment dealer, receivable/payable from forward exchange contracts and accrued expenses. Accrued interest are designated as loans and receivables and reported at amortized cost. Accrued expenses are designated as financial liabilities and reported at amortized cost. Due to their short term nature, the carrying value of these financial assets and liabilities approximates fair value. The Fund recognizes financial instruments at fair value upon initial recognition on trade date basis. The Fund classifies its investment in debt and equity securities and derivatives as financial assets or financial liabilities at fair value through profit or loss. These financial assets or financial liabilities are either held for trading or designated at fair value through profit or loss at inception. Financial assets or financial liabilities held for trading are those acquired or incurred principally for the purpose of selling or repurchasing in the near future or on initial recognition they are part of a portfolio of identified financial instruments that the Fund manages together and has a recent actual pattern of short-term profit-taking. All derivatives are also included in this category. The Fund does not classify any derivatives as hedges in a hedging relationship. Financial assets or financial liabilities designated at fair value through profit or loss at inception are those that are managed and their performance evaluated on a fair value basis in accordance with the Fund s investment strategy as documented in its simplified prospectus, and information about these financial assets and liabilities are evaluated by the management of the Fund on a fair value basis together with other relevant financial information. All other financial assets and liabilities, including redeemable units, are measured at amortized cost. 10

14 Notes to the financial statements for June 30, 2016 (unaudited) The Fund classifies financial instruments carried at fair value using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The hierarchy has the following levels. Please refer to the Fund specific (e) for the Fair Value Hierarchy. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs for the asset or liability Fair value measurements The securities in the Fund s Portfolio are measured at Fair Value Through Profit or Loss ( FVTPL ). The fair value of financial assets and liabilities traded in active markets (such as publicly traded derivatives and securities) are based on quoted market prices at the close of trading on the year-end date. The quoted market price used for financial assets and financial liabilities of the Fund is the last traded price provided such price is within the bid-ask spread. In circumstances where the last traded price is not within the bid-ask spread, management will determine the points within the bid-ask spread that are most representative of the fair value. The fair value of financial assets and liabilities that are not traded in an active market is determined using valuation techniques. The Fund uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Valuation techniques used include the use of comparable recent arms length transactions, option pricing models and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity-specific inputs. Income recognition Dividend income is recognized when the Fund s right to receive the payment has been established, normally being the ex-dividend date. Dividend income is recognized gross of withholding tax, if any. The interest income for distribution purposes shown on the statement of comprehensive income represents the coupon interest received by the Fund 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. The interest income for distribution purposes is the tax basis of calculating the interest received and which is subject to tax. Recognition, derecognition and measurement At initial recognition, financial assets and liabilities are measured at fair value. Transaction costs on financial assets and liabilities at fair value through profit or loss are expensed as incurred in the statement of comprehensive income. Subsequent to initial recognition, financial assets and liabilities at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in their fair value are included in the statement of comprehensive income for the period in which they arise. Dividend or interest income earned on financial assets at fair value through profit or loss and dividend or interest expense on the financial liabilities at fair value through profit or loss are disclosed in a separate line item in the statement of comprehensive income. Financial assets are derecognized when the contractual rights to the cash flows from the investments have expired or the Fund has transferred substantially all risks and rewards of ownership. Financial liabilities at fair value through profit or loss are derecognized when the obligation specified in the contract is discharged, cancelled or expired. Investment transactions are accounted for on a trade date basis. Interest income is recorded on an accrual basis. Realized gains and losses on the disposition of investments, and unrealized appreciation and depreciation of investments, are determined on an average cost basis and are included in the statement of comprehensive income. 11

15 Notes to the financial statements for June 30, 2016 (unaudited) Realized gains and losses related to options are included in net realized gain/(loss) on options at fair value through profit or loss. Realized gains and losses relating to written options may arise from expiration of written options whereby realized gains are equivalent to the premium received and from the exercise of written covered call options whereby realized gains or losses are equivalent to the premium received in addition to the realized gain or losses from disposition of the related investments at the exercise price of the option. Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. Accounting estimates In the application of the Fund s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily available from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. The most significant estimates relate to the valuation of investments. Actual results could differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Net assets attributable to holders of redeemable units Units issued and outstanding represent the capital of the Fund, with units in each series representing an equal and rateable share in the assets allocated to each series. The management fee rates are different for each of the series. Please refer to Note 6 for discussion of management fee rates. The redeemable units are classified as financial liabilities and are measured at the redemption amounts. Units of the Fund may be purchased or redeemed at a price per unit equal to the net asset value ( NAV ) of a unit of the applicable series of the Fund on each Valuation Date. Net asset value per unit The net asset value per unit of each series of units of the Fund is computed by dividing the NAV of a series of units by the total number of units of the series outstanding at the time. The Fund s accounting policies for measuring the fair value of its investments and derivatives are identical to those used in measuring its NAV for transactions with holders of redeemable units. Foreign currency translation Foreign currency amounts are translated into each Fund s functional currency as follows: fair value of investments, forward currency contracts and other financial assets and liabilities, at the closing rate of exchange on each business day; income and expenses, and purchases, sales and settlements of investments, at the rate of exchange prevailing on the respective dates of such transactions. Foreign currency forward contracts The value of the foreign currency forward contracts is the gain or loss that would be realized if the position in the forward contract was closed out in accordance with its terms. The unrealized gains or losses on the forward contract are reported as part of the change in unrealized appreciation or depreciation on forwards in the statement of comprehensive income. Foreign currency forward contracts manage exposure to foreign currency gains and losses arising from short and long-term investments denominated in foreign currencies. 12

16 Notes to the financial statements for June 30, 2016 (unaudited) Taxation The Fund is a unit trust within the meaning of the Income Tax Act (Canada) (the Act ). The Fund is subject to tax on its net taxable income, including net realized capital gains, for the calendar year which is not paid or payable to its unitholders as of the end of the calendar year. It is the intention of the Fund to pay all of its net taxable income and net realized capital gains so that the Fund will not be subject to income taxes other than foreign withholding taxes, if applicable. Therefore, no provision for income taxes has been made in these financial statements. Please refer to the Fund Specific Notes section (h). Distributions The Fund makes distributions of net income quarterly or monthly, please refer to the Fund s Simplified Prospectus, and any net realized capital gains annually. These are recognized in the statement of changes in net assets attributable to holders of redeemable units. Critical Accounting Estimates and Judgments The preparation of financial statements requires management to use judgment in applying its accounting policies and to make estimates and assumptions about the future. The following discusses the most significant accounting judgments and estimates that the Fund has made in preparing the financial statements: Determination of Functional Currency Functional currency is the currency of the primary economic environment in which the Fund operates. If indicators of the primary economic environment are mixed, then management uses its judgment to determine the functional currency that most faithfully represents the economic effect of the underlying transactions, events, and conditions. The Fund s subscriptions and redemptions are denominated in Canadian Dollars ( CAD ).Accordingly, management has determined that the functional currency of the Fund is CAD unless noted otherwise. Fair Value Measurement of Derivatives and Securities Not Quoted in an Active Market The Fund may hold financial instruments that are not quoted in active markets, including derivatives. Fair values of such instruments are determined using valuation techniques and may be determined using reputable pricing sources (such as pricing agencies) or indicative prices from market makers. Broker quotes as obtained from the pricing sources may be indicative and not executable or binding. 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 las 39, Financial Instruments- Recognition and Measurement. The most significant judgment made includes the determination that certain investments are held-for-trading and that the fair value at inception classification can be applied to those which are not. Future changes in accounting standards IFRS 9, Financial Instruments: In July 2014, the IASB issued the final version of IFRS 9, first issued in November 2009, which brings together the classification and measurement, impairment and hedge accounting phases of the IASB s project to replace IAS 39 Financial Instruments: Recognition and Measurement (IAS 39). IFRS 9 introduces a principles-based approach to the classification of financial assets based on an entity s business model and the nature of the cash flows of the asset. It introduces a forward-looking impairment model for financial assets which will be applicable for all financial instruments subject to impairment accounting and requires more timely recognition of expected credit losses. Finally, it introduces a new hedge accounting model that aligns the accounting for hedge relationships more closely with risk management. IFRS 9 will be effective for the Fund on January 1, The Fund is currently determining the impact of the amendments on its financial statements. 13

17 Notes to the financial statements for June 30, 2016 (unaudited) 4. Expenses The Fund is responsible for the payment of all expenses related to its operations, including but not limited to audit fees, Independent Review Committee fees, fund administration fees, filing fees, redeemable unitholder reporting and custodian fees plus harmonized sales tax. At their discretion, the Manager or a portfolio manager may pay certain of the expenses of the Fund but any such payments shall not oblige the Manager or a portfolio manager to make similar future payments. All expenses are recognized in the statement of comprehensive income on the accrual basis. Service fees may be paid by the Manager from the management fees it receives from the Fund. Service fees may be paid to brokers and dealers to compensate them for providing ongoing services to redeemable unitholders holding Series A or A5 units, if applicable. Please refer to the Fund Specific Notes section (b). 5. Issuance and redemption of units The Fund is authorized to issue an unlimited number of transferable, redeemable units of beneficial interest, each of which represents an equal undivided interest in the net assets of the Fund. Each unit entitles the holder to the same rights and obligations as a holder of any other unit and no holder of units is entitled to any privilege, priority or preference in relation to any other holder of units. Each holder of units is entitled to one vote for each whole unit held and is entitled to participate equally with respect to any and all distributions made by the Fund, including distributions of net income and net realized capital gains, if any. On termination or liquidation of the Fund, the holders of outstanding units of record are entitled to receive on a pro rata basis all of the assets of the Fund remaining after payment of all debts, liabilities and liquidation expenses of the Fund. The units of the Fund are issued and redeemed at their Net Asset Value. Please refer to the Fund Specific Notes section (c). 6. Related party transactions The Manager is responsible for the day-to-day management of the Fund and its investment portfolio in compliance with the Fund s constating documents. The Manager pays for the investment management services and provides all administrative services required by the Fund. As compensation for its services the Manager is entitled to receive a management fee as disclosed in the Fund Specific Notes section (d). The Manager is entitled to receive from the Fund a management fee which is calculated daily and payable monthly at an annualized rate, based on the net asset value of each respective series. The Manager may offer a reduced management fee to selected investors in Series A and Series F Units who (among other considerations) hold large investments in the Fund. This is achieved by reducing the management fee charged to the Fund based on the assets held by such investors and the Fund distributing the amount of the reduction in additional units of the same series of the Fund to the investor. Please refer to the Fund Specific Notes section (d) for other related party transactions. 7. Fair Value Hierarchy The fair value hierarchy table, in the Fund Specific Notes section (e), presents information about the Fund s assets measured at fair value, as described in Note 3, as at June 30, 2016 and December 31, The Fund s financial instruments classified by category is found in the Fund Specific Notes section (f). 8. Risk management The Fund s activities expose it to a variety of financial risks in the normal course of operations. These include credit risk, liquidity risk, and market risk. The value of the investments in the Fund s portfolio can fluctuate as a result of changes in interest rates, general economic conditions, supply and demand conditions relating to specific securities, or news relating to a specific issuer. In order to manage risk, the Portfolio Manager will diversify the portfolio based on industry and credit rating category. Significant risks that are relevant to the Fund are discussed below. 14

18 Notes to the financial statements for June 30, 2016 (unaudited) Credit risk Credit risk is the risk of financial loss that could arise from a security issuer or counterparty to a financial instrument not being able to meet its financial obligations. The Fund s main exposure to credit risk consists of investments in debt instruments, such as bonds. The Fund is also exposed to counterparty risk from other assets, such as amounts due from brokers or subscriptions receivable. To manage this risk, the Portfolio Manager monitors the Fund s credit exposure and counterparty ratings. Please refer to the Fund Specific Notes section (g). Liquidity risk Liquidity risk is the risk that the Fund will encounter difficulty in meeting obligations, including any redemption of units for cash. The Fund is exposed to possible daily redemptions at the then current NAV per unit. Liquidity risk is managed by in- vesting a significant portion of the Fund s assets in investments that are traded in an active market and that can be readily sold. All liabilities of the Fund are due within one year. Please refer to the Fund Specific Notes section (g). Market risk Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a fund asset will fluctuate because of changes in market interest rates. To manage interest rate risk, the Portfolio Manager monitors exposures and maintains the portfolio duration within the limits specified in the investment policies and objectives of the fund. In practice, the actual results may differ from this sensitivity analysis and the difference could be material. Please refer to the Fund Specific Notes section (g). Currency risk Currency risk arises when the value of investments denominated in currencies other than CAD fluctuate due to changes in exchange rates. The currency risk will typically be hedged by entering into foreign currency forward contracts if required, however some moderate currency exposure may be assumed if deemed to be beneficial to the Fund. In practice, actual results could differ from this sensitivity analysis and the difference could be material. Please refer to the Fund Specific Notes section (g). Price risk Price risk is the risk that the value of financial instruments will fluctuate as a result of changes in market prices, whether caused by factors specific to an individual investment, its issuer or all factors affecting all instruments traded in a market or market segment. This risk is managed through a careful selection of securities and other financial instruments within the parameters of the investment strategy and by maintaining a well-diversified portfolio. Exposure to price risk arises from investments in equity securities. In practice, actual results will differ from this sensitivity analysis and the difference could be material. Please refer to the Fund Specific Notes section (g). 15

19 Fund specific notes to the financial statements for June 30, 2016 (unaudited) (a) Formation of Fund The Lysander Corporate Value Bond Fund (the Fund ), is an open-end fund formed under the laws of the Province of Ontario by a declaration of trust dated April 24, The Fund commenced operations on April 30, 2009 and distributed units under a prospectus exemption. The Fund became a reporting issuer on December 23, The Fund has been established for the purposes of acquiring and holding a portfolio (the Portfolio ) consisting primarily of fixed income securities, including those of foreign issuers. The portfolio manager of the Fund is Canso Investment Counsel,( Portfolio Manager ), a company under common control. (b) Service Fees The maximum service fee is 0.50% on the Series A and Series A5 units, exclusive of any applicable taxes. (c) Issuance and redemption of units During the periods ended June 30, 2016 and June 30, 2015, the number of units issued, redeemed and outstanding were as follows: Series A June 30, 2016 June 30, 2015 Units outstanding at beginning of period 32,065,761 23,746,035 Redeemable units issued 3,067,627 9,525,757 Redeemable units redeemed (4,362,394) (2,656,966) Redeemable units issued on reinvestments 455, ,401 Units outstanding at end of period 31,226,928 30,924,227 Series A5 June 30, 2016 June 30, 2015 Units outstanding at beginning of period 271, Redeemable units issued 26, ,448 Redeemable units redeemed (25,552) (5,828) Redeemable units issued on reinvestments 1,683 1,611 Units outstanding at end of period 273, ,731 Series F June 30, 2016 June 30, 2015 Units outstanding at beginning of period 73,780,130 46,862,600 Redeemable units issued 14,215,684 23,606,533 Redeemable units redeemed (9,783,644) (3,850,011) Redeemable units issued on reinvestments 1,155, ,115 Units outstanding at end of period 79,367,422 67,313,237 Series F5 June 30, 2016 June 30, 2015 Units outstanding at beginning of period 831, Redeemable units issued 273, ,332 Redeemable units redeemed (186,066) (12,897) Redeemable units issued on reinvestments 13,827 6,247 Units outstanding at end of period 932, ,182 16

20 Fund specific notes to the financial statements for June 30, 2016 (unaudited) (Cont d) Series O June 30, 2016 June 30, 2015 Units outstanding at beginning of period 568, ,535 Redeemable units issued - 186,729 Redeemable units redeemed (576,372) (600,000) Redeemable units issued on reinvestments 7,934 10,075 Units outstanding at end of period - 556,339 (d) Related party transactions At June 30, 2016, the shareholders of the Manager and Portfolio Manager, together with certain immediate family members and employees of such shareholders had an ownership interest in the Fund amounting to 0.05% (December 31, %). The Manager is entitled to receive from the Fund a management fee which is calculated daily and payable monthly at an annualized rate of up to 1.25% on Series A and Series A5 units and up to 0.75% on Series F and Series F5 units, exclusive of applicable taxes, based on the net asset value of each respective series. Series O has no management fees because investors will pay a negotiated management fee. The Manager paid the Portfolio Manager, an affiliate of the Manager, $2,369,302 (June 30, $1,973,517) for managing the portfolio of the Fund. As at June 30, 2016 the amount payable to the Portfolio Manager was $405,429 (December 31, $404,277). (e) Fair Value Hierarchy The following tables present the carrying amounts of the Fund s financial instruments by category based upon a fair value hierarchy discussed in Note 3, as at June 30, 2016 and December 31, 2015: Financial assets at fair value as at June 30, 2016 Level 1 ($) Level 2 ($) Level 3 ($) Total ($) Investments Equities 84,100,555-10,211,346 94,311,901 Fixed Income 1,155,364,121-58,797,575 1,214,161,696 1,239,464,676-69,008,921 1,308,473,597 Financial assets at fair value as at December 31, 2015 Level 1 ($) Level 2 ($) Level 3 ($) Total ($) Investments Equities 85,587,423-7,926,539 93,513,962 Fixed income 1,086,704,738-61,062,080 1,147,766,818 1,172,292,161-68,988,619 1,241,280,780 17

21 Fund specific notes to the financial statements for June 30, 2016 (unaudited) Investments classified within Level 3 have a significant level of unobservable inputs, as they are comprised of private equity or debt securities. As observable prices are not available for these securities, the Fund has used valuation techniques to derive their fair value. The Fund utilizes either the most recent transaction price, indications of interest from brokers, or industry standard liquidity discounts to calculate the fair value of the Level 3 investments. Level 3 valuations are reviewed and approved on a monthly basis by the Manager. The Manager considers the appropriateness of the valuation model inputs, as well as the valuation result using various valuation methods and techniques generally recognized as standard within the industry. Level 3 reconciliation as at June 30, 2016 Balance, beginning of period 68,988,619 Purchases 3,272,406 Sales - Net Transfers - Realized and change in unrealized gains and losses, net - Change in unrealized appreciation/depreciation (3,252,104) Total investments 69,008,921 (f) Financial Instruments by Category The following tables present the carrying amounts of the Fund s financial instruments by category as at June 30, 2016: Financial assets at FVTPL at Loans and Receivables Assets inception ($) ($) Total ($) - Fixed income securities 1,214,161,696-1,214,161,696 - Equity securities 94,311,901-94,311,901 - Cash and cash equivalents - 2,611,504 2,611,504 - Subscriptions receivable - 6,364,630 6,364,630 - Accrued interest and dividends - 13,488,111 13,488,111 - Due from investment dealers - 9,298 9,298 Total 1,308,473,597 22,473,543 1,330,947,140 Financial Financial liabilities at liabilities at Held for Trading FVTPL at Other Financial Liabilities ($) inception ($) Liabilities ($) Total ($) - Redemption payable - 3,802,319 3,802,319 - Due to investment dealers - - 2,950,407 2,950,407 - Accrued expenses - - 1,214,555 1,214,555 - Payable from forward exchange contracts 1,312, ,312,661 Total 1,312,661-7,967,281 9,279,942 18

22 Fund specific notes to the financial statements for June 30, 2016 (unaudited) The following tables present the carrying amounts of the Fund s financial instruments by category as at December 31, 2015: Financial assets at FVTPL at Loans and Receivables Assets inception ($) ($) Total ($) - Fixed income securities 1,147,766,818-1,147,766,818 - Equity Securities 93,513,962-93,513,962 - Cash and cash equivalents - 10,199,452 10,199,452 - Subscriptions receivable - 2,195,715 2,195,715 - Accrued interest and dividends - 12,439,545 12,439,545 Total 1,241,280,780 24,834,712 1,266,115,492 Financial Financial liabilities at liabilities at Held for Trading FVTPL at Other Financial Liabilities ($) inception ($) Liabilities ($) Total ($) - Redemption payable - - 6,422,066 6,422,066 - Accrued expenses - - 1,219,545 1,219,545 - Payable from forward exchange contracts 1,948, ,948,427 Total 1,948,427-7,641,611 9,590,038 (g) Risk Management Credit risk As at June 30, 2016 and December 31, 2015, the Fund had directly invested in debt instruments with the following credit ratings: Liquidity risk June 30, 2016 (%) December 31, 2015 (%) AAA AA A BBB BB B CCC CC Not Rated The following table presents the Fund s liabilities according to their maturity date as at June 30, 2016 and December 31, 2015: June 30, 2016 Less Than One Month 1-3 Months 3 Months 1 Year Redemption Payable 3,802, Due to investment dealers 2,950, Accrued expenses - 1,214,555 - Payable on forward exchange contracts - 1,312,661 - December 31, 2015 Less Than One Month 1-3 Months 3 Months 1 Year Redemption Payable 6,422, Accrued Expense Payable - 1,219,545 - Payable on forward exchange contracts - 1,948,427-19