Redwood Unconstrained Bond Fund

Unaudited Interim Financial Statements June 30, 2016

Statements of Financial Position (unaudited) As at June 30, 2016 and December 31, 2015 June 30, 2016 December 31, 2015 $ $ Assets Current Assets Investments Non-derivative financial assets 12,016,883 11,115,060 Cash 544,762 284,916 Margin on Deposit 2,353 - Subscription receivable 40,967 - Interest and dividends receivable - 16,211 Prepaid expenses 2,038 - Derivative Assets - 738 Total Assets 12,607,003 11,416,925 Liabilities Current Liabilities Payable for investments purchased 2,353 - Redemptions payable 3,289 - Management fees payable 14,059 13,131 Distributions payable 2,444 - Accrued expenses 7,053 2,838 Total Liabilities 29,198 15,969 Net assets attributable to holders of redeemable units 12,577,805 11,400,956 Net assets attributable to holders of redeemable units by series Series A 4,296,323 3,887,971 Series A USD 466,245 317,573 Series F 6,764,765 5,753,220 Series F USD 1,050,472 1,442,192 12,577,805 11,400,956 Net assets attributable to holders of redeemable units per unit - CAD (Note 8) Series A 9.56 9.50 Series A USD 12.46 12.31 Series F 9.75 9.65 Series F USD 12.48 12.51 Net assets attributable to holders of redeemable units per unit - USD (Note 8) Series A USD 9.65 8.90 Series F USD 9.66 9.04 Approved by the Board of Directors of the Fund's Manager: "Peter Shippen" Director (signed) "Larry Guy" Director (signed) The accompanying notes are an integral part of the financial statements. 2

Statements of Comprehensive Income (unaudited) for the periods ended June 30, 2016 and 2015 2016 2015 $ $ Income Net gains (losses) on investments and derivatives (Note 7) Dividends 100,023 - Interest for distribution purposes 56 86,654 Net realized gain (loss) on sale of investments and derivatives (12,887) 154,820 Net change in unrealized appreciation (depreciation) of investments and derivatives 408,322 182,959 495,514 424,433 Security lending income - - Foreign exchange gain (loss) on cash (167,627) (46,692) Total income (net) 327,887 377,741 Expenses (Note 9, 10) Management fees 105,652 74,215 Valuation and administrative fees 44,937 21,073 Interest and borrowing costs 730 - Audit fees 11,002 7,855 Custodial fees 2,172 4,959 Regulatory fees 8,630 3,538 Other expense (135) - Independent review committee fees 640 9 Total expenses 173,628 111,649 Expenses waived/absorbed by the Manager (68,441) (32,226) Net expenses 105,187 79,423 Increase (decrease) in net assets attributable to holders of redeemable units 222,700 298,318 Increase (decrease) in net assets attributable to holders of redeemable units by series (Note 11) Series A 76,529 53,275 Series A USD 4,942 48,411 Series F 132,282 61,096 Series F USD 8,947 135,536 85,476 298,318 Increase (decrease) in net assets attributable to holders of redeemable units per unit (Note 11) Series A 0.17 0.14 Series A USD 0.14 0.13 Series F 0.20 0.82 Series F USD 0.11 1.03 The accompanying notes are an integral part of the financial statements. 3

Statements of Changes in Net Assets Attributable to Holders of Redeemable Units (unaudited) for the periods ended June 30, 2016 and 2015 2016 2015 Total Fund $ $ Net assets attributable to holders of redeemable units at beginning of period 11,400,956 7,998,516 Increase (decrease) in net assets attributable to holders of redeemable units 222,700 298,318 Distributions Paid or Payable to holders of redeemable units From net investment income (114,919) (102,520) Total distributions to holders of redeemable units (114,919) (102,520) Redeemable unit transactions Proceeds from redeemable units issued 2,547,152 5,622,220 Reinvestments of distributions to holders of redeemable units 102,473 97,991 Redemption of redeemable units (1,580,557) (1,177,224) Net increase (decrease) from redeemable unit transactions 1,069,068 4,542,987 Net increase (decrease) in net assets attributable to holders of redeemable units 1,176,849 4,738,785 Net assets attributable to holders of redeemable units at end of period 12,577,805 12,737,301 2016 2015 Series A $ $ Net assets attributable to holders of redeemable units at beginning of period 3,887,971 3,747,892 Increase (decrease) in net assets attributable to holders of redeemable units 76,529 53,275 Distributions Paid or Payable to holders of redeemable units From net investment income (40,589) (35,036) Total distributions to holders of redeemable units (40,589) (35,036) Redeemable unit transactions Proceeds from redeemable units issued 883,321 387,507 Reinvestments of distributions to holders of redeemable units 38,140 33,564 Redemption of redeemable units (549,049) (267,650) Net increase (decrease) from redeemable unit transactions 372,412 153,421 Net increase (decrease) in net assets attributable to holders of redeemable units 408,352 171,660 Net assets attributable to holders of redeemable units at end of period 4,296,323 3,919,552 2016 2015 Series A USD $ $ Net assets attributable to holders of redeemable units at beginning of period 317,573 579,939 Increase (decrease) in net assets attributable to holders of redeemable units 4,942 48,411 Distributions Paid or Payable to holders of redeemable units From net investment income (4,417) (6,586) Total distributions to holders of redeemable units (4,417) (6,586) Redeemable unit transactions Proceeds from redeemable units issued 143,515 112,975 Reinvestments of distributions to holders of redeemable units 4,632 6,586 Redemption of redeemable units - (73,727) Net increase (decrease) from redeemable unit transactions 148,147 45,834 Net increase (decrease) in net assets attributable to holders of redeemable units 148,672 87,659 Net assets attributable to holders of redeemable units at end of period 466,245 667,598 The accompanying notes are an integral part of the financial statements. 4

Statements of Changes in Net Assets Attributable to Holders of Redeemable Units (unaudited) for the periods ended June 30, 2016 and 2015 2016 2015 Series F $ $ Net assets attributable to holders of redeemable units at beginning of period 5,753,220 2,595,931 Increase (decrease) in net assets attributable to holders of redeemable units 132,282 61,096 Distributions Paid or Payable to holders of redeemable units From net investment income (60,088) (46,079) Total distributions to holders of redeemable units (60,088) (46,079) Redeemable unit transactions Proceeds from redeemable units issued 1,441,623 4,455,490 Reinvestments of distributions to holders of redeemable units 49,973 43,434 Redemption of redeemable units (552,245) (368,278) Net increase (decrease) from redeemable unit transactions 939,351 4,130,646 Net increase (decrease) in net assets attributable to holders of redeemable units 1,011,545 4,145,663 Net assets attributable to holders of redeemable units at end of period 6,764,765 6,741,594 2016 2015 Series F USD $ $ Net assets attributable to holders of redeemable units at beginning of period 1,442,192 1,074,754 Increase (decrease) in net assets attributable to holders of redeemable units 8,947 135,536 Distributions Paid or Payable to holders of redeemable units From net investment income (9,825) (14,819) Total distributions to holders of redeemable units (9,825) (14,819) Redeemable unit transactions Proceeds from redeemable units issued 78,693 666,248 Reinvestments of distributions to holders of redeemable units 9,728 14,407 Redemption of redeemable units (479,263) (467,569) Net increase (decrease) from redeemable unit transactions (390,842) 213,086 Net increase (decrease) in net assets attributable to holders of redeemable units (391,720) 333,803 Net assets attributable to holders of redeemable units at end of period 1,050,472 1,408,557 The accompanying notes are an integral part of the financial statements. 5

Statements of Cash Flows (unaudited) for the periods ended June 30, 2016 and 2015 2016 2015 $ $ Cash flows from operating activities Increase in net assets attributable to holders of redeemable units 222,700 298,318 Adjustments for: Foreign exchange (gain) loss on cash 167,627 46,692 Net realized (gain) loss on sale of investments and derivatives 12,887 (154,820) Net change in unrealized (appreciation) depreciation of investments and derivatives (408,322) (182,959) Distributions from mutual funds (100,023) - Accrued liabilities 5,143 (15,332) Proceeds from sale and maturity of investments 378,230 195,475 Net investments purchased (783,857) (3,993,280) Interest, dividends receivable and other assets 14,173 (16,736) Net cash from operating activities (491,442) (3,822,642) Cash flows used in financing activities Proceeds from redeemable units issued 2,506,185 5,669,630 Redemption of redeemable units (1,577,268) (1,177,224) Distributions paid to holders of redeemable units, net of reinvested distributions (10,002) (4,529) Net cash provided by (used in) financing activities 918,915 4,487,877 Foreign exchange gain (loss) on cash (167,627) (46,692) Increase (decrease) in cash 427,473 665,235 Cash at beginning of period 284,916 433,423 Cash at end of period 544,762 1,051,966 Cash activities included in operating activities: Interest received 56 - Dividends received, net of withholding taxes 116,234 - The accompanying notes are an integral part of the financial statements. 6

Schedule of Investment Portfolio as at Shares, Units, Warrants Fair Security or Par Value Cost Value $ $ Canadian Equities (95.6%) Mutual Funds (95.6%) Redwood Unconstrained Bond Class, Series 'Y' 1,129,576 11,664,147 12,016,883 Total Mutual Funds 11,664,147 12,016,883 Total Investment Portfolio (95.6%) 11,664,147 12,016,883 Cash (4.3%) 544,762 Other Assets less Other Liabilities (0.1%) 16,160 Net Assets (100.0%) 12,577,805 The accompanying notes are an integral part of the financial statements. 7

1. Reporting entity The Redwood Unconstrained Bond Fund (the Fund ) is an open-ended unit trust formed under the laws of the Province of Ontario by Declarations of Trust, executed by the Trustee of the Fund on November 27, 2013. The Fund commenced operations on February 13, 2014. Redwood Asset Management Inc. (the Manager ) is the manager and the Trustee of the Fund. The Manager is incorporated under the laws of Ontario and is registered with the Ontario Securities Commission as an Investment Fund Manager and an Exempt Market Dealer. The custodian of the Fund is CIBC Mellon ( Custodian ). The Portfolio Advisor is Redwood Asset Management Inc. and the investment subadvisor is Scout Investments, Inc. through its Reams Asset Management Company, LLC division. The address of the Fund s registered office is 120 Adelaide St. W., Suite 2400, Toronto, Ontario M5H 1T1. The objective of the Fund is to maximize total return consistent with the preservation of capital by investing directly in fixed income securities through an underlying Fund. The financial statements of the Fund comprises the statements of financial position as at June 30, 2016 and December 31, 2015 and the statements of comprehensive income, changes in net assets attributable to holders of redeemable units, and cash flows for the six-month period ended June 30, 2016 and 2015. The schedule of investment portfolio is as at June 30, 2016. These financial statements were authorized for issue by the Board of Directors of Redwood Asset Management Inc., the Trustee of the Fund on August 29, 2016. 2. Basis of presentation These financial statements have been prepared in compliance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board applicable to preparation of interim financial statements, including IAS 34 Interim Financial Reporting. 3. Significant accounting policies The accounting policies set out below have been applied consistently to all periods presented in these financial statements. Financial instruments The Fund recognizes financial instruments at fair value upon initial recognition. Investments have been designated at fair value through profit or loss (FVTPL) and the Fund s derivatives and securities sold short are held for trading and also carried at FVTPL. The Fund s obligation for net assets attributable to holders of redeemable units is presented at the redemption amount. All other financial assets and liabilities are measured at amortized cost. Classification of financial assets and liabilities The Fund s investments, other than derivatives, are classified as financial assets or liabilities at fair value through profit or loss. The Fund s financial assets and liabilities, other than derivatives, are designated at fair value through profit or loss at inception, as those financial assets and liabilities are managed together and their performance evaluated on a fair value basis in accordance with the Fund s documented investment strategies. Derivatives are classified as held for trading and measured at fair value through profit or loss. Unrealized gains (losses) arising on derivatives are shown on the Fund s Statements of Financial Position and such amounts are included in the Statements of Comprehensive Income in net change in unrealized appreciation (depreciation) in value of investments and derivatives, where applicable. Realized gains arising on derivatives during a period are included in the Statements of Comprehensive Income in net realized gain (loss) on sale of investments and derivatives, where applicable. 8

Offsetting Financial assets and liabilities are offset and the net amount presented in the statements 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. Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The fair value of financial assets and liabilities traded in active markets (such as publicly traded derivatives and marketable securities) are based on quoted market prices at the close of trading on the reporting date. The Fund uses the last traded market price for both financial assets and financial liabilities where the last traded price falls within the bid-ask spread. In circumstances where the last traded price is not within the bid-ask spread, the Manager will review and apply a price within the bid-ask spread that is most representative of fair value based on the specific facts and circumstances. The Fund s policy is to recognize transfers into and out of the fair value hierarchy levels as of the date of the event of change in circumstances that gave rise to the transfer. Investments held that are not traded in an active market are valued based on the results of 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 include the use of comparable recent arm s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, option pricing models and others commonly used by market participants and which make the maximum use of observable inputs. Investments in other funds are valued at the net asset value per unit reported by each fund. Impairment of financial assets At each reporting date the Fund assesses whether there is objective evidence that financial assets at amortized cost are impaired. If such evidence exists, the Fund recognizes an impairment loss as the difference between the amortized cost of the financial asset and the present value of the estimated future cash flows, discounted using the instrument s original effective interest rate. Impairment losses on financial assets at amortized cost are reversed in subsequent periods if the amount of the loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized. Investment income Regular way purchases and sales of financial assets are recognized at their trade date. The interest for distribution purposes shown on the statements 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. Dividend income is recognized on the ex-dividend date. Realized and unrealized gains and losses from investment transactions are calculated on a weighted average cost basis. Income, realized gains (losses) and unrealized gains (losses) are allocated among the series on a pro-rata basis. The Fund generally incurs 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 as a separate expense in the statements of comprehensive income. Forward foreign exchange contracts Forward foreign exchange contracts, if purchased or sold, are valued at the current market value thereof on the valuation date. The value of these forward contracts is the gain or loss that would be realized if, on the valuation date, the positions were to be closed out. Any unrealized appreciation (depreciation) on forward contracts are included in the statements of financial position. When the forward contracts are closed out or expire, realized gains 9

or losses on forward contracts are recognized and are included in the statements of comprehensive income. The Canadian dollar value of forward foreign exchange contracts is determined using forward currency exchange rates supplied by an independent service provider. Functional and presentation currency and foreign currency translation The functional and presentation currency of the Fund is Canadian dollars (CAD). Canadian dollars is the currency of the primary economic environment in which the Fund operates and is the primary currency in which it raises capital. The Fund offers series to the public in U.S. dollars and the net assets attributed to these units is translated daily to U.S. dollars at the exchange rate for that day. The Canadian dollar and U.S. dollar series net assets per unit as at the financial reporting date are reported in the Statements of Financial Position. The fair value of investments and other assets and liabilities denominated in a foreign currency are translated into Canadian dollars at the rate of exchange which is current on the valuation date. Transactions denominated in a foreign currency are translated into Canadian dollars at the rate of exchange prevailing at the date of the transactions. Realized and unrealized foreign currency gains or losses on investments are included in the Statements of Comprehensive Income in Net realized gain (loss) on sale of investments and derivatives and Net change in unrealized appreciation (depreciation) on investments and derivatives, respectively. Realized and unrealized foreign currency gains or losses on monetary assets and liabilities other than investments denominated in foreign currencies are included in the Statements of Comprehensive Income in Foreign exchange gain (loss) on cash and other assets. Cash Cash is comprised of demand deposits with financial institutions, bank overdraft, and short term debt instruments with original terms of maturity of less than 90 days, as applicable. The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice. Multi-series operations Each series of the Fund has rights to the assets of the Fund equal to that of other series. Income, non-series specific expenses, and non-series specific realized and unrealized capital gains and losses are allocated to each series of units based on the relative net asset values of each series of the Fund. Specific gains and losses designated to a series related to currency hedging operations are only allocated to these series. A separate net asset value ( NAV ) is calculated for each series of units of the Fund by taking the series proportionate share of the Fund s common assets less that series proportionate share of the Fund s common liabilities and deducting from this amount all liabilities that relate solely to a specific series. The NAV per unit for each series is determined by dividing the NAV of each series by the number of units of that series outstanding on the valuation date. Transaction costs Transaction costs are expensed and are included in Transaction costs in the statements of comprehensive income. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of an investment, which include fees and commissions paid to agents, advisors, brokers and dealers. Investments in unconsolidated structured entities The Fund is considered to be investment entities as defined by IFRS 10 Consolidated Financial Statements and consequently is required to measure investments in subsidiaries, including controlled investments in underlying funds, if any, at fair value through profit and loss. Additional disclosures required under IFRS are disclosed in Note 13, which outlines the exposure of the Fund s investments in those structured entities. 10

Changes in fair value of underlying funds are included in the Statements of Comprehensive Income in Net change in unrealized appreciation (depreciation) on investments and derivatives. Standards issued but not yet effective 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 recognised in profit or loss. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, however 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 is in the process of assessing the impact of IFRS 9 and has not yet determined when it will adopt the new standard. 4. 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 discussing the most significant accounting judgments and estimates that the Fund has made in preparing the financial statements: Classification of Redeemable Units Issued by the Fund IAS 32 requires that units of an entity that include a contractual obligation for the issuer to repurchase or redeem them for cash or another financial asset be classified as a financial liability. The Fund s redeemable units do not have identical features and is structured as a multi-series trust. Accordingly, Net Assets attributable to holders of redeemable units are presented as a liability on the Statements of Financial Position. Fair value measurement of derivatives and securities not quoted in an active market The Fund holds 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. Broker quotes as obtained from the pricing sources may be indicative and not executable. Where no market data is available, the Fund may value positions using its own models, which are usually based on valuation methods and techniques generally recognized as standard within the industry. The models used to determine fair values are validated and periodically reviewed by the Manager, independent of the party that created them. The models used for private equity securities are based mainly on earnings multiples adjusted for a lack of marketability as appropriate. Models use observable data, to the extent practicable. However, areas such as credit risk, 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. See Notes 6 and 7 for more information on the fair value measurement of the Fund s financial instruments. 11

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 financial assets under IAS 39, Financial Instruments Recognition and Measurement (IAS 39). The most significant judgments made include the determination that certain investments are held-for-trading and that the fair value option can be applied to those which are not. Investments in associates, joint ventures and subsidiaries IFRS 10 requires investment entities (as defined therein) to account for investments in subsidiaries at FVTPL, rather than consolidating them. The Manager has determined that the Fund meets the definition of an investment entity, and as a result, measures subsidiaries at FVTPL. An investment entity is an entity that obtains funds from one or more investors for the purpose of providing them with investment management services, commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both, and measures and evaluates the performance of substantially all of its investments on a fair value basis. The most significant judgment that the Fund has made in determining that it meets this definition is that fair value is used as the primary measurement attribute to measure and evaluate the performance of substantially all of their investments. 5. Financial instruments risk Risk factors The Fund s activities expose it to various types of risks that are associated with its investment strategies, financial instruments and markets in which it invests. The most significant risks include credit risk, liquidity risk and market risk (including price risk, currency risk and interest rate risk). The level of risk depends on the Fund s investment objectives and the type of securities it invests in. The Fund s overall risk management program seeks to maximize the returns derived for the level of risk to which the Fund is exposed and seeks to minimize potential adverse effects on the Fund s financial performance. All investments result in a risk of capital. These risks and related risk management practices employed by the Fund are discussed below: Credit risk The Fund is exposed to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. All transactions in listed securities are settled upon delivery using approved brokers. The risk of default is considered minimal, as delivery of securities sold is only made once the broker has received payment. Payment is made on a purchase once the securities have been received by the broker. The trade will fail if either party fails to meet its obligations. The Fund also invests in derivative instruments such as forward contracts; therefore, it is subject to credit risk if the counterparty fails to meet its obligation. The Manager may choose to utilize multiple counterparties and those that have a high credit rating in order to minimize credit risk. The analysis below summarizes the credit quality of the derivative and debt portfolio of the underlying fund at June 30, 2016 and December 31, 2015. The Fund's holding in the underlying fund is 9.6% of net assets of the underlying fund as of June 30, 2016 (December 31, 2015 8.8%). 12

Credit rating Percentage of total debt and derivative securities June 30, 2016 December 31, 2015 AAA 54.8% 51.3% AA 17.4% 0.5% A 10.2% 12.3% BBB 10.3% 27.6% Other 7.3% 8.3% Total 100.0% 100.0% Liquidity risk Liquidity risk is the possibility that investments of the Fund cannot be readily converted into cash when required. The Fund may be subject to liquidity constraints because of insufficient volume in the markets for the securities of the Fund or the securities may be subject to legal or contractual restrictions on their resale. In addition, the Fund is exposed to daily cash redemptions of redeemable units. The units of the Fund are redeemed on demand at the current net asset value per unit at the option of the unitholder. Liquidity risk is managed by investing the majority of the Fund s assets in investments that are traded in an active market and can be readily disposed. The Fund aims to retain sufficient cash and cash equivalent positions to maintain liquidity; therefore, the liquidity risk for the Fund is considered minimal. In addition, the Fund maintains sufficient cash on hand to fund anticipated redemptions and can borrow for funding redemptions. All of the Fund s financial liabilities as at June 30, 2016 and December 31, 2015 are due within three months. Redeemable units are redeemable on demand at the holder s option. However, the Manager does not expect that the contractual maturity disclosed above will be representative of the actual cash outflows, as holders of these instruments typically retain them for a longer period. Market risks The Fund s investments are subject to market risk, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The following include sensitivity analyses that show how the net assets attributable to holders of redeemable units would have been affected by a reasonably possible change in the relevant risk variable at each reporting date. In practice the actual results may differ and the differences may be material. (a) Currency risk The Fund may hold assets and liabilities that are denominated in currencies other than the Canadian dollar - the functional currency. It is therefore exposed to currency risk, as the value of the securities denominated in other currencies will fluctuate due to changes in exchange rates. As well, the Fund may enter into forward foreign exchange contracts primarily with the intention to offset or reduce exchange rate risks associated with the investments and also, periodically, to enhance returns to the portfolio. The Canadian dollar value of forward foreign exchange contracts is determined using forward currency exchange rates supplied by an independent service provider. Losses may arise due to a change in the value of the foreign currency or if the counterparty fails to perform under the contract. 13

The tables below summarize the Fund s indirect exposure to currency risks through its investment in the underlying fund as at June 30, 2016 and December 31, 2015. The Fund's holding in the underlying fund is 9.6% of net assets of the underlying fund as of June 30, 2016 (December 31, 2015 8.8%), below is the risk disclosure of the underlying fund as at June 30, 2016. June 30, 2016 Non-monetary Percentage of Monetary assets assets Derivatives Net exposure net assets $ $ $ $ % Euro (326,034) (415,244) - (741,278) (0.6) United States, Dollars 35,187,363 (160,223,607) (124,289,471) (746,773) (0.6) Total 34,861,329 (160,638,851) (124,289,471) (1,488,051) (1.2) December 31, 2015 Non-monetary Percentage of Monetary assets assets Derivatives Net exposure net assets $ $ $ $ % Australia, Dollars (26,681) - - (26,681) 0.0% Brazil, Real 45,774 - - 45,774 0.0% Euro (101) - - (101) 0.0% Mexico, Peso 2,031 (6,073,422) (6,071,391) -4.8% United States, Dollars 130,421,943 - (139,345,000) (8,923,057) -7.1% Total 130,442,966 - (145,418,422) (14,975,456) -11.9% Had the exchange rate between the Canadian dollar and the foreign currencies increased (decreased) by 10%, with all other variables held constant, net assets attributable to holders of redeemable units would have (decreased) increased by $14,285 in June 30, 2016 (December 31, 2015 - $131,784). In practice, actual results may differ from this sensitivity analysis. In addition to the indirect risk through the underlying fund, the Fund is also directly exposed to currency risk through a forward contract with a notional value of $nil (December 31, 2015 - $1,867,050) Canadian dollars. Had the exchange rate between the Canadian dollar and the foreign currencies increased (decreased) by 10%, with all other variables held constant, net assets attributable to holders of USD series A and F redeemable units would have increased (decreased) on a combined basis by $191,242 CAD o n J u n e 3 0, 2016, (December 31, 2015 - $186,779). In practice, actual results may differ from this sensitivity analysis. (b) Interest rate risk Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or fair values of financial instruments. Interest rate risk arises when the Fund invests in interest-bearing financial assets or liabilities. The Fund is exposed to the risk that the value of such financial assets or liabilities will fluctuate due to changes in the prevailing levels of market interest rates. In addition, as interest rates fall and fixed-income security issuers prepay principal, the Fund may have to reinvest this money in securities with lower interest rates. The Fund s exposure to interest rate risk is concentrated in its investment in money market instruments and fixed income securities. Other assets and liabilities are short-term in nature and/or non-interest bearing. The tables below summarize the Fund s indirect exposure to interest rate risk through its underlying fund as at June 30, 2016 and December 31, 2015. They include the underlying fund s assets and trading liabilities at fair values, categorized by the earlier of contractual re-pricing or maturity dates. 14

The Fund's holding in the underlying fund is 9.6% of net assets of the underlying fund as of June 30, 2016 (December 31, 2015 8.8%), below is the risk disclosure of the underlying fund as at June 30, 2016 and December 31, 2015. June 30, 2016 Less than 1 1-3 3-5 More than 5 Total year years years years $ $ $ $ Fixed Income 3,965,951 1,950,717 323,994 2,258,006 8,498,668 December 31, 2015 Less than 1 1-3 3-5 More than 5 Total year years years years $ $ $ $ Fixed Income 347,873 4,009,044 1,239,177 4,648,209 10,244,303 As at June 30, 2016, if the prevailing interest rate had been raised or lowered by 1%, assuming a parallel shift in the yield curve, with all other factors remaining constant, net assets attributable to holders of redeemable units could possibly have increased or decreased, respectively, by $226,004 (December 31, 2015 - $495,959). The Fund s interest rate sensitivity was determined based on portfolio weighted duration. In practice, actual results may differ from this sensitivity analysis. (c) Other price risk The Fund s significant market risks have been discussed in the previous sections. The Fund did not have any other significant market risks as at June 30, 2016 and December 31, 2015. Concentration risks Concentration risk arises as a result of the concentration of exposures within the same category, whether it is geographical location, product type, industry sector or counterparty type. The following is a summary of the Fund s indirect concentration risk through its underlying fund: Market Segment June 30, December 31, 2016 2015 % % Corporate 16.7% 40.5% Asset-Backed 3.4% 3.3% Mortgage-Backed 7.6% 4.1% Government 43.0% 44.3% Other 0.5% -4.0% 71.2% 88.2% 6. Fair value measurement The Fund classifies fair value measurements within a hierarchy which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are as follows: Level 1: Fair value based on unadjusted quoted prices in active markets for identical assets or liabilities that the Manager has the ability to access at the measurement date. Level 2: Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, 15

including inputs in markets that are not considered to be active. Level 3: Inputs based on at least one significant non-observable input that is not supported by market data. There is little if any market activity. Inputs into the determination of fair value require significant management judgment or estimation. If inputs of different levels are used to measure an asset s or liability s fair value, the classification within the hierarchy is based on the lowest level input that is significant to the fair value measurement. The following fair value hierarchy tables present information about the Fund s assets and liabilities measured at fair value within the fair value hierarchy as at June 30, 2016 and December 31, 2015. June 30, 2016 Level 1 Level 2 Level 3 Total $ $ $ $ Financial Assets Investment funds 12,016,883 - - 12,016,883 Forward foreign exchange contracts - - - - Total Financial Assets 12,016,883 - - 12,016,883 Financial Liabilities Total Financial Assets and Liabilities 12,016,883 - - 12,016,883 December 31, 2015 Level 1 Level 2 Level 3 Total $ $ $ $ Financial Assets Investment funds 11,115,060 - - 11,115,060 Forward foreign exchange contracts - 738-738 Total Financial Assets 11,115,060 738-11,115,798 Financial Liabilities Total Financial Assets and Liabilities 11,115,060 738-11,115,798 All fair value measurements are recurring. The carrying values of cash, subscription receivable, interest receivable, payable for interest securities purchased, accrued liabilities and the Fund s obligation for net assets attributed to holders of redeemable units approximates their fair value due to their short term nature. Fair values are classified as Level 1 when the related security or derivative is actively traded and a quoted price is available. If an instrument classified as Level 1 subsequently ceases to be actively traded, it is transferred out of Level 1. In such cases, instruments are reclassified into Level 2, unless the measurement of its fair value requires the use of significant unobservable inputs, in which case it is classified as Level 3. 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 gives rise to the transfer. For the period ended June 30, 2016 and December 31, 2015, no investments were transferred from Level 1 to Level 2 as a result of the securities no longer being traded in an active market and no investments were transferred from Level 2 to Level 1 as a result of the securities now being traded in an active market. i) Equities The Fund s equity positions are classified as Level 1 when the security is actively traded and a reliable price is observable. Certain of the Fund s equities do not trade frequently and therefore observable prices may not be available. In such cases, fair value is determined using observable market data (e.g. transactions for similar securities of the same issuer) and the fair value is classified as Level 2, unless the determination of fair value requires significant unobservable data, in which case the measurement is classified as Level 3. 16

The Manager is responsible for performing the fair value measurements included in the financial statements of the Fund, including Level 3 measurements. The Manager obtains pricing from a third party pricing vendor, which is monitored and reviewed daily by the portfolio manager. Any adjustments to the prices or estimates provided by the third party pricing vendor are approved by the portfolio manager. ii) Bonds and short-term investments Bonds include primarily government and corporate bonds, which are valued using models with inputs including interest rate curves, credit spreads and volatilities. The inputs that are significant to valuation are generally observable and therefore the Fund s bonds and short-term investments have been classified as Level 2. iii) Derivative assets and liabilities Derivative assets and liabilities consist of foreign currency forward contracts which are valued based primarily on the contract notional amount, the difference between the contract rate and the forward market rate for the same currency, interest rates and credit spreads. Contracts for which counterparty credit spreads are observable and reliable, or for which the credit-related inputs are determined not to be significant to fair value, are classified as Level 2. 7. Financial instruments by category and offsetting The following table presents the net gains (losses) and net unrealized gains (losses) on financial instruments at FVTPL by category for the periods ended June 30, 2016 and December 31, 2015 Net realized gains (losses) June 30, 2016 December 31, 2015 Financial assets/liabilities at FVTPL Designated at inception $ (4,801) $ 7,911 HFT (8,086) 359,285 Total $ (12,887) $ 367,196 Net unrealized gains (losses) June 30, 2016 December 31, 2015 Financial assets/liabilities at FVTPL Designated at inception $ 409,060 $ (31,683) HFT (738) 738 Total $ 408,322 $ (30,945) The following table presents the recognized financial instruments that are offset, or subject to enforceable master netting agreements or other similar agreements but that are not offset, as at June 30, 2016 and December 31, 2015. The Net column shows what the impact on Fund s statements of financial position would be if all set-off rights were exercised. 17

Financial Assets and Liabilities Amounts Offset Amounts Not Offset Net Gross Assets (Liabilities) Gross Assets (Liabilities) Offset Net Amounts Financial Instruments Cash Collateral Received June 30, 2016 Derivative Assets - - - - Derivative Liabilities - - - - Total - - - Financial Assets and Liabilities Amounts Offset Amounts Not Offset Net Gross Assets (Liabilities) Gross Assets (Liabilities) Offset Net Amounts Financial Instruments Cash Collateral Received December 31, 2015 Derivative Assets 738-738 - - 738 Derivative Liabilities - - - - - - Total 738 738 738 8. Redeemable units Units issued and outstanding are considered to be the capital of the Fund. The capital is managed in accordance with the investment objective of the Fund. The Fund does not have any specific capital requirements on the subscription and redemption of units, other than certain minimum subscription requirements. Unitholders are entitled to require payment of the net asset value per unit of that Fund for all or any of the units of such unitholder by giving written notice to the Manager. The written notice must be received no later than 4:00 p.m., EST, on the valuation day upon which the units are to be redeemed. Additionally, the notice must be irrevocable and the signature thereon must be guaranteed by a Canadian chartered bank, a trust company or an investment dealer acceptable to the Manager. The units are redeemable for cash equal to a pro rata unit of the Fund s net asset value (NAV). During the periods ended June 30, 2016 and December 31, 2015, the number of units issued redeemed and outstanding was as follows: Series A Series A USD 2016 2015 2016 2015 Units outstanding - beginning 409,180 384,890 25,794 55,673 Redeemable units issued 41,199 80,732 11,445 9,790 Redeemable units redeemed (2,808) (64,046) - (40,597) Units issued on reinvestment of distributions 1,939 7,604 174 928 Units outstanding - end 449,510 409,180 37,413 25,794 Series F Series F USD 2016 2015 2016 2015 Units outstanding - beginning 596,211 264,673 115,256 103,496 Redeemable units issued 133,812 569,360 4,250 75,624 Redeemable units redeemed (38,631) (248,171) (35,712) (66,454) Units issued on reinvestment of distributions 2,659 10,349 377 2,590 Units outstanding - end 694,051 596,211 84,171 115,256 For the periods ended June 30, 2016 and December 31, 2015 there no Series I units outstanding, issued, or redeemed. 18

9. Related Party Transactions Management fees and related party transactions The Fund pays the Manager an annual management fee of up to 1.65% of the average net assets in respect of the series A and A USD securities and up to 0.95% in respect of the series F and F USD securities. The management fee is calculated and accrued daily and is paid on the last day of each month based on the average daily net asset value of the Fund. Included in accrued expenses at June 30, 2016 is $14,059 (December 31, 2015 - $13,131) of management fee payable to the Manager. The Fund invested $12,016,883 or 95.6% of its net assets as of June 30, 2016, (December 31, 2015 - $11,115,060 or 97.5%) in Redwood Unconstrained Bond Class, which is a separate fund under the same manager, Redwood Asset Management Inc. To avoid duplicating the management fee the Manager reimbursed Redwood Unconstrained Bond Fund for all management fees resulting from fund-on fund purchases. These transactions are measured at the exchange amounts, and occur within the normal course of operations. Expenses The Fund is responsible for the payment of all direct expenses related to its operations, such as brokerage commissions and fees, taxes, audit and legal fees, safekeeping, trustee and custodial fees and other expenses. Each series of units of the Fund is responsible for the operating expenses that relate specifically to that series. The total remuneration paid to members on the Independent Review Committee during the period ended June 30, 2016 was $640 (June 30, 2015 - $9). Certain administration and custodian fees have been absorbed by the Manager. These expenses are noted on the Statements of Comprehensive Income. Such absorption can be terminated by the manager at any time without notice. 10. Brokerage commissions The Fund paid $nil (December 31, 2015 - $nil) in brokerage commissions and other transaction costs for portfolio transactions for the period ended June 30, 2016. 11. Increase (decrease) in net assets attributable to holders of redeemable units per unit The increase (decrease) in net assets attributable to holders of redeemable units per unit for the period ended June 30, 2016 and 2015 is as follows: Series A June 30, 2016 June 30, 2015 $ $ Increase in net assets attributable to holders of redeemable units 76,529 53,275 Weighted average units outstanding during the year 443,536 388,890 Increase in net assets attributable to holders of redeemable units per unit 0.17 0.14 19

Series A USD June 30, 2016 June 30, 2015 $ $ Increase in net assets attributable to holders of redeemable units 4,942 48,411 Weighted average units outstanding during the year 36,403 58,823 Increase in net assets attributable to holders of redeemable units per unit 0.14 0.82 Series F June 30, 2016 June 30, 2015 $ $ Increase in net assets attributable to holders of redeemable units 132,282 61,096 Weighted average units outstanding during the year 660,377 481,991 Increase in net assets attributable to holders of redeemable units per unit 0.20 0.13 Series F USD June 30, 2016 June 30, 2015 $ $ Increase in net assets attributable to holders of redeemable units 8,947 135,536 Weighted average units outstanding during the year 84,028 131,111 Increase in net assets attributable to holders of redeemable units per unit 0.11 1.03 12. Income tax 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. In accordance with the terms of the Declaration of Trust, all of the net investment income and net taxable capital gains will be paid or payable to unitholders in the taxation year so that no income tax will be payable by the Fund. As a result, the Fund does not record income taxes. Losses incurred by the Fund cannot be allocated to unitholders, but may be carried forward and applied to reduce future year's distributions of taxable income. Occasionally, more income is distributed than earned by the Fund. This distribution is deemed a return of capital and is not taxable to the unitholder. Capital and Non-Capital Losses As at June 30, 2016, the Fund had $nil of unused capital losses and $9,487 unused non-capital losses for income tax purposes. Since the Fund does not record income taxes, the tax benefit of capital and non-capital losses, if any, has not been reflected in the financial statements. 13. Investments in Unconsolidated Structured Entities The Fund invests in underlying funds which are considered structured entities, whose investment objectives range from achieving short- to long-term income and capital growth potential. The Fund does not have any financial liabilities recognized in respect of any of their interests in structured entities. Underlying funds may use leverage in a manner consistent with their respective investment objectives and as permitted by Canadian securities regulatory authorities. In all cases, the Fund s maximum exposure to loss from the structured entity is represented by the carrying value of their investment therein and the Fund does not have any current intentions to provide financial support to any of the underlying funds. Redwood Unconstrained Bond Class is managed by the same manager. The fair value of the underlying fund included in the statements of financial position is as follows: 20