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Notice of Termination of the Marquest Mutual Funds Inc. – Flex Dividend and Income Growth™ Series Fund

Notice of Termination of the Marquest Mutual Funds Inc. – Flex Dividend and Income Growth™ Series Fund

Toronto, Ontario, April 6, 2023 – Marquest Asset Management Inc. (the ”Manager”), the Manager of Marquest Mutual Funds Inc. (the “Corporation”), announces the proposed termination of Marquest Mutual Funds Inc. – Flex Dividend and Income Growth™ Series Fund (the “Fund”).

The Corporation is a “mutual fund corporation” under the Income Tax Act (Canada).  Since the establishment of the Corporation, the refundable dividend tax on hand (“RDTOH”) account accumulates passive investment income until taxable dividends are declared and paid to shareholders.  As such, the RDTOH account represents an asset of the Corporation for financial reporting purposes.  As the Fund is a class of shares of the Corporation, the Manager has allocated a portion of the Corporation’s RDTOH account to the Fund reflecting the passive income received by it but not paid to shareholders of the Fund.

Given recent sizeable redemptions in respect of the Fund and the related decline in the assets under management of the Fund, the Manager has determined that the value of the RDTOH receivable allocated to the Fund has become impaired. As a result, the audited financial statements of the Fund for the year ended December 31, 2022 will reflect this impairment and, effective April 5, 2023, the net asset value of the Fund has reflected the write-off of the value of the allocated portion of the RDTOH receivable.  After discussions with its advisors, the Manager has determined that the preferred course of action is to terminate the Fund and seek to maximize the value of the net assets of the Fund, including the allocated portion of the RDTOH receivable.

To this end, the Corporation will:

  • issue a stock dividend to the shareholders of record of the Fund on April 24, 2023 (the “Record Date”) in an amount that is expected to result in the maximizing of any potential refund of RDTOH; and
  • confirm the expected amount and timing of the payment to shareholders of the Fund on the Record Date of their portion of the termination proceeds, including in respect of their proportionate share of the RDTOH refund received by the Corporation in respect of the Fund.

The Fund has ceased to be available for purchase with effect from April 6, 2023. Shareholders who elect to redeem shares prior to the Record Date will receive a proportionate share of the net asset value of the Fund but will not be entitled to receive their proportionate share of the RDTOH refund.

Any redemption of shares, the receipt of the stock dividend and/or the disposition of shares upon wind-up of the Fund will have tax consequences to a shareholder.

In respect of individuals, upon the redemption of shares or other disposition of such shares, a capital gain (or a capital loss) will be realized by the shareholder to the extent that the proceeds of disposition of the shares exceed (or are less than) the aggregate of the adjusted cost base of the shares and any reasonable costs of disposition.   One-half of the capital gain is included in computing income as a taxable capital gain and one-half of the capital losses may be deducted against taxable capital gains to the extent and under the circumstances prescribed in the Income Tax Act (Canada) (the “Tax Act”).

Shareholders must include in income the stock dividends received from the Fund.  For individual shareholders, such dividends will be subject to the usual gross-up and dividend tax credit rules with respect to taxable dividends paid by Canadian corporations under the Tax Act.  An enhanced gross-up and dividend tax credit is available on “eligible dividends” received from a taxable Canadian corporation which are so designated by the corporation.

Individuals (other than certain trusts) realizing net capital gains or receiving dividend may be subject to an alternative minimum tax under the Tax Act.

We encourage all shareholders of the Fund to consult with their financial advisors to understand the financial and tax implications associated with redeeming their shares and the termination of the Fund.

If you have any questions regarding the termination of the Fund, please do not hesitate to contact us by email at clientservices@marquest.ca.


Marquest Asset Management Inc., as Manager on behalf of the Fund


Notice on forward-looking statements:

This press release includes forward-looking statements regarding the Corporation and the Fund. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “is expected”, “expects”, “scheduled”, “intends”, “contemplates”, “anticipates”, “believes”, “proposes” or variations (including negative variations) of such words and phrases, or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Such statements are based on the current expectations of the Manager, and are based on assumptions and subject to risks and uncertainties. Although the Manager believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect. The forward-looking events and circumstances discussed in this release may not occur by certain specified dates or at all and could differ materially as a result of known and unknown risk factors and uncertainties affecting the Fund. Although the Manager has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward- looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. No forward-looking statement can be guaranteed.  Forward-looking statements speak only as of the date on which they are made and, except as required by applicable securities laws, the Manager undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

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