Rollover Completion and Dissolution Information MARQUEST MINING 2021-II SUPER FLOW-THROUGH LIMITED PARTNERSHIP – October 14, 2022
TORONTO, October 14, 2022 – Marquest Mining 2021-II Super Flow-Through Limited Partnership has completed a mutual fund rollover transaction (“the Mutual Fund Rollover”) where the Marquest Mining 2021-II Super Flow-Through LP transferred all of its assets other than cash (all cash in excess of funds required to meet existing liabilities was distributed to limited partners on October 14, 2022) to Marquest Mutual Funds Inc. on October 14, 2022, in exchange for Marquest Mutual Funds Inc. – Explorer Series A/Rollover and Series F Mutual Fund (MAV7001/MAV7011) (the “Mutual Fund Shares”). As part of the wind- up and dissolution of the Marquest Mining 2021-II Super Flow-Through LP, the Mutual Fund Shares were distributed to limited partners of record as of October 14, 2022 on a pro rata basis.
The information contained herein is strictly for information purposes only and should in no way be regarded as tax advice. You are advised to obtain professional tax advice about your individual circumstances.
MUTUAL FUND ROLLOVER
Limited partners of the Marquest Mining 2021-II Super Flow-Through LP, A Class, received 61.092020 Mutual Fund Shares (issued at the October 14, 2022 Net Asset Value per Mutual Fund Share of $0.607500 (MAV7001)) for each limited partnership unit, based on a net asset value of $37.113400 per unit of the Marquest Mining 2021-II Super Flow-Through LP.
Limited partners of the Marquest Mining 2021-II Super Flow-Through LP, F Class, received 64.252900 Mutual Fund Shares (issued at the October 14, 2022 Net Asset Value per Mutual Fund Share of $0.630300 (MAV7011)) for each limited partnership unit, based on a net asset value of $40.498600 per unit of the Marquest Mining 2021-II Super Flow-Through LP.
AFTER TAX RETURNS and ACB OF PARTNERSHIP UNITS – AS AT October 14, 2022
We can report that our investors in the Marquest Mining 2021-II Super Flow-Through LP have the following pre-tax and after-tax returns on their initial investment of $100.00, factoring in capital gains tax*:
Pre-Tax (A Class) After-Tax (A Class)
Pre-Tax (F Class) After-Tax (F Class)
The ACB per unit of the Marquest Mining 2021-II Super Flow-Through LP, based on the information available to us will be provided to you with your 2022 tax slips.
Investors who have not redeemed their holdings of the Mutual Fund Shares (or any shares of Marquest Mutual Funds Inc. that they hold as a result of a switch transaction in respect of the Mutual Fund Shares) resulting from the rollover transaction have deferred the potential tax liability of capital gains until they do so. Investors who have redeemed a portion or all of their holdings of the Mutual Fund Shares (including shares of Marquest Mutual Funds Inc. that they hold as a result of a switch transaction in respect of the Mutual Fund Shares) resulting from the rollover transaction should use the ACB per share that will be provided with the 2022 tax slips when determining their capital gains tax liability. Investors are urged to consult with their Investment Advisor and tax professionals.
The year 2022 has been an extremely challenging year for global investors as inflation accelerated in most western markets to multi-decade highs, which led both equity and bond markets to price in recession risks while central banks began to raise rates aggressively to slow inflation, and thus economic growth. And if recession concerns and runaway inflation were not enough to concern markets, the conflict in the Ukraine only exacerbated an already negative market sentiment. As a result of these factors, the S&P500 was down 25% in the first nine months of the year on a price basis, and the S&P/TSX Venture Composite Index (a broad market indicator of Canadian micro-cap securities in Canada) was down more than 36% over the same time period. Junior mining equities selected for the Marquest Mining 2021-II Super Flow-Through Limited Partnership are of a higher risk profile than those found in the S&P/TSX Venture Composite Index, and therefore would have been more negatively impacted on average than the constituents of the Venture index. As capital exited equity markets, the junior mining space suffered outsized losses.
To date, uncertainty around the inflation outlook and global geopolitical risks continues to generate high market volatility; however, progress has been made in addressing the challenges that have followed the pandemic — namely reducing high inflation and unwinding policy accommodation. Inflation has begun to ease in certain areas of the global economy, and interest rates have begun to adjust to more normalized levels. With the accelerated path central bank policy rates have taken, global economic growth appears to have slowed sufficiently enough to begin to work its way into 40-year high inflation levels. And while a moderate recession is still quite possible, the sharp decline in equity markets this year appears to be overdone and has likely reached an inflection point. Thus, the equity market selloff has been mostly factored into risks to company earnings. Accordingly, the outlook for equities for the remainder of this year and into 2023 has become more balanced and a strong argument now exists for increasing portfolio allocations to equity markets, specifically the junior mining sector that is very well positioned for outsized growth.
Lastly, in periods of market weakness where there were serious concerns around recession risks, they have commonly been followed by strong rebounds in equity prices, with the S&P500 up typically more than 20% in the following year when consumer sentiment is at its lowest point in the cycle. With Consumer Sentiment now at 59.8 (levels similar to the 2008-2009 financial crisis), one would expect equities to perform much better into the next year if historical patterns are to repeat. And again, the junior mining sector would be set to outperform the S&P500 in such a scenario, which now appears to be more likely as inflation abates, growth returns, and rates reset at more normalized levels.
Note: Limited partners will receive a T5013/RL15 for the 2022 taxation year early in 2023. Certain tax deductions will be available for the taxation years 2022 through to 2025.
For further information, please contact Marquest Asset Management at 1-888-964-3533.
* Based on approximate amounts of Canadian Exploration Expenses and additional credits and deductions for an Ontario resident; assuming Ontario marginal tax rate of 53.53%; including the amortized offering costs deductions; no alternative minimum tax is triggered from other deductions; ACB at rollover is considered $0; assumes disposition of the rollover value. All numbers are approximate and for illustration purposes only. All investors will receive tax slips that reflect their exact amounts. Investors should discuss with their tax specialist in order to evaluate their respective performance.