The Fiera Sceptre Private Mutual Funds

Transcription

1 The Fiera Sceptre Private Mutual Funds ANNUAL FINANCIAL REPORT For the year ended DECEMBER 31, 2012 Fiera Sceptre Core Canadian Equity Fund Fiera Sceptre Large Cap Canadian Equity Fund Fiera Sceptre U.S. Equity Fund

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3 TABLE OF CONTENTS INDEPENDENT AUDITOR S REPORT FINANCIAL STATEMENTS Fiera Sceptre Core Canadian Equity Fund 3 Fiera Sceptre Large Cap Canadian Equity Fund 14 Fiera Sceptre U.S. Equity Fund 24

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5 Independent Auditor s Report To the Unitholders of: Fiera Sceptre Core Canadian Equity Fund Fiera Sceptre Large Cap Canadian Equity Fund Fiera Sceptre U.S. Equity Fund (collectively the Funds ) We have audited the accompanying financial statements of each of the Funds, which comprise the statement of investment portfolio as at December 31, 2012, the statements of net assets as at December 31, 2012 and December 31, 2011 and the statements of operations and changes in net assets for the years then ended, and the related notes, which comprise a summary of significant accounting policies and other explanatory information. Management s responsibility for the financial statements Management is responsible for the preparation and fair presentation of the financial statements of each of the Funds in accordance with Canadian generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on the financial statements of each of the Funds based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained in each of our audits is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements of each of the Funds present fairly, in all material respects, the financial position of each of the Funds as at December 31, 2012 and December 31, 2011 and the results of each of their operations and the changes in each of their net assets for the years then ended in accordance with Canadian generally accepted accounting principles. March 22, 2013 Montreal, Quebec 1 CPA auditor, CA, public accountancy permit No. A blank 1

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7 FIERA SCEPTRE CORE CANADIAN EQUITY FUND STATEMENTS OF NET ASSETS As at December 31 STATEMENTS OF OPERATIONS For the years ended December Assets Investments at fair value (at cost $30,276,740; 2011 $62,494,782) $ 34,523,241 $ 66,553,903 Short-term investments (at cost $848,102; 2011 $863,404) 848, ,607 Cash 518,931 21,536 Dividends receivable 78, ,632 35,969,832 67,593,678 Liabilities Due to brokers 104,948 Accounts payable for units redeemed 4,011 13,876 Management fee payable 5,979 9,424 Other accrued liabilities 143, , , ,800 Net assets representing Unitholders Equity $ 35,710,918 $ 67,413,878 Net assets per class Class A* $ 1,378 $ 1,316 Class B* $ 11,696,395 $ 13,083,966 Class F $ 81,040 $ 215,526 Class O $ 23,932,105 $ 54,113,070 Net assets per unit Class A* $ $ Class B* $ $ Class F $ $ Class O $ $ * On August 26, 2011, the existing Class D have been redesignated as Class A and the existing Class A have been redesignated as Class B. Investment income Interest $ 9,146 $ 15,199 Income received from income trusts 5,191 Security lending income 5,418 6,752 Dividends 1,046,303 2,735,382 1,066,058 2,757,333 Expenses Management fees 173, ,508 Securityholder reporting costs 109, ,476 Legal fees 43,686 29,682 Filing fees 36,275 Audit fees 27,552 22,189 Custodian fees 15,361 31,844 Administration fees 10,204 58,675 Independent review committee fees 9,079 9, , ,522 Net investment income 640,902 2,252,811 Realized and unrealized gain (loss) on investments and transaction costs Realized gain (loss) on sale of investments 2,238,639 7,376,817 Transaction costs (58,519) (80,465) Unrealized appreciation (depreciation) of investments and foreign currency 188,072 (22,291,768) Net gain (loss) on investments 2,368,192 (14,995,416) Increase (decrease) in net assets from operations $ 3,009,094 $(12,742,605) Signed on behalf of Fiera Capital Corporation, Fund Manager Increase (decrease) in net assets from operations per class Class A* $ 62 $ (193) Class B* $ 649,195 $ (2,071,512) Class F $ 7,884 $ (68,748) Class O $ 2,351,953 $(10,602,152) Sylvain Brosseau, Director Jean-Guy Desjardins, Director Increase (decrease) in net assets from operations per unit Class A* $ 0.82 $ (2.57) Class B* $ 0.95 $ (2.45) Class F $ 1.14 $ (2.94) Class O $ 1.31 $ (2.12) * On August 26, 2011, the existing Class D have been redesignated as Class A and the existing Class A have been redesignated as Class B. The accompanying notes are an integral part of these financial statements. 3

8 FIERA SCEPTRE CORE CANADIAN EQUITY FUND STATEMENTS OF CHANGES IN NET ASSETS For the years ended December Class A* Class B* Class F Net assets at beginning of year $ 1,316 $ 1,509 $13,083,966 $ 18,900,604 $ 215,526 $ 513,786 Increase (decrease) in net assets from operations 62 (193) 649,195 (2,071,512) 7,884 (68,748) Capital unit transactions Proceeds from units issued 969, ,265 19, ,777 Value of units redeemed (3,008,824) (4,492,417) (162,259) (767,192) Units issued on reinvestment of distributions ,594 87, ,782 Net capital unit transactions 8 5 (1,959,691) (3,660,437) (142,300) (223,633) Distributions paid to unitholders From net investment income (8) (5) (77,075) (84,689) (70) (5,879) Total distributions paid to unitholders (8) (5) (77,075) (84,689) (70) (5,879) Net assets at end of year $ 1,378 $ 1,316 $11,696,395 $ 13,083,966 $ 81,040 $ 215, Class O Total Fund Net assets at beginning of year $54,113,070 $119,363,068 $67,413,878 $138,778,967 Increase (decrease) in net assets from operations 2,351,953 (10,602,152) 3,009,094 (12,742,605) Capital unit transactions Proceeds from units issued 5,753,004 7,465,065 6,742,439 8,747,107 Value of units redeemed (37,958,233) (61,749,196) (41,129,316) (67,008,805) Units issued on reinvestment of distributions 416,331 1,674, ,996 1,768,390 Net capital unit transactions (31,788,898) (52,609,243) (33,890,881) (56,493,308) Distributions paid to unitholders From net investment income (744,020) (2,038,603) (821,173) (2,129,176) Total distributions paid to unitholders (744,020) (2,038,603) (821,173) (2,129,176) Net assets at end of year $23,932,105 $ 54,113,070 $35,710,918 $ 67,413, Class A* Class B* Number of Units Balance beginning of year , ,616 Units issued and paid during the year 53,758 38,370 Units redeemed during the year (167,073) (234,985) Units issued on reinvestment of distributions 4,663 5,069 Balance end of year , , Class F Class O Number of Units Balance beginning of year 12,131 25,176 2,889,740 5,560,100 Units issued and paid during the year 1,099 28, , ,984 Units redeemed during the year (8,888) (41,967) (1,992,036) (3,120,959) Units issued on reinvestment of distributions ,706 83,615 Balance end of year 4,346 12,131 1,217,243 2,889,740 * On August 26, 2011, the existing Class D have been redesignated as Class A and the existing Class A have been redesignated as Class B. 4 The accompanying notes are an integral part of these financial statements.

9 FIERA SCEPTRE CORE CANADIAN EQUITY FUND STATEMENT OF INVESTMENT PORTFOLIO As at December 31, 2012 NUMBER OF MATURITY COUPON SHARES/UNITS/ AVERAGE FAIR % OF NET DATE RATE PAR VALUE COST ($) VALUE ($) ASSETS Cash 518, , Short-Term Notes Treasury Bills Canada Treasury Bills 17-Jan % 125, , ,947 Canada Treasury Bills 14-Feb % 600, , ,324 Canada Treasury Bills 28-Mar % 125, , ,726 Total Short-Term Notes 848, , Equities Consumer Discretionary Automobiles and Components Magna International Inc. 10, , , Consumer Services Tim Hortons Inc. 7, , , Media Shaw Communications Inc., Class B 21, , , Retailing Dollarama Inc. 7, , , Total Consumer Discretionary 1,470,575 1,795, Consumer Staples Food and Staples Retailing Shoppers Drug Mart Corp. 10, , , Food, Beverage and Tobacco Saputo Inc. 11, , , Total Consumer Staples 840,180 1,035, Energy ARC Resources Ltd. 16, , ,332 Baytex Energy Corp. 6, , ,442 Cameco Corp. 23, , ,100 Canadian Natural Resources Ltd. 37,426 1,148,926 1,071,881 Cenovus Energy Inc. 26, , ,361 Crescent Point Energy Corp. 15, , ,663 Imperial Oil Ltd. 9, , ,609 Inter Pipeline Fund, Class A 21, , ,359 Keyera Corp. 6, , ,996 MEG Energy Corp. 11, , ,425 Suncor Energy Inc. 45,968 1,717,807 1,503,613 Tourmaline Oil Corp. 13, , ,547 Vermilion Energy Inc. 8, , ,606 Total Energy 7,908,497 7,627, Financials Banks Bank of Nova Scotia 36,056 1,689,712 2,070,335 Canadian Imperial Bank of Commerce 15,201 1,003,833 1,215,624 Royal Bank of Canada 40,623 1,839,738 2,430,473 Toronto Dominion Bank 27,875 1,873,667 2,331,743 6,406,950 8,048, The accompanying notes are an integral part of these financial statements. 5

10 FIERA SCEPTRE CORE CANADIAN EQUITY FUND STATEMENT OF INVESTMENT PORTFOLIO (Continued) As at December 31, 2012 NUMBER OF SHARES/UNITS/ AVERAGE FAIR % OF NET PAR VALUE COST ($) VALUE ($) ASSETS Diversified Financials Onex Corp. 8, , , Insurance Intact Financial Corp. 5, , ,105 Manulife Financial Corp. 65,429 1,673, ,983 1,998,964 1,245, Real Estate Brookfield Asset Management Inc., Class A 28, ,529 1,051, Total Financials 9,570,503 10,719, Health Care Health care equipment and services Catamaran Corp 13, , ,270 Total Health Care 646, , Industrials Capital goods Finning International Inc. 20, , , Transportation Canadian National Railway Co. 18, ,586 1,641, Total Industrials 1,244,756 2,148, Materials Agrium Inc. 5, , ,490 Eldorado Gold Corp. 40, , ,960 Goldcorp Inc. 31,189 1,033,981 1,134,656 New Gold Inc. 31, , ,336 Potash Corp of Saskatchewan Inc. 28, ,315 1,144,773 Silver Wheaton Corp. 18, , ,647 Teck Resources Ltd., Class B 18, , ,267 West Fraser Timber Co., Ltd. 2, , ,053 Total Materials 4,411,520 5,172, Telecommunication Services Rogers Communications Inc., Class B 19, , ,807 Total Telecommunication Services 496, , Utilities Emera Inc. 14, , ,306 Total Utilities 483, , Total Equities 27,071,884 30,531, Mutual Funds Fiera Sceptre Equity Growth Fund, Class O 37,137 3,230,609 3,991,498 Total Mutual Funds 3,230,609 3,991, Total Equities and Mutual Funds 30,302,493 34,523, Transacation Costs (25,753) Total Investment Portfolio Including Cash and Short-Term Notes 31,643,773 35,891, The accompanying notes are an integral part of these financial statements.

11 FIERA SCEPTRE CORE CANADIAN EQUITY FUND NOTES TO FINANCIAL STATEMENTS For the years ended December 31, 2012 and Declaration of Trust The Fiera Sceptre Core Canadian Equity Fund (the Fund ) (formerly Sceptre Canadian Equity Fund) is open-end unincorporated mutual fund created under the laws of the Province of Ontario pursuant to a Declaration of Trust dated November 22, 1985, as amended on September 10, 2010, August 26, 2011 and further restated on May 31, 2012 by Fiera Capital Corporation. On February 27, 2012, Fiera Sceptre Inc. and National Bank of Canada ( National Bank ) have signed a binding agreement under which Fiera Sceptre Inc. will acquire the business of Natcan Investment Management Inc. ( Natcan ) from the National Bank. The Natcan operations were then fully integrated into Fiera Sceptre Inc. s existing business. In return, the National Bank, through Natcan, received class A subordinate voting shares representing 35% of the issued and outstanding shares of Fiera Sceptre Inc. along with an option to increase its stake to 40%. Effective as of April 2, 2012, Fiera Sceptre Inc. changed its name to Fiera Capital Corporation ( Fiera Capital or the Manager ), who acts as trustee and manager of the Fund. The financial statements of the Fund are comprised of the statements of investment portfolio as at December 31, 2012, the statements of net assets as at December 31, 2012 and 2011 and the statements of operations and changes in net assets for the years then ended. Effective August 26, 2011, the Fund has been considered as a Private Mutual Fund. 2. Significant accounting policies These financial statements have been prepared in accordance with Canadian generally accepted accounting principles ( GAAP ) and are expressed in Canadian dollars. They include estimates and assumptions that affect the amounts recorded in the financial statements and the accompanying notes. These estimates are based on management s best knowledge of current events and actions that the Fund may undertake in the future. Actual results could vary from these estimates. The significant accounting policies followed by the Fund are summarized below. Future accounting standards International Financial Reporting Standards ( IFRS ) In February 2008, the Canadian Institute of Chartered Accountants ( CICA ) announced that Canadian GAAP for publicly accountable enterprises will be replaced by IFRS. IFRS will apply to semi-annual and annual financial statements for fiscal years beginning on or after January 1, In October 2010, the CICA amended the date of application of IFRS for investment companies that apply the accounting guideline on investment companies ( AcG-18 ). Hence, IFRS will be adopted for semi-annual and annual financial statements for fiscal years beginning on or after January 1, The CICA has recently proposed to extend the IFRS conversion date to financial years beginning on or after January 1, The Manager has been monitoring developments in the IFRS conversion program and, in particular, the key elements below: Changes in accounting policies; Impacts on information technology and data systems; Impacts on internal control over financial reporting; Impacts on disclosure controls and procedures; and Impacts on expertise in financial reporting. As at December 31, 2012, the Manager has completed the Identification and Feasibility phases and analysis of the effects of conversion to IFRS. Until transition, the Manager will monitor developments in IFRS and adjust its transition plan if necessary. The Manager has established that conversion to current IFRS will essentially change the following current accounting policies: Classification of units According to Emerging Issues Committee ( EIC ) Abstract 149, Accounting for Retractable or Mandatorily Redeemable Shares, units are presented in unitholders equity. In accordance with International Accounting Standard ( IAS ) 1, Presentation of Financial Statements, and IAS 32, Financial Instruments: Presentation, units will be classified as liabilities or as unitholders equity based on the units characteristics. Fair value measurement According to CICA Handbook Section 3855, Financial Instruments Recognition and Measurement, investments are measured at their fair value, which is determined using the bid or ask prices on an accredited stock exchange. The International Accounting Standards Board issued IFRS 13, Fair Value Measurement, which defines fair value, sets out a single IFRS framework for measuring fair value and requires disclosure about fair value measurements. The standard allows for the possibility of using closing prices to value investments. This may result in eliminating the difference between net asset value per unit and net assets per unit under current Canadian GAAP. 7

12 FIERA SCEPTRE CORE CANADIAN EQUITY FUND NOTES TO FINANCIAL STATEMENTS (Continued) For the years ended December 31, 2012 and 2011 Income taxes According to EIC-107, Application of CICA Section 3465 to Mutual Fund Trusts, Real Estate Investment Trusts, Royalty Trusts and Income Trusts, investment funds do not report any future income taxes. In accordance with IAS 12, Income Taxes, no similar exception to EIC-107 is permitted. Therefore, investment funds will have to report future income tax assets or liabilities when applicable. Statement of cash flows According to current accounting policies (CICA Handbook Section 1540, Cash Flow Statements), the presentation of a cash flow statement is not required when the cash flow information is readily apparent from the other financial statements or is adequately disclosed in the notes to the financial statements. In accordance with IAS 7, Statement of Cash Flows, the presentation of the statement of cash flows will be required for all entities. Beginning in 2013, the Manager will ensure that comparative information is gathered in order to prepare the opening statements of net assets to be in accordance with IFRS; these statements of net assets will be included in the semi-annual financial statements ending June 30, Due to anticipated changes in IFRS prior to the transition to IFRS, the Manager cannot conclusively determine at this time the full impact of the transition on the Fund s financial results. Based on the Manager s current understanding and analysis of IFRS as compared to current accounting policies under Canadian GAAP, the Manager does not anticipate that the transition to IFRS will have a material impact on the Fund s net assets per unit nor on its systems and processes. It is expected that the transition will result mainly in additional note disclosures in the financial statements. Implementation of the changeover plan is progressing as scheduled. The Manager will continue to monitor ongoing changes to IFRS and adjust the changeover plan accordingly. Valuation of investments Investments are measured at fair value in accordance with CICA Handbook Section 3855, Financial Instruments Recognition and Measurement and are deemed as held for trading. The market value of investments as at the financial reporting period-end is determined as follows: (i) Securities traded in an active market are valued at their bid prices (for investments held) and ask prices (for investments sold short) through a recognized public stock exchange or through recognized investment dealer. Securities with no available bid prices are valued at their closing prices. (ii) Securities not traded in an active market are valued using valuation techniques, using observable market inputs. (iii) Underlying funds are valued each business day at the price calculated by the Manager of such underlying fund. The Fund continues to use the close or last trade price as fair value of a security to determine the daily transactional Net Asset Value ( NAV ) for purchases and redemptions by clients. The valuation method used to calculate the daily NAV to transact units of the Fund is not identical to the accounting policies used to determine the financial statement Net Assets ( Net Assets ). Any differences between the transactional NAV and Net Assets are disclosed in note 3. Transaction costs Transaction costs are expensed as incurred. 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, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Unit valuation and valuation date Units are issued and redeemed on a continuous basis at their transactional NAV per unit which is determined, for every class of units of the Fund, on each day that the Toronto Stock Exchange is open for business. The unit valuation per class is determined by dividing the aggregate fair value of the transactional NAV of that class of the Fund by the total number of units of that class outstanding at the close of business on the valuation day. Investment transactions Investment transactions are accounted for on the trade date. The cost of investments represents the amount paid for each security, and is determined on an average cost basis, except for money market securities for which cost is determined using the first-in, first out method. Cash Cash and bank overdraft are deemed to be held for trading and are carried at fair value. Other assets and liabilities In accordance with Section 3855, due from broker, accounts receivable for units sold as well as interest, dividends and other receivables are deemed to be loans and receivables and are recorded at cost. Similarly, accrued liabilities, accounts payable for units redeemed, due to broker, interest, dividends and other payables as well as distributions payable are deemed to be financial liabilities and are recorded at cost. Given their short-term nature, their carrying amount closely approximates their fair value. Income Interest income is recorded on an accrual basis. Dividend income is recorded on the ex-dividend date and is net of withholding taxes. Realized gains and losses on investments and unrealized appreciation (depreciation) on the value of investments are calculated using the average cost of the related investments. Income received from income trusts is recorded on the ex-distribution date and allocated between income, capital gains and return of capital when the information 8

13 FIERA SCEPTRE CORE CANADIAN EQUITY FUND NOTES TO FINANCIAL STATEMENTS (Continued) For the years ended December 31, 2012 and 2011 necessary for such an allocation becomes available, or if such information is not available, the Manager will determine the split at its discretion. Income, realized gains (losses) and unrealized gains (losses) are allocated among the classes on a pro rata basis based on the weighted average NAV for each class. Management fees and operating expenses The Manager is paid a management fee from the Fund calculated on Class A, Class B and Class F units, as a percentage of the NAV of the class, as of the close of business on each business day. Foreign currency translation The fair value of assets and liabilities denominated in foreign currencies are expressed in Canadian dollars at the exchange rates prevailing on December 31. Investment transactions, income and expenses are translated at the exchange rates prevailing on the respective dates of such transactions. Realized exchange gains and losses are included in Realized gain (loss) on foreign exchange in the statement of operations. The difference between the unrealized exchange gains and losses at the beginning and end of the year is included in Unrealized appreciation (depreciation) of investments and foreign currency in the statement of operations. Increase (decrease) in net assets from operations per unit Increase (decrease) in net assets from operations per unit in the statements of operations represents the increase (decrease) in net assets from operations attributable to each class of units for the year, divided by the weighted average number of outstanding units of that class during the year. Distributions to unitholders The Fund distributes net investment income twice a year, in June and December. The net realized capital gains of the Fund are distributed annually in December to each unitholder of record on that date. These distributions are generally reinvested. Any capital losses incurred by the Fund reduce the net realized capital gains of subsequent years to be distributed to unithholders. Refer to note 9 for the Fund s accumulated non-capital losses and net capital losses. 3. Comparison of Net Asset Value and Net Assets The table below shows the difference between the transactional NAV per unit and Net Assets per unit as at December 31: Net Assets Net Asset Value Net Assets Net Asset Value Per Unit ($) Per Unit ($) Per Unit ($) Per Unit ($) Fiera Sceptre Core Canadian Equity Fund Class A Class B Class F Class O Unitholders equity Unitholders may redeem all or part of their units by delivering a written request to do so to the Manager or to an investment dealer, securities dealer or mutual fund dealer for delivery to the Manager. The unitholder s signature may be required to be guaranteed by a guarantor acceptable to the Manager. Units will be redeemed at the class transactional NAV per unit as determined on the next valuation date. Requests for redemptions received after 4.00 p.m., Eastern Standard Time, on any day are deemed to be received on the first business day following the date of the actual receipt. Redemption requests relating to unitholders registered plans are to be accompanied by all transfer documents prescribed by the Canada Revenue Agency when the proceeds are to be transferred to another registered plan. Units issued and outstanding represent the capital of the Fund. The Fund does not have any specific capital requirements on the subscriptions and redemptions of units, other than minimum subscription requirements. Changes in the Fund s capital during the year are reflected in the statement of changes in net assets. The Manager is responsible for managing the capital of the Fund in accordance with the investment objectives and in managing their liquidity in order to meet redemption requirements (refer to note 8 for more information). The units The Fund may issue an unlimited number of units of each class. Effective August 26, 2011, Class D units of the Sceptre Canadian Equity Fund have been redesignated as Class A units of the Fiera Sceptre Core Canadian Equity Fund and Class A units of the Sceptre Canadian Equity Fund have been redesignated as Class B units of the Fiera Sceptre Core Canadian Equity Fund. Class A and B units are available to all investors. Class O units are designed for institutional and high net worth investors, who are entitled to reduced management fees because of the lower cost of servicing large dollar investments. Class A and B units may be changed into Class F or O units of the same Fund at the Manager s discretion and upon the agreement of the unitholder if the unitholder meets the Class O unit eligibility requirements. Class F units are available to investors who participate in dealer-sponsored fee-for-service or wrap programs and whose broker or dealer has entered into an agreement with the Manager to sell Class F units. Fund units are of the same class and grant identical rights and privileges. Each unit entitles its holder to one vote and, in the case of a Fund liquidation, in the allocation of the class s net assets after all liabilities have been paid. 9

14 FIERA SCEPTRE CORE CANADIAN EQUITY FUND NOTES TO FINANCIAL STATEMENTS (Continued) For the years ended December 31, 2012 and Management fees and operating expenses The management fee rate for December 31, 2012 and 2011 are set out in the following table. The rate is an annual percentage of the average NAV of the class: December 31, 2012 Class A Class B Class F Fiera Sceptre Core Canadian Equity Fund 2.00% 1.25% 1.00% December 31, 2011 Class A Class B Class F Fiera Sceptre Core Canadian Equity Fund 2.00% 1.25% 1.00% Management fees are not charged to Class O units of the Fund. For its services in managing these assets, the Manager receives a management fee from each unitholder under the terms of an investment management contract based on a fee applied to the unitholder s total assets managed. Such fees may decrease, in percentage terms, as the assets under management increase. The Fund is responsible for the payment of all expenses relating to the operation of the Fund. Operating expenses include audit, legal, transfer agent, trustee, administration, and filing expenses specific to the Fund. The Fund also bears the cost of the Independent Review Committee ( IRC ) which was established pursuant to National Instrument Independent Review Commitee for Investment Funds. Operating expenses and the IRC expenses are allocated between the classes of units based on the services used by each class. The Manager may absorb at its discretion all or a portion of the Fund s obligations where the aggregate expenses exceed a certain percentage of the average daily NAV per class of the Fund. This absorption of expenses may be terminated at any time by the Manager. Amounts absorbed by the Manager, if any, are reported in the statement of operations. The provinces of Ontario and British Columbia have implemented the harmonized sales tax ( HST ), which replaced existing provincial sales tax ( PST ) and the federal goods and services tax in these provinces. The HST was effective since July 1, 2010 and is adminstered by the Canada Revenue Agency. On August 5, 2011, a referendum in British Columbia was completed and the outcome is that British Columbia will dissolve the HST model and reinstate the PST model. On September 30, 2011, the province of Quebec announced that it will adopt an HST model effective January 1, Related party transactions The Manager ensures the daily administration of the Fund. It provides the Fund or makes sure the Fund is provided with all services (accounting, custodial, portfolio management, record maintenance, transfer agent) required to function properly. Related party transactions presented in the financial statements incurred by the Fund with the Manager are as follows: Management fees $ 173,508 $ 233,508 Administration fees 10,204 39,549 Management fee payable 5,979 9,424 Other accrued liabilities 4,242 9,863 The Manager provides funding of seed capital for Fund that it promotes and as a result, the Manager holds some of the Fund s units. December 31, 2012 Seed Money Class A Class B Class F Class O Fiera Sceptre Core Canadian Equity Fund 100% 1.2% December 31, 2011 Seed Money Class A Class B Class F Class O Fiera Sceptre Core Canadian Equity Fund 100% 0.4% 7. Commissions and other transaction costs The amounts paid by the Fund for brokerage commissions and other transaction costs for portfolio transactions are included in the statement of operations for the Fund. Included in the transaction costs are soft dollar commissions as follows: Fiera Sceptre Core Canadian Equity Fund $ 9,463 $ 11,372 10

15 FIERA SCEPTRE CORE CANADIAN EQUITY FUND NOTES TO FINANCIAL STATEMENTS (Continued) For the years ended December 31, 2012 and Financial instrument disclosures Risk Management Classification of financial instruments at fair value measurement CICA Handbook Section 3862, Financial Instruments Disclosures, requires that financial instruments be classified at fair value following the three level hierarchy for disclosure which reflects the significance of the inputs in such fair value measurements. The hierarchy of the measurements is split into three levels which are defined as follows: Level 1 Inputs that reflect 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, including inputs from markets that are not considered to be active. Level 3 Inputs that are unobservable. There is little if any market activity. Inputs into the determination of fair value require significant management judgment or estimation. The following fair value hierarchy tables present information about the Fund s assets measured at fair value as at December 31, 2012 and 2011: Financial assets at fair value as at December 31, 2012 Level 1 Level 2 Total Equities Long $ 30,531,743 $ $ 30,531,743 Mutual funds 3,991,498 3,991,498 Short-term notes 848, ,997 $ 35,372,238 $ $ 35,372,238 During the year, there were no transfers of investments between levels 1 and 2, and no level 3 financial assets were held. The cash flows of the Fund s financial liabilities are not discounted given that they all have maturity dates of less than three months. These include management fees payable and other accrued liabilities. Financial assets at fair value as at December 31, 2011 Level 1 Level 2 Total Equities Long $ 55,822,297 $ $ 55,822,297 Mutual funds 10,731,031 10,731,031 Short-term notes 863, ,607 Warrants $ 67,417,510 $ $ 67,417,510 During the year, there were no transfers of investments between levels 1 and 2, and no level 3 financial assets were held. The cash flows of the Fund s financial liabilities are not discounted given that they all have maturity dates of less than three months. These include management fees payable and other accrued liabilities. Financial risk management The Fund classifies its financial assets and financial liabilities in the following categories: held-for-trading, loans and receivables and other financial liabilities at amortized cost. The Fund s financial instruments consist of cash, investments, receivables and payables. The carrying values of cash, receivables and payables approximate fair value due to their short-term nature. The Fund is exposed to various types of risk that are associated with their investment strategies, financial instruments and markets in which they invest. The Fund s activities exposes them to a variety of financial risks, among which are market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Fund s overall risk management strategy focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Fund s rate of return. The Manager is responsible for the risk management of the Fund. The Manager compares the Fund s performance to its benchmark on a monthly basis. This analysis is then reviewed every month by the Chief Investment Officer and the CIO Office Committee. Furthermore, the Manager ensures that the Fund s investment policies are rigorously followed and writes a quarterly compliance report, which is reviewed on a quarterly basis by the Chief Investment Officer. The fundamental investment objective of the Fund is to achieve over the longer term the highest possible return that is consistent with a conservative investment philosophy encompassing a diversified portfolio approach. The Fund invests primarily in equity securities of large and medium-sized Canadian companies with a focus on high-quality solid companies with financial strength and growth prospects. 11

16 FIERA SCEPTRE CORE CANADIAN EQUITY FUND NOTES TO FINANCIAL STATEMENTS (Continued) For the years ended December 31, 2012 and 2011 Market risk Market risk is comprised of three components: market price risk, interest rate risk and foreign currency risk. The Fund s market risk is related primarily to changes in actual market prices on its portfolio of equity securities, and to a limited degree by interest rate risk on its short-term note investments. (a) Market price risk Market price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The investments of the Fund are subject to normal market fluctuations and the risk inherent in investing in financial markets. The maximum risk resulting from financial instruments held by the Fund is determined by the fair value of the financial instruments and indirectly through its holdings in underlying Funds. The Manager moderates this risk through a careful selection of securities within specified limits and the Fund s market price risk is managed through diversification of the investment portfolio. The Investment Manager monitors the Fund s overall market positions on a daily basis and positions are maintained within established ranges. Using a predicted beta of 0.83 (1.06 in 2011), if the S&P/TSX Composite Index had increased or decreased by 10% at December 31, 2012, with all other variables held constant, the Fund s net assets could have increased or decreased respectively by approximately $2,890,000 ($7,055,000 in 2011). In practice, the actual results may differ from this sensitivity analysis and the difference could be material. (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 instruments. Interest rate risk is considered to be minimal in the Fund as its holdings of short-term investments represent only 2.37% (1.28% in 2011) of the fair value of the Fund at December 31, (c) Currency risk Currency risk is the risk that the value of investments denominated in currencies other than the functional currency of the Fund, will fluctuate due to changes in foreign exchange rates. Equities in foreign markets and foreign bonds are exposed to currency risk as the prices denominated in foreign currencies are converted to the Fund s functional currency in determining fair value. As at December 31, 2012 and 2011, there is no currency risk as all monetary financial instruments held in the Fund are denominated in Canadian dollars. Credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause financial loss to another party. The Fund is subject to credit risk from its short-term note investments. However, since the short-term notes are Canada Treasury Bills or are guaranteed by the Government of Canada and represent only 2.37% (1.28% in 2011) of the fair value of the Fund, credit risk is considered minimal. All portfolio transactions in listed securities are settled/paid for 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 are received by the broker. The trade will not settle if either party fails to meet its obligation. The Fund may engage in securities lending transactions with their custodian, RBC Dexia Investor Services Trust. Credit risk associated with these transactions is considered minimal as: the value of the collateral must be no less than 102% of the value of the loaned securities; the collateral to be held may consist only of cash, qualified securities (including debt obligations of the Government of Canada and US treasury bills) or securities that can be immediately converted into identical securities to those that are on loan; and the Fund cannot loan more than 50% of the total value of its assets through securities lending transactions. The securities on loan continue to be included in the Statement of Investment Portfolio. Income from securities lending is included in Security Lending Income in the Statement of Operations and any cash collateral received or cash collateral payable is included in the Statement of Net Assets in Cash collateral received for securities on loan and Payable for cash collateral for securities lending. The market value of the loaned securities is determined at the close of business on each valuation date and any additional required collateral is delivered to the Fund on the next business day. Cash collateral is invested in cash equivalents. The aggregate market values of securities loaned and collateral held under securities lending transactions as at December 31, 2012 and 2011 are as follows: Outstanding loans Collateral amount Fiera Sceptre Core Canadian Equity Fund $9,147,484 $12,046,527 $9,604,874 $12,648,853 Liquidity risk Liquidity risk is the risk that the Fund will encounter difficulty in raising funds to meet cash flow commitments associated with financial instruments. The Fund is exposed to daily cash redemptions of redeemable units. The units of the Fund are redeemed on demand at the current transactional NAV 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 of. In addition, the Fund aims to retain sufficient cash and cash equivalent positions to maintain liquidity. As at December 31, 2012 and 2011, the Fund s investments are considered readily realizable and highly liquid; therefore, the Fund s liquidity risk is considered minimal. 12

17 FIERA SCEPTRE CORE CANADIAN EQUITY FUND NOTES TO FINANCIAL STATEMENTS (Continued) For the years ended December 31, 2012 and Income tax and capital gains tax The Fund qualifies as mutual fund trust as defined in the Income Tax Act (Canada). Pursuant to the terms of the declaration of trust establishing the Fund, the Fund pays or makes payable in the calendar year to the unitholders all the net taxable investment income and such portion of the net capital gains which will result in the Fund paying no tax under the current provisions of the Act. As a result, under existing tax legislation, the net investment income and capital gains are taxable in the hands of the unitholders of the Fund. Accordingly, no provision for Canadian income taxes has been made in these financial statements. As at December 31, 2012, the Fund had no accumulated non-capital losses, and accumulated net capital losses as follows: Capital Losses Fiera Sceptre Core Canadian Equity Fund $ 11,339,109 The capital losses are available to be carried forward indefinitely for tax purposes and may be applied against capital gains realized in the future. 10. Comparative figures Certain prior year figures have been reclassified to conform to the current year s presentation. 13

18 FIERA SCEPTRE LARGE CAP CANADIAN EQUITY FUND STATEMENTS OF NET ASSETS As at December 31 STATEMENTS OF OPERATIONS For the years ended December Assets Investments at fair value (at cost $9,013,540; 2011 $16,353,391) $12,259,642 $21,034,367 Short-term investments (at cost $49,899; 2011 $349,358) 49, ,355 Cash 26, ,527 Due from brokers 307,116 Dividends receivable 38,489 77,415 12,374,884 21,934,780 Liabilities Accounts payable for units redeemed 495,845 Other accrued liabilities 80,390 57,668 80, ,513 Net assets representing Unitholders Equity $12,294,494 $21,381,267 Net assets per unit $ $ Signed on behalf of Fiera Capital Corporation, Fund Manager Investment income Interest $ 1,397 $ 1,891 Dividends 403, ,024 Security lending income 2,138 4, , ,389 Expenses Custodian fees 42,186 15,389 Securityholder reporting costs 36,218 35,226 Legal fees 29,771 15,335 Audit fees 23,171 16,458 Filing fees 12,822 Independent review committee fees 8,734 2,762 Administration fees 5,568 23, , ,042 Net investment income 248, ,347 Realized and unrealized gain (loss) on investments and transaction costs Realized gain (loss) on sale of investments 2,202,913 3,454,072 Transaction costs (37,473) (37,096) Unrealized appreciation (depreciation) of investments and foreign currency (1,434,836) (7,073,808) Sylvain Brosseau, Director Net gain (loss) on investments 730,604 (3,656,832) Increase (decrease) in net assets from operations $ 979,240 $ (2,806,485) Jean-Guy Desjardins, Director Increase (decrease) in net assets from operations per unit $ 1.15 $ (1.44) 14 The accompanying notes are an integral part of these financial statements.

19 FIERA SCEPTRE LARGE CAP CANADIAN EQUITY FUND STATEMENTS OF CHANGES IN NET ASSETS For the years ended December Net assets at beginning of year $ 21,381,267 $ 39,171,624 Increase (decrease) in net assets from operations 979,240 (2,806,485) Capital unit transactions Proceeds from units issued 6,400 1,433,249 Value of units redeemed (10,058,142) (16,366,281) Units issued on reinvestment of distributions 431,939 2,813,307 Net capital unit transactions (9,619,803) (12,119,725) Distributions paid to unitholders From net investment income (248,977) (843,044) From net realized gains (2,014,681) From return of capital (197,233) (6,422) Total distributions paid to unitholders (446,210) (2,864,147) Net assets at end of year $ 12,294,494 $ 21,381, Number of Units Balance beginning of year 1,309,459 2,032,264 Units issued and paid during the year ,498 Units redeemed during the year (609,055) (959,866) Units issued on reinvestment of distributions 26, ,563 Balance end of year 726,795 1,309,459 The accompanying notes are an integral part of these financial statements. 15

20 FIERA SCEPTRE LARGE CAP CANADIAN EQUITY FUND STATEMENT OF INVESTMENT PORTFOLIO As at December 31, 2012 Cash 26,845 26, Short-Term Notes NUMBER OF MATURITY COUPON SHARES/UNITS/ AVERAGE FAIR % OF NET DATE RATE PAR VALUE COST ($) VALUE ($) ASSETS Treasury Bills Canada Treasury Bills 14-Mar % 50,000 49,899 49,908 Total Short-Term Notes 49,899 49, Equities Consumer Discretionary Consumer Services Tim Hortons Inc. 3, , , Media Shaw Communications Inc., Class B 13, , , Total Consumer Discretionary 399, , Energy ARC Resources Ltd. 5, , ,567 Baytex Energy Corp. 3, , ,101 Cameco Corp. 7, , ,625 Canadian Natural Resources Ltd. 15, , ,333 Cenovus Energy Inc. 12, , ,739 Crescent Point Energy Corp. 5, , ,475 Enbridge Inc. 5,100 48, ,300 Keyera Corp. 3, , ,436 MEG Energy Corp. 4, , ,068 Suncor Energy Inc. 16, , ,589 Tourmaline Oil Corp. 6, , ,893 TransCanada Corp. 4,000 80, ,880 Vermilion Energy Inc. 4, , ,918 Total Energy 2,708,240 3,178, Financials Banks Bank of Nova Scotia 16, , ,204 Canadian Imperial Bank of Commerce 6, , ,111 National Bank of Canada 1,600 71, ,440 Royal Bank of Canada 17, ,281 1,064,974 Toronto Dominion Bank 11, , ,150 1,951,533 3,596, Diversified Financials Onex Corp. 3, , , Insurance Manulife Financial Corp. 23, , ,461 Power Financial Corp. 5, , , , , The accompanying notes are an integral part of these financial statements.

21 FIERA SCEPTRE LARGE CAP CANADIAN EQUITY FUND STATEMENT OF INVESTMENT PORTFOLIO (Continued) As at December 31, 2012 Real Estate Brookfield Asset Management Inc., Class A 13, , , Total Financials 3,001,487 4,652, Health Care Health Care Equipment and Services Catamaran Corp 4, , , Total Health Care 195, , Industrials NUMBER OF SHARES/UNITS/ AVERAGE FAIR % OF NET PAR VALUE COST ($) VALUE ($) ASSETS Capital Goods Finning International Inc. 9, , , Transportation Canadian National Railway Co. 7, , , Total Industrials 436, , Materials Franco-Nevada Corp. 6, , ,327 Goldcorp Inc. 11, , ,292 Potash Corp of Saskatchewan Inc. 13, , ,016 Silver Wheaton Corp. 8, , ,789 Teck Resources Ltd., Class B 10, , ,130 Total Materials 1,719,790 1,990, Telecommunication Services BCE Inc. 4, , ,047 Rogers Communications Inc., Class B 9, , ,372 Total Telecommunication Services 381, , Utilities Emera Inc. 5, , , Total Utilities 177, , Total Equities 9,020,309 12,259, Transaction Costs (6,769) Total Investment Portfolio Including Cash and Short-Term Notes 9,090,284 12,336, The accompanying notes are an integral part of these financial statements. 17

22 FIERA SCEPTRE LARGE CAP CANADIAN EQUITY FUND NOTES TO FINANCIAL STATEMENTS For the years ended December 31, 2012 and Declaration of Trust The Fiera Sceptre Large Cap Canadian Equity Fund (the Fund ) (formerly Sceptre Large Cap Canadian Equity Fund) is open-end unincorporated mutual fund created under the laws of the Province of Ontario pursuant to a Declaration of Trust dated November 22, 1985, as amended on September 10, 2010, August 26, 2011 and further restated on May 31, 2012 by Fiera Capital Corporation. On February 27, 2012, Fiera Sceptre Inc. and National Bank of Canada ( National Bank ) have signed a binding agreement under which Fiera Sceptre Inc. will acquire the business of Natcan Investment Management Inc. ( Natcan ) from the National Bank. The Natcan operations were then fully integrated into Fiera Sceptre Inc. s existing business. In return, the National Bank, through Natcan, received class A subordinate voting shares representing 35% of the issued and outstanding shares of Fiera Sceptre Inc. along with an option to increase its stake to 40%. Effective as of April 2, 2012, Fiera Sceptre Inc. changed its name to Fiera Capital Corporation ( Fiera Capital or the Manager ), who acts as trustee and manager of the Fund. The financial statements of the Fund are comprised of the statements of investment portfolio as at December 31, 2012, the statements of net assets as at December 31, 2012 and 2011 and the statements of operations and changes in net assets for the years then ended. Effective August 26, 2011, the Fund has been considered as a Private Mutual Fund. 2. Significant accounting policies These financial statements have been prepared in accordance with Canadian generally accepted accounting principles ( GAAP ) and are expressed in Canadian dollars. They include estimates and assumptions that affect the amounts recorded in the financial statements and the accompanying notes. These estimates are based on management s best knowledge of current events and actions that the Fund may undertake in the future. Actual results could vary from these estimates. The significant accounting policies followed by the Fund are summarized below. Future accounting standards International Financial Reporting Standards ( IFRS ) In February 2008, the Canadian Institute of Chartered Accountants ( CICA ) announced that Canadian GAAP for publicly accountable enterprises will be replaced by IFRS. IFRS will apply to semi-annual and annual financial statements for fiscal years beginning on or after January 1, In October 2010, the CICA amended the date of application of IFRS for investment companies that apply the accounting guideline on investment companies ( AcG-18 ). Hence, IFRS will be adopted for semi-annual and annual financial statements for fiscal years beginning on or after January 1, The CICA has recently proposed to extend the IFRS conversion date to financial years beginning on or after January 1, The Manager has been monitoring developments in the IFRS conversion program and, in particular, the key elements below: Changes in accounting policies; Impacts on information technology and data systems; Impacts on internal control over financial reporting; Impacts on disclosure controls and procedures; and Impacts on expertise in financial reporting. As at December 31, 2012, the Manager has completed the Identification and Feasibility phases and analysis of the effects of conversion to IFRS. Until transition, the Manager will monitor developments in IFRS and adjust its transition plan if necessary. The Manager has established that conversion to current IFRS will essentially change the following current accounting policies: Classification of units According to Emerging Issues Committee ( EIC ) Abstract 149, Accounting for Retractable or Mandatorily Redeemable Shares, units are presented in unitholders equity. In accordance with International Accounting Standard ( IAS ) 1, Presentation of Financial Statements, and IAS 32, Financial Instruments: Presentation, units will be classified as liabilities or as unitholders equity based on the units characteristics. Fair value measurement According to CICA Handbook Section 3855, Financial Instruments Recognition and Measurement, investments are measured at their fair value, which is determined using the bid or ask prices on an accredited stock exchange. The International Accounting Standards Board issued IFRS 13, Fair Value Measurement, which defines fair value, sets out a single IFRS framework for measuring fair value and requires disclosure about fair value measurements. The standard allows for the possibility of using closing prices to value investments. This may result in eliminating the difference between net asset value per unit and net assets per unit under current Canadian GAAP. 18