INTERIM FINANCIAL STATEMENTS

Transcription

1 INTERIM FINANCIAL STATEMENTS For the period ended June 30, 2015

2 Jarislowsky Fraser Select Canadian Equity Fund Financial Statements Statements Interim of Financial Position (Unaudited) (in thousands canadian dollars, except per unit amounts) Assets June 30, December 31, Note $ $ Current assets Investments 5 65,438 63,648 Cash Subscriptions receivable Dividends receivable Total assets 66,513 64,736 Liabilities Current liabilities Redeemed units payable Accrued expenses Total liabilities (excluding net assets attributable to holders of redeemable units) Net assets attributable to holders of redeemable units 66,348 64,481 Net assets attributable to holders of redeemable units per series Advisor Series 34,860 35,434 Series F/E 31,486 29,045 Series F5 1 1 Series T ,348 64,481 Net assets attributable to holders of redeemable units per unit, per series Advisor Series Series F/E Series F Series T Approved on behalf of the Manager, National Bank Investments Inc. Tina Tremblay-Girard Vice-President, Administration and Strategy Jonathan Durocher President and chief executive officer The accompanying notes are an integral part of these financial statements. 19

3 Jarislowsky Fraser Select Canadian Equity Fund (continued) Financial Statements Statements Interim of Comprehensive Income for the 6-month Periods Ended June 30 (Unaudited) (in thousands canadian dollars, except per unit amounts) Note $ $ Income Interest income for distribution purposes 2 4 Dividends income 1, Other income 26 - Changes in fair value Net realized gains (losses) on sale investments 1, Net realized gains (losses) on foreign currencies 34 4 Net realized gains (losses) on forwards currency 4 - Change in net unrealized appreciation/depreciation on investments (2,928) 3,872 Change in unrealized gains/losses on foreign currencies 1 (2) Total income (87) 5,127 Expenses 9 Management fees Custodial fees 6 4 Audit fees 2 2 Legal fees 1 1 Rights and deposits 12 8 Securityholder reporting costs Professional fees 4 1 Withholding taxes Transaction costs on purchase and sale of investments Total expenses Increase (decrease) in net assets attributable to holders of redeemable units (665) 4,655 Increase (decrease) in net assets attributable to holders of redeemable units per series Advisor Series (425) 2,504 Series F/E (240) 2,151 Series F5 - n/a Series T5 - n/a (665) 4,655 Increase (decrease) in net assets attributable to holders of redeemable units per unit, per series 2 Advisor Series (0.17) 1.12 Series F/E (0.11) 1.22 Series F5 (0.04) n/a Series T5 (0.10) n/a The accompanying notes are an integral part of these financial statements. 20

4 Jarislowsky Fraser Select Canadian Equity Fund (continued) Financial Statements Statements Interim of Changes in Net Assets Attributable to Holders of Redeemable Units per Series for the 6-month Periods Ended June 30 (Unaudited) (in thousands canadian dollars) Advisor Series Series F/E Series F5 Série T5 Note $ $ $ $ $ $ Net assets attributable to holders of redeemable units, beginning of period 35,434 27,342 29,045 20, Increase (decrease) in net assets attributable to holders of redeemable units (425) 2,504 (240) 2, Redeemable units transactions 7 Proceeds from redeemable units issued 4,890 4,634 5,555 5, Redemption of redeemable units (5,039) (3,005) (2,874) (1,279) - - Total redeemable units transactions (149) 1,629 2,681 3, Net increase (decrease) in net assets attributable to holders of redeemable units (574) 4,133 2,441 5, Net assets attributable to holders of redeemable units, end of period 34,860 31,475 31,486 26, Redeemable units transactions Redeemable units outstanding, beginning of period 2,523,107 2,147,741 2,034,770 1,580, Redeemable units issued 341, , , , Redeemable units issued on reinvestments Redeemable units redeemed (353,759) (228,936) (198,315) (94,796) - - Redeemable units outstanding, end of period 2,511,208 2,273,613 2,219,031 1,864, The accompanying notes are an integral part of these financial statements. 21

5 Jarislowsky Fraser Select Canadian Equity Fund (continued) Financial Statements Statements Interim of Cash Flows for the 6-month Periods Ended June 30 (Unaudited) (in thousands canadian dollars) Note $ $ Cash flows from operating activities Increase (decrease) in net assets attributable to holders of redeemable units (665) 4,655 Adjustements for: Net realized gains (losses) on sale investments (1,740) (430) Net realized gains (losses) on foreign currencies (34) (4) Net realized gains (losses) on forwards currency (4) - Change in net unrealized appreciation/depreciation on investments 2,928 (3,872) Change in unrealized gains/losses on foreign currencies (1) 2 Purchases of investments (10,321) (8,712) Proceeds from sale and maturity of investments 7,343 2,466 Dividends receivable (11) (45) Accrued expenses 3 12 Net cash from operating activities (2,502) (5,928) Cash flows used in financing activities 2 Proceeds from issuances of redeemable units 10,397 9,899 Amounts paid on redemption of redeemable units (8,006) (4,282) Net cash used in financing activities 2,391 5,617 Net realized gains (losses) on foreign currencies 34 4 Net realized gains (losses) on forwards currency 4 - Change in unrealized gains/losses on foreign currencies 1 (2) Net increase (decrease) for the period (111) (311) Cash (bank overdraft), beginning of period Cash (bank overdraft), end of period Included in cash flows from operating activities Interest received 2 4 Dividends received, net of withholding taxes The accompanying notes are an integral part of these financial statements. 22

6 Jarislowsky Fraser Select Canadian Equity Fund Informations on Financial Instruments Currency Risk (Note 5) June 30, 2015 December 31, 2014 Percentage of Percentage of Currency Exposition Net Assets Exposition Net Assets $ % $ % American Dollar 10,110, ,637, Euro 1,672, , Japanese Yen (36) (0.0) 451, Norwegian Krone n/a n/a 267, Pound Sterling 9, , Swiss Franc 264, , This fund has no investments in other mutual funds. Numbers shown include monetary and non-monetary instruments. Based on the assumption that the Canadian Dollar had risen or fallen by 5% in relation to all other currencies, with all other variables held constant, net assets and results of the fund would have varied by approximately $602,862 ($602,650 as at December 31, 2014). Price Risk (Note 5) June 30, 2015 December 31, 2014 Impact on Percentage Impact on Percentage The Funds Benchmark net assets of net net assets of net Composition and results assets and results assets $ % $ % FTSE TMX Canada Short Term Bond Index (5%) S&P/TSX Index Capped TR (95%) ± 5,917, ± 5,603, The impact is presented in the event that the benchmark s performance would rise or fall by 10%, with all variables held constant. This impact is presented on a 36-month historical correlation between the fund s fluctuating performance and the reference index. Concentration Risk (Note 5) Percentage of net assets June 30, December 31, Asset Mix % % Canadian Equity Cash, money market and other Net assets International Equity US Equity Fair Value of Financial Instruments Table (Note 5) June 30, 2015 Level 1 Level 2 Level 3 Total $ $ $ $ Common shares 65,438,280 n/a n/a 65,438,280 During the period ended June 30, 2015, there were no significant transfers of investments between Level 1, Level 2 and Level 3. December 31, 2014 Level 1 Level 2 Level 3 Total $ $ $ $ Common shares 63,648,281 n/a n/a 63,648,281 During the year ended December 31, 2014, there were no significant transfers of investments between Level 1, Level 2 and Level 3. The breakdown of securities between the different levels has been changed due to a change of classification methodology which better reflects the industry trends. The accompanying notes are an integral part of these financial statements. 23

7 Jarislowsky Fraser Select Canadian Equity Fund Schedule of Investments as at June 30, 2015 (in canadian dollars) Number Average Fair of Shares Cost Value $ $ Canadian Equities (80.2%) Consumer Discretionary (8.9%) Aimia Inc. 76,200 1,278,291 1,036,320 Canadian Tire Ltd., Class A 12, ,849 1,697,802 Corus Entertainment Inc., Class B 37, , ,125 Gildan Activewear Inc. 17, , ,330 Thomson Reuters Corp. 37,390 1,396,727 1,778,268 5,133,810 5,844,845 Consumer Staples (8.5%) Alimentation Couche-Tard Inc., Class B 13, , ,742 George Weston Ltd. 4, , ,062 Jean Coutu Group Inc., Class A 21, , ,456 Loblaw Companies Ltd. 29,646 1,264,071 1,870,070 Metro Inc. 61, ,520 2,050,418 3,505,786 5,543,748 Energy (20.9%) AltaGas Ltd. 22, , ,367 ARC Resources Ltd. 29, , ,440 Cameco Corp. 48,830 1,090, ,592 Canadian Natural Resources Ltd. 59,380 2,359,092 2,012,982 Cenovus Energy Inc. 81,450 2,403,909 1,626,556 Enbridge Inc. 39,640 1,661,796 2,315,372 Inter Pipeline Ltd. 23, , ,154 Keyera Corp. 18, , ,268 Pembina Pipeline Corporation 18, , ,386 Suncor Energy Inc. 65,960 2,388,369 2,269,024 Vermilion Energy Inc. 17,900 1,214, ,705 14,278,672 13,722,846 Financials (25.4%) Bank of Nova Scotia 52,740 3,127,447 3,400,148 Great-West Lifeco Inc. 33, ,825 1,231,877 Industrial Alliance, Insurance & Financial Services Inc. 22, , ,645 Intact Financial Corp. 15,630 1,060,318 1,356,528 Manulife Financial Corp. 88,980 1,567,383 2,065,226 Royal Bank of Canada 46,150 2,791,106 3,524,937 Toronto-Dominion Bank 77,180 3,276,494 4,093,627 13,688,927 16,617,988 Industrials (8.8%) CAE Inc. 61, , ,854 Canadian National Railway Co. 30,900 1,396,521 2,226,654 SNC-Lavalin Group Inc. 35,420 1,867,765 1,486,223 Stantec Inc. 30, ,290 1,116,900 4,921,953 5,738,631 Information Technology (4.9%) CGI Group Inc., Class A 21,340 1,166,103 1,042,459 Descartes Systems Group Inc./The 42, , ,712 Open Text Corp. 25,700 1,021,613 1,303,761 2,830,238 3,192,932 Materials (1.1%) Potash Corporation of Saskatchewan Inc. 18, , ,995 Utilities (1.7%) Canadian Utilities Ltd., Class A 11, , ,691 Innergex Renewable Energy Inc. 68, , ,072 1,029,292 1,142,763 Number Average Fair of Shares Cost Value $ $ Global Equities (19.4%) Australia (0.3%) BHP Billiton Ltd., ADR 4, , ,896 France (3.2%) AXA 22, , ,071 Lafarge SA 4, , ,990 Louis Vuitton Moet Hennessy 1, , ,794 Sanofi-Aventis, ADR 7, , ,215 Schneider Electric SA 2, , ,107 1,839,435 2,129,177 Germany (1,3%) Bayer AG 2, , ,809 Siemens Ag 3, , , , ,860 Switzerland (0.5%) Nestlé SA 2, , ,187 Nestlé SA, ADR ,886 45, , ,252 United Kingdom (0.9%) HSBC Holdings PLC, ADR 10, , ,919 United States (13.2%) 3M Co. 2, , ,747 Becton, Dickinson and Co. 2, , ,103 Borg Warner Inc. 4, , ,325 CA Technologies Inc. 11, , ,487 Capital One Financial Corp. 6, , ,876 DaVita Inc. 6, , ,861 General Electric Co. 14, , ,470 Google Inc ,177 Google Inc., Class A , ,812 IMS Health Holdings Inc. 13, , ,633 International Business Machines Corp. 1, , ,629 Johnson & Johnson 3, , ,095 Microsoft Corp. 9, , ,393 Noble Energy Inc. 12, , ,349 Oracle Corp. 10, , ,414 PepsiCo Inc. 3, , ,569 US Bancorp 9, , ,374 Verisk Analytics Inc. 4, , ,042 Walgreens Boots Alliance Inc. 6, , ,073 6,718,361 8,792,429 Total Global Equities 10,353,901 12,913,532 Total Investments (98.6%) 56,524,864* 65,438,280 Cash and Other Net Assets (1.4%) 909,892 Net Assets (100%) 66,348,172 * Average cost of Investments as at December 31, 2014 is $51,806,449. Total Canadian Equities 46,170,963 52,524,748 The accompanying notes are an integral part of these financial statements. 24

8 Notes to Financial Statements as at June 30, 2015 and December 31, 2014 (Unaudited) NOTE 1: GENERAL INFORMATION The following are open-ended mutual fund trusts formed under the laws of the Province of Ontario by an instrument of trust on the following dates: Funds Date Established Jarislowsky Fraser Select Income Fund October 7, 2010 Jarislowsky Fraser Select Balanced Fund October 7, 2010 Jarislowsky Fraser Select Canadian Equity Fund October 7, 2010 Collectively the mutual fund trusts and the mutual fund corporations are known as the Funds. The manager of the Funds, National Bank Investments Inc. (hereafter the Manager ), and the trustee of the Funds, Natcan Trust Company, are wholly-owned subsidiaries of National Bank of Canada. The headquarters, which is also the Funds principal place of business, is located at 1100 Robert-Bourassa Street, 10 th floor, Montreal, Quebec, H3B 2G7, Canada. The Board of Directors of National Bank Investments Inc. authorized the publication of these financial statements on August 12th, The Funds are a pool of money contributed to by many investors with similar investment objectives in order to make a collective investment. Management of these investments is performed by specialists who act as portfolio advisors. The portfolio advisor invests the assets based on the objectives of the investment Fund. The portfolio may be invested in several different securities at the same time, enabling investors to diversify their investments in a manner in which they would not be able to achieve on their own. Mutual funds invest in a variety of securities such as equity securities, bonds, debentures, and money market instruments and also keep a portion of the portfolio in cash. Each investment type is associated with a different risk and return potential. The investment objectives of each Fund are detailed in their Prospectus. Funds can provide six series of units called Advisor, E, F, F5, O and T5 Series. Each series is intended for a type of investor and includes management fees and administrative expenses that are listed in Note 9. Advisor and T5 Series are offered to all investors with either the initial sales charge option, deferred sales charge option or low sales charge option. The distinction between Advisor Series securities and T5 Series securities is based on the distribution policy. T5 Series securities are intended for investors seeking to obtain regular fixed monthly distributions. E Series units are intended for independent investors who have an account with a dealer which offers discount brokerage services and which has entered into an agreement with National Bank Investments Inc. The management fees for this series are lower. F Series and F5 Series units are only offered to investors with a fixed fee account with dealers who have entered into an agreement with National Bank Investments Inc. These investors pay their dealer annual compensation based on the asset value of their account instead of commissions on each trade. The distinction between F Series securities and F5 Series securities is based on the distribution policy. F5 Series securities are intended for investors seeking to obtain regular fixed monthly distributions. O Series units are only available to selected investors that have entered into an O Series account agreement with National Bank Investments Inc. O Series units are offered on a no-load basis. NOTE 2: SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION Basis of presentation The presented Funds interim financial statements were prepared in accordance with International Financial Reporting Standards (hereafter, IFRS ), published in CPA Canada Handbook including International Accounting Standard IAS 34 Interim Financial Reporting as well as the standards governed by Regulation Respecting Investment Fund Continuous Disclosure. These financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and liabilities at fair value through profit or loss ( FVTPL ). 2.1 Financial instruments a) Classification The Funds classify their financial instruments in the following categories in accordance with IAS 39 Financial Instruments Recognition and Measurement: Financial assets and liabilities at fair value through profit or loss: The assets and liabilities at FVTPL include the financial assets and liabilities classified as held for trading or those satisfies certain conditions and are designated as being at FVTPL upon initial recognition. A financial asset or liability at FVTPL is an investment classified as held for trading if it has been acquired principally for the purpose of selling in the near term; on initial recognition it is a part of a portfolio of identified financial instruments that are managed together, and has a recent actual pattern of short-term profit taking; or is a derivative. The investments are designated in this category because they are managed on a fair value basis according to the Funds investment strategy. Financials assets and liabilities at FVTPL on the Statement of Financial Position included: investments which included fixed income securities, shares, mutual funds, index equivalents and gains/losses and income from these financials instruments on the Statements of Comprehensive Income included: Net realized gains (losses) on sale investments, Net realized gains (losses) on foreign currencies, Change in net unrealized appreciation/depreciation on investments, Change in unrealized gains/losses on foreign currencies. Financial assets classified in loans and receivables: Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. In this category, the Funds have included cash, subscriptions receivable, proceeds from sale of investments receivable, interest receivable, dividends receivable and other assets receivable. 25

9 Notes to Financial Statements (continued) as at June 30, 2015 and December 31, 2014 (Unaudited) Financial liabilities at amortized cost: This category includes all financial liabilities, except those classified as held for trading. In this category, the Funds have included bank overdrafts, redeemed units payable, accrued expenses, interest payable, dividends payable, investments payable and distributions payable. b) Recognition Investment transactions are accounted for on the trade date. Income and expenses are recorded using the accrual basis of accounting. The interest income for distribution purposes presented in the Statement of Comprehensive Income is the nominal interest amount. Interest income receivable is shown separately in the Statements of Financial Position based on the debt instruments stated rates of interest. The Funds do not amortize the premiums paid or discounts received upon the purchase of fixed income securities. Dividend income is recognized on the ex-dividend date. Foreign revenue is presented before withholding taxes deducted by foreign countries. Withholding taxes deducted by foreign countries are recorded separately in the Statement of Comprehensive Income under Withholding taxes. Gains or losses arising from investment transactions and unrealized appreciation or depreciation on investments are determined from the cost using the average cost basis. The income, the realized and unrealized gains (losses) are allocated among the different series to pro rata basis of net assets value of each series. Transaction costs, such as brokerage commissions, incurred at the time of purchase and sale of investments by the Funds are recognized as Transaction costs on purchase and sale of investments in the Statement of Comprehensive Income. c) Measurement Initial measurement Upon initial measurement, the Funds financial instruments are measured at fair value, which, in the case of financial instruments measured subsequently at amortized cost, is increased by the transaction costs. Subsequent measurement Financial instruments classified as financial assets and liabilities at FVTPL are measured at fair value. Changes in the fair value of these financial instruments are recorded in the unrealized net gains (losses). The Funds obligations regarding net assets attributable to holders of redeemable units is recorded at the redemption value as at the date of the Statement of Financial Position. All other financial assets and liabilities are measured at amortized cost. Given the short term of these financial instruments, their value at amortized cost is similar to their fair value. Refer to Note 5 for the description of fair value. d) Derecognition Financial assets are derecognized when the contractual rights to the cash flows from the investments have expired or when the Funds have significantly transferred the risk and financial reward of their participation (ownership). Financial liabilities are derecognized when the obligation specified in the contract is discharged, cancelled or expired. Realized gains and losses are recognized based on the average cost method and included in the profit and loss of the period ended in which they occur. e) Impairment of financial assets At each closing date, the Funds verify whether there is objective evidence of impairment of their financial assets at amortized cost. If such evidence exists, the Funds recognize an impairment loss which corresponds to 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 relating to financial assets at amortized cost are reversed in subsequent years if the amount of the loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized. 2.2 Cash Cash includes cash deposits with various financial institutions, that is, cash and bank overdrafts if applicable. 2.3 Redeemable units The Funds obligation in respect of the outstanding redeemable units is at the request of the unit holder. Also, the units include a contractual obligation to distribute any net income and net realized capital gains at least annually. Therefore, the ongoing redemption feature is not the units only contractual obligation and the units series do not have identical characteristics: difference in distribution policy for management fees and commissions. Consequently, the Funds outstanding redeemable units (refer to Note 3) are classified as financial liabilities in accordance with the requirements of IAS 32, Financial Instruments: Presentation ( IAS 32 ). 2.4 Valuation of units For the purposes of treatment of the operations of the unitholders in accordance with National Instrument Information Continuous investment funds, the net asset value ( NAV ) of a Fund extends of the difference between total of its assets and its liabilities. The NAV of a unit of each series within a Fund is determined each business day when the Toronto Stock Exchange is open by dividing the NAV attributable to each series by the number of units outstanding for the corresponding series. Funds issue units at NAV. The unitholder may request redemption or exchange of all evaluation dates at the NAV. 26

10 Notes to Financial Statements (continued) as at June 30, 2015 and December 31, 2014 (Unaudited) Net assets attributable to redeemable unitholders refers to the net assets calculated in accordance with IFRS. For the calculation of the net asset attributable to redeemable unitholders, assets and liabilities are measured at fair value. The net assets attributable to redeemable unitholders of a unit is calculated by dividing the net assets attributable to redeemable unitholders by the number of units then outstanding. The increase or decrease in net assets from operations per unit redeemable represents the increase or decrease in net assets attributable to redeemable unitholders for the period divided by the average number of units outstanding during the period. Canadian Securities Administrators ( CSA ) regulations allow the Funds to respect the IFRS provisions for financial statements reporting, without changing their method of calculating the transactional NAV for transaction processing purposes unitholders of the Fund. As required by the CSA, a reconciliation of the transactional NAV per unit and the net assets per unit calculated under IFRS of the Funds is presented in note 6 of the financial statements. 2.5 Increase or decrease in net assets/equity attributable to holders of redeemable units per unit The increase or decrease in net assets attributable to operations per unit presented in the Statement of Comprehensive Income represents the increase or decrease in net assets attributable to holders of redeemable units for the period, divided by the average number of units outstanding during the period. 2.6 Units issuance and redemption Units are issued or redeemed at the NAV on the last business day of the year ended during which the deposit for the purchase of units was received or the redemption of units request was received by the trustee within the deadlines stipulated in the trust agreement. The Statements of Changes in Net Assets attribuable to holders of redeemable units identify changes in capital of the Fund in the presented periods. 2.7 Distributions to unitholders The net income and net realized capital gains of each Fund are distributed to unitholders of the Fund according to the period provided in the following table, pro rata to the units held by them. Unrealized gains and losses are included in the net assets attributable to unitholders. However, they will be distributed to unitholders once only the gain or loss is realized. Capital losses are not distributed to unitholders but are retained by the Funds to be applied against future capital gains. The net income of the Funds and net capital gains are paid to unitholders, based on the following table: Distribution Distribution of Net Realized Funds of Net Income Capital Gains Jarislowsky Fraser Select Income Fund* Series Advisor Monthly Annually Series F/E Monthly Annually Jarislowsky Fraser Select Balanced Fund Series Advisor Quarterly Annually Series F/E Quarterly Annually Series F5 Monthly Annually Series T5 Monthly Annually Jarislowsky Fraser Select Canadian Equity Fund Series Advisor Annually Annually Series F/E Annually Annually Series F5 Monthly Annually Series T5 Monthly Annually * These funds may also distribute return of capital on a monthly basis. All annual distributions take place in December of each year. 2.8 Foreign currency translation The Funds purchases and redemptions are denominated in Canadian dollars. The functional and presentation currency of the Funds is the Canadian dollar. The fair value of investments, other assets and liabilities denominated in foreign currencies is translated into the functional currency at the exchange rate in effect as at the date of the Statement of Financial Position. Foreign currency transactions are translated into the functional currency of the Funds, using the exchange rates prevailing at the dates of the transactions (closing rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items at period-end exchange rates are recognized in the Statement of Comprehensive Income under Change in unrealized gains/losses on foreign currencies and Net realized gains (losses) on sale of investments. 2.9 Taxes The Funds are currently subject to 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 tax expense in the Statement of Comprehensive Income. Pursuant to the Income Tax Act (Canada) and the Taxation Act (hereafter, collectively, the Tax Acts ), the Funds qualify as mutual fund trusts, all of their net income for tax purposes and sufficient capital gains realized in any year are distributed to unitholders such that no income tax is payable by these Funds. 27

11 Notes to Financial Statements (continued) as at June 30, 2015 and December 31, 2014 (Unaudited) Therefore, the Funds do not recognize any income tax. Given that these Funds do not record any income tax expenses, the tax savings linked to capital and non-capital losses was not recorded as a deferred income tax asset in the Statement of Financial Position. NOTE 3: ACCOUNTING ESTIMATES AND CRITICAL JUDGMENTS When preparing the financial statements, the Funds Management undertakes a number of judgments, estimates and assumptions about the recognition and measurement of assets, liabilities, income and expenses. Significant judgements The following are significant management judgments in applying the accounting policies of the Funds that have the most significant effect on the financial statements. Functional currency The Manager considers the Canadian dollar to be the functional currency in which the Funds operates, because it is the currency which, in their opinion, most faithfully represents the economic effects of the underlying transactions, events and conditions of the Funds. Moreover, the Canadian dollar is the currency in which the Funds assess their performance. The Funds issue and redeem their units in Canadian dollars. Units classification The criteria contained within IAS 32 Financial Instruments: Presentation will result in the classification of the units as liabities within the Funds Statement of Financial Position, unless all conditions required for equity classification are met. All the units of the Funds are presented as liabilities. Estimation uncertainties Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Fair value of financial instruments As described in Note 5 Financial instruments disclosures, the Manager has taken a position when the closing price does not fall within that day s bid-ask spread. IFRSs stipulate that the Manager must determine the traded price by considering the character that is most representative of fair value based on the specific facts and circumstances. Management has taken the position that when such a situation arises investments are measured at the bid price. Furthermore, the Manager exercises its judgment in selecting the appropriate valuation technique for financial instruments that are not listed on an active market. The valuation techniques used are those that are currently applied by market participants. NOTE 4: CHANGES IN ACCOUNTING STANDARDS THAT ARE NOT YET IN EFFECT At the date of authorization of these financial statements, certain new standards, amendments and interpretations to existing standards have been published by the International Accounting Standards Board (hereafter, IASB ) but are not yet effective, and have not been early adopted by the Funds. Information on the new standard that could be relevant for the Funds financial statements is presented below. IFRS 9 Financial Instruments (IFRS 9) In July 2014, the IASB published IFRS 9 which replaces IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 introduces improvements which include a logical model for classification and measurement of financial assets, a single, forward-looking expected loss impairment model and a substantially-reformed approach to hedge accounting. IFRS 9 is effective for annual reporting periods beginning on or after January 1, Earlier application is permitted. The Funds have not yet assess the impact of this new standard on their financial statements. The Manager does not expect that the new standards and interpretations that have been published will have an impact on the financial statements of the Funds. NOTE 5: FINANCIAL INSTRUMENT DISCLOSURES Financial risks Investment activities of the Funds expose them to some financial risks. The basic types of risk to which the Funds are exposed are the credit risk, liquidity risk, market risk, and concentration risk. The Funds Manager seeks to maximize returns derived for the level of risk to which the Funds are exposed and seeks to minimize these risks by entrusting the management of the Funds portfolios to seasoned portfolio management advisors who oversee daily portfolio management based on market events and the investment policy of each Fund. Tables quantifying the various financial risks are presented following the statement of cash flows for each of the funds for which exposure to risk is important at the end of the year/period. These presented analyses of sensibility may differ from actual results and the differences could be significant. Credit risk Credit risk is the risk that a commitment with the Fund is not respected by the counterparty of the financial instrument. The Funds credit risk is derived primarily from debt securities. The fair value of investments represents the maximum credit risk as at the end of the period. The fair value of a financial instrument reflects the creditworthiness and the credit rating of the issuer. The Funds 28

12 Notes to Financial Statements (continued) as at June 30, 2015 and December 31, 2014 (Unaudited) policy with respect to credit risk management is to invest in financial assets whose credit rating is established by recognized credit rating agencies. Credit risk is reduced by the choice of financial assets with a good reputation and having previously been subjected to a rigorous credit assessment. A table containing the distribution of securities under their credit rating is presented following the Statement of Cash Flows for each fund whose exposure to credit risk is significant at the end of the period. The securities transactions are settled upon delivery by brokers. The default risk is considered low because the supply of securities is conducted once the broker has received payment. The transaction fails when a party fails to meet its commitments. The Funds are exposed to deposit credit risk. If the security custodian becomes insolvent, the Funds may encounter a delay in accessing their assets. This risk is limited given that the security custodian is under the control of the National Bank of Canada, a reputable financial institution with an excellent credit rating. In accordance with the investment restrictions, the Funds may not invest more than 10% of their net assets in a single issuer with the exception of securities issued by the Government of Canada, which have a good credit rating. In accordance with the investment policy of the Funds, the credit risk is monitored regularly by the Funds Manager. In addition, the portfolio manager responsibility to ensure that invests in securities respecting the credit rating standards for each Fund, as its management mandate. Liquidity risk Liquidity risk is defined as the risk of a Fund having difficulty meeting its obligations or making a commitment, resulting in its creditors incurring a financial loss. The unitholders may redeem their units each valuation day. The Funds may not purchase an illiquid asset if, by following this acquisition, more than 10% of their NAV would consist of illiquid assets and cannot have invested more than 15% of their NAV in illiquid assets for 90 days or more. Since the Funds invest in active markets, they can dispose of their assets quickly. The Funds may invest in unlisted derivatives, debt securities and equity securities that are not traded on an active market. As a result, the Funds may not be able to quickly liquidate their investments in these instruments at amounts which approximate their fair values, or be able to respond to specific events such as deterioration in the creditworthiness of any particular issuer. In accordance with the Funds policy, the Manager monitors the liquidity position on a daily basis. Redeemable units are redeemable on demand at the holder s option. Maturities for other financial liabilities are within three months for all Funds. The Funds maintain a cash flow and short-term investment level that the Funds Manager deems sufficient to maintain the required liquidities. Market risk 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 market risk can be broken down into the following three risk components: currency risk, interest rate risk and price risk. Currency risk The Funds invest in monetary assets denominated in currencies other than the functional currency. These investments result in currency risk, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The bonds issued in foreign currency are listed in the investment portfolio inventory. Foreign stocks are also exposed to currency risks since the value of such stocks are translated into the Funds functional currency to determine their fair value. As necessary, the Funds use foreign exchange forward contracts to reduce their exposure to foreign currency risk. A table quantifying the currency risk is presented after the Statement of Cash Flows of each Fund having a significant exposure to foreign currencies at the end of the period. The sensitivity rate retained by management corresponds to the assessment of a reasonably possible change based on a historical analysis of foreign currency exchange rates. Interest rate risk Changes in market interest rates expose income units, such as bonds, to interest rate risk. Funds that hold income units are exposed to this risk since changes in prevailing market interest rates will affect the value of income units. The Fund s policy requires the Manager to manage this risk by calculating and monitoring the average effective duration of the portfolio of these units. The Funds sensitivity to interest rates was assessed using the weighted term of the portfolio. A table quantifying the interest rate risk is presented after the Statement of Cash Flows of each fund having a significant exposure to interest rate risks at the end of the period. The percentage retained by management for the sensitivity analysis reflects, in particular, interest rate changes, the economic situation and the market. Price risk Price risk is the risk that the value of financial instruments will fluctuate as a result of changes in market prices caused by factors specific to a security, its issuer or all factors affecting a market or a market segment (other than those arising from currency risk and interest rate risk). Funds are exposed to the price risk since all investments they include are exposed to the volatility of market factors and capital loss risk. Maximum risk of financial instruments is equivalent to their fair value, except for certain options and futures contracts whose loss can be unlimited. The Fund s policy is to manage price risk through diversification and selection of investments within specified limits established by the investment guidelines within the prospectus of the Funds. 29

13 Notes to Financial Statements (continued) as at June 30, 2015 and December 31, 2014 (Unaudited) A table quantifying the price risk is presented after the Statement of Cash Flows of each fund having a significant exposure to this risk at the end of the period. Concentration risk Concentration risk arises from the net exposures of financial instruments to the same investment category, notably based on a region, a type of asset, industry or market segment. Financial instruments of the same class have similar characteristics and are affected similarly by changes in economic or other conditions. Exposure to this risk is managed through diversification of investments of the Funds with their investment policy as disclosed in the Prospectus. Compliance with this policy allows a management of the concentration risk related to exposure to an issuer or group of issuers with common characteristics. A table quantifying the concentration risk is presented after the Statement of Cash Flows for each Fund depending on the concentration that the Manager has deemed relevant. Fair value measurement According to IFRS 13 Fair Value Measurement, fair value is defined as the price that would be received on the sale of an asset or paid to transfer a liability in an orderly transaction between market participants as at the date of valuation. The fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or broker price quotations: Common shares, preferred shares and exchange-traded funds are valued at the closing price at the valuation date when that price is within bid-ask spread. When the last quoted price does not fall within the bid-ask spread, the investments are measured at the bid price. Bonds and debentures are valued at the closing price quoted by major dealers in such units. Mortgages are valued at a principal amount, which produces a yield equivalent to the prevailing rate of return on mortgages of similar type and term. Money market units are valued at fair value, which is established based on the bid price. This value, together with accrued interest, approximates fair value using closing prices. The Funds measure fair values using the following fair value hierarchy that reflects the inputs used in making the measurements. For the purposes of the presentation of financial instruments information, these must be classified based on a fair value valuation hierarchy. This three-level hierarchy is established according to the transparency of data taken into account in assessing the fair value of assets and liabilities and is presented below: Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Fund can access at the measurement date. Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data. Level 3 Unobservable inputs relating to the asset or liability. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument s valuation. This category includes instruments that are valued based on quoted prices for similar instruments but for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments. This category also includes illiquid units (are considered as such when no transaction has been recorded for such title for more than 10 days), insolvent units, delisted units or units suspended for more than one year, private investments as well as options and warrants that are not exchange-traded. The fair value hierarchy requires the use of observable market inputs whenever such inputs exist. A financial instrument is classified to the lowest level of the hierarchy for which a significant input has been considered in measuring fair value. When on the date of the financial position, the observable inputs used for a financial instrument are different from those used at the opening date, the Funds policy is to establish that on the closing date a transfer between levels of the fair value hierarchy is deemed to have occurred. A table indicating the breakdown of units according to their level along with a sensitivity analysis of each Fund having Level 3 financial instruments is presented after the Statement of Cash Flows. Valuation techniques include net present value and discounted cash flow models, comparison with similar instruments for which observable quoted prices exist and other valuation models. Assumptions and inputs used in valuation techniques include riskfree and benchmark interest rates, credit spreads and other premium used in estimating discount rates, bond and equity prices, foreign currency exchange rates, equity and equity index prices and expected price volatilities and correlations. The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date. 30

14 Notes to Financial Statements (continued) as at June 30, 2015 and December 31, 2014 (Unaudited) The Funds use widely recognised valuation models for determining the fair value of common and more simple financial instruments, such as interest rate and currency swaps that use only observable market data and require little management judgement and estimation. Observable inputs are usually available in the market for listed debt and equity units, exchange-traded derivatives and simple OTC derivatives such as interest rate swaps. The availability of observable inputs reduces the need for the Manager s judgement and estimation and reduces the uncertainty associated with the determination of fair values. The availability of those inputs varies depending on the type of units and markets and is prone to changes based on specific events and general conditions in the financial markets. The Fund has an established control framework with respect to the measurement of fair values. This framework includes portfolio valuation function. The latter assumes overall responsibility for fair value measurements. Specific controls include: Verification of observable quoted price inputs; Re-execution of model valuations; A review and approval process for new models and changes to such models; Calibration and implementation of retroactive testing models with observed market transactions. Analysis and investigation of significant daily valuation movements; and Review of unobservable inputs and valuation adjustments. When third party information, such as broker quotes or pricing services, is used to measure fair value, then the portfolio valuation function assesses and documents the evidence obtained from third parties to support the conclusion that such valuations meet the requirements of IFRS. This includes: Verifying that broker or pricing service is approved by the Fund for use in pricing the relevant type of financial instrument; Understanding how the fair value has been arrived at and the extent to which it represents actual market transactions; If a number of quotes for the same financial instrument have been obtained, then how fair value has been determined using those quotes. NOTE 6: NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS PER UNIT The following table presents the reconciliation of the closing NAV per units and the net assets attribuable to holders of redeemable units value in compliance with IFRS as at June 30 and December 31, The adjustments between the NAV and net assets attribuable to holders of redeemable units are due to the fact that the valuation of the units used to calculate the NAV is, if available, the close price while in IFRS, as described above, other prices are usable. As at June 30, 2015 Transactional Net Asset Value Adjustment Net Assets Funds per unit/share per unit/share per unit/share $ $ $ Jarislowsky Fraser Select Income Fund Series Advisor (0.01) Series F/E Jarislowsky Fraser Select Balanced Fund Series Advisor Series F/E Series F Series T Jarislowsky Fraser Select Canadian Equity Fund Series Advisor Series F/E Series F Series T As at December 31, 2014 Transactional Net Asset Value Adjustment Net Assets Funds per unit/share per unit/share per unit/share $ $ $ Jarislowsky Fraser Select Income Fund Series Advisor Series F/E Jarislowsky Fraser Select Balanced Fund Series Advisor Series F/E Series F Series T Jarislowsky Fraser Select Canadian Equity Fund Series Advisor Series F/E Series F Series T NOTE 7: REDEEMABLE UNITS Issued capital The Funds capital is presented in the Statement of Financial Position. All issued redeemable units are fully paid. The Funds capital is represented by these redeemable units that are issued or outstanding. The funds are not subject to specific capital requirements regarding the subscription and redemption of units, other than minimum subscription requirements. Each unit issued confers upon the unitholders an equal interest in the Fund and is of equal value. A unit does not confer any interest in any particular asset or investment of the Fund. Unitholders have various rights under the Funds declaration of trust, including the right to: have their units redeemed at a proportionate unit based on the Fund s NAV per unit/share on the redemption date; 31

15 Notes to Financial Statements (continued) as at June 30, 2015 and December 31, 2014 (Unaudited) receive income distributions; attend and vote at meetings of unitholders; participate in the termination and winding up of the Fund. The rights, obligations and restrictions mentioned above, which are attached to each unit, are identical in all respects. Capital management The Funds capital is equal to their net assets. It is managed in compliance with the investment objective, policies and restrictions of each Fund, as stated in the prospectus. The changes in the Funds capital during the period are presented in the Statement of Changes in Net Assets attribuable to holders of redeemable units. Units The number of outstanding units of the Advisor Series, the Series T5, the Series F and E and the Series F5 as at June and 2014 as well as the number of units issued, reinvested and redeemed for the periods ended are indicated under the Statements of Changes in Net Assets Attributable to Holders of Redeemable Units per Series. NOTE 8: SALES AND TRAILING COMMISSIONS Sales commissions As the Manager of the Funds, National Bank Investments Inc. pays no sales commissions to the brokers. Trailing commissions As the Manager of the Funds, National Bank Investments Inc. pays trailing commissions to the brokers according to the rates listed below for the Advisor and T5 Series. No trailer commission is paid for the F, F5 and E Series. Maximum annual trailing commission Low sales Low sales charges charges No-Load option option option (1 to 3 years) (4 + years) Jarislowsky Fraser Select Income Fund 0.75% 0.25% 0.75% Jarislowsky Fraser Select Balanced Fund 1.00% 0.50% 1.00% Jarislowsky Fraser Select Canadian Equity Fund 1.00% 0.50% 1.00% * The related entity is the National Bank Financial (NBF), a company under common control. NOTE 9: TRANSACTIONS WITH RELATED PARTIES The following transactions are considered related party transactions. Management and other fees As manager of the Funds, NBI provides and ensures daily management of the funds, portfolio management through portfolio managers and fund administration. In consideration for their management services, NBI receives management fees charged on a percentage of the NAV of each series. The management fees are paid monthly. The maximum annual management fees for the Advisor Series are indicated in the following table: Annual Management Funds Fees (Maximum) Jarislowsky Fraser Select Income Fund 1,40% Jarislowsky Fraser Select Balanced Fund 1,70% Jarislowsky Fraser Select Canadian Equity Fund 1,75% The maximum annual management fees for the Series F, F5 and the Series E are indicated in the following table: Annual Management Funds Fees (Maximum) Jarislowsky Fraser Select Income Fund 0,65% Jarislowsky Fraser Select Balanced Fund 0,70% Jarislowsky Fraser Select Canadian Equity Fund 0,75% The total amount of management fees is presented as an expense in the statement of comprehensive income for each fund. Management fees are incurred in the normal course of business and have been recorded at the exchange amounts. No management fees are charged to the funds for the Series O. Administration fees In addition to the management fee, the Funds are responsible for the payment of taxes to which the Funds are subject, to brokerage commissions and other expenses on the purchase and sale of units for their portfolios. The Funds are also responsible for the payment of all expenses related to their operations, including legal, audit, professional, trustee, custodial and safekeeping fees, interest, operating and administrative costs (other than advertising and promotional expenses which are the responsibility of the Manager), the costs of investor servicing and financial reports, prospectuses and other documents used by the Funds. Brokerage fees Certain Funds pay commissions on portfolio transactions, which are paid to brokers considered as related parties, such as National Bank Financial and National Bank Direct Brokerage, corporations under common control with the Manager. The related party commissions are presented in Note 10: Brokerage fees and soft dollars for the periods endingjune 30, 2015 and Positions held by related parties As atjune 30, 2015 and 2014, the National Bank of Canada was not holding any units in the Funds. NOTE 10: BROKERAGE COMMISSIONS AND SOFT DOLLARS (in thousands canadian dollars) Total commissions paid to brokers in connection with investment portfolio transactions, including commissions paid to brokers considered to be the related party, for the periods ended June 30, 2015 and 2014, are indicated in the following table: 32