NUVEEN ASSET MANAGEMENT GLOBAL INFRASTRUCTURE FUND

Transcription

1 Financial Statements of NUVEEN ASSET MANAGEMENT GLOBAL Period from August 28, 2013 (commencement of operations) to December 31, 2013

2 KPMG LLP Telephone (416) Bay Adelaide Centre Fax (416) Bay Street Suite 4600 Internet Toronto ON M5H 2S5 Canada INDEPENDENT AUDITORS' REPORT To the Unitholders of Nuveen Asset Management Global Infrastructure Fund We have audited the accompanying financial statements of Nuveen Asset Management Global Infrastructure Fund, which comprise the statements of net assets and investments as at December 31, 2013, the statements of operations and changes in net assets for the period from August 28, 2013 (commencement of operations) to December 31, 2013, and notes, comprising 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 these financial statements 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. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 our 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, we consider 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 is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the net assets of Nuveen Asset Management Global Infrastructure Fund and its investments as at December 31, 2013, and its results of operations and its changes in net assets for the period from August 28, 2013 (commencement of operations) to December 31, 2013 in accordance with Canadian generally accepted accounting principles. Chartered Professional Accountants, Licensed Public Accountants March 20, 2014 Toronto, Canada KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. KPMG Canada provides services to KPMG LLP.

3 Statement of Net Assets December 31, 2013 Assets Investments, at fair value $ 7,237,885 Cash 126,326 Accrued dividend receivable 23,798 Receivable for securities sold 172,778 7,560,787 Liabilities Accrued expenses 42,404 Securities purchased payable 135,838 Redemptions payable 4, ,781 Net assets, representing unitholders' equity $ 7,378,006 Units outstanding (note 3) 687,110 Net assets per unit (note 11) $ Net asset value per unit (note 11) $ See accompanying notes to financial statements. On behalf of the Manager, Integra Capital Limited: Graham Rennie Director Craig Honey Director 1

4 Statement of Operations Income: Dividend $ 66,524 Revenue from securities lending (note 7) 38 66,562 Expenses: Custodial fees 25,436 Operating 4,500 Audit fees 7,589 Harmonized sales tax 4,878 42,403 Net investment income 24,159 Realized and unrealized gain (loss) on investments: Net realized gain on sale of investments 196,930 Net realized gain on foreign exchange 2,544 Net change in unrealized loss on foreign exchange (177) Transaction costs (note 6) (16,094) Net change in unrealized appreciation of investments 428,670 Net gain on investments and transaction costs 611,873 Increase in net assets from operations $ 636,032 Increase in net assets from operations per unit (based on the average number of units outstanding during the period) $ 0.98 See accompanying notes to financial statements. 2

5 Statement of Changes in Net Assets Net assets, beginning of period $ Increase in net assets from operations 636,032 Distributions to unitholders: Distributions from net investment income (31,556) Distributions from net realized gains on investments (144,024) (175,580) Capital unit transactions (note 3): Proceeds from issuance of units 6,758,817 Reinvested distributions 175,580 Payments on redemptions (16,843) 6,917,554 Increase in net assets from operations 7,378,006 Net assets, end of period $ 7,378,006 See accompanying notes to financial statements. 3

6 Statement of Investments December 31, 2013 Common shares % Number Average Fair of shares cost value Australia %: Asciano Ltd. 6,824 $ 38,724 $ 37,039 Aurizon Holdings Ltd. 12,708 54,189 58,587 DUET Group 4,013 8,078 7,629 Macquarie Atlas Roads Group 1,584 3,617 3,945 Spark Infrastructure Group 17,403 26,597 26,799 Sydney Airport 22,444 79,093 80,858 Transurban Group 30, , , , ,553 Austria %: Oesterreichische Post AG ,961 15,690 Belgium %: bpost SA 2,020 42,164 41,848 Elia System Operator SA/NV 191 8,521 9,415 50,685 51,263 Bermuda %: Wilson Sons Ltd., BDR 3,380 43,031 47,066 Brazil %: Alupar Investimento SA, Units 3,309 27,127 24,186 CCR SA 2,391 20,070 19,005 Companhia de Saneamento Basico do Estado de Sao Paulo, ADR 680 6,111 8,103 Companhia de Saneamento de Minas Gerais - Copasa MG 460 7,486 7,706 CPFL Energias Renovaveis SA 1,188 7,572 7,068 EDP - Energias do Brasil SA 1,953 10,514 9,983 78,880 76,051 4

7 Statement of Investments (continued) December 31, 2013 Number Average Fair of shares cost value Canada %: Enbridge Inc 6, , ,360 AltaGas Ltd ,170 9,336 Brookfield Infrastructure Partners L.P. 1,315 48,787 54,743 Canadian Utilities Ltd., Class 'A' ,915 27,720 Fortis Inc. 1,104 33,364 33,595 Gibson Energy Inc. 3,510 81,809 96,174 Keyera Corp ,285 29,567 Progressive Waste Solutions Ltd. 2,347 62,801 61,632 TransAlta Renewables Inc ,800 4,978 TransCanada Corp. 3, , ,440 Westshore Terminals Investment Corp. 64 2,194 2, , ,759 Chile %: Empresa Nacional de Electricidad SA, ADR ,251 39,533 Enersis SA, ADR 1,587 25,775 25,259 62,026 64,792 China %: ENN Energy Holdings Ltd ,367 France %: Aéroports de Paris ,933 94,834 GDF Suez 1,699 42,453 42,461 Groupe Eurotunnel SA 9,588 80, ,233 Rubis ,485 65,678 Suez Environnement SA 2,287 39,317 43,595 Vinci SA ,055 67, , ,710 Germany %: Fraport AG 1,293 91, ,020 5

8 Statement of Investments (continued) December 31, 2013 Number Average Fair of shares cost value Hong Kong %: Panva Gas Holdings Ltd. 27,831 27,151 34,248 Beijing Enterprises Holdings Ltd. 1,390 10,040 14,590 Cheung Kong Infrastructure Holdings Ltd. 2,635 18,574 17,657 China Everbright International 33,680 31,825 47,721 China Merchants Holdings International Co. Ltd. 25,498 92,040 98,531 COSCO Pacific Ltd. 60,647 92,068 88,091 Guangdong Investment Ltd. 9,767 8,301 10,145 Hong Kong & China Gas Co. Ltd. 21,209 51,821 51,674 MTR Corp. Ltd. 11,112 44,752 44,691 Power Assets Holdings Ltd. 1,000 8,928 8,448 Sinopec Kantons Holdings Ltd. 3,922 3,938 4, , ,423 India %: Gail India Ltd., GDR ,598 15,959 Indonesia %: PT Jasa Marga 31,144 16,187 12,711 PT Sarana Menara Nusantara TBK ,378 12,896 Italy %: Atlantia SPA 9, , ,161 Hera SPA 10,460 22,233 25,268 Snam SPA 9,611 47,906 57,185 Societa Iniziative Autostradali e Servizi SPA 1,980 20,658 20,915 Terna SPA 6,104 28,083 32,458 World Duty Free SPA 643 7,444 8, , ,591 Japan %: Japan Airport Terminal Co. Ltd ,888 13,037 Kamigumi Co. Ltd. 3,187 27,363 31,025 Tokyo Gas Co. Ltd. 9,633 53,156 50,248 91,407 94,310 Malaysia %: Petronas Gas Berhad 4,944 32,488 38,778 Westports Holdings BHD 8,929 7,507 7,299 39,995 46,077 6

9 Statement of Investments (continued) December 31, Number Average Fair of shares cost value Mexico %: Grupo Aeroportuario del Centro Norte SAB de CV, ADR ,810 16,159 Grupo Aeroportuario del Sureste SA de CV, ADR, Series 'B' ,661 72,963 Infraestructura Energetica Nova SAB de CV 8,982 35,721 38,007 OHL Mexico SAB de CV 13,526 35,500 36,507 Promotora y Operadora de Infraestructura SAB de CV 879 8,856 11, , ,681 Netherlands %: Koninklijke Vopak NV 1, , ,896 New Zealand %: Auckland International Airport Ltd. 34,139 89, ,385 Infratil Ltd. 12,687 25,214 25,185 Port of Tauranga Ltd. 4,704 56,066 55,780 Vector Ltd. 2,982 6,675 6, , ,052 Norway %: Hafslund ASA, Class 'B' 1,079 8,642 8,787 Philippines %: International Container Terminal Services Inc. 75, , ,584 Manila Water Co. 19,459 14,764 10, , ,833 Poland %: Energa SA 5,218 29,403 28,957 Portugal %: Redes Energeticas Nacionais SA 747 2,284 2,448 Singapore %: CitySpring Infrastructure Trust 58,445 22,238 22,870 ComfortDelGro Corp. Ltd. 29,985 44,295 50,466 Hutchison Port Holdings Trust 108,989 82,151 77,959 Hyflux Ltd. 14,369 14,079 14,026 K-Green Trust 13,834 11,580 12,165 Parkway Life Real Estate Invesment Trust 18,174 34,188 35,940 SembCorp Industries Ltd. 2,325 9,515 10,741 Singapore Airport Terminal Services Ltd. 12,538 31,744 33,869 Singapore Post Ltd. 45,095 46,608 50, , ,317

10 Statement of Investments (continued) December 31, 2013 Number Average Fair of shares cost value Spain %: Abertis Infraestructuras SA ,393 16,544 EDP Renovaveis SA 775 4,310 4,360 Ferrovial SA 1,337 24,328 27,404 41,031 48,308 Switzerland %: Flughafen Zuerich AG, Registered , ,375 United Kingdom %: Centrica PLC 5,253 33,106 32,049 National Grid PLC, ADR 3, , ,840 Pennon Group PLC 401 4,643 4,647 SSE PLC ,917 20, , ,926 United States %: Access Midstream Partners L.P ,184 10,036 Alliant Energy Corp. 31 1,698 1,631 American Electric Power Co. Inc ,594 17,622 American Tower Corp. 1, , ,293 American Water Works Co. Inc. 1,302 56,552 58,365 Aqua America Inc. 1,332 34,020 32,834 CenterPoint Energy Inc. 5, , ,851 CMS Energy Corp. 2,715 75,332 77,165 Connecticut Water Service Inc ,590 30,605 Corrections Corp. of America 1,432 50,830 48,749 Covanta Holding Corp. 4, ,173 89,287 Crown Castle International Corp. 1,057 80,977 80,883 Dominion Resources Inc. 2, , ,925 DTE Energy Co ,075 23,123 Duke Energy Corp. 2, , ,450 Edison International 57 2,769 2,805 Genesee & Wyoming Inc., Class 'A' 1, , ,186 Geo Group Inc. (The) ,666 12,308 ITC Holdings Corp ,061 41,162 Kinder Morgan Inc. 2, , ,723 Laclede Group Inc. (The) ,677 31,320 Magellan Midstream Partners L.P ,015 15,784 MarkWest Energy Partners L.P ,950 58,941 NextEra Energy Inc ,642 87,655 NiSource Inc. 2,162 68,184 75,461 OGE Energy Corp. 1,047 38,776 37,678 Oiltanking Partners L.P. 1,149 71,223 73,041 Oneok Inc. 1,120 62,569 71,936 8

11 Statement of Investments (continued) December 31, 2013 Number Average Fair of shares cost value PG&E Corp ,148 28,952 Piedmont Natural Gas Co. Inc ,036 13,974 Pinnacle West Capital Corp. 1, , ,626 Plains All American Pipeline L.P ,520 37,613 Rose Rock Midstream L.P ,298 9,946 SBA Communications Corp ,409 38,509 SemGroup Corp., Class 'A' ,464 44,525 Sempra Energy Inc. 1, , ,138 South Jersey Industries Inc ,552 8,617 Spectra Energy Corp. 5, , ,479 Standard Plus Corp ,488 16,123 Targa Resources Corp. 83 6,959 7,775 Union Pacific Corp ,162 55,606 Unitil Crop Waste Connections Inc. 2,021 92,170 93,666 Western Gas Partners LP 1,011 63,163 66,277 Williams Cos. Inc. 4, , ,877 Wisconsin Energy Corp ,285 14,224 2,762,014 2,866,778 Total equities % 6,817,043 7,237,885 Transaction costs (7,828) Total investment portfolio % $ 6,809,215 7,237,885 Other assets, net of liabilities % 140,121 Net assets % $ 7,378,006 See accompanying notes to financial statements. 9

12 Risk Disclosures 1. Financial instruments risk: Investment activities of the Nuveen Asset Management Global Infrastructure Fund (the "Fund") expose the Fund to some financial risks. The Fund's overall risk management program seeks to minimize the potentially adverse effect of risk on the Fund's financial performance in a manner consistent with the Fund's investment objectives and long-term investment time horizon. 2. Risk management: The Fund's objective is to achieve long-term growth of capital and income, through investments primarily in publicly traded infrastructure stocks. The Fund seeks to invest at least 80% of its net assets in equity securities of infrastructure-related companies. This includes investments in common and preferred stocks, publicly traded units of master limited partnerships (MLPs), real estate investment trusts (REITs), exchange traded funds and other investment companies. The Fund may hold up to an aggregate of 5.0% in cash and cash equivalents. While it is expected that currency exposures shall be typically unhedged; currency hedging whose use is restricted to reducing risk as part of a hedging strategy is permitted. The Fund may enter into securities lending transactions. Securities lending transactions will be used in conjunction with the Fund's other strategies in a manner considered most appropriate by Integra Capital Limited (the "Manager") to achieve the Fund's investment objectives and to enhance the Fund's returns. To assist with managing risk, the Manager also maintains a governance structure that oversees the Fund's investment activities and monitors compliance with the Fund's stated investment strategy and securities regulations. 10

13 Risk Disclosures (continued) 2. Risk management (continued): (a) Credit risk: Credit risk on financial instruments is the risk of a loss occurring as a result of the default of an issuer on its obligation to a Fund. Credit risk is managed by dealing with issuers that are believed to be creditworthy and by regular monitoring of credit exposures. Additionally, credit risk is reduced by diversification of issuer, industry and geography. As at December 31, 2013, the Fund had no significant investments in debt instruments and/or derivatives. (b) Counterparty credit risk: Counterparty credit risk primarily emanates from the use of over-the-counter derivatives. This risk is minimized by selecting counterparties who have a minimum of "A" credit rating. Ongoing monitoring of credit events/rating developments occurs to ensure the sustainable credit quality of the counterparty. Various factors are considered in the assessment process including fundamental components of the counterparty's profile (such as capital adequacy, asset quality, profitability and liquidity) and credit ratings assigned to the counterparty. (c) Currency risk: Changes in the value of the Canadian dollar compared to foreign currencies will affect the value, in Canadian dollars, of any foreign securities held in the Fund. From time to time, the Fund may manage currency risk through foreign currency hedging strategies. 11

14 Risk Disclosures (continued) 2. Risk management (continued): The table below indicates the currency to which the Fund had exposure on its trading monetary assets and liabilities as well as the underlying principal amount of foreign exchange contracts: Currency risk Foreign exposed exchange % of Currency holdings* contracts Net exposure net assets U.S. dollar $ 3,947,674 $ $ 3,947, Euro 1,185,757 1,185, Hong Kong dollar 441, , Australian dollar 440, , Singapore dollar 233, , Phillippine peso 193, , New Zealand dollar 193, , Swiss franc 107, , Brazilian real 115, , Japanese yen 114, , Mexican peso 85,356 85, British pound 67,515 67, Malaysian ringgit 46,077 46, Polish zloty 28,957 28, Indonesian rupiah 12,886 12, Norwegian krone 8,787 8, *Amounts include monetary items. As at December 31, 2013, had the Canadian dollar strengthened or weakened by 5% in relation to all currencies, with all other variables held constant, net assets would have decreased or increased, respectively, by approximately $360,924. In practice, the actual trading results may differ from this sensitivity analysis and the difference could be material. (d) Interest rate risk: Changes in market interest rates expose fixed income securities, such as bonds, to interest rate risk. Funds that hold income investments are exposed to this risk since changes in prevailing market interest rates will affect the value of fixed-income securities. 12

15 Risk Disclosures (continued) 2. Risk management (continued): The majority of the Fund's financial assets and liabilities are non-interest bearing. Accordingly, the Fund is not subject to significant amounts of risk due to fluctuations in the prevailing levels of market interest rates. (e) Liquidity risk: Unitholders may redeem their units on each valuation date. Therefore, the Fund is invested in securities that are traded in active markets and can be readily disposed. The Fund retains sufficient cash and cash equivalent positions to maintain liquidity. (f) Other market risk: Other market risk is the risk that the value of financial instruments will fluctuate as a result of changes in market prices (other than those arising from interest rate risk or currency risk), whether caused by factors specific to an individual investment, its issuer, or all factors affecting all instruments traded in a market or market segment. All securities present a risk of loss of capital. The Sub-Advisor moderates this risk through a careful use of investment strategies and selection of securities and other financial instruments within the parameters of the investment strategy developed by the Manager of the Fund. As at December 31, 2013, a 5% change in stock prices would have changed the Fund's net assets by $361,894 with all other factors held constant. In practice, the actual results may differ from this sensitivity analysis and the difference could be material. The impact on net assets of the Fund as at December 31, 2013, due to a 5% increase or decrease in the Fund's benchmark (S&P Global Infrastructure Index), with all other variables held constant, would have been $455,961. This calculation is based on the exante tracking error of the Fund. In practice, the actual results may differ from the sensitivity analysis indicated above and the difference could be material. 13

16 Risk Disclosures (continued) 3. Fair value measurements: The Chartered Professional Accountants of Canada Handbook Section 3862, Financial Instruments - Disclosures, establishes a three-tier hierarchy as a framework for disclosing fair value based on inputs used to value the Fund's investments. The hierarchy of inputs is summarized below: Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs). Changes in valuation methods may result in transfers into or out of an investment's assigned level. The table below summarizes the inputs used in valuing the Fund's financial assets carried at fair values: Level 1 Level 2 Level 3 Total Equities $ 7,237,885 $ $ $ 7,237,885 14

17 Risk Disclosures (continued) 4. Summary of investment portfolio: The Fund's summary of investment portfolio appears in the following table: % of net assets Common shares Australia 5.58 Austria 0.21 Belgium 0.70 Bermuda 0.64 Brazil 1.03 Canada Chile 0.88 China 0.02 France 5.72 Germany 1.40 Hong Kong 5.70 India 0.22 Indonesia 0.18 Italy 4.87 Japan 1.28 Malaysia 0.63 Mexico 2.37 Netherlands 1.58 New Zealand 2.62 Norway 0.12 Philippines 2.63 Poland 0.39 Portugal 0.03 Singapore 4.18 Spain 0.65 Switzerland 1.70 United Kingdom 3.69 United States Total investment portfolio Other assets, net of liabilities 1.90 Net assets

18 Notes to Financial Statements 1. Establishment of Fund: The Nuveen Asset Management Global Infrastructure Fund (the "Fund") was created under the laws of the Province of Ontario by a Declaration of Trust. The Fund was established on July 25, 2013 and commenced operations on August 28, The Fund is not a reporting issuer and is exempt, pursuant to National Instrument , Investment Fund Continuous Disclosure ("NI "), from the requirement to file its financial statements with the regulatory authorities and has notified the Ontario Securities Commission that it is relying on this exemption. 2. Significant accounting policies: These financial statements, prepared in accordance with Canadian generally accepted accounting principles ("GAAP") and in accordance with NI , include estimates and assumptions made by management that affect the reported amounts of assets, liabilities, income, and expenses during the reporting periods. Actual results may differ from such estimates. The Chartered Professional Accountants of Canada ("CPA Canada") Handbook Section 3862, Financial Instruments - Disclosures ("Section 3862"), and Section 3863, Financial Instruments - Presentation ("Section 3863"), establish standards for comprehensive disclosure and presentation requirements for financial instruments. The standards include requirements to quantify certain risk exposures and to provide sensitivity analysis for certain risks. The disclosure requirements of Section 3862 and Section 3863 are contained in the Risk Disclosures note of the Fund's financial statements. (a) Investments are recorded at their fair value in Canadian currency, with the difference between this amount and the average cost being shown as unrealized appreciation (depreciation) of investments, net of unrealized gains (losses) resulting from foreign currency translations. Canadian GAAP requires the use of bid prices for long positions and ask prices for short positions in the fair valuation of investments traded in an active market, rather than the use of closing prices currently used for the purpose of determining net asset value ("NAV"). For investments that are not traded in an active market, Canadian GAAP requires the use of valuation techniques, incorporating factors that market participants would consider in setting a price. 16

19 Notes to Financial Statements (continued) 2. Significant accounting policies (continued): (b) The fair values of foreign investments and other foreign-currency-denominated assets and liabilities are translated into Canadian dollars at exchange rates prevailing on the reporting date. (c) Purchases and sales of foreign securities and income and expenses are translated into Canadian dollars at the exchange rates prevailing on the dates of the transactions. (d) The gain or loss on sale of investments, net of realized gains (losses) resulting from foreign currency translations, is calculated with reference to the average cost of the related investments, excluding transaction costs. (e) Income and expenses are recorded on an accrual basis. Foreign income and expenses are translated into Canadian dollars at the rates of exchange applicable on the valuation date. Security transactions are recorded on the trade date and related transaction costs are charged to income. Dividends are accrued as of the ex-dividend date. Stock dividends are recorded in income based on the fair value of the security. (f) Short-term notes are recorded at fair value. The fair value of short-term notes approximates the accrued interest added to the average cost. (g) For each Fund unit sold, the Fund receives an amount equal to the NAV per unit at the date of sale, which amount is included in unitholders' equity. Fund units are redeemable at the option of unitholders at their NAV on the redemption date. For each Fund unit redeemed, unitholders' equity is reduced by the NAV of the Fund unit at the date of redemption. (h) The fair value of a forward contract is the gain or loss that would be realized if, on the valuation date, the positions were closed out. The forward contract is valued using an interpolation of the foreign exchange rate based on the length of the forward contract. It is reflected in the statement of operations as change in unrealized appreciation (depreciation) on foreign exchange forward contracts. When the forward contracts are closed out, any gains or losses realized are included in net realized gain on foreign exchange. 17

20 Notes to Financial Statements (continued) 2. Significant accounting policies (continued): (i) Commissions and other 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, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Commissions and transaction costs are included as expenses in the statement of operations. (j) The cost of investments represents the amount paid for each security and is determined on an average cost basis, excluding commissions and other transaction costs. (k) The Fund is permitted to enter into securities lending transactions. These transactions involve the temporary exchange of securities for collateral with a commitment to redeliver the same securities at a future date. Income is earned from these transactions in the form of fees paid by the counterparty. Income earned from these transactions is recognized on an accrual basis and included in the statement of operations. (l) Other assets and liabilities are short-term in nature, and are carried at cost or amortized cost which approximates fair value. 3. Unitholders' equity: Unit transactions during the period were as follows: Number of Fund units Amount Subscriptions 672,405 $ 6,758,817 Reinvestments 16, ,580 Redemptions (1,580) (16,843) The number of issued and outstanding units as at December 31, 2013 is 687,

21 Notes to Financial Statements (continued) 4. Foreign exchange forward contracts: The Fund utilizes foreign exchange forward contract hedging in the management of currency risk associated with its investment in foreign securities. The objective is to protect the Fund from the possibility of capital losses on foreign-currency-denominated investments due to increases in the value of the Canadian dollar. However, credit and market risks associated with foreign exchange forward contracts potentially expose the Fund to losses. In order to minimize the possibility of losses arising from credit risk, the Fund deals only with large financial institutions with a minimum of "A" credit rating. Currency risk relates to the possibility that foreign exchange forward contracts change in value due to fluctuations in currency prices. The foreign exchange forward contracts are marked to market daily and the resulting unrealized gains or losses are recognized in the statement of net assets. The result of employing foreign exchange forward contracts is that the foreign exchange gains and losses in the securities portfolio move substantially in opposite directions from the gains and losses in the hedging portfolio. As at December 31, 2013, the Fund did not directly hold any foreign exchange forward contracts. 5. Income taxes: The Fund qualifies as a unit trust under the provisions of the Income Tax Act (Canada) and has a taxation year-end of December 31. The Fund is subject to tax on its income, including net realized capital gains, for the calendar year which is not paid or payable to the unitholders at the end of the calendar year. Sufficient distributions of income and of net realized capital gains are made to the Fund's unitholders of record, so that no provision for income taxes is required in the financial statements. Capital losses incurred by the Fund cannot be allocated to unitholders but may be carried forward indefinitely to apply against realized capital gains. As at December 31, 2013, the Fund had no net capital loss carryforwards. 19

22 Notes to Financial Statements (continued) 6. Brokerage commissions: Brokerage commissions on portfolio transactions may also include research services provided to the Sub-Advisor. The value of the research services paid to certain brokers for the period ended December 31, 2013 was $6, Securities lending: The Fund lends portfolio securities from time to time in order to earn additional income. The Fund has entered into a securities lending program with its custodian, CIBC Mellon Global Securities Services. The aggregate market value of all securities cannot exceed 50% of the net assets of the Fund. The Fund receives collateral in the form of debt obligations of the Government of Canada and any other Sovereign States and Canadian provincial governments, against the loaned securities. The Fund maintains a minimum collateral requirement of 102% for North American equities and 105% for Non-North American equities of the market value of the loaned securities during the period of the loan. As at December 31, 2013, certain securities shown in the statement of net assets with a market value of $308,445 had been loaned as part of the securities lending program. The counterparty has pledged securities with a market value of $346,763 as collateral for such loans. Under the terms of the program, the Fund may instruct that securities be returned within three days. 8. Capital management: CPA Canada Handbook Section 1535, Capital Disclosures, establishes standards for disclosing information about an entity's capital and how it is managed. The adoption of this standard results in additional disclosures relating to the redeemable units of the Fund, but does not affect the Fund's results or financial position. The capital of the Fund is represented by issued redeemable units with no par value. The units of the Fund are entitled to distributions, if any, and any redemptions are based on the Fund's NAV per unit. The Fund has no restrictions or specific capital requirements on the subscriptions and redemptions of units. The relevant movements are shown on the statement of changes in net assets. The Fund endeavours to invest its subscriptions received in appropriate investments while maintaining sufficient liquidity to meet redemptions. 20

23 Notes to Financial Statements (continued) 9. Management fees: Integra Capital Limited (the "Trustee" and "Manager") administers and regulates the day-to-day operations of the Fund. In return for the services provided, the Manager's parent company, Integra Capital Management Corporation, receives management fees from the Fund's unitholders, based on the NAV of the Fund. These management fees are paid either by a redemption of units or the unitholder, if an institution, may be invoiced and payment will be delivered to the Manager. 10. Trustee and other fees: The Fund is responsible for its operating expenses relating to the carrying on of its business, including custodial services, legal, Independent Review Committee fees (if applicable), audit fees, transfer agency services relating to the issue and redemption of units, and the cost of financial and other reports in compliance with all applicable laws, regulations and policies. The Manager pays for such expenses on behalf of the Fund, except for certain expenses such as interest and taxes, and is then reimbursed by the Fund. The Manager at its discretion may agree to waive or absorb certain expenses associated with the Fund. The absorbed amounts, if any, are shown in the statement of operations as applicable. Such absorption or waiver, where applicable, may be terminated by the Manager at any time without notice. 21

24 Notes to Financial Statements (continued) 11. Comparison of NAV per unit to net assets per unit: NI issued by the Canadian Securities Administrators requires investment funds to value their investments using fair value measures as defined in NI NI requires that fair value prices be based on bid prices, whereas subscriptions and redemptions from the Fund are based on closing prices. Consequently, the method by which the NAV is calculated for subscription and redemption purposes will be different from the net assets calculated for financial reporting purposes. In accordance with NI , a comparison of net assets, calculated in accordance with the CPA Canada Handbook Section 3855, Financial Instruments - Recognition and Measurement, of an investment fund, and NAV, calculated in accordance with the Manager's fair value policies and procedures for unit pricing, as at December 31 were as follows: NAV per unit $ Net assets per unit Transition to International Financial Reporting Standards: On February 13, 2008, the Accounting Standards Board ("AcSB") confirmed that publicly accountable enterprises would be required to adopt International Financial Reporting Standards ("IFRS"), as published by the International Accounting Standards Board ("IASB"), on January 1, However, the AcSB deferred the mandatory IFRS changeover date for Canadian investment funds to January 1, Consequently, the Fund will publish its first annual audited financial statements in accordance with IFRS for the year ended December 31, 2014, with comparatives for the year ended December 31, 2013, and prepare an opening IFRS statement of net assets at January 1, The Fund will also be publishing unaudited interim financial statements in accordance with IFRS for the six-month period ending June 30,

25 Notes to Financial Statements (continued) 12. Transition to International Financial Reporting Standards (continued): The Manager has not identified any changes that will impact NAV per unit as a result of the changeover to IFRS. However, this determination is subject to change as the Manager finalizes its assessment of the impact of IFRS, and the impact of new standards issued by the IASB prior to the Fund's adoption of IFRS (see commentary below). The criteria contained within International Accounting Standard ("IAS") 32, Financial Instruments - Presentation, may require unitholders' equity to be classified as a liability within the Fund's statement of net assets, unless certain conditions are met. The Manager is currently assessing the Fund's unitholder structure to confirm the appropriate classification in accordance with IFRS. IFRS is also expected to affect the overall presentation of financial statements, such as the inclusion of a statement of cash flows in the financial statements. Overall, enhanced disclosure requirements are expected. Upon adoption of IFRS, the Fund will apply IFRS 13, Fair Value Measurement ("IFRS 13"). IFRS 13 defines fair value, sets out a single IFRS framework for measuring fair value and requires disclosure about fair value measurements. It applies when other IFRS require or permit fair value measurement. If an asset or a liability measured at fair value has a bid price and an ask price, it requires valuation to be based on a price within the bid-ask spread that is most representative of fair value. It allows the use of mid-market pricing or other pricing conventions that are used by market participants as a practical expedient for fair value measurements within a bid-ask spread. This may result in eliminating the difference between the NAV per unit and net assets per unit under current Canadian GAAP. In October 31, 2012, the IASB published Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27), which provides an exemption from consolidation of subsidiaries under IFRS 10, Consolidated Financial Statements, for entities which meet the definition of an investment entity. A qualifying investment entity is required to account for investments in controlled entities, as well as investments in associates and joint ventures, at fair value through profit or loss; the only exception would be subsidiaries that are considered an extension of the investment entity's investing activities. The consolidation exception is mandatory, not optional. 23