ANNUAL FINANCIAL STATEMENTS

Transcription

1 ANNUAL FINANCIAL STATEMENTS December 31, 2017 CC&L Core Income and Growth Fund CC&L Equity Income and Growth Fund CC&L Global Alpha Fund CC&L High Yield Bond Fund

2 TABLE OF CONTENTS Independent Auditors Report... 3 CC&L Core Income and Growth Fund... 5 CC&L Equity Income and Growth Fund CC&L Global Alpha Fund CC&L High Yield Bond Fund Notes to Financial Statements CONNOR, CLARK & LUNN FUNDS INC. Annual Financial Statements for the year ending December 31,

3 March 23, 2018 Independent Auditor s Report To the Unitholders and Trustee of CC&L Core Income and Growth Fund CC&L Equity Income and Growth Fund CC&L High Yield Bond Fund CC&L Global Alpha Fund (collectively the Funds) We have audited the accompanying financial statements of each of the Funds, which comprise the statements of financial position as at December 31, 2017 and December 31, 2016 and the statements of comprehensive income, changes in net assets attributable to holders of redeemable units and cash flows 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 these financial statements in accordance with International Financial Reporting Standards, 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. PricewaterhouseCoopers LLP 18 York Street, Toronto, Ontario, Canada M5J 0B2 T: , F: PwC refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.

4 Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Funds as at December 31, 2017 and December 31, 2016 and the financial performance and the cash flows of each of the Funds for the years then ended in accordance with International Financial Reporting Standards. Chartered Professional Accountants, Licensed Public Accountants

5 CC&L Core Income and Growth Fund Statements of Financial Position As at December Assets Current assets Short-term investments $ 2,394,636 $ 4,794,403 Financial assets at fair value through profit or loss 152,962, ,758,842 Subscriptions receivable 5, ,333 Dividends receivable 341, ,050 Interest receivable 175, , ,880, ,651,779 Liabilities Current liabilities Bank indebtedness 93, ,227 Management fees payable 59,844 70,032 Accrued expenses 129, ,606 Due to broker - 1,368,011 Distributions payable 77 2,020 Redemptions payable 141,714 74, ,990 1,792,481 Net Assets attributable to holders of redeemable units $ 155,455,863 $ 145,859,298 Net Assets attributable to holders of redeemable units for each series Series A $ 76,443,737 $ 76,625,004 Series C $ 19,953,010 $ 23,044,429 Series F $ 59,059,116 $ 46,189,865 Redeemable units outstanding (note 6) Series A 2,479,366 2,493,863 Series C 629, ,641 Series F 1,796,106 1,428,251 Net Assets attributable to holders of redeemable units per unit Series A $ $ Series C $ $ Series F $ $ Approved by the Manager Director Director The accompanying notes are an integral part of these financial statements. 5

6 CC&L Core Income and Growth Fund Statements of Comprehensive Income For the years ended December Income Other income $ 14,673 $ 11,156 Realized foreign exchange gain (loss) on currency (15) - Change in unrealized foreign exchange gain (loss) on currency 194 (708) Net gain (loss) on investments Dividends 3,353,678 2,405,604 Interest for distribution purposes 755, ,202 Income from income trusts 622, ,629 Net realized gain (loss) on investments 6,121,340 1,078,634 Change in unrealized appreciation (depreciation) of investments (159,964) 13,728,776 Total net gain (loss) on investments 10,692,834 18,745,845 Total income (loss), net 10,707,686 18,756,293 Expenses (note 8) Management fees 1,565,696 1,250,422 Trailer fees (note 8) 875, ,435 Audit fees 20,367 17,290 Custodial fees 133, ,531 Filing fees 26,300 22,865 Fundserv fees 5,734 4,371 Independent Review Committee fees 7,241 6,042 Independent Review Committee insurance Interest expense 1, Legal fees 3,191 10,936 Securityholder reporting fees 205, ,286 Transaction costs (note 9) 96, ,379 Total operating expenses 2,941,935 2,467,201 Withholding taxes - (58) Increase (decrease) in Net Assets attributable to holders of redeemable units from operations $ 7,765,751 $ 16,289,034 Increase (decrease) in net assets attributable to holders of redeemable units for each series Series A $ 3,534,270 $ 8,590,536 Series C $ 1,064,981 $ 3,216,830 Series F $ 3,166,500 $ 4,481,668 Weighted average units 1 Series A 2,585,079 2,242,276 Series C 689, ,568 Series F 1,693,096 1,059,207 Increase (decrease) in net assets attributable to holders of redeemable units per unit 1 Series A $ 1.37 $ 3.83 Series C $ 1.54 $ 4.08 Series F $ 1.87 $ based on weighted average number of units outstanding during the year. The accompanying notes are an integral part of these financial statements. 6

7 CC&L Core Income and Growth Fund Statements of Changes in Net Assets Attributable to Holders of Redeemable Units For the years ended December 31 Series A Series C Series F Total Net Assets attributable to holders of redeemable units - Beginning of year $ 76,625,004 $ 23,044,429 $ 46,189,865 $ 145,859,298 Increase (decrease) in Net Assets attributable to holders of redeemable units from operations 3,534,270 1,064,981 3,166,500 7,765,751 Redeemable unit transactions Proceeds from redeemable units issued 15,617, ,105 24,069,075 39,988,035 Reinvestments of distributions to holders of redeemable units 2,516,793 68,806 1,346,009 3,931,608 Redemption of redeemable units (18,473,810) (3,629,636) (13,481,407) (35,584,853) Net increase (decrease) from redeemable unit transactions (339,162) (3,259,725) 11,933,677 8,334,790 Distributions to holders of redeemable units From net investment income (751,266) (199,516) (496,396) (1,447,178) Return of capital (2,625,109) (697,159) (1,734,530) (5,056,798) Total distributions to holders of redeemable units (3,376,375) (896,675) (2,230,926) (6,503,976) Increase (decrease) in Net Assets attributable to holders of redeemable units during the year (181,267) (3,091,419) 12,869,251 9,596,565 Net Assets attributable to holders of redeemable units - End of year $ 76,443,737 $ 19,953,010 $ 59,059,116 $ 155,455,863 Series A Series C Series F Total Net Assets attributable to holders of redeemable units - Beginning of year $ 57,665,728 $ 24,485,431 $ 20,752,610 $ 102,903,769 Increase (decrease) in Net Assets attributable to holders of redeemable units from operations 8,590,536 3,216,830 4,481,668 16,289,034 Redeemable unit transactions Proceeds from redeemable units issued 24,887, ,080 28,842,452 54,023,286 Reinvestments of distributions to holders of redeemable units 2,171,192 55, ,517 3,026,363 Redemption of redeemable units (13,740,345) (3,981,902) (7,266,859) (24,989,106) Net increase (decrease) from redeemable unit transactions 13,318,601 (3,633,168) 22,375,110 32,060,543 Distributions to holders of redeemable units From net investment income (716,148) (248,761) (344,623) (1,309,532) Return of capital (2,233,713) (775,903) (1,074,900) (4,084,516) Total distributions to holders of redeemable units (2,949,861) (1,024,664) (1,419,523) (5,394,048) Increase (decrease) in Net Assets attributable to holders of redeemable units during the year 18,959,276 (1,441,002) 25,437,255 42,955,529 Net Assets attributable to holders of redeemable units - End of year $ 76,625,004 $ 23,044,429 $ 46,189,865 $ 145,859,298 The accompanying notes are an integral part of these financial statements. 7

8 CC&L Core Income and Growth Fund Statements of Cash Flows For the years ended December Cash flows from (used in) Operating activities Increase (decrease) in Net Assets attributable to holders of redeemable units from operations $ 7,765,751 $ 16,289,034 Adjustments to reconcile to operating cash flows: Change in unrealized foreign exchange (gain) loss on currency (194) 708 Net realized (gain) loss on investments (6,121,340) (1,078,634) Change in unrealized (appreciation) depreciation on investments 159,964 (13,728,776) Purchase of investments (99,797,446) (113,329,777) Proceeds from investments sold 95,586,480 85,596,117 (Increase) decrease in dividends receivable (64,940) (39,880) (Increase) decrease in interest receivable 3,214 8,213 Increase (decrease) in management fees payable (10,188) 22,412 Increase (decrease) in accrued expenses 28,759 19,447 Net cash flows from (used in) operating activities (2,449,940) (26,241,136) Cash flows from (used in) Financing activities Proceeds from redeemable units issued 34,490,816 49,099,863 Redemption of redeemable units (29,383,522) (20,664,821) Distributions paid to holders of redeemable units, net of reinvestments (2,574,311) (2,365,945) Net cash flows from (used in) financing activities 2,532,983 26,069,097 Increase (decrease) in cash (bank indebtedness) Change in unrealized foreign exchange gain (loss) on currency 194 (708) Net increase (decrease) in cash 83,043 (172,039) Bank indebtedness, beginning of year (177,227) (4,480) Bank indebtedness, end of year $ (93,990) $ (177,227) Dividends received, net of withholding taxes* $ 3,288,738 $ 2,365,666 Interest received* 758, ,415 Interest paid* 1, *included in operating activities The accompanying notes are an integral part of these financial statements. 8

9 CC&L Core Income and Growth Fund Schedule of Investment Portfolio As at December 31, 2017 Coupon Rate/ Yield (%) Maturity Date Number of Shares or Par Value Average Cost $ Fair Value $ Percentage of Net Assets % Short-Term Investments Treasury Bills (December 31, 2016: 3.29%) Canadian Treasury Bill 0.884% 08-Mar-18 2,000,000 1,995,600 1,995,600 Canadian Treasury Bill 0.958% 22-Mar , , ,036 2,394,636 2,394, Total Short-Term Investments 2,394,636 2,394, Bonds Corporate Bonds (December 31, 2016: 15.43%) Bank of Nova Scotia 2.620% 02-Dec-26 4,110,000 4,088,518 4,035,227 Bell Canada 3.350% 22-Mar-23 4,221,000 4,334,436 4,323,301 CU Inc % 02-Sep-44 1,962,000 2,135,158 2,162,580 Enbridge Pipelines Inc % 06-Apr-20 2,538,000 2,786,391 2,659,729 Hydro One Inc % 24-Feb-26 3,128,000 3,148,606 3,124,334 Manufacturers Life Insurance Co % 22-Nov-27 2,800,000 2,900,344 2,859,537 Rogers Communications Inc % 06-Jun-22 2,725,000 2,865,912 2,879,331 Royal Bank of Canada 2.980% 07-May-19 1,833,000 1,864,800 1,856,137 Toronto-Dominion Bank 2.045% 08-Mar-21 2,218,000 2,235,339 2,199,171 Transcanada Trust 4.650% 18-May-77 1,750,000 1,757,525 1,748,140 Total Bonds 28,117,029 27,847, Canadian Common Stocks Energy (December 31, 2016: 15.92%) ARC Resources Ltd. 162,700 2,861,705 2,399,825 Crescent Point Energy Corp. 196,800 2,989,956 1,885,344 Enbridge Inc. 46,000 2,332,519 2,261,360 Enbridge Income Fund Holdings Inc. 79,400 2,257,950 2,366,914 Inter Pipeline Ltd. 53,300 1,363,496 1,387,399 Keyera Corp. 79,116 3,054,912 2,802,289 Suncor Energy Inc. 46,300 1,636,603 2,136,745 TransCanada Corp. 58,200 3,508,052 3,560,676 Vermilion Energy Inc. 13, , ,544 Whitecap Resources Inc. 198,300 1,980,013 1,774,785 22,569,941 21,182, Capital Goods (December 31, 2016: 4.23%) CAE Inc. 51,400 1,149,581 1,200,190 Finning International Inc. 58,300 1,508,776 1,849,276 SNC-Lavalin Group Inc. 61,200 3,385,943 3,491,460 WSP Global Inc. 33,460 1,285,695 2,004,589 7,329,995 8,545, Commercial Services & Supplies (December 31, 2016: 1.06%) Transportation (December 31, 2016: 3.17%) Canadian National Railway Co. 44,500 3,535,970 4,612, Consumer Services (December 31, 2016: 0.78%) Materials (December 31, 2016: Nil%) Agrium Inc. 16,300 2,229,618 2,356, The accompanying notes are an integral part of these financial statements. 9

10 CC&L Core Income and Growth Fund Schedule of Investment Portfolio As at December 31, 2017 Coupon Rate/ Yield (%) Maturity Date Number of Shares or Par Value Average Cost $ Fair Value $ Percentage of Net Assets % Media (December 31, 2016: 1.91%) Shaw Communications Inc. 42,100 1,165,629 1,207,849 Thomson Reuters Corp. 38,000 2,069,667 2,082,020 3,235,296 3,289, Food & Staples Retailing (December 31, 2016: 6.60%) Cott Corp. 177,875 3,174,800 3,731,818 Loblaw Cos. Ltd. 48,700 2,845,209 3,322,314 6,020,009 7,054, Financials (December 31, 2016: 16.23%) Bank of Nova Scotia 91,171 6,061,317 7,395,792 Brookfield Asset Management Inc. 21,000 1,032,461 1,149,120 Royal Bank of Canada 96,200 7,079,890 9,874,930 TMX Group Ltd. 16,800 1,127,544 1,183,392 Toronto-Dominion Bank 141,057 7,112,449 10,388,848 22,413,661 29,992, Insurance (December 31, 2016: 7.02%) Intact Financial Corp. 27,200 2,111,225 2,855,728 Manulife Financial Corp. 186,100 3,709,039 4,879,542 Sun Life Financial Inc. 41,000 1,619,138 2,127,080 7,439,402 9,862, Real Estate (December 31, 2016: 1.67%) First Capital Realty Inc. 59,800 1,270,947 1,239, Software & Services (December 31, 2016: 1.64%) Open Text Corp. 36,600 1,488,966 1,636, Telecommunication Services (December 31, 2016: 4.75%) Rogers Communications Inc. 44,500 2,292,853 2,850,225 TELUS Corp. 48,700 2,261,774 2,319,094 Utilities (December 31, 2016: 1.09%) 4,554,627 5,169, Algonquin Power & Utilities Corp. 100,387 1,173,861 1,411,441 Northland Power Inc. 34, , ,570 1,977,137 2,210, Total Canadian Common Stocks 84,065,569 97,150, Income Trusts (December 31, 2016: 8.76%) Allied Properties REIT 93,900 3,525,771 3,951,312 Canadian Apartment Properties REIT 157,300 4,884,658 5,870,436 Chartwell Retirement Residences (REIT) 373,586 4,709,816 6,074,508 H&R REIT 57,700 1,309,221 1,232,472 RioCan REIT 51,200 1,372,156 1,247,232 Smart REIT 39,725 1,094,031 1,227,900 Total Income Trusts 16,895,653 19,603, Limited Partnerships (December 31, 2016: 6.93%) Brookfield Infrastructure Partners LP 94,253 2,912,280 5,313,984 Brookfield Property Partners LP 109,405 2,742,756 3,046,929 Total Limited Partnerships 5,655,036 8,360, The accompanying notes are an integral part of these financial statements. 10

11 CC&L Core Income and Growth Fund Schedule of Investment Portfolio As at December 31, 2017 Coupon Rate/ Yield (%) Maturity Date Number of Shares or Par Value Average Cost $ Fair Value $ Percentage of Net Assets % Embedded Broker Commissions (note 3) (86,775) Total Investments 137,041, ,357, Other Assets Less Liabilities 98, Net Assets Attributable to Holders of Redeemable Units 155,455, The accompanying notes are an integral part of these financial statements. 11

12 CC&L Core Income and Growth Fund Notes to Financial Statements Fund Specific Information December 31, 2017 and 2016 These fund specific notes shall be read in conjunction with the accompanying notes to the financial statements which are an integral part of these financial statements. Reporting entity and investment objective (Note 1) The CC&L Core Income and Growth Fund was originally established as a closed-end investment trust under the laws of Ontario pursuant to a trust agreement (the Core Income Trust Agreement ) between Aston Hill Capital Markets Inc. (formerly known as Connor, Clark & Lunn Capital Markets Inc.), the then manager of the Core Income Fund, and RBC Investor Services Trust (formerly known as RBC Dexia Investor Services Trust) ( RBC IS ) dated November 29, 2001, as amended on June 8, 2010 and May 31, On December 12, 2001, the Fund completed its initial public offering raising in excess of $100 million. On June 14, 2010 (the Merger Date ), the Fund merged with the Connor, Clark & Lunn Conservative Income Fund II ( Conservative II ), with the Fund as the continuing Fund (the Merger ). The continuing Fund was renamed the Connor, Clark & Lunn Conservative Income & Growth Fund. On February 1, 2011 (the Second Merger Date ), the Fund merged with the Connor, Clark & Lunn Conservative Income Fund ( CCQ ) (the Second Merger ). The Fund was also the continuing Fund. The initial units of the Fund, each subsequently redesignated as Series C units, were delisted from the Toronto Stock Exchange on May 31, 2012 and the Fund converted to an open-end mutual fund trust on May 31, 2012, in accordance with the provisions of the Trust Agreement (the Conversion ). The Trust Agreement was amended on May 31, 2012 to (i) to redesignate the outstanding units as Series C units and (ii) to create the Series A units and Series F units. On May 31, 2012 the Fund changed its name to the CC&L Core Income and Growth Fund in connection with the conversion. Pursuant to an assignment and assumption agreement dated August 14, 2013 between Connor, Clark & Lunn Funds Inc. ( CFI ) and Aston Hill Capital Markets Inc., management of the Fund and its related agreements, including the Core Income Trust Agreement, were assigned to CFI by Aston Hill Capital Markets Inc., an affiliate of CFI at the time of the assignment. As a result of this assignment CFI became the manager of the Fund effective August 14, The address of the Fund s registered office is West Georgia Street, Vancouver, British Columbia, V6E 4M3. The investment objective of the Fund is to deliver an attractive and sustainable yield and growth to outpace inflation by investing in a diversified mix of dividend paying Canadian equities, REITs and equity securities of real estate companies, and corporate bonds. The Fund seeks to achieve its investment objectives by diligently selecting and actively managing a diversified portfolio of high income investments across a broad range of income-oriented securities. Fair value of financial instruments (Note 5) Classification and measurement of investments and application of the fair value option The tables below illustrate the classification of the Fund s financial instruments measured at fair value at the reporting date. The amounts are based on the values recognized in the Statements of Financial Position. 12

13 CC&L Core Income and Growth Fund Notes to Financial Statements Fund Specific Information December 31, 2017 and 2016 As at December 31, 2017: Assets at Fair Value Level 1 Level 2 Level 3 Total Short-term investments $ - $ 2,394,636 $ - $ 2,394,636 Bonds - 27,847,487-27,847,487 Equities 97,150, ,150,680 Income trusts 19,603, ,603,860 Limited partnerships 8,360, ,360,913 $ 125,115,453 $ 30,242,123 $ - $ 155,357,576 As at December 31, 2016: Assets at Fair Value Level 1 Level 2 Level 3 Total Short-term investments $ - $ 4,794,403 $ - $ 4,794,403 Bonds - 22,499,408-22,499,408 Equities 96,383, ,383,960 Income trusts 12,770, ,770,620 Limited partnerships 10,104, ,104,854 $ 119,259,434 $ 27,293,811 $ - $ 146,553,245 There were no transfers of financial assets between Level 1, Level 2 and Level 3 for the years ended December 31, 2017 and All fair value measurements above are recurring. Redeemable units of the Fund (Note 6) The Fund has three series of units available for issue, namely Series A, C and F. Series A units were created on June 13, 2012 and are available to all investors who purchase through dealers and who invest the minimum amount. On May 31, 2012 and following the Conversion mentioned in Note 1 above, the units of the Fund were delisted on the TSX and 2,157,741 units were redesignated as Series C units as the Fund was converted into an open-ended mutual fund. Series F units were created on June 19, 2012 and are available to investors who participate in fee based programs through their dealer. For the years ended December 31, 2017 and 2016, changes in outstanding units were as follows: Balance - Beginning Redeemable units Redeemable units Redeemable units Balance of year issued reinvested redeemed End of year Series A 2,493, ,167 82,285 (603,949) 2,479,366 Series C 733,641 9,522 2,194 (115,446) 629,911 Series F 1,428, ,270 41,516 (414,931) 1,796, Series A 2,050, ,588 72,974 (465,424) 2,493,863 Series C 855,826 9,424 1,834 (133,443) 733,641 Series F 710, ,200 25,478 (233,551) 1,428,251 13

14 CC&L Core Income and Growth Fund Notes to Financial Statements Fund Specific Information December 31, 2017 and 2016 Taxation of Fund (Note 7) As at December 31, 2017 the Fund had unused capital losses of $10,719,648 ( $12,933,781), which may be carried forward indefinitely to reduce future realized capital gains. The Fund had unused non-capital losses of $Nil ( $Nil). Related party transactions and other expenses (Note 8) Management fees The Fund pays a management fee, which is accrued daily and paid monthly. The annual management fee rates, exclusive of taxes, are 1.90% for Series A, 1.50% for Series C, and 0.90% for Series F. The Fund pays the trailer fees (detailed below) and the Investment Manager out of these management fees. The total management fees charged to the Fund during the year ended December 31, 2017, net of the trailer fees, were $1,565,696 including applicable taxes ( $1,250,422). Trailer fees The Fund pays trailer fees to dealers whose clients hold the Series A and Series C units in the Fund. The trailer fees are paid by the Investment Manager out of management fees (detailed above) charged to the Fund. The trailer fees are calculated and payable each calendar quarter in arrears and are equal to 1.0% annually of the NAV of the Series A units and 0.40% annually of the NAV of Series C units. No trailer fees are charged to Series F units. The total trailer fees paid by the Fund during the year ended December 31, 2017 were $875,817 ( $756,435). Brokerage commissions and other transaction costs (Note 9) The Fund paid $96,610 ( $104,379) in brokerage commissions and other transactions costs for portfolio transactions during the year. The soft dollars paid during the year were $12,342 ( $6,896). Financial risk management (Note 10) Currency risk As at December 31, 2017 and 2016, currency risk was negligible as the Fund had no significant exposure to foreign currencies. Interest rate risk As at December 31, 2017, the Fund had direct exposure to interest rate risk through its investment in fixed income and short-term debt. The tables below summarize the Fund s exposure to interest rate risk as at December 31, 2017 and Amounts shown are based on the carrying values of debt instruments and exclude cash and preferred shares. 14

15 CC&L Core Income and Growth Fund Notes to Financial Statements Fund Specific Information December 31, 2017 and 2016 As at December 31, 2017: Total % of Debt Instruments Grouped by Maturity Date $ Net Assets Less than 1 year 2,394, to 3 years 4,515, to 5 years 5,078, Greater than 5 years 18,253, Total 30,242, As at December 31, 2016: Total % of Debt Instruments Grouped by Maturity Date $ Net Assets Less than 1 year 4,794, to 3 years 3,668, to 5 years 2,344, Greater than 5 years 16,486, Total 27,293, As at December 31, 2017, had prevailing interest rates raised or lowered by 1.0%, with all other variables held constant, net assets would have decreased or increased, respectively, by approximately $1,632,000 ( $1,352,000). In practice, actual results may differ from this sensitivity analysis and the difference could be material. Other price risk As at December 31, 2017 and 2016, the Fund was exposed to other price risk primarily through its equity investments. Approximately 80.5% ( %) of the Fund s net assets were exposed to other price risk because of exposure to market fluctuations (not caused by other factors mentioned previously). If stock prices of the portfolio held increased or decreased by 10%, all other variables held constant, the net assets of the Fund would have increased or decreased, respectively, by approximately $12,512,000 ( $11,926,000). In practice, actual results may differ from this sensitivity analysis and the difference could be material. Credit risk The tables below summarize the Fund s exposure to credit risk as at December 31, 2017 and Amounts shown are based on the carrying values of debt instruments and the unrealized gain on derivative instruments outstanding with counterparties. Credit ratings are determined from a composite of bond rating services such as Standard & Poor s, Moody s and Dominion Bond Rating Services. As at December 31, 2017: Debt and Counterparty Credit Ratings $ Net Assets AAA 2,394, % AA 4,055, % A 12,181, % BBB 11,610, % Total 30,242, % Total % of 15

16 CC&L Core Income and Growth Fund Notes to Financial Statements Fund Specific Information December 31, 2017 and 2016 As at December 31, 2016: Debt and Counterparty Credit Ratings $ Net Assets AAA 4,794, % AA 5,075, % A 6,851, % BBB 10,572, % Total 27,293, % Liquidity risk The liquidity of some securities held by the Fund, which may need to be disposed of in order to meet immediate or short-term obligations, are susceptible to rapid negative movements in credit markets; in particular non-government issued fixed income securities found on the Schedule of Investments Portfolio. Like all fixed income securities, the market value of these securities is based on a credit risk premium or spread. The greater the credit risk associated with a security, the greater the spread demanded by holders. There is a negative correlation between the size of the spread and the value or price of the underlying security. To mitigate this risk, the Fund retains sufficient cash, cash equivalents and marketable securities that can be readily disposed of to maintain liquidity. Liquidity risk is considered negligible. The Fund s financial liabilities are all short-term in nature and are expected to mature within three months of the December 31, 2017 financial statement date, with the exception of redeemable units, which are due on demand. All of the Fund s financial liabilities as at December 31, 2016 matured within three months of the financial statement date. Concentration risk The Schedule of Investment Portfolio provides detailed information on the Fund s concentration risk exposure as at December 31, 2017 and Total % of 16

17 CC&L Equity Income and Growth Fund Statements of Financial Position As at December Assets Current assets Short-term investments $ 5,736,488 $ 10,188,201 Financial assets at fair value through profit or loss 293,016, ,418,563 Subscriptions receivable 352,619 1,599,617 Dividends receivable 774, ,291 Interest receivable 3,149 3, ,883, ,747,282 Liabilities Current liabilities Bank indebtedness 193, ,633 Management fees payable 207, ,864 Accrued expenses 90,852 44,055 Due to broker - 3,001,198 Distributions payable 808 4,027 Redemptions payable 240, , ,701 3,792,362 Net Assets attributable to holders of redeemable units $ 299,150,045 $ 256,954,920 Net Assets attributable to holders of redeemable units for each series Series A $ 80,852,475 $ 78,489,407 Series F $ 218,297,570 $ 178,465,513 Redeemable units outstanding (note 6) Series A 5,779,280 5,677,943 Series F 14,784,905 12,364,037 Net Assets attributable to holders of redeemable units per unit Series A $ $ Series F $ $ Approved by the Manager Director Director The accompanying notes are an integral part of these financial statements. 17

18 CC&L Equity Income and Growth Fund Statements of Comprehensive Income For the years ended December Income Other income $ 55,042 $ 127,541 Realized foreign exchange gain (loss) on currency (688) (2,741) Change in unrealized foreign exchange gain (loss) on currency 268 (1,342) Net gain (loss) on investments Dividends 8,144,381 5,152,695 Interest for distribution purposes 56,313 45,914 Income from income trusts 766, ,021 Net realized gain (loss) on investments 6,389,845 1,160,598 Net change in unrealized appreciation (depreciation) on investments 6,093,190 28,889,511 Total net gain (loss) on investments 21,450,553 36,140,739 Total income (loss), net 21,505,175 36,264,197 Expenses (note 8) Management fees 3,720,672 2,625,745 Audit fees 20,446 17,500 Custodial fees 79,114 60,966 Filing fees 30,668 30,494 Independent Review Committee fees 7,262 6,042 Independent Review Committee insurance Legal fees 3,191 14,008 Fundserv fees 10,288 6,444 Interest expense Securityholder reporting fees 332, ,428 Transaction costs (note 9) 183, ,150 Total operating expenses 4,388,791 3,183,436 Withholding taxes - (41) Increase (decrease) in Net Assets attributable to holders of redeemable units from operations $ 17,116,384 $ 33,080,720 Increase (decrease) in Net Assets attributable to holders of redeemable units for each series Series A $ 4,192,847 $ 10,988,877 Series F $ 12,923,537 $ 22,091,843 Weighted average units 1 Series A 5,938,437 5,148,111 Series F 14,270,041 9,299,088 Increase (decrease) in Net Assets attributable to holders of redeemable units per unit 1 Series A $ 0.71 $ 2.13 Series F $ 0.91 $ based on weighted average number of units outstanding during the year. The accompanying notes are an integral part of these financial statements. 18

19 CC&L Equity Income and Growth Fund Statements of Changes in Net Assets Attributable to Holders of Redeemable Units For the years ended December 31 Series A Series F Total Net Assets attributable to holders of redeemable units - Beginning of year $ 78,489,407 $ 178,465,513 $ 256,954,920 Increase (decrease) in Net Assets attributable to holders of redeemable units from operations 4,192,847 12,923,537 17,116,384 Redeemable unit transactions Proceeds from redeemable units issued 20,963,564 91,715, ,678,773 Reinvestments of distributions to holders of redeemable units 2,912,157 5,564,255 8,476,412 Redemption of redeemable units (22,434,884) (62,070,498) (84,505,382) Net increase (decrease) from redeemable unit transactions 1,440,837 35,208,966 36,649,803 Distributions to holders of redeemable units From net investment income (1,067,412) (2,708,968) (3,776,380) From return of capital (2,203,204) (5,591,478) (7,794,682) Total distributions to holders of redeemable units (3,270,616) (8,300,446) (11,571,062) Increase (decrease) in Net Assets attributable to holders of redeemable units during the year 2,363,068 39,832,057 42,195,125 Net Assets attributable to holders of redeemable units - End of year $ 80,852,475 $ 218,297,570 $ 299,150,045 Series A Series F Total Net Assets attributable to holders of redeemable units - Beginning of year $ 56,692,982 $ 85,761,301 $ 142,454,283 Increase (decrease) in Net Assets attributable to holders of redeemable units from operations 10,988,877 22,091,843 33,080,720 Redeemable unit transactions Proceeds from redeemable units issued 29,211, ,992, ,203,791 Reinvestments of distributions to holders of redeemable units 2,334,419 3,577,101 5,911,520 Redemption of redeemable units (18,042,785) (37,808,074) (55,850,859) Net increase (decrease) from redeemable unit transactions 13,502,772 75,761,680 89,264,452 Distributions to holders of redeemable units From net investment income (889,588) (1,699,587) (2,589,175) From return of capital (1,805,636) (3,449,724) (5,255,360) Total distributions to holders of redeemable units (2,695,224) (5,149,311) (7,844,535) Increase (decrease) in Net Assets attributable to holders of redeemable units during the year 21,796,425 92,704, ,500,637 Net Assets attributable to holders of redeemable units - End of year $ 78,489,407 $ 178,465,513 $ 256,954,920 The accompanying notes are an integral part of these financial statements. 19

20 CC&L Equity Income and Growth Fund Statements of Cash Flows For the years ended December Cash flows from (used in) Operating activities Increase (decrease) in Net Assets attributable to holders of redeemable units from operations $ 17,116,384 $ 33,080,720 Adjustments to reconcile to operating cash flows: Change in unrealized foreign exchange (gain) loss on currency (268) 1,342 Net realized (gain) loss on investments (6,389,845) (1,160,598) Net change in unrealized (appreciation) depreciation on investments (6,093,190) (28,889,511) Proceeds from investments sold 176,415, ,052,293 Purchase of investments (207,079,978) (253,652,545) (Increase) decrease in dividends and interest receivable (237,167) (145,740) Increase (decrease) in management fees payable 13,014 85,292 Increase (decrease) in accrued expenses 46,797 12,343 Net cash flows from (used in) operating activities (26,208,733) (80,616,404) Cash flows from (used in) Financing activities Proceeds from redeemable units issued 106,348, ,615,164 Redemption of redeemable units (77,072,872) (51,092,065) Distributions paid to holders of redeemable units, net of reinvestments (3,097,869) (1,930,906) Net cash flows from (used in) financing activities 26,177,302 80,592,193 Increase (decrease) in cash (bank indebtedness) Change in unrealized foreign exchange gain (loss) on currency 268 (1,342) Net increase (decrease) in cash (31,431) (24,211) Bank indebtedness, beginning of year (162,633) (137,080) Bank indebtedness, end of year $ (193,796) $ (162,633) Dividends received, net of withholding taxes* $ 7,906,753 $ 5,007,698 Interest received* 56,774 45,130 Interest paid* *included in operating activities The accompanying notes are an integral part of these financial statements. 20

21 CC&L Equity Income and Growth Fund Schedule of Investment Portfolio As at December 31, 2017 Coupon Rate/ Yield (%) Maturity Date Number of Shares or Par Value Average Cost $ Fair Value $ Percentage of Net Assets % Short-Term Investments Treasury Bills (December 31, 2016: 3.96%) Canadian Treasury Bill 1.090% 25-Jan ,000 99,773 99,773 Canadian Treasury Bill 0.869% 08-Feb , , ,293 Canadian Treasury Bill 0.872% 22-Feb-18 1,350,000 1,346,892 1,346,892 Canadian Treasury Bill 0.888% 08-Mar-18 1,600,000 1,596,479 1,596,478 Canadian Treasury Bill 1.042% 22-Mar-18 1,650,000 1,646,018 1,646,018 Canadian Treasury Bill 1.057% 05-Apr , , ,034 Total Short-Term Investments 5,736,489 5,736, Canadian Common Stocks Energy (December 31, 2016: 20.66%) ARC Resources Ltd. 433,800 7,637,615 6,398,550 Crescent Point Energy Corp. 510,000 7,874,318 4,885,800 Enbridge Inc. 121,600 6,261,889 5,977,856 Enbridge Income Fund Holdings Inc. 205,100 5,931,005 6,114,031 Inter Pipeline Ltd. 138,000 3,530,058 3,592,140 Keyera Corp. 223,713 8,681,326 7,923,914 Suncor Energy Inc. 138,600 5,010,948 6,396,390 TransCanada Corp. 154,500 9,340,861 9,452,310 Vermilion Energy Inc. 34,400 1,512,396 1,571,392 Whitecap Resources Inc. 513,900 5,189,139 4,599,405 60,969,555 56,911, Capital Goods (December 31, 2016: 5.52%) CAE Inc. 135,800 3,037,202 3,170,930 Finning International Inc. 157,200 4,031,410 4,986,384 SNC-Lavalin Group Inc. 158,600 8,769,658 9,048,130 WSP Global Inc. 88,264 3,542,419 5,287,896 19,380,689 22,493, Commercial Services & Supplies (December 31, 2016: 1.52%) Transportation (December 31, 2016: 4.08%) Canadian National Railway Co. 117,800 9,471,332 12,209, Consumer Services (December 31, 2016: 1.01%) Materials (December 31, 2016: Nil%) Agrium Inc. 43,300 5,922,794 6,260, Media (December 31, 2016: 2.47%) Shaw Communications Inc. 110,900 3,074,730 3,181,721 Thomson Reuters Corp. 102,800 5,632,756 5,632,412 8,707,486 8,814, Food & Staples Retailing (December 31, 2016: 8.57%) Cott Corp. 469,125 8,359,505 9,842,243 Loblaw Cos. Ltd. 128,400 8,029,797 8,759,448 16,389,302 18,601, Banks (December 31, 2016: 21.69%) Bank of Nova Scotia 243,450 16,703,328 19,748,664 Royal Bank of Canada 256,700 19,810,876 26,350,255 Toronto-Dominion Bank 391,306 21,116,946 28,819,687 57,631,150 74,918, The accompanying notes are an integral part of these financial statements. 21

22 CC&L Equity Income and Growth Fund Schedule of Investment Portfolio As at December 31, 2017 Coupon Rate/ Yield (%) Maturity Date Number of Shares or Par Value Average Cost $ Fair Value $ Percentage of Net Assets % Diversified Financials (December 31, 2016: Nil%) Brookfield Asset Management Inc. 58,400 2,873,203 3,195,648 TMX Group Ltd. 44,400 2,978,974 3,127,536 5,852,177 6,323, Insurance (December 31, 2016: 9.42%) Intact Financial Corp. 73,950 6,221,282 7,764,011 Manulife Financial Corp. 491,950 10,058,557 12,898,929 Sun Life Financial Inc. 109,300 4,512,951 5,670,484 20,792,790 26,333, Real Estate (December 31, 2016: 0.74%) Software & Services (December 31, 2016: 2.13%) Open Text Corp. 107,100 4,395,996 4,788, Telecommunication Services (December 31, 2016: 6.17%) Rogers Communications Inc. 142,100 7,437,039 9,101,505 TELUS Corp. 128,700 5,977,128 6,128,694 13,414,167 15,230, Utilities (December 31, 2016: 1.48%) Algonquin Power & Utilities Corp. 268,567 3,145,417 3,776,052 Northland Power Inc. 95,700 2,250,562 2,234,595 5,395,979 6,010, Total Canadian Common Stocks 228,323, ,895, Income Trusts (December 31, 2016: 3.55%) Allied Properties REIT 75,500 2,817,667 3,177,040 Canadian Apartment Properties REIT 105,800 3,513,476 3,948,457 Chartwell Retirement Residences (REIT) 492,458 6,643,452 8,007,367 Total Income Trusts 12,974,595 15,132, Limited Partnerships (December 31, 2016: 7.67%) Brookfield Infrastructure Partners LP 258,771 9,433,396 14,589,508 Brookfield Property Partners LP 157,934 4,233,466 4,398,462 Total Limited Partnerships 13,666,862 18,987, Embedded Broker Commissions (note 3) (159,615) Total Investments 260,541, ,753, Other Assets Less Liabilities 396, Net Assets Attributable to Holders of Redeemable Units 299,150, The accompanying notes are an integral part of these financial statements. 22

23 CC&L Equity Income and Growth Fund Notes to Financial Statements Fund Specific Information December 31, 2017 and 2016 These fund specific notes shall be read in conjunction with the accompanying notes to the financial statements which are an integral part of these financial statements. Reporting entity and investment objective The CC&L Equity Income and Growth Fund (the Fund ) is an open-ended mutual fund trust established under the laws of Ontario and is governed by the Declaration of Trust dated May 1, 2012 (the Declaration of Trust), as amended from time to time. The Fund commenced operations on May 1, The address of the Fund s registered office is King St. West, P.O. Box 240, Toronto, Ontario, Canada, M5X 1C8. The investment objective of the Fund is to construct a diversified portfolio of primarily income oriented equity instruments listed on a Canadian stock exchange with a view to maximize long-term total returns. The Fund seeks to generate returns in excess of the return of the S&P/TSX Composite Index. Fair value of financial instruments (Note 5) Classification and measurement of investments and application of the fair value option The tables below illustrate the classification of the Fund s financial instruments measured at fair value at the reporting date. The amounts are based on the values recognized in the Statements of Financial Position. As at December 31, 2017: Assets at Fair Value Level 1 Level 2 Level 3 Total Short-term investments $ - $ 5,736,488 $ - $ 5,736,488 Canadian equities 258,895, ,895,737 Limited partnerships 18,987, ,987,970 Income trusts 15,132, ,132,864 $ 293,016,571 $ 5,736,488 $ - $ 298,753,059 As at December 31, 2016: Assets at Fair Value Level 1 Level 2 Level 3 Total Short-term investments $ - $ 10,188,201 $ - $ 10,188,201 Canadian equities 219,603, ,603,037 Limited partnerships 19,696, ,696,442 Income trusts 9,119, ,119,084 $ 248,418,563 $ 10,188,201 $ - $ 258,606,764 There were no transfers of financial assets between Level 1, Level 2 and Level 3 for the years ended December 31, 2017 and All fair value measurements above are recurring. Redeemable units of the Fund (Note 6) The Fund has two series of units available for issue, namely Series A and F. Series A units are available to all investors who purchase through dealers and who invest the minimum amount. Series F units are available to investors who participate in fee based programs through their dealer. 23

24 CC&L Equity Income and Growth Fund Notes to Financial Statements Fund Specific Information December 31, 2017 and 2016 For the years ended December 31, 2017 and 2016, changes in outstanding units were as follows: Balance - Beginning Redeemable units Redeemable units Redeemable units Balance of year issued reinvested redeemed End of year Series A 5,677,943 1,513, ,143 (1,623,698) 5,779,280 Series F 12,364,037 6,320, ,971 (4,283,251) 14,784, Series A 4,653,484 2,235, ,876 (1,388,535) 5,677,943 Series F 6,815,739 8,089, ,336 (2,802,160) 12,364,037 Taxation of Fund (Note 7) As at December 31, 2017 the Fund had unused capital losses of $Nil ( $Nil). There were $Nil ( $Nil) unused non-capital losses available for tax purposes. Related party transactions and other expenses (Note 8) Management fees The Fund pays a management fee, which is accrued daily and paid monthly. The annual management fee rates, exclusive of taxes, are 1.90% for Series A and 0.90% for Series F. Brokerage commissions and other transaction costs (Note 9) The Fund paid $183,316 (2016 $190,150) in brokerage commissions and other transactions costs for portfolio transactions during the year. The soft dollars paid during the year were $16,083 (2016 $10,785). Financial risk management (Note 10) Currency risk As at December 31, 2017 and 2016, currency risk was negligible as the Fund had no significant exposure to foreign currencies. Interest rate risk As at December 31, 2017 and 2016, the Fund was exposed to interest rate risk through its investment in short-term debt instruments. If prevailing interest rates had been raised or lowered by 1.0%, assuming a parallel shift in the yield curve, with all other factors remaining constant, net assets attributable to holders of redeemable units would have decreased or increased by approximately $11,000 ( $18,000). In practice, actual results may differ from this sensitivity analysis and the difference could be material. 24

25 CC&L Equity Income and Growth Fund Notes to Financial Statements Fund Specific Information December 31, 2017 and 2016 Other price risk As at December 31, 2017 and 2016, the Fund was exposed to other price risk primarily through its equity investments. Substantially all of the Fund s net assets were exposed to other price risk because of exposure to market fluctuations (not caused by other factors mentioned previously). If stock prices of the portfolio held increased or decreased by 10%, with all other factors remaining constant, net assets attributable to holders of redeemable units would have increased or decreased by approximately $29,302,000 ( $24,842,000). In practice, actual results may differ from this sensitivity analysis and the difference could be material. Credit risk As at December 31, 2017 and 2016, the Fund was exposed to credit risk through its investment in short-term debt instruments that comprised approximately 1.92% ( %) of the Fund s net assets attributable to holders of redeemable units. All of the short-term investments were rated AA or better by Dominion Bond Rating Services (DBRS). Liquidity risk The Fund retains sufficient cash, cash equivalents and marketable securities that can be readily disposed of to maintain liquidity. Liquidity risk is considered negligible. The Fund s financial liabilities are all short-term in nature and are expected to mature within three months of the December 31, 2017 financial statement date, with the exception of redeemable units, which are due on demand. All of the Fund s financial liabilities as at December 31, 2016 matured within three months of the financial statement date. Concentration risk The Schedule of Investment Portfolio provides detailed information on the Fund s concentration risk exposure as at December 31, 2017 and

26 CC&L Global Alpha Fund Statements of Financial Position As at December Assets Current assets Cash $ 10,745,348 $ 1,829,971 Financial assets at fair value through profit or loss 423,244, ,790,855 Withholding taxes receivable 56,252 84,482 Subscriptions receivable 665,301 1,071,940 Dividends receivable 345, ,261 Due from broker - 1,660, ,056, ,599,126 Liabilities Current liabilities Management fees payable 432, ,321 Accrued expenses 33,420 17,995 Due to broker 4,347,726 1,536,827 Distributions payable 27,425 3,368 Redemptions payable - 13,382 4,841,050 1,844,893 Net Assets attributable to holders of redeemable units $ 430,215,790 $ 260,754,233 Net Assets attributable to holders of redeemable units for each series Private Client Series $ 366,083,902 $ 243,430,957 Series A $ 7,982,085 $ 3,759,408 Series F $ 12,986,515 $ 2,801,830 Series I $ 43,163,288 $ 10,762,038 Redeemable units outstanding (note 6) Private Client Series 20,864,770 14,440,695 Series A 744, ,308 Series F 1,189, ,459 Series I 4,045,524 1,049,836 Net Assets attributable to holders of redeemable units per unit Private Client Series $ $ Series A $ $ Series F $ $ Series I $ $ Approved by the Manager Director Director 26

27 CC&L Global Alpha Fund Statements of Comprehensive Income For the years ended December Income Realized foreign exchange gain (loss) on currency $ 373,011 $ (99,552) Change in unrealized foreign exchange gain (loss) on currency (175,026) 11,875 Net gain (loss) on investments Interest for distribution purposes 5, Dividends 4,270,961 3,070,003 Income from income trusts 870, ,300 Net realized gain (loss) on investments 35,523,313 16,376,763 Change in unrealized appreciation (depreciation) of investments 4,258,578 2,396,380 Total net gain (loss) on investments 44,928,613 22,155,067 Total income (loss), net 45,126,598 22,067,390 Expenses (note 8) Management fees 1,852,041 1,299,940 Audit fees 20,749 17,799 Custodial fees 101,161 75,324 Filing fees 2,161 4,139 Independent Review Committee fees 7,211 6,042 Independent Review Committee insurance Interest expense 19,595 7,733 Securityholder reporting fees 25,523 26,742 Transaction costs (note 9) 572, ,121 Total operating expenses 2,601,841 1,993,560 Withholding taxes (607,827) (364,132) Increase (decrease) in Net Assets attributable to holders of redeemable units from operations $ 41,916,930 $ 19,709,698 Increase (decrease) in Net Assets attributable to holders of redeemable units for each series Private Client Series $ 37,273,498 $ 18,363,255 Series A $ 569,505 $ 281,229 Series F $ 655,401 $ 303,173 Series I $ 3,418,526 $ 762,041 Weighted average units 1 Private Client Series 16,191,712 13,388,866 Series A 504, ,486 Series F 550, ,655 Series I 2,323,094 1,000,000 Increase (decrease) in Net Assets attributable to holders of redeemable units per unit 1 Private Client Series $ 2.30 $ 1.37 Series A $ 1.13 $ 0.73 Series F $ 1.19 $ 1.02 Series I $ 1.47 $ based on weighted average number of units outstanding during the year. 27

28 CC&L Global Alpha Fund Statements of Changes in Net Assets Attributable to Holders of Redeemable Units For the years ended December 31 Private Client Series Net Assets attributable to holders of redeemable units - Beginning of year $ 243,430,957 $ 231,125,315 Increase (decrease) in Net Assets attributable to holders of redeemable units from operations 37,273,498 18,363,255 Redeemable unit transactions Proceeds from redeemable units issued 90,909,638 26,519,015 Reinvestments of distributions to holders of redeemable units 30,442,857 12,442,256 Redemption of redeemable units (5,331,562) (32,571,435) Net increase (decrease) from redeemable unit transactions 116,020,933 6,389,836 Distributions to holders of redeemable units From net investment income (2,282,282) (1,556,237) From net realized capital gains (28,359,204) (10,891,212) Total distributions to holders of redeemable units (30,641,486) (12,447,449) Increase (decrease) in Net Assets attributable to holders of redeemable units during the year 122,652,945 12,305,642 Net Assets attributable to holders of redeemable units - End of year $ 366,083,902 $ 243,430,957 Series A Net Assets attributable to holders of redeemable units - Beginning of year $ 3,759,408 $ 3,813,490 Increase (decrease) in Net Assets attributable to holders of redeemable units from operations 569, ,229 Redeemable unit transactions Proceeds from redeemable units issued 5,345,823 1,013,488 Reinvestments of distributions to holders of redeemable units 450, ,715 Redemption of redeemable units (1,510,971) (1,336,418) Net increase (decrease) from redeemable unit transactions 4,285,711 (165,215) Distributions to holders of redeemable units From net realized capital gain (632,539) (170,096) Total distributions to holders of redeemable units (632,539) (170,096) Increase (decrease) in Net Assets attributable to holders of redeemable units during the year 4,222,677 (54,082) Net Assets attributable to holders of redeemable units - End of year $ 7,982,085 $ 3,759,408 28