2013 Annual Report
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Fiera Capital is Canada’s 3rd largest publicly traded independent asset
manager with $77.5 billion in assets under management and 400 employees
located in 7 offices across North America.* After 10 years of success,
10 acquisitions, a record 2013 and ambitious growth plans for the future,
Fiera Capital’s numbers continue to tell a compelling story of excellence,
innovation and strong performance.
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2013 was another record year for
Fiera Capital, experiencing growth
in all of its market segments while
extending its reach in the United
States. Our firm is well positioned
to become a North American leader
in the next few years.”
JUERG GRIMM, SENIOR VICE PRESIDENT, INVESTMENT
ANALYST, PORTFOLIO MANAGER, NEW YORK
ii
up 33%
year-over-year
Creation
More than
of a powerful
North American
private wealth
division with AUM
of more than
net earnings*
increase to
$14.9 million
* Attributable
to the Company’s
shareholders
strategic
acquisitions
in 2013, including
in Los Angeles
and New York
for the year
* Attributable to the Company’s shareholders
2013: Another Record Year for
Fiera Capital
A year-over-year increase of 10%, bringing its CAGR since
inception to 16%
$59 million in adjusted EBITDA,*
a year-over-year increase of .
* Excludes non-cash compensation, acquisition and
restructuring related costs
revenue increase for a
total of $154 million
compared to the same
period in 2012*
* In 2012, the Company changed its
year-end from September 30
to December 31
employees
in 7 offices
in Canada
& the U.S.
with 150
investment
professionals
on board
With 400 employees and
growing, Fiera Capital has
a strong team of passionate
professionals that share in the
same entrepreneurial culture
and in the same values of
professionalism, excellence,
innovation and teamwork.”
MARTINE DROLET, DIRECTOR, HUMAN RESOURCES
AND TALENT MANAGEMENT, MONTREAL
iv
TABLE OF CONTENTS
002
007
009
013
014
017
An Industry Leader
A Message from the Chairman
A Conversation with
the President and COO
A Record Year
Industry Recognition
Unrivalled Expertise
018
021
060
061
101
103
Our Board of Directors
Management’s Discussion
and Analysis
Independent Auditor’s Report
Consolidated
Financial Statements
Corporate Information
Contact Us
An Industry Leader
Founded in 2003 by Jean-Guy Desjardins, Fiera Capital (TSX: FSZ.TO) is a leading
publicly traded investment firm offering unique expertise in both traditional and
alternative investment strategies. Fiera Capital is also one of only a handful of
independent Canadian investment firms providing extensive knowledge in fixed
income, liability-driven investment solutions, equity, asset allocation and non-
traditional investment solutions through a broad range of strategies and services.
An Ambitious Vision
Fiera Capital is a leading-edge and prominent Canadian
investment firm with a clear vision for the future. Fiera Capital
aims to become a leading North American investment
management firm recognized for its superior portfolio
management capabilities, innovative investment solutions,
and its ability to surpass client expectations in all major
market segments.
Fiera Capital will become a North American leader while
continuing to deliver competitive and tailored multi-style
investor solutions to its diversified and growing clientele
of investors.
The Power of Thinking
Fiera Capital is committed to excellence in investment
management services, and we believe in a disciplined,
methodical analysis and the consistent application of
a rigorous investment approach to produce superior
performance. Our active management model stresses
teamwork and the free exchange of ideas among a group of
highly experienced investment professionals.
We are also a client-focused organization, which
continually strives to provide the highest level of service in
order to always exceed our clients’ expectations, maintain
trust and build long-term relationships.
Successful
Organic and
Strategic Growth
OCTOBER 2005
Acquisition of Senecal
Investment Counsel
FEBRUARY 2006
Acquisition of YMG
Capital Management
SEPTEMBER 2003
Creation of Fiera Capital through
the acquisition of Elantis, Desjardins
Group’s investment subsidiary
2005
Introduction of first
alternative strategy
DECEMBER 2008
Creation of Fiera
Axium Infrastructure
2
2
FIERA CAPITAL’S VALUES
Professionalism
& Integrity
Excellence
Teamwork
& Transfer of
Knowledge
Accountability
Innovation &
Entrepreneurship
A Strong Team
With offices across North America, the firm has over
400 employees and benefits from the expertise and diversified
experience of approximately 150 investment professionals.
Our structure promotes excellence within our
specialized investment teams by combining the flexible
and efficient environment of a multi-style investment
manager with the scale of resources offered by one of
Canada’s leading investment firms.
Integrated solutions diversified by asset class and investment
style, and supported by a disciplined risk management
framework, are key to achieving our superior returns.
Guided by Shared Values
Our firm is also guided by strong values, shared by
all the members of our diversified and growing team
of dedicated individuals: professionalism & integrity;
excellence; teamwork & transfer of knowledge;
accountability; innovation & entrepreneurship.
In addition to these shared values, a climate of
ownership is equally important. To engage each team
member in our goals, we promote equity ownership
in our firm. This fosters a strong sense of responsibility,
long-term retention of key personnel and superior
cohesion within the group.
SEPTEMBER 2010
Listing on Toronto
Stock Exchange
SEPTEMBER 2011
Establishment of
first office in the
United States
APRIL 2012
Acquisition of
Natcan Investment
Management Inc.
2009
Creation of foreign
equity team
Merger with Sceptre
Investment Counsel
Limited
DECEMBER 2011
Creation of
Fiera Properties
Limited
Acquisition of
Roycom Inc.,
merger with Fiera
Properties Limited
Fiera Capital Corporation 2013 Annual Report | 3
AUM TREND
$B
80
70
60
50
40
30
20
10
0
CAGR 32%
5
7
10
77.5
58.1
21
21
21.4
18
30.8
29.5
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
10 Years of Creating Value and Sustainable Growth
Fiera Capital may not have become a prominent Canadian
investment firm overnight, but its path to success has
certainly been an accelerated one. In just a decade,
Fiera Capital has become a true leader in its field with a
strong track record of organic growth and 10 successful
strategic acquisitions. It has also grown its portfolio of
investment strategies from less than 10 in 2003 to over
55 today.
Fiera Capital’s proven ability to pursue and integrate
acquisitions while maintaining its focus on investment
portfolio performance is a testament to the strength of
its team and its growth strategy.
Fiera Capital recognizes the importance of attracting and
retaining the best portfolio managers, allowing it to continue
to create value for all of its stakeholders.
We have solidified our leading position in Canada
as the 3rd largest publicly traded independent asset
manager in the country and the 6th overall.
JANUARY 2013
Acquisition of Canadian institutional
assets from UBS Global Asset
Management (Canada) Inc.
OCTOBER 2013
Acquisition of Bel Air Investment
Advisors LLC, as well as Wilkinson
O’Grady & Co., Inc.
NOVEMBER 2012
Acquisition of Canadian Wealth
Management Group Inc.
MAY 2013
Acquisition of selected alternative
management assets from GMP Limited
Partnership and creation of Fiera Quantum
4
Since 2003, we have
been introducing innovative
investment strategies
adapted to current market
environments. Our goal is
to provide clients with
optimized, personalized
investment solutions
while delivering superior
risk-adjusted returns.”
FRANÇOIS BOURDON, CHIEF INVESTMENT
SOLUTIONS OFFICER, MONTREAL
Fiera Capital Corporation 2013 Annual Report | 5
LEFT: SYLVAIN BROSSEAU, PRESIDENT
AND CHIEF OPERATING OFFICER
RIGHT: JEAN-GUY DESJARDINS,
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
6
A Message from the Chairman:
Our Numbers Tell a Story
Dear Shareholders,
2013 was another record year for Fiera Capital and it also marked the 10th anniversary of our
firm…what a decade it has been! 10 acquisitions in 10 years. From a team of just 50 in the early
days to over 400 employees at the end of 2013. From $5 billion to over $77 billion in assets
under management. From less than 10 strategies to more than 55 today. There is no doubt that
our numbers tell a compelling story, one of excellence, of continued growth and of an ever-
promising future.
Since Fiera Capital’s founding in 2003, strategic acquisitions and organic growth have
peppered our path to becoming Canada’s 3rd largest asset manager, independent and publicly
traded, recognized in the market for excellence, integrity and innovation, and for a laser focus
on investment performance and surpassing client expectations.
In the last few years in particular, Fiera Capital has proven that it is truly a force to be reckoned
with. In early 2012, Fiera Capital accomplished no small feat by doubling in size following
the acquisition of Natcan, and quickly demonstrated its ability to successfully integrate new
assets, new teams and new services. Less than two years later, Fiera Capital is a leading firm of
like-minded, creative and collaborative professionals, whom I consider to be the best and the
brightest the industry has to offer; and is poised to become a North American leader in both
traditional and non-traditional investment solutions.
RECENT SUCCESSES
While 2012 was a transformational year for our firm, 2013 was about putting the building
blocks in place for our five-year plan to become a North American leader. This included gaining
a stronger foothold in the United States, as well as growing our presence and client offering in
certain asset classes and market segments.
In late 2011, Fiera Capital began to establish a presence in the United States, a market
that presents boundless opportunities but that can be challenging to pierce. Following our
continued work in this territory and the strategic acquisition of two U.S.-based wealth managers
in 2013, Bel Air Investment Advisors LLC and Wilkinson O’Grady & Co., Inc., Fiera Capital
now has a meaningful U.S. presence through these affiliates with offices in Los Angeles and
New York. In fact, at the end of 2013, over 10% of our assets under management came from the
U.S. These acquisitions also contributed towards growing our presence in the North American
private wealth sector, thereby further diversifying our sources of revenue.
Fiera Capital Corporation 2013 Annual Report | 7
Last year, Fiera Capital also broadened its product offering through acquisitions, namely in
Canadian fixed income, Canadian equity and domestic balanced accounts, as well as in alternative
assets. In terms of organic growth, we grew across all our market segments. We made significant
inroads in the U.S. by winning key institutional mandates, in addition to our association with world-
renowned Russell Investments in January 2014. These are but a few examples of our continued
efforts to stay at the top of our game and doing so while aiming for North American scale.
POISED FOR THE FUTURE
Taking pause to celebrate our 10th anniversary in 2013 was a wonderful opportunity to
revisit our recent successes, to recognize the incredible work achieved by our employees, our
management team and our Board of Directors. But despite this milestone, the fact is, we don’t
have much time to sit back and reflect because we continue to raise the bar for ourselves. The
next few years will be about solidifying our position as a true North American leader in the asset
management industry.
Our ambitious plans for future growth are not about getting bigger for the sake of it. It’s about
ensuring that we have the resources, talent and technology necessary to stay competitive in all
market segments for the next five, ten, fifteen years. It’s about continuing to deliver the same
stellar performance to the benefit of our clients, and ultimately our shareholders.
“Operating on a North American scale is an essential ingredient to this industry leadership.”
Our objective to reach over $150 billion in assets under management will be accomplished
through the continued execution of our strategic road map consisting of accretive acquisitions,
but mainly through organic growth. This will be made possible thanks to our investment
professionals and our client service teams who all embody the Power of Thinking and who will
continue to build even greater trust with our existing clientele as well as grow our client base in
the institutional, private wealth and retail sectors.
IT’S ALL ABOUT THE TEAM
If there is one thing I have learned in my career, it’s that our success lies not only in making the
right business decisions, but also in attracting and retaining top talent. It’s about building a team
of individuals who share the same values and the same goals. In this respect, Fiera Capital truly is
a leader.
I wish to sincerely thank our 400 employees for their incredible work this year, and I also wish
to take this opportunity to welcome those who have recently joined our team. In the same vein,
I would like to recognize the work of the management team for leading this company with vision
and determination.
I thank members of our Board of Directors for their continued wisdom and direction, as well
as our shareholders for their continued support. Last but not least, I thank our clients for their
continued trust in us, because at the end of the day, it’s all about you.
I have no doubt that in 2014, our numbers will continue to tell a great story, one that reflects
the creativity, the integrity and the know-how of the team that always aims to be the best!
Jean-Guy Desjardins
Chairman of the Board and Chief Executive Officer
8
Q&A
A Conversation with Sylvain Brosseau,
President and Chief Operating Officer
How would you describe Fiera Capital’s financial performance in 2013?
I am extremely proud of Fiera Capital’s performance in 2013. It was a record year in terms
of assets under management, revenues and earnings. Once again, Fiera Capital delivered solid
growth to the benefit of shareholders.
“Our robust results are a testimony to the strength of our acquisition strategy, whereby we
are efficiently leveraging our fixed costs through accretive acquisitions.”
Given our record results and our effective cash flow management practices, the Board
approved a quarterly dividend increase of 10% to $0.11 per share. In fact, Fiera Capital’s dividend
per share has increased every year since its inception in 2010, bringing its compounded annual
growth rate to 16%.
Total assets under management increased by $19.5 billion, or 33%, to $77.5 billion compared
to $58.1 billion for fiscal 2012, making Fiera Capital the 3rd largest publicly traded independent
asset manager in Canada and the 6th largest overall. This increase was due in large part to
the four acquisitions made this year. New mandates won in all market segments, positive
net contributions from existing client accounts and market appreciation also contributed to
this growth.
Revenues increased by 55% to $154 million compared to $99 million for the same period
in the prior year. This reflects a full-year impact in 2013 from the Natcan and Canadian Wealth
Management acquisitions, in addition to the four acquisitions made during the year. Fuelled by
the solid returns of our portfolios, performance fees from both alternative and traditional asset
Fiera Capital Corporation 2013 Annual Report | 9
classes were exceptional this year, amounting to $12.1 million for fiscal 2013, an increase of
$7.4 million, or over 100%, compared to the same period last year.
With the continuous leveraging of our fixed costs, adjusted EBITDA increased by 61%
to $59 million for fiscal 2013 compared to the same period in 2012.
Net earnings per share attributable to the Company’s shareholders were $0.26, an increase
of more than 100% compared to $0.04 per share recorded for the same period ended
December 31, 2012.
What about your investment performance?
Investment performance is and always will be our top priority. Our business model is based
primarily on delivering excellence in investment management, and we are strongly committed
to bringing unique expertise to the table for a broad range of investment solutions, catering to
a diverse and ever-growing clientele.
I am pleased to say that we were able to once again generate strong returns for our clients in
2013. We were honored with industry awards such as the Fundata FundGrade® A+ Recognition
for our Global Equity Fund, in addition to being named one of the top five portfolio managers in
Canada according to the 2013 TopGun Investment Team rankings.
While North American equity markets generated strong returns overall, fixed income markets
faced certain challenges during the year. In this market environment, our portfolio managers,
who primarily rely on multi-strategy approaches, performed well – especially in the provincial
and corporate bond sectors. Since inception, our active fixed income and active fixed income
long-term portfolios have been in the top quartile and our tactical fixed income ranked first in
its universe.
Equities in 2013 generated strong returns across most sectors and our portfolios continued to
outperform indexes across the board. Our U.S. and global equity strategies delivered exceptional
results, both ranking in the top decile. Finally, alternative strategies such as the infrastructure
and real estate funds continued to experience strong momentum, fuelled by investors’ ever-
growing interest in non-traditional solutions. Our alternative strategies are a key differentiator
for us in the market, and an offering we are committed to further enhancing to better meet the
needs of our clients.
And we certainly won’t stop there. We are continuously innovating by bringing new strategies
to the market. As such, one of the largest open-ended Canadian property funds in 20 years was
jointly launched by Fiera Capital and Fiera Properties. Fiera Capital also added a new High Yield
Bond Fund to its existing suite of fixed income strategies.
Fiera Capital closed on four acquisitions in 2013. Can you explain the strategy
behind these?
In 2013, Fiera Capital completed four acquisitions aimed at adding even more depth to our
bench strength in terms of investment strategies and geographic diversification. The acquisition
of assets from GMP and UBS helped reinforce our leading portfolio management position
in Canada, further diversifying both our client base and our product offering. In terms of
geographic diversification and to establish ourselves south of the border, we acquired Bel Air
Investment Advisors LLC and Wilkinson O’Grady & Co., Inc., based in Los Angeles and New York,
respectively. These latter acquisitions are key to developing our North American platform, an
essential element of our five-year plan. We sought out quality and fit and that’s exactly what
these partners of caliber have brought to the table.
Overall, our growth is being driven by building a diversified team of professionals who share
the same values, and by creating an integrated North American platform that can deliver
10
superior services across all segments. Post-acquisition, our priority is integration, an ability we
have proven again and again, as well as the sharing of best practices and the leveraging of
synergies. We have a track record of success in these areas and will continue to only make
strategic acquisitions that extend our reach and enhance our expertise.
Looking back at 2013, what are you most proud of?
I am most proud of our exceptionally talented and passionate team. In fact, passion truly is the
cornerstone of our success. Fiera Capital was a 2013 Passion Capital Winner, a national awards
program recognizing organizations that have the energy, intensity and sustainability needed to
generate superior results. This achievement reflects the strength of our team.
I am also very proud of the significant inroads we have made in the U.S. this year. We created
a powerful North American private wealth platform. We also reached a significant milestone by
winning new mandates in the U.S. institutional sector. Our association with Russell Investments
is also of great significance as it enhances Fiera’s distribution capabilities and global market
reach. We are the first Canadian firm appointed to manage one of their global equity investment
strategies on a Canadian platform.
So what’s in store for Fiera Capital in 2014…and beyond?
Our focus is on maintaining our current leadership position in Canada while building a robust
North American platform within five years’ time. We intend to achieve our goal by expanding
two-thirds organically and the rest through strategic acquisitions.
Concretely, this means that we will offer a wide range of performing investment strategies
while ensuring that we have strong distribution channels. We also want to strengthen our
leadership position in the realm of non-traditional investment solutions and gain further
traction in sub-advisory segments. We will also continue to innovate and invest to ensure
best-in-class portfolio management capabilities.
In terms of potential acquisitions, we will be looking first and foremost at talent and
for additional investment solutions that will complement our current offering. With each
acquisition, we will increase scale while ensuring successful integration and the realization of
synergies and operational efficiency.
By becoming North American leaders, we will continue to create value for our clients and
our shareholders thanks to our scalable business model, our capacity to grow while staying
nimble and, most importantly, because of our ability to deliver continued growth through
strong investment performance.
Fiera Capital Corporation 2013 Annual Report | 11
Investment performance is our top
priority. Our success is measured by our
continued ability to meet and surpass
our clients’ expectations.”
CLAUDIO R. GAGLIARDI, SENIOR VICE PRESIDENT, PRIVATE WEALTH
CANDICE BANGSUND, VICE PRESIDENT AND PORTFOLIO MANAGER,
CANADIAN EQUITIES, CALGARY
12
A Record Year
2013 was the best year on record for Fiera Capital in terms of financial performance.
FINANCIAL HIGHLIGHTS
Assets Under Management
$77.5B
$58.1B
AS AT DECEMBER 31, 2013
AS AT DECEMBER 31, 2012
Revenues
Adjusted EBITDA1
Net Earnings2
Net Earnings Per Share2
FOR THE 12 MONTHS ENDED
DECEMBER 31, 2013
$153.7M
FOR THE 12 MONTHS ENDED
DECEMBER 31, 2012
$99.2M
$59.2M
$14.9M
$0.26
$36.7M
$2.2M
$0.04
1 Excludes non-cash compensation, acquisition and restructuring related costs 2 Attributable to the Company’s shareholders
GROWTH
33%
GROWTH
55%
61%
577%
550%
ASSETS UNDER MANAGEMENT
100%
100%
100%
Market Segment
Asset Class
Institutional
$41.5B
Retail
$25.5B
53%
33%
Private Wealth $10.5B
14%
Total
$77.5B 100%
Fixed Income $48.3B 62%
Canadian &
Foreign Equity $22.2B 29%
Asset Allocation &
Non-Traditional
Strategies
$7.0B
9%
Total
$77.5B 100%
Region
Quebec
Ontario
$39.8B
51%
$20.3B
26%
Western Canada $5.2B
Maritimes
$2.0B
7%
3%
United States
$8.6B
11%
Other
Total
$1.6B
2%
$77.5B 100%
REVENUE
100%
Institutional
Retail
Private Wealth
Total Performance Fees
Total Revenue
$69.4M
$51.9M
$20.3M
$12.1M
$153.7M
45.1%
33.8%
13.2%
7.9%
100%
Fiera Capital Corporation 2013 Annual Report | 13
Industry Recognition
In 2013, Fiera Capital’s continued success and strong performance resulted in a
number of industry nods. We are proud of our employees for the recognition they
have garnered thanks to their continued dedication and hard work, as well as their
unwavering commitment to the Power of Thinking.
2013 Passion Capital Winner
Fiera Capital was a 2013 Passion Capital Winner, a national awards program launched
by Knightsbridge Human Capital Solutions in partnership with Business News Network
(BNN), Global Governance Advisors and the National/Financial Post that celebrates
leading Canadian organizations that create Passion Capital: the energy, intensity, and
sustainability needed to generate superior results. It’s what enables small start-ups to
compete with large multinationals, and large multinationals to stay relevant over time.
Jean-Guy Desjardins Named 2013 Financial Person of the Year
For the second time in four years, Jean-Guy Desjardins, our Chairman and Chief Executive
Officer, was named Financial Person of the Year by Finance et Investissement, Canada’s
French-language publication for financial professionals. Every year, it ranks the top 25
influential people in Quebec’s financial services industry, with Mr. Desjardins coming in
first in 2013. Sylvain Brosseau, Fiera Capital’s President and Chief Operating Officer, was
also named in the top 25.
Top 5 TopGun Investment Mind
Fiera Capital was named one of the top five portfolio managers in Canada according to
the 2013 TopGun Investment Team rankings, published by Brendan Wood International, a
performance and career advisor assisting both firms and individuals. In 2013, its Canadian
panel considered more than 700 potential nominees, cast 1,700 ballots, and selected only
74 TopGun Investment Minds, making it the toughest competition since its inception.
TOPGUN
Fundata FundGrade® A+ Recognition
For 2013, the Fiera Capital Global Equity Fund won the Fundata FundGrade® A+
Recognition. This distinction is awarded annually to funds that achieve consistently high
FundGrade scores through an entire calendar year. The Fundata FundGrade A+ rating is
an objective, transparent, score-based calculation using a grade-point average that ranks
funds to determine the annual “best-of-the-best”. As such, the FundGrade A+ rating
provides investors, advisors and fund managers with a single, reliable, easy-to-understand
fund-performance rating based on an entire calendar year.
14
While Bel Air is new to the
Fiera Capital family, we couldn’t
be happier to have joined forces
with such a winning team. As
leading wealth managers, we
share in the same values, the
same drive for excellence and
commitment to delivering
superior results for our clients.”
CAROL CHENG-MAYER, SENIOR VICE PRESIDENT,
LOS ANGELES
Fiera Capital Corporation 2013 Annual Report | 15
Fiera Capital is well positioned to
support a broad range of investors
in reaching their financial goals.
This is thanks to the breadth of our
expertise but also to our state-of-
the-art technological capabilities,
which enable us to provide
customized client services
across all market segments.”
GREG STOREY, DIRECTOR OF OPERATIONS AND IT,
TORONTO
16
Unrivalled Expertise
Our Market Presence
Strong Partners
Institutional Markets
Fiera Capital offers a complete range of traditional and non-
traditional investment strategies through specialized and
balanced mandates for institutional markets. Our diversified
clientele includes pension funds, endowments, foundations,
religious and charitable organizations, and major municipality
and university funds.
The philosophy embraced by the institutional markets
team relies on a personalized approach, innovative investment
solutions, as well as the highest possible standards of
professionalism and integrity.
Retail
Our retail teams offer complete portfolio management
solutions to help individual investors achieve their financial
goals. Our strategies meet a broad and diverse range of needs,
whether in traditional or alternative products. Our alternative
funds are designed to generate returns that are not market
dependent. Generally available to accredited investors, these
funds can enhance portfolio returns and reduce portfolio risk.
As for our mutual funds, they are focused on the core asset
classes needed to construct a well-balanced portfolio. These
funds are available to all investors, some of them since 1985.
Our retail arm also works closely with distinctive
distribution networks across Canada, serving more than
two million customers. We communicate portfolio data
information, share knowledge, and provide a single access
point to our portfolio management team – a rare privilege in
our financial universe.
The retail teams’ philosophy is based on rigorous services
combined with a keen sense of innovation.
Private Wealth
Fiera Capital is a unique provider of sophisticated and highly
customized investment management services catering to the
specific needs of high-net-worth individuals and their families,
estates, foundations, trusts and endowments.
Our ability to offer both non-traditional investment
strategies and a proactive, tactical asset allocation process
in addition to the complete range of traditional investment
solutions clearly sets us apart from our peers.
The private wealth team’s investment philosophy
focuses on absolute returns and capital preservation
through a disciplined investment approach that leverages
the optimal usage of traditional and non-traditional wealth
management strategies.
Since its creation, Fiera Capital has positioned itself as a leader
in the realm of non-traditional investment solutions. Today,
we offer numerous alternative investment strategies with total
assets under management of close to $3 billion. Our partners,
Fiera Properties, Fiera Axium and Fiera Quantum, play key
roles in our non-traditional offering.
Fiera Properties
Fiera Properties Limited is a Canadian real estate investment
management company that provides direct real estate
investment opportunities to institutional investors, foundation
and endowment clients, and high-net-worth investors.
Committed to providing superior client-driven investment
strategies that continuously generate value for investors,
Fiera Properties is comprised of a team of experienced real
estate practitioners offering innovative solutions to meet
clients’ investment challenges.
Fiera Axium
Fiera Axium Infrastructure Inc. is an independent portfolio
management firm dedicated to generating attractive,
long-term investment returns through investing in core
infrastructure assets. It is led by a highly qualified team
of infrastructure investment specialists with decades of
combined experience acquiring, developing, financing,
operating and managing infrastructure assets.
Fiera Axium Infrastructure seeks to assemble a diversified
portfolio of high-quality assets, generating stable and predictable
cash flows within the energy, transportation and social
infrastructure sub-sectors. The firm manages two infrastructure
investment funds, Fiera Axium Infrastructure Canada L.P. and
Fiera Axium Infrastructure North America L.P. with aggregate
capital commitments totaling $824 million.
Fiera Quantum
Fiera Quantum Limited Partnership is a Toronto-based asset
management firm that strictly adheres to its proprietary
strategies, systems and technologies, which are designed
to deliver steady growth and manage volatility. While the
processes to generate Fiera Quantum’s consistent performance
are complex, the benefits are simple: preservation of capital, low
volatility, and absolute, risk-adjusted returns over the long-term.
Fiera Quantum manages portfolios for institutional, high-net-
worth and individual investors through its flagship funds, the
Fiera Quantum Diversified Alpha Master Fund, Ltd., the Canadian
ABCP Fund L.P. and selected separately managed accounts.
Fiera Capital Corporation 2013 Annual Report | 17
01
02
03
04
05
Our Board of Directors
Good corporate governance is a cornerstone of Fiera Capital’s
management practices and policies and its board is comprised
of 11 highly experienced directors.
01
02
Jean-Guy Desjardins is Chairman
of the Board and CEO of Fiera Capital.
Prior to founding Fiera Capital,
Mr. Desjardins co-founded TAL Global
Asset Management Inc. in 1972 and
was its principal shareholder until the
business was purchased by Canadian
Imperial Bank of Commerce. In 2013,
Jean-Guy Desjardins was named Financial
Person of the Year by the business
publication Finance et Investissement.
Sylvain Brosseau is President and
COO of Fiera Capital, and has over
22 years of experience in the
investment management industry.
Prior to joining Fiera Capital,
Mr. Brosseau served as executive
vice president, institutional markets
at TAL Global Asset Management,
and executive vice president at TAL
International, where he oversaw
worldwide distribution and operations.
18
06
07
08
09
10
11
03
04
05
Denis Berthiaume is Senior Vice
President and General Manager,
Wealth Management and Life and
Health Insurance at Desjardins Group.
In this capacity, he is responsible for
the activities of Desjardins Financial
Security, Desjardins Securities, Disnat
and Desjardins Asset Management.
During his career spanning 29 years,
Mr. Berthiaume has occupied strategic
functions that provided him with the
opportunity to touch on most of the
areas linked to life and health insurance
and to specialized savings products.
Raymond Laurin is a Corporate Director.
He served Desjardins Group in various
key capacities during a 32-year career,
including as CFO as of 2008, and one year
later, as senior vice president, Finance and
Treasury, and CFO. In addition, he served
as functional manager of the Desjardins
Group Audit and Inspection Commission,
the Fonds de sécurité Desjardins, the
Desjardins Group Pension Plan and its Board
of Directors, investment committee, and
audit, ethics and compliance committees.
Mr. Laurin is a Fellow of the Ordre des
comptables agréés du Québec.
Jean C. Monty is a Corporate Director.
In April 2002, Mr. Monty retired as
Chairman of the Board and CEO
of Bell Canada Enterprises (BCE Inc.),
following a distinguished 28-year
career. Prior to BCE Inc., he joined
Nortel Networks Corporation in 1992
as president and COO before becoming
president and CEO in 1993. Mr. Monty
was elected Canada’s Outstanding
CEO of the Year for 1997, and is
member of the Order of Canada. He
currently sits on the board of several
international companies.
06
07
08
Luc Paiement is Co-President
and Co-CEO of National Bank
Financial and Executive Vice
President – Wealth Management.
He is responsible for all wealth
management activities at National
Bank and its subsidiaries. During
his 30-year career at National Bank
Financial, he has held key positions in
brokerage, institutional equities and
corporate finance. He was one of
Canada’s Top 40 under 40™ in 1999.
David Pennycook leads Fiera Capital’s
Institutional Markets team and his
responsibilities include business
development and client servicing
for institutional clients. With over
34 years of industry experience,
Mr. Pennycook has been with the
firm and a predecessor since 1991.
Prior experience includes marketing
and servicing roles at major Canadian
investment management firms and
insurance companies.
Lise Pistono is Vice President and CFO
of DJM Capital Inc. Previously, she worked
for KPMG supporting public companies in
their disclosure requirements, and served
as senior finance officer for a Bell Canada
subsidiary and for a private office furniture
and supplies distribution company. She
also has prior experience in internal audit.
She has 20 years of teaching experience at
l’École des Hautes Études Commerciales
in the departments of Applied Economics,
Quantitative Methods and Accounting.
09
10
11
Arthur R.A. Scace is a Corporate
Director. He is a former managing
partner and chairman of McCarthy
Tétrault LLP, Barristers and
Solicitors, in Toronto. He is also
a former chairman of the Bank
of Nova Scotia. He serves on the
Board of Directors of a number of
Canadian corporations.
David R. Shaw is Founder and CEO
of Knightsbridge Human Capital
Management Inc., a national human
resources firm. Previously, he was
president and chief executive officer
of Pepsi Cola Canada Beverages
from 1996 to 1999. He is a former
chairman of the North York General
Hospital Foundation and sits on
several boards.
Louis Vachon has been President and
CEO of National Bank since 2007 and is
responsible for the strategies, direction
and development of the National Bank and
its subsidiaries. Prior experience includes
senior management positions at BT Bank
of Canada, Natcan and National Bank
Financial. He was named 2012 Financial
Personality of the Year by the publication
Finance et Investissement and in 2001 was
named one of Canada’s Top 40 Under 40TM.
Fiera Capital Corporation 2013 Annual Report | 19
Fiera Capital provides a
stimulating and dynamic work
environment in which everyone
is called upon to contribute to
the firm’s success.”
PASCALE HILAIRE, ADMINISTRATIVE TECHNICIAN,
MONTREAL
20
Management’s Discussion
and Analysis
For the Three and Twelve Months Ended December 31, 2013
The following management’s discussion and analysis (“MD&A”) provided as of March 19, 2014 presents an analysis of the
financial condition and results of operations of Fiera Capital Corporation (“the Company” or “Fiera Capital” or “we” or “Firm”)
for the three and twelve months ended December 31, 2013. The following MD&A should be read in conjunction with the
audited consolidated financial statements including the notes thereto, as at and for the year ended December 31, 2013. The
audited consolidated financial statements include the accounts of Fiera Capital and its wholly owned subsidiaries, Fiera Sceptre
Funds Inc., (“FSFI”) which is registered with various provincial securities commissions as a mutual fund dealer and maintains
membership in the Mutual Fund Dealer Association, Fiera US Holding Inc. (which owns Bel Air Investment Advisors, LLC., Bel Air
Securities, LLC, Bel Air Management LLC, and Wilkinson O’Grady & Co. Inc.), Fiera Quantum G.P. Inc., and 9276-5072 Quebec
Inc. (which collectively own a controlling 55% interest in Fiera Quantum Limited Partnership (“Fiera Quantum L.P.”) which owns
Fiera Quantum Holdings Limited Partnership, FQ ABCP GP Inc., FQ GenPar LLC and FQ ABCP (USA) GP Inc. ), and 8645230
Canada Inc. (which owns Gestion Fiera Capital S.a.r.l). All intercompany transactions and balances have been eliminated on
consolidation.
Fiera Axium Infrastructure Inc. (“Fiera Axium”) is an entity specialized in infrastructure investment, and Fiera Properties
Limited (“Fiera Properties”) is an entity specialized in real estate investments, over which the Company has joint control. The
financial results of the Company’s investments in its joint ventures are included in the Company’s results using the equity method
of accounting.
Figures are presented in Canadian dollars. Certain totals, subtotals and percentages may not reconcile due to rounding.
44 Liquidity
48 Control and Procedures
49 Financial Instruments
51 Significant Accounting Judgments
52 New Accounting Policies
53 Non-IFRS Measures
Twelve Months Ended December 31, 2013 53 Risks of the Business
22 Basis for Presentation
22 Forward-Looking Statements
22 Company Overview
23 Change in Fiscal Year-End
23 Significant Events
24 Summary of Portfolio Performance
25 Highlights for the Three and
30 Results from Operations
and Estimation Uncertainties
and Overall Performance
Fiera Capital Corporation 2013 Annual Report | 21
Basis for Presentation
The Company prepares its consolidated financial statements
in accordance with International Financial Reporting
Standards (“IFRS”), as issued by the International Accounting
Standards Board (“IASB”).
The policies applied in the audited consolidated financial
statements are based on IFRS issued and outstanding as at
December 31, 2013.
The preparation of financial statements in accordance with
IFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgment in the
process of applying the Company’s accounting policies. The
areas involving a higher degree of judgment or complexity,
or areas where assumptions and estimates are significant to
the audited consolidated financial statements are disclosed in
Note 3 of the audited consolidated financial statements.
The following MD&A should be read in conjunction with
the Company’s 2013 annual audited consolidated financial
statements, which contain a description of the accounting
policies used in the preparation of these financial statements.
The Company selected the adjusted earnings before
interest, taxes, depreciation and amortization (“Adjusted
EBITDA”) and the adjusted net earnings as non-IFRS key
performance measures. These non-IFRS measures are defined
on page 53.
Forward-Looking Statements
Forward-looking statements, by their very nature, involve
numerous assumptions, inherent risks and uncertainties, both
general and specific, and the risk that predictions and other
forward-looking statements will not prove to be accurate. As
a result, the Company does not guarantee that any forward-
looking statement will materialize and readers are cautioned
not to place undue reliance on these forward-looking
statements. A number of important factors, many of which are
beyond Fiera Capital’s control, could cause actual events or
results to differ materially from the estimates and intentions
expressed in such forward-looking statements. These factors
include, but are not limited to: Fiera Capital’s ability to maintain
its clients and to attract new clients, Fiera Capital’s investment
performance of Fiera Capital, Fiera Capital’s reliance on a
major customer, Fiera Capital’s ability to attract and retain key
employees, Fiera Capital’s ability to integrate successfully the
businesses that it acquires, industry competition, Fiera Capital’s
ability to manage conflicts of interest, adverse economic
conditions in Canada or globally including among other things,
declines in the financial markets, fluctuations in interest rates
and currency values, regulatory sanctions or reputational harm
due to employee errors or misconduct, regulatory and litigation
risks, Fiera Capital’s ability to manage risks, the failure of third
22
parties to comply with their obligations to Fiera Capital and
its affiliates, the impact of acts of God or other events of force
majeure; legislative and regulatory developments in Canada
and elsewhere, including changes in tax laws, the impact and
consequences of Fiera Capital’s indebtedness, potential dilution
of the share ownership that could occur and other factors
described under “Risk Factors” in this MD&A or discussed
in other materials filed by the Corporation with applicable
securities regulatory authorities from time to time. These
forward-looking statements are made as of the date of this
MD&A and the Company assumes no obligation to update or
revise them to reflect new events or circumstances, except as
may be required pursuant to securities laws.
Company Overview
Fiera Capital is an independent, full-service, multi-product
investment firm, providing investment advisory and related
services, with approximately $77.5 billion in assets under
management (“AUM”) including the joint ventures’ AUM.
Fiera Capital’s business model is based foremost on delivering
excellence in investment management to its clients. Fiera
Capital offers multi-style investment solutions through
diversified investment strategies to institutional investors,
private wealth clients and retail investors. In addition
to managing its clients’ accounts on a segregated basis
(“Managed Accounts”), Fiera Capital uses pooled funds to
manage specialized investment strategies and to combine
the assets of smaller clients for investment efficiencies
(“Pooled Funds”). To provide retail investors with access
to its investment management services, Fiera Capital also
acts as the investment manager of certain mutual funds,
a commodity pool fund and The Fiera Capital QSSP II
Investment Fund Inc. (the “Mutual Funds” and, collectively
with the Pooled Funds, the “Funds”).
Units of the Mutual Funds are distributed through Fiera
Sceptre Funds Inc. (“FSFI”), Fiera Capital’s wholly owned
subsidiary. FSFI is a member of the Mutual Fund Dealers
Association of Canada and is registered in the category of
mutual fund dealer in the provinces of British Columbia,
Alberta, Manitoba, Saskatchewan, Ontario, Quebec and
New Brunswick.
Fiera Capital is registered in the categories of exempt
market dealer and portfolio manager in all provinces and
territories of Canada. Following its acquisitions of Bel Air and
Wilkinson O’Grady, Fiera Capital terminated its registration as
an investment adviser with the SEC and acts as a “participating
affiliate” of Bel Air. Fiera Capital is also registered in the
category of investment fund manager in the provinces of
Ontario, Quebec and Newfoundland and Labrador. In addition,
as Fiera Capital manages derivatives portfolios, it is registered
as commodity trading manager pursuant to the Commodity
Management’s Discussion and Analysis Futures Act (Ontario), as an adviser under the Commodity
Futures Act (Manitoba) and, in Quebec, as derivatives portfolio
manager pursuant to the Derivatives Act (Quebec).
adding $8.3 billion in assets under management. The
total consideration for the transaction was approximately
US$156.25 million.
Change in Fiscal Year-End
In 2012, the Company decided to change its year-end from
September 30 to December 31. This change was made in
order to allow for a better alignment of the Company’s
operations processes.
Consequently, the twelve months ended December 31,
2013, will be analyzed in comparison with the twelve months
ended December 31, 2012, as well as the fifteen months
ended December 31, 2012.
Significant Events
Fiscal 2013 was a successful year during which Fiera Capital
forged its presence as a solid and growing force in the North
American asset management industry. The significant increase
in AUM, revenues and earnings is a testimony to the rationale
for the Firm’s expansion strategy.
Acquisitions
During the twelve months ended December 31, 2013, Fiera
Capital entered into four strategic transactions which are
currently being successfully integrated into Fiera Capital’s
existing business.
UBS Global Asset Management (Canada) Inc.
On January 31, 2013, Fiera Capital closed the transaction
to acquire the Canadian fixed income, Canadian equity and
domestic balanced account business from UBS Global Asset
Management (Canada) Inc. (“UBS”), further strengthening
Fiera’s client-driven service approach. The acquisition added
approximately $6 billion in assets under management for a
cash consideration of $48.1 million.
GMP Investment Management
In order to expand and strengthen the Firm’s alternative
strategies, Fiera Capital acquired, on May 1, 2013, selected
alternative asset management funds of GMP Investment
Management (“GMP”), representing approximately $0.6 billion
in assets under management. As part of the transaction, Fiera
Quantum L.P., a new Fiera Capital subsidiary, was created.
Bel Air and Wilkinson O’Grady
Fiera Capital has put in place a powerful North American
private wealth platform with the acquisitions, on October 31,
2013, of Los Angeles, California based Bel Air Investment
Advisors (“Bel Air”) and New York based investment
manager Wilkinson O’Grady & Co (“Wilkinson O’Grady”),
Financing Activities
In order to fund a portion of the purchase price for the
acquisition of Bel-Air, Fiera Capital issued for $105 million in
equity financing on a private placement bought deal basis.
Fiera Capital also renegotiated its credit facilities to benefit
from a $75 million revolving facility and a $175 million term
loan in order to finance the transactions and for general
corporate purposes.
Dividend Increase
The Board of Directors has declared a dividend of $0.11
per Class A subordinate voting share and Class B special
voting share of Fiera Capital, payable on April 29, 2014,
to shareholders of record at the close of business on
April 1, 2014.
Fiera Capital’s per share dividend has increased each year
since inception and has grown at a compounded annual rate
of 16%.
Investment Performance
Investment performance remains Fiera Capital’s highest
priority and the Firm is continuously innovating by bringing
new strategies to market. As such, one of the largest open-
ended Canadian property funds in 20 years was jointly
launched by Fiera Capital and Fiera Properties, in addition to
the introduction of the new High Yield Bond Fund.
The Firm delivered stellar performance in 2013, and
was honored with industry’s awards such as the Fundata
FundGrade® A+ Recognition; Fiera Capital’s Global Equity
Portfolio Manager won this distinction awarded annually
to funds that achieve consistently high FundGrade scores
through an entire calendar year.
Russell Investments
Fiera Capital has been selected by Russell Investments Canada
Limited and U.K. based Russell Investments Company II PLC
to sub-advise two of their global equity strategies. Fiera
Capital becomes the first Canadian firm appointed to manage
one of Russell’s global equity investment strategies on its
Canadian platform.
Passion Capital
Fiera Capital is a 2013 Passion Capital winner, a national
awards program launched by Knightsbridge Human Capital
Solutions in partnership with BNN, Global Governance
Advisors and the National/Financial Post. This award
celebrates the energy, intensity, and sustainability needed in
organizations to generate superior results.
Fiera Capital Corporation 2013 Annual Report | 23
Summary of Portfolio Performance
ANNUALIZED RATES OF RETURN
AUM
($billion)
48.3
Fixed Income Investment Strategies
Active Fixed Income
Tactical Fixed income
Long Bonds
High-Yield Bonds
Preferred Shares
Real Return Bonds
Corporate Bonds
Money Market Core Composite
Balanced Investment Strategies
4.5
Balanced Core
Diversified Fund
Equity Investment Strategies
Canadian Equity Value
High Income Equities
Canadian Equity Growth
Environment Fund
Canadian Equity Core
Canadian Equity Small Cap «Core»
Canadian Equity Small Cap
US Equities
International Equities
Global Equities
Alternative Investment Strategies
North American Market Neutral
Long / Short equities
Global Macro
Fiera Diversified Lending
Income Fund
Fiera Infrastructure Fund
Absolute Bond Yield
Total AUM
Notes:
22.2
2.5
77.5
Inception
Date
Jan 01, 1997
Jan 01, 2000
Jul 01, 1998
Sep 01, 2003
Jan 01, 2004
Jan 01, 1998
Feb 01, 2008
Jan 01, 2004
Jan 01, 1998
Jan 01, 2004
Jan 01, 2002
Oct 01, 2009
Jan 01, 2007
Jan 01, 2004
Jan 01, 1992
Jan 01, 1989
Dec 01, 1986
Apr 01, 2009
Jan 01, 2010
Oct 01, 2009
Oct 01, 2007
Aug 01, 2010
Nov 01, 2006
Apr 01, 2008
Jan 01, 2010
Nov 01, 2009
Dec 01, 2010
1 Year
(%)
(1.46)
(1.94)
(6.03)
7.11
(1.79)
(13.46)
1.16
1.28
15.64
12.98
15.81
23.83
17.31
16.60
16.42
34.42
34.56
47.96
26.42
37.76
11.84
44.22
5.29
8.48
0.05
8.34
0.69
3 years
(%)
5 years
(%)
10 years
(%)
Since Inception
Annualized
(%)
4.51
4.67
5.88
7.56
3.56
1.78
4.98
1.28
8.88
6.54
5.69
12.32
1.53
2.83
4.31
8.53
8.53
22.23
15.38
19.68
(0.35)
11.40
2.45
8.58
4.44
6.18
5.14
5.55
6.63
7.05
12.23
11.23
6.57
7.56
1.14
10.63
9.32
12.53
-
12.13
11.79
11.98
22.72
23.25
-
-
-
7.91
-
1.72
7.46
-
-
-
5.68
6.18
7.16
7.52
3.51
6.01
-
2.32
7.11
7.10
9.24
-
-
-
9.18
13.08
13.02
-
-
-
-
-
-
-
-
-
-
6.43
7.44
7.12
7.77
3.51
7.40
6.19
2.32
8.69
7.10
9.41
15.41
5.79
9.85
10.12
12.54
14.03
21.13
14.65
18.35
11.22
20.21
7.47
6.87
5.98
4.65
4.61
1. All returns, including those of High Yield Bonds, US Equities, International Equities, and Global Equities, are expressed in Canadian dollars.
2. All performance returns presented above are annualized.
3. All returns are presented gross of management and custodial fees and withholding taxes but net of all trading expenses.
4. The performance returns above assume reinvestment of all dividends.
5. The returns presented for any one strategy above represent the returns of a composite of clients discretionary portfolios.
6. Each strategy (line) above represents a group of discretionary portfolios that collectively represent one particular investment strategy or objective.
7. The inception date represents the earliest date at which a discretionary portfolio was in operation within the strategy.
8. The above composites are selected from the Firm’s major investment strategies.
9. AUM reflects all assets under management of the Firm, including those from Fiera Axium and Fiera Properties.
24
Management’s Discussion and Analysis Highlights for the Three and Twelve Months Ended December 31, 2013
December 31, 2013 versus December 31, 2012
• SG&A expenses and external managers expenses
• Total AUM increased by $19.4 billion, or 33%, to
$77.5 billion as at December 31, 2013, compared to AUM
of $58.1 billion as at December 31, 2012.
• Revenue for the three months ended December 31, 2013,
increased by $24.2 million, or 78%, to $55.2 million
compared to $31.0 million for the same period of the
prior year.
• Selling, general and administration (“SG&A”) expenses and
external managers expenses increased by $15.0 million,
or 81%, to $33.6 million for the three months ended
December 31, 2013, compared to $18.6 million for the
same period of 2012.
• Adjusted EBITDA increased by $10.2 million, or 80%, to
$22.9 million for the three months ended December 31,
2013, compared to $12.7 million for the same period
of 2012. Adjusted EBITDA per share was $0.36 (basic)
and $0.35 (diluted) for the three months ended
December 31, 2013, compared to $0.23 (basic and diluted)
for the same period of 2012.
• For the quarter ended December 31, 2013, the Firm
recorded net earnings attributable to the Company’s
shareholders of $8.5 million, or $0.13 per share (basic
and diluted), compared to net earnings of $3.1 million, or
$0.05 per share (basic and diluted), for the three months
ended December 31, 2012.
• The adjusted net earnings attributable to the Company’s
shareholders for the quarter ended December 31, 2013, were
$18.3 million, or $0.29 per share (basic) and $0.28 (diluted),
compared to $9.4 million, or $0.16 per share (basic and
diluted), for the three months ended December 31, 2012.
December 31, 2013 versus September 30, 2013
• Total AUM increased by $10.3 billion, or 15%, to
$77.5 billion during the quarter ended December 31, 2013,
compared to $67.2 billion as at September 30, 2013.
• Revenue for the three months ended December 31, 2013,
increased by $20.1 million, or 57%, to $55.2 million
compared to $35.1 million for the quarter ended
September 30, 2013.
increased by $10.4 million, or 45%, to $33.6 million for
the three months ended December 31, 2013, compared to
$23.2 million for the quarter ended September 30, 2013.
• Adjusted EBITDA increased by $10.8 million, or 90%, to
$22.9 million for the three months ended December 31,
2013, compared to $12.1 million for the quarter ended
September 30, 2013. Adjusted EBITDA per share was $0.36
(basic) and $0.35 (diluted) for the three months ended
December 31, 2013, compared to $0.22 per share (basic
and diluted) for the previous quarter.
• For the quarter ended December 31, 2013, the Firm
recorded net earnings attributable to the Company’s
shareholders of $8.5 million, or $0.13 per share (basic
and diluted), or an increase of $7.3 million, or over 100%,
compared to the quarter ended September 30, 2013,
when the Firm recorded net earnings attributable to the
Company’s shareholders of $1.5 million, or $0.03 per share
(basic and diluted).
• The adjusted net earnings attributable to the Company’s
shareholders for the period were $18.3 million, or $0.29
per share (basic) and $0.28 (diluted), compared to
$8.7 million, or $0.15 per share (basic and diluted), for the
three months ended September 30, 2013.
The following section compares the
twelve months ended December 31, 2013,
against the twelve months and fifteen months
ended December 31, 2012.
• Revenues for the twelve months ended December 31,
2013, increased by $54.5 million, or 55%, to $153.7 million
compared to the same period of the prior year, and
increased by $38.4 million, or 33% compared to the
fifteen months ended December 31, 2012.
• SG&A expenses and external managers expenses
increased by $33.7 million, or 53%, to $97.2 million for
the twelve months ended December 31, 2013, compared
to the same period of 2012, and increased by $21 million,
or 28%, compared to the fifteen months ended
December 31, 2012.
Fiera Capital Corporation 2013 Annual Report | 25
• Adjusted EBITDA increased by $22.5 million, or 61%, to
$59.2 million for the twelve months ended December 31,
2013, compared to the same period of 2012, and increased
by $18.9 million, or 47%, compared to the fifteen months
ended December 31, 2012. Adjusted EBITDA per share was
$1.01 (basic) and $1.00 (diluted) for the twelve months
ended December 31, 2013, compared to the adjusted
EBITDA per share (basic and diluted) of $0.71, and of
$0.82 for the twelve months and fifteen months ended
December 31, 2012, respectively.
• For the twelve months ended December 31, 2013, the
Firm recorded net earnings attributable to the Company’s
shareholders of $14.9 million, or $0.26 per share (basic)
and $0.25 (diluted), or an increase of $13 million, or over
100%, compared to the same period ended December 31,
2012, when the Firm recorded net earnings attributable to
the Company’s shareholder of $2.2 million, or $0.04 per
share (basic and diluted). For the twelve months ended
December 31, 2013, the net earnings attributable to
the Company’s shareholders increased by $12.2 million,
or over 100% compared to the fifteen months ended
December 31, 2012, when the firm recorded net earnings
attributable to the Company’s shareholders of $3.0 million,
or $0.06 per share (basic and diluted).
• The adjusted net earnings attributable to the Company’s
shareholders for the twelve months ended December 31,
2013, were $43.4 million, or $0.74 per share (basic) and
$0.73 (diluted). The adjusted net earnings attributable to
the Company’s shareholders for the twelve months and
fifteen months ended December 31, 2012, were $25.7 million,
or $0.50 per share (basic and diluted), and $28.4 million, or
$0.59 per share (basic and diluted), respectively.
27 Table 1 - Statements of Earnings and Assets Under Management
28 Table 1 - Statements of Earnings and Assets Under Management – Continued
29 Table 2 - Selected Balance Sheets Information
30 Table 3 - Assets Under Management
30 Table 4 - Assets Under Management by Type of Clientele – Quarterly Activity Continuity Schedule
31 Table 5 - Assets Under Management by Type of Clientele – Yearly Activity Continuity Schedule
31 Table 6 - Revenue: Quarterly Activity
33 Table 7 - Revenue: Year-to-Date Activity
38 Table 8 - Adjusted EBITDA
39 Table 8 - Adjusted EBITDA – Continued
40 Table 9 - Net Earnings and Adjusted Net Earnings
41 Table 9 - Net Earnings and Adjusted Net Earnings – Continued
42 Table 10 - Quarterly Results
44 Table 11 - Summary of Consolidated Statements of Cash Flows
45 Table 12 - Cash Earnings and Cash Earnings Per Share
45 Table 13 - Contractual Obligations
46 Table 14 - Options
48 Table 15 - Related Party Transactions
26
Management’s Discussion and Analysis Summary of Quarterly and Yearly Results
TABLE 1 – STATEMENTS OF EARNINGS AND ASSETS UNDER MANAGEMENT
Assets Under Management
($ in millions)
As at
Variance
Assets under Management
77,485
67,163
58,138
December 31,
2013
September 30,
2013
December 31,
2012
Quarter
over
Quarter
FAV/(UNF)
10,322
Year
over
Year
FAV/(UNF)
19,347
Statements of Earnings
($ in thousands)
Revenue
Base management fees and other revenue
Performance fees – Traditional Assets
Performance fees – Alternative Assets
Total revenue
Expenses
Selling, general and administration
External managers
Depreciation of property & equipment
Amortization of intangible assets
Interest on long-term debt and other financial charges
Accretion and change in fair value of purchase
price obligations
Restructuring provision and other costs
Acquisition costs
Change in fair value of financial instruments
Other expense (Income)3
Total expenses
Earnings before income taxes
Income taxes
Net earnings
Attributable to:
Company’s shareholders
Non-controlling interest
BASIC PER SHARE
Adjusted EBITDA1
Net earnings
Adjusted net earnings1
DILUTED PER SHARE
Adjusted EBITDA1
Net earnings
Adjusted net earnings1
For the Three Months Ended
Variance
December 31,
2013
September 30,
2013
December 31,
2012
Quarter
over
Quarter
FAV/(UNF)
Year
over
Year
FAV/(UNF)
44,243
6,529
4,450
55,222
32,388
1,221
367
6,164
2,029
(1,566)
67
2,877
(126)
(535)
42,886
12,336
3,924
8,412
8,481
(69)
8,412
0.36
0.13
0.29
0.35
0.13
0.28
34,388
294
429
35,111
22,682
554
326
4,384
1,742
960
270
1,662
1,338
(907)
27,034
3,651
324
31,009
18,267
287
259
3,664
1,006
619
747
1,647
627
(221)
33,011
26,902
2,100
606
1,494
1,508
(14)
1,494
0.22
0.03
0.15
0.22
0.03
0.15
4,107
1,021
3,086
3,086
-
3,086
0.23
0.05
0.16
0.23
0.05
0.16
9,855
6,235
4,021
20,111
(9,706)
(667)
(41)
(1,780)
(287)
2,526
203
(1,215)
1,464
(372)
(9,875)
10,236
(3,318)
6,918
6,973
(55)
6,918
0.14
0.10
0.14
0.13
0.10
0.13
17,209
2,878
4,126
24,213
(14,121)
(934)
(108)
(2,500)
(1,023)
2,185
680
(1,230)
753
314
(15,984)
8,229
(2,903)
5,326
5,395
(69)
5,326
0.13
0.08
0.13
0.12
0.08
0.12
1. Adjusted EBITDA and Adjusted net earnings are non-IFRS measures. Please refer to “Non-IFRS Measures” on page 53.
2. FAV: Favourable – UNF: Unfavourable
3. Other expense (income) includes “Loss on disposal of investments” and “Shares of earnings of joint ventures”.
Certain totals, subtotals and percentages may not reconcile due to rounding.
Fiera Capital Corporation 2013 Annual Report | 27
TABLE 1 – STATEMENTS OF EARNINGS AND ASSETS UNDER MANAGEMENT (CONTINUED)
Statements of Earnings
($ in thousands)
For the Twelve Months Ended
For the Fifteen
Months Ended
Variance
December 31,
2013
December 31,
2012
December 31,
2012
12 Months 2013
Vs
12 Months 2012
FAV/(UNF)
12 Months 2013 Vs
15 Months 2012
FAV/(UNF)
Revenue
Base management fees and other revenue
Performance fees – Traditional Assets
Performance fees – Alternative Assets
Total revenue
Expenses
Selling, general and administration
External managers
Depreciation of property & equipment
Amortization of intangible assets
Interest on long-term debt and other financial charges
Accretion and change in fair value of purchase
price obligations
Restructuring provision and other costs
Acquisition costs
Change in fair value of financial instruments
Other expense (Income)3
Total expenses
Earnings before income taxes
Income taxes
Net earnings
Attributable to:
Company’s shareholders
Non-controlling interest
BASIC PER SHARE
Adjusted EBITDA1
Net earnings
Adjusted net earnings1
DILUTED PER SHARE
Adjusted EBITDA1
Net earnings
Adjusted net earnings1
141,610
7,181
4,936
153,727
94,357
2,858
1,341
19,083
6,931
637
1,509
6,572
(426)
(1,129)
131,733
21,994
7,389
14,605
14,939
(334)
14,605
1.01
0.26
0.74
1.00
0.25
0.73
94,494
4,237
466
99,197
61,682
1,824
934
11,725
2,940
1,864
7,513
5,022
1,491
(185)
94,810
4,387
2,190
2,197
2,197
-
2,197
0.71
0.04
0.50
0.71
0.04
0.50
109,741
5,036
551
115,328
74,236
1,989
1,136
12,609
2,940
1,864
7,513
5,937
1,491
(195)
47,116
2,944
4,470
54,530
(32,675)
(1,034)
(407)
(7,358)
(3,991)
1,227
6,004
(1,550)
1,917
944
31,869
2,145
4,385
38,399
(20,121)
(869)
(205)
(6,474)
(3,991)
1,227
6,004
(635)
1,917
934
109,520
(36,923)
(22,213)
5,808
2,782
3,026
3,026
-
3,026
0.82
0.06
0.59
0.82
0.06
0.59
17,607
(5,199)
12,742
12,742
(334)
12,742
0.30
0.22
0.24
0.29
0.21
0.23
16,186
(4,607)
11,579
11,913
(334)
11,579
0.19
0.20
0.15
0.18
0.19
0.14
1. Adjusted EBITDA and Adjusted net earnings are non-IFRS measures. Please refer to “Non-IFRS Measures” on page 53.
2. FAV: Favourable – UNF: Unfavourable
3. Other expense (income) includes “Loss on disposal of investments” and “Shares of earnings of joint ventures”.
Certain totals, subtotals and percentages may not reconcile due to rounding.
28
Management’s Discussion and Analysis TABLE 2 - SELECTED BALANCE SHEETS INFORMATION ($ IN THOUSANDS)
December 31, 2013
December 31, 2012
Cash, restricted cash and investments
Accounts receivable
Other current assets
Intangible assets
Goodwill
Investment in joint ventures
Other long-term assets
Total assets
Current liabilities
Bank loan
Deferred income taxes
Long-term debt
Purchase price obligations
Derivative financial instruments
Value of option granted to non-controlling interest
Other long-term liabilities
Equity
Attributable to Company’s shareholders
Attributable to Non-controlling interest
32,175
56,072
3,771
310,151
357,773
8,284
8,341
776,567
56,329
-
24,636
228,262
40,250
644
7,720
1,685
417,041
416,083
958
417,041
12,845
29,888
1,216
180,230
278,750
6,879
6,966
516,774
21,493
9,800
20,264
107,521
56,503
1,491
-
1,963
297,739
297,739
-
297,739
Total liabilities and equity
776,567
516,774
Fiera Capital Corporation 2013 Annual Report | 29
Results from Operations and Overall Performance
Assets Under Management
The change in Fiera Capital’s assets under management is determined by i) the level of new mandates (“New”); ii) the level
of redemption (“Lost”); iii) the increase or decrease in the market value of the assets held in the portfolio of investments
(“Market”) and (iv) business acquisition (“Acquisition”). For simplicity, the “Net variance” is the sum of the new mandates
(“New”), the redemption (“Lost”), the inflows and outflows from existing clients (“Net Contribution”) and the change in market
value (“Market”).
The following tables (Table 3, 4 and 5) provide a summary of changes in the Firm’s assets under management.
TABLE 3 – ASSETS UNDER MANAGEMENT ($ IN MILLIONS)1
For the Three Months Ended
For the Twelve Months Ended
December 31,
2013
September 30,
2013
December 31,
2012
December 31,
2013
December 31,
2012
67,163
2,067
8,255
77,485
65,109
2,054
-
67,163
55,681
1,348
1,109
58,138
58,138
4,334
15,013
77,485
29,380
2,221
26,537
58,138
For the Fifteen
Months Ended
December 31,
2012
29,480
2,121
26,537
58,138
AUM – beginning of period
Net variance
Acquisition
AUM – end of period
Certain totals, subtotals and percentages may not reconcile due to rounding.
1. AUM were restated to include those of Fiera Axium and Fiera Properties.
TABLE 4 – ASSETS UNDER MANAGEMENT BY TYPE OF CLIENTELE – QUARTERLY ACTIVITY CONTINUITY SCHEDULE1
($ IN MILLIONS)
Institutional
Private Wealth
Retail
AUM – end of period
September 30,
2013
39,888
2,049
25,226
67,163
New
456
36
50
542
Lost
(442)
(20)
(335)
(797)
Net
Contribution
Market
Acquisition
December 31,
2013
318
(13)
(364)
(59)
1,258
228
895
2,381
-
8,255
-
8,255
41,478
10,535
25,472
77,485
Certain totals, subtotals and percentages may not reconcile due to rounding.
1. AUM were restated to include those of Fiera Axium and Fiera Properties.
30
Management’s Discussion and Analysis Quarterly Activity
Total AUM increased by $10.3 billion, or 15.4%, to $77.5 billion during the quarter ended December 31, 2013, compared to
$67.2 billion as at September 30, 2013. The increase is due primarily to the acquisitions of Bel Air and Wilkinson O’Grady totaling
$8.3 billion in AUM for the private sector, combined with the market appreciation of $2.4 billion during the fourth quarter
of 2013.
TABLE 5 – ASSETS UNDER MANAGEMENT BY TYPE OF CLIENTELE – YEARLY ACTIVITY CONTINUITY SCHEDULE1
($ IN MILLIONS)
Institutional
Private Wealth
Retail
AUM – end of period
December 31,
2012
31,835
1,828
24,475
58,138
New
2,587
162
454
3,203
Lost
(1,803)
(72)
(1,330)
(3,205)
Net
Contribution
Market
Acquisition
December 31,
2013
582
(23)
92
651
2,151
385
1,149
3,685
6,126
8,255
632
15,013
41,478
10,535
25,472
77,485
Certain totals, subtotals and percentages may not reconcile due to rounding.
1. AUM were restated to include those of Fiera Axium and Fiera Properties.
Year-to-Date Activity (Twelve-Month Period)
Total AUM increased by $19.3 billion, or 33%, to $77.5 billion as at December 31, 2013, compared to AUM of $58.1 billion as at
December 31, 2012. The increase is attributable mainly to the addition of the assets from UBS and GMP earlier this year and from
Bel Air and Wilkinson O’Grady later in the year, combined with new client mandates and the positive net contribution of existing
clients as well as the market appreciation during this period.
Revenue
Management fees are based on AUM, and, for each type of clientele, revenue is earned primarily on the average closing value
of AUM at the end of each day, month or calendar quarter. The Firm calculates performance fees on two asset classes: the
traditional asset class and the alternative asset class. The analysis of revenue that follows refers to average assets in the case of
each clientele segment.
TABLE 6 – REVENUE: QUARTERLY ACTIVITY ($ IN THOUSANDS)
Institutional
Private Wealth
Retail
Total management fees and other revenue
Performance fees – Traditional asset class
Performance fees – Alternative asset class
Total performance fees
Total Revenue
For the Three Months Ended
Variance
December 31,
2013
September 30,
2013
December 31,
2012
Quarter
over Quarter
Year
over Year
19,466
10,918
13,859
44,243
6,529
4,450
10,979
55,222
16,946
3,323
14,119
34,388
294
429
723
35,111
13,791
2,271
10,972
27,034
3,651
324
3,975
31,009
2,520
7,595
(260)
9,855
6,235
4,021
10,256
20,111
5,675
8,647
2, 887
17,209
2,878
4,126
7,004
24,213
Certain totals, subtotals and percentages may not reconcile due to rounding.
Fiera Capital Corporation 2013 Annual Report | 31
Current Quarter versus Prior-Year Quarter
Revenue for the three months ended December 31, 2013,
increased by $24.2 million, or 78%, to $55.2 million
compared to $31.0 million for the same period of the prior
year. The increase in revenue is due mainly to the higher
AUM base, hence higher management fees of $17.2 million,
following the acquisition of assets from UBS, GMP, Bel Air and
Wilkinson O’Grady, combined with higher performance fees
of $7 million.
Management fees:
Increase of $17.2 million, or 64%, to $44.2 million
The increase of $17.2 million in revenue for the overall
Company and the impact on revenue by different types of
clientele are as follows:
• Revenue from the Institutional clientele increased by
$5.7 million, or 41%, to $19.5 million for the three months
ended December 31, 2013, compared to the same quarter
of 2012. The increase is due mainly to the acquisition of
assets from UBS combined with additional net AUM.
• Revenue from the Private Wealth clientele increased
by $8.6 million, or over 100%, to $10.9 million for the
three months ended December 31, 2013, compared to the
same period of the prior year. The increase is due mainly to
the inclusion of assets from Bel Air and Wilkinson O’Grady.
• Revenue from the Retail clientele increased by $2.9 million,
or 26%, to $13.9 million for the three months ended
December 31, 2013, compared to the same quarter of
the prior year, mainly due to the acquisition of assets
from GMP.
Current Quarter versus Previous Quarter
Revenue for the three months ended December 31, 2013,
increased by $20.1 million, or 57%, to $55.2 million
compared to $35.1 million for the three months ended
September 30, 2013.
Management fees:
Increase of $9.9 million, or 28.7%, to $44.2 million
The increase in management fees of $9.9 million, or 28.7%,
is attributable to the higher quarterly average AUM base and
results in the following variations by type of clientele:
• Revenue from the Institutional clientele increased by
$2.5 million, or 15%, to $19.5 million for the three months
ended December 31, 2013, compared to the quarter ended
September 30, 2013, as a result of positive cash flows and
new mandates.
• Revenue from the Private Wealth clientele increased by
$7.6 million, or over 100%, to $10.9 million compared
to the previous quarter ended September 30, 2013. The
increase is due mainly to the inclusion of assets from Bel
Air and Wilkinson O’Grady.
• Revenue from the Retail clientele remained stable at
$13.9 million for the three months ended December 31,
2013, compared to $14.1 million from the quarter ended
September 30, 2013. Although the AUM from the Retail
clientele has slightly increased in the quarter ended
December 31, 2013 compared to the quarter ended
September 30, 2013, the revenue will be fully generated
only in the first quarter of 2014.
Performance fees:
Increase of $7 million, or over 100%, to $11 million
Performance fees:
Increase of $10.2 million, or over 100%, to
$11 million
Revenue from performance fees increased by $7 million, or over
100%, to $11 million for the three months ended December 31,
2013, compared to the same period of last year. The increase is
due to higher performance fees from the alternative asset class
of $4.1 million, combined with higher performance fees from
the traditional asset class of $2.9 million.
Revenue from performance fees increased by $10.2 million,
or over 100%, to $11 million for the three months ended
December 31, 2013, compared to the previous quarter. The
increase is due to higher performance fees from the traditional
asset class of $6.2 million, combined with higher performance
fees from the alternative asset class of $4 million.
32
Management’s Discussion and Analysis TABLE 7 – REVENUE: YEAR-TO-DATE ACTIVITY ($ IN THOUSANDS)
Institutional
Private Wealth
Retail
Total management fees and other revenue
Performance fees – Traditional asset class
Performance fees – Alternative asset class
Total performance fees
Total Revenue
For the Twelve Months Ended
For the Fifteen
Months Ended
Variance
December 31,
2013
December 31,
2012
December 31,
2012
12 Months 2013
vs
12 Months 2012
12 Months 2013
vs
15 Months 2012
69,374
20,344
51,892
141,610
7,181
4,936
12,117
153,727
50,291
8,204
35,999
94,494
4,237
466
4,703
99,197
59,802
10,452
39,487
109,741
5,036
551
5,587
115,328
19,083
12,140
15,893
47,116
2,944
4,470
7,414
54,530
9,572
9,892
12,405
31,869
2,145
4,385
6,530
38,399
Certain totals, subtotals and percentages may not reconcile due to rounding.
Twelve Months Ended December 31, 2013, versus
Twelve Months Ended December 31, 2012
Revenue for the twelve months ended December 31, 2013,
increased by $54.5 million, or 55%, to $153.7 million from
$99.2 million for the twelve months ended December 31,
2012. The increase resulted mainly from the inclusion of four
quarters of revenue from Natcan in 2013 compared to three
quarters of revenue from Natcan in 2012, combined with
revenue generated from the acquisition of assets from CWM,
UBS, GMP and Bel Air and Wilkinson O’Grady, as well as the
higher AUM base and higher performance fees.
Management fees: Increase of $47.1 million, or
50%, to $141.6 million
The increase in management fees of $47.1 million, or 50%,
to $141.6 million for the twelve months ended December 31,
2013, versus the same period of the prior year, is due mainly
to the acquisition of assets from Natcan, CWM, UBS, GMP,
and Bel Air and Wilkinson O’Grady, combined with additional
sales and positive cash flows. The variation in revenue by types
of clientele was as follows:
• Revenue from the Institutional clientele increased by
$19.1 million, or 38%, to $69.4 million for the twelve months
ended December 31, 2013, compared to the twelve months
ended December 31, 2012. This increase is mainly due to
the addition of UBS and four quarters of revenue from the
Natcan acquisition, combined with new mandates.
• Revenue from the Private Wealth clientele increased
by $12.1 million, or over 100%, to $20.3 million for the
twelve months ended December 31, 2013, compared
to the twelve months ended December 31, 2012, due
mainly to the full year of operation since the acquisition
of CWM assets as well as the acquisitions of Bel Air and
Wilkinson O’Grady.
• Revenue from the Retail clientele increased by
$15.9 million, or 44%, to $51.9 million for the
twelve months ended December 31, 2013, compared to
the twelve months ended December 31, 2012, due mainly
to the inclusion of four quarters of revenue from Natcan
and the acquisition of GMP assets.
Performance fees:
Increase of $7.4 million, or over 100%, to
$12.1 million
Performance fees increased by $7.4 million, or over 100%,
to $12.1 million for the twelve months ended December 31,
2013, compared to the same period ended December 31,
2012. The increase is due to higher performance fees from
the alternative asset class of $4.5 million, combined with
higher performance fees from the traditional asset class of
$2.9 million.
Fiera Capital Corporation 2013 Annual Report | 33
Twelve Months Ended December 31, 2013, versus
Fifteen Months Ended December 31, 2012
Revenue for the twelve months ended December 31, 2013,
increased by $38.4 million, or 33%, to $153.7 million from
$115.3 million for the fifteen months ended December 31,
2012. The increase resulted mainly from the inclusion of four
quarters of revenue from Natcan in 2013 compared to three
quarters of revenue from Natcan in 2012, combined with
revenue generated from the acquisition of assets from CWM,
UBS, GMP and Bel Air and Wilkinson O’Grady, as well as the
higher AUM base and higher performance fees.
Management fees:
Increase of $31.9 million, or 29%, to $141.6 million
The increase in management fees of $31.9 million, or 29%,
to $141.6 million for the twelve months ended December 31,
2013, compared to the fifteen months ended December 31,
2012, is due mainly to the impact of a full year of operation
since the acquisition of assets from Natcan and CWM in
2012, as well as the acquisitions of assets from UBS, GMP, and
Bel Air and Wilkinson O’Grady in 2013, combined with new
mandates and positive cash flows. The variation in revenue by
types of clientele was as follows:
• Revenue from the Institutional clientele increased by
$9.6 million, or 16%, to $69.4 million for the twelve months
ended December 31, 2013, compared to the fifteen months
ended December 31, 2012. This increase is mainly due to
the addition of UBS and four quarters of revenue from the
Natcan acquisition, combined with new mandates.
• Revenue from the Private Wealth clientele increased
by $9.9 million, or 95%, to $20.3 million for the
twelve months ended December 31, 2013, compared
to the fifteen months ended December 31, 2012, due
mainly to the full year of operation since the acquisition
of CWM assets as well as the acquisitions of Bel Air and
Wilkinson O’Grady.
• Revenue from the Retail clientele increased by
$12.4 million, or 31%, to $51.9 million for the
twelve months ended December 31, 2013, compared to
the fifteen months ended December 31, 2012, due mainly
to the inclusion of four quarters of revenue from Natcan
and the acquisition of GMP assets.
Performance fees:
Increase of $6.5 million, or over 100%, to
$12.1 million
Performance fees increased by $6.5 million, or over
100%, to $12.1 million for the twelve months ended
December 31, 2013, compared to the fifteen months ended
December 31, 2012. The increase is due to higher performance
fees from the alternative asset class of $4.4 million, combined
with higher performance fees from the traditional asset class
of $2.1 million.
Selling, General and Administration Expenses
Current Quarter versus Prior-Year Quarter
SG&A expenses increased by $14.1 million, or 77%, to
$32.4 million for the three months ended December 31,
2013, compared to $18.3 million for the same period of the
prior year. The increase is due mainly to the inclusion of costs
related to CWM, UBS, GMP, Bel Air and Wilkinson O’Grady,
namely higher compensation costs of $10.5 million, higher
marketing and servicing and information technology expenses
$2.1 million, higher professional fees of $1 million and higher
rental costs of $0.4 million.
SG&A expenses a as percentage of total revenue for the
quarter ended December 31, 2013 remained at the same
level at 58.7% compared to 58.9% for the same period of the
prior year.
Current Quarter versus Previous Quarter
SG&A expenses increased by $9.7 million, or 43%, to
$32.4 million for the three months ended December 31,
2013, compared to $22.7 million for the quarter ended
September 30, 2013. The increase is due mainly to the
inclusion of Bel Air and Wilkinson O’Grady in the fourth
quarter of 2013, with higher compensation costs of
$7.2 million, higher marketing and servicing and information
technology expenses of $1.8 million, higher professional fees
of $0.6 million and higher rental costs of $0.4 million.
SG&A expenses as a percentage of total revenue for the
quarter ended December 31, 2013, was 58.7% compared to
64.6% for the previous quarter ended September 30, 2013.
The decrease in terms of percentage is due mainly to higher
compensation costs, which were 47% of total revenue, due
to the strong performance of the investment teams recorded
in the third quarter of 2013 compared to the fourth quarter
of 2013, when the compensation costs represented 43% of
total revenue.
Twelve Months Ended December 31, 2013, versus
Twelve Months Ended December 31, 2012
SG&A expenses increased by $32.7 million, or 53%, to
$94.4 million for the twelve months ended December 31,
2013, compared to $61.7 million for the same period of the
34
Management’s Discussion and Analysis prior year. The increase is due mainly to the inclusion of four
quarters of costs related to Natcan in 2013 compared to
three quarters of costs related to Natcan in 2012, combined
with the costs related to the acquisition of assets from CWM
late 2012, and from UBS, GMP and Bel Air and Wilkinson
O’Grady recorded in 2013. The increase resulted from higher
compensation costs of $23.8 million, higher professional fees
of $3 million, higher reference fees of $1.9 million, higher
marketing and servicing of $1.2 million, higher information
technology expenses of $1.4 million, and higher rental costs
of $1 million.
SG&A expenses as a percentage of total revenue for the
twelve months ended December 31, 2013, was 61.4% compared
to 62.2% for the same period ended December 31, 2012. The
improvement in the ratio is due mainly to the synergies realized
from the acquisition of Natcan, CWM, UBS, and GMP.
Twelve Months Ended December 31, 2013, versus
Fifteen Months Ended December 31, 2012
SG&A expenses increased by $20.1 million, or 27%, to
$94.4 million for the twelve months ended December 31,
2013, compared to $74.2 million for the fifteen months
ended December 31, 2012. The increase is due mainly to the
inclusion of four quarters of costs related to Natcan in 2013
compared to three quarters of costs related to Natcan in 2012,
combined with the costs related to the acquisition of assets
from CWM late 2012, and from UBS, GMP and Bel Air and
Wilkinson O’Grady business acquired in 2013. The increase
resulted from higher compensation costs of $14.3 million,
higher professional fees of $2.5 million, higher reference fees
of $1.4 million, higher marketing and servicing expenses of
$0.4 million, higher information technology expenses of
$0.8 million, and higher rental cost of $0.6 million.
SG&A expenses as a percentage of total revenue
for the twelve months ended December 31, 2013, was
61.4% compared to 64.4% for the fifteen months ended
December 31, 2012. The improvement in the ratio is due
mainly to the synergies realized from the acquisition of
Natcan, CWM, UBS and GMP.
External Managers Expenses
Current Quarter versus Prior-Year Quarter
External managers expenses increased by $0.9 million, or
over 100%, to $1.2 million for the three months ended
December 31, 2013, from $0.3 million for the three months
ended December 31, 2012. The increase is due mainly to the
additional expenses related to higher traditional performance
fees earned during the fourth quarter and related to the
Natcan acquisition.
Current Quarter versus Previous Quarter
External managers expenses increased by $0.6 million, or
over 100%, to $1.2 million for the three months ended
December 31, 2013, compared to $0.6 million for the
three months ended September 30, 2013. The increase is
due mainly to the additional expenses related to traditional
performance fees earned during the fourth quarter.
Twelve Months Ended December 31, 2013, versus
Twelve Months Ended December 31, 2012
External managers expenses increased by $1.1 million, or 57%,
to $2.9 million for the twelve months ended December 31,
2013, from $1.8 million for the same period of the prior year.
The increase is due mainly to the four quarters of costs related
to Natcan in 2013 compared to three quarters of costs related
to Natcan in 2012.
Twelve Months Ended December 31, 2013, versus
Fifteen Months Ended December 31, 2012
External managers expenses increased by $0.9 million,
or 44%, to $2.9 million for the twelve months ended
December 31, 2013, from $2 million for the fifteen months
ended December 31, 2012. The increase is due mainly to four
quarters of costs related to Natcan in 2013 compared to three
quarters of costs related to Natcan in 2012.
Depreciation and Amortization
Current Quarter versus Prior-Year Quarter
Depreciation of property and equipment remained stable
at $0.4 million for the three months ended December 31,
2013, compared to $0.3 million for the three months ended
December 31, 2012.
Amortization of intangible assets increased by $2.5 million,
or 68%, to $6.2 million for the three months ended
December 31, 2013, from $3.7 million for the same period of
the prior year, following the acquisition of assets of UBS, GMP,
Bel Air and Wilkinson O’Grady.
Current Quarter versus Previous Quarter
Depreciation of property and equipment remained stable
at $0.4 million for the three months ended December 31,
2013, compared to $0.3 million for the three months ended
September 30, 2013.
Amortization of intangible assets increased by $1.8 million,
or 40%, to $6.2 million for the three months ended
December 31, 2013, from $4.4 million for the previous
quarter, following the acquisition of assets from Bel Air and
Wilkinson O’Grady.
Fiera Capital Corporation 2013 Annual Report | 35
Twelve Months Ended December 31, 2013, versus
Twelve Months Ended December 31, 2012
Depreciation of property and equipment increased by
$0.4 million, or 44%, to $1.3 million for the twelve months
ended December 31, 2013, compared to $0.9 million for the
twelve months ended December 31, 2013.
Amortization of intangible assets increased by $7.4 million,
or 62%, to $19.1 million for the twelve months ended
December 31, 2013, compared to $11.7 million for the same
period in 2012.
The increase is due mainly to the inclusion of CWM, UBS,
GMP, Bel Air and Wilkinson O’Grady and the inclusion of
four quarters of costs related to Natcan in 2013 compared to
three quarters of costs related to Natcan in the same period
of 2012.
Twelve Months Ended December 31, 2013, versus
Fifteen Months Ended December 31, 2012
Depreciation of property and equipment increased by
$0.2 million, or 18%, to $1.3 million for the twelve months
ended December 31, 2013, compared to $1.1 million for the
fifteen months ended December 31, 2013.
Amortization of intangible assets increased by $6.5 million,
or 51%, to $19.1 million for the twelve months ended
December 31, 2013, compared to $12.6 million for the
fifteen months ended December 31, 2013.
The increase is due mainly to the inclusion of CWM, UBS,
GMP, Bel Air and Wilkinson O’Grady and the inclusion of four
quarters of costs related to Natcan in 2013 compared to three
quarters of costs related to Natcan in the fifteen months
ended December 31, 2013.
Interest on Long-Term Debt and Other
Financial Charges
Current Quarter versus Previous Quarter
The interest on long-term debt and other financial charges
increased by $0.3 million, or over 17%, to $2 million for the
three months ended December 31, 2013, from $1.7 million
for the previous quarter. The increase is due mainly to the
additional long-term debt following the acquisitions of Bel Air
and Wilkinson O’Grady.
Twelve Months Ended December 31, 2013,
versus Twelve Months and Fifteen Months Ended
December 31, 2012
On a twelve-month basis, the interest on long-term debt
and other financial charges increased by $4 million, or
more than 100%, to $6.9 million for the twelve months
ended December 31, 2013, compared to $2.9 million for
the twelve months and fifteen months ended December 31,
2012, due to the increase in long-term debt following
the acquisition of assets of UBS and GMP, Bel Air and
Wilkinson O’Grady.
Accretion and Change in Fair Value of Purchase
Price Obligations
Current Quarter versus Prior-Year Quarter
The accretion and change in fair value of purchase price
obligations decreased by $2.2 million, or over 100%, to a
favourable gain of $1.6 million for the three months ended
December 31, 2013, from $0.6 million of charge for the
three months ended December 31, 2012. The decrease is
due mainly to the reversal of $2 million of the purchase
price obligation related to the acquisition of CWM assets
since the Company reviewed the assets under management
and concluded that the conditions required to trigger the
contingent payment of $2 million were not met.
Current Quarter versus Prior-Year Quarter
The interest on long-term debt and other financial charges
increased by $1 million, or over 100%, to $2 million for the
three months ended December 31, 2013, from $1 million for
the three months ended December 31, 2012. The increase is
due mainly to the higher interest expenses on additional long-
term debt following the acquisition of assets from UBS, GMP,
Bel Air and Wilkinson O’Grady.
Current Quarter versus Previous Quarter
The accretion and change in fair value of purchase price
obligations decreased by $2.5 million, or over 100%, to a
favourable gain of $1.6 million for the three months ended
December 31, 2013, from $0.9 million charge for the
previous quarter. The decrease is due mainly to the reversal
of $2 million of the purchase price obligation related to the
acquisition of CWM assets.
36
Management’s Discussion and Analysis Derivative Financial Instrument
During the quarter ended June 30, 2012, the Company had
entered into a derivative financial instrument that has not
been designated for hedge accounting. The interest rate swap
agreement consists of exchanging its variable rate for a fixed
rate of 1.835 % ending in March 2017. These derivatives are
measured at fair value at the end of each period, and the
gain or loss arising from revaluation is recorded and reported
under “Change in fair value of financial instruments” in the
statement of earnings.
The variation in the fair value of financial instruments
was recorded in the statements of earnings as a gain of
$0.1 million for the three months ended December 31,
2013, compared to a charge of $1.3 million in the
three months ended September 30, 2013, and compared to
a charge of $0.6 million for the comparable period ended
December 31, 2012.
On a twelve-month basis, the variation in the fair value
of financial instruments was recorded in the statements of
earnings as a gain of $0.4 million for the twelve months
ended December 31, 2013, compared to a charge of
$1.5 million in the twelve and fifteen months ended
December 31, 2012.
It is the Corporation’s policy not to speculate on derivative
financial instruments; accordingly, such instruments are
normally purchased for risk management purposes and held
until maturity.
Twelve Months Ended December 31, 2013,
versus Twelve Months and Fifteen Months Ended
December 31, 2012
On a twelve-month basis, the accretion and change in
fair value of purchase price obligations decreased by
$1.2 million, or 66%, to $0.6 million for the twelve months
ended December 31, 2013, from $1.8 million the twelve and
fifteen months ended December 31, 2012. The decrease is
due mainly to the reversal of $2 million of the purchase price
obligation related to the acquisition of CWM assets.
Acquisition and Restructuring Costs
Current Quarter versus Prior-Year Quarter
Acquisition and restructuring costs increased by $0.5 million,
or 23%, for the three months ended December 31, 2013, to
$2.9 million compared to $2.4 million for the same period in
2012. This increase is due mainly to the costs related to the
acquisitions of Bel Air and Wilkinson O’Grady.
Current Quarter versus Previous Quarter
Acquisition and restructuring costs increased by $1 million,
or 52%, for the three months ended December 31, 2013,
to $2.9 million compared to $1.9 million for the previous
quarter. This increase is due mainly to the costs related to the
acquisitions of Bel Air and Wilkinson O’Grady.
Twelve Months Ended December 31, 2013,
versus Twelve Months and Fifteen Months Ended
December 31, 2012
Acquisition costs increased by $1.6 million, or 31%, for the
twelve months ended December 31, 2013, to $6.6 million
compared to $5 million for the same period of 2012, and
increased by $0.7 million, or 11%, compared to $5.9 million
for the fifteen months ended December 31, 2012. The increase
is due mainly to various acquisitions made during 2013.
Restructuring costs decreased by $6 million, or 80%, for
the twelve months ended December 31, 2013, to $1.5 million
compared to $7.5 million for the twelve and fifteen months
ended December 31, 2012. The decrease in restructuring costs
is due mainly to higher costs related to the Natcan acquisition
recorded in the twelve months ended December 31, 2012,
compared to the costs related to the acquisition of UBS and
GMP assets and the acquisitions of Bel Air and Wilkinson
O’Grady in the twelve months ended December 31, 2013.
Fiera Capital Corporation 2013 Annual Report | 37
Adjusted EBITDA1
The Company defines adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, acquisition and
restructuring costs adjusted for non-cash compensations items. We believe that adjusted EBITDA is a meaningful measure as it
permits us to evaluate our operating performance without having the impact of non-operational items.
TABLE 8 - ADJUSTED EBITDA ($ IN THOUSANDS)
Revenue
Base management fees
Performance fees
Total revenue
Expenses
Selling, general and administration
External managers
Total expenses
Add back: Non-cash compensation
Adjusted EBITDA
Per share basic
Per share diluted
For the Three Months Ended
Variance
December 31,
2013
September 30,
2013
December 31,
2012
Quarter
over Quarter
Year
over Year
44,243
10,979
55,222
32,388
1,221
33,609
21,613
1,328
22,941
0.36
0.35
34,388
723
35,111
22,682
554
23,236
11,875
210
12,085
0.22
0.22
27,034
3,975
31,009
18,267
287
18,554
12,455
291
12,746
0.23
0.23
9,855
10,256
20,111
9,706
667
10,373
9, 738
1,118
10,856
0.14
0.13
17,209
7,004
24,213
14,121
934
15,055
9,158
1,037
10,195
0.13
0.12
1. Adjusted EBITDA is a non-IFRS measure. Please refer to “Non-IFRS Measures” on page 53.
Certain totals, subtotals and percentages may not reconcile due to rounding.
Current Quarter versus Prior-Year Quarter
For the three months ended December 31, 2013, adjusted EBITDA increased year-over-year by $10.2 million, or 80%, to
$22.9 million, or $0.36 per share (basic) and $0.35 (diluted), compared to $12.7 million, or $0.23 per share (basic and diluted),
for the same period of 2012.
Adjusted EBITDA for the current quarter ended December 31, 2013, was driven by an increase in the base management fees
compared to the same period of the previous year, mainly due to the acquisition of the UBS, GMP, Bel Air and Wilkinson O’Grady
assets. These elements were offset by an overall rise in operating expenses, namely for SG&A expenses and external managers
expenses with the inclusion of the UBS, GMP, Bel Air and Wilkinson O’Grady operations.
38
Management’s Discussion and Analysis Current Quarter versus Previous Quarter
For the three months ended December 31, 2013, adjusted EBITDA increased by $10.8 million, or 90%, to $22.9 million, or
$0.36 per share (basic) and $0.35 (diluted), compared to $12.1 million, or $0.22 per share (basic and diluted), in the previous
quarter ended September 30, 2013. The higher adjusted EBITDA is explained by higher performance fees recorded in the fourth
quarter of the year, as well as the inclusion of Bel Air and Wilkinson O’Grady operation during the period.
TABLE 8 - ADJUSTED EBITDA ($ IN THOUSANDS) - CONTINUED
Revenue
Base management fees
Performance fees
Total revenue
Expenses
Selling, general and administration
External managers
Total expenses
Add back: Non-cash compensation
Adjusted EBITDA
Per share basic
Per share diluted
For the Twelve Months Ended
For the Fifteen
Months Ended
Variance
December 31,
2013
December 31,
2012
December 31,
2012
12 Months 2013
Vs
12 Months 2012
12 Months 2013
Vs
15 Months 2012
141,610
12,117
153, 727
94,358
2,858
97,216
56,511
2,716
59,227
1.01
1.00
94,494
4,703
99,197
61,682
1,824
63,506
35,691
1,020
36,711
0.71
0.71
109,741
5,587
115,328
74,236
1,989
76,225
39,103
1,200
40,303
0.82
0.82
47,116
7,414
54,530
32,676
1,034
33,710
20, 820
1,696
22,516
0.30
0.29
31,869
6,530
38,399
20,122
869
20,991
17,408
1,516
18,924
0.19
0.18
1. Adjusted EBITDA is a non-IFRS measure. Please refer to “Non-IFRS Measures” on page 53.
Certain totals, subtotals and percentages may not reconcile due to rounding.
Twelve Months Ended December 31, 2013, versus Twelve Months Ended December 31, 2012
For the twelve months ended December 31, 2013, adjusted EBITDA increased by $22.5 million, or 61%, to $59.2 million or
$1.01 per share (basic) and $1.00 (diluted), compared to $36.7 million, or $0.71 per share (basic and diluted), for the same period
last year. The increase is attributable to higher revenue of $54.5 million offset by an increase of $33.7 million in SG&A expenses
and external managers expenses.
Twelve Months Ended December 31, 2013, versus Fifteen Months Ended December 31, 2012
For the twelve months ended December 31, 2013, adjusted EBITDA increased by $18.9 million, or 47%, to $59.2 million or $1.01
per share (basic) and $1.00 (diluted), compared to $40.3 million, or $0.82 per share (basic and diluted), for the same period
of the prior year. The increase is attributable to higher revenue of $38.4 million offset by an increase of $20.9 million in SG&A
expenses and external managers expenses.
Fiera Capital Corporation 2013 Annual Report | 39
Net Earnings and Adjusted Net Earnings1
TABLE 9 - NET EARNINGS AND ADJUSTED NET EARNINGS ($ IN THOUSANDS)
For the Three Months Ended
Variance
December 31,
2013
September 30,
2013
December 31,
2012
Quarter
over Quarter
Year
over Year
Net earnings attributable to the Company’s shareholders
Depreciation of property & equipment
Amortization of intangible assets
Non-cash compensation items
Change in fair value of financial instruments1
Non-cash items
Restructuring costs1
Acquisition costs1
Acquisition and restructuring costs
Income taxes on above identified items1
Adjusted net earnings attributable to the
Company’s shareholders
Per share basic
Net earnings
Adjusted net earnings
Per share diluted
Net earnings
Adjusted net earnings
8,481
367
6,164
1,328
(126)
7,733
67
2,877
2,944
19,158
845
18,313
0.13
0.29
0.13
0.28
1,508
326
4,384
210
1,338
6,258
270
1,662
1,932
9,698
981
8,717
0.03
0.15
0.03
0.15
3,086
259
3,664
291
627
4,841
747
1,647
2,394
10,321
906
9,415
0.05
0.16
0.05
0.16
1. Adjusted net earnings are a non-IFRS measure. Please refer to “Non-IFRS Measures” on page 53.
Certain totals, subtotals and percentages may not reconcile due to rounding.
6,973
41
1,780
1,118
(1,464)
1,475
(203)
1,215
1,012
9,460
(136)
9,596
0.10
0.13
0.10
0.13
5,395
108
2,500
1,037
(753)
2,892
(680)
1,230
550
8,837
(61)
8,898
0.08
0.11
0.08
0.11
Current Quarter versus Prior-Year Quarter
For the quarter ended December 31, 2013, the Firm recorded
net earnings attributable to the Company’s shareholders
of $8.5 million, or $0.13 per share (basic and diluted). For
the three months ended December 31, 2012, the Firm
recorded net earnings of $3.1 million, or $0.05 per share
(basic and diluted). The increase in net earnings attributable
to the Company’s shareholders is explained by higher base
management fees of $17.2 million, higher performance fees
of $7 million, offset by an increase in SG&A expenses and
external managers expenses of $15 million. During the quarter
ended December 31, 2013, the increase in net earnings was
also attributable to favourable changes in the accretion
and change in fair value of purchase price obligations of
$2.2 million, and to favourable changes in the fair value
of derivative financial instruments of $0.8 million, offset
by higher amortization and depreciation of $2.6 million,
higher income taxes of $2.9 million, higher interest expenses
of $1 million, and higher restructuring and acquisition
costs of $0.6 million, compared to the quarter ended
December 31, 2012.
Current Quarter versus Previous Quarter
The Firm’s net earnings attributable to the Company’s
shareholders increased by $7 million to $8.5 million, or
$0.13 per share (basic and diluted), during the quarter
compared to $1.5 million, or $0.03 per share (basic and
diluted), for the quarter ended September 30, 2013. The
increase in net earnings attributable to the Company’s
shareholders is primarily explained by higher base
management fees of $9.9 million, higher performance fees
of $10.2 million, offset by an increase in SG&A expenses and
external managers expenses of $10.4 million. Also, the increase
in the net earnings attributable to the Company’s shareholders
is due to favourable changes in the fair value of derivative
financial instruments of $1.5 million and to favourable changes
in the accretion and change in fair value of purchase price
obligation of $2.5 million, offset by higher income taxes of
$3.3 million, by higher amortization and depreciation costs of
$1.8 million and higher acquisition costs of $1.2 million.
During the current quarter, the net earnings attributable
to the Company’s shareholders were affected negatively by
$7.8 million of non-cash items (net of income taxes on the
change the in fair value of derivative financial instruments), or
40
Management’s Discussion and Analysis $0.13 per share (basic) and $0.12 (diluted), and by $2 million,
or $0.03 per share (basic and diluted), of acquisition and
restructuring costs (net of income taxes). When added back
to the Firm’s net earnings attributable to the Company’s
shareholders of $8.5 million, or $0.13 per share (basic
and diluted), the adjusted net earnings attributable to
the Company’s shareholders for the three months ended
December 31, 2013, were $18.3 million, or $0.29 per share
(basic) and $0.28 (diluted).
The adjusted net earnings attributable to the Company’s
shareholders for the three months ended December 31, 2012,
and September 30, 2013, were $9.4 million, or $0.16 per
share (basic and diluted), and $8.7 million, or $0.15 per share
(basic and diluted), respectively.
TABLE 9 - NET EARNINGS AND ADJUSTED NET EARNINGS ($ IN THOUSANDS) – CONTINUED
For the Twelve Months Ended
For the Fifteen
Months Ended
Variance
December 31,
2013
December 31,
2012
December 31,
2012
12 Months 2013
Vs
12 Months 2012
12 months 2013
Vs
15 months 2012
Net earnings attributable to the Company’s shareholders
Depreciation of property & equipment
Amortization of intangible assets
Non-cash compensation items
Change in fair value of financial instruments1
Non-cash items
Restructuring costs1
Acquisition costs1
Acquisition and restructuring costs
Income taxes on above identified items1
Adjusted net earnings attributable to the
Company’s shareholders
Per share basic
Net earnings
Adjusted net earnings
Per share diluted
Net earnings
Adjusted net earnings
14,939
1,341
19,083
2,716
(426)
22,714
1,509
6,572
8,081
45,734
2,297
2,197
934
11,725
1,020
1,491
15,170
7,513
5,022
12,535
29,902
4,208
43, 437
25,694
0.26
0.74
0.25
0.73
0.04
0.50
0.04
0.50
1. Adjusted net earnings is a non-IFRS measure. Please refer to “Non-IFRS Measures” on page 53.
Certain totals, subtotals and percentages may not reconcile due to rounding.
3,026
1,136
12,609
1,200
1,491
16,436
7,513
5,937
13,450
32,912
4,482
28,430
0.06
0.59
0.06
0.59
12,742
407
7,358
1,696
(1,917)
7,544
(6,004)
1,550
(4,454)
15,832
(1,911)
17,743
0.22
0.24
0.21
0.23
11,913
205
6,474
1,516
(1,917)
6,278
(6,004)
635
(5,369)
12,822
(2,185)
15,007
0.20
0.15
0.19
0.14
Twelve Months Ended December 31, 2013, versus
Twelve Months Ended December 31, 2012
The Firm’s net earnings attributable to the Company’s
shareholders increased by $12.7 million, or over 100%, to
$14.9 million, or $0.26 (basic) and $0.25 (diluted), for the
twelve months ended December 31, 2013, compared to
$2.2 million, or $0.04 per share (basic and diluted), for the
twelve months ended December 31, 2012.
The increase in net earnings attributable to the Company’s
shareholders for the twelve months ended December 31,
2013, resulted from higher base management fees and
performance fees of $54.5 million, offset by an increase
in SG&A expenses and external managers expenses of
$33.7 million, combined with lower restructuring costs
of $6 million, favourable changes in fair value of financial
instruments of $1.9 million, and to favourable changes in
the accretion and change in fair value of purchase price
obligations of $1.2 million, offset by higher depreciation
and amortization expenses of $7.8 million, higher interest
expenses of $4 million, and higher income taxes of
$5.2 million.
Twelve Months Ended December 31, 2013, versus
Fifteen Months Ended December 31, 2012
The Firm’s net earnings attributable to the Company’s
shareholders increased by $11.9 million, or over 100%, to
$14.9 million, or $0.26 (basic) and $0.25 (diluted), for the
twelve months ended December 31, 2013, compared to
$3 million, or $0.06 per share (basic and diluted) for the
fifteen months ended December 31, 2012.
Fiera Capital Corporation 2013 Annual Report | 41
The increase in net earnings attributable to the Company’s
shareholders resulted from higher base management fees
and performance fees of $38.4 million, offset by an increase
in SG&A expenses and external managers expenses of
$21 million, combined with lower restructuring costs of
$6 million, favourable changes in fair value of derivative
financial instruments of $1.9 million, and to favourable
changes in the accretion and change in fair value of purchase
price obligations of $1.2 million, offset by higher amortization
and depreciation expenses of $6.7 million, higher interest
expenses of $4 million, and higher income taxes of
$4.6 million.
During the period, the net earnings attributable to
the Company’s shareholders were affected negatively by
$22.8 million of non-cash items, (net of income taxes on
derivative financial instruments), or $0.38 per share (basic
and diluted), and $5.7 million, or $0.10 per share (basic
and diluted) of acquisition and restructuring costs (net of
income taxes). When added back to the firm’s net earnings
attributable to the Company’s shareholders of $15.2 million,
or $0.26 per share (basic) and $0.25 (diluted) for the
twelve months ended December 31, 2013 were $43.4 million,
or $0.74 per share (basic) and $0.73 (diluted).
The adjusted net earnings attributable to the Company’s
shareholders for the twelve months and fifteen months ended
December 31, 2012, were $25.7 million, or $0.50 per share
(basic and diluted), and $28.4 million, or $0.59 per share
(basic and diluted), respectively.
Summary of Quarterly Results
This quarterly information is unaudited and has been prepared on an IFRS basis. The Firm’s AUM, total revenue, adjusted EBITDA,
and net earnings, on a consolidated basis, including amounts on a per-share basis for each of the Firm’s most recently completed
eight quarterly periods, are as follows:
TABLE 10 – QUARTERLY RESULTS ($ IN THOUSANDS EXCEPT AUM $ IN MILLIONS)1
AUM
Total revenue
Adjusted EBITDA2
Adjusted EBITDA margin
Net earnings (Loss) attributable to the
Company’s shareholders
PER SHARE BASIC
Adjusted EBITDA2
Net earnings (Loss) attributable to the
Company’s shareholders
Adjusted net earnings attributable to the
Company’s shareholders2
PER SHARE DILUTED
Adjusted EBITDA2
Net earnings (Loss) attributable to the
Company’s shareholders
Adjusted net earnings attributable to the
Company’s shareholders2
PER SHARE DILUTED
(Including non-cash compensation and options granted3)
Adjusted EBITDA2
Net earnings (Loss) attributable to the
Company’s shareholders
Adjusted net earnings attributable to the
Company’s shareholders2
Q4
Dec. 31
2013
77,485
55, 222
22,941
41.5%
Q3
Sep. 30
201 3
67,163
35,111
12,085
34.4%
Q2
Jun. 30
2013
65,092
33,178
12,858
38.8%
Q1
Mar. 31
2013
65,702
30,215
11,342
37.5%
Q5
Dec. 31
2012
58,138
31,009
12,746
41.1%
Q4
Sep. 30
2012
55,681
26,399
9,717
36.8%
Q3
Jun. 30
2012
54,375
26,257
10,732
40.9%
Q2
Mar. 31
2012
29,151
15,531
3,516
22.6%
8,481
1,508
3,365
1,586
3,086
3,008
(3,463)
(435)
0.36
0.13
0.29
0.35
0.13
0.28
0.33
0.12
0.26
0.22
0.03
0.15
0.22
0.03
0.15
0.22
0.03
0.15
0.23
0.06
0.16
0.23
0.06
0.16
0.23
0.06
0.16
0.20
0.03
0.13
0.20
0.03
0.13
0.20
0.03
0.13
0.23
0.05
0.16
0.23
0.05
0.16
0.23
0.05
0.16
0.18
0.05
0.12
0.18
0.05
0.12
0.18
0.05
0.12
0.19
0.10
(0.06)
(0.01)
0.13
0.07
0.19
0.10
(0.06)
(0.01)
0.13
0.07
0.19
0.10
(0.06)
(0.01)
0.13
0.07
1. AUM were restated to include Fiera Axium and Fiera Properties AUM.
2. Adjusted EBITDA and Adjusted net earnings are non-IFRS measures. Please refer to “Non-IFRS Measures” on page 53.
3. This analysis considers that all outstanding stock-based programs will be vested and paid with shares of the Corporation.
42
Management’s Discussion and Analysis Results and Trend Analysis
AUM
AUM increased in the fourth quarter of 2013 compared to
the previous quarter mainly due to the acquisitions of Bel Air
and Wilkinson O’Grady, combined with additional AUM from
new mandates. AUM increased in the third quarter of 2013
compared to the previous quarter mainly due to additional
AUM resulting from new mandates in the institutional sector
combined with market appreciation during the period.
AUM increased in the three months ended June 30, 2013,
compared to previous quarters due to the acquisition of assets
from GMP, combined with market appreciation as well as
additional net AUM. The acquisition of Natcan AUM in April
2012 contributed to the AUM increase in the quarter ended
June 30, 2012.
Revenue
During the quarter ended December 31, 2013, revenue
increased due to the inclusion of Bel Air and Wilkinson O’Grady
operations, combined with higher performance fees on
both traditional and alternative assets class. Revenue for the
previous quarter ended September 30, 2013, increased mainly
due to positive cash flows and new mandates. The quarter
ended June 30, 2013, also demonstrated an increase compared
to the quarter ended March 31, 2013, following the acquisition
of assets of UBS and GMP. The quarter ended March 31, 2013,
showed a slight decrease compared to the quarter ended
December 31, 2012, due to lower performance fees, which are
generally earned in the fourth quarter of each year.
Adjusted EBITDA
Adjusted EBITDA has fluctuated from a low of $3.5 million
to a high of $22.9 million. The current quarter ended
December 31, 2013, was positively impacted by additional
AUM base revenue resulting from the acquisitions of Bel
Air and Wilkinson O’Grady as well as higher revenue from
performance fees. The previous quarter ended September 30,
2013, benefited from the acquisition of assets from UBS
and GMP, combined with positive cash flows, market
appreciation and new mandates. The acquisition of Natcan
contributed to the rise in adjusted EBITDA in the quarter
ended June 30, 2012. The quarters ended March 31, 2012,
experienced a shortfall in the adjusted EBITDA and were
characterized by a rise in operating expenses due to the strong
investment performance of our investment teams namely
the Fixed Income and Global teams resulting in an increase
in compensation expenses combined with the continuation
of the Firm’s investment in strategic initiatives such as
the US branch office and the Real Estate fund and related
set-up costs.
Adjusted EBITDA Margin
Adjusted EBITDA margin relates adjusted EBITDA to revenue.
It is an important measure of overall operating performance
because it indicates the operating profitability of the Company.
Adjusted EBITDA margin has fluctuated from a low of
22.6% to a high of 41.5%. The quarter ended March 31, 2012,
experienced a low adjusted EBITDA margin of 22.6% due
to overall rise in operating expenses resulting from higher
performance fees and compensation expenses. The quarters
following the Natcan acquisition have shown adjusted EBITDA
margin in the range of 37% to 40% due to higher revenue
and cost savings from synergies following the acquisition.
The previous quarter ended September 30, 2013, had an
adjusted EBITDA margin of 34.4% due to the overall rise in
SG&A expenses resulting mainly from higher compensation
following strong performances by the investment teams.
The current quarter ended December 31, 2013, had a high
adjusted EBITDA margin of 41.5% mainly due to higher
base management fees, combined with higher revenue from
performance fees on traditional and alternative assets class.
Net Earnings Attributable to the
Company’s Shareholders
Net earnings attributable to the Company’s shareholders
have fluctuated from a low of $3.5 million loss to a high of
$8.5 million earnings. Since the quarter ended March 31, 2012,
various initiatives and non-recurring costs related mainly
to the Natcan transaction have contributed to the decrease
in net earnings attributable to the Company’s shareholders,
especially for the quarter ended June 30, 2012, since business
combination costs are expensed. Net earnings attributable to
the Company’s shareholders for the quarter ended March 31,
2013, were lower than those of the quarter ended June 30,
2013, due to higher revenue from based management fees
offset by higher operating expenses and unfavourable changes
in fair value of derivative financial instruments.
The current quarter’s net earnings attributable to
the Company’s shareholders were higher than those of
the previous quarter ended September 30, 2013, due to
higher revenue resulting from the acquisitions of Bel Air
and Wilkinson O’Grady as well as higher revenue from
performance fees recorded during the fourth quarter of 2013.
Adjusted Net Earnings Attributable to the
Company’s Shareholders
Adjusted net earnings attributable to the Company’s
shareholders per share are a good performance indicator of
the Company’s ability to generate cash flows. Adjusted net
earnings attributable to the Company’s shareholders have
fluctuated from a low of $0.07 per share (basic and diluted) to
a high of $0.29 per share (basic) and $0.28 (diluted).
Fiera Capital Corporation 2013 Annual Report | 43
The first quarter after the Natcan acquisition was
closed with adjusted net earnings attributable to the
Company’s shareholders of $0.13 per share (basic and
diluted), an increase of $0.6 per share (basic and diluted),
from $0.07 per share (basic and diluted) recorded in the
quarter ended March 31, 2012. The following quarter
ended September 30, 2012, closed with adjusted net
earnings attributable to the Company’s shareholders of
$0.12 per share (basic and diluted) and the quarter ended
December 31, 2012, had adjusted net earnings attributable
to the Company’s shareholders of $0.16 per share (basic
and diluted), mainly due to additional performance fees
earned in this period. The quarter ended March 31, 2013,
showed adjusted net earnings attributable to the Company’s
shareholders of $0.13 per share (basic and diluted), mainly
due to the lower performance fees recorded in this period.
During the following quarter and the quarter ended
September 30, 2013, the Company recorded adjusted net
earnings attributable to the Company’s shareholders of
$0.16 and $0.15 per share (basic and diluted), respectively.
The current quarter ended December 31, 2013, recorded
adjusted net earnings attributable to the Company’s
shareholders of $0.29 per share (basic) and $0.28 (diluted),
due to higher revenue resulting from the acquisitions of Bel
Air and Wilkinson O’Grady as well as higher revenue from
performance fees recorded during the quarter.
LIQUIDITY
Cash Flows
The following table provides additional details regarding Fiera Capital’s cash flows.
TABLE 11 – SUMMARY OF CONSOLIDATED STATEMENTS OF CASH FLOWS ($ IN THOUSANDS)
Cash provided by operating activities
Cash used in investing activities
Cash provided by financing activities
Increase in cash and cash equivalents
Effect of exchange rate changes on cash denominated in foreign currencies
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
For the Twelve Months Ended
December 31, 2013
For the Fifteen Months Ended
December 31, 2012
35,002
(201,368)
181,918
15,552
206
6,016
21,744
17,888
(107,631)
95,793
6,050
-
(34)
6,016
Cash provided by operating activities was $35 million for
Cash provided by financing activities of $181.9 million for
the twelve months ended December 31, 2013, compared
to $17.9 million cash provided in the fifteen months ended
December 31, 2012. The variation of $17 million is mainly
explained by higher net earnings, adjusted for higher non-cash
items (mainly depreciation and amortization) and higher non-
cash compensation items.
Cash used in investing activities of $201.4 million for the
twelve months ended December 31, 2013, is due mainly to
the acquisition of assets of UBS, GMP, Bel Air and Wilkinson
O’Grady during this period, whereas cash used in investing
activities of $107.6 million for the fifteen months ended
December 31, 2012, results mainly from the acquisition
of Natcan.
the twelve months ended December 31, 2013, is due to a
net increase in bank loan and long-term debt of $111 million,
combined with $102 million from the share issuance (net
of issuance costs) following the acquisition of the assets
from UBS, GMP, Bel Air and Wilkinson O’Grady, offset by
the payments of dividends of $22.6 million, payments of
interest on long-term debt of $6.9 million and financing
charges of $1 million during the twelve months ended
December 31, 2013.
44
Management’s Discussion and Analysis The following table provides details of the Firm’s cash earnings and cash earnings per share for the twelve months ended
December 31, 2013, and fifteen months ended December 31, 2012.
TABLE 12 – CASH EARNINGS AND CASH EARNINGS PER SHARE ($ IN THOUSANDS)
Net earnings attributable to the Company’s shareholders
Adjusted for the following items:
Depreciation of property & equipment
Amortization of intangible assets
Non-cash compensation
Change in fair value of derivative financial instruments
Cash earnings
Cash earnings per share (basic)
Cash earnings per share (diluted)
For the Twelve Months Ended
December 31, 2013
For the Twelve Months Ended
December 31, 2012
14,939
1,341
19,083
2,716
(426)
37,653
0.64
0.63
3,026
1,136
12,609
1,200
1,491
19,462
0.40
0.40
Long-Term Debt
After the acquisition of the Natcan, CWM, UBS, GMP, Bel Air and Wilkinson O’Grady assets the Firm has put in place a
$250 million unsecured credit facility (“Credit Facility”) consisting of a $75 million revolving facility maturing in April 2017 and a
$175 million term facility maturing in April 2017.
On October 31, 2013, the Company amended its $118 million credit facility which consisted of a $10 million revolving facility
and a $108 million term facility to a $250 million Credit Facility. The amended Credit Facility bearing interest at prime rate plus a
premium varying from 0% to 2.25% or at the banker’s acceptances rate plus a premium varying from 1.00% to 2.25% (2.25% as
at December 31, 2013) matures on April 3, 2017, and is repayable in quarterly instalments of $3.4 million starting in June 2015 up
to April 2017 with a final payment of $206 million. The revolving facility can be used for general corporate purposes, to finance
permitted acquisitions and was used to finance a portion of the Bel Air and Wilkinson O’Grady acquisitions.
Under the terms of the loan agreement, the Firm must satisfy certain restrictive covenants as to minimum financial
ratios. These restrictions are composed of the ratio of funded debt to EBITDA and the interest coverage ratio. Under the loan
agreement, EBITDA, a non-IFRS measure, means, on a consolidated basis, net earnings before interest, taxes, depreciation,
amortization, non-recurring and one-time expenses related to acquisitions and other non-cash items and shall include various
items. As at December 31, 2013, all debt covenant requirements and exemptions have been respected.
Contractual Obligations
The Company has the following contractual obligations as at December 31, 2013:
TABLE 13 – CONTRACTUAL OBLIGATIONS ($ IN THOUSANDS)
Long-Term Debt
Purchase Price Obligations
Operating Leases
Total Obligations
Carrying
amount
229,563
58,323
n/a
n/a
Total
229,563
68,184
19,455
317,202
2014
-
18,184
6,185
24,369
2015
10,125
8,500
5,559
24,184
2016
13,500
8,500
2,468
24,468
Thereafter
205,938
33,000
5,243
244,181
Off-Balance Sheet Arrangements
At December 31, 2013, Fiera Capital was not engaged in any off-balance sheet arrangements, including guarantees, derivatives,
other than the floating-to-fixed interest rate swap detailed under the long-term debt section above, and variable-interest
entities. We do not expect to enter into such agreements.
Fiera Capital Corporation 2013 Annual Report | 45
Legal Proceedings
Fiera Capital may become involved in various claims and
litigation as part of its business. Even though the Firm cannot
predict the final outcome of the claims and litigation that
were pending at December 31, 2013, from information
currently available and management’s assessment of the
merits of such claims and litigation, management believes
that the resolution of these claims and litigation will not have
a material and negative effect on our consolidated financial
position or results of operations.
Post-Employment Benefits Obligations
The Company contributes to defined contribution plans for
its employees. Contributions for the 12-month period ended
December 31, 2013 amount to $1.6 million ($1.3 million for
the 15-month period ended December 31, 2012).
Subsequent to a business acquisition realized in September
2010, the Company assumed the role of sponsor of an
individual pension plan (“IPP“) which had been established
by the Company for former employees. Under pension
legislation, while the IPPs are ongoing, the Company has no
legal requirement to make contributions towards any solvency
deficiencies. These IPPs are valued on a triennial reporting
cycle. The most recent actuarial valuation was performed as
at January 1, 2013 and the next actuarial valuation date is
January 1, 2016.
As at January 1, 2013, no IPPs for former executive
employees had an ongoing funding deficit. The funding
requirement, if any, will be confirmed at the termination date
of the plans.
Share Capital
As at December 31, 2013, the Company had 46,639,057
Class A subordinate voting shares and 20,798,008 Class B
special voting shares for a total of 67,437,065 shares
outstanding compared to 35,368,114 Class A subordinate
voting shares and 21,207,964 Class B special voting
shares for a total of 56,576,078 shares outstanding, as at
December 31, 2012.
On September 18, 2013, the Company issued under
a private placement, 9,781,000 subscription receipts at
a price of $10.75 per receipt for an aggregate amount of
$102 million, net of issuance costs of $4.2 million and
deferred income taxes recovery of $1.1 million. Proceeds
were placed in escrow until the closing of the Bel Air and
Wilkinson O’Grady business combinations. Upon the closing,
the subscription receipts were automatically exchanged on a
one-for-one basis for 9,781,000 Class A Shares.
As part of the Bel Air transaction, the Company committed
to issue over a 32-month period following closing, Class A
Shares worth US$9.8 million. This commitment was
considered an equity component and was recorded at a
discounted value of US$8.4 million (CA$8.9 million) under
the caption: Hold back shares.
Share-Based Payment
Stock Option Plan
The following table presents transactions that occurred
during the twelve months ended December 31, 2013, and
the fifteen months ended December 31, 2012, under the
Company’s share-based plans.
December 31, 2013
December 31, 2012
Number of
Class A Share Options
Weighted-Average
Exercise Price ($)
Number of
Class A Share Options
Weighted-Average
Exercise Price ($)
2,290,393
823,000
(170,871)
-
2,942,522
999,690
6.92
10.77
4.84
8.12
6.48
1,630,072
986,939
(181,401)
(145,217)
2,290,393
707,172
5.93
8.22
4.16
8.13
6.92
5.88
TABLE 14 – OPTIONS
Outstanding – beginning of period
Granted
Exercised
Forfeited
Outstanding - end of period
Options exercisable - end of period
46
Management’s Discussion and Analysis Deferred Share Unit Plan (DSU)
In 2007, the Board of Directors of the Company adopted a
Deferred Share Unit Plan (the “DSU Plan”) for the purposes
of strengthening the alignment of interests between the
directors and the shareholders by linking a portion of annual
director compensation to the future value of the shares,
in lieu of cash compensation. Under the DSU Plan, each
director received, on the date in each quarter which is three
business days following the publication by the Company of
its earnings results for the previous quarter, that number of
DSUs having a value equal to up to 100% of such director’s
base retainer for the current quarter, provided that a
minimum of 50% of the base retainer must be in the form
of DSUs. The number of DSUs granted to a director was
determined by dividing the dollar value of the portion of
the director’s fees to be paid in DSUs by the closing price of
the Class A Shares on the Toronto Stock Exchange (“TSX”)
for the business day immediately preceding the date of the
grant. At such time as a director ceased to be a director,
the Company would make a cash payment to the director
equal to the closing price of the Class A Shares on the date
of departure, multiplied by the number of DSUs held by the
director on that date. As at September 1, 2010, the Board
of Directors cancelled the DSU plan; however, all existing
rights and privileges were kept intact. All directors are now
compensated in cash.
As at December 31, 2013, management had provided an
amount of approximately $0.19 million for the 13,214 units
($0.24 million for 31,933 units as at December 31, 2012)
outstanding under the DSU Plan.
Employee Share Purchase Plan (ESPP)
On October 6, 2011, the Board of Directors adopted an
Employee Share Purchase Plan (“ESPP Plan”) for the purposes
of attracting and retaining eligible employees, therefore
allowing them to participate in the growth and development
of the Company. The maximum number of issuable Shares
under this plan is 1.5 million shares of Class A Shares. The
Board of Directors may determine the subscription date and
the number of shares each eligible employee can subscribe to.
The subscription price is determined by the volume-weighted
average trading price of the Company’s shares on the TSX
for the five trading days immediately preceding the date of
the subscription.
Restricted Share Unit Plan (RSU)
On December 11, 2012, the Board of Directors adopted a
Restricted Share Unit Plan (“RSU Plan”) for the purposes of
providing certain employees with the opportunity to acquire
Class A Shares of the Company in order to induce such persons
to become employees of the Company or one of its affiliates and
to permit them to participate in the growth and development of
the Company. The maximum number of issuable Class A Shares
under all plans is 10% of the issued and outstanding shares of
the Company calculated on a non-diluted basis. The subscription
date is the third anniversary of the award date. The Board may
determine the number of shares each eligible employee can
receive. RSU expense is recorded at fair value and is amortized
over the vesting period on a straight-line basis.
As at December 31, 2013, management had provided an
amount of approximately $0.6 million for the 367,548 units
($0.02 million for 125,646 units as at December 31, 2012)
outstanding under the RSU Plan.
Performance Share Unit Plan (PSU)
On October 30, 2013, the Board of Directors adopted a
Performance Share Unit Plan (“PSU Plan”) for the purposes of
retaining key employees and to permit them to participate in
the growth and development of the Company. The Company
has the option to settle the performance share units in cash
or Class A Shares of the Company. The maximum number of
issuable Class A Shares under all plans is 10% of the issued
and outstanding shares of the Company calculated on a non-
diluted basis.
During the fourth quarter of 2013, the Company issued PSU
to employees of Bel Air and Wilkinson O’Grady that became
employees of the Company as at October 31, 2013. The PSU
will vest in tranches equivalent to 20% of the total grant in
each of the next five years. The annual vesting of the PSU is
subject to different conditions, including the attainment of
an agreed upon annualized revenue growth objective and
the continuance of employment of the participant with the
Company. The value of each PSU granted is derived from the
value of the Fiera Private Wealth North America business unit
which was created in the first quarter of 2014. In total, the
Company granted 1,389,071 PSU which corresponds to a total
incentive of $16.7 million. An expense of $0.8 million was
recorded in 2013 for this grant. 43,750 PSUs were forfeited
between the grant date and December 31, 2013.
Fiera Capital Corporation 2013 Annual Report | 47
Related Party Transactions
The Company has carried out the following principal transactions with shareholders and their related companies.
TABLE 15 – RELATED PARTY TRANSACTIONS ($ IN THOUSANDS)
Base management fees
Performance fees
SG&A
Interest on long-term debt
Changes in fair value of financial instruments
Integration cost
Shares issued as settlement of the purchase price obligations
For the 12 Months Ended
December 31, 2013
For the 15 Months Ended
December 31, 2012
39,132
6,114
1,503
6,934
(847)
183
8,500
30,653
2,238
2,468
2,863
1,491
1,031
-
These transactions were made in the normal course of business and are measured at the exchange amount, which is the
amount of consideration established and agreed to by the related parties. Fees are at prevailing market prices and are settled on
normal trade terms. Bank loans, long-term debt and derivative financial instruments are amounts due to shareholders and their
related companies as at December 31, 2013, and December 31, 2012.
CONTROL AND PROCEDURES
The Chief Executive Officer (“CEO”) and the Senior Vice
President, Finances (“SVP,F”) in the capacity of an officer
performing the functions of a chief financial officer, together
with management, are responsible for establishing and
maintaining adequate disclosure controls and procedures
(“DC&P”) and internal controls over financial reporting
(“ICFR”), as defined in National Instrument 52-109. Fiera
Capital Corporation’s internal control framework is based
on the criteria published in the report Internal Control-
Integrated Framework (COSO framework 1992) issued by
the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) and is designed to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes
in accordance with IFRS.
The CEO and SVP,F, supported by management, evaluated
the design and operating effectiveness of the Company’s
disclosure controls and procedures (“DC&P”) and internal
controls over financial reporting (“ICFR”) as of December 31,
2013, and have concluded that they were effective.
Furthermore, no significant changes to the internal controls
over financial reporting occurred during the year ended
December 31, 2013, except as described below:
On October 31, 2013, the Corporation acquired 100%
of the issued and outstanding shares of Bel Air Investment
Advisors LLC and of Wilkinson O’Grady. Due to the
short period of time between this acquisition and the
certification dates on March 19, 2014, management was
unable to complete its review of the design and operating
48
effectiveness of ICFR for this acquisition. At December 31,
2013, risks were however mitigated as management
was fully apprised of any material events affecting these
acquisitions. In addition, all the assets and liabilities
acquired were valued and recorded in the consolidated
financial statements as part of the purchase price allocation
process and Bel Air Investment Advisors LLC and Wilkinson
O’Grady results of operations were also included in the
Corporation’s consolidated results. Bel Air Investment
Advisors LLC constitutes 4% of revenue, 7% of profit of the
year, 19% of the total assets, 19% of the current assets,
19% of the non-current assets, 22% of the current liabilities
and none of the non-current liabilities of the consolidated
financial statements for the year ended December 31, 2013.
Wilkinson O’Grady constitutes 1% of revenue, 6% (as a
loss) of profit of the year, 5% of the total assets, 10% of
the current assets, 5% of the non-current assets, 2% of the
current liabilities and 2% of the non-current liabilities of
the consolidated financial statements for the year ended
December 31, 2013. In the coming fiscal year, management
will complete its review of the design of ICFR for Bel
Air Investment Advisors LLC and Wilkinson, and assess
its effectiveness.
Following the above mentioned acquisitions, management
had to adjust the consolidation process to incorporate the
new U.S. subsidiary. New controls were implemented in order
to present fairly the financial position of the Corporation as at
December 31, 2013, and its financial performance and its cash
flows for the year ended December 31, 2013.
Management’s Discussion and Analysis FINANCIAL INSTRUMENTS
The Company, through its financial assets and financial
liabilities, has exposure to the following risks from its use of
financial instruments: credit risk, interest rate risk, currency
risk and liquidity risk. The following analysis provides a
measurement of risks as at December 31, 2013.
The Company’s business is the management of investment
assets. The key performance driver of the Company’s results
is the level of assets under management. The level of
assets under management is directly tied to the Company’s
investment returns and ability to retain existing assets and
attract new assets.
The Company’s audited consolidated balance sheet
includes a portfolio of investments. The value of these
investments is subject to a number of risk factors. While a
number of these risks also affect the value of client’s assets
under management, the following discussion relates only to
the Company’s own portfolio of investments.
The Company’s exposure to potential loss from its financial
instrument investments is due primarily to market risk,
including interest rate and equity market fluctuation risks,
credit risk and liquidity risk.
Market Risk
Market risk is the risk of loss arising from adverse changes
in market rates and prices, such as interest rates, equity
market fluctuations and other relevant market rate or price
changes. Market risk is directly influenced by the volatility
and liquidity of the markets in which the related underlying
assets are traded. Below is a discussion of the Company’s
primary market risk exposures and how these exposures are
currently managed.
Equity Market Fluctuation Risk
Fluctuations in the value of equity securities affect the level
and timing or recognition of gains and losses on equity and
mutual fund and pooled fund securities in the Company’s
portfolio and cause changes in realized and unrealized gains
and losses. General economic conditions, political conditions
and many other factors can also adversely affect the stock
and bond markets and, consequently, the value of the equity,
mutual fund, pooled fund and fixed income available-for-sale
financial assets held.
The Company manages its investment portfolio with a
medium-risk mandate. Its particular expertise is investment
management and, as part of its daily operations, it has
resources to assess and manage the risks of a portfolio. The
Company’s portfolio of equity and equity-related securities
as at December 31, 2013, comprises mutual fund and pooled
fund investments under its management. Mutual fund
investments comprise a well-diversified portfolio of Canadian
investments. Mutual fund and pooled fund units have no
specific maturities. A 10% change in the Company’s equity
and equity-related holdings has an impact of increasing or
decreasing other comprehensive income by $0.6 million
for the twelve months ended December 31, 2013, and by
$0.7 million for the twelve months ended December 31,
2012, respectively. Refer to note 6, Financial Instruments,
of the audited consolidated financial statements for
additional information.
Credit Risk
Credit risk is the risk that one party to a financial instrument
fails to discharge an obligation and causes financial loss to
another party.
The credit risk on cash, restricted cash and investments is
limited because the counterparties are chartered banks with
high-credit ratings assigned by national credit-rating agencies.
The Company’s principal financial assets that are subject
to credit risk are cash, restricted cash, investments and
accounts receivable. The carrying amounts of financial assets
on the consolidated balance sheets represent the Company’s
maximum credit exposure at the consolidated balance sheet
dates. Refer to note 6, Financial Instruments, of the audited
consolidated financial statements for additional information.
Interest Rate Risk
The Company is exposed to interest rate risk through its long-
term debt and bank loan. The interest on the bank loan and
long-term debt are at variable rates and expose the Company
to cash flow interest rate risk which is partially offset by cash
held at variable rates.
The Company manages its cash flow interest rate risk by
using a floating-to-fixed interest rate swap. Such interest
rate swap has the economic effect of converting debt from
floating rates to fixed rates. The Company obtained the long-
term debt at a floating rate and swapped a portion of it into
fixed rates that are lower than those available if the Company
borrowed at fixed rate directly. Under the interest rate swap,
the Company agrees with the counterparty to exchange, at
specified intervals, the difference between the fixed contract
rate and floating-rate interest amounts calculated by
reference to the agreed notional amounts. Refer to note 6,
Financial Instruments, of the audited consolidated financial
statements for additional information.
Fiera Capital Corporation 2013 Annual Report | 49
The derivative financial instruments consist of an interest
rate swap contract. The Company determines the fair value
of its derivative financial instruments using the purchase
or selling price, as appropriate, in the most advantageous
active market to which the Company has immediate access.
When there is no active market for derivative financial
instruments, the Company determines the fair value by
applying valuation techniques, using available information
on market transactions involving other instruments that are
substantially the same, discounted cash flow analysis or other
techniques, where appropriate. The Company ensures, to the
extent practicable, that its valuation technique incorporates
all factors that market participants would consider in setting
a price and that it is consistent with accepted economic
methods for pricing financial instruments.
The carrying amount of derivative financial instruments
classified as cash flow hedges as at December 31, 2013,
was a liability of $0.6 million. Refer to note 6, Financial
Instruments, of the audited consolidated financial statements
for additional information.
Capital Management
The Company’s capital comprises share capital, (deficit)
retained earnings and long-term debt, including the current
portion, less cash. The Company manages its capital to
ensure adequate capital resources while maximizing the
return to shareholders through optimization of the debt and
equity balance and to maintain compliance with regulatory
requirements and certain restrictive covenants required by the
lender of the debt.
In order to maintain its capital structure, the Company
may issue new shares or carry out the issuance or repayment
of debt and acquire or sell assets to improve its financial
performance and flexibility.
To comply with Canadian securities administration
regulations, the Company is required to maintain minimum
capital of $100,000 as defined in Regulation 31-103
respecting Registration Requirements, Exemptions and Ongoing
Registrant Obligations. As at December 31, 2013, all regulatory
requirements and exemptions were respected.
Currency Risk
Currency risk 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 Company’s exposure relates
to cash, restricted cash and long-term debt dominated in
US dollars and to the operations of its US operations which
are predominantly in US dollars. The Company manages
a portion of its exposure to foreign currency by matching
asset and liability positions. More specifically, the Company
matches the long-term debt in foreign currency with
long-term assets in the same currency.
Based on the US dollar balances outstanding as at
December 31, 2013, a 5% increase/decrease of the US
dollar against the Canadian dollar would result in an
increase/decrease in total comprehensive income (loss)
of $0.6 million. Refer to note 6, Financial Instruments,
of the audited consolidated financial statements for
additional information.
Liquidity Risk
The Company’s objective is to have sufficient liquidity to
meet its liabilities when they become due. The Company
monitors its cash balance and cash flows generated from
operations to meet its requirements. Refer to note 6, Financial
Instruments, of the audited consolidated financial statements
for additional information.
Determination of Fair Value of Derivative
Financial Instruments
The fair value of the financial instruments represents the
amount of the consideration that would be agreed upon in
an arm’s length transaction between knowledgeable, willing
parties who are under no compulsion to act.
The fair value of cash, restricted cash, accounts receivable,
bank loan, accounts payable and accrued liabilities, amount due
to related companies and client deposits is approximately equal
to their carrying values due to their short-term maturities.
The fair value of long-term debt approximates its carrying
amount value, given that it is subject to terms and conditions,
including variable interest rates, similar to those available to
the Company for instruments with comparable terms.
The value of the option granted to non-controlling interest
is based on a formula that was agreed upon by all parties
during the acquisition of the selected alternative asset
management funds of GMP. This formula uses the present
value of the sum of a multiple of the forecasted earnings
before income taxes, depreciation and amortization and
forecasted performance fees. The actual performance of the
subsidiary will affect the value of the option.
50
Management’s Discussion and Analysis SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATION UNCERTAINTIES
The application of the Company’s accounting policies requires
management to use estimates and judgments that can have
a significant effect on the revenues, expenses, comprehensive
income, assets and liabilities recognized and disclosures
made in the consolidated financial statements. Estimates and
judgments are significant when:
• the outcome is highly uncertain at the time the estimates
and judgments are made; and
• if different estimates or judgments could reasonably have
been used that would have had a material impact on the
consolidated financial statements.
Management’s best estimates regarding the future are
based on the facts and circumstances available at the time
estimates are made. Management uses historical experience,
general economic conditions and trends, as well as
assumptions regarding probable future outcomes as the basis
for determining estimates. Estimates and their underlying
assumptions are reviewed periodically and the effects of
any changes are recognized immediately. Actual results will
differ from the estimates used, and such differences could
be material. Management’s annual budget and long-term
plan which covers a five-year period are key information
for many significant estimates necessary to prepare these
consolidated financial statements. Management prepares a
budget on an annual basis and regularly updates its long-
term plan. Cash flows and profitability included in the budget
and long-term plan are based on existing and future assets
under management, general market conditions and current
and future cost structures. The budget and long-term plan
are subject to approval at various levels, including senior
management and the Board of Directors.
The following discusses the most significant accounting
judgments and estimates that the Company has made in the
preparation of the consolidated financial statements:
Cash Generating Unit
The Company determined that it had one cash-generating
unit (“CGU”) for the purpose of assessing the carrying value
of the allocated goodwill and indefinite-life intangible
assets until the acquisition by the Company of the asset
management funds of GMP Investment Management now
referred to as Fiera Diversified Alpha Fund and Canadian ABCP
Fund which also constitutes a CGU since the acquisition on
May 1, 2013.
Impairment of Goodwill, Indefinite-life Intangible Assets
and Finite-life Intangible Assets
Goodwill is tested annually for impairment. The recoverable
amount of the CGU is determined based on value-in-use
calculation. This calculation requires the use of estimates
including those with respect to the assumed growth rates for
future cash flows, the number of years used in the cash flow
model, the discount rate and other estimates. The recoverable
amounts of indefinite-life-intangible assets and finite-life
intangible assets are based on the present value of the
expected future cash flows which involves making estimates
about the future cash flows including projected client attrition
rates when applicable, as well as discount rates and gross
profit margin percentage.
Business Combinations
The purchase price allocation process resulting from a
business combination requires management to estimate
the fair value of assets acquired including intangible assets,
property and equipment along with liabilities assumed, such
as the purchase price obligation due over time. The Company
uses valuation techniques which are generally based on a
forecast of the total expected future net discounted cash
flows. These valuations are linked closely to the assumptions
made by management regarding the future performance of
the related assets and the discount rate applied.
Income Taxes
The calculation of income tax expense requires significant
judgment in interpreting tax rules and regulations, which
are changing constantly. There are many transactions and
calculations for which the ultimate tax determination is
uncertain. The Company recognizes liabilities for anticipated
tax audit issues based on estimates of whether additional
taxes will be due. Where the final tax outcome of these
matters is different from the amounts that were initially
recorded, such differences will impact the current and
deferred income tax assets and liabilities in the period in
which such determination is made.
Deferred tax assets and liabilities require judgment in
determining the amounts to be recognized. Significant
judgment is required when assessing the timing of the reversal
of the temporary differences to which future tax rates are
applied. The amount of deferred tax assets, which is limited to
the amount that is probable to be realized, is estimated with
consideration given to the timing, sources and level of future
taxable profit.
Fiera Capital Corporation 2013 Annual Report | 51
NEW ACCOUNTING POLICIES
The Company is still evaluating the impact of this standard
on its consolidated financial statements.
The Company has not applied the following new and revised
IFRSs that have been issued but are not yet effective:
IFRS 9 - Financial Instruments
IFRS 9, issued in November 2009, introduced new requirements
for the classification and measurement of financial assets.
IFRS 9 was amended in October 2010 to include requirements
for the classification and measurement of financial liabilities
and for derecognition. IFRS 9 is effective for annual periods
beginning on or after January 1, 2015, with earlier application
permitted. In November 2013, the IASB further amended IFRS 9
to remove the mandatory effective date. The amendment also
provides relief from restating comparative information and
required disclosures in IFRS 7, Financial Instruments: Disclosures.
Key requirements of IFRS 9:
• all recognized financial assets that are within the
scope of IAS 39, Financial Instruments: Recognition
and Measurement are required to be subsequently
measured at amortized cost or fair value. Specifically,
debt investments that are held within a business model
whose objective is to collect the contractual cash flows,
and that have contractual cash flows that are solely
payments of principal and interest on the principal
outstanding are generally measured at amortized cost at
the end of subsequent accounting periods. All other debt
investments and equity investments are measured at their
fair value at the end of subsequent accounting periods. In
addition, under IFRS 9, entities may make an irrevocable
election to present subsequent changes in the fair value
of an equity investment (that is not held for trading) in
other comprehensive income, with only dividend income
generally recognized in profit or loss.
Amendments to IFRS 10, IFRS 12 and IAS 27-
Investment Entities
The amendments to IFRS 10 define an investment entity
and require a reporting entity that meets the definition
of an investment entity not to consolidate its subsidiaries
but instead to measure its subsidiaries at fair value
through profit or loss in its consolidated and separate
financial statements.
To qualify as an investment entity, a reporting entity is
required to:
• obtain funds from one or more investors for the
purpose of providing them with professional investment
management services;
• commit to its investor(s) that its business purpose is to
invest funds solely for returns from capital appreciation,
investment income, or both; and
• measure and evaluate performance of substantially all of
its investments on a fair value basis.
Consequential amendments have been made to IFRS 12
and IAS 27 to introduce new disclosure requirements for
investment entities.
The amendments to IFRS 10, IFRS 12 and IAS 27 are
effective for annual periods beginning on or after January 1,
2014, with earlier application permitted. The Company does
not anticipate that the investment entities amendments
will have any effect on the Company’s consolidated financial
statements as the Company is not an investment entity as
defined under IFRS.
• with regard to the measurement of financial liabilities
designated as at fair value through profit or loss, IFRS 9
requires that the amount of change in the fair value
of the financial liability that is attributable to changes
in the credit risk of that liability is presented in other
comprehensive income, unless the recognition of the
effects of changes in the liability’s credit risk in other
comprehensive income would create or enlarge an
accounting mismatch in profit or loss. Changes in fair
value attributable to a financial liability’s credit risk are not
subsequently reclassified to profit or loss. Under IAS 39,
the entire amount of the change in the fair value of the
financial liability designated as fair value through profit or
loss is presented in profit or loss.
Amendments to IAS 32 - Offsetting Financial Assets and
Financial Liabilities
The amendments to IAS 32 clarify the requirements relating
to the offset of financial assets and liabilities. Specifically,
the amendments clarify the meaning of “currently has a
legally enforceable right of set-off” and “simultaneous
realization and settlement”.
IAS 32 is effective for annual periods beginning on or
after January 1, 2014, with earlier application permitted. The
Company does not anticipate that the application of these
amendments to IAS 32 will have a significant impact on the
Company’s consolidated financial statements as the Company
does not have any financial assets and liabilities that qualify
for offset.
52
Management’s Discussion and Analysis NON-IFRS MEASURES
RISKS OF THE BUSINESS
Adjusted EBITDA is calculated as the difference of
total revenue and Selling, general and administration
(“SG&A”) excluding non-cash compensation and external
managers expenses.
Adjusted net earnings is calculated as the sum of net
earnings (loss), non-cash items, namely depreciation on
property and equipment, amortization of intangible assets
adjusted for the change in fair value of derivative financial
instruments after taxes, certain acquisition and restructuring
costs after taxes and non-cash compensation items.
We have included non-IFRS measures to provide investors
with supplemental measures of our operating and financial
performance. We believe non-IFRS measures are important
supplemental metrics of operating and financial performance
because they eliminate items that have less bearing on our
operating and financial performance and thus highlight trends
in our core business that may not otherwise be apparent
when one relies solely on IFRS measures. We also believe
that securities analysts, investors and other interested parties
frequently use non-IFRS measures in the evaluation of issuers,
many of which present non-IFRS measures when reporting
their results. Our management also uses non-IFRS measures
in order to facilitate operating and financial performance
comparisons from period to period, to prepare annual budgets
and to assess our ability to meet our future debt service, capital
expenditure and working capital requirements. Non-IFRS
measures are not presentations made in accordance with IFRS.
For example, some or all of the non-IFRS measures do not
reflect: (a) our cash expenditures, or future requirements for
capital expenditures or contractual commitments; (b) changes
in, or cash requirements for, our working capital needs; (c)
the significant interest expense, or the cash requirements
necessary to service interest or principal payments on our debt;
and (d) income tax payments that represent a reduction in
cash available to us. Although we consider the items excluded
from the calculation of non-IFRS measures to be non-recurring
and less relevant to evaluate our performance, some of these
items may continue to take place and accordingly may reduce
the cash available to us. We believe that the presentation
of the non-IFRS measures described above is appropriate.
However, these non-IFRS measures have important limitations
as analytical tools, and you should not consider them in
isolation, or as substitutes for analysis of our results as reported
under IFRS. Because of these limitations, we primarily rely
on our results as reported in accordance with IFRS and use
non-IFRS measures only as a supplement. In addition, because
other companies may calculate non-IFRS measures differently
than we do, they may not be comparable to similarly titled
measures reported by other companies.
Fiera Capital’s business is subject to a number of risk factors,
including but not limited to the following:
Clients are not committed to a
long-term relationship
The agreements pursuant to which Fiera Capital manages
its clients’ assets, in accordance with industry practice, may
be terminated upon short notice. Clients who are invested
in units of the Funds may have their units redeemed upon
short notice as well. Consequently, there is no assurance that
Fiera Capital will be able to achieve or maintain any particular
level of AUM, which may have a material negative impact
on Fiera Capital’s ability to attract and retain clients and on
its management fees, its potential performance fees and its
overall profitability.
The loss of any major clients or of a significant number
of existing clients could have a material adverse effect upon
Fiera Capital’s results of operations and financial condition.
Poor investment performance could lead to
the loss of existing clients, an inability to
attract new clients, lower AUM and a decline
in revenue
Poor investment performance, whether relative to Fiera
Capital’s competitors or otherwise, could result in the
withdrawal of funds by existing clients in favour of better-
performing products and would have an adverse impact
upon Fiera Capital’s ability to attract funds from new and
existing clients, any of which could have an adverse impact
on Fiera Capital’s AUM, management fees, profitability
and growth prospects. In addition, Fiera Capital’s ability to
earn performance fees is directly related to its investment
performance, and therefore poor investment performance
may cause Fiera Capital to earn less or no performance fees.
Fiera Capital cannot guarantee that it will be able to achieve
positive relative returns, retain existing clients or attract
new clients.
Reliance on a major customer
As part of the Natcan Transaction, Fiera Capital entered into
an Assets Under Management Agreement with Natcan and
National Bank. Following the Natcan Transaction, National
Bank became the largest client of Fiera Capital with $22.1 billion
of AUM as of December 31, 2013, representing approximately
28.5% of Fiera Capital’s $77.5 billion in AUM. Termination of the
agreement or failure to renew the term of this agreement could
result in a significant reduction of Fiera Capital’s AUM which
could have a material adverse effect on its business, prospect
financial condition and results of operations.
Fiera Capital Corporation 2013 Annual Report | 53
Loss of key employees as a result of
competitive pressures could lead to a loss of
clients and a decline in revenue
Fiera Capital’s business is dependent on the highly skilled
and often highly specialized individuals it employs.
The contribution of these individuals to Fiera Capital’s
Investment Management, Risk Management and Client
Service teams plays an important role in attracting and
retaining clients. Fiera Capital devotes considerable
resources to recruiting, training and compensating these
individuals. However, given the growth in total AUM in
the investment management industry, the number of new
firms entering the industry and the reliance on performance
results to sell financial products, demand has increased for
high-quality investment and client service professionals.
Compensation packages for these professionals have a
tendency to increase at a rate well in excess of inflation
and above the rates observed in other industries. Fiera
Capital expects that these costs will continue to represent a
significant portion of its expenses.
Fiera Capital has taken, and will continue to take, steps to
encourage its key employees to remain with the Company.
These steps include providing a stock option plan, a short-
term incentive plan and the Employee Share Purchase Plan,
as well as a working environment that fosters employee
satisfaction. We are confident that these measures, aimed
to ensure we are an employer of choice, will be effective
in retaining these individuals, even if we face increasing
competition for experienced professionals in the industry,
and that Fiera Capital will be able to recruit high-quality new
employees with the desired qualifications in a timely manner
when required.
Integration of Acquired Businesses
The success of the expected benefits from any acquisition
completed or that may be completed by Fiera Capital will
depend, in part, on the ability of management of Fiera
Capital to realize the expected benefits and cost savings
from integration of the businesses of Fiera Capital and those
acquired. The integration of the businesses may result in
significant challenges, and management of Fiera Capital
may be unable to accomplish the integration smoothly or
successfully or without spending significant amounts of
money. It is possible that the integration process could result
in the loss of key employees, the disruption of their respective
ongoing businesses or inconsistencies in standards, controls,
procedures and policies that adversely affect the ability of
management of Fiera Capital to maintain relationships with
customers, suppliers or employees or to achieve the expected
benefits of any acquisition.
The integration of Fiera Capital and any acquired business
requires the dedication of substantial management effort,
time and resources, which may divert management’s focus
and resources from other strategic opportunities and from
operational matters during this process. There can be no
assurance that management of Fiera Capital will be able
to integrate the operations of each acquired business
successfully or achieve any of the synergies or other benefits
expected as a result of an acquisition. Any inability of
management to successfully integrate the operations of Fiera
Capital and those contemplated by an acquisition, including
information technology and financial reporting systems,
could have a material adverse effect on the business, financial
condition and results of operations of Fiera Capital.
Competitive pressures could reduce revenue
The investment management industry is competitive. Certain
of Fiera Capital’s competitors have, and potential future
competitors could have, substantially greater technical,
financial, marketing, distribution and other resources than Fiera
Capital. There can be no assurance that Fiera Capital will be able
to achieve or maintain any particular level of AUM or revenue
in this competitive environment. Competition could have a
material adverse effect on Fiera Capital’s profitability, and there
can be no assurance that Fiera Capital will be able to compete
effectively. In addition, Fiera Capital’s ability to maintain its
management fee and performance fee structure is dependent
on its ability to provide clients with products and services that
are competitive. There can be no assurance that Fiera Capital
will not come under competitive pressures to lower the fees it
charges or that it will be able to retain its fee structure or, with
such a fee structure, retain clients in the future. A significant
reduction in Fiera Capital’s management fees or performance
fees could have an adverse effect on revenue.
Conflicts of Interest and Reputational Risk
The failure by Fiera Capital to appropriately manage and
address conflicts of interest could damage Fiera Capital’s
reputation and materially adversely affect its business,
financial condition or profitability. Certain of the Funds and
Managed Accounts have overlapping investment objectives
and potential conflicts may arise with respect to a decision
regarding how to allocate investment opportunities among
them. It is possible that actual, potential or perceived conflicts
could give rise to investor dissatisfaction or litigation or
regulatory enforcement actions. Claims in connection with
conflicts of interest could have a material adverse effect on
Fiera Capital’s reputation, which could materially adversely
affect Fiera Capital’s business in a number of ways, including
as a result of any related client losses.
54
Management’s Discussion and Analysis Reputational risk is the potential that adverse publicity,
whether true or not, may cause a decline in Fiera Capital’s
earnings or client base because of its impact on Fiera
Capital’s corporate image. Reputational risk is inherent in
virtually all Fiera Capital’s business transactions, even when
the transaction is fully compliant with legal and regulatory
requirements. Reputational risk cannot be managed
in isolation, as it often arises as a result of operational,
regulatory and other risks inherent in Fiera Capital’s business.
For this reason, Fiera Capital’s framework for reputation
risk management is integrated into all other areas of risk
management and is a key part of the code of ethics and
conduct that all Fiera Capital’s employees are required
to observe.
Change(s) in the investment management
industry could result in a decline in revenue
Fiera Capital’s ability to generate revenue has been
significantly influenced by the growth experienced in the
investment management industry and by Fiera Capital’s
relative performance within the investment management
industry. The historical growth of the investment
management industry may not continue, and adverse
economic conditions and other factors, including any
significant decline in the financial markets, could affect
the popularity of Fiera Capital’s services or result in clients’
withdrawing from the markets or decreasing their level and/or
rate of investment. A decline in the growth of the investment
management industry or other changes to the industry that
discourage investors from using Fiera Capital’s services could
affect Fiera Capital’s ability to attract clients and result in a
decline in revenue.
Employee errors or misconduct could result
in regulatory sanctions or reputational harm,
which could materially adversely affect
Fiera Capital’s business, financial condition
or profitability
There have been a number of highly publicized cases involving
fraud or other misconduct by employees in the financial
services industry in recent years and, notwithstanding the
extensive measures Fiera Capital takes to deter and prevent
such activity (including by instituting its code of ethics
and conduct), Fiera Capital runs the risk that employee
misconduct could occur. Misconduct by employees could
include binding Fiera Capital to transactions that exceed
authorized limits or present unacceptable risks, or concealing
from Fiera Capital unauthorized or unsuccessful activities,
which, in either case, may result in unknown and unmanaged
risks or losses. Employee misconduct could also involve the
improper use of confidential information, which could result
in regulatory sanctions and serious reputational harm. Fiera
Capital is also susceptible to loss as a result of employee
error. It is not always possible to deter employee misconduct
or prevent employee error, and the precautions Fiera Capital
takes to prevent and detect these activities may not be
effective in all cases, which could materially adversely affect
Fiera Capital’s business, financial condition or profitability.
Regulatory and Litigation Risk
Fiera Capital’s ability to carry on business is dependent
upon Fiera Capital’s compliance with, and continued
registration under, securities legislation in the jurisdictions
where it carries on business. Any change in the securities
regulatory framework or failure to comply with any of these
laws, rules or regulations could have an adverse effect on
Fiera Capital’s business. There is also the potential that the
laws or regulations governing Fiera Capital’s operations or
particular investment products or services could be amended
or interpreted in a manner that is adverse to Fiera Capital.
The rapidly changing securities regulatory environment and
the rise of investment management industry standards for
operational efficiencies, as well as competitive pressures
to implement innovative products and services, may
require additional human resources. The implementation
of additional reporting obligations and other procedures
for investment funds may require additional expenditures.
Failure to comply with these regulations could result in fines,
temporary or permanent prohibitions on Fiera Capital’s
activities or the activities of some of Fiera Capital’s personnel
or reputational harm, which could materially adversely affect
Fiera Capital’s business, financial condition or profitability.
Regardless of Fiera Capital’s effectiveness in monitoring
and administering established compliance policies and
procedures, Fiera Capital, and any of its directors, officers,
employees and agents, may be subject to liability or fines
that may limit its ability to conduct business. Fiera Capital
maintains various types of insurance to cover certain potential
risks and regularly evaluates the adequacy of this coverage.
In recent years, the cost of obtaining insurance has increased
while the number of insurance providers has decreased. As
a result of the introduction of the civil liability regime for
secondary market disclosure, the ability to obtain insurance
on reasonable economic terms may be even more difficult in
the future.
Litigation risk is inherent in the investment management
industry in which Fiera Capital operates. Litigation risk cannot
be eliminated, even if there is no legal cause of action.
The legal risks facing Fiera Capital, its directors, officers,
employees and agents in this respect include potential liability
Fiera Capital Corporation 2013 Annual Report | 55
for violations of securities laws, breach of fiduciary duty and
misuse of investors’ funds. In addition, with the existence of
the civil liability regime for secondary market disclosure in
certain jurisdictions, dissatisfied shareholders may more easily
make claims against Fiera Capital, its directors and its officers.
Fiera Capital’s US subsidiaries, Bel Air Advisors (and its
subsidiary, Bel Air Management, LLC (“Bel Air Management”)
and Wilkinson O’Grady, are registered investment advisers
with the SEC. Bel Air Securities is also a registered US broker-
dealer. Many aspects of these entities’ asset management
and broker-dealer activities are subject to US federal and
state laws and regulations primarily intended to benefit
the investor or client. These laws and regulations generally
grant supervisory agencies and bodies broad administrative
powers, including the power to limit or restrict Bel Air, Bel Air
Management or Wilkinson O’Grady from carrying on their
asset management or broker-dealer activities (including, but
not limited to, by suspending individual employees, revoking
registrations or imposing other censures and significant fines)
in the event that they, their employees or their affiliates fail
to comply with such laws and regulations. The regulatory
environment in which Bel Air, Bel Air Management and
Wilkinson O’Grady operate in the United States is in a
period of transition. In the United States, there has been
active debate over the appropriate extent of regulation and
oversight of investment advisers and broker-dealers. New or
revised legislation or regulations imposed by the SEC or other
US governmental regulatory authorities or self-regulatory
organizations, or changes in the interpretation or enforcement
of existing laws and rules by these governmental authorities
and self-regulatory organizations, may impose additional
costs or other adverse effects on Bel Air, Bel Air Management
or Wilkinson O’Grady.
Indebtedness
The Second Amended and Restated Credit Agreement
contains various covenants that limit the ability of Fiera
Capital to engage in specified types of transactions and
imposes significant operating restrictions, which may prevent
Fiera Capital from pursuing certain business opportunities and
taking certain actions that may be in its interest.
These covenants limit Fiera Capital’s ability to, among
other things:
• incur, create, assume, or suffer to exist additional debt for
borrowed money (as defined therein);
• create, assume or otherwise become or maintain in respect
of, or permit to be outstanding, certain guarantees;
• pay dividends on, redeem or repurchase Fiera Capital’s
capital stock;
• make investments and loans;
• create, incur, assume or suffer to exist certain liens; engage
in certain mergers, acquisitions, asset sales or sale-
leaseback transactions,
• dispose of assets;
• effect any change in the nature of its business activities;
• amend or modify in any way Fiera Capital’s constitutive
documents, charters, by-laws or jurisdiction
of incorporation;
• amend any material provision of the material contracts
(as described therein); and
• consolidate, merge or sell all or substantially all of the assets.
These restrictions may prevent us from taking actions
that we believe would profit our business, and may make
it difficult for Fiera Capital to execute its business strategy
successfully or to compete effectively with companies that
are not similarly restricted.
In addition, the Amended and Restated Credit Agreement
requires Fiera Capital to meet certain financial ratios and
tests, and provides that the occurrence of a change of control
will cause an event of default.
Although at present, given Fiera Capital’s strong balance
sheet, these covenants do not restrict Fiera Capital’s ability
to conduct its business as presently conducted, there are
no assurances that in the future Fiera Capital will not be
limited in its ability to respond to changes in its business or
competitive activities or restricted in its ability to engage in
mergers, acquisitions or dispositions of assets. Furthermore,
a failure to comply with these covenants, including a failure
to meet the financial tests or ratios, would most probably
result in an event of default under the Credit Agreement as
amended and restated.
Furthermore, a portion of Fiera Capital’s indebtedness,
including the borrowings under the Amended and Restated
Credit Agreement, is at variable rates of interest and exposes
Fiera Capital to interest rate risk. If interest rates increase,
Fiera Capital’s debt service obligations on the variable-rate
indebtedness would increase even though the amount
borrowed would remain the same, and net earnings and cash
flows would decrease.
56
Management’s Discussion and Analysis Failure to manage risks in portfolio models
could materially adversely affect Fiera
Capital’s business, financial condition
or profitability
Fiera Capital monitors, evaluates and manages the principal
risks associated with the conduct of its business. These
risks include external market risks to which all investors are
subject, as well as internal risks resulting from the nature of
Fiera Capital’s business. Certain of Fiera Capital’s methods of
managing risk are based upon the use of observed historical
market behaviour. As a result, these methods may not predict
future risk exposures, which may be significantly greater than
the historical measures indicated.
Other risk management methods depend upon evaluation
of information regarding markets, clients or other matters
that is publicly available or otherwise accessible by Fiera
Capital. This information may not in all cases be accurate,
complete, up-to-date or properly evaluated. Management
of operational, legal and regulatory risk requires, among
other things, policies and procedures to record properly and
verify a large number of transactions, and events and these
policies and procedures may not be fully effective. A failure
by Fiera Capital to manage risks in its portfolio models could
materially adversely affect Fiera Capital’s business, financial
condition or profitability.
Rapid growth in Fiera Capital’s AUM could
adversely affect Fiera Capital’s investment
performance or its ability to continue to grow
An important component of investment performance is the
availability of appropriate investment opportunities for new
client assets. If Fiera Capital is not able to identify sufficient
investment opportunities for new client assets in a timely
manner, its investment performance could be adversely
affected, or Fiera Capital may elect to limit its growth and
reduce the rate at which it receives new client assets. If Fiera
Capital’s AUM increases rapidly, it may not be able to exploit
the investment opportunities that have historically been
available to it or find sufficient investment opportunities for
producing the absolute returns it targets.
Valuation
Valuation of the Funds is subject to uncertainty. While
the Funds are audited by independent auditors, within the
meaning of the Code of Ethics of the Ordre des comptables
professionnels agréés du Québec, in order to assess
whether the Funds’ financial statements are fairly stated
in accordance with Canadian GAAP or IFRS, valuation of
certain of the Funds’ securities and other investments may
involve uncertainties and judgment determinations and, if
such valuations should prove to be incorrect, the net asset
value of a Fund could be misstated. Independent pricing
information may not always be available regarding certain
of the Funds’ securities and other investments. Additionally,
the Funds may hold investments which by their very nature
may be extremely difficult to value accurately, particularly
the venture investments held by Fiera Capital in private
portfolio companies. Fiera Capital may incur substantial costs
in rectifying pricing errors caused by the misstatement of
investment values.
Possible Requirement to Absorb Operating
Expenses on behalf of Mutual Funds
If the assets under management in the Funds decline to the
point that charging the full fund operating expenses to the
Funds causes management expense ratios or the Funds to
become uncompetitive, Fiera Capital may choose to absorb
some of these expenses. This will result in an increase in
expenses for Fiera Capital and a decrease in profitability.
Failure to implement effective information
security policies, procedures and capabilities
could disrupt operations and cause financial
losses that could materially adversely affect
Fiera Capital’s business, financial condition
or profitability
Fiera Capital is dependent on the effectiveness of its
information security policies, procedures and capabilities to
protect its computer and telecommunications systems and
the data that reside on or is transmitted through them. An
externally caused information security incident, such as a
hacker attack, a virus or a worm, or an internally caused issue,
such as failure to control access to sensitive systems, could
materially interrupt Fiera Capital’s business operations or
cause disclosure or modification of sensitive or confidential
information and could result in material financial loss,
regulatory actions, breach of client contracts, reputational
harm or legal liability, which, in turn, could materially
adversely affect Fiera Capital’s business, financial condition
or profitability.
The administrative services provided by Fiera Capital
depend on software supplied by third parties. Failure of a key
supplier, the loss of suppliers’ products or problems or errors
related to such products would most likely have a material
adverse effect on the ability of Fiera Capital to provide these
administrative services. Changes to the pricing arrangement
with such third-party suppliers because of upgrades or other
circumstances could also have an adverse effect upon the
profitability of Fiera Capital.
Fiera Capital Corporation 2013 Annual Report | 57
Dependency on Information Systems and
Telecommunications
Fiera Capital is dependent on the availability of its personnel,
its office facilities and the proper functioning of its computer
and telecommunications systems. A disaster such as water
damage, an explosion or a prolonged loss of electrical
power could materially interrupt Fiera Capital’s business
operations and cause material financial loss, loss of human
capital, regulatory actions, and breach of client contracts,
reputational harm or legal liability, which in turn could
materially adversely affect Fiera Capital’s business, financial
condition or profitability.
Obtaining sufficient insurance coverage
on favourable economic terms may not
be possible
Fiera Capital holds various types of insurance, including
errors and omissions insurance, general commercial liability
insurance and a financial institution bond. The adequacy of its
insurance coverage is evaluated on an ongoing basis, including
the cost relative to the benefits. However, there can be no
assurance that claims will not exceed the limits of available
insurance coverage or that any claim or claims will ultimately
be satisfied by an insurer. A judgment against Fiera Capital in
excess of available insurance or in respect of which insurance
is not available could have a material adverse effect on its
business, financial condition or profitability. There can be no
assurance that Fiera Capital will be able to obtain insurance
coverage on favourable economic terms.
58
Management’s Discussion and Analysis Management’s Report
to the Shareholder
Management of Fiera Capital Corporation is responsible for the integrity and objectivity of the
consolidated financial statements and all other information contained in the Annual Report.
The consolidated financial statements were prepared in accordance with International Financial
Reporting Standards and based on management’s information and judgment.
In fulfilling its responsibilities, management has developed internal control systems as well as
policies and procedures designed to provide reasonable assurance that the Corporation’s assets are
safeguarded, that transactions are executed in accordance with appropriate authorization, and that
accounting records may be relied upon to accurately reflect the Corporation’s business transactions.
Operating under the Board of Directors, the Audit Committee meets periodically with
management and with auditors to discuss the Corporation’s financial reporting and internal control.
The Audit Committee reviews the financial information prepared by management and the results
of the audit by the auditors prior to recommending the consolidated financial statements to the
Board of Directors for approval. The independent auditors have unrestricted access to the Audit
Committee. In addition, the Corporation’s independent auditors, Deloitte LLP, are responsible for
auditing the consolidated financial statements and for providing an opinion thereon. Their report is
provided herein.
Management recognizes its responsibility to conduct the Corporation’s affairs in the best interests
of its shareholders.
Sylvain Brosseau
President and Chief
Operating Officer
Jean-Guy Desjardins
Chairman of the Board and
Chief Executive Officer
Fiera Capital Corporation 2013 Annual Report | 59
Independent Auditor’s Report
To the Shareholders of Fiera Capital Corporation
We have audited the accompanying consolidated financial statements of Fiera Capital Corporation
Inc., which comprise the consolidated balance sheets as at December 31, 2013 and December 31,
2012, and the consolidated statements of earnings, consolidated statements of comprehensive
income, consolidated statements of changes in equity and consolidated statements of cash flows
for the year ended December 31, 2013, and for the 15-month period ended December 31, 2012, and
a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards, and for such internal
control as management determines is necessary to enable the preparation of consolidated 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 these consolidated financial statements 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 audits to obtain reasonable assurance about whether the consolidated financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the consolidated financial statements. The procedures selected depend on the
auditor’s judgment, including the assessment of the risks of material misstatement of the
consolidated 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 consolidated 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 consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate
to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of Fiera Capital Corporation Inc. as at December 31, 2013 and December 31,
2012, and its financial performance and cash flows for the year ended December 31, 2013 and
for the 15-month period ended December 31, 2012, in accordance with International Financial
Reporting Standards.
Montreal (Canada)
March 19, 2014
1. CPA auditor, CA, public accountancy permit No. A103322
60
Consolidated Financial
Statements of
Fiera Capital Corporation
December 31, 2013 and 2012
of Earnings
63 Consolidated Statements
64 Consolidated Statements
65 Consolidated Balance Sheets
of Comprehensive Income
of Changes in Equity
66 Consolidated Statements
68 Consolidated Statements
of Cash Flows
Fiera Capital Corporation 2013 Annual Report | 61
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62
Consolidated Financial Statements Consolidated Statements of Earnings
(In thousands of Canadian dollars, except per share data)
Revenues
Base management fees
Performance fees
Other revenue
Expenses
Selling, general and administrative expenses (Note 18)
External managers
Depreciation of property and equipment
Amortization of intangible assets
Acquisition costs
Restructuring provisions and other costs (Note 4)
Periods ended:
December 31, 2013
December 31, 2012
12 months
15 months
$
$
139,397
12,117
2,213
153,727
94,357
2,858
1,341
19,083
6,572
1,509
125,720
109,261
5,587
480
115,328
74,236
1,989
1,136
12,609
5,937
7,513
103,420
Earnings before loss on disposal of investments, interest on long-term debt and other financial charges, accretion
and change in fair value of purchase price obligations, changes in fair value of financial instruments and share of
earnings of joint ventures
28,007
11,908
Loss on disposal of investments
Interest on long-term debt and other financial charges
Accretion and change in fair value of purchase price obligations
Changes in fair value of financial instruments
Share of earnings of joint ventures (Note 5)
Earnings before income taxes
Income taxes (Note 12)
Net earnings for the period
Net earnings attributable to :
Company’s shareholders
Non-controlling interest
Earnings per share (Note 15)
Basic
Diluted
The accompanying notes are an integral part of these consolidated financial statements.
98
6,931
637
(426)
(1,227)
21,994
7,389
14,605
14,939
(334)
14,605
0.26
0.25
6
2,940
1,864
1,491
(201)
5,808
2,782
3,026
3,026
-
3,026
0.06
0.06
Fiera Capital Corporation 2013 Annual Report | 63
Consolidated Statements of Comprehensive Income
(In thousands of Canadian dollars)
Periods ended:
December 31, 2013
December 31, 2012
12 months
15 months
Net earnings for the period
Other comprehensive income:
Items that may be reclassified subsequently to earnings:
Unrealized gain (loss) on available-for-sale financial assets (net of income taxes)
Reclassification of loss on disposal of investments
Share of other comprehensive income of joint ventures
Unrealized exchange differences on translating financial statements of foreign operations
Other comprehensive income for the period
Comprehensive income for the period
Comprehensive income attributable to:
Company’s shareholders
Non-controlling-interest
The accompanying notes are an integral part of these consolidated financial statements.
$
14,605
152
97
130
1,472
1,851
16,456
16,790
(334)
16,456
$
3,026
(60)
-
108
-
48
3,074
3,074
-
3,074
64
Consolidated Financial Statements Consolidated Balance Sheets
(In thousands of Canadian dollars)
Assets
Current assets
Cash
Restricted cash
Investments (Note 7)
Accounts receivable (Note 8)
Advance to a joint venture
Prepaid expenses
Non-current assets
Deferred charges
Deferred income taxes (Note 12)
Advance to a related shareholder
Investment in joint ventures (Note 5)
Property and equipment (Note 9)
Intangible assets (Note 10)
Goodwill (Note 10)
Liabilities
Current liabilities
Bank loan
Accounts payable and accrued liabilities (Note 11)
Restructuring provisions (Note 4)
Amount due to related companies
Purchase price obligations (Note 4)
Client deposits
Deferred revenues
Non-current liabilities
Deferred lease obligations
Lease inducements
Deferred income taxes (Note 12)
Long-term restructuring provisions (Note 4)
Value of option granted to non-controlling interest
Long-term debt (Note 13)
Purchase price obligations (Note 4)
Derivative financial instruments (Note 6 & 13)
Equity
As at:
December 31, 2013
December 31, 2012
$
$
21,774
689
9,711
56,072
-
3,771
92,017
460
1,349
1,211
8,284
5,322
310,151
357,773
776,567
-
35,000
1,116
956
18,073
689
495
56,329
588
904
24,636
193
7,720
228,262
40,250
644
359,526
416,083
8,256
(7,298)
958
417,041
776,567
6,016
297
6,532
29,888
342
874
43,949
402
1,364
-
6,879
5,200
180,230
278,750
516,774
9,800
16,501
1,764
2,003
-
297
928
31,293
599
1,052
20,264
312
-
107,521
56,503
1,491
219,035
297,739
-
-
-
297,739
516,774
Share capital, contributed surplus, (deficit) retained earnings, and accumulated other comprehensive income (Note 14)
Non-controlling interest
Initial value of option granted to non-controlling interest
Total non-controlling interest
The accompanying notes are an integral part of these consolidated financial statements.
Approved by the Board
Jean-Guy Desjardins, Director
Sylvain Brosseau, Director
Fiera Capital Corporation 2013 Annual Report | 65
Consolidated Statements of Changes in Equity
Periods ended December 31,
(In thousands of Canadian dollars)
As at September 30, 2011
Net earnings for the period
Other comprehensive income
Comprehensive income for the period
Share-based compensation expense
Stock options exercised
Shares issued as part of a business combination (Note 4)
Shares issued as part of the employee share purchase plan
Gain on dilution
Dividends
As at December 31, 2012
Net earnings for the period
Other comprehensive income
Comprehensive income for the period
Share-based compensation expense (Note 18)
Stock options exercised (Note 14)
Shares issued as settlement of the purchase price obligations
Shares issued under a private placement (Note 14)
Shares issued as part of a business combination (Note 4)
Gain on dilution (Note 5)
Dividends
Non-controlling interest (Note 4)
Initial value of option granted to non-controlling interest (Note 4)
Share Capital
Hold Back Shares
Contributed Surplus
(Deficit)
Other Comprehensive
Retained Earnings
Income
Accumulated
Related to
Non-Controlling
Interest
$
135,587
-
-
-
-
967
170,487
718
-
-
307,759
-
-
-
-
1,090
8,500
102,066
1,794
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,781
-
-
-
-
$
1,703
-
-
-
1,176
(211)
-
-
-
-
2,668
-
-
-
2,128
(263)
-
-
-
-
-
-
-
As at December 31, 2013
421,209
8,781
4,533
(20,356)
1,916
416,083
The accompanying notes are an integral part of these consolidated financial statements.
$
3,530
3,026
3,026
-
-
-
-
-
-
-
-
-
-
-
-
-
112
(19,421)
(12,753)
14,939
14,939
48
(22,590)
$
17
-
48
48
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
65
1,851
1,851
140,837
Total
$
3,026
48
3,074
1,176
756
170,487
718
112
(19,421)
297,739
14,939
1,851
16,790
2,128
827
8,500
102,066
10,575
(22,590)
48
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(334)
(334)
8,590
(7,298)
958
Total
Equity
$
140,837
3,026
48
3,074
1,176
756
170,487
718
112
(19,421)
297,739
14,605
1,851
16,456
2,128
827
8,500
102,066
10,575
48
(22,590)
8,590
(7,298)
417,041
66
Consolidated Financial Statements Consolidated Statements of Changes in Equity
Periods ended December 31,
(In thousands of Canadian dollars)
As at September 30, 2011
Net earnings for the period
Other comprehensive income
Comprehensive income for the period
Share-based compensation expense
Stock options exercised
Gain on dilution
Dividends
As at December 31, 2012
Net earnings for the period
Other comprehensive income
Shares issued as part of a business combination (Note 4)
Shares issued as part of the employee share purchase plan
Comprehensive income for the period
Share-based compensation expense (Note 18)
Stock options exercised (Note 14)
Shares issued as settlement of the purchase price obligations
Shares issued under a private placement (Note 14)
Shares issued as part of a business combination (Note 4)
Gain on dilution (Note 5)
Dividends
Non-controlling interest (Note 4)
Initial value of option granted to non-controlling interest (Note 4)
135,587
170,487
967
718
307,759
1,090
8,500
102,066
1,794
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,781
$
1,703
1,176
(211)
2,668
2,128
(263)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Share Capital
Hold Back Shares
Contributed Surplus
(Deficit)
Retained Earnings
Accumulated
Other Comprehensive
Income
$
3,530
3,026
-
3,026
-
-
-
-
112
(19,421)
(12,753)
14,939
-
14,939
-
-
-
-
-
48
(22,590)
-
-
$
17
-
48
48
-
-
-
-
-
-
65
-
1,851
1,851
-
-
-
-
-
-
-
-
-
Total
$
140,837
3,026
48
3,074
1,176
756
170,487
718
112
(19,421)
297,739
14,939
1,851
16,790
2,128
827
8,500
102,066
10,575
48
(22,590)
-
-
As at December 31, 2013
421,209
8,781
4,533
(20,356)
1,916
416,083
The accompanying notes are an integral part of these consolidated financial statements.
Related to
Non-Controlling
Interest
$
-
-
-
-
-
-
-
-
-
-
(334)
-
(334)
-
-
-
-
-
-
-
8,590
(7,298)
958
Total
Equity
$
140,837
3,026
48
3,074
1,176
756
170,487
718
112
(19,421)
297,739
14,605
1,851
16,456
2,128
827
8,500
102,066
10,575
48
(22,590)
8,590
(7,298)
417,041
Fiera Capital Corporation 2013 Annual Report | 67
Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
Operating activities
Net earnings
Adjustments for:
Depreciation of property and equipment
Amortization of intangible assets
Amortization of deferred charges
Accretion and change in fair value of purchase price obligations
Lease inducements
Deferred lease obligations
Share-based compensation
Interest on long-term debt and other financial charges
Change in fair value of financial instruments
Income taxes expense
Income taxes paid
Share of earnings of joint ventures
Loss on disposal of investments
Deferred revenues
Other
Changes in non-cash operating working capital items (Note 19)
Net cash generated from operating activities
Investing activities
Business combinations (less cash acquired of $11,468 in 2013) (Note 4)
Investments
Purchase of property and equipment
Purchase of intangible assets (Note 10)
Investment in joint ventures (Note 5)
Proceeds from lease inducements
Advance to a related shareholder, net
Advance to a joint venture
Deferred charges
Restricted cash and client deposits
Net cash used in from investing activities
Financing activities
Bank loan
Dividends
Issuance of share capital, net of issuance costs of $4,201 (nil for 2012)
Long-term debt, net (Note 13)
Interest paid on long-term debt
Financing charges
Repayment of amount due to shareholder
Net cash generated from financing activities
Net increase in cash
Effect of exchange rate changes on cash denominated in foreign currencies
Cash – beginning of period
Cash – end of period
Periods ended:
December 31, 2013
December 31, 2012
12 months
15 months
$
14,605
1,341
19,083
321
637
(148)
(11)
2,128
6,931
(426)
7,389
(5,800)
(1,227)
98
(448)
(34)
(9,437)
35,002
(150,445)
(1,410)
(572)
(48,224)
-
-
(1,211)
342
(379)
531
$
3,026
1,136
12,609
260
1,864
(185)
274
1,176
2,921
1,491
2,782
(4,551)
(201)
6
888
(115)
(5,493)
17,888
(92,393)
(5,500)
(2,393)
(2,336)
(5,125)
531
-
(342)
(73)
-
(201,368)
(107,631)
(9,800)
(22,590)
101,772
120,579
(6,934)
(1,109)
-
181,918
15,552
206
6,016
21,774
9,800
(19,421)
1,474
108,000
(2,838)
(562)
(660)
95,793
6,050
-
(34)
6,016
The accompanying notes are an integral part of these consolidated financial statements.
68
Consolidated Financial Statements Notes to the Consolidated
Financial Statements
December 31, 2013 and 2012
Investments
Investment in Joint Ventures
70 Note 1 - Description of Business
70 Note 2 - Basis of Presentation and Adoption of New IFRS
71 Note 3 - Significant Accounting Policies, Judgments and Estimation Uncertainty
79 Note 4 - Business Combinations
83 Note 5 -
83 Note 6 - Financial Instruments
88 Note 7 -
88 Note 8 - Accounts Receivable
89 Note 9 - Property and Equipment
90 Note 10 - Goodwill and Intangible Assets
92 Note 11 - Accounts Payable and Accrued Liabilities
92 Note 12 - Income Taxes
93 Note 13 - Long-Term Debt
94 Note 14 - Share Capital and Accumulated Other Comprehensive Income
95 Note 15 - Earnings per Share
96 Note 16 - Share-Based Payment
98 Note 17 - Post-Employment Benefit Obligations
98 Note 18 - Expenses by Nature
99 Note 19 - Additional Information Relating to Consolidated Statements of Cash Flows
99 Note 20 - Commitments
99 Note 21 - Capital Management
100 Note 22 - Related Party Transactions
100 Note 23 - Segment Reporting
100 Note 24 - Subsequent Event
Fiera Capital Corporation 2013 Annual Report | 69
Note 1 Description of Business
Fiera Capital Corporation (“Fiera Capital Corporation” or the
“Company”) was incorporated as Fry Investment Management
Limited in 1955 and is incorporated under the laws of the
Province of Ontario. The Company is a full-service, multi-
product investment firm, providing investment advisory and
related services to institutional investors, private wealth clients
and retail investors. Its head office is located at 1501 Avenue
McGill College, office 800, Montreal, Quebec, Canada.
The Company changed its registered company name to
Fiera Capital Corporation as approved by the shareholders at
Fiera Capital Corporation’s annual and special meeting held
on March 29, 2012.
Fiera Capital Corporation is registered in the categories of
exempt market dealer and portfolio manager in all provinces
and territories of Canada. Fiera Capital Corporation is also
registered in the category of investment fund manager in the
provinces of Ontario and Quebec. In addition, as Fiera Capital
Corporation manages derivatives portfolios, it is registered as
a commodity trading manager pursuant to the Commodity
Futures Act (Ontario), as an adviser under the Commodity
Futures Act (Manitoba) and, in Quebec, as derivatives portfolio
manager pursuant to the Derivatives Act (Quebec).
In 2012, the Corporation changed its financial year-end
from September 30 to December 31. This change was made
in order to allow for a better alignment of the Corporation’s
operations processes and as a result, the amounts presented
in the financial statements are not entirely comparable.
The Board of Directors approved the consolidated financial
statements for the periods ended December 31, 2013 and
2012 on March 19, 2014.
Note 2 Basis of Presentation and Adoption of New IFRS
Statement of Compliance
The Company prepares its consolidated financial statements
in accordance with International Financial Report Standards
(“IFRS”) as issued by the International Account Standards
Board (“IASB”).
The policies applied in these consolidated financial
statements are based on IFRS issued and outstanding as of
December 31, 2013.
The preparation of financial statements in conformity with
IFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgment in the
process of applying the Company’s accounting policies. The
areas involving a higher degree of judgment or complexity, or
areas where assumptions and estimates are significant to the
consolidated financial statements are disclosed in Note 3.
Revised IFRS, interpretations and amendments
IAS 1 (Revised) – Presentation of Financial Statements
In June 2011, the IASB amended IAS 1, Presentation of
Financial Statements, providing guidance on items contained
in other comprehensive income and their classification within
other comprehensive income. As a result of adopting the
amendments to IAS 1, the Company has grouped items within
the consolidated statements of comprehensive income by
those that will be reclassified subsequently to net earnings
and those that will not be reclassified to net earnings. In
addition, the Company has changed the presentation of the
consolidated statements of changes in equity. The changes
did not result in any impact on profit or loss, comprehensive
income or equity.
IFRS 7 (Revised) – Financial Instruments: Disclosures
On December 16, 2011, the IASB issued common disclosure
requirements that are intended to help investors and other
users to better assess the effects or potential effect of
offsetting arrangements on a company’s balance sheet.
The new requirements are set out in Disclosures-Offsetting
Financial Assets and Financial Liabilities (Amendments to
IFRS 7). The adoption of this standard had no impact on the
consolidated financial statements.
IFRS 10 – Consolidated Financial Statements
In May 2011, the IASB issued IFRS 10, Consolidated Financial
Statements. IFRS 10 requires an entity to consolidate an
investee when it is exposed, or has rights, to variable returns
from its involvement with the investee and has the ability to
affect those returns through its power over the investee. Under
previous IFRS, consolidation is required when an entity has the
power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities. IFRS 10 replaces
SIC-12, Consolidation-Special Purpose Entities, and the parts of
IAS 27, Consolidated and Separate Financial Statements related
to the preparation and presentation of consolidated financial
statements. The adoption of this standard had no impact on the
consolidated financial statements.
70
Notes to the Consolidated Financial StatementsDecember 31, 2013 and 2012 (In thousands of Canadian dollars) IFRS 11 – Joint Arrangements
In May 2011, the IASB released IFRS 11, Joint arrangements,
which supersedes IAS 31, Interests in joint ventures, and
SIC-13, Jointly controlled entities – non-monetary contributions
by venturers. IFRS 11 focuses on the rights and obligations
of a joint arrangement, rather than its legal form as was the
case under IAS 31. IFRS 11 classifies joint arrangements into
two types: joint ventures and joint operations. Joint ventures
are arrangements whereby the parties have rights to the net
assets, while joint operations are arrangements whereby
the parties have rights to the assets and obligations for the
liabilities. The standard eliminates choices in the reporting of
joint arrangements by requiring the use of the equity method
to account for interests in joint ventures, and by requiring
joint operators to recognize assets and liabilities in relation
to their interests in the arrangements. IFRS 11 was adopted
effective January 1, 2013.
The Company’s investments in joint arrangements qualify
as joint ventures. However, since these investments were
already accounted for using the equity method of accounting,
the adoption of this standard had no impact on the
Company’s consolidated financial statements.
IFRS 12 – Disclosure of Interests in Other Entities
In May 2011, the IASB released IFRS 12, Disclosure of interests
in other entities. IFRS 12 is a new and comprehensive standard
on disclosure requirements for all forms of interests in other
entities, including subsidiaries, joint arrangements, associates,
special purpose vehicles and other off-balance sheet vehicles.
The standard requires an entity to disclose information
regarding the nature and risks associated with its interests in
other entities and the effects of those interests on its financial
position, financial performance and cash flows. IFRS 12 was
adopted effective January 1, 2013. See Note 5. The adoption
of this standard had no significant impact on the Company’s
consolidated financial statements.
IFRS 13 – Fair Value Measurement
In May 2011, the IASB released IFRS 13, Fair value measurement.
IFRS 13 improves consistency and reduces complexity by
providing a precise definition of fair value and a single source
of fair value measurement and disclosure requirements
for use across IFRS when another IFRS requires or permits
the item to be measured at fair value. IFRS 13 was adopted
effective January 1, 2013. The adoption of this standard had
no significant impact on the Company’s consolidated financial
statements other than to give rise to additional disclosures, see
Note 6 – Fair value of financial instruments.
IAS 19 – Employee Benefits
The amendments to IAS 19 changed the accounting for
defined benefit plans and termination benefits. The most
significant change relates to the accounting for changes in
defined benefit obligations and plan assets. The adoption of
this standard had no impact on the Company’s consolidated
financial statements.
Note 3 Significant Accounting Policies, Judgments and Estimation Uncertainty
Significant accounting policies
Basis of Measurement
The consolidated financial statements have been
prepared under the historical cost convention, except for
financial assets and liabilities held at fair value through
profit or loss and available-for-sale investments, which
have been measured at fair value as discussed under
“Financial Instruments”.
Consolidation
The financial statements of the Company include the accounts
of the Company and its subsidiaries. All intercompany
transactions, balances and unrealized gains and losses from
intercompany transactions are eliminated on consolidation.
The consolidated financial statements include the
accounts of Fiera Capital Corporation and its wholly owned
subsidiaries, Fiera Sceptre Funds Inc. (“FSFI”) which is
registered with various provincial securities commissions as a
mutual fund dealer and maintains membership in the Mutual
Fund Dealer Association, Fiera US Holding Inc. (which owns
Bel Air Investment Advisors, LLC, Bel Air Securities, LLC, Bel
Air Management LLC and Wilkinson O’Grady & Co. Inc.),
Fiera Quantum GP Inc. and 9276-5072 Quebec Inc. (which
collectively owns a controlling 55% interest in Fiera Quantum
Limited Partnership (“Fiera Quantum L.P.”) which owns Fiera
Quantum Holdings Limited Partnership, FQ ABCP GP Inc.,
FQ GenPar LLC and FQ ABCP (USA) GP Inc.), and 8645230
Canada Inc.(which owns Gestion Fiera Capital S.a.r.l.).
Subsidiaries are those entities which the Company
controls. The Company controls an investee when it is
exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns
through its power over the investee. The existence and effect
of potential voting rights that are currently exercisable or
convertible are considered when assessing whether the
Fiera Capital Corporation 2013 Annual Report | 71
December 31, 2013 and 2012 (In thousands of Canadian dollars) Company controls another entity. Subsidiaries are fully
consolidated from the date on which control is obtained by
the Company and are deconsolidated from the date that
control ceases.
Accounting policies of subsidiaries have been changed
when necessary to ensure consistency with the policies
adopted by the Company.
Investments in Joint Ventures
A joint venture is a contractual arrangement whereby the
Company and other parties undertake an economic activity
that is subject to joint control. The Company owns interests
in the following joint ventures: Fiera Axium Infrastructure
Inc. (“Fiera Axium”), an entity specialized in infrastructure
investment and Fiera Properties Limited (“Fiera Properties”),
an entity specialized in real estate investments, over which
the Company has joint control. The financial results of the
Company’s investments in its joint ventures are included in
the Company’s results using the equity method of accounting.
Subsequent to the acquisition date, the Company’s
share of earnings of the joint venture is recognized in the
consolidated statement of earnings. The cumulative post-
acquisition movements are adjusted against the carrying
amount of the investment. When the Company’s share of
losses in the joint venture equals or exceeds its interest in
the joint venture, including any other unsecured receivables,
the Company does not recognize further losses unless it has
incurred a legal or constructive obligation or made payment
on behalf of the joint venture.
The accounting policies of the joint ventures have been
changed when necessary to ensure consistency with the
policies adopted by the Company.
The Company assesses at each year-end whether there
is any objective evidence that its interests in the joint
ventures are impaired; if impaired, the carrying value of the
Company’s investment in the joint venture is written down
to its estimated recoverable amount (being the higher of
fair value less costs to sell and value in use) and charged to
the consolidated statement of earnings. In accordance with
IAS 36, impairment losses are reversed in subsequent years
if the recoverable amount of the investment subsequently
increases and the increase can be related objectively to an
event occurring after the impairment was recognized.
Business Combination
Acquisitions of businesses are accounted for using
the acquisition method. The consideration transferred
in a business combination is measured at fair value.
Acquisition-related costs are recognized in the statement
of earnings.
At the acquisition date the identifiable assets acquired
and the liabilities assumed are recognized at their fair
value, except deferred tax assets or liabilities, which are
recognized and measured in accordance with IAS 12.
Subsequent changes in fair values are adjusted against
the cost of acquisition if they qualify as measurement
period adjustments. The measurement period is the
period between the date of the acquisition and the date
where all significant information necessary to determine
the fair values is available and cannot exceed 12 months.
All other subsequent changes are recognized in the
consolidated statement of earnings. The determination of
fair value involves making estimates relating to acquired
intangibles assets, property and equipment and contingent
consideration. Contingent consideration that is classified
as a liability is measured at each subsequent reporting
date with the corresponding gain or loss being recognized
in earnings.
Goodwill is measured as the excess of the consideration
transferred over the net amounts of the identifiable assets
acquired and the liabilities assumed. If, after reassessment,
the net of identifiable assets acquired and liabilities assumed
exceeds the sum of the consideration transferred, the excess
is recognized immediately in the consolidated statement of
earnings as a bargain purchase gain.
Foreign Currency Translation
The Company has prepared and presented the
consolidated financial statements in Canadian dollars, its
functional currency.
Foreign currency transactions are translated using the
exchange rates prevailing at the dates of the transactions.
Generally, foreign exchange gains and losses from the
settlement of foreign currency transactions and from the
translation at year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognized in
the consolidated statement of earnings. Non-monetary assets
and liabilities denominated in foreign currencies are reported
in Canadian dollars based on the exchange rates in effect at
the date of initial recognition.
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on acquisition
are translated in Canadian dollars at exchange rates at
the reporting date. The revenue and expenses of foreign
operations are translated at exchange rates at the date
of transactions.
Translation gains or losses are recognized in other
comprehensive income and are reclassified in earnings on
disposal or partial disposal of the investment in the related
foreign operations.
72
Notes to the Consolidated Financial StatementsDecember 31, 2013 and 2012 (In thousands of Canadian dollars) Revenue Recognition
Revenue from management fees is recognized as the related services are rendered and when the fees are determinable.
Management fees are invoiced quarterly based on daily average assets under management (“AUM”) and others are calculated
and invoiced monthly or quarterly in arrears based on calendar quarter-end or month-end asset values under management or on
an average of opening and closing AUM for the quarter.
Performance fees are recorded only at the performance measurement dates contained in the individual account agreements
and are dependent upon performance of the account exceeding agreed-upon benchmarks over the relevant period.
Deferred Revenues
Funds received from external parties for specified purposes are recorded upon receipt as deferred revenues. These revenues are
recognized in the period in which the related services or expenses are incurred.
Financial Instruments
Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the
instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been
transferred and the Company has transferred substantially all risks and rewards of ownership. Regular purchases and sales of
financial assets are accounted for at the trade date.
At initial recognition, the Company classifies its financial instruments in the following categories depending on the purpose for
which the instruments were acquired:
CLASSIFICATION
Cash and restricted cash
Investments
Loans and receivables
Other securities and obligations
Fair value through profit or loss
Mutual fund and pool fund investment
Accounts receivable
Advance to a joint venture
Advance to a related shareholder
Bank loan
Available-for-sale
Loans and receivables
Loans and receivables
Loans and receivables
Financial liabilities at amortized cost
Accounts payable and accrued liabilities
Financial liabilities at amortized cost
Amount due to related companies
Client deposits
Financial liabilities at amortized cost
Financial liabilities at amortized cost
Value of option granted to non-controlling interest
Fair value through profit or loss
Long-term debt
Purchase price obligations
Derivative financial instruments
Financial liabilities at amortized cost
Financial liabilities at amortized cost
Fair value through profit or loss
Financial Assets at Fair Value Through Profit or Loss
A financial asset is classified in this category if acquired principally for the purpose of selling or repurchasing in the short term.
The instruments held by the Company that are classified in this category are other securities and obligations, classified under
investments in the consolidated balance sheet and derivative financial instruments.
Financial instruments in this category are measured initially and subsequently at fair value. Transaction costs are expensed
as incurred in the consolidated statement of earnings. Gains and losses arising from changes in fair value are presented in the
consolidated statement of earnings in the period in which they arise. Financial assets at fair value through profit or loss are
classified as current except for the portion expected to be realized or paid beyond twelve months of the consolidated balance
sheet date, which is classified as non-current.
Fiera Capital Corporation 2013 Annual Report | 73
December 31, 2013 and 2012 (In thousands of Canadian dollars) Loans and Receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an
active market. The Company’s loans and receivables consist
of cash, restricted cash, accounts receivable, advance to a
joint venture and advance to a related shareholder. With
the exception of the advance to a related shareholder, these
assets are included in current assets due to their short-term
nature. Loans and receivables are initially recognized at
the amount expected to be received, less, if applicable, a
discount to reduce the loans and receivables to fair value.
Subsequently, loans and receivables are measured at
amortized cost using the effective interest method, less a
provision for impairment.
Available for-Sale
Available-for-sale investments are recognized initially at fair
value plus transaction costs and are subsequently carried at
fair value. Gains or losses arising from changes in fair value are
recognized in other comprehensive income (loss). Available-
for-sale investments are classified as non-current, unless the
investment matures within twelve months or management
expects to dispose of it within twelve months.
Dividends on available-for-sale equity instruments are
recognized in the consolidated statement of earnings when
the Company’s right to receive payment is established. When
an available-for-sale investment is sold or impaired, the
accumulated gains or losses are moved from accumulated
other comprehensive income to the consolidated statement
of earnings.
Financial Liabilities at Amortized Cost
Financial liabilities at amortized cost include bank loan,
accounts payable and accrued liabilities, amount due to
related companies, client deposits, long-term debt and
purchase price obligations. Accounts payable and accrued
liabilities, amount due to related companies and client
deposits are initially recognized at the amount required to
be paid less, if applicable, a discount to reduce the payables
to fair value. Subsequently, they are measured at amortized
cost using the effective interest method. Long-term debt and
purchase price obligations are recognized initially at fair value,
net of any transaction costs incurred, and subsequently at
amortized cost using the effective interest method.
Restricted Cash
Restricted cash consists of client deposits received during the
year following the settlement of a class action in favour of
certain clients for whom the Company acted as agent and a
letter of credit issued in conjunction with a lease agreement.
Investments
Investments in other securities and obligations are carried on
the consolidated balance sheets at fair value using bid prices.
Investments in mutual fund and pool fund units are carried at
the net asset value reported by the fund manager.
Property and Equipment
Property and equipment are stated at cost less accumulated
depreciation and accumulated impairment losses. Cost
includes expenditures that are directly attributable to the
acquisition of the asset. Subsequent costs are included in the
asset’s carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Company
and the cost can be measured reliably. The carrying amount
of a replaced asset is derecognized when replaced. Repairs
and maintenance costs are charged to the consolidated
statement of earnings during the period in which they
are incurred.
The major categories of property and equipment are
depreciated over their estimated useful lives using the
straight-line method over the following periods:
Office furniture and equipment
5 years
Computer equipment
3 years
Leasehold improvements
Lease term
Residual values, methods of amortization and useful
lives of the assets are reviewed annually and adjusted if
appropriate. Gains and losses on disposals of property and
equipment are determined by comparing the proceeds
from disposal with the carrying amount of the asset and are
recognized in the consolidated statement of earnings.
Intangible Assets
Intangible assets with an indefinite life such as the
management contracts with mutual funds are accounted
for at cost. The Company expects both the renewal of these
contracts and the cash flows generated by these assets to
continue indefinitely. These mutual funds have an indefinite
life. Accordingly, the Company does not amortize these
intangible assets, but reviews them for impairment, annually
or more frequently if events or changes in circumstances
indicate that the assets might be impaired.
The finite life intangible assets are accounted for at cost.
Other intangible assets are notably comprised of trade name,
software and non-compete agreements. The expected useful
lives of finite life customer relationships are analyzed each
year and determined based on the analysis of the historical
and projected attrition rates of clients and other factors that
74
Notes to the Consolidated Financial StatementsDecember 31, 2013 and 2012 (In thousands of Canadian dollars) may influence the expected future economic benefit that the
Company will generate from the customer relationships.
the consolidated statement of earnings on a straight-line
basis over the term of the lease.
Amortization of the finite life assets is based on their
estimated useful lives using the straight-line method over the
following periods:
Asset management contracts
10 years
Customer relationships
10 to 20 years
Other
2 to 8 years
Impairment of Non-Financial Assets
Property and equipment and finite-life intangible assets
are tested for impairment when events or changes in
circumstances indicate that the carrying amounts may not
be recoverable. Indefinite-life intangible assets are tested at
least annually for impairment. For the purpose of measuring
recoverable amounts, assets are grouped at the lowest level
for which there are separately identifiable cash inflows (cash-
generating units or “CGU”). The recoverable amount is the
higher of an asset’s fair value less costs to sell and value in use
(being the present value of the expected future cash flows of
the relevant asset or CGU). An impairment loss is recognized
for the amount by which the asset’s carrying amount exceeds
its recoverable amount.
The Company evaluates impairment losses for
potential reversals when events or circumstances warrant
such consideration.
Goodwill
Goodwill represents the excess of the consideration
transferred in a business combination over the fair value
of the Company’s share of the net identifiable assets
acquired at the date of acquisition. Goodwill is tested
at least annually for impairment and carried at cost less
accumulated impairment losses. Impairment losses on
goodwill are not reversed.
For goodwill impairment testing purposes, the CGU,
which represents the lowest level within the Company at
which management monitors goodwill is the operating
segment (Note 23) excluding the selected alternative asset
management funds managed under Fiera Quantum L.P. (see
Note 4) which, since its acquisition on May 1, 2013, also
represents a GGU.
Leases
Leases in which substantially all of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any
lease inducements received from the lessor) are charged to
Deferred Charges
Deferred charges consist of insurance, rent and other long-
term prepaid expenses and are amortized on a straight-line
basis over the term of the contract or lease.
Deferred Lease Obligations
The Company leases office space with a predetermined fixed
escalation of the minimum rent. The Company recognizes
the related rent expense on a straight-line basis and,
consequently, records the difference between the recognized
rental expense and the amounts payable under the lease as
deferred lease obligations.
Lease Inducements
Lease inducements consist of allocations received from lessors
for leasehold improvements and are amortized over the
lease term.
Income Taxes
Income taxes are comprised of current and deferred tax.
Income taxes are recognized in the consolidated statement
of earnings, except to the extent that they relate to items
recognized directly in equity, in which case the income taxes
are also recognized directly in equity.
Current income taxes are the expected tax payable on
the taxable income for the year, using tax rates enacted or
substantively enacted at the end of the reporting period, and
any adjustment to tax payable in respect of previous years.
In general, deferred income taxes are recognized in respect
of temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the
consolidated financial statements. Deferred income taxes are
determined on a non-discounted basis using tax rates and
laws that have been enacted or substantively enacted at the
consolidated balance sheet date and are expected to apply
when the deferred tax asset or liability is settled. Deferred tax
assets are recognized to the extent that it is probable that the
assets can be recovered.
Deferred income taxes are provided on temporary
differences arising on investments in subsidiaries and joint
ventures except in the cases of subsidiaries where the timing
of the reversal of the temporary difference is controlled by the
Company and it is probable that the temporary difference will
not reverse in the foreseeable future.
Deferred income tax assets and liabilities are presented as
non-current.
Fiera Capital Corporation 2013 Annual Report | 75
December 31, 2013 and 2012 (In thousands of Canadian dollars) Employee Benefits
Post-Employment Benefit Obligations
Certain employees of the Company have entitlements under
the Company’s pension plans, which are defined contribution
pension plans. The cost of defined contribution pension plans
is charged to expense as the contributions are earned by
the employees.
Bonus Plans
The Company recognizes a provision and an expense for
bonuses at the time the Company becomes contractually
obliged to make a payment or when there is a past practice
that has created a constructive obligation.
Share-Based Compensation
The Company grants stock options to certain employees.
The Board of Directors may determine when any option
will become exercisable and may determine that the
option will be exercisable in instalments or pursuant to a
vesting schedule.
Share-based compensation expense is recorded using the
fair value method. Under this method, the compensation
expense for each tranche is measured at fair value at the
grant date using the Black-Scholes-option-pricing model
and recognized over the vesting period. When stock options
are exercised, any consideration paid by employees is
credited to share capital and the recorded fair value of the
options is removed from contributed surplus and credited to
share capital.
Deferred Share Unit Plan
The expense associated with granting deferred share units
(“DSU”) was recognized when the deferred shares were
issued. Changes in the fair value of previously issued DSU
that arise due to changes in the price of the Company’s
common shares are recognized on an ongoing basis in the
consolidated statement of earnings. The number of DSU
granted to directors was determined by dividing the dollar
value of the portion of directors’ fees to be paid in DSU by
the closing price of the Company’s shares on the Toronto
Stock Exchange (“TSX”) for the business day immediately
preceding the date of the grant. In 2010, the Board of
Directors cancelled the DSU plan; however, all existing rights
and privileges were kept intact. All eligible directors are now
compensated in cash.
Restricted Share Unit Plan
The Restricted Share Unit Plan (“RSU Plan”) was established
for the purpose of providing certain employees with the
opportunity to acquire Class A subordinate voting shares of
the Company in order to induce such persons to become
employees of the Company or one of its affiliates and to
permit them to participate in the growth and development of
the Company. The maximum number of issuable shares under
all plans is 10% of the issued and outstanding shares of the
Company calculated on a non-diluted basis. The subscription
date is the third anniversary of the award date. The Board of
Directors may determine the number of shares each eligible
employee can receive. The restricted share unit (“RSU”)
expense is recorded at fair value and is amortized over the
vesting period on a straight-line basis.
Performance Share Unit Plan
The Company has two Performance Share Unit Plans
(collectively the “PSU Plans”). One PSU Plan was established
in 2012 and the other one was established in 2013. These
PSU Plans were established for the purpose of retaining key
employees and to permit them to participate in the growth
and development of the Company. No grants of performance
share units (“PSUs”) have yet been made under the PSU Plan
established in 2012 while grants of PSUs have been made
under the PSU Plan established in 2013.
Under the PSU Plan established in 2013, the Company
has the option to settle the PSUs in cash or Class A shares of
the Company. The vesting of the PSU awarded is subject to
satisfying time and performance conditions determined by
the Board of Directors when the PSU are awarded. The PSU
expense for the PSU Plan established in 2013 is recorded using
the fair value method. Under this method, the compensation
expense is measured at fair value at the grant date using a
discounted cash flow model and recognized over the vesting
period. In light of the intention of the Company to settle these
PSUs in shares, these awards are considered equity-settled
share-based payment awards.
Termination Benefits
The Company recognizes termination benefits when
it is demonstrably committed to either terminating
the employment of current employees according to a
detailed formal plan without possibility of withdrawal, or
providing benefits as a result of an offer made to encourage
voluntary termination. Benefits becoming due more than
twelve months after the end of the reporting period are
discounted to their present value.
Restructuring Provisions
Provisions, representing termination benefits, are measured
at management’s best estimate of the expenditures required
to settle the obligation at the end of the reporting period,
and are discounted to present value where the effect
is material.
76
Notes to the Consolidated Financial StatementsDecember 31, 2013 and 2012 (In thousands of Canadian dollars) Earnings per Share
Basic earnings per share (“EPS”) is calculated by dividing the
net earnings for the period attributable to equity owners of
the Company by the weighted average number of shares
outstanding during the period.
Diluted EPS is calculated by adjusting the weighted average
number of shares outstanding for dilutive instruments. The
number of shares included with respect to options and similar
instruments is computed using the treasury stock method,
with only the bonus element of the issue reflected in diluted
EPS. The bonus element is the difference between the number
of ordinary shares that would be issued at the exercise price
and the number of ordinary shares that would have been
issued at the average market price. The Company’s potentially
dilutive shares comprise stock options and performance share
units granted to employees.
Share Capital
Class A subordinate voting shares (“Class A Shares”) and
Class B special voting shares (“Class B Shares”) are classified
as equity. Incremental costs directly attributable to the
issuance of shares are recognized as a deduction from equity.
Dividends
Dividends on shares are recognized in the Company’s
consolidated financial statements in the period in which the
dividends are approved by the Company’s Board of Directors.
Contributed Surplus
Contributed surplus is defined as the share-based payment
reserve recorded at fair value.
Significant Accounting Judgments and
Estimation Uncertainties
The application of the Company’s accounting policies requires
management to use estimates and judgments that can have
a significant effect on the revenues, expenses, comprehensive
income, assets and liabilities recognized and disclosures
made in the consolidated financial statements. Estimates and
judgments are significant when:
• the outcome is highly uncertain at the time the estimates
and judgments are made; and
• if different estimates or judgments could reasonably have
been used that would have had a material impact on the
consolidated financial statements.
Management’s best estimates regarding the future are
based on the facts and circumstances available at the time
estimates are made. Management uses historical experience,
general economic conditions and trends, as well as
assumptions regarding probable future outcomes as the basis
for determining estimates. Estimates and their underlying
assumptions are reviewed periodically and the effects of
any changes are recognized immediately. Actual results will
differ from the estimates used, and such differences could
be material. Management’s annual budget and long-term
plan which covers a five-year period are key information
for many significant estimates necessary to prepare these
consolidated financial statements. Management prepares
a budget on an annual basis and regularly updates its
long-term plan. Cash flows and profitability included in the
budget and long-term plan are based on existing and future
assets under management, general market conditions and
current and future cost structures. The budget and long term
plan are subject to approval at various levels, including
senior management. The Board of Directors approves the
annual budget.
The following discusses the most significant accounting
judgments and estimates that the Company has made in the
preparation of the consolidated financial statements:
Cash Generating Unit
The Company determined that it had one CGU for the
purpose of assessing the carrying value of the allocated
goodwill and indefinite-life intangible assets, until the
acquisition by the Company of the asset management funds
of GMP Investment Management now referred to as Fiera
Diversified Alpha Fund and Canadian ABCP Fund which also
constitutes a CGU since their acquisition on May 1, 2013.
Impairment of Goodwill, Indefinite-Life Intangible
Assets and Finite-Life Intangible Assets
Goodwill is tested annually for impairment. The recoverable
amount of the CGU is determined based on value-in-use
calculation. This calculation requires the use of estimates
including those with respect to the assumed growth rates
for future cash flows, the numbers of years used in the cash
flow model, the discount rate and others estimates. The
recoverable amounts of indefinite-life-intangible assets and
finite-life intangible assets are based on the present value
of the expected future cash flows, which involves making
estimates about the future cash flows including projected
client attrition rates when applicable, as well as discount rates
and gross profit margin percentage.
Business Combinations
The purchase price allocation process resulting from a
business combination requires management to estimate
the fair value of assets acquired including intangible assets,
property and equipment along with liabilities assumed, such
Fiera Capital Corporation 2013 Annual Report | 77
December 31, 2013 and 2012 (In thousands of Canadian dollars) as the purchase price obligation due over time. The Company
uses valuation techniques, which are generally based on a
forecast of the total expected future net discounted cash
flows. These valuations are linked closely to the assumptions
made by management regarding the future performance of
the related assets and the discount rate applied.
Income Taxes
The calculation of income tax expense requires significant
judgment in interpreting tax rules and regulations, which
are changing constantly. There are many transactions and
calculations for which the ultimate tax determination is
uncertain. The Company recognizes liabilities for anticipated
tax audit issues based on estimates of whether additional
taxes will be due. Where the final tax outcome of these
matters is different from the amounts that were initially
recorded, such differences will impact the current and
deferred income tax assets and liabilities in the period in
which such determination is made.
Deferred tax assets and liabilities require judgment in
determining the amounts to be recognized. Significant
judgment is required when assessing the timing of the reversal
of the temporary differences to which future tax rates are
applied. The amount of deferred tax assets, which is limited to
the amount that is probable to be realized, is estimated with
consideration given to the timing, sources and level of future
taxable profit.
IFRS not yet Adopted
The Company has not applied the following new and revised
IFRS that have been issued but are not yet effective:
IFRS 9 – Financial Instruments
IFRS 9, issued in November 2009, introduced new
requirements for the classification and measurement of
financial assets. IFRS 9 was amended in October 2010 to
include requirements for the classification and measurement
of financial liabilities and for derecognition. IFRS 9 is effective
for annual periods beginning on or after January 1, 2015, with
earlier application permitted. In November 2013, the IASB
further amended IFRS 9 to remove the mandatory effective
date. The amendment also provides relief from restating
comparative information and required disclosures in IFRS 7,
Financial Instruments: Disclosures.
Key requirements of IFRS 9:
• all recognized financial assets that are within the
scope of IAS 39, Financial Instruments: Recognition
and Measurement are required to be subsequently
measured at amortized cost or fair value. Specifically,
debt investments that are held within a business model
78
whose objective is to collect the contractual cash flows,
and that have contractual cash flows that are solely
payments of principal and interest on the principal
outstanding are generally measured at amortized cost at
the end of subsequent accounting periods. All other debt
investments and equity investments are measured at their
fair value at the end of subsequent accounting periods. In
addition, under IFRS 9, entities may make an irrevocable
election to present subsequent changes in the fair value
of an equity investment (that is not held for trading) in
other comprehensive income, with only dividend income
generally recognized in profit or loss.
• with regard to the measurement of financial liabilities
designated as at fair value through profit or loss, IFRS 9
requires that the amount of change in the fair value
of the financial liability that is attributable to changes
in the credit risk of that liability is presented in other
comprehensive income, unless the recognition of the
effects of changes in the liability’s credit risk in other
comprehensive income would create or enlarge an
accounting mismatch in profit or loss. Changes in fair
value attributable to a financial liability’s credit risk are not
subsequently reclassified to profit or loss. Under IAS 39,
the entire amount of the change in the fair value of the
financial liability designated as fair value through profit or
loss is presented in profit or loss.
The Company is still evaluating the impact of this standard on
its consolidated financial statements.
Amendments to IFRS 10, IFRS 12 and IAS 27–
Investment Entities
The amendments to IFRS 10 define an investment entity
and require a reporting entity that meets the definition of
an investment entity not to consolidate its subsidiaries, but
instead to measure its subsidiaries at fair value through profit
or loss in its consolidated and separate financial statements.
To qualify as an investment entity, a reporting entity is
required to:
• obtain funds from one or more investors for the
purpose of providing them with professional investment
management services;
• commit to its investor(s) that its business purpose is to
invest funds solely for returns from capital appreciation,
investment income, or both; and
• measure and evaluate performance of substantially all of
its investments on a fair value basis.
Notes to the Consolidated Financial StatementsDecember 31, 2013 and 2012 (In thousands of Canadian dollars) Consequential amendments have been made to IFRS 12
and IAS 27 to introduce new disclosure requirements for
investment entities.
The amendments to IFRS 10, IFRS 12 and IAS 27 are
effective for annual periods beginning on or after January 1,
2014, with earlier application permitted. The Company does
not anticipate that the investment entities amendments
will have any effect on the Company’s consolidated financial
statements as the Company is not an investment entity as
defined under IFRS.
Amendments to IAS 32 – Offsetting Financial Assets and
Financial Liabilities
The amendments to IAS 32 clarify the requirements relating
to the offset of financial assets and liabilities. Specifically, the
amendments clarify the meaning of “currently has a legally
enforceable right of set-off’’ and “simultaneous realization
and settlement”.
IAS 32 is effective for annual periods beginning on or after
January 1, 2014, with earlier application permitted. The Company
does not anticipate that the application of these amendments
to IAS 32 will have a significant impact on the Company’s
consolidated financial statements as the Company does not have
any financial assets and liabilities that qualify for offset.
Note 4 Business Combinations
2013
GMP Capital Inc.
On May 1, 2013, the Company closed a transaction with GMP
Capital Inc. (“GMP”) whereby the Company acquired selected
alternative asset management funds of GMP Investment
Management including flagship funds pertaining to the GMP
Diversified Alpha Fund and the Canadian ABCP Fund. The
transaction enabled Fiera Capital to expand its alternative
strategies, an investment area that has been experiencing
significant momentum over the past few years in the North
American marketplace and that will continue to grow in
the future. The acquisition provided clients of the Company
with enhanced product innovation and offerings, and with
customized investment solutions that meet their objectives.
Under the terms of the agreement, key members of GMP
Investment Management’s team joined a newly created Fiera
Capital subsidiary, Fiera Quantum L.P. in which they now own
a 45% interest. The purchase price includes a $10,750 cash
consideration paid at closing, plus an amount payable to an
escrow account at the end of each of the next three years
equal to 25 percent of the performance fees generated based
on the acquired assets. The amount in escrow will be released
to GMP only if certain minimum AUM thresholds are met.
As part of the GMP business combination, the key
members of the GMP investment management’s team have
the option to sell all but not less than all of their interest
in Fiera Quantum L.P. on the last business day of the 36th
month following the closing of the purchase of the GMP
assets by Fiera Quantum L.P. This option can be settled in cash
or by the issuance of Fiera Capital Class A subordinate voting
shares at the option of Fiera Capital. The option to acquire the
non-controlling interest was accounted for as a liability and
applied in reduction of the non-controlling interest.
The transaction was accounted for as a business combination
using the acquisition method and accordingly the assets and
liabilities were recorded at their estimated fair value at the date
of acquisition. The Company completed the purchase price
allocation based on management’s best estimates as follows:
Current assets
Intangible assets
Goodwill
Deferred income taxes
Value of option granted to non-controlling interest
Non-controlling interest
Initial value of option granted to non-controlling interest
Non-controlling interest, net
Purchase consideration
Cash consideration
Purchase price obligation
$
518
18,570
1,918
(1,555)
(7,298)
12,153
(8,590)
7,298
(1,292)
10,861
$
10,750
111
10,861
Goodwill is attributable to synergies expected as a result of
the consolidation of the alternative asset management teams.
Goodwill is not deductible for tax purposes. Management of
the Company has identified certain intangible assets acquired
from GMP, which have been accounted for separately
from goodwill. These intangible assets include customer
relationships valued at $18,570.
During the fourth quarter of 2013, although the Company
had completed the purchase price allocation in the third
quarter, the Company recorded an adjustment to increase
the current assets for an amount of $518 and to reduce
the purchase price obligation for an amount of $1,239 for
Fiera Capital Corporation 2013 Annual Report | 79
December 31, 2013 and 2012 (In thousands of Canadian dollars) Wilkinson O’Grady
On October 31, 2013, the Company closed a transaction
to acquire New York based investment manager Wilkinson
O’Grady & Co. Inc. (“Wilkinson O’Grady”), a global asset
manager. The acquisition is part of the Company’s strategy to
expand into the U.S. private wealth market and will broaden
its product expertise in U.S. and global equities.
The purchase price for Wilkinson O’Grady includes
US$29,529 (CA$30,844) paid in cash and US$1,720
(CA $1,794) worth of new Fiera Capital Class A subordinate
voting shares (which reflects the roll-over of senior employee
ownership in Wilkinson O’Grady into newly issued Fiera
Capital Class A Shares).
The transaction was accounted for as business combinations
using the acquisition method and the assets and liabilities
were recorded at their estimated fair value at the acquisition
as follows:
Cash
Other current assets
Property and equipment
Deferred income tax asset
Intangible assets
Goodwill
Accounts payable and accrued liabilities
Deferred income tax liability
Purchase consideration
Cash consideration
Share capital
$
1,839
7,674
498
155
14,622
15,717
(1,251)
(6,616)
32,638
$
30,844
1,794
32,638
The goodwill is attributable to the future growth potential
of establishing a North American private wealth platform as
well as an assembled and trained work force. Goodwill is not
deductible for tax purposes.
Management of Fiera Capital Corporation has identified
certain intangible assets acquired from Wilkinson O’Grady,
which have been accounted for separately from goodwill.
These intangible assets include trade name valued at $679
and customer relationships valued at $13,943.
The Company financed the Bel Air and Wilkinson O’Grady
transactions by extending its long-term debt and by the
proceeds received from the issuance of share capital as
disclosed in Note 14.
an aggregate reduction of goodwill of $1,757. The above
adjustment led to an increase of non-controlling interest of
$234, with a corresponding increase in goodwill.
Bel Air
On October 31, 2013, the Company closed a transaction
to acquire Los Angeles, California based Bel Air Investment
Advisors, LLC as well as its affiliate Bel Air Securities LLC,
(collectively “Bel Air”), a prominent U.S. wealth management
firm. The acquisition is part of the Company’s strategy to
expand into the U.S. market. The transaction provides the
Company with a foothold in California and Texas and increases
the growth potential in the U.S. private wealth market.
Under the terms of the agreement, the purchase price for
Bel Air includes US$115,240 (CA$120,371) paid in cash and
US$9,760 worth of new Fiera Capital Class A Shares to be
issued over a 32-month period following closing, which was
accounted for at a value of US$8,419 (CA$8,781) as well as
a purchase price obligation of US$9,000 (CA$9,400) which
represents the Company’s best estimate of the working capital
adjustment that will be finalized in 2014. An amount of
US$14,640 (CA$15,292) of the cash consideration will be held
in escrow for a period of three years.
The transaction was accounted for as a business combination
using the acquisition method and the assets and liabilities
were recorded at their estimated fair value at the acquisition
as follows:
Cash
Other current assets
Property and equipment
Intangible assets
Goodwill ($60,049 deductible for tax purposes)
Accounts payable and accrued liabilities
Purchase consideration
Cash consideration
Purchase price obligation
Hold back shares
$
9,629
5,503
376
66,112
60,049
(3,117)
138,552
$
120,371
9,400
8,781
138,552
The goodwill is attributable to the future growth potential
of establishing a North American private wealth platform as
well as an assembled and trained work force. Management
of Fiera Capital Corporation has identified certain intangible
assets acquired from Bel Air, which have been accounted for
separately from goodwill. These intangible assets include trade
name valued at $1,880, non-compete agreement valued at
$2,298, asset management contract valued at $1,984 and
customer relationships valued at $59,950.
80
Notes to the Consolidated Financial StatementsDecember 31, 2013 and 2012 (In thousands of Canadian dollars) Pro Forma Impact of 2013 Acquisitions
The impact of these acquisitions for the year ended
December 31, 2013 on the base management and
performance fees and the net loss are as follows:
Base management fees
Performance fees
Net earnings
$
12,622
3,172
770
If the business combinations had occurred on January 1,
2013, the Company’s consolidated base management fees
and performance fees and net earnings would have been
as follows:
Base management fees
Performance fees
Net earnings
$
171,118
15,552
19,193
The Company considers the pro forma figures to be an
approximate measurement of the financial performance of
the combined business over a twelve-month period and that
they provide a baseline against which to compare the financial
performance of future periods.
The above pro forma net earnings includes selling, general
and administrative expense, amortization of tangible and
intangible assets, interest on long-term debt and the elimination
of the acquisition costs, as well as related tax effects.
2012
Natcan Investment Management Inc.
On April 2, 2012, Fiera Capital Corporation and National
Bank of Canada (“National Bank” or the “Bank”) announced
the closing of the transaction under which Fiera Capital
Corporation acquired substantially all of the assets of Natcan
Investment Management Inc. (“Natcan”) from the Bank with
the following conditions:
The Bank, through Natcan, received 19,732,299 Class A
subordinate voting shares of Fiera Capital Corporation with
an assigned value of $170,487, a cash payment of $85,553
and future instalments amounting to $74,500 payable over
the time after the closing unless certain minimum AUM
thresholds are not satisfied by National Bank or its affiliates.
At the transaction date, the share purchase consideration
was accounted for using a value of $8.64 per share.
The 19,732,299 Class A Shares over which the Bank exercises
control and direction represented approximately 56.11% of the
issued and outstanding Class A Shares and 35% of the total
number of Class A Shares and Class B Shares in the capital of
Fiera Capital Corporation issued and outstanding at the time
of the transaction. The Bank also received an option to acquire
additional Class A Shares at a market price determined on the
day of exercise, equal to 2.5% of total shares outstanding at
the end of September in each of 2013 and 2014. If the options
are fully exercised, the Bank will own 40% of the outstanding
shares of Fiera. The Bank will also be entitled to protect its
ownership in Fiera pursuant to anti-dilution rights.
The transaction was accounted for as a business combination
using the acquisition method; accordingly the assets and
liabilities are recorded at their estimated fair values at the
acquisition date as follows.
Current assets
Property and equipment
Deferred charges
Intangible assets
Goodwill
Accounts payable and accrued liabilities
Deferred income taxes
Purchase consideration
Cash consideration
Purchase price obligations
Share capital issued
$
332
193
365
132,302
186,518
(332)
(10,698)
308,680
$
85,553
52,640
170,487
308,680
Goodwill was attributable to the significant synergies
expected as result of the acquisition of Natcan. A small
portion of the goodwill was tax deductible.
Management of Fiera Capital Corporation had identified
certain intangible assets acquired from Natcan, which
had been accounted for separately from goodwill. These
intangible assets included asset management contracts with
the National Bank and its affiliates (which have a seven-year
life and a three-year renewal period) valued at $84,800 and
customer relationships valued at $47,500.
Canadian Wealth Management Group Inc.
On November 30, 2012, Fiera Capital Corporation acquired
100 % of the shares of Canadian Wealth Management Group
Inc. (“CWM”) from Société Générale Private Banking, a
Calgary-based subsidiary of Société Générale Private Banking.
The purchase price included cash of $7,150 paid at closing and
a contingent payment of $2,000 payable in December 2013 if
a certain level of AUM was reached.
During the second quarter of 2013, the Company
completed the purchase price allocation shown below based
on management’s best estimates. The Company received a
reimbursement of $52 from Société Générale Private Banking
as part of the purchase price adjustment and accordingly the
amount was applied as a reduction of goodwill.
Fiera Capital Corporation 2013 Annual Report | 81
December 31, 2013 and 2012 (In thousands of Canadian dollars) As at the acquisition date, the estimated fair value of the
identifiable assets acquired and liabilities was as follows:
The impact of the 2012 acquisitions during the 15-month
period ended December 31, 2012, on the management fees,
performance fees and the net earnings is as follows:
Cash
Other current assets
Property and equipment
Intangible assets
Goodwill
Accounts payable and accrued liabilities
Amount due to shareholder
Deferred income taxes
Purchase consideration
Cash consideration
Purchase price obligation
$
310
1,219
1,337
7,452
1,710
(1,318)
(660)
(952)
9,098
$
7,098
2,000
9,098
During the fourth quarter of 2013, the Company reviewed
the AUM and concluded that the conditions required to
trigger the contingent payment of $2,000 were not met.
As such, the purchase price obligation was revalued and the
recovery was recorded in the consolidated statement of
earnings, under the caption: accretion and change in fair value
of purchase price obligations.
Base management fees
Performance fees
Net loss
$
32,273
2,545
(3,173)
If the business combinations would have occurred on
October 1, 2011, the Company’s consolidated management
fees, performance fees and net earnings would have been
as follows:
Base management fees
Performance fees
Net earnings
$
137,135
5,587
23,018
The Company considers the pro forma figures to be an
approximate measurement of the financial performance of
the combined business over a 15-month period and that they
provide a baseline against which to compare the financial
performance of future periods.
The above pro forma net earnings includes selling, general
and administrative expense, external managers expense
amortization of tangible and intangible assets, interest on
long-term debt, accretion on purchase price obligation and
change in fair value of derivative financial instrument and the
elimination of the acquisition costs, restructuring provisions,
as well as related tax effects.
Restructuring Provisions and Other Costs
With respect to the current and past business combinations, the Company recorded restructuring provisions related to leases for premises
which the Company vacated and costs related to the termination of certain employees in view to integrate the different businesses.
During the year ended December 31, 2013, the Company recorded a restructuring provision of nil ($4,336 for the 15-month
period ended December 31, 2012) and integration costs of the business combinations and special bonuses totalling $1,509 for
the year ended December 31, 2013 ($3,177 for the 15-month period ended December 31, 2012), for an aggregate amount of
$1,509 ($7,513 for the 15-month period ended December 31, 2012).
The change in the restructuring provisions during the periods is as follows:
Balance, September 30, 2011
Addition during the period
Paid during the period
Balance, December 31, 2012
Paid during the year
Balance, December 31, 2013
Current portion
Non-current portion
Total
82
Severance
Lease for
Premises
$
530
4,336
(2,790)
2,076
(767)
1,309
$
912
-
(912)
-
-
-
Total
$
1,442
4,336
(3,702)
2,076
(767)
1,309
December 31,2013
December 31, 2012
$
1,116
193
1,309
$
1,764
312
2,076
Notes to the Consolidated Financial StatementsDecember 31, 2013 and 2012 (In thousands of Canadian dollars) Note 5 Investment in Joint Ventures
The Company has investments in two joint ventures (Fiera Axium and Fiera Properties) and the variation of its interests during
the 12- and 15-month periods are as follows:
Opening balance
Subscription to capital
Share of earnings
Gain on dilution
Share of other comprehensive income
Closing balance
December 31, 2013
December 31, 2012
12 months
15 months
$
6,879
-
1,227
48
130
8,284
$
1,333
5,125
201
112
108
6,879
During 2013, the Company’s ownership in Fiera Axium changed slightly but remained stable at 35%. A gain on dilution of $48
was recorded to reflect this minor change.
During 2012, the Company increased its share of ownership in Fiera Axium from 35% to 36% resulting from a share buy-back
by the joint venture; however, in October 2012 and November 2012, different shareholders of the joint venture exercised options
resulting in a decrease of the ownership to 35% and a gain on dilution of $112.
The Company’s share of earnings in the joint ventures and their aggregated assets and liabilities are as follows:
Balance sheet
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Statement of earnings
Revenues
Expenses
Net earnings
December 31, 2013
December 31, 2012
$
2,671
9,419
4,192
51
$
1,662
8,664
2,356
1,673
December 31, 2013
December 31, 2012
12 months
$
7,478
5,990
1,488
15 months
$
4,758
4,557
201
Note 6 Financial Instruments
The Company, through its financial assets and liabilities,
has exposure to the following risks from its use of financial
instruments: equity market fluctuation risk, credit risk, interest
rate risk, currency risk and liquidity risk. The following analysis
provides a measurement risk as at December 31, 2013
and 2012.
The Company’s business is the management of investment
assets. The key performance driver of the Company’s ongoing
results is the level of AUM. The level of AUM is directly tied
to investment returns and the Company’s ability to retain
existing assets and attract new assets.
The Company’s consolidated balance sheets include a
portfolio of investments. The value of these investments is
subject to a number of risk factors. While a number of these
risks also affect the value of client’s AUM, the following
discussion relates only to the Company’s own portfolio
of investments.
Market Risk
Market risk is the risk of loss arising from adverse changes
in market rates and prices, such as interest rates, equity
market fluctuations and other relevant market rate or price
Fiera Capital Corporation 2013 Annual Report | 83
December 31, 2013 and 2012 (In thousands of Canadian dollars) changes. Market risk is directly influenced by the volatility
and liquidity in the markets in which the related underlying
assets are traded. Below is a discussion of the Company’s
primary market risk exposures and how these exposures are
currently managed.
Equity Market Fluctuation Risk
Fluctuations in the value of equity securities affect the level
and timing of recognition of gains and losses on equity and
mutual fund and pool fund securities in the Company’s
portfolio and causes changes in realized and unrealized gains
and losses. General economic conditions, political conditions
and many other factors can also adversely affect the stock
and bond markets and, consequently, the value of the equity,
mutual fund and fixed income available-for-sale financial
assets held.
The Company manages its investment portfolio with a
medium risk mandate. Its particular expertise is investment
management and, as part of its daily operations, it has
resources to assess and manage the risks of a portfolio. The
Company’s portfolio of equity and equity-related securities
as at December 31, 2013 and 2012, is comprised of mutual
fund and pool fund investments under its management with
a fair value of $6,096 as at December 31, 2013 and $6,532
as at December 31, 2012. Mutual fund investments comprise
a well-diversified portfolio of Canadian investments. Mutual
fund and pool fund units have no specific maturities.
A 10% change in the fair value of the Company’s equity
and equity-related holdings as at December 31, 2013,
and 2012 has an impact of increasing or decreasing other
comprehensive income by $610 and $653 respectively.
Credit Risk
Credit risk is the risk that one party to a financial instrument
fails to discharge an obligation and causes financial loss to
another party.
The credit risk on cash, restricted cash and investments is
limited because the counterparties are chartered banks with
high-credit ratings assigned by national credit-rating agencies.
The Company’s principal financial assets which are subject
to credit risk are cash, restricted cash, investments and
accounts receivable. The carrying amounts of financial assets
on the consolidated balance sheets represent the Company’s
maximum credit exposure at the consolidated balance
sheet dates.
The Company’s credit risk is attributable primarily to its
trade receivables. The amounts disclosed in the consolidated
balance sheets are net of allowance for doubtful accounts,
estimated by the Company’s management based on previous
experience and its assessment of the current economic
environment. In order to reduce its risk, management has
84
adopted credit policies that include regular review of credit
limits. With the exception of National Bank and related
companies which represent 22% as at December 31, 2013
(21% as at December 31, 2012), no customer represents 10%
of the Company’s revenues and accounts receivable as at
December 31, 2013 and 2012.
Interest Rate Risk
The Company is exposed to interest rate risk through its long-
term debt and bank loan. The interest rates on the bank loan
and long-term debt are variable and expose the Company to
cash flow interest rate risk, which is partially offset by cash
held at variable rates.
The Company manages its cash flow interest rate risk by
using floating-to-fixed interest rate swaps. Such interest rate
swaps have the economic effect of converting debt from
floating rates to fixed rates. The Company obtained its long-
term debt at a floating rate and swapped a portion of it into
fixed rates that are lower than those available if the Company
borrowed at fixed rates directly. Under the interest rate swap,
the Company agrees with the counterparty to exchange, at
specified intervals, the difference between the fixed contract
rate and floating-rate interest amounts calculated by
reference to the agreed notional amounts.
Currency Risk
Currency risk 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 Company’s exposure relates to
cash and long-term debt denominated in US dollars and the
operations of its US operations which are predominantly in
US dollars. The Company manages a portion of its exposure
to foreign currency by matching asset and liability positions.
More specifically, the Company matches the long-term
debt in foreign currency with long-term assets in the
same currency.
The consolidated balance sheets as at December 31, 2013 and
2012, include the following amounts expressed in Canadian
dollars with respect to financial assets and liabilities for which
cash flows are denominated in US dollars:
US dollars
Cash
Restricted cash
Investments
Accounts receivable
Accounts payable and accrued liabilities
Purchase obligations
Long-term debt
2013
$
8,481
531
5,268
10,368
(4,357)
(9,572)
(54,563)
2012
$
160
-
-
75
-
-
-
Notes to the Consolidated Financial StatementsDecember 31, 2013 and 2012 (In thousands of Canadian dollars) Based on the US dollar balances outstanding (excluding
long-term debt) as at December 31, 2013, a 5% increase/
decrease of the US dollar against the Canadian dollar would
result in an increase/decrease in total comprehensive income
(loss) of $536. The above calculation does not include the
US dollar long-term debt, which is hedged by a long-term
asset in the same currency. This long-term asset is not
included in the consolidated balance sheets given that it is an
intercompany balance.
Liquidity Risk
The Company’s objective is to have sufficient liquidity to meet its liabilities when they become due. The Company monitors its
cash balance and cash flows generated from operations to meet its requirements.
The Company generates enough cash from its operating activities and has sufficient available financing through its long-term
debt to finance its activities and to respect its obligations as they become due.
The Company has the following financial liabilities as at December 31, 2013:
Carrying
Amount
$
35,000
956
229,563
58,323
323,842
Total
$
35,000
956
229,563
68,184
333,703
2014
$
35,000
956
-
18,184
54,140
Contractual Cash Flow Commitments
2015
2016
Other
$
-
-
10,125
8,500
18,625
$
-
-
13,500
8,500
22,000
$
-
-
205,938
33,000
238,938
Accounts payable and accrued liabilities
Amount due to related companies
Long-term debt
Purchase price obligations
Fair Value
Determination of Fair Value of Financial Instruments
The fair value of the financial instruments represents the
amount of the consideration that would be agreed upon in
an arm’s length transaction between knowledgeable, willing
parties who are under no compulsion to act.
The fair value of cash, restricted cash, accounts receivable,
bank loan, accounts payable and accrued liabilities, amount due
to related companies and client deposits is approximately equal
to their carrying values due to their short-term maturities.
The cost of mutual fund investments and pool funds
is $5,890 as at December 31, 2013 and $6,580 as at
December 31, 2012, while the fair value is $6,096 as at
December 31, 2013 and $6,532 as at December 31, 2012.
The unrealized gain (loss) of $206 as at December 31, 2013
and ($48) as at December 31, 2012, are reflected in other
comprehensive income.
The fair value of long-term debt approximates their
carrying amount, value given that it is subject to terms
and conditions, including variable interest rates, similar
to those available to the Company for instruments with
comparable terms.
The value of the option granted to non-controlling
interest is based on a formula that was agreed upon by all
parties during the acquisition of the selected alternative
asset management funds of GMP. This formula uses the
present value of the sum of a multiple of the forecasted
earnings before income taxes, depreciation, amortization and
forecasted performance fees. The actual performance of the
subsidiary will affect the value of the option.
Derivative financial instruments consist primarily of
interest rate swap contracts. The Company determines the
fair value of its derivative financial instruments using the bid
or ask price, as appropriate, in the most advantageous active
market to which the Company has immediate access. When
there is no active market for a derivative financial instrument,
the Company determines the fair value by applying
valuation techniques, using available information on market
transactions involving other instruments that are substantially
the same, discounted cash flows analysis or other techniques,
where appropriate. The Company ensures, to the extent
practicable, that its valuation technique incorporates all
factors that market participants would consider in setting a
price and that is consistent with accepted economic methods
for pricing financial instruments.
Fiera Capital Corporation 2013 Annual Report | 85
December 31, 2013 and 2012 (In thousands of Canadian dollars) Financial instruments by category:
AS AT DECEMBER 31, 2013
Assets
Cash
Restricted cash
Investments
Accounts receivable
Advance to a related shareholder
Total
Liabilities
Accounts payable and accrued liabilities
Amount due to related companies
Client deposits
Value of option granted to non-controlling interest
Long-term debt
Purchase price obligations
Derivative financial instruments
Total
Loans and
Receivables
$
21,774
689
-
56,072
1,211
79,746
-
-
-
-
-
-
-
-
Available
for Sale
FVTPL1
Financial Liabilities
at Amortized Cost
$
-
-
$
-
-
6,096
3,615
-
-
-
-
6,096
3,615
-
-
-
-
-
-
-
-
-
-
-
7,720
-
-
644
8,364
$
-
-
-
-
-
-
35,000
956
689
-
228,262
58,323
-
323,230
Total
$
21,774
689
9,711
56,072
1,211
89,457
35,000
956
689
7,720
228,262
58,323
644
331,594
1. Assets (Liabilities) at fair value through profit or loss. This category includes assets and financial instruments designated as financial liabilities at fair value through profit
or loss.
AS AT DECEMBER 31, 2012
Assets
Cash
Restricted cash
Investments
Accounts receivable
Advance to a joint venture
Total
Liabilities
Bank loan
Accounts payable and accrued liabilities
Amount due to related companies
Client deposits
Loan-term debt
Purchase price obligations
Derivative financial instruments
Total
Loans and
Receivables
$
6,016
297
-
29,888
342
36,543
-
-
-
-
-
-
-
-
Available
for Sale
FVTPL1
Financial Liabilities
at Amortized Cost
$
-
-
6,532
-
-
6,532
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
1,491
1,491
$
-
-
-
-
-
-
9,800
16,501
2,003
297
107,521
56,503
-
192,625
Total
$
6,016
297
6,532
29,888
342
43,075
9,800
16,501
2,003
297
107,521
56,503
1,491
194,116
1. Assets (Liabilities) at fair value through profit or loss. This category includes assets and financial instruments designated as financial liabilities at fair value through profit
or loss.
86
Notes to the Consolidated Financial StatementsDecember 31, 2013 and 2012 (In thousands of Canadian dollars) Fair Value Hierarchy
The following table classifies financial assets and liabilities that are recognized on the consolidated balance sheets at fair value in
a hierarchy that is based on the significance of the inputs used in making the measurements. The levels in the hierarchy are:
• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2 – Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices); and
• Level 3 – Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
There was no transfer between levels during these periods.
The following table presents the financial instruments recorded at fair value in the consolidated balance sheets, classified using
the fair value hierarchy described above:
Financial assets
Mutual fund and pool fund investments under Company’s management
Other securities and investments
Total financial assets
Financial liabilities
Value of option granted to non-controlling interest
Derivative financial instruments – interest rate swap agreement
Total financial liabilities
Financial assets
Mutual fund and Pool fund investments under Company’s management
Total financial assets
Financial liabilities
Derivative financial instruments – interest rate swap agreement
Total financial liabilities
Level 1
$
-
3,615
3,615
-
-
-
Level 2
$
6,096
-
6,096
-
644
644
Level 1
$
821
821
-
-
December 31, 2013
Total
$
6,096
3,615
9,711
7,720
644
8,364
December 31, 2012
Total
$
6,532
6,532
1,491
1,491
Level 3
$
-
-
-
7,720
-
7,720
Level 2
$
5,711
5,711
1,491
1,491
Fiera Capital Corporation 2013 Annual Report | 87
December 31, 2013 and 2012 (In thousands of Canadian dollars) Note 7 Investments
Mutual fund and pool fund investments under Company’s management
Other securities and investments
Note 8 Accounts Receivable
Trade accounts and other
Trade accounts – related companies of shareholders
Trade accounts – Joint ventures
The aging of accounts receivable were as follows:
Trade
Current
Aged between 61 – 119 days
Aged greater than 120 days
Total trade
Related companies (current)
Other
There is no provision for doubtful accounts.
December 31, 2013
December 31, 2012
$
6,096
3,615
9,711
$
6,532
-
6,532
December 31, 2013
December 31, 2012
$
41,127
13,894
1,051
56,072
$
19,776
9,635
477
29,888
December 31, 2013
December 31, 2012
$
38,180
1,441
1,087
40,708
14,945
419
56,072
$
18,720
149
120
18,989
10,112
787
29,888
88
Notes to the Consolidated Financial StatementsDecember 31, 2013 and 2012 (In thousands of Canadian dollars) Note 9 Property and Equipment
Period ended December 31, 2012
Opening net book value
Additions
Business combinations
Depreciation for the period
Closing net book value
As at December 31, 20121
Cost
Accumulated depreciation
Net book value
Year ended December 31, 2013
Opening net book value
Additions
Business combinations
Foreign exchange difference
Depreciation for the year
Closing net book value
As at December 31, 20131
Cost
Accumulated depreciation
Foreign exchange difference
Net book value
Office Furniture
& Equipment
Computer
Equipment
Leasehold
Improvements
$
552
695
502
(320)
1,429
3,368
(1,939)
1,429
1,429
69
124
2
(360)
1,264
3,561
(2,299)
2
1,264
$
701
300
314
(428)
887
1,870
(983)
887
887
238
354
7
(483)
1,003
2,462
(1,466)
7
1,003
$
1,160
1,398
714
(388)
2,884
3,736
(852)
2,884
2,884
265
396
8
(498)
3,055
4,397
(1,350)
8
3,055
Total
$
2,413
2,393
1,530
(1,136)
5,200
8,974
(3,774)
5,200
5,200
572
874
17
(1,341)
5,322
10,420
(5,115)
17
5,322
1. During the year ended December 31, 2013 and 15-month period ended December 31, 2012, the Company disposed of office furniture and equipment which had an
accounting cost of nil ($74 for December 31, 2012), and accumulated amortization of nil ($74 for December 31, 2012). Also, the Company disposed of computer
equipment which had an accounting cost of nil ($1,798 for December 31, 2012) and an accumulated amortization of nil ($1,798 for December 31 2012). Finally,
the Company disposed of leasehold improvements which had an accounting cost of nil ($21 for December 31, 2012) and accumulated amortization of nil ($21 for
December 31, 2012).
Fiera Capital Corporation 2013 Annual Report | 89
December 31, 2013 and 2012 (In thousands of Canadian dollars) Note 10 Goodwill and Intangible Assets
Indefinite Life
Finite Life
Asset
Management
Contracts
Asset
Management
Contracts
Period ended December 31, 2012
Opening net book value
Additions
Business combinations
Amortization for the period
Closing net book value
As at December 31, 20121
Cost
Accumulated amortization
Net book value
Year ended December 31, 2013
Opening net book value
Additions
Business combinations
Acquisitions
Foreign exchange difference
Amortization for the year
Closing net book value
As at December 31, 20131
Cost
Accumulated amortization
Foreign exchange difference
Net book value
Goodwill
$
90,470
-
188,280
-
278,750
278,750
-
278,750
278,750
-
77,632
-
1,391
-
357,773
356,382
-
1,391
357,773
$
6,170
-
-
-
6,170
6,170
-
6,170
6,170
-
1,984
-
37
-
8,191
8,154
-
37
$
-
-
84,800
(6,360)
78,440
84,800
(6,360)
78,440
-
-
-
-
(8,480)
69,960
84,800
(14,840)
-
Customer
Relationships
$
41,622
-
54,905
(4,670)
91,857
100,185
(8,328)
91,857
-
92,463
48,100
1,351
(9,277)
224,494
240,748
(17,605)
1,351
224,494
78,440
91,857
8,191
69,960
Other
$
2,957
2,336
49
(1,579)
3,763
6,711
(2,948)
3,763
3,763
124
4,857
-
88
(1,326)
7,506
11,692
(4,274)
88
7,506
Total
$
50,749
2,336
139,754
(12,609)
180,230
197,866
(17,636)
180,230
180,230
124
99,304
48,100
1,476
(19,083)
310,151
345,394
(36,719)
1,476
310,151
1. During the year ended December 31, 2013, and the 15-month period ended December 31, 2012, the Company disposed of software which had an accounting cost of nil
($695 for December 31, 2012) and accumulated amortization of nil ($695 for December 31, 2012).
Acquisitions
In December 2012, the Company announced that it had reached an agreement with UBS Global Asset Management (Canada)
Inc. (“UBS”) to purchase the latter’s Canadian Fixed Income, Canadian Equity and Domestic Balance account assets for a
maximum cash consideration of $52,000. At closing, which occurred on January 31, 2013, an amount of $40,200 was paid to
UBS and an amount of $11,800 was placed in escrow.
As certain AUM thresholds were not met, during the quarter ended September 30, 2013, the Company received from the
escrow agent an amount of $3,900, which was applied as a reduction of the purchase price, for a net revised amount of $48,100.
The remaining $7,900 under escrow was released and paid by the escrow agent on July 31, 2013, to UBS.
The Company financed the assets acquisition by extending its long-term debt.
90
Notes to the Consolidated Financial StatementsDecember 31, 2013 and 2012 (In thousands of Canadian dollars) Impairment Tests of Goodwill
In assessing goodwill for impairment as at December 31, 2013 and 2012, the Company compared the aggregate recoverable
amount of the CGU’s to their carrying amounts. The CGUs were determined to be the entity as a whole as at December 31, 2012
and two CGUs as at December 31, 2013 (Fiera Quantum L.P and the remainder of the business). The recoverable amounts have
been determined based on the value in use using five-year cash flow forecasts approved by management that made maximum
use of observable market inputs. For the periods beyond the five-year budget, the terminal value was determined using the
expected long-term growth rate. Key assumptions included the following:
Budgeted gross margin
Weighted average growth rate
Discount rate
2013
%
38%
5.5%
11%
2012
%
40%
5.1%
11%
Reasonable changes in key assumptions would not cause the recoverable amount of goodwill to fall below the carrying value.
As at December 31, 2013, the Company also tested the recoverability of the assets of Fiera Quantum L.P. as a separate CGU using
five-year cash flow forecasts that made maximum use of observable market inputs. For the periods beyond the five-year budget,
the terminal value was determined using the expected long-term growth rate. Key assumptions included the following:
Budgeted gross margin
Weighted average growth rate
Discount rate
2013
%
30%
6%
16%
Impairment Tests of Indefinite-Life Intangible Assets
In assessing indefinite-life intangible assets for impairment as at December 31, 2013 and 2012, the Company compared the
aggregate recoverable amount of the assets to their respective carrying amounts. The recoverable amount has been determined
based on the value using indefinite-life cash flow forecasts approved by management that made maximum use of observable
markets inputs and outputs. For the periods beyond the budget period, the terminal value was determined using the expected
long-term growth rate. Key assumptions included the following:
Budgeted gross margin
Weighted average growth rate
Discount rate
2013
%
38%
2.5%
11%
2012
%
40%
2.5%
11%
The budgeted gross margin is based on past experience and represents the margin achieved in the period preceding the
budgeted period. The discount rate is applied to the five-year pre-tax cash flow projections and is derived from the weighted
average cost of capital.
Reasonable changes in key assumptions would not cause the recoverable amount of indefinite life intangible assets to fall
below the carrying value.
As a result of the impairment analysis, the Company determined that the recoverable amount of its CGUs exceeded their
carrying amounts and as a result, there was no impairment identified.
Fiera Capital Corporation 2013 Annual Report | 91
December 31, 2013 and 2012 (In thousands of Canadian dollars) Note 11 Accounts Payable and Accrued Liabilities
Trade accounts payable and accrued liabilities
Wages, vacation and severance payable
Bonuses and commissions payable
Taxes
Note 12 Income Taxes
Income tax expense details as follows:
Current income taxes
Deferred income taxes (recovery)
December 31, 2013
December 31, 2012
$
14,932
1,564
17,544
960
35,000
$
6,124
447
9,033
897
16,501
December 31, 2013
December 31, 2012
12 months
15 months
$
10,017
(2,628)
7,389
$
5,561
(2,779)
2,782
The Company’s income tax expense differs from the amounts that would have been obtained using the combined federal and
provincial statutory tax rates as follows:
December 31, 2013
December 31, 2012
12 months
15 months
Earnings before income taxes
Combined federal and provincial statutory tax rates
Income tax expense based on combined statutory income tax rate
Share-based compensation
Non-deductible acquisition costs
Effect of investment in foreign subsidiaries
Effect of foreign tax rate
Prior years’ tax adjustments
Other non-deductible (non-taxable) amounts
Adjustment of deferred income tax assets and liabilities due to changes to substantively
enacted income tax rate
$
21,994
26.7%
5,872
568
1,266
(345)
32
414
(418)
-
7,389
$
5,808
27.3%
1,586
314
586
-
-
-
100
196
2,782
The movement in deferred income tax assets and liabilities during the periods, without taking into consideration the offsetting of
balances within the same tax jurisdiction, is as follows:
Lease &
Inducements
Restructuring
Provisions
Carry Forward
Losses
$
271
169
-
440
(42)
-
398
$
304
(194)
-
110
239
-
349
$
-
-
1,173
1,173
(792)
-
381
Other
$
93
482
-
575
(66)
1,121
1,630
Total
$
668
457
1,173
2,298
(661)
1,121
2,758
September 30, 2011
Charged to earnings
Business combinations
December 31, 2012
Charged to earnings
Charged to equity
December 31, 2013
92
Notes to the Consolidated Financial StatementsDecember 31, 2013 and 2012 (In thousands of Canadian dollars) September 30, 2011
Charged to earnings
Business combinations
December 31, 2012
Charged to earnings
Business combinations
Charged to equity
Foreign exchange difference
December 31, 2013
Financial statement presentation as at:
Non-current deferred income tax assets
Non-current deferred income tax liabilities
Total
Note 13 Long-Term Debt
Term facility
Revolving facility ($51,300 US dollars)
Deferred financing charges
Total (From Above)
Intangible Assets
Property &
Equipment
$
668
457
1,173
2,298
(661)
-
1,121
-
2,758
$
(10,622)
2,460
(12,660)
(20,822)
3,136
(8,016)
-
(120)
(25,822)
$
(75)
(138)
(163)
(376)
153
-
-
-
(223)
Total
$
(10,029)
2,779
(11,650)
(18,900)
2,628
(8,016)
1,121
(120)
(23,287)
December 31,2013
December 31, 2012
$
1,349
(24,636)
(23,287)
$
1,364
(20,264)
(18,900)
December 31, 2013
December 31, 2012
$
175,000
54,563
(1,301)
228,262
$
108,000
-
(479)
107,521
Credit Facilities
Fiera Capital Corporation has in place a $250,000 unsecured credit facility (“Credit Facility”) consisting of:
a. $75,000 revolving facility maturing in April 2017 and;
b. $175,000 term facility maturing in April 2017.
On October 31, 2013, the Company amended its $118,000 credit facility which consisted of a $10,000 revolving facility
and a $108,000 term facility to a $250,000 Credit Facility. The amended Credit Facility bears interest at prime rate plus a
premium varying from 0% to 2.25% or at banker’s acceptance rate plus a premium varying from 1.00% to 2.25% (2.25% as at
December 31, 2013), matures on April 3, 2017, and is repayable in quarterly instalments of $3,375 starting in June 2015 up to
April 2017. The revolving facility can be used for general corporate purposes, to finance permitted acquisitions and was used to
finance a portion of the Bel Air and Wilkinson O’Grady acquisitions.
Under the terms of the loan agreement, the Company must satisfy certain restrictive covenants including minimum financial
ratios. These restrictions are composed of ratio of funded debt to EBITDA and interest coverage ratio. EBITDA, a non IFRS
measure, is defined in the Credit Facility on a consolidated basis, as earnings of the Borrower before interest, taxes, depreciation,
amortization, non-recurring and one-time expenses related to acquisitions and other non-cash items and shall include various
items. As at December 31, 2013, all debt covenant requirements and exemptions have been respected.
On May 1, 2012, the Company entered into an interest rate swap agreement of a notional amount of $108,000, which
consists of exchanging its variable rate for a fixed rate of 1.835% ending in March 2017, payable in monthly instalments
(see Note 6).
Fiera Capital Corporation 2013 Annual Report | 93
December 31, 2013 and 2012 (In thousands of Canadian dollars) The principal repayments required over the next three years as at December 31, 2013, are as follows:
Years
2015
2016
2017
$
10,125
13,500
205,938
229,563
Note 14 Share Capital and Accumulated Other Comprehensive Income
The Company is authorized to issue an unlimited number of Class A Shares and an unlimited number of Class B Shares. The
Class B Shares may only be issued to Fiera Capital L.P.
Except as described below, the Class A Shares and the Class B Shares have the same rights, are equal in all respects and are
treated as if they were shares of one Class only. The Class A Shares and Class B Shares rank equally with respect to the payment of
dividends, return of capital and distribution of assets in the event of the liquidation, dissolution or winding up of the Company.
The holders of outstanding Class A Shares and Class B Shares are entitled to receive dividends out of assets legally available
at such times and in such amounts and form as the Board of Directors may from time to time determine without preference or
distinction between Class A Shares and Class B Shares.
Class A Shares and Class B Shares each carry one vote per share for all matters other than the election of directors. With
respect to the election of directors, holders of Class A Shares are entitled to elect one-third of the members of the Board
of Directors while holders of Class B Shares are entitled to elect two-thirds of the members of the Board of Directors of
the Company.
The Class A Shares are not convertible into any other class of shares. Class B Shares are convertible into Class A Shares on a
one-for-one basis, at the option of the holder as long as Fiera Capital L.P. is controlled by current shareholders or holds at least
20% of the total number of issued and outstanding Class A Shares and Class B Shares.
The shares have no par value
Shares issued as part of a business combination (Note 4)
19,732,299
170,487
As at September 30, 2011
Stock options exercised
Shares issued for cash1
As at December 31, 2012
Stock options exercised
Shares issued as settlement for the purchase price obligations
Transfer from Class B Shares to Class A Shares
Shares issued under a private placement
Shares issued as part of a business combination (Note 4)
Class A Subordinate
Voting shares
Class B Special
Voting Shares
Number
$
Number
$
Number
Total
$
15,367,666
101,839
21,207,964
33,748
36,575,630
135,587
181,401
967
86,748
718
-
-
-
-
-
-
181,401
967
19,732,299
170,487
86,748
718
35,368,114
274,011
21,207,964
33,748
56,576,078
307,759
170,871
764,602
409,956
9,781,000
144,514
1,090
8,500
652
102,066
1,794
-
-
-
-
(409,956)
(652)
-
-
-
-
170,871
764,602
-
9,781,000
144,514
1,090
8,500
-
102,066
1,794
421,209
As at December 31, 2013
46,639,057
388,113
20,798,008
33,096
67,437,065
1. During the month of June 2012, as part of the Employee Share Purchase Plan, the Company issued 86,748 Class A subordinate voting shares for an amount of $718
in cash.
Shares Issued in 2013
On September 18, 2013, the Company issued, under a private placement, 9,781,000 subscription receipts at a price of $10.75
per receipt for an aggregate amount of $102,066, net of issuance costs of $4,201 and deferred income taxes recovery of $1,121.
94
Notes to the Consolidated Financial StatementsDecember 31, 2013 and 2012 (In thousands of Canadian dollars) Proceeds were placed in escrow until the closing of the Bel Air and Wilkinson O’Grady business combinations. Upon the closing,
the subscription receipts were automatically exchanged on a one-for-one basis for 9,781,000 Class A Shares.
As part of the Bel Air transaction, the Company committed to issue over a 32-month period following closing, Class A Shares
worth US$9,760. This commitment was considered an equity component and was recorded at a discounted value of US$8,419
(CA$8,781) under the caption: Hold back shares.
Dividends
During the year ended December 31, 2013, the Company paid $22,590 of dividends on Class A and Class B Shares ($0.38 per
share) and $19,421 for the 15-month period ended December 31, 2012 ($0.40 per share).
Components of accumulated other comprehensive income includes:
As at September 30, 2011
Unrealized loss on available-for-sale financial assets
Share of other comprehensive income of joint venture
As at December 31, 2012
Unrealized gain on available-for-sale financial assets and reclassification of loss on disposal of investments
Share of other comprehensive income of joint venture
Unrealized exchange differences on translating financial statements of foreign operations
As at December 31, 2013
Note 15 Earnings per Share
$
17
(60)
108
65
249
130
1,472
1,916
Earnings per share as well as the reconciliation of the number of shares used to calculate basic and diluted earnings per share are
as follows:
December 31, 2013
December 31, 2012
Net earnings available to shareholders for the periods
Weighted average shares outstanding – basic
Effect of dilutive share-based awards
Weighted average shares outstanding – diluted
Basic earnings per share
Diluted earnings per share
12 months
$
14,939
58,576,797
872,215
59,449,012
0.26
0.25
15 months
$
3,026
48,562,458
387,944
48,950,402
0.06
0.06
For the year ended December 31, 2013, and the 15-month period ended December 31, 2012, the calculation of hypothetical
conversions does not include 448,000 options (1,566,750 in 2012) with an anti-dilutive effect.
Fiera Capital Corporation 2013 Annual Report | 95
December 31, 2013 and 2012 (In thousands of Canadian dollars) Note 16 Share-Based Payment
a. Stock option plan
Under the stock option plan, the exercise price of each stock option is equal to the volume weighted average trading price
of the Company’s shares on the TSX for the five trading days immediately preceding the date the stock option is granted
and each stock option’s maximum term is ten years. The Board of Directors may determine when any option will become
exercisable and may determine that the option will be exercisable in instalments or pursuant to a vesting schedule.
A summary of the changes that occurred during the year ended December 31, 2013, and the 15-month period ended
December 31, 2012, in the Company stock option plans is presented below:
Outstanding – beginning of period
Granted
Exercised
Forfeited
Outstanding – end of period
Options exercisable – end of period
December 31, 2013
December 31, 2012
Number of
Class A Share Options
Weighted-Average
Exercise Price
Number of
Class A Share Options
Weighted-Average
Exercise Price
2,290,393
823,000
(170,871)
-
2,942,522
999,690
$
6.92
10.77
4.84
-
8.12
6.48
1,630,072
986,939
(181,401)
(145,217)
2,290,393
707,172
$
5.93
8.22
4.16
8.13
6.92
5.88
The following table presents the weighted average assumptions used during the year ended December 31, 2013 and the
15-month period ended December 31, 2012, to determine the share-based compensation expense using the Black-Scholes
option-pricing-model:
Dividend yield (%)
Risk-free interest rate (%)
Expected life (years)
Expected volatility of the share price (%)
Weighted-average fair values ($)
Share-based compensation expense ($)
December 31, 2013
December 31, 2012
2.93 to 4.22
1.70 to 2.20
7.5
43.8 to 44.5
3.59
1,372
3.79 to 4.23
1.58 to 1.91
7.5
46 to 47
2.69
1,176
The expected volatility is based on the historical volatility of the Company’s share price. The risk-free interest used is equal to
the yield available on government of Canada bonds at the date of grant with a term equal to the expected life of options.
The following table summarizes the stock options outstanding:
Range of Exercise Price
Number
of Class A Share
Options
Weighted-Average
Remaining Contractual
Life In (Years)
Weighted-Average
Exercise Price
Number
of Class A Share
Options
Weighted-Average
Exercise Price
Options Outstanding
Options Exercisable
518,329
52,500
1,923,693
448,000
6
1
8
10
$
3.67
5.74
8.11
13.58
368,287
52,500
578,903
-
$
3.67
5.74
8.33
-
3.67
5.41 to 6.37
6.38 to 8.50
13.58
96
Notes to the Consolidated Financial StatementsDecember 31, 2013 and 2012 (In thousands of Canadian dollars) b. Deferred share unit plan
In 2007, the Board of Directors of the Company adopted a deferred share unit plan (the “DSU Plan”) for the purposes of
strengthening the alignment of interests between the directors and the shareholders by linking a portion of annual director
compensation to the future value of the shares, in lieu of cash compensation. Under the DSU Plan, each director received, on
the date in each quarter which is three business days following the publication by the Company its earnings results for the
previous quarter, that number of DSU having a value equal to up to 100% of such director’s base retainer for the current quarter,
provided that a minimum of 50% of the base retainer must be in the form of DSU. The number of DSU granted to a director was
determined by dividing the dollar value of the portion of the director’s fees to be paid in DSUs by the closing price of the Class A
Shares of the TSX for the business day immediately preceding the date of the grant. At such time as a director ceased to be a
director, the Company would make a cash payment to the director equal to the closing price of the Class A Shares on the date of
departure, multiplied by the number of DSU held by the director on that date. As at September 1, 2010, the Board of Directors
cancelled the DSU plan; however, all existing rights and privileges were kept intact. All directors are now compensated in cash.
As at December 31, 2013, management had provided an amount of approximately $186 for the 13,214 units ($238 for
31,933 units as at December 31, 2012), outstanding under the DSU Plan.
c. Employee share purchase plan
On October 6, 2011, the Board of Directors adopted an Employee Share Purchase Plan (“ESPP”) for the purposes of attracting
and retaining eligible employees, therefore allowing them to participate in the growth and development of the Company.
The maximum number of issuable shares under this plan is 1.5 million shares of Class A Shares. The Board of Directors may
determine the subscription date and the number of shares each eligible employee can subscribe to. The subscription price
is determined by the volume-weighted average trading price of the Company’s shares on the TSX for the five trading days
immediately preceding the date of the subscription.
d. Restricted share unit plan
On December 11, 2012, the Board of Directors adopted a RSU Plan for the purposes of providing certain employees with the
opportunity to acquire Class A Shares of the Company in order to induce such persons to become employees of the Company,
or one of its affiliates and to permit them to participate in the growth and development of the Company. The maximum
number of issuable Class A Shares under all plans is 10% of the issued and outstanding shares of the Company calculated on a
non-diluted basis. The subscription date is the third anniversary of the award date. The Board of Directors may determine the
number of shares each eligible employee can receive. RSU expense is recorded at fair value and is amortized over the vesting
period on a straight-line basis.
As at December 31, 2013, management had provided an amount of approximately $591 for the 367,548 units ($24 for
125,646 units as at December 31, 2012), outstanding under the RSU Plan.
e. Performance share unit plan
On October 30, 2013, the Board of Directors adopted a PSU Plan for the purposes of retaining key employees and to permit
them to participate in the growth and development of the Company. Under this PSU Plan, the Company has the option to
settle the PSU in cash or Class A Shares of the Company. The maximum number of issuable Class A Shares under all plans is
10% of the issued and outstanding shares of the Company calculated on a non-diluted basis.
During the fourth quarter of 2013, the Company issued PSU to employees of Bel Air and Wilkinson O’Grady that became
employees of the Company as at October 31, 2013. The PSU will vest in tranches equivalent to 20% of the total grant in
each of the next five years. The annual vesting of the PSU is subject to different conditions, including the attainment of an
agreed upon annualized revenue growth objective and the continuance of employment of the participant with the Company.
The value of each PSU granted is derived from the value of the Fiera Private Wealth North America business unit, which was
created in the first quarter of 2014. In total, the Company granted 1,389,071 PSU which corresponds to a total incentive of
$16,700. An expense of $756 was recorded in 2013 for this grant. 43,750 PSU were forfeited between the grant date and
December 31, 2013.
Fiera Capital Corporation 2013 Annual Report | 97
December 31, 2013 and 2012 (In thousands of Canadian dollars) Note 17 Post-Employment Benefit Obligations
The Company contributes to defined contribution plans for its employees. Contributions for the year ended December 31, 2013,
amount to $1,559 ($1,252 for the 15-month period ended December 31, 2012).
Subsequent to a business combination realized in September 2010, the Company assumed the role of sponsor of an individual
pension plan (“IPP“) which had been established by the Company for former employees. Under pension legislation, while the
IPPs are ongoing, the Company has no legal requirement to make contributions towards any solvency deficiencies. These IPPs
are valued on a triennial reporting cycle. The most recent actuarial valuation was performed as at January 1, 2013, and the next
actuarial valuation date is January 1, 2016.
As at January 1, 2013 no IPP’s for former executive employees had an ongoing funding deficit. The funding requirement, if any,
will be confirmed at the termination date of the plans.
Note 18 Expenses by Nature
Selling, general and administration expense details as follows:
Wages and employee benefits
Travelling and marketing
Reference fees
Rent
Technical Services
Professional fees
Other
Wages and employee benefit details as follows:
Salaries and wages
Pension costs
Share-based compensation
Other
December 31, 2013
December 31, 2012
12 months
15 months
$
68,408
4,460
4,772
3,706
3,747
4,971
4,293
94,357
$
53,976
4,046
3,343
3,151
3,103
2,472
4,145
74,236
December 31, 2013
December 31, 2012
12 months
15 months
$
60,700
1,559
2,128
4,021
68,408
$
48,937
1,252
1,176
2,611
53,976
Key management includes the Company’s directors and key officers. Compensation awarded to key management is as follows:
Salaries and other short-term benefits
Share-based payments
6,915
510
4,368
427
98
Notes to the Consolidated Financial StatementsDecember 31, 2013 and 2012 (In thousands of Canadian dollars) Note 19 Additional Information Relating to Consolidated Statements of Cash Flows
Changes in non-cash operating working capital items
Accounts receivable
Prepaid expenses
Accounts payable and accrued liabilities
Amount due to related companies
Restructuring provisions
Note 20 Commitments
December 31, 2013
December 31, 2012
12 months
$
(16,739)
(486)
9,602
(1,047)
(767)
(9,437)
15 months
$
(12,678)
265
4,972
1,854
94
(5,493)
The Company leases office space and equipment under non-cancellable operating leases expiring at different dates until 2021.
Future lease payments total $19,455 and include the following payments for each of the next five years as at December 31, 2013,
and thereafter:
2014
2015
2016
2017
2018
Thereafter
Note 21 Capital Management
$
6,185
5,559
2,468
2,224
1,156
1,863
The Company’s capital comprises share capital, (deficit) retained earnings and long-term debt, including the current portion
less cash. The Company manages its capital to ensure there are adequate capital resources while maximizing the return to
shareholders through the optimization of the debt and equity balance and to maintain compliance with regulatory requirements
and certain restrictive covenants required by the lender of the debt.
In order to maintain its capital structure, the Company may issue new shares or proceed to the issuance or repayment of debt
and acquire or sell assets to improve its financial performance and flexibility.
To comply with Canadian securities administration regulations, the Company is required to maintain a minimum
working capital of $100 as defined in Regulation 31-103, Respecting Registration Requirements, Exemptions, and Ongoing
Registrants Obligations.
As at December 31, 2013, all regulatory requirements and exemptions were respected.
Fiera Capital Corporation 2013 Annual Report | 99
December 31, 2013 and 2012 (In thousands of Canadian dollars) Note 22 Related Party Transactions
The Company has carried out the following transactions with shareholders and their related companies.
Base management fees
Performance fees
Selling, general & administrative expense
Salaries and employee benefits
Reference fees
Other
Interest on long-term debt
Changes in fair value of financial instruments
Integration cost
Shares issued as settlement of the purchase price obligations
December 31, 2013
December 31, 2012
12 months
$
39,132
6,114
-
1,503
-
6,934
(847)
183
8,500
15 months
$
30,653
2,238
1,015
971
482
2,863
1,491
1,031
-
These transactions were made in the normal course of business and are measured at the exchange amount, which is the
amount of consideration established and agreed to by the related parties. Fees are at prevailing market prices and are settled on
normal trade terms. Bank loan, long-term debt and derivative financial instruments are amounts due to shareholders and their
related companies as at December 31, 2013.
The Company has carried out the following transactions with joint ventures: other revenue of $871 as at December 31, 2013
($151 as at December 31, 2012), reimbursement of salaries of nil as at December 31, 2013 ($30 as at December 31, 2012) and
reimbursement of other expense of nil as at December 31, 2013 ($92 as at December 31, 2012).
Note 23 Segment Reporting
The chief operating decision-maker of the Company has determined that the Company’s reportable segment is investment
management services in Canada and the United States of America.
Geographical information
Canada
United States of America
Revenues
Non-Current Assets
For the Year Ended
December 31, 2013
As at December 31, 2013
$
145,985
7,742
$
524,067
159,134
Revenues are attributed to countries on the basis of the customer’s location. Non-current assets exclude deferred income
taxes. The Company had no operations in the United States of America before 2013.
Note 24 Subsequent Event
On March 19, 2014, the Board of Directors declared a quarterly dividend of $0.11 per share to shareholders of record as at April 1,
2014 and payable on April 29, 2014.
100
Notes to the Consolidated Financial StatementsDecember 31, 2013 and 2012 (In thousands of Canadian dollars) Corporate Information
EXECUTIVE OFFICERS
Pierre Blanchette
Sylvain Brosseau
Jean-Guy Desjardins
Violaine Des Roches
Merri Jones
David Pennycook
Sylvain Roy
Alain St-Hilaire
Robert Trépanier
Alexandre Viau
HEAD OFFICE
1501 McGill College Avenue
Suite 800
Montreal, Quebec, Canada H3A 3M8
T 514 954-3300
T 1 800 361-3499 (toll free)
F 514 954-5098
info@fieracapital.com
www.fieracapital.com
TRANSFER AGENT & REGISTRAR
Computershare Investor Services Inc.
100 University Avenue, 9th Floor
Toronto, Ontario, Canada M5J 2Y1
T 1 800 564-6253 (toll free Canada and United States)
T 514 982-7555 (international direct dial)
www.computershare.com
AUDITOR
Deloitte LLP
STOCK EXCHANGE LISTING
Stock markets: Class-A subordinate voting shares are listed on the TSX under the symbol FSZ
ANNUAL AND SPECIAL MEETING
Centre Mont-Royal
2200 Mansfield Street
Montreal, Quebec, Canada H3A 3R8
Wednesday, May 21, 2014, 9:30 a.m.
Fiera Capital Corporation 2013 Annual Report | 101
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102
Contact Us
Fiera Capital Corporation
Montreal
1501 McGill College Avenue
Suite 800
Montreal, Quebec
H3A 3M8
T 514 954-3300
T 1 800 361-3499 (toll free)
Toronto
1 Adelaide Street East
Suite 600
Toronto, Ontario
M5C 2V9
T 416 364-3711
T 1 800 994-9002 (toll free)
Calgary
607 8th Avenue SW
Suite 300
Calgary, Alberta
T2P 0A7
T 403 699-9000
Vancouver
Halifax
1040 West Georgia Street
Suite 520
Vancouver, British Columbia
V6E 4H1
T 604 688-7234
T 1 877 737-4433 (toll free)
5657 Spring Garden Road, Box 117
Suite 505
Halifax, Nova Scotia
B3J 3R4
T 902 421-1066
info@fieracapital.com
New York
Los Angeles
FIERA ASSET MANAGEMENT USA*
WILKINSON O’GRADY & CO., INC.*
BEL AIR INVESTMENT ADVISORS*
499 Park Avenue
7th Floor
New York, New York
10022
T 646 449-9058
499 Park Avenue
7th Floor
New York, New York
10022
T 212 644-5252
1999 Avenue of the Stars
Los Angeles, California
90067
T 310 229-1500
T 1 877 229-1500 (toll free)
*Legal Notice to U.S. Persons: Fiera Capital does not provide investment advisory services, or offer investment funds, in the United States or to U.S. persons. Investment
advisory services for U.S. persons are provided by Fiera Capital’s U.S. affiliates, Bel Air Investment Advisors LLC, Wilkinson O’Grady & Co., Inc., Fiera Asset Management
USA, and Fiera Axium Infrastructure US Inc.
Fiera Asset Management USA is a trade name of Bel Air Investment Advisors LLC. All services of Fiera Asset Management USA are provided by Bel Air Investment
Advisors LLC, a SEC-registered investment advisor. Bel Air Investment Advisors LLC is a subsidiary of Fiera Capital.
Our numbers reflect a commitment
Fiera Capital is deeply committed to being a good corporate citizen and recognizes the importance
of protecting the environment for the well-being of all. The pages of this annual report were printed on
100% post-consumer, paper that was processed without chlorine and manufactured using biogas energy.
10
mature trees
1,529 kg
of CO2
9 GJ
energy
466 kg
of waste
38,016 litres
of water
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