2014
Annual Report
Invested in Success
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Fiera Capital is invested in the success of
its stakeholders and in promoting sustained
growth. For our people, our clients, our
shareholders and our business partners.
At Fiera Capital, this is what success
looks like.
Our proven ability to support
our clients in reaching their
investment objectives is what
drives our success as trusted
wealth advisors.
ANDREW D. PALMER, SENIOR MANAGING
DIRECTOR, BEL AIR INVESTMENT ADVISORS,
LOS ANGELES
ii
Table of Contents
002
Message from the Chairman
and CEO
005
011
Recipe
for Success
013
020
Board of Directors
023
Message from the President
and COO
A Diversified Market Presence
and Investment Expertise
Management’s Discussion
and Analysis
007
2014 Highlights
009
017
067
Best-in-Class Investment
Practices
Consolidated Financial
Statements
A Growing North American
Presence
The Success of Our Team
Rewarded
018
106
Corporate Information
JEAN-GUY DESJARDINS, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
MESSAGE FROM THE CHAIRMAN AND CEO
Fiera Capital: A Team Invested in Success
Dear shareholders,
2014 was a busy and exciting year for all of us at Fiera Capital. From investment performance to
financial performance, one thing remains clear: we are all as invested as ever in the success of our
clients, the success of our firm and the success of our people.
While 2013 was more about acquisitions, our focus in 2014 was on organic growth and
integration. Acquisitions are a key driver of our strategic plan, but we remain deeply committed
to organic growth across all geographies and market segments. Last year, we successfully grew
our client base and expanded existing relationships, an accomplishment I am particularly proud
of in this competitive environment. We maintained our leadership position in Canada and made
significant inroads in the US in both the institutional and private wealth sectors. This success
resulted in $4.2 billion in new mandates combined with more than $4 billion of growth in
assets under management (AUM), demonstrating that our North American expansion strategy
is bearing fruit.
We also launched new investment strategies to meet and anticipate client needs and
continued to reap the benefits of our sub-advisory partnerships. In addition, we expanded
our expertise, offering and distribution capabilities in the Canadian retail investor space with
the acquisition in September 2014 of Propel Capital Corporation, a boutique closed-end fund
manager. With no major acquisitions in 2014, we nonetheless grew our AUM by 12%; they now
stand at just under $87 billion.
2
Our 2014 financial performance was consistently strong, making it possible for us to increase
our quarterly dividend twice in the last twelve months and reinvest capital in the business for future
growth. Our earnings are not only solid, they are also sustainable as we continue to leverage our scale
and focus on being a leading North American asset manager reaching the objective of $150 billion in
AUM by the end of 2018. We are on track to achieve this milestone.
Quarterly Dividends Declared per Participating Share
CAGR
20%
$0.12
$0.13
$0.11
$0.09
$0.10
$0.08
$0.06
$
0.15
0.12
0.09
0.06
0.03
0.00
2010
2011
2012
Q2-2013 Q4-2013 Q2-2014 Q4-2014
AUM Growth and Goal
$B
150
120
90
60
30
0
$150
$150
$77.5
$77.5
$86.6
$86.6
$58.1
$58.1
$29.4
$29.4
2011
2011
2012
2012
2013
2013
2014
2014
2018
2018
Driving our success is our unwavering commitment to performance. We live and breathe
performance. In our field, there is no other metric that is more important or fundamental to
measuring success. I am very pleased that once again in 2014, we demonstrated that Fiera Capital
has best-in-class investment teams and top-tier client service professionals, well supported
by dedicated professional experts across the various strategic support functions. It is thanks
to the strength and talent of our people that we consistently deliver strong results for all of
our stakeholders.
Whether working in the institutional, retail or private wealth sectors, in Canada or in the US,
our specialized teams are able to focus on what they do best and consistently deliver for our
clients. This is due to a combination of two factors. Firstly, we benefit from a depth of expertise in all
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 3
“We are all as invested
market segments and across a wide spectrum of investment solutions.
as ever in the success of
our clients, the success
of our firm and the
success of our people.”
Secondly, we provide a work environment that combines the flexibility
and efficiency of a boutique investment firm with the scale, support and
available resources of a large, best-in-class leader. Our ability to support
and invest in our people while creating an environment in which they can
shine remains a key competitive advantage that is very important to us.
Looking at this year, which is now well underway, we have already
accomplished much as we continue on our growth plan. In the first
quarter of 2015, we announced the acquisition of Samson Capital Advisors LLC, a leading fixed
income asset manager in the US. With this acquisition, we are further bolstering our presence in
this sophisticated market and creating a full-fledged global asset manager, thus establishing a
strong foundation for our proprietary strategies in this market. This is a significant step as we work
towards raising our profile as a North American leader.
As the backbone of our US asset management operations, the objective is for Samson Capital
Advisors to merge with Wilkinson O’Grady to create a wholly owned subsidiary operating under
the banner Fiera Capital Global Asset Management. As for Bel Air Investment Advisors, it will
continue to operate as a stand-alone entity and serve as Fiera Capital’s base to develop the US
wealth management market segment through an open-architecture platform.
We have all the building blocks in place to grow sustainably while exceeding client expectations
and we have proven day in, day out, our ability to do so. We have an excellent team, strong values
and guiding principles and a dynamic work environment and we dare to dream big. Fiera Capital is
absolutely invested in the success of our clients as well as the success of our growing and dynamic
firm. I wish to thank our shareholders for their continued support, our board and management for
their continued wisdom and leadership and the growing Fiera Capital team for always aiming for
excellence. As I look to the years ahead, I am excited about what we can achieve and confident
that our North American leadership goals are well within our reach.
Jean-Guy Desjardins
Chairman of the Board and Chief Executive Officer
4
SYLVAIN BROSSEAU, PRESIDENT AND CHIEF OPERATING OFFICER
MESSAGE FROM THE PRESIDENT AND COO
Promoting Sustained Growth
Once again in 2014, Fiera Capital delivered solid results across the board.
Looking at our financial performance, we experienced solid growth across all of our key
metrics. Our total AUM grew 12% to just under $87 billion. Our revenues, which include
management and performance fees, increased by 45% to $222 million compared to the prior year.
Adjusted earnings before income taxes, depreciation and amortization rose 32% to $78.2 million
or $1.14 per share. Finally, adjusted net earnings rose 54% to $66.7 million or $0.97 per share. To
the benefit of our shareholders, this supported a consistent quarterly dividend, which was most
recently increased by 8% to $0.13 per share.
Our results were positively influenced by the sustained growth we have experienced over the
last few years, including accelerated traction in the US. The US sector accounted for an important
portion of our business in 2014, amounting to 25% in revenues and 13% in AUM.
Our ability to retain and grow existing mandates while also winning new mandates is a
reflection of our strong distribution capabilities and our solid investment performance, both in
traditional and alternative investments.
Year after year our teams innovate, develop and implement new strategies to the benefit of our
broad range of clients. This is driven by the depth of expertise of our professionals as well as our
rigorous and research-driven investment approach. Our emphasis on teamwork and excellence is
also key to our ability to quickly adapt and seize opportunities in a fast-paced – and not always
predictable – market environment.
In 2014, we continued to operate in a low-interest rate environment. We successfully leveraged
this context to drive returns across most of our fixed income solutions. More specifically, both our
Tactical Fixed Income Universe and Integrated Fixed Income Universe strategies benefited from
lower rates. We also experienced strong traction with our Infrastructure Bonds strategy, which
continued to perform well over the past year and to attract new flows.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 5
“2014 was a solid year for
As for our equity teams, they continued to deliver solid returns across
Fiera Capital and 2015 is
off to a strong start. Our
brand is gaining increased
recognition, our platform
has been strengthened
and our investment
teams are relentlessly
most of our funds, despite the drop in oil prices that was felt across the
markets. The performances of the Canadian Equity Growth and Canadian
Equity Small Cap strategies were particularly noteworthy.
In general, stock markets continued to benefit from a favourable
context, most notably in the US, which is fuelled by a more bullish
macroeconomic sentiment. Given that the US is a pillar of our
expansion strategy, we are pleased with the exceptional inroads we are
making into this market. We are gaining US-originated mandates at an
striving to deliver
impressive pace and are witnessing a strong demand for our US and
performance excellence.”
global strategies.
Our alternative strategies also delivered strong performance
considering the elevated volatility that persisted during the year. The
North American Market Neutral and Long/Short Equity strategies
maintained their superior returns and our Infrastructure and Real Estate strategies continued to be
very appealing in the context of low interest rates.
We witnessed a consistently strong appetite for alternative products. As such, we remain focused
on integrating all alternative investment expertise under a single leadership and implementing a
distribution strategy to specifically penetrate the institutional market in both Canada and the US.
We continue to be active in bringing new innovative investment solutions to the market, as
evidenced by the launch of several funds in 2014.
Overall, I am very proud of the exceptional year we experienced in terms of investment performance,
earnings and growth. On the strength of such successes, we will continue to seize opportunities in
the US in both the institutional and private wealth segments. This includes leveraging our growing
number of favourable consultant ratings to win more institutional mandates. In Canada, we will focus
on maintaining and strengthening our leadership position across all market sectors.
2014 was a solid year for Fiera Capital and 2015 is off to a strong start. Our brand is gaining
increased recognition, our platform has been strengthened and our investment teams are
relentlessly striving to deliver performance excellence.
We will continue to grow to the benefit of all stakeholders. This growth will be guided by the
vision and strategic plan outlined by Jean-Guy Desjardins, our Chairman and CEO, and executed by
our management team with the support of some 450 employees across North America. 2015 is
already proving to be another productive year and promises to bring many more successes.
I would like to thank all of our stakeholders for their continued support.
Sylvain Brosseau
President and Chief Operating Officer
6
— 2014 HIGHLIGHTS
Fiscal 2014 was characterized by significant organic growth. The firm continued to
innovate, diversify and strengthen its business platform by bringing new strategies to
market in order to build a leading North American asset manager.
ASSETS UNDER
MANAGEMENT
Revenues
Adjusted EBITDA1
Net Earnings2
Adjusted Net Earnings
Per Share2 (basic)
AS AT DECEMBER 31, 2014
AS AT DECEMBER 31, 2013
$86.6B
$77.5B
FOR THE 12 MONTHS ENDED
DECEMBER 31, 2014
FOR THE 12 MONTHS ENDED
DECEMBER 31, 2013
$222.3M
$78.2M
$27.5M
$0.97
$153.7M
$59.2M
$14.9M
$0.74
1 Excludes non-cash compensation, acquisition and restructuring related costs
2 Attributable to the Company’s shareholders
GROWTH
12%
45%
32%
84%
31%
(25% CAGR since Q4 2010)
AT A GLANCE
9
consecutive quarters
of growth in base
management fees
Acquisition of Toronto-based closed-end fund
manager Propel Capital Corporation
32%
growth in adjusted
EBITDA in fiscal 2014
Dividend growth of
an average of
20%
per year on a compounded
basis since Q4 2010
$4.2B
in new mandates won
during the year
$4.9B
of growth in assets under
management
Announcement in February 2015 of
acquisition of New York-based Samson
Capital Advisors LLC, part of Fiera Capital’s
growth plans in the US
Total performance fees
increase of
27%
year-over-year
A declared
Q4 dividend of
$0.13
per share
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 7
2014 marked a breakthrough
for Fiera Capital’s institutional
business in the US. We successfully
leveraged our growing number of
favourable consultant ratings, our
increasing North American
presence and our best-in-class
global equity investment
capabilities, which resulted in
significant new asset growth.
RICK NINO, EXECUTIVE VICE PRESIDENT,
INSTITUTIONAL MARKETS, FIERA CAPITAL GLOBAL
ASSET MANAGEMENT, NEW YORK CITY
8
— A GROWING NORTH AMERICAN PRESENCE
Fiera Capital Corporation (TSX: FSZ.TO) is a leading publicly traded independent
investment firm, with more than $86 billion in assets under management. Fiera Capital
numbers over 450 employees, including over 100 portfolio managers, analysts and traders
based in major financial centres across North America.
T he firm is one of only a handful of full-service,
multi-product investment firms offering clients a
proven top-tier track record in Canadian and
foreign equity and fixed income management, LDI solutions
as well as depth and expertise in asset allocation and
alternative investments.
Fiera Capital is recognized for its excellence in portfolio
management, innovative and personalized investment
solutions and ability to exceed client expectations.
In the US, Fiera Capital’s presence continues to grow.
In the first quarter of 2015, we announced the acquisition of
Samson Capital Advisors LLC, which we plan to merge with
Wilkinson O’Grady & Co., Inc. later in 2015 to form Fiera Capital
Global Asset Management. This new entity will serve as the
backbone of our US asset management operations. Bel Air
Investment Advisors will continue to operate as a stand-alone
entity, serving as our base to develop the US wealth management
market segment through an open-architecture platform.
75% | $166.5M CANADA
25% | $ 55.8M US
AUM per Geography (as at December 31, 2014)
2014 Revenues per Geography
87% | $75.4B CANADA
13% | $11.2B US
75% | $166.5M CANADA
25% | $ 55.8M US
87% | $75.4B CANADA
13% | $11.2B US
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 9
— A GROWING NORTH AMERICAN PRESENCE
CALGARY
VANCOUVER
HALIFAX
MONTREAL
TORONTO
SAN FRANCISCO
NEW YORK
LOS ANGELES
Over 450 employees including more than
100 portfolio managers, analysts and traders.
10
— RECIPE FOR SUCCESS
— PROMOTING EXCELLENCE —
Fiera Capital’s structure promotes excellence within its specialized investment teams by combining the
flexible and efficient environment of a boutique investment manager with the scale and resources of a leading
investment firm. Integrated solutions diversified by asset class and investment style, and supported by a
disciplined risk management framework, are key to achieving superior returns.
— EXCEEDING CLIENT EXPECTATIONS —
With a growing North American footprint, our client service professionals are dedicated to serving a highly
diversified clientele comprised of pension funds, foundations, religious and charitable organizations, high-
net-worth individuals, financial institutions as well as mutual funds and managed asset platforms. As a client-
focused organization, we continually strive to provide the highest level of service in order to consistently
exceed clients’ expectations and to offer innovative solutions that evolve with their changing needs.
— GUIDED BY STRONG VALUES —
We are guided by strong
values and we deliver
performance excellence
through innovation and
accountability.
Client Focus
Respect &
Integrity
Performance &
Accountability
Teamwork
Innovation &
Entrepreneurship
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 11
Fiera Capital will maintain
its leadership position in
Canada through its unwavering
commitment to excellence and
its ability to provide tailored
solutions and superior returns
to a diverse client base.
BOB MOFFATT, SENIOR VICE PRESIDENT,
INSTITUTIONAL MARKETS, FIERA CAPITAL, TORONTO
12
— A DIVERSIFIED MARKET PRESENCE
AND INVESTMENT EXPERTISE
Fiera Capital offers a complete array of traditional and non-traditional investment solutions
for institutional, private wealth and retail clients, as well as a proactive and tactical asset
allocation process. Fiera Capital’s teams provide clients with optimized and personalized
investment solutions while delivering superior risk-adjusted returns.
S ince its creation, Fiera Capital has positioned itself as a
leader in non-traditional investment solutions. Today,
the firm offers a full spectrum of alternative strategies
with total assets under management of more than $4 billion.
Fiera Capital has partnered with industry experts to add further
depth to an already strong offering with strategies managed by
Fiera Axium Infrastructure, Fiera Properties and Fiera Quantum.
These partnerships allow Fiera Capital to provide clients with
competitive investment strategies capable of adding value across
market environments.
AUM per Clientele Type (as at December 31, 2014)
54% | $46.8B INSTITUTIONAL
54% | $46.8B INSTITUTIONAL
32% | $27.8B RETAIL
54% | $46.8B INSTITUTIONAL
32% | $27.8B RETAIL
14% | $12.0B PRIVATE WEALTH
32% | $27.8B RETAIL
14% | $12.0B PRIVATE WEALTH
100% | $86.6B TOTAL
14% | $12.0B PRIVATE WEALTH
100% | $86.6B TOTAL
100% | $86.6B TOTAL
AUM per Asset Class (as at December 31, 2014)
58% | $50.5B FIXED INCOME
58% | $50.5B FIXED INCOME
32% | $27.2B CANADIAN & GLOBAL EQUITY
58% | $50.5B FIXED INCOME
32% | $27.2B CANADIAN & GLOBAL EQUITY
10% | $08.9B ALTERNATIVE STRATEGIES & ASSET ALLOCATION
32% | $27.2B CANADIAN & GLOBAL EQUITY
10% | $08.9B ALTERNATIVE STRATEGIES & ASSET ALLOCATION
100% | $86.6B TOTAL
10% | $08.9B ALTERNATIVE STRATEGIES & ASSET ALLOCATION
100% | $86.6B TOTAL
100% | $86.6B TOTAL
Revenue1 per Clientele Type (FY 2014)
38% | $76.9M INSTITUTIONAL
38% | $76.9M INSTITUTIONAL
32% | $63.9M PRIVATE WEALTH
38% | $76.9M INSTITUTIONAL
32% | $63.9M PRIVATE WEALTH
30% | $59.8M RETAIL
32% | $63.9M PRIVATE WEALTH
30% | $59.8M RETAIL
100% | $200.6M TOTAL
30% | $59.8M RETAIL
100% | $200.6M TOTAL
100% | $200.6M TOTAL
1 Management Fees
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 13
— A DIVERSIFIED MARKET PRESENCE AND INVESTMENT EXPERTISE
Institutional Markets
The Fiera Capital Institutional Markets team is dedicated to providing
the highest standards in client service and satisfaction.
T he team offers a complete range of traditional and non-traditional investment strategies
through specialized and balanced mandates. Its diverse 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 standards of professionalism and integrity.
Private Wealth
Fiera Capital Private Wealth offers customized investment solutions to
investors who have built significant wealth.
G iven the unique needs of high net worth investors, the Private Wealth team is able to
accommodate their specific requirements and customize portfolios to best suit their
needs. Private Wealth is specifically structured to work with and counsel individuals,
families, estates, trusts, endowments and foundations.
The Private Wealth team follows a disciplined investment approach that leverages optimized
traditional and non-traditional investment management strategies and provides a customized
service delivery to ensure that clients’ wealth is prudently safeguarded.
Retail
The Fiera Capital Retail teams offer complete portfolio management
solutions to help individual investors achieve their financial goals.
traditional products.
T he teams’ strategies meet a broad and diverse range of needs, whether in traditional or non-
Fiera Capital’s mutual funds are focused on the core asset classes needed to construct a
well-balanced portfolio. These funds are available to all investors, some since 1985.
Non-traditional products are designed to generate returns that are not market dependent.
Generally available to accredited investors, these funds may enhance portfolio returns and reduce
portfolio risk.
Fiera Capital has recently added closed-end funds to its product offering. These funds are
designed to generate yield and diversification through funds that provide exposure to asset classes
or strategies that are typically more difficult for individual investors to access.
More specifically, the Strategic Investment Partnerships team works closely with distinctive
distribution networks across Canada, serving more than two million clients. They communicate
portfolio data information, share knowledge and provide a single access point for our portfolio
management team – a rare feature in the financial services universe.
14
In our business, the key to
success is to meet the unique
needs of our clients through
the use of innovative
investment solutions and to
provide them with the peace
of mind they deserve.
LOUIS BOURASSA, SENIOR VICE PRESIDENT,
INVESTMENT COUNSELLOR, PRIVATE WEALTH,
FIERA CAPITAL, MONTREAL
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 15
The main role of the CIO office is
to develop and offer a performing
and comprehensive array of traditional
and alternative investment strategies
which follow the most rigorous
standards. Our clients deserve no less
than the best.
SYLVAIN ROY, CHIEF INVESTMENT OFFICER AND EXECUTIVE
VICE PRESIDENT, ALTERNATIVE STRATEGIES, FIERA CAPITAL
16
— BEST-IN-CLASS INVESTMENT PRACTICES
Fiera Capital distinguishes itself within the industry through its use of a Chief Investment
Officer (CIO) office. The CIO office oversees aspects of risk management, operations and
governance across all of the firm’s investment activities and supports investment teams
who have full discretion over investment and portfolio construction decisions.
— PERFORMANCE MEASUREMENT AND
RISK MANAGEMENT
Monitoring of a broad range of portfolio risk metrics is
performed by Fiera Capital’s Performance Measurement and
Risk Management group, which operates independently from
the investment function and ultimately reports to the firm’s
President and Chief Operating Officer.
— PORTFOLIO ADMINISTRATION
Fiera Capital’s Portfolio Administration group is responsible
for the reconciliation of all portfolios with trustees, custodians
and brokers, for fund accounting as well as for ensuring
seamless processing of transactions on behalf of clients.
This team operates independently from the investment
function and ultimately reports to the firm’s President and
Chief Operating Officer.
— LEGAL AND COMPLIANCE
Fiera Capital’s Legal and Compliance groups ensure that the
highest ethical standards are consistently upheld at all levels
of the organization. These teams operate independently from
our investment, client service, portfolio administration and
performance measurement groups. It monitors compliance,
legal and regulatory requirements. The firm has established
supporting policies and procedures which are monitored
rigorously to ensure that they are consistently applied.
— CONTINUOUS IMPROVEMENT
In its efforts to offer the highest level of transparency and
strive for the greatest operational standards, Fiera Capital
has implemented several key initiatives in recent years.
Fiera Capital’s composites are compliant with the Global
Investment Performance Standards and the firm completes
an Audit 5025, a report on key control procedures, on a
regular basis. Fiera Capital is also a member of the Portfolio
Management Association of Canada, which provides a forum
to exchange on the industry’s best practices.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 17
— THE SUCCESS OF OUR TEAM REWARDED
In 2014, Fiera Capital’s continued investment in success resulted in a number of industry
accolades. The unwavering commitment to innovation, promoting excellence and surpassing
client expectations continues to pay off.
FUNDATA FUNDGRADE® A+ RECOGNITION 2014
The Fiera Capital Global Equity Fund received Fundata FundGrade® A+ Recognition for
the second consecutive year. Two funds sub-advised by Fiera Capital, the National Bank
Quebec Growth Fund and the Horizons Active Corporate Bond ETF (HAB), also received an
A+ rating from Fundata. The FundGrade A+ Rating identifies funds with not only the best
risk-adjusted returns but also those demonstrating the highest level of consistency through
an entire calendar year.
FOUR CANADIAN HEDGE FUND AWARDS GARNERED IN 2014
Jean-Philippe Choquette, Vice President and Senior Portfolio Manager, Equities and
Alternative Strategies, and his team were presented with Canadian Hedge Fund Awards.
This award celebrates excellence and achievement in the hedge fund industry, in the
Market Neutral category. They ranked second and third for best 1-year return, best 5-year
return and best 5-year Sharpe ratio, a strong endorsement of Fiera Capital’s goal of
becoming a North American leader in alternative investments.
TOP 5 TOPGUN INVESTMENT MIND AND CANADA’S BEST-IN-CLASS
INVESTMENT FIRMS
Michael Chan, Vice President and Senior Portfolio Manager, Small Cap Equities, was
recognized as among the country’s top investment professionals, ranking in the top 5
TopGun Canadian Investment Minds of 2014. Mr. Chan was also named to the Canadian
Society of TopGun Investment Minds Class of 2014 along with Ashish Chaturvedi, Vice
President and Senior Portfolio Manager, Canadian Equities, and Jean-Philippe Choquette,
Vice President and Senior Portfolio Manager, Equities and Alternative Strategies.
In the team category, Fiera Capital was voted in the Top 5 of the TopGun Investment
Teams of the Year ranking. The firm was also in the Top 10 of the prestigious TopGun
Investment Brands based on votes from the Canadian Society of TopGuns, Class of 2014.
The TopGun designations are the brainchild of Brendan Wood International. Through their
global intelligence network, they identify the best of the best in the capital markets.
JEAN-GUY DESJARDINS AND SYLVAIN BROSSEAU NAMED AMONG THE TOP 5
MOST INFLUENTIAL FINANCIAL PROFESSIONALS IN QUEBEC FOR 2014
Jean-Guy Desjardins, Chairman and Chief Executive Officer, and Sylvain Brosseau, President
and Chief Operating Officer, were named among the Top 5 most influential people in
Québec’s finance industry in 2014 by Finance et Investissement, Canada’s French-language
publication for financial professionals. This is the third time in five years that Mr. Desjardins
has been included in the Top 5, while Sylvain Brosseau was previously among the Top 25.
TOPGUN
18
Fiera Capital has a talented
pool of investment experts
with a high level of professional
ethics. Independence and
transparency, along with the
careful measure of risks and
returns, are all fundamental
to the success of our firm and
our clients.
VIOLAINE DES ROCHES, SENIOR VICE PRESIDENT,
LEGAL AFFAIRS AND COMPLIANCE, FIERA CAPITAL
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 19
01
02
03
04
05
06
— BOARD OF DIRECTORS
Fiera Capital benefits from a strong board of directors comprised of 12 highly
experienced individuals who bring a wealth of knowledge and know-how to the
table. This strong team of senior leaders contributes to the success of our firm and
ensures that Fiera Capital continues to reach even higher when it comes to good
corporate governance and performance excellence.
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 in 1972 and was
its principal shareholder until it was
purchased by CIBC. Mr. Desjardins
subsequently created Fiera Holdings,
which grew to become Fiera Capital,
a leading Canadian independent asset
management firm. In 2014, he was
appointed to the Order of Canada.
Sylvain Brosseau is President
and COO of Fiera Capital, and has
over 23 years of experience in the
investment management industry.
Previously, Mr. Brosseau served
as president and CEO of Fiera
Holdings, 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.
03
Denis Berthiaume is Senior Vice
President and General Manager,
Wealth Management and Life and
Health Insurance, Desjardins Group.
He is responsible for Desjardins
Financial Security, Desjardins
Securities, Disnat and Desjardins Asset
Management. Mr. Berthiaume has
had a 30-year career occupying
strategic functions in the fields of
life insurance, health insurance and
specialized savings.
20
07
08
09
10
11
12
04
Brian A. Davis is Co-President
and Co-CEO of National Bank
Financial since April 2014. Previously,
Mr. Davis served as executive
vice-president, corporate development
and governance. Prior to joining
National Bank Financial in 2005,
Mr. Davis was a partner with Torys
LLP, where he practiced corporate and
securities law for almost 20 years.
07
Todd M. Morgan is a founding
member of Bel Air Investment
Advisors LLC and its Chairman and
CEO. Previously, Mr. Morgan was a
limited partner at Goldman, Sachs &
Co. in Los Angeles, where he launched
its private client services investment
advisory business for high net worth
individuals and families. Prior to that
he was a general partner at Goldman,
Sachs & Co. in New York. Mr. Morgan
began his investment career in 1970.
10
Arthur R.A. Scace is a Corporate
Director. He is a former managing
partner and chairman of McCarthy
Tétrault LLP, Barristers and Solicitors
and managing partner, 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.
05
Raymond Laurin is a Corporate Director.
During his 32-year career with Desjardins
Group, he served namely as senior vice
president, finance and treasury, and CFO.
In addition, he was functional manager of
the Desjardins Group Audit and Inspection
Commission, the Fonds de sécurité
Desjardins and the Desjardins Group
Pension Plan. Mr. Laurin is a Fellow of the
Ordre des comptables agréés du Québec.
06
Jean C. Monty is a Corporate Director.
Mr. Monty had a distinguished
28-year career with BCE Inc., where he
was chairman of the board and CEO
until 2002. Prior to joining BCE Inc.,
he was president and CEO of Nortel
Networks Corporation since 1993. Mr.
Monty is a member of the Order of
Canada. He currently sits on the board
of several international companies.
08
David Pennycook is Vice Chairman
and Executive Vice President,
Institutional Markets with
Fiera Capital, responsible namely
for business development and client
services. With over 35 years of
industry experience, Mr. Pennycook
has been with the firm since 1991.
Prior experience includes marketing
and servicing roles at major Canadian
investment management firms and
insurance companies.
11
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.
09
Lise Pistono is Vice President and
CFO of DJM Capital Inc. Previously,
she was with KPMG supporting
public companies in their disclosure
requirements, served as senior finance
officer for a Bell Canada subsidiary
and for a private office furniture and
supplies company. Ms. Pistono also has
over 20 years of teaching experience
at l’École des Hautes études
commerciales in Applied Economics,
Quantitative Methods and Accounting.
12
Louis Vachon has been President and
CEO of National Bank since 2007. Prior
experience includes senior management
positions at BT Bank of Canada,
Natcan Investment Management and
National Bank Financial. He was named
Financial Personality of the Year in 2014
by Quebec business publication
Finance et Investissement, a recognition
he also received in 2012. Mr. Vachon
was also named 2014’s CEO of the Year
by Canadian Business.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 21
22
MANAGEMENT’S DISCUSSION
AND ANALYSIS
For the Three and Twelve-Month Periods Ended December 31, 2014
The following management’s discussion and analysis (“MD&A”) dated
March 18, 2015 presents an analysis of the financial condition and
results of the consolidated operations of Fiera Capital Corporation
(“the Company” or “Fiera Capital” or “we” or “Firm”) for the three
and twelve-month periods ended December 31, 2014. 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, 2014.
The audited consolidated financial statements include the
accounts of Fiera Capital Corporation and its wholly owned
subsidiaries, Fiera Capital Funds Inc. (“FCFI”) (previously Fiera Sceptre
Funds Inc.) 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 Management LLC, Bel
Air Securities 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 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 investments, 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 joint venture investments 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.
Certain comparative figures have been reclassified to conform with
the current period’s presentation.
24 Basis of Presentation
30 Highlights for the Three and
Twelve-Month Periods Ended
December 31, 2014
57
Capital Management
24 Forward-Looking Statements
32
Summary of Quarterly Results
57
Significant Accounting Judgments
and Estimation Uncertainties
24 Company Overview
35
Results from Operations and
Overall Performance
58 New Accounting Policies
25
25
Significant Events
46 Summary of Quarterly Results
60 Non-IFRS Measures
Market Outlook
49 Liquidity and Capital Resources
60 Risks of the Business
26 Summary of
Portfolio Performance
28 Trend Highlights
55
55
Control and Procedures
65 Management’s Report to
the Shareholder
Financial Instruments
66 Audit Committee’s Annual Report
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 23
— BASIS OF 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 Company’s consolidated financial
statements are based on IFRS issued and outstanding as of
December 31, 2014.
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 of the audited
consolidated financial statements.
The following MD&A should be read in conjunction with the
Company’s 2014 annual audited consolidated financial statements,
which contain a description of the accounting policies used in the
preparation of these financial statements.
The Company presents adjusted earnings before interest, taxes,
depreciation and amortization (“Adjusted EBITDA”), adjusted net
earnings and cash earnings as key non-IFRS performance measures.
These non-IFRS measures are defined on page 60.
— 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 prove to be inaccurate. 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 retain its
existing clients and to attract new clients, Fiera Capital’s investment
performance, Fiera Capital’s reliance on major customers, Fiera
Capital’s ability to attract and retain key employees, Fiera Capital’s
ability to successfully integrate the businesses 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 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
parties to comply with their obligations to Fiera Capital and its
affiliates, the impact of acts of God or other force majeure events;
legislative and regulatory developments in Canada and elsewhere,
including changes in tax laws, the impact and consequences of
Fiera Capital’s indebtedness, potential share ownership dilution
and other factors described under “Risk Factors” in this MD&A or
discussed in other documents filed by the Company with applicable
24
securities regulatory authorities from time to time. These forward-
looking statements are made as at 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 more
than $86 billion in assets under management (“AUM”), including the
joint ventures’ AUM. The Company owns interests in the following
joint ventures: Fiera Axium Infrastructure Inc., an entity specialized
in infrastructure investments, and Fiera Properties Limited, an entity
specialized in real estate investments, over which the Company has
joint control. 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 asset classes and to combine the assets
of smaller clients to achieve greater investment efficiencies (“Pooled
Funds”). To provide retail investors with access to its investment
management services, Fiera Capital also manages and acts as
investment manager to mutual funds, including certain commodity
pool funds, the Fiera Capital QSSP II Investment Fund Inc. (the “Mutual
Funds”) and following the acquisition of Propel Capital Corporation,
Fiera Capital is now investment manager of several closed end funds
which are listed on the TSX (“Closed End Funds” and, collectively with
the Pooled Funds and the Mutual Funds, the “Funds”).
Units of some of the Mutual Funds are distributed through Fiera
Capital Funds Inc. (“FCFI”) (previously Fiera Sceptre Funds Inc.), a
wholly owned subsidiary of Fiera Capital. FCFI 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, Québec, Nova Scotia
New Brunswick and the Yukon. Fiera Capital is registered in the
categories of exempt market dealer and portfolio manager in all
provinces and territories of Canada. 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 a
commodity trading manager pursuant to the Commodity Futures Act
(Ontario), as an adviser under the Commodity Futures Act (Manitoba)
and, in Quebec, as a derivatives portfolio manager pursuant to the
Derivatives Act (Quebec).
Following its acquisition of the Bel Air entities and Wilkinson
O’Grady & Co. Inc. (“Wilkinson”), Fiera Capital terminated its
registration as an investment advisor with the US Securities and
Exchange Commission (“SEC”) and generally is not permitted to
provide investment advisory services directly to US clients.
Bel Air Investment Advisors LLC (“Bel Air”), Bel Air Securities
LLC (“Bel Air Securities”) and Wilkinson are now Fiera Capital’s US
operating subsidiaries and provide a variety of investment advisory
MANAGEMENT’S DISCUSSION AND ANALYSISFor the Three and Twelve-month Periods Ended December 31, 2014 and brokerage services to US clients. Bel Air and Bel Air Securities
operate under both the Bel Air and the Fiera Asset Management
USA brands.
according to the 2014 TopGun rankings, published by Brendan Wood
International, a leading independent intelligence-based advisor. Fiera
Capital was also voted in the top 5 for best investment teams.
Fiera Capital shares investment advisory personnel and other
resources with Bel Air and Bel Air Securities as a “participating
affiliate” within the meaning of the guidance provided by the Staff
of the SEC that allows US registered investment advisers to use
the investment advisory resources of non-US affiliates that are not
registered with the SEC.
Bel Air, its subsidiary, Bel Air Management, LLC and Wilkinson
are registered investment advisers with the SEC. Bel Air Securities is
a registered US broker-dealer.
— SIGNIFICANT EVENTS
Fiscal 2014 was characterized by significant organic growth, while
the Firm continued to diversify and strengthen its business platform
in order to build a leading North American asset manager.
Strong Traction in the United States
The Firm experienced strong momentum in the US during the
year, winning significant new mandates in both the institutional
and private wealth segments. The US sector now accounts for an
important portion of the business, amounting to 28% in revenues
and 13% in AUM.
The Firm also received favorable ratings from global consultants
during the year, bringing the total number of consultant approvals
to six.
Launch of New Funds
The Firm is committed to continuously innovate by bringing new
strategies to market.
As such, four investment strategies were introduced during the
year: The Fiera High Yield Bond Fund, the Fiera Private Infrastructure
Fund, the Fiera Capital Defensive U.S. Equity Fund and the Fiera
Capital Defensive Global Equity Fund.
As for structured products, a preliminary prospectus has been
filed for the Investment Grade Infrastructure Bond Fund at the end
of the year.
Industry Recognition
In 2014, Fiera Capital’s continued success and strong performance
resulted in a number of industry nods.
Jean-Guy Desjardins, Chairman and Chief Executive Officer, and
Sylvain Brosseau, President and Chief Operating Officer, were named
among the Top 5 in the Quebec’s finance industry by Finance et
Investissement, Canada’s French-language publication for financial
professionals.
Jean-Philippe Choquette, Vice President and Senior Portfolio
Manager, received four Canadian Hedge Fund Awards for its superior
performance in the Market Neutral category, a strong endorsement
of the Firm’s goal of becoming a North American leader in alternative
investments.
Michael Chan, Vice President and Senior Portfolio Manager, Small
Cap Equities, was named one of the top Investment Minds of the Year
The Fiera Capital Global Equity Fund won the Fundata
FundGrade® A+ Recognition for the second consecutive year. Two
funds sub-advised by Fiera Capital, the National Bank Quebec
Growth Fund and the Horizons Active Corporate Bond ETF (HAB),
also received an A+ rating from Fundata.
Acquisitions
Propel Capital Corporation
On September 2, 2014, the Firm acquired Propel Capital Corporation
for a total consideration of up to $12 million. Propel is a prominent
Toronto-based investment firm which develops, manages and
distributes investment solutions to Canadians with a focus on closed-
end funds. The acquisition of Propel Capital Corporation notably
added depth to the Firm’s retail distribution capabilities.
Samson Capital Advisors LLC
Subsequent to year-end, on February 11, 2015, the Firm reached
an agreement to acquire New York based Samson Capital Advisors
LLC, a prominent U.S. fixed income investment management firm
with US$7.6 billion in assets under management. Total consideration
paid at closing for the transaction will be approximately US$33.5
million, subject to various adjustments. This acquisition will bring
Fiera Capital’s total assets under management to over CAD$96
billion while bolstering its U.S. presence in the global asset
management space.
Dividend Increase
The Board of Directors has declared a dividend of $0.13 per Class A
subordinate voting share and Class B special voting share of Fiera
Capital, payable on April 28, 2015, to shareholders of record at the
close of business on March 31, 2015.
This represents the second dividend increase in fiscal 2014.
— MARKET OUTLOOK
Global growth prospects and monetary policies abroad continue to
decouple. While the robust growth outlook in the US means that
the economy no longer requires ultra-accommodative monetary
policies, liquidity is becoming more abundant elsewhere as sluggish
growth overseas has resulted in coordinated actions from central
banks in Europe, Japan, and China to tackle lingering disinflationary
pressures. This combination of an impressive growth trajectory at
home and ultra-stimulative monetary policies abroad has created a
favourable environment for equities.
Bond yields continued their downward trajectory in December
and fixed-income markets produced positive results, despite the
impressive economic recovery in North America. Various geopolitical
uncertainties and some growth concerns emanating from abroad
fuelled investor anxiety, increasing the allure of North American
bonds. Similarly, global equity markets declined across the board in
local currency terms, with the theme of US equity outperformance
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 25
Strategy
Return
Quartile
Strategy
Return
Added
Value
Quartile
5 yrs or Since Inception (SI)*
(SI if Inception < 5 yrs)
Inception
Date
Benchmark Name
Notes
1 year
Added
Value
-0.31
0.55
0.28
-0.78
0.59
0.22
0.65
1.58
1.77
0.24
-2.14
3.72
1.92
-1.21
13.76
18.21
3.03
3.29
2.12
10.39
23.90
-5.12
5.11
4.06
n/a
n/a
-4.83
8.48
9.34
9.07
16.69
3.77
7.04
18.65
12.30
12.48
10.92
8.42
14.28
12.48
4.02
11.42
15.87
26.97
6.95
16.51
11.29
24.81
-4.21
6.02
7.12
8.13
5.83
-3.93
n/a
n/a
3
1
1
3
4
1
1
2
3
1
2
4
2
1
1
1
1
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
5.93
6.44
5.91
9.24
9.25
6.13
9.21*
9.64
13.19*
9.57
7.89
7.19
8.47
12.29
13.96
11.04
20.95
13.07
17.76
1.92
15.57*
-0.03*
7.36
6.18
5.09*
4.25*
1.38*
0.49
0.99
0.46
0.20
-0.06
1.57
1.7*
1.50
2.46*
1.63
0.36
-0.33
0.94
1.68
10.94
8.03
3.17
5.61
5.34
1.03
14.60*
-1.01*
6.47
3.18
n/a
n/a
0.41*
2
1
2
2
1
2
2
2
4
4
3
1
1
2
1
1
1
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
01/01/1997
FTSE TMX Universe
01/01/2000
FTSE TMX Universe
01/01/1993
FTSE TMX Universe
01/07/1998
FTSE TMX Long Term
01/02/2002
High Yield Blended
n/a
n/a
01/02/2004
S&P/TSX Preferred Share
01/08/2011
FTSE TMX Provincials Long Term
01/09/1984
Balanced Core Blended
01/04/2013
Balanced Integrated Blended
01/03/1973
Balanced Blended Benchmark
1
2
3
4
01/10/2009
S&P/TSX Composite High Dividend
01/01/2002
S&P/TSX Composite
01/01/2007
S&P/TSX Capped
01/01/1992
S&P/TSX Composite
01/01/1989
S&P/TSX Small Cap
01/01/1989
S&P/TSX Small Cap
01/04/2009
S&P 500 CAD
01/01/2010 MSCI EAFE Net CAD
01/10/2009 MSCI World Net CAD
01/10/2007
FTSE TMX T-Bill 91 day
01/08/2010
FTSE TMX T-Bill 91 day
01/12/2010
FTSE TMX T-Bill 91 day
01/04/2008
FTSE TMX T-Bill 91 day
01/11/2009
FTSE TMX Short Term
01/03/2010 No Benchmark
01/07/2013 No Benchmark
01/04/2013
FTSE TMX T-Bill 91 day
prevailing. Finally, the major theme in currency and commodity
markets lies with recent USD strength stemming from the stronger
growth landscape in the US versus the rest of the world. Recent
USD strength has fuelled commodity price weakness amid some
oversupply issues, which have been at the forefront of the oil
price decline.
We continue to see substantial macroeconomic divergences
between the US and the rest of the world. The US economy
continues to be the bright spot in an otherwise uncertain global
economic environment on the back of buoyant consumer demand
stemming from an improving labour market and low gasoline prices.
At the same time, inflation remains firmly under control amid the
combination of lower energy prices and USD strength. Accordingly,
the Federal Reserve has stressed a “patient” approach to interest-
rate policy normalization. Meanwhile, growth has been firming
in Canada and exceeded expectations in October. As the Bank of
Canada predicted, high levels of inflation proved temporary and
inflation declined closer to target in November, providing the bank
with more leeway to remain flexible on interest-rate policy.
In contrast to North America, economic prospects abroad have
been mediocre. Growth and inflation (deflation) in Europe have
been underwhelming, Japan entered official recession territory in
the third quarter as the economy continues to digest the increased
consumption tax implemented in early 2014, and economic data in
China continues to surprise on the downside. As a result, we have
witnessed a major influx of liquidity from international central banks
aimed at reigniting these faltering economies. While the European
Central Bank is anticipated to announce a quantitative program later
in January, the Japanese authorities have committed to reflating the
economy by weakening the yen and delaying a planned increase in
the consumption tax. Finally, the muted inflationary backdrop in
China has allowed policymakers to implement targeted stimulative
policies to ensure that China’s growth targets are met.
Our central scenario for “Stronger Growth” remains intact. We
are witnessing a global growth re-acceleration, led by the mighty
US, which has also fuelled the Canadian economy. Meanwhile, more
subdued economic recoveries abroad have resulted in coordinated
stimulus policies to promote growth in these regions, where
expectations for growth are likely too pessimistic, setting the stage
for a potential upside surprise for global growth. The recent decline
in energy prices is providing an additional stimulus to consumption-
based economies, further supporting the global economic backdrop
in 2015.
— SUMMARY OF PORTFOLIO PERFORMANCE
Annualized Rates of Return
AUM
($Billion)
50.5
4.7
27.2
4.2
Strategies
Fixed Income Investment Strategies
Active Fixed Income Universe
Tactical Fixed Income Universe
Integrated Fixed Income Universe
Active Fixed Income Long-Term
High Yield Bonds
Preferred Shares
Infrastructure Bonds
Balanced Investment Strategies
Balanced Core
Balanced Integrated
Balanced Fund
Equity Investment Strategies
Canadian Equity Value
Canadian Equity Growth
Canadian Equity Core
High Income Equity
Canadian Equity Small Cap Core
Canadian Equity Small Cap
US Equity
International Equity
Global Equity
Alternative Investment Strategies
North American Market Neutral Fund
Long / Short Equity Fund
Absolute Bond Yield Fund
Diversified Lending Fund
Multi-Strategy Income Fund
Infrastructure Fund
Real Estate Fund
Fixed Income and Currency Arbitrage Fund
Total AUM
86.6
26
MANAGEMENT’S DISCUSSION AND ANALYSISFor the Three and Twelve-month Periods Ended December 31, 2014 — SUMMARY OF PORTFOLIO PERFORMANCE
Annualized Rates of Return
AUM
($Billion)
50.5
4.7
27.2
4.2
Strategies
Fixed Income Investment Strategies
Active Fixed Income Universe
Tactical Fixed Income Universe
Integrated Fixed Income Universe
Active Fixed Income Long-Term
High Yield Bonds
Preferred Shares
Infrastructure Bonds
Balanced Core
Balanced Integrated
Balanced Fund
Balanced Investment Strategies
Equity Investment Strategies
Canadian Equity Value
Canadian Equity Growth
Canadian Equity Core
High Income Equity
Canadian Equity Small Cap Core
Canadian Equity Small Cap
US Equity
International Equity
Global Equity
Alternative Investment Strategies
North American Market Neutral Fund
Long / Short Equity Fund
Absolute Bond Yield Fund
Diversified Lending Fund
Multi-Strategy Income Fund
Infrastructure Fund
Real Estate Fund
Fixed Income and Currency Arbitrage Fund
Total AUM
86.6
1 year
Added
Value
Strategy
Return
5 yrs or Since Inception (SI)*
(SI if Inception < 5 yrs)
Quartile
Strategy
Return
Added
Value
Quartile
Inception
Date
Benchmark Name
Notes
1
2
3
4
8.48
9.34
9.07
16.69
3.77
7.04
18.65
12.30
12.48
10.92
8.42
14.28
12.48
4.02
11.42
15.87
26.97
6.95
16.51
11.29
24.81
-4.21
6.02
7.12
8.13
5.83
-3.93
-0.31
0.55
0.28
-0.78
0.59
0.22
0.65
1.58
1.77
0.24
-2.14
3.72
1.92
-1.21
13.76
18.21
3.03
3.29
2.12
10.39
23.90
-5.12
5.11
4.06
n/a
n/a
-4.83
3
1
1
3
4
n/a
n/a
1
1
2
3
1
2
4
2
1
1
1
1
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
5.93
6.44
5.91
9.24
9.25
6.13
9.21*
9.64
13.19*
9.57
7.89
7.19
8.47
12.29
13.96
11.04
20.95
13.07
17.76
1.92
15.57*
-0.03*
7.36
6.18
5.09*
4.25*
1.38*
0.49
0.99
0.46
0.20
-0.06
1.57
1.7*
1.50
2.46*
1.63
0.36
-0.33
0.94
1.68
10.94
8.03
3.17
5.61
5.34
1.03
14.60*
-1.01*
6.47
3.18
n/a
n/a
0.41*
2
1
2
2
1
n/a
n/a
2
2
2
4
4
3
1
1
2
1
1
1
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
01/01/1997
FTSE TMX Universe
01/01/2000
FTSE TMX Universe
01/01/1993
FTSE TMX Universe
01/07/1998
FTSE TMX Long Term
01/02/2002
High Yield Blended
01/02/2004
S&P/TSX Preferred Share
01/08/2011
FTSE TMX Provincials Long Term
01/09/1984
Balanced Core Blended
01/04/2013
Balanced Integrated Blended
01/03/1973
Balanced Blended Benchmark
01/01/2002
S&P/TSX Composite
01/01/2007
S&P/TSX Capped
01/01/1992
S&P/TSX Composite
01/10/2009
S&P/TSX Composite High Dividend
01/01/1989
S&P/TSX Small Cap
01/01/1989
S&P/TSX Small Cap
01/04/2009
S&P 500 CAD
01/01/2010 MSCI EAFE Net CAD
01/10/2009 MSCI World Net CAD
01/10/2007
FTSE TMX T-Bill 91 day
01/08/2010
FTSE TMX T-Bill 91 day
01/12/2010
FTSE TMX T-Bill 91 day
01/04/2008
FTSE TMX T-Bill 91 day
01/11/2009
FTSE TMX Short Term
01/03/2010 No Benchmark
01/07/2013 No Benchmark
01/04/2013
FTSE TMX T-Bill 91 day
1. The High Yield Blended Index is composed of 85% Merrill Lynch US High Yield Cash Pay BB-B Hedged in CAD, 15% Merrill Lynch US High Yield Cash Pay C Hedged in
CAD.
2. Balanced Core Blended Benchmark is composed of 5% FTSE TMX T-Bill 91 Day / 35% FTSE TMX Universe / 32.5% S&P TSX Composite / 27.5% MSCI World Ex-Canada
Net.
3. Balanced Integrated Blended Benchmark is composed of 2% FTSE TMX T-Bill 91 Day / 36% FTSE TMX Universe / 35% S&P/TSX Composite / 27% MSCI ACWI Net.
4. Balanced Blended Benchmark is composed of 5% FTSE TMX T-Bill 91 Day / 35% FTSE TMX Universe / 32.5% S&P TSX Composite / 27.5% MSCI World NET CAD.
5. All returns, including those of the High Yield Bonds, US Equities, International Equities, and Global Equities, are expressed in Canadian dollars.
6. All performance returns presented above are annualized.
7. All returns, except alternative strategies and Balanced Fund are presented gross of management and custodial fees and without taxes but net of all trading expenses.
8. Alternative Investment Strategies and Balanced Fund are presented net of management fees, custodial fees, performance fees and withholding taxes.
9. The performance returns above assume reinvestment of all dividends.
10. Besides for the alternative strategies, the returns presented for any one line above represent the returns of a composite of discretionary portfolios.
11. Each strategy listed above represents a single discretionary portfolio or group of discretionary portfolios that collectively represent a unique investment strategy or
composite.
12. The since inception date represents the earliest date at which a discretionary portfolio was in operation within the strategy.
13. The above composites and pooled funds were selected from the Firm’s major investment strategies while the AUM represent the total amounts managed by asset class.
14. Quartile rankings are provided by eVestment.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 27
— TREND HIGHLIGHTS
The following illustrates the Company’s trends regarding AUM, revenues, Last Twelve Months (“LTM”) Adjusted EBITDA, LTM Adjusted
EBITDA Margin, LTM Adjusted Earnings per share, as well as the LTM dividend payout. The trend analysis is presented in the “Results and
Trend Analysis” section on page 47.
AUM
Retail
Private Wealth
Institutional
Total AUM
Revenues
77.5
80.4
82.1
84.9
86.6
65.7
65.1
67.2
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
25.0
1.9
38.8
65.7
25.0
1.9
38.2
65.1
25.2
2.1
39.9
67.2
25.5
10.5
41.5
77.5
26.6
10.7
43.1
80.4
27.8
10.7
43.6
82.1
28.2
11.2
45.5
84.9
27.8
12.0
46.8
86.6
LTM (Last Twelve Months)
113.9
120.8
129.5
30.2
33.2
35.1
153.7
55.2
173.5
196.0
213.3
222.4
50.0
55.7
52.4
64.3
$B
100
90
80
70
60
50
40
30
20
10
0
$M
250
200
150
100
60
50
40
30
20
10
0
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Other Revenues
Perfomance Fees
Retail
Private Wealth
Institutional
Total Revenues
0.2
0.1
11.2
3.0
15.7
30.2
0.4
0.3
12.7
3.1
16.7
33.2
0.2
0.7
14.1
3.3
16.8
35.1
1.4
11.0
13.9
10.9
18.0
55.2
1.7
0.5
14.1
15.5
18.2
50.0
1.9
4.0
15.0
15.9
18.9
55.7
1.4
0.3
15.2
15.9
19.6
52.4
1.2
10.6
15.5
16.7
20.3
64.3
28
MANAGEMENT’S DISCUSSION AND ANALYSISFor the Three and Twelve-month Periods Ended December 31, 2014 Last Twelve Months Adjusted EBITDA and LTM Adjusted EBITDA Margin
$M
100
90
80
70
60
50
40
30
20
10
0
39.1%
38.6%
37.9%
38.5%
36.3%
35.9%
35.8%35.8%
35.2%
44.5
46.7
49.0
59.2
53.0
70.3
76.3
78.2
%
50
45
40
35
30
25
20
15
10
5
0
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
LTM Adjusted EBITDA
LTM Adjusted EBITDA Margin
LTM Adjusted Net Earnings per Share (EPS) and LTM Dividends
$
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
0.91
0.85
0.97
0.74
0.78
0.40
0.42
0.44
0.46
0.48
0.53
0.34
0.57
0.36
0.60
0.38
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
LTM Dividends
LTM Adjusted Net Earnings per Share (EPS)
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 29
— HIGHLIGHTS FOR THE THREE AND TWELVE-MONTH PERIODS ENDED DECEMBER 31, 2014
Highlights for the three-month period ended December 31, 2014 were as follows:
December 31, 2014 compared to December 31, 2013
December 31, 2014 compared to September 30, 2014
• Total AUM increased by $9.1 billion, or 12%, to $86.6 billion as
at December 31, 2014, compared to AUM of $77.5 billion as at
December 31, 2013.
• Total AUM increased by $1.7 billion, or 2%, to $86.6 billion during
the fourth quarter ended December 31, 2014, compared to $84.9
billion as at September 30, 2014.
• Base management fees and other revenues for the fourth quarter
ended December 31, 2014, increased by $9.5 million, or 21%, to
$53.7, million compared to $44.2 million for the same period
last year.
• Base management fees and other revenues for the fourth quarter
ended December 31, 2014, increased by $1.6 million, or 3%, to
$53.7 million compared to $52.1 million for the previous quarter
ended September 30, 2014.
• Performance fees were $10.6 million for the fourth quarter ended
December 31, 2014, compared to $11.0 million for the same
period last year.
• Performance fees were $10.6 million for the fourth quarter ended
December 31, 2014, compared to $0.3 million for the previous
quarter ended September 30, 2014.
• Selling, general and administrative (“SG&A”) expenses and
external managers’ expenses increased by $8.0 million, or 24%,
to $41.6 million for the fourth quarter ended December 31, 2014,
compared to $33.6 million for the same period last year.
• SG&A expenses and external managers’ expenses increased
by $5.4 million, or 15%, to $41.6 million for the fourth quarter
ended December 31, 2014, compared to $36.2 million for the
previous quarter ended September 30, 2014.
• Adjusted EBITDA increased by $1.9 million, or 8%, to $24.8
million for the fourth quarter ended December 31, 2014,
compared to $22.9 million for the same period last year.
Adjusted EBITDA per share remained unchanged at $0.36 per
share (basic) and $0.35 (diluted) compared to those of the same
period last year.
• For the fourth quarter ended December 31, 2014, the Firm
recorded net earnings attributable to the Company’s shareholders
of $12.1 million, or $0.18 per share (basic and diluted), an increase
of $3.6 million, or 43%, compared to the fourth quarter ended
December 31, 2013, during which the Firm recorded net earnings
attributable to the Company’s shareholders of $8.5 million, or
$0.13 per share (basic and diluted).
• Adjusted net earnings attributable to the Company’s shareholders
for the fourth quarter ended December 31, 2014 amounted to
$23.5 million, or $0.34 per share (basic and diluted), compared
to $18.1 million, or $0.28 per share (basic) and $0.27 (diluted),
for the fourth quarter ended December 31, 2013.
• Adjusted EBITDA increased by $6.7 million, or 37%, to $24.8
million for the fourth quarter ended December 31, 2014,
compared to $18.1 million for the previous quarter ended
September 30, 2014. Adjusted EBITDA per share were $0.36
(basic) and $0.35 (diluted) for the fourth quarter ended
December 31, 2014, compared to $0.26 per share (basic and
diluted) for the previous quarter ended September 30, 2014.
• For the fourth quarter ended December 31, 2014, the Firm
recorded net earnings attributable to the Company’s shareholders
of $12.1 million, or $0.18 per share (basic and diluted), an increase
of $7.0 million, or over 100%, compared to the previous quarter
ended September 30, 2014, during which the Firm recorded
net earnings attributable to the Company’s shareholders of $5.1
million, or $0.07 per share (basic and diluted).
• Adjusted net earnings attributable to the Company’s shareholders
for the fourth quarter ended December 31, 2014 amounted to
$23.5 million, or $0.34 per share (basic and diluted), compared
to $14.6 million, or $0.21 per share (basic and diluted), for the
previous quarter ended September 30, 2014.
30
MANAGEMENT’S DISCUSSION AND ANALYSISFor the Three and Twelve-month Periods Ended December 31, 2014 Highlights for the twelve-month period ended December 31, 2014 were as follows:
• For the twelve-month period ended December 31, 2014, the
Firm recorded net earnings attributable to the Company’s
shareholders of $27.5 million, or $0.40 per share (basic and
diluted), an increase of $12.6 million, or 84%, compared to
the same period last year, during which 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).
• Adjusted net earnings attributable to the Company’s shareholders
for the twelve-month period ended December 31, 2014 were
$66.7 million, or $0.97 per share (basic) and $0.96 (diluted),
compared to $43.4 million, or $0.74 per share (basic) and $0.73
(diluted), for the same period last year.
• Base management fees and other revenues for the twelve-month
period ended December 31, 2014, increased by $65.3 million,
or 46%, to $206.9 million compared to $141.6 million for the
same period last year.
• Performance fees were $15.4 million for the twelve-month period
ended December 31, 2014, compared to $12.1 million for the
same period last year.
• SG&A expenses and external managers’ expenses rose by $53.9
million, or 55%, to $151.1 million for the twelve-month period
ended December 31, 2014, compared to $97.2 million for the
twelve-month period ended December 31, 2013.
• Adjusted EBITDA rose by $19.0 million, or 32%, to $78.2
million for the twelve-month period ended December 31, 2014,
compared to $59.2 million for the same period last year. Adjusted
EBITDA per share were $1.14 (basic) and $1.12 (diluted) for the
twelve-month period ended December 31, 2014, compared to
$1.01 per share (basic) and $1.00 (diluted) for the same period
last year.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 31
— SUMMARY OF QUARTERLY RESULTS
Table 1 – Statements of Earnings and Assets under Management
Assets Under Management
(In $ Millions)
Assets under Management
Statements of Earnings
(in $ thousands except per share data)
Revenues
Base management fees
Performance fees - Traditional Assets
Performance fees - Alternative Assets
Other revenues
Total revenues
Expenses
Selling, general and administrative expenses
External managers
Depreciation of property and 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 and other integration costs
Acquisition costs
Changes in fair value of derivative
financial instruments
Impairment of non-financial assets
Other (income) expenses3
Total expenses
Earnings before income taxes
Income taxes
Net earnings
Attributable to:
Company’s shareholders
Non-controlling interest
Net earnings
BASIC PER SHARE
Adjusted EBITDA1
Net earnings
Adjusted net earnings1
DILUTED PER SHARE
Adjusted EBITDA1
Net earnings
Adjusted net earnings1
As at
Variance
December 31,
2014
September 30,
2014
December 31,
2013
Quarter over
Quarter
FAV/(UNF)2
Year overYear
FAV/(UNF)2
86,612
84,875
77,485
1,737
9,127
For the Three-Month Periods Ended
Variance
December 31,
2014
September 30,
2014
December 31,
2013
Quarter over
Quarter
FAV/(UNF)2
Year overYear
FAV/(UNF)2
52,502
5,567
5,022
1,213
64,304
40,150
1,490
611
6,655
2,283
636
1,174
824
(8,284)
8,016
(38)
53,517
10,787
1,322
9,465
12,090
(2,625)
9,465
0.36
0.18
0.34
0.35
0.18
0.34
50,647
97
180
1,447
52,371
34,775
1,420
343
6,411
2,164
612
654
561
50
-
(364)
46,626
5,745
1,226
4,519
5,053
(534)
4,519
0.26
0.07
0.21
0.26
0.07
0.21
42,802
6,529
4,450
1,441
55,222
32,388
1,221
367
6,164
2,029
(1,302)
67
2,878
(390)
-
(536)
42,886
12,336
3,924
8,412
8,481
(69)
8,412
0.36
0.13
0.28
0.35
0.13
0.27
1,855
5,470
4,842
(234)
11,933
9,700
(962)
572
(228)
9,082
(5,375)
(7,762)
(70)
(268)
(244)
(119)
(24)
(520)
(263)
8,334
(8,016)
(326)
(6,891)
5,042
(96)
4,946
7,037
(2,091)
4,946
0.10
0.11
0.13
0.09
0.11
0.13
(269)
(244)
(491)
(254)
(1,938)
(1,107)
2,054
7,894
(8,016)
(498)
(10,631)
(1,549)
2,602
1,053
3,609
2,556
1,053
-
0.05
0.06
-
0.05
0.07
1. Adjusted EBITDA and Adjusted net earnings are non-IFRS measures. Please refer to “Non-IFRS Measures” on page 60.
2. FAV: Favourable - UNF: Unfavourable
3. Other expenses (income) include “(Gain) Loss on disposal of investments”, “Share of (earnings) loss of joint ventures” and “(Gain) Loss on dilution of investments in
joint ventures”.
Certain totals, subtotals and percentages may not reconcile due to rounding.
32
MANAGEMENT’S DISCUSSION AND ANALYSISFor the Three and Twelve-month Periods Ended December 31, 2014 Table 1 – Statements of Earnings and Assets under Management (Continued)
Statements of Earnings
(In $ Thousands Except Per Share Data)
Revenues
Base management fees
Performance fees - Traditional Assets
Performance fees - Alternative Assets
Other revenues
Total revenues
Expenses
Selling, general and administrative expenses
External managers
Depreciation of property and equipment
Amortization of intangible assets
Interest on long-term debt and other financial charges
Accretion and change in fair value ofpurchase price obligations
Restructuring and other integration costs
Acquisition costs
Changes in fair value of derivative financial instruments
Impairment of non-financial assets
Other (income) expenses3
Total expenses
Earnings before income taxes
Income taxes
Net earnings
Attributable to:
Company’s shareholders
Non-controlling interest
Net earnings
BASIC PER SHARE
Adjusted EBITDA1
Net earnings
Adjusted net earnings1
DILUTED PER SHARE
Adjusted EBITDA1
Net earnings
Adjusted net earnings1
For the Twelve-Month Periods Ended
Variance
December 31,
2014
December 31,
2013
Year overYear
FAV/(UNF)2
200,612
6,434
9,003
6,309
222,358
145,967
5,107
1,733
25,700
7,977
2,642
3,127
2,079
(7,419)
8,016
(1,320)
193,609
28,749
5,158
23,591
27,492
(3,901)
23,591
1.14
0.40
0.97
1.12
0.40
0.96
139,397
7,181
4,936
2,213
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
61,215
(747)
4,067
4,096
68,631
(51,610)
(2,249)
(392)
(6,617)
(1,046)
(2,005)
(1,618)
4,493
6,993
(8,016)
191
(61,876)
6,755
2,231
8,986
12,553
(3,567)
8,986
0.13
0.14
0.23
0.12
0.15
0.23
1. Adjusted EBITDA and Adjusted net earnings are non-IFRS measures. Please refer to “Non-IFRS Measures” on page 60.
2. FAV: Favourable - UNF: Unfavourable
3. Other expenses (income) include “(Gain) Loss on disposal of investments”, “Share of (earnings) loss of joint ventures” and “(Gain) Loss on dilution of investments in
joint ventures”.
Certain totals, subtotals and percentages may not reconcile due to rounding.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 33
Table 2 – Selected Statements of Financial Position Information (in $ thousands)
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
Deferred income taxes
Long-term debt
Purchase price obligations
Derivative financial instruments
Value of option granted to non-controlling interest
Other long-term liabilities
Total liabilities
Equity
Attributable to Company’s shareholders
Attributable to Non-controlling interest
Total liabilities and equity
December 31, 2014
December 31, 2013
25,445
59,960
4,654
292,835
370,161
9,635
9,490
772,180
53,680
20,091
222,081
36,168
945
-
5,004
32,174
56,072
3,771
310,151
357,773
8,284
8,342
776,567
56,329
24,636
228,262
40,250
644
7,720
1,685
337,969
359,526
437,154
(2,943)
434,211
772,180
416,083
958
417,041
776,567
34
MANAGEMENT’S DISCUSSION AND ANALYSISFor the Three and Twelve-month Periods Ended December 31, 2014 — RESULTS FROM OPERATIONS AND OVERALL PERFORMANCE
Assets under Management
Assets under management levels are critical to Fiera Capital’s business. The change in the Firm’s AUM is determined by i) the level of new
mandates (“New”); ii) the level of redemption (“Lost”); iii) the level of inflows and outflows from existing customers (“Net Contributions”);
iv) the increase or decrease in the market value of the assets held in the portfolio of investments (“Market”) and (v) business acquisitions
(“Acquisitions”). For simplicity, the “Net variance” is the sum of the New mandates, Lost mandates and Net Contributions, the change in
Market value and the impact of foreign exchange rate changes. In this MD&A, the Firm analyzes its results based on its clientele type.
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
AUM - beginning of period
Net variance
Acquisitions
AUM - end of period
For the Three-Month Periods Ended
For the Twelve-Month Periods Ended
December 31,
2014
September 30,
2014
December 31,
2013
December 31,
2014
December 31,
2013
84,875
1,737
-
86,612
82,131
2,519
225
84,875
67,163
2,067
8,255
77,485
77,485
8,902
225
86,612
58,138
4,334
15,013
77,485
Certain totals, subtotals and percentages may not reconcile due to rounding.
1. AUM include the foreign exchange impact.
Table 4 – Assets under Management by Clientele Type – Quarterly Activity Continuity Schedule ($ in millions)
Institutional
Private Wealth
Retail
AUM - end of period
September 30,
2014
45,539
11,186
28,150
84,875
New
651
443
9
1,103
Net
Contributions
(477)
31
393
(53)
Lost
(233)
(53)
(671)
(957)
Foreign
Exchange
Impact
60
323
-
383
Market
1,234
68
(41)
1,261
Acquisitions
December 31,
2014
-
-
-
-
46,774
11,998
27,840
86,612
Certain totals, subtotals and percentages may not reconcile due to rounding.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 35
Quarterly Activity
Total AUM increased by $1.7 billion, or 2%, to $86.6 billion during the fourth quarter ended December 31, 2014, compared to $84.9 billion
as at September 30, 2014. The increase is due primarily to new mandates of $1.1 billion, namely $0.7 billion from the institutional clientele,
combined with positive net contributions of $0.3 billion from existing clients and market appreciation of $1.3 billion, partially offset by lost
mandates of $1.0 billion during the period. Lastly, the US dollars exchange rate variation positively impacted AUM during the fourth quarter
by approximately $0.4 billion.
During the fourth quarter ended December 31, 2014, the institutional clientele generated approximately $650 million of new mandates to
the Firm’s AUM, fueled by a number of asset classes, most notably global equity, specialized fixed income mandates and real assets. The growth
came from clients across North America, which is in line with the Firm’s objective of becoming a leading North American asset management
firm. On the other hand, lost mandates in the institutional sector over the quarter were primarily the result of internal repatriation of assets
as well as consolidation of investment management providers.
The AUM in the private wealth clientele increased by $0.8 billion during the fourth quarter ended December 31, 2014, mainly attributable
to new mandates from Bel Air, the positive impact of foreign exchange rate change and market appreciation during the period.
The AUM in the retail clientele decreased by $0.3 billion during the fourth quarter ended December 31, 2014 mainly due to the loss of
one mandate which accounts for $0.6 billion from a large client for which the other mandates remained with the Firm. This loss was partially
offset by new and net contributions of $0.4 billion as the retail clientele continued to increase net contributions during the fourth quarter
of 2014 as a result of improved distribution channels.
Table 5 – Assets under Management by Clientele Type – Year-to-Date Activity Continuity Schedule (in $ millions)
Institutional
Private Wealth
Retail
AUM - end of period
December 31,
2013
41,478
10,534
25,473
77,485
New
2,729
772
686
4,187
Lost
(1,228)
(564)
(943)
(2,735)
Net
Contributions
(974)
(74)
694
(354)
Market
4,671
558
1,705
6,934
Foreign
Exchange
Impact
98
772
-
870
Acquisitions
December 31,
2014
-
-
225
225
46,774
11,998
27,840
86,612
Certain totals, subtotals and percentages may not reconcile due to rounding.
36
MANAGEMENT’S DISCUSSION AND ANALYSISFor the Three and Twelve-month Periods Ended December 31, 2014 Year-to-Date Activity
Total AUM increased by $9.1 billion, or 12%, to $86.6 billion during the twelve-month period ended December 31, 2014, compared to $77.5
billion as at December 31, 2013. The increase is due primarily to the market appreciation of $6.9 billion during the period, combined with
new mandates of $4.2 billion. These were partially offset by lost mandates of $2.7 billion. Also, foreign exchange rate changes positively
impacted AUM during fiscal 2014 by approximately $0.9 billion, as reflected in the above figures.
The following graphs illustrate the breakdown of the Firm’s AUM by clientele type and by asset class as at December 31, 2013 and
December 31, 2014, respectively.
AUM by clientele type
As at December 31, 2013
As at December 31, 2014
2013
53.5%
32.9%
13.6%
INSTITUTIONAL
RETAIL
PRIVATE WEALTH
54.0%
32.1%
13.9%
AUM by Asset Class
As at December 31, 2013
As at December 31, 2014
2013
62.3%
28.6%
9.1%
FIXED INCOME
EQUITIES
ALTERNATIVE AND OTHER
58.3%
31.4%
10.3%
2014
2014
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 37
Revenues
The Firm’s revenues consist of (i) management fees, (ii) performance fees, and (iii) other revenues. Management fees are AUM based and,
for each clientele type, revenues are primarily earned on the AUM average closing value at the end of each day, month or calendar quarter
in accordance with contractual agreements. For certain mandates, the Firm is also entitled to performance fees. The Firm categorizes
performance fees in two groups: those associated with traditional asset classes or strategies and those associated with alternative asset
classes or strategies. Other revenues are primarily derived from brokerage and consulting fees which are not AUM driven.
The following revenues analysis refers to average assets for each clientele type.
Table 6 – Revenues: Quarterly Activity (in $ thousands)
Institutional
Private Wealth
Retail
Total management fees*
Performance fees – Traditional asset class
Performance fees – Alternative asset class
Total performance fees
Other revenues*
Total Revenues
For the Three-Month Periods Ended
Variance
December 31,
2014
September 30,
2014
December 31,
2013
Quarter over
Quarter
Year over
Year
20,298
16,662
15,542
52,502
5,567
5,022
10,589
1,213
64,304
19,603
15,876
15,168
50,647
97
180
277
1,447
52,371
18,026
10,918
13,858
42,802
6,529
4,450
10,979
1,441
55,222
695
786
374
1,855
5,470
4,842
10,312
(234)
11,933
2,272
5,744
1,684
9,700
(962)
572
(390)
(228)
9,082
* Other revenues for the three-month period ended December 31, 2013, were reclassified to better reflect the business of the Company.
Certain totals, subtotals and percentages may not reconcile due to rounding.
Current Quarter Versus Prior-Year Quarter
Revenues for the fourth quarter ended December 31, 2014 increased by $9.1 million, or 16%, to $64.3 million compared to $55.2 million for
the same period last year. The increase in revenues is due mainly to the higher AUM base driving a $9.7 million improvement in management
fees, following the acquisition of assets from Bel Air and Wilkinson, and most recently Propel, partially offset by the decrease of $0.2 million in
other revenues, particularly brokerage and consulting fees and lower performance fees of $0.4 million, mainly from the traditional asset class.
Management Fees
Management fees increased by $9.7 million, or 23%, to $52.5 million for the fourth quarter ended December 31, 2014, compared to $42.8
million for the same period last year. The overall increase in revenues and the increase by clientele type are as follows:
• Revenues from the Institutional clientele improved by $2.3 million, or 13%, to $20.3 million for the fourth quarter ended December 31,
2014, compared to $18.0 million for the same quarter last year. The improvement is primarily due to the increase in net AUM namely
from the U.S. during the fourth quarter of 2014 compared to the same period last year.
• Revenues from the Private Wealth clientele increased by $5.7 million, or 53%, to $16.7 million for the fourth quarter ended December
31, 2014, compared to $10.9 million for the same period last year. The increase is due mainly to a full quarter of operation of Bel Air and
Wilkinson O’Grady in the fourth quarter of 2014 compared to two months of operations in the same period of last year, combined with
the positive impact of changes in foreign exchange rate.
• Revenues from the Retail clientele increased by $1.6 million, or 12%, to $15.5 million for the fourth quarter ended December 31, 2014,
compared to $13.9 million for the same quarter last year. The increase results primarily from additional net AUM in the fourth quarter
of 2014 compared to the same period last year and additional revenue from the acquisition of Propel during the fourth quarter of 2014.
Performance Fees
Total performance fees amounted to $10.6 million for the fourth quarter ended December 31, 2014, compared to $11.0 million for the same
period last year. The mix of the level of the AUM subject to performance fees and the fund performance resulted in slightly lower performance
fee revenues for the quarter ended December 31, 2014. The performance of the traditional asset class was slightly lower with a higher AUM
base, combined with a strong performance from the alternative asset class for which the AUM base remained stable.
38
MANAGEMENT’S DISCUSSION AND ANALYSISFor the Three and Twelve-month Periods Ended December 31, 2014 Other Revenues
Other revenues decreased by $0.2 million, or 16%, to $1.2 million for the fourth quarter ended December 31, 2014, compared to $1.4 million
for the same period last year. The decrease is mainly attributable to lower revenue from interest and tax planning fees, partially offset by
higher brokerage and consulting fees earned during the fourth quarter of 2014 following the acquisition of Bel Air.
The following graphs illustrate the breakdown of the Firm’s revenues for the three-month periods ended December 31, 2013 and December
31, 2014, respectively.
Revenues
Revenues Q4 2013
Revenues Q4 2014
2013
32%
25%
20%
20%
3%
INSTITUTIONAL
RETAIL
PRIVATE WEALTH
PERFORMANCE FEES
OTHER REVENUES
32%
24%
26%
16%
2%
2014
Current Quarter Versus Previous Quarter
Revenues for the fourth quarter ended December 31, 2014 increased by $11.9 million, or 23%, to $64.3 million compared to $52.4 million
for the previous quarter ended September 30, 2014. The increase in revenues is mainly attributable to higher performance fees, which are
generally recognized in December of each year, combined with higher base management fees resulting from net additional AUM in the fourth
quarter of 2014, compared to the previous quarter.
Management Fees
Management fees increased by $1.9 million, or 4%, to $52.5 million for the fourth quarter ended December 31, 2014, compared to $50.6
million for the previous quarter ended September 30, 2014. The increase in management fees is attributable to the higher quarterly average
AUM base and the following is the increase by clientele type:
• Revenues from the Institutional clientele increased by $0.7 million, or 3.5%, to $20.3 million for the fourth quarter ended December 31,
2014, compared to $19.6 million for the previous quarter ended September 30, 2014, mainly as a result of new mandates from the U.S.
funded toward the end of the quarter, for which revenues will be fully recognized in the upcoming months.
• Revenues from the Private Wealth clientele increased by $0.8 million, or 5%, to $16.7 million for the fourth quarter ended December 31,
2014, compared to $15.9 million for the previous quarter ended September 30, 2014. This increase in revenue is mainly attributable to
higher average AUM from Bel Air, combined with the positive impact of foreign exchange rate changes.
• Revenues from the Retail clientele increased by $0.3 million, or 2.5%, to $15.5 million for the fourth quarter ended December 31, 2014,
compared to $15.2 million for the previous quarter ended September 30, 2014. The increase is mainly attributable to a full quarter of
operation of Propel during the fourth quarter ended December 31, 2014, compared to one month of operation in the previous quarter
ended September 30, 2014.
Performance Fees
Total performance fees, which are generally recorded in December of each year, were $10.6 million for the fourth quarter ended December
31, 2014, compared to $0.3 million for the previous quarter ended September 30, 2014.
Revenues from performance fees resulted from the strong performance of the alternative asset class combined with a higher AUM base
that are subject to performance fees in the traditional asset class.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 39
Other Revenues
Other revenues decreased by $0.2 million, or 16%, to $1.2 million for the fourth quarter ended December 31, 2014, compared to $1.4 million
for the previous quarter ended September 30, 2014. The decrease is mainly due to lower interest and tax planning fees.
Table 7 – Revenues: Year-to-Date Activity (in $ thousands)
Institutional
Private Wealth
Retail
Total management fees1
Performance fees – Traditional asset class
Performance fees – Alternative asset class
Total performance fees
Other revenues1
Total Revenues
For The Twelve-Month Periods Ended
Variance
December 31, 2014
December 31, 2013
Year over Year
76,921
63,897
59,794
200,612
6,434
9,003
15,437
6,309
222,358
67,161
20,344
51,892
139,397
7,181
4,936
12,117
2,213
153,727
9,760
43,553
7,902
61,215
(747)
4,067
3,320
4,096
68,631
1. Other revenues were reclassified to better reflect the business of the Company.
Certain totals, subtotals and percentages may not reconcile due to rounding.
Year-to-Date December 31, 2014 Versus Year-to-Date December 31, 2013
Revenues for the twelve-month period ended December 31, 2014 increased by $68.6 million, or 45%, to $222.4 million, compared to $153.7
million for the same period last year. The increase in revenues is mainly due to the higher AUM base, driving a $61.2 million improvement in
management fees, following the acquisition of assets from UBS Global Asset Management (Canada) Inc. (“UBS”), GMP Capital Inc. (“GMP”),
Bel Air, Wilkinson O’Grady and Propel and the Firm’s organic growth, combined with increases of $3.3 million in performance fees and $4.1
million in other revenues, particularly brokerage and consulting fees.
Management Fees
Management fees increased by $61.2 million, or 44%, to $200.6 million for the twelve-month period ended December 31, 2014, compared
to $139.4 million for the same period last year. The overall increase in revenues and the increase by clientele type are as follows:
• Revenues from the Institutional clientele increased by $9.7 million, or 15%, to $76.9 million for the twelve-month period ended December
31, 2014, compared to $67.2 million for the same period last year. The improvement is mainly due to additional net AUM.
• Revenues from the Private Wealth clientele increased by $43.6 million, or over 100%, to $63.9 million for the twelve-month period
ended December 31, 2014, compared to $20.3 million for the same period last year. The increase is mainly due to the inclusion of assets
from Bel Air and Wilkinson O’Grady.
• Revenues from the Retail clientele increased by $7.9 million, or 15%, to $59.8 million for the twelve-month period ended December 31,
2014, compared to $51.9 million for the same period last year. The increase is mainly attributable to additional AUM from new mandates,
combined with a higher AUM base resulting from market appreciation, and the inclusion of AUM from Propel since September 2014.
Performance Fees
Total performance fees amounted to $15.4 million for the twelve-month period ended December 31, 2014, compared to $12.1 million for
the same period last year. This improvement is due to a $4.1 million increase in alternative asset class performance fees resulting from strong
fund performance with a stable AUM level, partially offset by a $0.7 million decrease in traditional asset class performance fees revenues
resulting from a slightly lower performance with higher AUM levels.
Other Revenues
Other revenues increased by $4.1 million, or over 100%, to $6.3 million for the twelve-month period ended December 31, 2014, compared
to $2.2 million for the same period last year. The increase is mainly attributable to the brokerage and consulting fees earned during the full
year of operation in 2014 following the Bel Air acquisition, compared to two months of operations during the same period last year.
40
MANAGEMENT’S DISCUSSION AND ANALYSISFor the Three and Twelve-month Periods Ended December 31, 2014 Selling, General and Administrative Expenses
Current Quarter Versus Prior-Year Quarter
SG&A expenses rose by $7.8 million, or 24%, to $40.2 million for the
three-month period ended December 31, 2014, compared to $32.4
million for the same period last year. The increase is mainly due to the
inclusion of costs related to the Bel Air, Wilkinson O’Grady and Propel
acquisitions, amounting to $6.8 million, $1.1 million, $0.6 million
and $0.2 million increases in compensation costs, insurance and
reference fees, marketing and servicing and information technology
expenses, and rental costs, respectively. These increases are partially
offset by a decrease of $0.9 million in professional fee expenses.
Current Quarter Versus Previous Quarter
SG&A expenses increased by $5.4 million, or 15.5%, to $40.2 million
for the three-month period ended December 31, 2014, compared to
$34.8 million for the previous quarter ended September 30, 2014.
The increase is mainly attributable to the rise of $5.1 million in fixed
and variable compensation related to incentive performance fees
and the inclusion of Propel for a full quarter of operations in the
fourth quarter ended December 31, 2014, compared to one month
of operation in the previous quarter.
Year-to-Date December 31, 2014 Versus Year-to-Date
December 31, 2013
SG&A expenses increased by $51.6 million, or 55%, to $146.0 million
for the twelve-month period ended December 31, 2014, compared
to $94.4 million for the same period last year. The increase is mainly
due to the inclusion of costs related to GMP (a full year of operations
in 2014 compared to eight months in the comparable period of
2013), Bel Air and Wilkinson O’Grady (twelve months of operation
in 2014 compared to two months in 2013) and Propel (four months
of operation in 2014 compared to nil in 2013), amounting to $39.9
million, $5.5 million, $2.5 million and $1.4 million in compensation
costs, marketing and servicing and information technology expenses,
insurance and reference fees and rental costs, respectively.
External Managers
Current Quarter Versus Prior-Year Quarter
External managers’ expenses increased by $0.3 million, or 22%,
to $1.5 million for the fourth quarter ended December 31, 2014,
compared to $1.2 million for the same quarter last year. The increase
is mainly due to the acquisitions of Bel Air and Propel.
Current Quarter Versus Previous Quarter
External managers’ expenses increased by $0.1 million, or 5%, to $1.5
million for the fourth quarter ended December 31, 2014, compared
to $1.4 million for the previous quarter ended September 30, 2014.
The increase is mainly due to the acquisition of Propel.
Year-to-Date December 31, 2014 Versus Year-to-Date
December 31, 2013
External managers’ expenses rose by $2.3 million, or 79%, to $5.1
million for the twelve-month period ended December 31, 2014,
compared to $2.9 million for the same period last year. The increase
is mainly due to the Bel Air and Propel acquisitions.
Depreciation and Amortization
Current Quarter Versus Prior-Year Quarter
Depreciation of property and equipment increased by $0.2 million,
or 67%, to $0.6 million for the fourth quarter ended December 31,
2014, compared to $0.4 million from the corresponding quarter
last year.
Amortization of intangible assets increased by $0.5 million, or
8%, to $6.7 million for the fourth quarter ended December 31, 2014,
compared to $6.2 million for the same period last year, following
the acquisition of intangible assets from Bel Air, Wilkinson O’Grady
and Propel.
Current Quarter Versus Previous Quarter
Depreciation of property and equipment increased by $0.3 million,
or 78%, to $0.6 million for the fourth quarter ended December 31,
2014, compared to $0.3 million for the previous quarter ended
September 30, 2014.
Amortization of intangible assets increased by $0.2 million, or
4%, to $6.6 million for the fourth quarter ended December 31, 2014,
compared to $6.4 million for the previous quarter ended September
30, 2014, following the acquisition of Propel.
Year-to-Date December 31, 2014 Versus Year-to-Date
December 31, 2013
Depreciation of property and equipment increase by $0.4 million, or
29%, to $1.7 million for the twelve-month period ended December
31, 2014, compared to $1.3 million for the same period last year.
Amortization of intangible assets increased by $6.6 million, or
35%, to $25.7 million for the twelve-month period ended December
31, 2014, compared to $19.1 million for the same period last year,
following the acquisition of intangible assets from GMP (twelve
months of operations in 2014 compared to eight months in the
comparable period of 2013), Bel Air, Wilkinson O’Grady and Propel.
Interest on Long-Term Debt and Other
Financial Charges
Current Quarter Versus Prior-Year Quarter
The interest on long-term debt and other financial charges increased
by $0.3 million, or 13%, to $2.3 million for the fourth quarter ended
December 31, 2014, compared to $2.0 million for the same quarter
last year. The increase is mainly attributable to additional long-term
debt related to the Bel Air and Wilkinson O’Grady acquisitions.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 41
Current Quarter Versus Previous Quarter
Acquisition and restructuring and other integration costs increased
by $0.8 million, or 64%, to $2.0 million for the fourth quarter ended
December 31, 2014, compared to $1.2 million for the previous quarter
ended September 30, 2014. This increase is mainly attributable to
higher costs related to Propel and Samson acquisitions (as identified
in the subsequent event section).
Year-to-Date December 31, 2014 Versus Year-to-Date
December 31, 2013
Acquisition and restructuring and other integration costs decreased
by $2.9 million, or 36%, to $5.2 million for the twelve-month period
ended December 31, 2014, compared to $8.1 million for the same
period last year. This decrease is mainly attributable to the higher
costs related to the acquisition of assets from UBS, GMP, Bel Air and
Wilkinson in 2013.
Changes in Fair Value of Derivative Financial
Instruments/Impairment of Non-Financial Assets
The Company recorded $8.3 million of gain related to changes in the
fair value of derivative financial instruments for the fourth quarter
ended December 31, 2014, which include a gain of $8.4 million from
the value of the option granted to non-controlling interest, net of
that, the gain would have been an expense of $0.1 million for the
quarter ended December 31, 2014, compared to a charge of $0.1
million for the previous quarter ended September 30, 2014, and
compared to a gain of $0.4 million for the fourth quarter ended
December 31, 2013.
During the fourth quarter ended December 31, 2014, an
impairment of non-financial assets of $8.0 million was recorded.
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 (“EBITDA”) and forecasted performance fees. The actual
performance of the subsidiary will affect the value of the option.
Forecasts are monitored and updated on a monthly basis, and the
value of the option is recalculated at the end of each reporting
period. During the fourth quarter of 2014, the Company completed
the annual budget for fiscal 2015 and recalculated the option value
using the most recent EBITDA attributable to Fiera Quantum L.P.
As a result, as at December 31, 2014, the Company determined
that the value of the option was nil. Refer to Note 6, Financial
Instruments, of the audited consolidated financial statements for
additional information.
Current Quarter Versus Previous Quarter
The interest on long-term debt and other financial charges remained
relatively stable at $2.3 million for the fourth quarter ended
December 31, 2014, compared to $2.2 million for the previous
quarter ended September 30, 2014.
Year-to-Date December 31, 2014 Versus Year-to-Date
December 31, 2013
The interest on long-term debt and other financial charges increased
by $1.1 million, or 15%, to $8.0 million for the twelve-month period
ended December 31, 2014, compared to $6.9 million for the same
period last year. The increase is mainly attributable to additional
interest on long-term debt resulting from incremental borrowings
related to the Bel Air and Wilkinson O’Grady acquisitions.
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
represented a charge of $0.6 million for the fourth quarter ended
December 31, 2014, compared to a gain of $1.3 million for the
same quarter last year. The variance is mainly due to the reversal of
$2 million of the purchase price obligation recorded in the fourth
quarter of 2013 related to the acquisition of assets from Canadian
Wealth Management Group Inc. (“CWM”) 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 Previous Quarter
The accretion and change in fair value of purchase price obligations
remained stable at $0.6 million for the fourth quarter ended
December 31, 2014, compared to $0.6 million for the previous
quarter ended September 30, 2014.
Year-to-Date December 31, 2014 Versus Year-to-Date
December 31, 2013
The accretion and change in fair value of purchase price obligations
increased by $2.0 million, or over 100%, to $2.6 million for the
twelve-month period ended December 31, 2014, compared to $0.6
million for the same period last year. The increase is due mainly to
the reversal of $2 million of the purchase price obligation related to
the acquisition of CWM assets recorded in the fourth quarter of 2013.
Acquisition and Restructuring and Other
Integration Costs
Current Quarter Versus Prior-Year Quarter
Acquisition and restructuring and other integration costs decreased
by $0.9 million, or 32%, to $2.0 million for the fourth quarter
ended December 31, 2014, compared to $2.9 million for the same
period last year. This decrease is mainly due to costs related to the
acquisition of Bel Air and Wilkinson recorded during the fourth
quarter ended December 31, 2013.
42
MANAGEMENT’S DISCUSSION AND ANALYSISFor the Three and Twelve-month Periods Ended December 31, 2014 Adjusted EBITDA1
Adjusted EBITDA is calculated as the difference between total revenues and SG&A expenses (excluding non-cash compensation) and external
managers’ expenses. We believe that adjusted EBITDA is a meaningful measure as it allows for the evaluation of our operating performance
before the impact of non-operating items.
Table 8 - Adjusted EBITDA (in $ thousands except per share data)
Revenues
Base management fees
Performance fees
Other revenues
Total revenues
Expenses
Selling, general and administrative
External managers
Total expenses
EBITDA
Add back: Non-cash compensation
Adjusted EBITDA
Per share basic2
Per share diluted2
For the Three-Month Periods Ended
For the Twelve-Month Periods Ended
December 31,
2014
September 30,
2014
December 31,
2013
December 31,
2014
December 31,
2013
52,502
10,589
1,213
64,304
40,150
1,490
41,640
22,664
2,156
24,820
0.36
0.35
50,647
277
1,447
52,371
34,775
1,420
36,195
16,176
1,909
18,085
0.26
0.26
42,802
10,979
1,441
55,222
32,388
1,221
33,609
21,613
1,328
22,941
0.36
0.35
200,612
15,437
6,309
222,358
145,967
5,107
151,074
71,284
6,940
78,224
1.14
1.12
139,397
12,117
2,213
153,727
94,357
2,858
97,215
56,512
2,716
59,228
1.01
1.00
1. Adjusted EBITDA is a non-IFRS measure. Please refer to “Non-IFRS Measures” on page 60.
2. Adjusted EBITDA include EBITDA attributable to the Company’s shareholders and non-controlling interest.
Certain totals, subtotals and percentages may not reconcile due to rounding.
Current Quarter Versus Prior-Year Quarter
For the fourth quarter ended December 31, 2014, adjusted EBITDA increased by $1.9 million, or 8%, to $24.8 million, or $0.36 per share
(basic) and $0.35 (diluted), compared to $22.9 million, or $0.36 per share (basic) and $0.35 (diluted), for the same period last year.
Adjusted EBITDA for the fourth quarter ended December 31, 2014, was driven by an increase in base management fees compared to the
same period last year, mainly due to the acquisition of the Bel Air, Wilkinson O’Grady and Propel assets. These items were partially offset by
an overall increase in operating expenses, including SG&A and external managers’ expenses due to the inclusion of the acquired GMP, Bel
Air, Wilkinson O’Grady and Propel operations.
Current Quarter Versus Previous Quarter
For the fourth quarter ended December 31, 2014, adjusted EBITDA increased by $6.7 million, or 37%, to $24.8 million, or $0.36 per share
(basic) and $0.35 (diluted), compared to $18.1 million, or $0.26 per share (basic and diluted), from the previous quarter ended September
30, 2014. The increase is mainly attributable to higher performance fees in both alternative and traditional asset class which are generally
recorded in December of each year, combined with higher base management fees, partially offset by higher SG&A expenses as described
in the SG&A section.
Year-to-Date December 31, 2014 Versus Year-to-Date December 31, 2013
For the twelve-month period ended December 31, 2014, adjusted EBITDA increased by $19.0 million, or 32%, to $78.2 million, or $1.14 per
share (basic) and $1.12 (diluted), compared to $59.2 million, or $1.01 per share (basic) and $1.00 (diluted), for the same period last year.
The increase in adjusted EBITDA for the twelve-month period ended December 31, 2014, is mainly attributable to an increase in base
management fees resulting from the acquisition of the GMP, Bel Air, Wilkinson O’Grady and Propel assets. These items were partially offset
by an overall rise in operating expenses, including SG&A and external managers’ expenses due to the inclusion of the acquired GMP, Bel Air,
Wilkinson O’Grady and Propel operations.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 43
Net Earnings
Table 9 - Net Earnings and Adjusted Net Earnings1 (in $ thousands except per share data)
For the Three-Month Periods Ended
For the Twelve-Month Periods Ended
December 31,
2014
September 30,
2014
December 31,
2013
December 31,
2014
December 31,
2013
Net earnings attributable to the Company’s shareholders
12,090
Depreciation of property and equipment
Amortization of intangible assets
Non-cash compensation items
Impairment of non-financial assets2
Changes in fair value of derivative financial instruments2
Non-cash items
Restructuring and other integration costs2
Acquisition costs2
Acquisition and restructuring and other integration costs
Adjusted net earnings before income taxes on above-
mentioned items2
Income taxes on above-mentioned items2
Adjusted net earnings attributable to the
Company’s shareholders
Per share – basic
Net earnings
Adjusted net earnings1
Per share – diluted
Net earnings
Adjusted net earnings
611
6,655
2,156
8,016
(8,284)
9,154
1,174
824
1,998
23,242
(269)
23,511
0.18
0.34
0.18
0.34
5,053
343
6,411
1,909
-
50
8,713
654
561
1,215
14,981
380
14,601
0.07
0.21
0.07
0.21
8,481
367
6,164
1,328
-
(390)
7,469
67
2,878
2,945
18,895
767
18,128
0.13
0.28
0.13
0.27
27,492
1,733
25,700
6,940
8,016
(7,419)
34,970
3,127
2,079
5,206
67,668
953
66,715
0.40
0.97
0.40
0.96
14,939
1,341
19,083
2,716
-
(426)
22,714
1,509
6,572
8,081
45,734
2,297
43,437
0.26
0.74
0.25
0.73
1. Adjusted net earnings are a non-IFRS measure. Please refer to “Non-IFRS Measures” on page 60.
2. Income tax on Changes in fair value of derivative financial instruments, acquisitions and restructuring and other integration costs is estimated by using a tax rate of 30%
Certain totals, subtotals and percentages may not reconcile due to rounding.
Current Quarter Versus Prior-Year Quarter
The Firm’s net earnings attributable to the Company’s shareholders increased by $3.6 million to $12.1 million, or $0.18 per share (basic and
diluted), during the fourth quarter ended December 31, 2014, compared to $8.5 million, or $0.13 per share (basic and diluted) for the same
quarter last year. The increase in net earnings attributable to the Company’s shareholders is mainly due to increases of $9.7 million in base
management fees, combined with lower acquisition costs of $2.1 million. The increase in revenues was partly offset by increases of $8.0
million, $1.9 million and $1.1 million in SG&A and external managers’ expenses, accretion and change in fair value of purchase price obligation
and restructuring and other integration costs, respectively.
Current Quarter Versus Previous Quarter
For the fourth quarter ended December 31, 2014, the Firm recorded net earnings attributable to the Company’s shareholders of $12.1 million,
or $0.18 per share (basic and diluted), compared to $5.1 million, or $0.07 per share (basic and diluted), for the previous quarter ended
September 30, 2014. The increase in net earnings attributable to the Company’s shareholders is mainly attributable to a $10.3 million increase
in performance fees, which are generally recorded in December of each year, combined with a $1.9 million increase in base management fees.
The increase in revenues was partly offset by higher corporate expenses, namely in SG&A and external managers’ expenses and acquisition
and restructuring and other integration costs.
Year-to-Date December 31, 2014 Versus Year-to-Date December 31, 2013
For the twelve-month period ended December 31, 2014, the Firm recorded net earnings attributable to the Company’s shareholders of $27.5
million, or $0.40 per share (basic and diluted), compared to $14.9 million, or $0.26 per share (basic) and $0.25 (diluted) for the same period
last year. The increase in net earnings attributable to the Company’s shareholders is mainly attributable to a $61.2 million increase in base
management fees, a $3.3 million increase in performance fees and an increase of $4.1 million in other revenues, mainly in brokerage and
consulting fees. These elements were partly offset by increases of $53.9 million, $7.0 million, $1.6 million in SG&A and external managers’
expenses and depreciation and amortization costs and restructuring and other integration costs, respectively, combined with $2.0 million
of unfavorable changes in accretion on purchase price obligations. Moreover, lower acquisition costs during the twelve-month period ended
December 31, 2014, have also contributed to the increase in net earnings relative to the same period last year.
44
MANAGEMENT’S DISCUSSION AND ANALYSISFor the Three and Twelve-month Periods Ended December 31, 2014 Adjusted Net Earnings
The Firm selects adjusted net earnings as one of the key non-IFRS
performance measures as it is a good indicator of the Firm’s ability to
generate cash flows. Adjusted net earnings are calculated as the sum
of net earnings (loss) attributable to the Company’s shareholders,
non-cash items, including depreciation of property and equipment,
amortization of intangible assets, after tax changes in fair value
of derivative financial instruments, after tax impairment of non-
financial assets, after tax acquisition and restructuring and other
integration costs and non-cash compensation items.
Current Quarter Versus Prior-Year Quarter
During the fourth quarter ended December 31, 2014, net earnings
attributable to the Company’s shareholders were negatively
affected by $10.0 million of non-cash items, net of income taxes
on the changes in fair value of derivative financial instruments and
impairment of non-financial assets ($9.2 million before taxes), or
$0.14 per share (basic and diluted), and by $1.4 million, or $0.02
per share (basic and diluted), of acquisition and restructuring and
other integration costs, net of income taxes ($2.0 million before
taxes). When added back to the Firm’s net earnings attributable to
the Company’s shareholders of $12.1 million, or $0.18 per share (basic
and diluted), adjusted net earnings attributable to the Company’s
shareholders amounted to $23.5 million, or $0.34 per share (basic
and diluted) for the fourth quarter ended December 31, 2014.
During the fourth quarter ended December 31, 2013, net earnings
attributable to the Company’s shareholders were negatively affected
by $7.6 million of non-cash items, net of income taxes on the
changes in fair value of derivative financial instruments ($7.5 million
before taxes), or $0.12 per share (basic) and $0.11 (diluted), and by
$2.1 million, or $0.03 per share (basic and diluted), of acquisition and
restructuring and other integration costs, net of income taxes ($2.9
million before 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), adjusted net earnings attributable to
the Company’s shareholders amounted to $18.1 million, or $0.28
per share (basic) and $0.27 (diluted) for the fourth quarter ended
December 31, 2013.
Current Quarter Versus Previous Quarter
During the previous quarter ended September 30, 2014, net earnings
attributable to the Company’s shareholders were negatively affected
by $8.7 million of non-cash items, net of income taxes on the
changes in fair value of derivative financial instruments ($8.7 million
before taxes), or $0.13 per share (basic and diluted), and by $0.8
million, or $0.01 per share (basic and diluted), of acquisition and
restructuring and other integration costs, net of income taxes (or $1.2
million before taxes). When added back to the Firm’s net earnings
attributable to the Company’s shareholders of $5.1 million, or $0.07
per share (basic and diluted), adjusted net earnings attributable to
the Company’s shareholders amounted to $14.6 million, or $0.21
per share (basic and diluted) for the third quarter ended September
30, 2014, compared to adjusted net earnings attributable to the
Company’s shareholders of $23.5 million or $0.34 per share (basic
and diluted) for the fourth quarter ended December 31, 2014.
Year-to-Date December 31, 2014 Versus Year-to-Date
December 31, 2013
For the twelve-month period ended December 31, 2014, net
earnings attributable to the Company’s shareholders were negatively
affected by $35.6 million of non-cash items, net of income taxes
on the changes in fair value of derivative financial instruments and
impairment of non-financial assets ($35.0 million before taxes), or
$0.52 per share (basic) and $0.51 (diluted), and by $3.6 million, or
$0.05 per share (basic and diluted), of acquisition and restructuring
and other integration costs, net of income taxes ($5.2 million before
taxes). When added back to the Firm’s net earnings attributable to
the Company’s shareholders of $27.5 million, or $0.40 per share
(basic and diluted), adjusted net earnings attributable to the
Company’s shareholders amounted to $66.7 million, or $0.97 per
share (basic) and $0.96 (diluted) for the twelve-month period ended
December 31, 2014, compared to $43.4 million or $0.74 per share
(basic) and $0.73 (diluted) for the same period last year.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 45
— SUMMARY OF QUARTERLY RESULTS
The Firm’s AUM, total revenues, adjusted EBITDA and net earnings, on a consolidated basis and including per-share amounts, for each of the
Firm’s most recently completed eight quarterly periods and the last twelve months are as follows:
Table 10 – Quarterly Results (in $ thousands except AUM in $ millions and per share data)
AUM1
Total revenues
Adjusted EBITDA2
Adjusted EBITDA margin
Net earnings attributable to
Company’s shareholders
PER SHARE – BASIC
Adjusted EBITDA2
Net earnings attributable
to the Company’s shareholders
Adjusted net earnings attributable
to the Company’s shareholders2
PER SHARE – DILUTED
Adjusted EBITDA2
Net earnings attributable to the
Company’s shareholders
Adjusted net earnings attributable
to the Company’s shareholders2
PER SHARE – DILUTED
(Including non-cash compensation and
options granted)3
Adjusted EBITDA2
Net earnings attributable
to the Company’s shareholders
Adjusted net earnings attributable
to the Company’s shareholders2
Last
Twelve
Months4
83,508
222,358
78,223
35.2%
Q4
Dec. 31
2014
86,612
64,304
24,280
38.6%
Q3
Sep. 30
2014
84,875
52,371
18,085
34.5%
Q2
Jun. 30
2014
82,131
55,720
20,191
36.2%
Q1
Mar. 31
2014
80,412
49,963
15,127
30.3%
Q4
Dec. 31
2013
77,485
55,222
22,941
41.5%
Q3
Sep. 30
2013
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
30,216
11,344
37.5%
27,492
12,090
5,053
7,671
2,678
8,481
1,508
3,365
1,586
1.14
0.40
0.97
1.12
0.40
0.96
1.05
0.37
0.90
0.36
0.18
0.34
0.35
0.18
0.34
0.33
0.16
0.31
0.26
0.07
0.21
0.26
0.07
0.21
0.24
0.07
0.20
0.30
0.11
0.23
0.29
0.11
0.23
0.28
0.10
0.22
0.22
0.04
0.18
0.22
0.04
0.18
0.20
0.04
0.17
0.36
0.13
0.28
0.35
0.13
0.27
0.33
0.12
0.26
0.22
0.03
0.16
0.22
0.03
0.16
0.20
0.03
0.15
0.23
0.06
0.16
0.23
0.06
0.16
0.22
0.06
0.15
0.20
0.03
0.13
0.20
0.03
0.13
0.19
0.03
0.13
1. AUM as at March 31, 2013 and before 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 60.
3. This analysis assumes that all outstanding stock-based awards will vest and will be settled with shares of the Company (including 3,346,037 share options;
1,699,508 PSUs and 540,508 RSUs as at December 31, 2014. Per share measures as at September 30, 2013 and before were restated for calculation consistency.
4. Last Twelve Months (“LTM’’) represents the sum of the last four quarters, except for AUM, which are average of last four quarters.
46
MANAGEMENT’S DISCUSSION AND ANALYSISFor the Three and Twelve-month Periods Ended December 31, 2014 Results and Trend Analysis
The following shows the evolution of the Company since its creation through successful organic growth and various business acquisitions.
Acquisition
of Senecal
Investment Counsel
(October 2005)
Introduction of
1st Alternative
Strategy
Merger with Sceptre
Investment Counsel
(September 2010)
Acquisition of
Canadian Wealth
Management Group
Inc. (November 2012)
$0.6B
Acquisition of Propel
Capital Corporation
(September 2013)
$0.2B
Creation
of Foreign
Equity Team
Opening of
First US Office
(September 2011)
Acquisition Of Assets
From Ubs Global Asset
Mgmt. (Canada) Inc.
(January 2013)
$6B
Agreement to Acquire
Samson Capital
Advisors LLC
$9.4B
2003
2005
2006
2008
2009
2010
2011
2012
2013
2014
2015
Creation of
Fiera Capital through
Acquisition of Elantis,
Desjardins Group’s
Investment Subsidiary
(September 2003)
Acquisition of
YMG Capital
(February 2006)
Creation of
Fiera Properties
(December 2011)
Acquisition of Assets
From GMP Captial Inc.
And Creation of Fiera
Quantum (May 2013)
$0.6B
Acquisitions of Bel Air
Investment Advisors
and Wilkinson O’Grady
(October 2013)
$8.5B
Creation of
Fiera Axium
Infrastructure
(December 2008)
Listing on Toronto
Stock Exchange
(September 2011)
Acquisition
of Natcan
(April 2012)
$25B
AUM
The current quarter continued to show an increase in AUM compared
to the previous quarter mainly due to new mandates won in the
institutional clientele notably in the U.S., combined with market
appreciation and favourable impact of foreign exchange rates. The
previous quarter ended September 30, 2014 showed a significant
increase in AUM compared to the quarter ended June 30, 2014,
mainly due to large mandates won in the institutional clientele
namely in the U.S., combined with market appreciation and
additional assets following the acquisition of Propel. The increase
in AUM in the second quarter of 2014 compared to the first quarter
of 2014 is mainly attributable to market appreciation and new
mandates, partially offset by lost mandates and net negative
contribution. The increase in AUM in the first quarter of 2014
compared to the fourth quarter of 2013 is mainly attributable to
new mandates and market appreciation from one quarter to the
next. The rise in AUM in the fourth quarter of 2013 compared to the
quarter ended September 30, 2013, is primarily due to the Bel Air and
Wilkinson O’Grady acquisitions, combined with additional AUM from
new mandates. AUM increased in the third quarter of 2013 compared
to the second quarter ended June 30, 2013, mainly due to additional
AUM from new mandates in the institutional clientele combined
with market appreciation during the period. AUM increased in the
second quarter 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 UBS
assets in January 2013 contributed to the increase in AUM in the
quarter ended March 31, 2013 compared to the previous quarter
ended December 31, 2012.
Revenues
Since the acquisition of Bel Air and Wilkinson in late 2013, the Firm’s
revenues stream is balanced between the institutional, retail and
private wealth clientele and has been constantly progressing.
The current quarter showed a significant increase in revenues
mainly due to the inclusion of performance fees from both traditional
and alternative asset classes which are generally recorded in
December of each year. Also, revenue from base management fees
in the fourth quarter of 2014 were higher than those from the third
quarter of 2014. For nine consecutive quarters since the quarter
ended December 31, 2012, revenues have been on a continuous
growth path.
The third quarter ended September 30, 2014, showed an
increase in base management fees compared to the quarter ended
June 30, 2014. Performance fees were lower in the third quarter
of 2014 compared to the second quarter of 2014 due to the fact
that they are generally recorded in June of each year. The increase
in revenues in the second quarter of 2014 compared to the first
quarter of 2014 is mainly attributable to the increase in base
management and performance fees in the alternative asset class.
The previous quarter ended March 31, 2014 was characterized by
an increase in base management fees and other revenue resulting
from a full quarter of Bel Air and Wilkinson O’Grady operations and
net additional AUM, combined with market appreciation. During the
quarter ended December 31, 2013, revenues increased due to the
inclusion of Bel Air and Wilkinson O’Grady operations, combined
with higher performance fees in both traditional and alternative asset
classes, which are generally earned in the fourth quarter of each
year. Revenues for the quarter ended September 30, 2013 increased
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 47
mainly due to positive net contributions and new mandates. The
quarter ended June 30, 2013 also demonstrated an increase
compared to the previous quarter as a result of the acquisition of
assets from UBS and GMP. Revenues in the quarter ended March 31,
2013 decreased slightly compared to the quarter ended December
31, 2012, mainly due to timing of performance fees generally earned
in the quarter ending in December of each year.
Adjusted EBITDA
Adjusted EBITDA has been on an increasing trend over the last eight
quarters. Adjusted EBITDA increased in the fourth quarter of 2014
compared to those from the third quarter of 2014, mainly due to
higher performance fees which are generally recorded in December
of each year, combined with higher base management fee revenues.
Adjusted EBITDA decreased in the third quarter of 2014 compared
to the second quarter of 2014, mainly due to lower performance
fees in the alternative asset class, which are generally recorded in
June of each year
Adjusted EBITDA increased in the second quarter of 2014
compared to the first quarter of 2014, mainly due to higher base
management and performance fees, combined with lower SG&A
expenses, particularly relating to variable compensation. The first
quarter ended March 31, 2014 showed a decrease in adjusted EBITDA
compared to the previous quarter, mainly due to lower performance
fees and higher SG&A expenses. The increase in SG&A is mainly due
to the inclusion of a full quarter of Bel Air and Wilkinson O’Grady
operations, combined with higher performance-based investment
manager compensation. The previous quarter ended December 31,
2013 was positively impacted by additional AUM base revenues
resulting from the Bel Air and Wilkinson O’Grady acquisitions, as
well as by higher performance fees which are generally recognized
in the quarter ending in December of each year. The quarter ended
September 30, 2013 benefited from positive net contributions,
market appreciation and new mandates. The quarter ended June
30, 2013 also showed an increase compared to the previous quarter
ended March 31, 2013 following the acquisition of assets from UBS
and GMP.
due to higher base management fees, higher performance fees in
the alternative asset class, combined with lower SG&A expenses,
particularly related to variable compensation. The third quarter
ended September 30, 2014 had an adjusted EBITDA margin of
34.5%, a lower level compared to the previous quarter, mainly due
to lower performance fees in the alternative asset class, which are
generally recorded in June of each year. The current quarter ended
December 31, 2014 had an adjusted EBITDA margin of 38.6%, a
higher level compared to the previous quarter, mainly attributable to
higher performance fees which are generally recorded in December
of each year, combined with higher base management fees as a
result of higher base AUM.
On a twelve-month basis, the current LTM adjusted EBITDA
margin was at 35.2%, which compares to the LTM adjusted EBITDA
margin of 35.8 % and 35.9% reported as at September 30, 2014,
and June 30, 2014, respectively. The LTM adjusted EBITDA margin
neutralizes the impact of the timing of performance fees which
are generally recorded in the fourth quarter of each year as well
as the rise in SG&A expenses in recent quarters resulting from
various acquisitions and provides a better measure of the Firm’s
overall performance.
Net Earnings Attributable to the
Company’s Shareholders
Net earnings attributable to the Company’s shareholders have
fluctuated from a low of $1.5 million to a high of $12.1 million.
Net earnings attributable to the Company’s shareholders were
impacted by various initiatives resulting in higher SG&A expenses,
acquisitions and restructuring and other integration costs. Also,
performance fees generally recorded in the fourth quarter of each
year contributed to the fluctuation of the net earnings attributable
to the Company’s shareholders.
The current quarter’s net earnings attributable to the Company’s
shareholders were higher than those of the previous quarter ended
September 30, 2014, mainly due to higher performance fees which
are generally recorded in December of each year, combined with
higher base management fees as a result of higher base AUM.
Adjusted EBITDA Margin
Adjusted EBITDA margin relates adjusted EBITDA to revenues. It is
an important measure of overall operating performance because it
measures Company profitability from operations.
Adjusted EBITDA margin has fluctuated from a low of 30.3% to
a high of 41.5% during the most recent eight quarters. The quarters
following the Natcan Investment Management Inc. (“Natcan”)
acquisition in 2012 have shown an adjusted EBITDA margin ranging
from 36.8% to 41.1% due to higher revenues and cost savings from
post-acquisition synergies. The quarters ended December 31, 2012
and 2013 had a high adjusted EBITDA margin, approximately 41%,
due to high performance fees which are generally earned in the
fourth quarter of each year. The 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 performance-based
compensation earned by the investment teams. The quarter ended
June 30, 2014 had an adjusted EBITDA margin of 36.2% mainly
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 $0.13
per share (basic and diluted) to a high of $0.34 per share (basic
and diluted).
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 lower performance fees recorded in that period. During the
following quarter and the quarter ended September 30, 2013,
the Company recorded adjusted net earnings attributable to the
48
MANAGEMENT’S DISCUSSION AND ANALYSISFor the Three and Twelve-month Periods Ended December 31, 2014 Company’s shareholders of $0.16 and $0.15 per share (basic and
diluted), respectively. The quarter ended December 31, 2013, closed
with high adjusted net earnings attributable to the Company’s
shareholders of $0.29 per share (basic) and $0.28 per share
(diluted), mainly due to higher base management fees combined
with higher performance fees in the traditional and alternative
asset classes recorded in the fourth quarter of that year. During the
first quarter of 2014 and the second quarter ended June 30, 2014,
the Company recorded adjusted net earnings attributable to the
Company’s shareholders of $0.18 and $0.23 per share (basic and
diluted), respectively.
For the current quarter ended December 31, 2014, adjusted net
earnings attributable to the Company’s shareholders were $0.34
per share (basic and diluted), representing an increase from the
previous quarter mainly due to higher performance fees and higher
base management fees.
— LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
The ability to consistently generate free cash flow from operations in excess of dividend payments, share repurchases, capital expenditures,
and ongoing operating expenses remains one of the Company’s fundamental financial goals. The Firm’s principal uses of cash, other than
for operating expenses include (but are not limited to) dividend payments, debt repayments, capital expenditures, business acquisitions
and stock buy-back.
The following table provides additional cash flows information for Fiera Capital.
Table 11 – Summary of Consolidated Statements of Cash Flows (in $ thousands)
Cash generated by operating activities
Cash used in investing activities
Cash (used in) generated by financing activities
Increase (Decrease) in cash
Effect of exchange rate changes on cash denominated in foreign currencies
Cash, beginning of period
Cash, end of period
For The Twelve-Month Periods Ended
December 31, 2014
December 31, 2013
63,735
(20,712)
(48,987)
(5,964)
1,070
21,774
16,880
35,002
(201,368)
181,918
15,552
206
6,016
21,774
Cash generated by operating activities amounted to $63.7 million for the twelve-month period ended December 31, 2014, compared to
$35.0 million for the same period last year. The variation of $28.7 million is mainly attributable to a $19.0 million increase in adjusted EBITDA
as describe in the “Adjusted EBITDA” section, combined with $13.1 million cash inflows from the changes in non-cash operating working
capital items, partially offset by an increase of $8.4 million in income tax paid during the twelve-month period ended December 31, 2014,
compared to the same period last year.
Cash used in investing activities amounted to $20.7 million for the twelve-month period ended December 31, 2014, compared to
$201.4 million of cash used in the twelve-month period ended December 31, 2013. The year-over-year variation is mainly attributable to
the acquisition of UBS, GMP, Bel Air and Wilkinson assets during the twelve-month period ended December 31, 2013.
Cash used in financing activities totaled $49 million for the twelve-month period ended December 31, 2014, compared to $181.9 million
of cash generated by financing activities for the same period last year. The year-over-year variation is attributable mainly to additional
borrowings related to the acquisition of UBS, GMP, Bel Air and Wilkinson assets during the twelve-month period ended December 31, 2013.
Finally, the positive impact of exchange rate changes on cash denominated in foreign currencies was $1.1 million during the twelve-month
period ended December 31, 2014, compared to a positive impact of $0.2 million for the same period last year. The year-over-year variation is
mainly due to a full year of operation of Bel Air and Wilkinson in 2014, compared to two months of operations of Bel Air and Wilkinson in 2013.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 49
Cash Earnings1
The Company defines cash earnings as net earnings attributable to the Company’s shareholders, adjusted for depreciation and amortization,
changes in fair value of derivative financial instruments and non-cash compensation items. Cash earnings are an indicator of our ability to
pay out dividends, to continue operations, and to invest in new businesses. We believe that cash earnings are an important measure used
to assess our core operating performance.
The following table provides details of the Firm’s cash earnings and cash earnings per share for the twelve-month periods ended
December 31, 2014 and 2013, respectively.
Table 12 – Cash Earnings and Cash Earnings per Share (in $ thousands except per share data)
Net earnings attributable to the Company’s shareholders
Adjusted for the following items:
Depreciation of property and equipment
Amortization of intangible assets
Non-cash compensation
Impairment of non-financial assets
Changes in fair value of derivative financial instruments
Cash earnings attributable to the Company’s shareholders
Cash earnings per share (basic)
Cash earnings per share (diluted)
For The Twelve-Month Periods Ended
December 31, 2014
December 31, 2013
27,492
14,939
1,733
25,700
6,940
8,016
(7,419)
62,462
0.91
0.90
1,341
19,083
2,716
-
(426)
37,653
0.64
0.63
1. Cash earnings and cash earnings per share are non-IFRS measures. Please refer to “Non-IFRS Measures” on page 60.
Certain totals, subtotals and percentages may not reconcile due to rounding.
For the twelve-month period ended December 31, 2014, earnings attributable to the Company’s shareholders were negatively affected by
$27.4 million of depreciation of property and equipment, and amortization of intangible assets, and by $7.5 million of non-cash compensation,
impairment of non-financial assets and change in fair value of derivative financial instruments, compared to $20.4 million and $2.3 million
for the same period last year, respectively. When added back to the Firm’s net earnings attributable to the Company’s shareholders of $27.5
million, or $0.40 per share (basic and diluted), cash earnings attributable to the Company’s shareholders amounted to $62.5 million, or
$0.91 per share (basic) and $0.90 (diluted) for the twelve-month period ended December 31, 2014, compared to $37.7 million or $0.64 per
share (basic) and $0.63 (diluted) for the same period last year.
Long-Term Debt
Fiera Capital Corporation has in place a $250.0 million unsecured
credit facility (“Credit Facility”) consisting of:
a) $75.0 million revolving facility maturing in April 2017 and;
b) $175.0 million term facility maturing in April 2017.
On October 31, 2013, the Company amended its $118.0 million
credit facility which consisted of a $10.0 million revolving facility and
a $108.0 million term facility to a $250.0 million 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, 2014), matures on April 3, 2017, and is repayable in quarterly
instalments of $3.375 million starting in June 2015 up to April 2017.
The instalments that are due in June 2015 have been classified as
non-current since the Company has the ability to refinance the
term facility using the undrawn portion of the revolving facility. The
revolving facility can also 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.
During the year ended December 31, 2014, the Company
converted $45.5 million from its term facility to US$41.597 million.
In addition, the Company reduced the drawing under its revolving
facility by US$12.3 million. As at December 31, 2014, the total
amount of long-term debt included US$41.597 million outstanding
on the term facility and US$39.0 million outstanding on the revolving
facility (US$51.3 million was outstanding on the revolving facility as
at December 31, 2013).
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,
2014, all debt covenant requirements were met.
On May 1, 2012, the Company entered into an interest rate
swap agreement of a notional amount of $108.0 million, which
consists of exchanging its variable rate for a fixed rate of 1.835%
ending in March 2017, payable in monthly instalments. Refer to
Note 6, Financial Instruments, of the audited consolidated financial
statements for additional information.
50
MANAGEMENT’S DISCUSSION AND ANALYSISFor the Three and Twelve-month Periods Ended December 31, 2014 Contractual Obligations and Contingent Liabilities
Contractual Obligations
The Company has the following contractual obligations as at December 31, 2014:
Table 13 – Contractual Obligations ($ in thousands)
Long-Term Debt
Purchase Price Obligations
Operating Leases
Total Obligations
Carrying
Amount
223,000
44,668
n/a
n/a
Total
223,000
52,000
21,422
296,422
2015
10,125
8,500
8,231
26,856
2016
13,500
10,500
4,505
28,505
2017
Thereafter
199,375
8,500
4,281
212,156
-
24,500
4,405
28,905
Contingent Liabilities
In the normal course of business, the Company is party to business and employee-related claims. The potential outcomes related to existing
matters faced by the Company are not determinable at this time. The Company intends to defend these actions, and management believes
that the resolution of these matters will not have a material adverse effect on the Company’s financial condition.
Off-Balance Sheet Arrangements
At December 31, 2014, Fiera Capital was not party to any off-balance
sheet arrangements, including guarantees, derivatives, except for the
above-mentioned floating-to-fixed interest rate swap agreement,
and variable-interest entities. We do not expect to enter into
such agreements.
Share Capital
As at December 31, 2014, the Company had 48,715,873 Class A
subordinate voting shares and 20,039,750 Class B special voting
shares for a total of 68,755,623 outstanding shares compared to
46,639,057 Class A subordinate voting shares and 20,798,008 Class
B special voting shares for a total of 67,437,065 outstanding shares
as at December 31, 2013.
Preferred Shares
On April 17, 2014, the Company directors approved the filing
of articles of amendment to create a new class of shares to be
designated as preferred shares (“Preferred Shares’’). This amendment
was approved by the Company’s shareholders at the annual
shareholders’ meeting. The Preferred Shares would be issuable in
series and would rank, both in regards to dividends and return on
capital, in priority to the holders of the Class A Shares, the holders
of the Class B Shares and over any other shares ranking junior to
the holders of the Preferred Shares. Other conditions could also be
applicable to the holders of the Preferred Shares.
Shares Issued
As part of the acquisition of Bel Air, the Company committed to
issue in three tranches over a 32-month period following closing,
832,755 Class A Shares valued at US$9.8 million. This commitment
represents an equity component that was recorded as hold back
shares at a discounted value of US$8.4 million ($8.8 million). During
the second quarter ended June 30, 2014, the first tranche amounting
to 277,578 hold back shares were issued and effectively converted
into Class A Shares and a value of $3.1 million was transferred from
the caption hold back shares to share capital.
On the same day as the conversion of the first tranche of the
hold back shares into share capital in connection with a related
agreement, the Company issued 149,469 Class A Shares to National
Bank of Canada (“National Bank”) for $1.8 million. The amount of
$1.8 million was received on July 2, 2014. These shares were issued
upon the exercise by National Bank of its anti-dilution rights, as
defined in the Investor Rights Agreement. The National Bank anti-
dilution rights allow National Bank to participate in future issuances
of shares upon the occurrence of certain dilutive events in order for
National Bank to maintain its ownership percentage.
In connection with the agreement described above, the Company
also issued two subscription receipts to National Bank, each providing
for the issuance of 149,469 Class A Shares, at a pre-determined
price of $12.24, to be exchanged into shares concurrently with the
second and third conversion of hold back shares into share capital.
The proceeds of these subscription receipts have been transferred to
an escrow account but the release from the escrow is conditional on
the issuance of the hold back shares. As such, the amounts have been
recorded as an asset and a liability for an amount of $3.4 million, of
which $1.7 million is presented as a current asset/liability.
Shares issued as settlement of purchase
price obligations
On November 3, 2014, in connection with the asset purchase
agreement of Natcan Investment Management Inc., the Company
issued 642,275 Class A Shares for $8.5 million as settlement of
purchase price obligations.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 51
Share-Based Payments
Stock Option Plan
The following table presents transactions that occurred during the twelve-month period ended December 31, 2014, and 2013, under the
terms of the Company’s stock option plan:
Table 14 – Options Transactions
Outstanding – beginning of year
Granted
Exercised
Forfeited
Expired
Outstanding – end of year
Options exercisable – end of year
December 31, 2014
December 31, 2013
Number of
Class A Share Options
Weighted-Average
Exercise Price ($)
Number of
Class A Share Options
Weighted-Average
Exercise Price ($)
2,942,522
692,427
(249,236)
(32,176)
(7,500)
3,346,037
1,230,298
8.12
13.43
6.77
8.10
5.59
9.32
6.55
2,290,393
823,000
(170,871)
-
-
2,942,522
999,690
6.92
10.77
4.84
-
-
8.12
6.48
Deferred share unit plan (“DSU”)
In 2007, the Board 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 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 cancelled the DSU plan; however,
all existing rights and privileges were kept intact. All directors are now compensated in cash.
As at December 31, 2014, management had recorded a liability for an amount of approximately $0.174 million for the 13,681 units ($0.186
million for 13,214 units as at December 31, 2013) outstanding under the DSU Plan.
Employee share purchase plan (“ESPP”)
On October 6, 2011, the Board 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 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 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 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.
52
MANAGEMENT’S DISCUSSION AND ANALYSISFor the Three and Twelve-month Periods Ended December 31, 2014 The following table presents transactions that occurred during the years ended December 31, 2014 and 2013 in the Company’s RSU plans.
Table 15 – RSU Transactions
Outstanding – beginning of year
Granted
Reinvestments in lieu of dividends
Forfeited
Outstanding – end of year
Number of RSUs Outstanding
2014
367,548
166,559
15,573
(9,172)
540,508
2013
125,646
237,071
4,831
-
367,548
As at December 31, 2014, management had recorded a liability for an amount of $2.2 million for the 540,508 units ($0.6 million for
367,548 units as at December 31, 2013) outstanding under the RSU Plan. An expense of $1.64 million and $0.567 million was recorded
during the years ended December 31, 2014 and 2013, respectively for these grants.
Performance Share Unit Plan (“PSU”)
On October 30, 2013, the Board 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 PSUs in cash or Class A Shares of
the Company with the exception of the September 2, 2014 plan for which the option is at the discretion of the participant. 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 following table summarizes the outstanding PSU awards as at December 31, 2014:
Table 16 – PSU Awards
Date of Grant
Vesting Schedule
Vesting Date
October 30, 2013
20% per year for 5 years
December 31 of each year
January 1, 2014
6.5% on year 1 and 7, 13.5% on
year 2 and 6 and 20% on year
3, 4 and 5
December 31 of each year
September 2, 2014
100% in 2017
December 31, 2017
Key vesting
Performance Conditions
Annualized revenue growth
objective for private wealth
revenues
Annualized revenue
growth objective for
alternative revenues
Payout Formula
Multiple of the private wealth
revenues
Multiple of the non-traditional
investment solution revenues
Annualized revenues of the
last quarter of 2017 for
closed-end funds
Variable percentage of
annualized revenue for
closed-end funds
All of the above awards are conditional on the continued employment of the participant with the Company.
The following table presents transactions that occurred during the twelve-month periods ended December 31, 2014, and December 31,
2013, in the Company’s PSU plans.
Table 17 – PSU Transactions
Date of Grant
Outstanding – December 31, 2012
Granted
Forfeited
Outstanding – December 31, 2013
Granted
Forfeited
Outstanding – December 31, 2014
October 30, 2013
Wilkinson
October 30, 2013
Bel Air
January 1, 2014
September 2, 2014
147,404
-
147,404
-
-
147,404
-
1,241,667
(43,750)
1,197,917
-
(25,000)
1,172,917
-
-
-
-
307,692
-
307,692
-
-
-
-
107,692
-
107,692
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 53
October 30, 2013
During the fourth quarter of 2013, the Company issued PSUs to employees of Bel Air and Wilkinson O’Grady that became employees of the
Company as at October 31, 2013. The PSUs will vest in tranches equivalent to 20% of the total grant in each of the next five years. The annual
vesting of the PSUs is subject to different conditions, including the attainment of an agreed upon annualized revenue growth objective and
the continuance of employment of the participant.
During the fourth quarter of 2014, the October 30, 2013 grant was modified to include revised performance conditions to all former
Bel Air employees that participated in this grant. These conditions aim at better aligning the performance condition applicable to these
employees with each participant’s ability to impact the Company’s results. After giving effect of this modification, the PSUs attributed to
the former Bel Air employees are now subject to the attainment of an agreed upon annualized revenue growth objective solely on the Bel
Air business unit as opposed to the Fiera Private Wealth North America business unit.
The value of each PSU granted to the former Wilkinson employees is derived from the value of the Fiera Private Wealth North America
business unit while the value of each PSU granted to the former Bel Air employees is derived from the value of the Bel Air business unit. The
value of the PSUs granted on October 30, 2014 was evaluated at US$13.7 million.
The attainment of the performance conditions for these two grants and the estimated vesting of the PSUs are reassessed at the end
of each reporting period. The following table summarizes the Company’s estimated vesting of the PSUs for the years ended December 31.
Vesting Schedule
Year 1
Year 2
Year 3
Year 4
Year 5
Fiscal Year
October 30, 2013
Wilkinson
October 30, 2013
Bel Air
2014
2015
2016
2017
2018
0%
0%
0%
0%
0%
100%
100%1
100%
0%
0%
1. Year 2 expected to vest in Year 3 along with Year 3 according to estimates.
An expense of $3.96 million and $0.76 million was recorded during the years ended December 31, 2014 and 2013, respectively for these grants.
January 1, 2014
During the first quarter of 2014, the Company issued PSUs to the responsible of the Alternative revenues business unit. The PSUs will vest
in accordance with the following tranches: 6.5% on year 1 and 7, 13.5% on year 2 and 6 and 20% on year 3, 4 and 5. The annual vesting
of the PSUs is subject to different conditions, including the attainment of an agreed upon annualized revenue growth objective and the
continuance of employment of the participant.
The value of the PSUs granted was determined at inception using forecasted revenues of the different payout targets. The value of the
PSUs granted on January 1, 2014 was evaluated at $2.8 million. The compensation expense is based on the number of PSUs expected to vest
based on the attainment of the performance conditions and is recorded over the vesting period.
The attainment of the performance conditions and the estimated vesting of the PSUs are reassessed at the end of each reporting period. As
at December 31, 2014, the Company does not believe these PSU’s will vest. As such, the Company did not record an expense for this PSU plan.
September 2, 2014
During the third quarter of 2014, the Company issued PSUs to employees of Propel that became employees of the Company as at September 2,
2014. The PSUs will vest on December 31, 2017. The vesting of the PSUs is subject to different conditions, including the attainment of an
agreed upon level of revenues during the last quarter of 2017 for closed-end funds and the continuance of employment of the participant.
The value of the PSUs granted was determined at inception using forecasted revenues of the payout target. The value of the PSUs granted
on September 2, 2014 was evaluated at $0.435 million.
The Company intends to settle this grant in cash. As such, the PSUs are recorded at fair value at the end of each reporting period. The
liability for this grant is $0.043 million as at December 31, 2014.
The attainment of the performance conditions and the estimated vesting of the PSUs are reassessed at the end of each reporting period.
As at December 31, 2014, the Company believes that all these PSUs will vest at December 31, 2017.
54
MANAGEMENT’S DISCUSSION AND ANALYSISFor the Three and Twelve-month Periods Ended December 31, 2014 Post-Employment Benefit Obligations
The Company contributes to defined contribution plans for its employees. Contributions for the year ended December 31, 2014, amount to
$2.26 million ($1.56 million for the year ended December 31, 2013).
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.
Related Party Transactions
The Company entered into the following significant transactions with its shareholders and their related companies:
Table 18 – Related Party Transactions (in $ thousands)
Base management fees
Performance fees
Selling, general & administrative expenses
Reference fees
Other
Interest on long-term debt
Changes in fair value of derivative financial instruments
Integration cost
Shares issued as settlement of the purchase price obligations
For the Twelve-Month Periods Ended
December 31, 2014
December 31, 2013
45,057
4,233
1,583
1,775
7,864
301
-
8,500
39,132
6,114
1,503
1,638
6,934
(847)
183
8,500
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.
The amounts due under the Company’s credit facility, presented as long-term debt are due to syndicate of lenders which includes two related
parties of the Company. The derivative financial instruments liability is due to a related company.
The Company has carried out the following transaction with joint ventures: other revenue of $1.2 million for the year ended December 31,
2014 ($0.9 million for the year ended December 31, 2013).
— CONTROL AND PROCEDURES
— FINANCIAL INSTRUMENTS
The Chairman and Chief Executive Officer (“CEO”) and the Executive
Vice President and Chief Financial Officer (“CFO”), 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 Internal Control-Integrated
Framework (COSO framework 2013) report 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 CFO, supported by Management, evaluated the
design and operating effectiveness of the Company’s DC&P and
ICFR as at December 31, 2014, and have concluded that they
were effective. Furthermore, no significant changes to the internal
controls over financial reporting occurred during the quarter ended
December 31, 2014.
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, 2014.
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 statements of financial
position 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 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, equity
market fluctuation risks, credit risk, interest rate risk, currency risk
and liquidity risk.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 55
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 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, 2014 and 2013,
is comprised of mutual fund and pool fund investments under its
management with a fair value of $7.1 million as at December 31, 2014
and $6.1 million as at December 31, 2013. Mutual fund and pooled
fund investments are comprised of a well-diversified portfolio of
investments in equities and bonds. 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, 2014, and 2013 has an
impact of increasing or decreasing other comprehensive income by
$0.7 million and $0.6 million 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 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 statements of financial position represent the
Company’s maximum credit exposure at the consolidated
statements of financial position dates.
The credit risk on cash, restricted cash and investments is limited
because the counterparties are chartered and commercial banks with
high-credit ratings assigned by national credit-rating agencies.
The Company’s credit risk is attributable primarily to its trade
receivables. The amounts disclosed in the consolidated statements
of financial position 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
and financial condition of the counterparties. In order to reduce its
risk, management has adopted credit policies that include regular
review of client balances. With the exception of National Bank
of Canada and related companies which represent 20.1% as at
56
December 31, 2014 (22% as at December 31, 2013), no customer
represents more than 10% of the Company’s accounts receivable as
at December 31, 2014 and 2013.
Interest Rate Risk
The Company is exposed to interest rate risk through its cash and
long-term debt. The interest rates on the long-term debt are variable
and expose the Company to cash flow interest rate risk.
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 were 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, accounts
receivable, accounts payable and accrued liabilities and long-
term debt denominated in US dollars and the operations of its US
businesses 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 (excluding long-
term debt) as at December 31, 2014, a 5% increase/decrease
of the US dollar against the Canadian dollar would result in an
increase/decrease in total comprehensive income of $1.1 million
(2013 - $0.5 million). 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 statement of financial position 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.
Determination of Fair Value of
Financial Instruments
The fair value represents the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
MANAGEMENT’S DISCUSSION AND ANALYSISFor the Three and Twelve-month Periods Ended December 31, 2014 The fair value of cash, restricted cash, accounts receivable,
accounts payable and accrued liabilities, dividend payable, amount
due to related companies and client deposits is approximately equal
to their carrying values due to their short-term maturities.
ended December 31, 2014, respectively and $(0.8) million and
$0.4 million for the year ended December 31, 2013, respectively.
Refer to Note 6, Financial Instruments, of the audited consolidated
financial statements for additional information.
The cost of mutual fund investments and pool funds is $6.5
million as at December 31, 2014 and $5.9 million as at December
31, 2013, while the fair value is $7.1 million as at December 31, 2014
and $6.1 million as at December 31, 2013. The unrealized gain of $0.6
million (net of income taxes of $0.083 million) as at December 31,
2014 and $0.2 million as at December 31, 2013, (net of income taxes
of nil) are reflected in other comprehensive income.
The fair value of long-term debt approximates its carrying
amount, 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 Company measured the initial fair value of the subscription
receipts receivable of $3.4 million and subscription receipts
obligation of the same amount using level 2 inputs in the fair
value hierarchy. The Company determined the fair value by using
observable market inputs such as the discount rate.
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. The value of the option is calculated using the present value of
the sum of a multiple of the forecasted earnings before income taxes,
depreciation, amortization (“EBITDA”) and forecasted performance
fees. The actual performance of the subsidiary directly impacts
the value of the option. Forecasts are monitored and updated on
a monthly basis, and the value of the option is recalculated at the
end of each reporting period. During the fourth quarter of 2014, the
Company completed the annual budget of the subsidiary for fiscal
year 2015 and recalculated the option value using the most recent
forecasted EBITDA attributable to Fiera Quantum L.P. As a result, the
Company determined that the value of the option was nil.
For the year ended December 31, 2014, the Company recorded
a recovery of $7.7 million (2013 – charge of $0.4 million) in changes
in fair value of financial instruments in the consolidated statement
of earnings to reflect the re-measurement of the value of the option
to fair value.
Derivative financial instruments consist only of interest rate swap
contracts, The Company determines the fair value of its interest rate
swap contracts by applying valuation techniques, using observable
market inputs such as interest rate yield curves as well as 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 it is consistent with accepted economic methods for pricing
financial instruments.
Changes in fair value of derivative financial instruments presented
in the consolidated statement of earnings include changes in the fair
value of the interest rate swap contracts described above and the
changes in the fair value of the option granted to non-controlling
interest for a total of $0.3 million and $(7.7) million for the year
— CAPITAL MANAGEMENT
The Company’s capital comprises share capital, (deficit) retained
earnings and long-term debt, including the current portion thereof,
less cash. The Company manages its capital to ensure adequate
capital resources while maximizing return to shareholders through
optimization of the debt and equity mix and to maintain compliance
with regulatory requirements and certain restrictive debt covenants.
To maintain its capital structure, the Company may issue
additional shares, incur additional debt, repay existing debt
and acquire or sell assets to improve its financial performance
and flexibility.
To comply with Canadian Securities Administrators’ 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, 2014, all regulatory requirements and
exemptions were met.
— SIGNIFICANT ACCOUNTING JUDGMENTS
AND ESTIMATION UNCERTAINTIES
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
periodically 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 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 which
also constitutes a CGU since their acquisition on May 1, 2013.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 57
Share- Based Payments
The Company measures the cost of cash and equity-settled
transactions with employees by reference to the fair value of the
related instruments at the date at which they are granted. Estimating
fair value for share-based payments requires determining the most
appropriate valuation model for a grant, which is dependent on
the terms and conditions of the grant. This also requires making
assumptions and determining the most appropriate inputs to
the valuation model including the assessment of some of the
performance criteria along with the expected number of units that
are going to vest.
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 and 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 frequently subject
to change. Furthermore, there are 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.
58
— NEW ACCOUNTING POLICIES
Adoption of New IFRS
Amendments to IFRS 10, IFRS 12 and IAS 27 –
Investment Entities
The amendments to IFRS 10 define an investment entity and require
that a reporting entity that meets the definition of an investment
entity measures its subsidiaries at fair value through profit or loss
in its consolidated and separate financial statements, instead of
consolidating them.
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 adoption of this standard had no impact on the
amounts reported or disclosures made in these consolidated
financial statements.
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”. The adoption of
this standard had no impact on the amounts reported or disclosures
made in these consolidated financial statements.
IFRIC Interpretation 21 – Levies
IFRIC Interpretation 21 provides guidance on when to recognise a
liability for a levy imposed by a government, both for levies that
are accounted for in accordance with IAS 37- Provisions, Contingent
Liabilities and Contingent Assets and those where the timing and
amount of the levy is certain. A levy is an outflow of resources
embodying economic benefits that is imposed by governments
on entities in accordance with legislation, other than income
taxes within the scope of IAS 12 - Income Taxes and fines or other
penalties imposed for breaches of the legislation. The Interpretation
identifies the obligating event for the recognition of a liability as the
activity that triggers the payment of the levy in accordance with the
relevant legislation. The adoption of this standard had no impact
on the amounts reported or disclosures made in these consolidated
financial statements.
MANAGEMENT’S DISCUSSION AND ANALYSISFor the Three and Twelve-month Periods Ended December 31, 2014 Amendments to IAS 36 – Impairment of Assets
The amendments to IAS 36 reduce the circumstances in which the
recoverable amount of assets or cash generating units is required
to be disclosed, clarify the disclosures required and introduce an
explicit requirement to disclose the discount rate used in determining
impairment (or reversals) where recoverable amount (based on
fair value less costs of disposal) is determined using a present
value technique. The adoption of this standard had no impact on
the amounts reported or disclosures made in these consolidated
financial statements.
IFRS Issued but 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
In July 2014, the IASB finalized IFRS 9, Financial Instruments, bringing
together the financial asset and financial liability classification and
measurement, impairment of financial assets and hedge accounting
phases of the IASB project. IFRS 9 provides a single model for
financial asset classification and measurement that is based on
contractual cash flow characteristics and on the business model for
holding financial assets. IFRS 9 also introduces a new impairment
model for financial assets not measured at fair value through profit
or loss. This version adds a new expected loss impairment model and
limited amendments to classification and measurement of financial
assets and liabilities. IFRS 9 replaces IAS 39 – Financial Instruments:
Recognition and Measurement and is mandatorily effective for
annual periods beginning on or after January 1, 2018, and is to be
applied retrospectively. Early adoption permitted.
IFRS 15 – Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15 - Revenue from Contracts
with Customers. The new standard provides a comprehensive
framework for recognition, measurement and disclosure of revenue
from contracts with customers, excluding contracts within the
scope of the standards on leases, insurance contracts and financial
instruments. IFRS 15 becomes effective for annual periods beginning
on or after January 1, 2017, and is to be applied retrospectively. Early
adoption is permitted.
Amendments to IFRS 11 – Joint Arrangements
In May 2014, the IASB issued an amendment to this standard
requiring business combination accounting to be applied to
acquisitions of interests in a joint operation that constitute a
business. The amendment is effective for annual periods beginning
on or after January 1, 2016.
Amendments to IAS 38 - Intangible Assets and IAS 16 -
Property, Plant and Equipment
In May 2014, the IASB issued amendments to these standards to
introduce a rebuttable presumption that the use of revenue-based
amortization methods for intangible assets is inappropriate. The
amendment is effective for annual periods beginning on or after
January 1, 2016 with early adoption permitted.
Annual Improvements to IFRS (2010-2012) and
(2011-2013) Cycles
In December 2013, the IASB published annual improvements on the
2010-2012 and the 2011-2013 cycles which included narrow-scope
amendments to a total of nine standards. Modifications of standards
that may be relevant to the Company include amendments made
to clarify items including the definition of vesting conditions in
IFRS 2 – Share-Based payment, disclosure on the aggregation of
operating segments in IFRS 8 – Operating segments, measurement
of short-term receivables and payables under IFRS 13 – Fair value
measurement, definition of related party in IAS 24 – Related party
disclosures, and other amendments. Most of the amendments are
effective for annual periods beginning on or after July 1, 2014. Early
adoption is permitted.
Amendments to IAS 1 – Presentation of
Financial Statements
In December 2014, the IASB published amendments to this standard
which aims to improve presentation and disclosure. The amendments
relate to materiality, order of notes, subtotals, accounting policies
and disaggregation and are designed to further encourage companies
to apply professional judgement in determining what information to
disclose in the financial statements. The amendments are effective
for annual periods beginning on or after January 1, 2016 with early
adoption permitted.
The Company is still evaluating the impact of these standards on its
consolidated financial statements.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 59
— NON-IFRS MEASURES
— RISKS OF THE BUSINESS
Adjusted EBITDA are calculated as the difference between total
revenues and SG&A expenses (excluding non-cash compensation)
and external managers’ expenses.
Adjusted net earnings are calculated as the sum of net earnings
(loss) attributable to the Company’s shareholders, non-cash items,
including depreciation of property and equipment, amortization of
intangible assets, after tax changes in fair value of derivative financial
instruments, after tax impairment of non-financial assets, after tax
acquisition and restructuring and other integration costs and non-
cash compensation items.
Cash earnings are calculated as the sum of net earnings (loss)
attributable to the Company’s shareholders, non-cash items,
including depreciation of property and equipment, amortization
of intangible assets, changes in fair value of derivative financial
instruments, impairment of non-financial assets 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.
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 recognized measures
under 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 be recurring
and, accordingly, may reduce available cash. 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 the reader should not consider
them in isolation, or as substitutes in the analysis of our results as
reported under IFRS. Because of these limitations, we rely primarily
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, these measures may not be comparable to similarly titled
measures reported by other companies.
60
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 $24.2 billion of AUM as of December
31, 2014, representing approximately 28% of Fiera Capital’s $86.6
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.
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
MANAGEMENT’S DISCUSSION AND ANALYSISFor the Three and Twelve-month Periods Ended December 31, 2014 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.
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.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 61
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.
62
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 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;
MANAGEMENT’S DISCUSSION AND ANALYSISFor the Three and Twelve-month Periods Ended December 31, 2014 •
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.
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.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 63
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.
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.
64
MANAGEMENT’S DISCUSSION AND ANALYSISFor the Three and Twelve-month Periods Ended December 31, 2014 — 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 2014 ANNUAL REPORT | 65
— AUDIT COMMITTEE’S ANNUAL REPORT
The Audit Committee (the “Committee”) assists the Board of Directors of Fiera Capital Corporation
(“Fiera Capital”) in fulfilling certain key oversight responsibilities. Its mandate consists primarily in reviewing
and discussing the financial statements, their presentation and the quality of the accounting principles adopted,
in overseeing the maintenance of the internal control systems for their appropriateness and effectiveness, in
monitoring the independent audit processes, the management of regulatory compliance and the enterprise
risk management.
The Committee is governed by a charter detailed in the Company’s Annual Information Form (“AIF”)
disclosed on Fiera Capital’s website. The charter was last amended effective March 17, 2015. The Committee held
10 meetings during fiscal year 2014 and all three members of the Committee have attended the meetings except
for one whereby a member was absent. Its membership comprises three directors of which two are independent
and the third appointed under the section 3.3(2) exemption of NI 52-110 as disclosed in the Company’s AIF. On
an annual basis, the Committee evaluates the efficiency and effectiveness of its performance.
The Company’s Management has the primary responsibility of preparing the financial statements and related
documents including the Management’s Discussion & Analysis report (“MD&A”), of maintaining and applying
appropriate internal controls over financial reporting on a continuous basis as well as assessing their effectiveness.
The Committee reviews Fiera Capital’s interim and annual financial statements, associated MD&A’s, AIF and
prospectuses. In addition, it ensures that Management has designed and implemented an effective internal
control system with respect to the organization’s business processes, financial reporting, asset protection, fraud
detection, and regulatory compliance.
The independent auditor is directly accountable to the Committee. As such, the Committee ensures the
external auditor’s independence by authorizing all of its non-audit and non-prohibited services, by recommending
its appointment or the continuance of its engagement, by approving its compensation as well as conducting an
annual evaluation of the independent auditor. In addition, the Committee oversees the work of the independent
auditor and examines its audit plan, its mandates, its annual strategy, its reports, its letter to Management and
associated Management’s action plans.
With respect to the Autorité des marchés financiers (“AMF”), the Committee reviews its inspection reports
and follows up on Management’s action plans related to AMF’s observations. The Committee also oversees
Management’s quarterly financial reporting to AMF process through compliance reports presented by Fiera
Capital’s Chief Compliance Officer.
The Committee meets privately with the independent auditor, Fiera Capital’s Senior Management including
the Executive Vice-President and Chief Financial Officer and the Chief Compliance Officer. It reports to the Board
of Directors on a quarterly basis and, when required, makes recommendations.
In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of
Directors, and the Board has approved the audited consolidated financial statements and the associated MD&A.
Raymond Laurin, FCA, FCPA, ASC, Adm A.
Chair
Montreal, Quebec
March 18, 2015
66
CONSOLIDATED FINANCIAL
STATEMENTS OF
FIERA CAPITAL CORPORATION
December 31, 2014 and 2013
68 Independent Auditor’s Report
71
Consolidated Statements of
Financial Position
75
Notes to the Consolidated
Financial Statements
69 Consolidated Statements
of Earnings
72
Consolidated Statements of
Changes in Equity
70 Consolidated Statements of
Comprehensive Income
74 Consolidated Statements of
Cash Flows
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 67
— INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Fiera Capital Corporation
We have audited the accompanying consolidated financial statements of Fiera Capital Corporation, which
comprise the consolidated statements of financial position as at December 31, 2014 and December 31, 2013,
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 years ended December 31, 2014
and December 31, 2013, 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 audit 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 as at December 31, 2014 and December 31, 2013, and its financial performance and
cash flows for the years ended December 31, 2014 and December 31, 2013, in accordance with International
Financial Reporting Standards.
Montreal (Canada)
March 18, 2015
___________________
1. CPA auditor, CA, public accountancy permit No. A116635
68
— CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands of Canadian dollars, except per share data)
For the years ended December 31,
Revenues
Base management fees
Performance fees
Other revenues
Expenses
Selling, general and administrative expenses (Note 18)
External managers
Depreciation of property and equipment (Note 9)
Amortization of intangible assets (Note 10)
Impairment of non-financial assets (Note 10)
Acquisition costs
Restructuring and other integration costs (Note 4)
Earnings before realized (gain) loss on investments, interest on long-term debt and other financial charges, accretion
and change in fair value of purchase price obligations, loss on dilution of investments in joint ventures, changes in
fair value of derivative financial instruments and share of earnings of joint ventures
Realized (gain) loss on investments
Interest on long-term debt and other financial charges
Accretion and change in fair value of purchase price obligations
Loss on dilution of investments in joint ventures
Changes in fair value of derivative financial instruments (Note 6)
Share of earnings of joint ventures (Note 5)
Earnings before income taxes
Income taxes (Note 12)
Net earnings
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.
2014
$
200,612
15,437
6,309
222,358
145,967
5,107
1,733
25,700
8,016
2,079
3,127
191,729
30,629
(80)
7,977
2,642
23
(7,419)
(1,263)
28,749
5,158
23,591
27,492
(3,901)
23,591
0.40
0.40
2013
$
139,397
12,117
2,213
153,727
94,357
2,858
1,341
19,083
-
6,572
1,509
125,720
28,007
98
6,931
637
-
(426)
(1,227)
21,994
7,389
14,605
14,939
(334)
14,605
0.26
0.25
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 69
— CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of Canadian dollars)
For the years ended December 31,
Net earnings
Other comprehensive income:
Items that may be reclassified subsequently to earnings:
Unrealized gain on available-for-sale financial assets (net of income taxes of $83 in 2014 and nil in 2013)
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
Comprehensive income
Comprehensive income attributable to:
Company’s shareholders
Non-controlling-interest
The accompanying notes are an integral part of these consolidated financial statements.
2014
$
2013
$
23,591
14,605
352
-
111
7,472
7,935
31,526
35,427
(3,901)
31,526
152
97
130
1,472
1,851
16,456
16,790
(334)
16,456
70
CONSOLIDATED FINANCIAL STATEMENTS — CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at December 31,
(In thousands of Canadian dollars)
Assets
Current assets
Cash
Restricted cash
Investments (Note 7)
Accounts receivable (Note 8)
Prepaid expenses
Subscription receipts receivable
Non-current assets
Deferred charges
Long-term receivable
Deferred income taxes (Note 12)
Subscription receipts receivable
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
Accounts payable and accrued liabilities (Note 11)
Dividend payable
Restructuring provisions (Note 4)
Amount due to related companies
Purchase price obligations
Client deposits
Deferred revenues
Subscription receipts obligation
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 (Note 6)
Cash settled share-based liabilities
Long-term debt (Note 13)
Purchase price obligations
Derivative financial instruments (Note 6 & 13)
Subscription receipts obligation
Equity
Share capital, hold back shares, contributed surplus, (deficit) retained earnings, and accumulated other
comprehensive income
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
2014
$
16,880
579
7,986
59,960
2,908
1,746
90,059
1,831
449
483
1,607
-
9,635
5,120
292,835
370,161
772,180
41,034
311
904
931
8,500
155
99
1,746
53,680
519
636
20,091
979
-
1,263
222,081
36,168
945
1,607
337,969
437,154
4,355
(7,298)
(2,943)
434,211
772,180
2013
$
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
Jean-Guy Desjardins
Director
Sylvain Brosseau
Director
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 71
— CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Share Capital
Hold back shares
Contributed
surplus
(Deficit) Retained
earnings
Accumulated
other
comprehensive
income
to Non-Controlling
Related
Interest
$
307,759
-
-
-
-
1,090
8,500
102,066
1,794
-
-
-
-
$
-
-
-
-
-
-
-
-
8,781
-
-
-
-
$
2,668
-
-
-
2,128
(263)
-
-
-
-
-
-
-
421,209
8,781
4,533
-
-
-
-
2,245
8,500
1,830
3,104
-
436,888
-
-
-
-
-
-
-
(3,104)
-
5,677
-
-
-
5,255
(557)
-
-
-
-
9,231
$
(12,753)
14,939
14,939
-
-
-
-
-
-
-
-
-
-
-
-
-
-
48
(22,590)
(20,356)
27,492
27,492
(31,629)
(24,493)
$
65
-
1,851
1,851
1,916
7,935
7,935
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$
297,739
14,939
1,851
16,790
2,128
827
8,500
102,066
10,575
(22,590)
48
-
-
416,083
27,492
7,935
35,427
5,255
1,688
8,500
1,830
-
(31,629)
437,154
$
-
(334)
(334)
8,590
(7,298)
958
(3,901)
(3,901)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
Equity
$
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
23,591
7,935
31,526
5,255
1,688
8,500
1,830
-
(31,629)
434,211
9,851
(2,943)
For the years ended December 31,
(In thousands of Canadian dollars)
Balance, December 31, 2012
Net earnings
Other comprehensive income
Comprehensive income
Share-based compensation expense
Stock options exercised (Note 14)
Shares issued as settlement of purchase price obligations (Note 14)
Shares issued under a private placement (Note 14)
Shares issued as part of a business combination (Note 4)
Gain on dilution
Dividends
Non-controlling interest
Initial value of option granted to non-controlling interest
Balance, December 31, 2013
Net earnings
Other comprehensive income
Comprehensive income
Share-based compensation expense (Note 18)
Stock options exercised (Note 14)
Shares issued as settlement of purchase price obligations (Note 14)
Issuance of shares (Note 14)
Conversion of hold back shares (Note 14)
Dividends
Balance, December 31, 2014
The accompanying notes are an integral part of these consolidated financial statements.
72
CONSOLIDATED FINANCIAL STATEMENTS — CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the years ended December 31,
(In thousands of Canadian dollars)
Balance, December 31, 2012
Net earnings
Other comprehensive income
Comprehensive income
Share-based compensation expense
Stock options exercised (Note 14)
Shares issued as settlement of purchase price obligations (Note 14)
Shares issued under a private placement (Note 14)
Shares issued as part of a business combination (Note 4)
Initial value of option granted to non-controlling interest
Gain on dilution
Dividends
Non-controlling interest
Balance, December 31, 2013
Net earnings
Other comprehensive income
Comprehensive income
Share-based compensation expense (Note 18)
Stock options exercised (Note 14)
Shares issued as settlement of purchase price obligations (Note 14)
Issuance of shares (Note 14)
Conversion of hold back shares (Note 14)
Dividends
Balance, December 31, 2014
The accompanying notes are an integral part of these consolidated financial statements.
$
-
-
-
-
-
-
-
-
-
-
-
-
-
307,759
1,090
8,500
102,066
1,794
2,245
8,500
1,830
3,104
436,888
Contributed
surplus
$
2,668
2,128
(263)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,255
(557)
9,231
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,781
(3,104)
5,677
421,209
8,781
4,533
Share Capital
Hold back shares
(Deficit) Retained
earnings
Accumulated
other
comprehensive
income
$
(12,753)
14,939
-
14,939
-
-
-
-
-
48
(22,590)
-
-
(20,356)
27,492
-
27,492
-
-
-
-
-
(31,629)
(24,493)
$
65
-
1,851
1,851
-
-
-
-
-
-
-
-
-
1,916
-
7,935
7,935
-
-
-
-
-
-
9,851
Related
to Non-Controlling
Interest
$
-
(334)
-
(334)
-
-
-
-
-
-
-
8,590
(7,298)
958
(3,901)
-
(3,901)
-
-
-
-
-
-
(2,943)
Total
$
297,739
14,939
1,851
16,790
2,128
827
8,500
102,066
10,575
48
(22,590)
-
-
416,083
27,492
7,935
35,427
5,255
1,688
8,500
1,830
-
(31,629)
437,154
Total
Equity
$
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
23,591
7,935
31,526
5,255
1,688
8,500
1,830
-
(31,629)
434,211
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 73
— CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Canadian dollars)
For the years ended December 31,
Operating activities
Net earnings
Adjustments for:
Depreciation of property and equipment
Amortization of intangible assets
Impairment of non-financial assets
Amortization of deferred charges
Accretion and change in fair value of purchase price obligations
Lease inducements
Deferred lease obligations
Share-based compensation
Cash settled share-based compensation
Restructuring provisions
Interest on long-term debt and other financial charges
Changes in fair value of derivative financial instruments
Income tax expense
Income tax paid
Share of earnings of joint ventures
Loss on dilution of investments in joint ventures
Realized (gain) loss on investments
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 $107 in 2014 ($11,468 in 2013)) (Note 4)
Payment of purchase price obligations
Investments, net
Purchase of property and equipment
Purchase of intangible assets
Advance to a related shareholder, net
Long-term receivable
Advance to a joint venture
Deferred charges
Restricted cash and client deposits
Net cash used in from investing activities
Financing activities
Repayment of bank loan
Dividends
Issuance of share capital, net of issuance costs of nil in 2014 ($4,201 for 2013)
Long-term debt, net
Interest paid on long-term debt
Financing charges
Net cash (used) generated from financing activities
Net (decrease) increase in cash
Effect of exchange rate changes on cash denominated in foreign currencies
Cash – beginning of year
Cash – end of year
The accompanying notes are an integral part of these consolidated financial statements.
74
2014
$
23,591
1,733
25,700
8,016
373
2,642
(121)
(15)
5,255
1,683
574
7,977
(7,419)
5,158
(14,346)
(1,263)
23
(80)
-
4,254
63,735
(9,914)
(9,484)
2,904
(1,295)
(2,343)
1,211
(449)
-
(1,500)
158
(20,712)
-
(31,318)
3,518
(13,300)
(7,864)
(23)
(48,987)
(5,964)
1,070
21,774
16,880
2013
$
14,605
1,341
19,083
-
321
637
(148)
(11)
2,128
567
(767)
6,931
(426)
7,389
(5,800)
(1,227)
-
98
(34)
(9,685)
35,002
(150,445)
-
(1,410)
(572)
(48,224)
(1,211)
-
342
(379)
531
(201,368)
(9,800)
(22,590)
101,772
120,579
(6,934)
(1,109)
181,918
15,552
206
6,016
21,774
CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 2014 and 2013
76 Note 1 – Description of business
92 Note 9 – Property and equipment
102 Note 17 – Post-employment
benefit obligations
76 Note 2 – Basis of presentation
and adoption of new IFRS
93 Note 10 – Goodwill and
intangible assets
103 Note 18 – Expenses by nature
77
Note 3 – Significant accounting
policies, judgments and
estimation uncertainty
94 Note 11 – Accounts payable and
accrued liabilities
103 Note 19 – Additional information
relating to consolidated
statements of cash flows
84 Note 4 – Business combinations
95 Note 12 – Income taxes
104 Note 20 – Commitments and
contingent liabilities
87
Note 5 – Investment in
joint ventures
96 Note 13 – Long-term debt
104 Note 21 – Capital management
87
91
Note 6 – Financial instruments
97
Note 14 – Share capital
and accumulated other
comprehensive income
105 Note 22 – Related party
transactions
Note 7 – Investments
99 Note 15 – Earnings per share
105 Note 23 – Segment reporting
92 Note 8 – Accounts receivable
99 Note 16 – Share-based payments
105 Note 24 – Subsequent event
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 75
NOTE
1 DESCRIPTION OF BUSINESS
Fiera Capital Corporation (“Fiera Capital” 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 is listed on the Toronto Stock Exchange (“TSX”) under
the symbol “FSZ”.
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 addition to the above, Bel Air
Investment Advisors LLC, a subsidiary of Fiera Capital Corporation, is
registered as an investment adviser with the United States Securities
and Exchange Commission.
The Board of Directors (the “Board”) approved the consolidated
financial statements for the years ended December 31, 2014 and
2013 on March 18, 2015.
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 Reporting Standards (“IFRS”)
as issued by the International Accounting Standards Board (“IASB”).
The policies applied in these consolidated financial statements
are based on IFRS issued and outstanding as of December 31, 2014.
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
Amendments to IFRS 10, IFRS 12 and IAS 27 –
Investment Entities
The amendments to IFRS 10 define an investment entity and require
that a reporting entity that meets the definition of an investment
entity measures its subsidiaries at fair value through profit or loss
in its consolidated and separate financial statements, instead of
consolidating them.
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
76
• 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 adoption of this standard had no impact on the
amounts reported or disclosures made in these consolidated
financial statements.
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”. The adoption of
this standard had no impact on the amounts reported or disclosures
made in these consolidated financial statements.
IFRIC Interpretation 21 – Levies
IFRIC Interpretation 21 provides guidance on when to recognise a
liability for a levy imposed by a government, both for levies that
are accounted for in accordance with IAS 37- Provisions, Contingent
Liabilities and Contingent Assets and those where the timing and
amount of the levy is certain. A levy is an outflow of resources
embodying economic benefits that is imposed by governments
on entities in accordance with legislation, other than income
taxes within the scope of IAS 12 - Income Taxes and fines or other
penalties imposed for breaches of the legislation. The Interpretation
identifies the obligating event for the recognition of a liability as the
activity that triggers the payment of the levy in accordance with the
relevant legislation. The adoption of this standard had no impact
on the amounts reported or disclosures made in these consolidated
financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2014 and 2013 (In thousands of Canadian dollars, unless noted otherwise – except share and per share information) Amendments to IAS 36 – Impairment of Assets
The amendments to IAS 36 reduce the circumstances in which the recoverable amount of assets or cash generating units is required to be
disclosed, clarify the disclosures required and introduce an explicit requirement to disclose the discount rate used in determining impairment
(or reversals) where recoverable amount (based on fair value less costs of disposal) is determined using a present value technique. The adoption
of this standard had no impact on the amounts reported or disclosures made in these 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, as well as its share of interests in joint
ventures. All intercompany transactions, balances and unrealized
gains and losses from intercompany transactions with and amongst
the subsidiaries are eliminated on consolidation.
The consolidated financial statements include the accounts of
Fiera Capital Corporation and its wholly owned subsidiaries, Fiera
Capital Funds Inc. (“FCFI”) 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
Management LLC, Bel Air Securities 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 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
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 joint arrangement whereby the parties that have
joint control of the arrangement have rights to the net assets of the
joint arrangement. Joint control is the contractually agreed sharing
of control of an arrangement, which exists only when decisions about
the relevant activities require unanimous consent of the parties
sharing control. The Company owns interests in the following joint
ventures: Fiera Axium Infrastructure Inc. (“Fiera Axium”), an entity
in Montreal, Quebec that specializes in infrastructure investment
and Fiera Properties Limited (“Fiera Properties”), an entity in Halifax,
Nova Scotia that specializes 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.
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 of assets, 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 combinations
Acquisitions of businesses are accounted for using the acquisition
method. The consideration transferred in a business combination is
measured at fair value at the date of acquisition. Acquisition-related
costs are recognized in the consolidated 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 – Income Taxes. 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.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 77
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 these 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 related to foreign operations are
recognized in other comprehensive income and are reclassified in
earnings on disposal or partial disposal of the investment in the
related foreign operations.
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”) while 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
Payments received in advance for services from external parties
are recorded upon receipt as deferred revenues. These revenues are
recognized in the period in which the related services are rendered.
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.
78
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
Loans and receivables
Investments
Other securities and obligations
Fair value through profit or loss
Mutual fund and pool fund
investment
Accounts receivable
Long-term receivable
Available-for-sale
Loans and receivables
Loans and receivables
Advance to a related shareholder
Loans and receivables
Subscription receipts receivable
Loans and receivables
Accounts payable and accrued
liabilities
Dividend payable
Financial liabilities at amortized cost
Financial liabilities at amortized cost
Amount due to related companies
Financial liabilities at amortized cost
Client deposits
Financial liabilities at amortized cost
Value of option granted to
non-controlling interest
Fair value through profit or loss
Cash settled share-based liabilities
Fair value through profit or loss
Long-term debt
Financial liabilities at amortized cost
Purchase price obligations
Financial liabilities at amortized cost
Derivative financial instruments
Fair value through profit or loss
Subscription receipts obligation
Financial liabilities at amortized cost
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 certain securities and obligations, classified under investments
in the consolidated statements of financial position 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 statement of financial position date,
which is classified as non-current.
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, long-term receivable, advance to a
related shareholder and subscription receipts receivable. With the
exception of the long-term receivable and 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, if necessary.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2014 and 2013 (In thousands of Canadian dollars, unless noted otherwise – except share and per share information) 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.
Available-for-sale investments are assessed for indicators of
impairment at the end of each reporting period. The investments
are considered to be impaired when there is objective evidence that,
as a result of one or more events that have occurred, the estimated
future cash flows of the investment have been affected, such as a
prolonged decline in the fair value of the investment below cost.
Financial liabilities at amortized cost
Financial liabilities at amortized cost include accounts payable
and accrued liabilities, dividend payable, amount due to related
companies, client deposits, long-term debt, purchase price
obligations and subscription receipts obligation. Accounts payable
and accrued liabilities, dividend payable, 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, purchase
price obligations and subscription receipts obligation 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 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 statements of financial position at fair value using bid
prices at the end of the reporting period. 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, if any. 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
Computer equipment
5 years
3 years
Leasehold improvements
Shorter of lease term or useful life
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 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 may influence the expected future economic benefit
that the Company will generate from the customer relationships.
Development costs for internally-generated intangible assets are
capitalized when all of the following conditions are met:
•
technical feasibility can be demonstrated;
• management has the intention to complete the intangible asset
and use or sell it;
• management can demonstrate the ability to use or sell the
intangible asset;
•
•
it is probable that the intangible asset will generate future
economic benefits;
the Company can demonstrate the availability of adequate
technical, financial and other resources to complete the
development and to use or sell the intangible asset; and
•
costs attributable to the asset can be measured reliably.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 79
The amount initially recognized for internally-generated
intangible assets is the sum of the expenditures incurred from the
date when the intangible asset first meets the recognition criteria
listed above. Where no internally-generated intangible asset can
be recognized, development expenditures are charged to the
consolidated statement of earnings in the period in which they
are incurred.
Amortization of the finite-life intangible assets is based on
their estimated useful lives using the straight-line method over the
following periods:
Asset management contracts
10 years
Customer relationships
Other
5 to 20 years
2 to 8 years
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.
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.
Value-in-use is determined by discounting estimated future cash
flows, using a pre-tax discount rate that reflects current assessments
of the market, of the time value of money and of the risks specific to
the CGU. Fair value less costs to sell is determined using an EBITDA
(earnings before interest, taxes, depreciation and amortization)
multiple of comparable companies operating in similar industries
for each CGU. An impairment loss is recognized for the amount by
which the asset’s carrying amount exceeds its recoverable amount.
Impairment losses are recognized in the consolidated statement
of earnings.
Impairment losses recognized are allocated first to reduce the
carrying amount of any goodwill allocated to the CGU, and then
to reduce the carrying amounts of the other assets in the CGU on
a pro rata basis. An impairment loss in respect of goodwill is not
reversed. Previously impaired non-financial assets are reassessed at
each reporting date for any indications that the loss has decreased
or no longer exists. An impairment loss is reversed if there have
been changes to the estimates used to determine the recoverable
amount, and that these changes will be supported in the future.
An impairment loss is reversed only to the extent that the asset’s
carrying amount does not exceed the carrying amount that would
have been determined, net of amortization, if no impairment loss
had been recognized.
80
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 CGU.
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 the consolidated statement of
earnings on a straight-line basis over the term of the lease.
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 statement of financial
position 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2014 and 2013 (In thousands of Canadian dollars, unless noted otherwise – except share and per share information) Deferred income tax assets and liabilities are presented as
non-current.
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 which are
approved by the Board. The Board 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 as share-based
compensation over the vesting period with an equal and offsetting
amount recorded to contributed surplus. 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 TSX for the business
day immediately preceding the date of the grant. In 2010, the Board
discontinued the DSU plan; however, all existing rights and privileges
were kept intact. All eligible directors are now compensated in cash.
The liability related to this plan is recognized in accounts payable
and accrued liabilities.
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 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. Grants
of PSUs have been made under both of the PSU Plans.
Under both of the PSU Plans, the Company has the option to
settle the PSUs in cash or Class A shares of the Company. The vesting
of the PSUs awarded is subject to satisfying time and performance
conditions determined by the Board when the PSUs are awarded.
The grant date is the date at which the Company and the participant
agree on the terms and conditions of the award, including the
definition of the performance criteria. On this date, the Company
and the participant have a shared understanding of the terms and
conditions of the award.
The PSU expense for the PSU Plans that the Company intends
to settle in shares 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. These awards are considered equity-settled
share-based payment awards.
The PSU expense for the PSU Plans that the Company intends to
settle in cash is recorded at fair value at the end of each reporting
period and recognized over the vesting period. These awards are
considered cash-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.
Acquisition costs
Acquisition costs include expenses, fees, commissions and other
costs associated with the collection of information, negotiation of
contracts, risk assessments related to business combinations that
have closed or that are being contemplated. These expenses are
mostly composed of lawyers, advisors and specialists’ fees.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 81
Earnings per share
Basic earnings per share (“EPS”) is calculated by dividing the net
earnings for the year attributable to equity owners of the Company
by the weighted average number of shares and hold back shares
outstanding during the year.
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.
•
•
82
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
periodically 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 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 which
also constitutes a CGU since their acquisition on May 1, 2013.
Share- based payments
The Company measures the cost of cash and equity-settled
transactions with employees by reference to the fair value of the
related instruments at the date at which they are granted. Estimating
fair value for share-based payments requires determining the most
appropriate valuation model for a grant, which is dependent on
the terms and conditions of the grant. This also requires making
assumptions and determining the most appropriate inputs to
the valuation model including the assessment of some of the
performance criteria along with the expected number of units that
are going to vest.
Impairment of non-financial 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2014 and 2013 (In thousands of Canadian dollars, unless noted otherwise – except share and per share information) 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 and 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 frequently subject
to change. Furthermore, there are 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
In July 2014, the IASB finalized IFRS 9 – Financial Instruments bringing
together the financial asset and financial liability classification and
measurement, impairment of financial assets and hedge accounting
phases of the IASB project. IFRS 9 provides a single model for
financial asset classification and measurement that is based on
contractual cash flow characteristics and on the business model for
holding financial assets. IFRS 9 also introduces a new impairment
model for financial assets not measured at fair value through profit
or loss. This version adds a new expected loss impairment model and
limited amendments to classification and measurement of financial
assets and liabilities. IFRS 9 replaces IAS 39 – Financial Instruments:
Recognition and Measurement and is mandatorily effective for annual
periods beginning on or after January 1, 2018, and is to be applied
retrospectively. Early adoption permitted.
IFRS 15 – Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15 - Revenue from Contracts
with Customers. The new standard provides a comprehensive
framework for recognition, measurement and disclosure of revenue
from contracts with customers, excluding contracts within the
scope of the standards on leases, insurance contracts and financial
instruments. IFRS 15 becomes effective for annual periods beginning
on or after January 1, 2017, and is to be applied retrospectively. Early
adoption is permitted.
Amendments to IFRS 11 – Joint Arrangements
In May 2014, the IASB issued an amendment to this standard
requiring business combination accounting to be applied to
acquisitions of interests in a joint operation that constitute a
business. The amendment is effective for annual periods beginning
on or after January 1, 2016.
Amendments to IAS 38 - Intangible Assets and IAS 16
- Property, Plant and Equipment
In May 2014, the IASB issued amendments to these standards to
introduce a rebuttable presumption that the use of revenue-based
amortization methods for intangible assets is inappropriate. The
amendment is effective for annual periods beginning on or after
January 1, 2016 with early adoption permitted.
Annual improvements to IFRS (2010-2012) and
(2011-2013) cycles
In December 2013, the IASB published annual improvements on the
2010-2012 and the 2011-2013 cycles which included narrow-scope
amendments to a total of nine standards. Modifications of standards
that may be relevant to the Company include amendments made to
clarify items including the definition of vesting conditions in IFRS 2
– Share-Based payment, disclosure on the aggregation of operating
segments in IFRS 8 – Operating segments, measurement of short-
term receivables and payables under IFRS 13 – Fair value measurement,
definition of related party in IAS 24 – Related party disclosures, and
other amendments. Most of the amendments are effective for annual
periods beginning on or after July 1, 2014. Early adoption is permitted.
Amendments to IAS 1 – Presentation of
Financial Statements
In December 2014, the IASB published amendments to this standard
which aims to improve presentation and disclosure. The amendments
relate to materiality, order of notes, subtotals, accounting policies
and disaggregation and are designed to further encourage companies
to apply professional judgement in determining what information to
disclose in the financial statements. The amendments are effective
for annual periods beginning on or after January 1, 2016 with early
adoption permitted.
The Company is still evaluating the impact of these standards on its
consolidated financial statements.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 83
NOTE 4 BUSINESS COMBINATIONS
— 2014
Propel Capital Corporation
On September 2, 2014, the Company acquired all of the outstanding
shares of Propel Capital Corporation (“Propel”), a prominent
Toronto–based investment firm which develops, manages and
distributes investment solutions to Canadians with a focus on
closed-end funds. The acquisition will enhance the Company’s
expertise, offering and distribution capabilities in the Canadian
retail investor space.
Under the terms of the agreement, the purchase price for Propel
includes $9,021 paid in cash to the sellers plus $1,000 paid to an
escrow account which will be released in February 2016 provided
there are no claims pursuant to the indemnification provisions
of the share purchase agreement. In addition, the purchase price
includes an amount of $2,000 payable in February 2016 if a certain
level of revenues generated from closed-end funds managed by the
Company is reached. Management believes that the target level of
revenues generated from closed-end funds will be achieved. 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 date as follows:
Cash
Other current assets
Intangible assets
Goodwill
Accounts payable and accrued liabilities
Deferred income tax liability
Purchase consideration
Cash consideration
Fair value of purchase price obligation
$
107
1,073
5,050
7,954
(931)
(1,346)
11,907
$
10,021
1,886
11,907
The goodwill is attributable to the well-established network
and trained work force of Propel and is not deductible for tax
purposes. Management of Fiera Capital Corporation has identified
intangible assets acquired from Propel which have been accounted
for separately from goodwill. These intangible assets are customer
relationships valued at $5,050. The fair value of the purchase price
obligation was calculated using the estimated discounted cash
flows. The Company incurred acquisition-related costs of $623
mainly composed of legal fees and due diligence costs. These costs
have been included under the caption acquisition costs in the
consolidated statement of earnings. The Company financed the
acquisition of Propel with cash on hand.
84
Pro forma Impact
The impact of the acquisition for the year ended December 31, 2014
on the Company’s base management fees, performance fees and net
earnings is as follows:
Base management fees
Performance fees
Net earnings
$
1,481
-
269
If the business combination would have occurred on January 1,
2014, the Company’s consolidated base management fees,
performance fees and net earnings for the year ended December
31, 2014 would have been as follows:
Base management fees
Performance fees
Net earnings
$
204,366
15,437
23,707
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, and the elimination of the acquisition costs, as well as related
tax effects.
— 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 included 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. During the year ended December
31, 2014, the Company paid $631 to an escrow account.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2014 and 2013 (In thousands of Canadian dollars, unless noted otherwise – except share and per share information) 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.
In addition, the Company has the option to purchase the
45% interest owned by the key member of the GMP Investment
Management team at any time following December 31, 2015. 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
formula to determine the purchase price of the remaining 45% is
the same that is used to calculate the value of the option, which
considers the sum of a multiple of the forecasted earnings before
income taxes, depreciation, amortization (“EBITDA”) and forecasted
performance fees.
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
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 was part
of the Company’s strategy to expand into the U.S. market. The
transaction provided the Company with a foothold in California
and Texas and increased the growth potential in the U.S. private
wealth market.
Under the terms of the agreement, the purchase price for Bel
Air included 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 represented the Company’s best
estimate of the working capital adjustment that was finalized in
2014. During the year ended December 31, 2014, the Company
reduced the purchase price obligation by US$561 (CA$623) after
completing the calculation of the working capital adjustment and
making the appropriate price adjustment payments of US$8,439
(CA$9,373). As a result, goodwill was reduced by US$561 (CA$623).
An amount of US$14,640 (CA$15,292) of the cash consideration will
be held in escrow for a period of up to 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 date of acquisition
as follows:
Cash
Other current assets
Property and equipment
Intangible assets
Goodwill ($59,426 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
59,426
(3,117)
137,929
$
120,371
8,777
8,781
137,929
Goodwill was attributable to synergies expected as a result of the
consolidation of the alternative asset management teams. Goodwill
was not deductible for tax purposes. Management of the Company
had identified certain intangible assets acquired from GMP, which
had been accounted for separately from goodwill. These intangible
assets included 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 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.
The goodwill was 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 had identified certain intangible assets acquired from
Bel Air, which had been accounted for separately from goodwill.
These intangible assets included 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.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 85
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 included 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 a business combination
using the acquisition method and 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:
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 (Note 14)
$
1,839
7,674
498
155
14,622
15,717
(1,251)
(6,616)
32,638
$
30,844
1,794
32,638
The goodwill was attributable to the future growth potential of
establishing a North American private wealth platform as well as
an assembled and trained work force. Goodwill was not deductible
for tax purposes.
Management of Fiera Capital had identified certain intangible
assets acquired from Wilkinson O’Grady, which had been accounted
for separately from goodwill. These intangible assets included 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.
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:
Purchase consideration
Base management fees
Performance fees
Net earnings
86
$
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 for the year ended December 31, 2013 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.
Restructuring and other integration costs
With respect to the current and past business combinations, the
Company recorded restructuring provisions and costs related to the
termination of certain employees as part of the integration of the
different businesses.
During the year ended December 31, 2014, the Company
recorded a restructuring provision of $1,210 (nil for the year ended
December 31, 2013) and integration costs related to the companies
acquired of $1,917 for the year ended December 31, 2014 ($1,509
for the year ended December 31, 2013), for an aggregate amount
of $3,127 ($1,509 for the year ended December 31, 2013). These
integration costs include an onerous lease provision for vacated
premises, cost for the termination of certain employees, professional
fees and other expenses.
The change in the restructuring provisions during the years ended
December 31 is as follows:
Balance, December 31, 2012
Paid during the year
Balance, December 31, 2013
Addition during the year
Paid during the year
Balance, December 31, 2014
Severance
$
2,076
(767)
1,309
1,210
(636)
1,883
Current portion
Non-current portion
Total
December 31,2014
December 31, 2013
$
904
979
1,883
$
1,116
193
1,309
The restructuring provision of $979 is classified as a non-current
liability as the Company does not expect to settle the provision
within the next twelve months.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2014 and 2013 (In thousands of Canadian dollars, unless noted otherwise – except share and per share information) 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 years
ended December 31 are as follows:
Balance, December 31,
Share of earnings
(Loss) gain on dilution
Share of other comprehensive income
Balance, December 31,
2014
$
8,284
1,263
(23)
111
9,635
2013
$
6,879
1,227
48
130
8,284
Statements of earnings
Revenues
Expenses
Depreciation and amortization
Interest income
Interest expense
Income taxes
Net earnings
For the years ended,
December 31,
2014
December 31,
2013
$
$
18,525
14,931
451
48
147
647
3,594
19,283
15,300
429
36
153
1,533
3,983
During the years ended December 31, 2014 and 2013, the
Company’s ownership in Fiera Axium changed slightly but remained
stable at approximately 35%. In addition, during the year, the
Company’s ownership in Fiera Properties decreased slightly to 44%
from 46% in 2013. A loss on dilution of $23 (gain of $48 in 2013)
was recorded to reflect these minor changes.
The summarized financial information of the joint ventures are
presented below. The summarized financial information represents
amounts shown in the joint ventures’ financial statements prepared
in accordance with IFRS:
The reconciliation of the summarized financial information to
the carrying amount of the interests in the joint ventures recognized
in the consolidated financial statements as at December 31 is as
follows:
Net assets of the joint ventures
Contributed surplus not attributable to the
Company
December 31,
2014
December 31,
2013
Ownership of the Company
$
$
Goodwill
2014
$
23,130
(195)
22,935
9,049
586
2013
$
18,918
(322)
18,596
7,698
586
Statements of financial position
Current assets (including cash – 2014:
$687 and 2013: $3,358)
Non-current assets
Current liabilities
Non-current liabilities
Net assets
3,698
28,108
(8,618)
(58)
23,130
6,647
22,873
(10,457)
(145)
18,918
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, 2014 and 2013.
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 statements of financial position
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.
Carrying amount of investment in
joint ventures
9,635
8,284
— 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 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.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 87
— EQUITY MARKET FLUCTUATION RISK
— INTEREST RATE 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, 2014 and 2013,
is comprised of mutual fund and pool fund investments under its
management with a fair value of $7,128 as at December 31, 2014
and $6,096 as at December 31, 2013. Mutual fund and pooled
fund investments are comprised of a well-diversified portfolio of
investments in equities and bonds. 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, 2014, and 2013 has an
impact of increasing or decreasing other comprehensive income by
$713 and $610 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 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 statements of financial position represent the
Company’s maximum credit exposure at the consolidated
statements of financial position dates.
The credit risk on cash, restricted cash and investments is limited
because the counterparties are chartered and commercial banks with
high-credit ratings assigned by national credit-rating agencies.
The Company’s credit risk is attributable primarily to its trade
receivables. The amounts disclosed in the consolidated statements
of financial position 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
and financial condition of the counterparties. In order to reduce
its risk, management has adopted credit policies that include
regular review of client balances. With the exception of National
Bank of Canada and related companies which represent 20% as at
December 31, 2014 (22% as at December 31, 2013), no customer
represents more than 10% of the Company’s accounts receivable as
at December 31, 2014 and 2013.
The Company is exposed to interest rate risk through its cash and
long-term debt. The interest rates on the long-term debt are variable
and expose the Company to cash flow interest rate risk.
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 were 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, accounts
receivable, accounts payable and accrued liabilities and long-
term debt denominated in US dollars and the operations of its US
businesses 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 statements of financial position as at December
31, 2014 and 2013, 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 price obligations
Long-term debt
2014
$
15,797
579
1,084
12,643
(7,543)
-
(93,501)
2013
$
8,481
531
5,268
10,368
(4,357)
(9,572)
(54,563)
Based on the US dollar balances outstanding (excluding long-
term debt) as at December 31, 2014, a 5% increase/decrease of the
US dollar against the Canadian dollar would result in an increase/
decrease in total comprehensive income of $1,128 (2013 - $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 statement of financial
position given that it is an intercompany balance.
88
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2014 and 2013 (In thousands of Canadian dollars, unless noted otherwise – except share and per share 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.
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, 2014:
Accounts payable and accrued liabilities
Dividend payable
Amount due to related companies
Long-term debt
Purchase price obligations
Carrying
Amount
$
41,034
311
931
223,000
44,668
309,944
Total
$
41,034
311
931
223,000
52,000
317,276
Contractual cash flow commitments
2015
$
41,034
311
931
10,125
8,500
60,901
2016
2017
Other
$
-
-
-
13,500
10,500
24,000
$
-
-
-
199,375
8,500
207,875
$
-
-
-
-
24,500
24,500
— FAIR VALUE
Determination of fair value of financial instruments
The fair value represents the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
The fair value of cash, restricted cash, accounts receivable,
accounts payable and accrued liabilities, dividend payable, 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 $6,492 as at
December 31, 2014 and $5,890 as at December 31, 2013, while the fair
value is $7,128 as at December 31, 2014 and $6,096 as at December
31, 2013. The unrealized gain of $553 (net of income taxes of $83)
as at December 31, 2014 and $206 (net of income taxes of nil) as
at December 31, 2013, are reflected in other comprehensive income.
The fair value of long-term debt approximates its carrying
amount, 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 Company measured the initial fair value of the subscription
receipts receivable of $3,353 and subscription receipts obligation
of the same amount using level 2 inputs in the fair value hierarchy.
The Company determined the fair value by using observable market
inputs such as the discount rate.
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. The value of the option is calculated using the present value of
the sum of a multiple of the forecasted earnings before income taxes,
depreciation, amortization (“EBITDA”) and forecasted performance
fees. The actual performance of the subsidiary directly impacts
the value of the option. Forecasts are monitored and updated on
a monthly basis, and the value of the option is recalculated at the
end of each reporting period. During the fourth quarter of 2014, the
Company completed the annual budget of the subsidiary for fiscal
year 2015 and recalculated the option value using the most recent
forecasted EBITDA attributable to Fiera Quantum L.P. As a result, the
Company determined that the value of the option was nil.
For the year ended December 31, 2014, the Company recorded
a recovery of $7,720 (2013 – charge of $421) in changes in fair value
of financial instruments in the consolidated statement of earnings to
reflect the re-measurement of the value of the option to fair value.
Derivative financial instruments consist only of interest rate swap
contracts. The Company determines the fair value of its interest rate
swap contracts by applying valuation techniques, using observable
market inputs such as interest rate yield curves as well as 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 it is consistent with accepted economic methods for pricing
financial instruments.
Changes in fair value of derivative financial instruments presented
in the consolidated statement of earnings include changes in the fair
value of the interest rate swap contracts described above and the
changes in the fair value of the option granted to non-controlling
interest for a total of $301 and $(7,720) for the year ended December
31, 2014, respectively and ($847) and $421 for the year ended
December 31, 2013, respectively.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 89
— FINANCIAL INSTRUMENTS BY CATEGORY
As at December 31, 2014
Loans and
receivables
Available-
for-sale
FVTPL1
Financial
liabilities at
amortized
cost
Assets
Cash
Restricted cash
Investments
Accounts receivable
Long-term receivable
Subscription receipts receivable
Total
Liabilities
Accounts payable and accrued liabilities
Dividend payable
Amount due to related companies
Client deposits
Subscription receipts obligation
Cash settled share-based liabilities
Long-term debt
Purchase price obligations
Derivative financial instruments
Total
$
16,880
579
-
59,960
449
3,353
81,221
-
-
-
-
-
-
-
-
-
-
$
-
-
$
-
-
7,128
858
-
-
-
-
-
-
7,128
858
$
-
-
-
-
-
-
-
Total
$
16,880
579
7,986
59,960
449
3,353
89,207
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,263
-
-
945
2,208
41,034
41,034
311
931
155
3,353
-
222,081
44,668
-
311
931
155
3,353
1,263
222,081
44,668
945
312,533
314,741
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, 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
Available-
for-sale
FVTPL1
Financial
liabilities at
amortized
cost
$
21,774
689
-
56,072
1,211
79,746
-
-
-
-
-
-
-
-
$
-
-
$
-
-
6,096
3,615
-
-
-
-
6,096
3,615
$
-
-
-
-
-
-
Total
$
21,774
689
9,711
56,072
1,211
89,457
-
-
-
-
-
-
-
-
-
-
-
7,720
-
-
644
8,364
35,000
35,000
956
689
-
228,262
58,323
-
956
689
7,720
228,262
58,323
644
323,230
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.
90
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2014 and 2013 (In thousands of Canadian dollars, unless noted otherwise – except share and per share information) — FAIR VALUE HIERARCHY
The following table classifies financial assets and liabilities that are recognized on the consolidated statements of financial position 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 years.
The following table presents the financial instruments recorded at fair value in the consolidated statements of financial position, classified
using the fair value hierarchy described above:
December 31, 2014
Financial assets
Mutual fund and pool fund investments under the Company’s management
Other securities and investments
Total financial assets
Financial liabilities
Cash settled share-based liabilities
Derivative financial instruments – interest rate swap agreement
Total financial liabilities
December 31, 2013
Financial assets
Mutual fund and pool fund investments under the 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
NOTE 7
INVESTMENTS
Mutual fund and pool fund investments under the Company’s management
Other securities and investments
Level 1
Level 2
Level 3
$
-
858
858
1,263
-
1,263
$
7,128
-
7,128
-
945
945
$
-
-
-
-
-
-
Level 1
Level 2
Level 3
$
-
3,615
3,615
-
-
-
$
6,096
-
6,096
-
644
644
$
-
-
-
7,720
-
7,720
Total
$
7,128
858
7,986
1,263
945
2,208
Total
$
6,096
3,615
9,711
7,720
644
8,364
December 31, 2014
December 31, 2013
$
7,128
858
7,986
$
6,096
3,615
9,711
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 91
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 and joint ventures
Current
Aged between 61 – 119 days
Aged greater than 120 days
Total related companies and joint ventures
Other
December 31, 2014
December 31, 2013
$
46,281
13,241
438
59,960
$
41,127
13,894
1,051
56,072
December 31, 2014
December 31, 2013
$
43,378
1,446
1,111
45,935
13,438
165
76
13,679
346
59,960
$
38,180
1,441
1,087
40,708
14,508
412
25
14,945
419
56,072
Total
$
5,200
572
874
17
(1,341)
5,322
10,420
(5,115)
17
5,322
5,322
1,459
72
(1,733)
5,120
11,879
(6,848)
89
5,120
As at December 31, 2014, there was a provision for doubtful accounts of $68 (2013 - $76).
NOTE 9 PROPERTY AND EQUIPMENT
Office furniture
& equipment
Computer
equipment
Leasehold
improvements
For the year ended December 31, 2013
Opening net book value
Additions
Business combinations
Foreign exchange difference
Depreciation
Closing net book value
Balance, December 31, 2013
Cost
Accumulated depreciation
Foreign exchange difference
Net book value
For the year ended December 31, 2014
Opening net book value
Additions
Foreign exchange difference
Depreciation
Closing net book value
Balance, December 31, 2014
Cost
Accumulated depreciation
Foreign exchange difference
Net book value
92
$
1,429
69
124
2
(360)
1,264
3,561
(2,299)
2
1,264
1,264
359
15
(402)
1,236
3,920
(2,701)
17
1,236
$
887
238
354
7
(483)
1,003
2,462
(1,466)
7
1,003
1,003
295
26
(560)
764
2,757
(2,026)
33
764
$
2,884
265
396
8
(498)
3,055
4,397
(1,350)
8
3,055
3,055
805
31
(771)
3,120
5,202
(2,121)
39
3,120
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2014 and 2013 (In thousands of Canadian dollars, unless noted otherwise – except share and per share information) NOTE 10 GOODWILL AND INTANGIBLE ASSETS
For the year ended December 31, 2013
Opening net book value
Additions
Business combinations
Acquisitions
Foreign exchange difference
Amortization for the year
Closing net book value
Balance, December 31, 20131
Cost
Accumulated amortization
Foreign exchange difference
Net book value
For the year ended December 31, 2014
Opening net book value
Additions
Additions – internally developed
Business combinations
Impairment charge
Foreign exchange difference
Amortization for the year
Closing net book value
Balance, December 31, 20141
Cost
Accumulated amortization and impairment
Foreign exchange difference
Net book value
Indefinite life
Finite-life
Asset
management
contracts
Asset
management
contracts
Customer
relationships
$
$
$
78,440
91,857
6,170
-
1,984
-
37
-
8,191
8,154
-
37
-
-
-
-
(8,480)
69,960
84,800
(14,840)
-
-
92,463
48,100
1,351
(9,277)
224,494
240,748
(17,605)
1,351
224,494
8,191
69,960
Goodwill
$
278,750
-
77,632
-
1,391
-
357,773
356,382
-
1,391
357,773
357,773
8,191
69,960
224,494
-
-
7,331
(1,918)
6,975
-
370,161
363,713
(1,918)
8,366
370,161
-
-
-
-
184
-
8,375
8,154
-
221
8,375
-
-
-
-
-
(8,480)
61,480
84,800
(23,320)
-
61,480
-
-
5,050
(6,098)
6,487
(14,795)
215,138
245,798
(38,498)
7,838
215,138
Other
$
3,763
124
4,857
-
88
(1,326)
7,506
11,692
(4,274)
88
7,506
7,506
1,799
611
-
-
351
(2,425)
7,842
13,297
(5,894)
439
7,842
Total
$
180,230
124
99,304
48,100
1,476
(19,083)
310,151
345,394
(36,719)
1,476
310,151
310,151
1,799
611
5,050
(6,098)
7,022
(25,700)
292,835
352,049
(67,712)
8,498
292,835
1. During the years ended December 31, 2014 and December 31, 2013, the Company derecognized a non-compete agreement which had an accounting cost of $805 (nil
for December 31, 2013) and accumulated amortization of $805 (nil for December 31, 2013).
— ACQUISITIONS
— IMPAIRMENT TESTS OF GOODWILL
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 2013 assets acquisition by extending
its long-term debt.
During the fourth quarter of 2014, in the context of its annual
impairment testing, the Company completed its impairment analysis
and assessed the recoverability of its assets. The Company identified
two CGUs as at December 31, 2013 and 2014: Fiera Quantum L.P.
and the remainder of the business.
Fiera Quantum L.P.
The recoverable amount of the assets within the Fiera Quantum
L.P. CGU was determined based on the value-in-use approach using
a discounted cash flow model. The significant key assumptions
included forecasted cash flows based on updated financial plans
prepared by management covering a five-year period.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 93
The discounted cash flow models were established using a
discount rate of 17%. The forecasted cash flows also incorporated
forecasted AUM decline in 2015 and stable AUM in future years. Cash
flows for the years beyond Fiera Quantum L.P.’s long-term plan were
extrapolated using a terminal growth rate of 1%.
As a result of the impairment analysis, the Company determined
that the carrying amounts of the assets of Fiera Quantum L.P.
exceeded their recoverable amounts and accordingly, the Company
recorded a goodwill impairment charge of $1,918 and an intangible
assets impairment charge of $6,098 for a total impairment charge
of $8,016. The charge is mostly attributable to lower AUM in Fiera
Quantum L.P. coupled with expenses that are not decreasing at
the same pace as revenues. The impairment charge did not affect
Fiera Quantum L.P.’s operations, its liquidity, or its cash flows from
operating activities.
Remainder of the business
The 2013 calculation of the recoverable amount of this CGU, which
represents the most recent detailed calculation made in a preceding
year, was used in the impairment test of that unit as of December 31,
2014 given that all of the following criteria were met:
a) the assets and liabilities making up the unit have not changed
significantly since the most recent recoverable amount calculation;
b) the most recent recoverable amount calculation resulted in an
amount that exceeded the carrying amount of the unit by a
substantial margin; and
c) based on an analysis of events that have occurred and
circumstances that have changed since the most recent
recoverable amount calculation, the likelihood that a current
recoverable amount determination would be less than the
current carrying amount of the unit is remote.
In assessing goodwill for impairment as at December 31, 2014 and
2013, the Company compared the aggregate recoverable amount
of the CGU to the carrying amount. 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
1. Assumptions carried forward from 2013.
20141
%
38%
5.5%
11%
2013
%
38%
5.5%
11%
Reasonable changes in key assumptions would not cause the
recoverable amount of goodwill to fall below the carrying value.
— IMPAIRMENT TESTS OF INDEFINITE-LIFE
INTANGIBLE ASSETS
In assessing indefinite-life intangible assets for impairment as at
December 31, 2014 and 2013, the Company compared the aggregate
recoverable amount of the assets to their respective carrying
amounts. For 2014, the 2013 calculation of the recoverable amount
for indefinite-life intangible assets was used in the impairment test
as of December 31, 2014 for the same reasons as discussed above.
Key assumptions included the following:
Budgeted gross margin
Weighted average growth rate
Discount rate
1. Assumptions carried forward from 2013.
20141
%
38%
2.5%
11%
2013
%
38%
2.5%
11%
The recoverable amount has been determined based on
value-in-use 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. 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 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, other
than the impairment on Fiera Quantum L.P. assets described earlier.
NOTE 11 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Trade accounts payable and accrued liabilities
Wages and vacation payable
Bonuses and commissions payable
Sales taxes payable
94
December 31, 2014
December 31, 2013
$
11,989
552
27,235
1,258
41,034
$
14,932
1,564
17,544
960
35,000
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2014 and 2013 (In thousands of Canadian dollars, unless noted otherwise – except share and per share information) NOTE 12
INCOME TAXES
Income tax expense details for the years ended December 31, are as follows
Current income taxes
Deferred income taxes (recovery)
2014
$
10,818
(5,660)
5,158
2013
$
10,017
(2,628)
7,389
For the years ended December 31, 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:
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
Income tax allocated to non-controlling interest
Difference between Canadian and foreign statutory rates
Prior years’ tax adjustments
Other non-deductible (non-taxable) amounts
2014
$
28,749
26.7%
7,676
154
357
1,022
(1,314)
(1,380)
(1,357)
5,158
2013
$
21,994
26.7%
5,872
568
1,266
89
(313)
414
(507)
7,389
The movement in deferred income tax assets and liabilities during the years, without taking into consideration the offsetting of balances
within the same tax jurisdiction, is as follows:
Balance, December 31, 2012
Charged to earnings
Business combinations
Balance, December 31, 2013
Charged to earnings
Business combinations
Charged to other comprehensive income
Foreign exchange difference
Balance, December 31, 2014
Balance, December 31, 2012
Charged to earnings
Business combinations
Charged to equity
Foreign exchange difference
Balance, December 31, 2013
Charged to earnings
Business combinations
Charged to other comprehensive income
Foreign exchange difference
Balance, December 31, 2014
Lease
inducements &
Deferred lease
obligations
Restructuring
provisions
Carry forward
losses
$
440
(42)
-
398
(45)
-
-
-
353
$
110
239
-
349
(89)
-
-
-
260
$
1,173
(792)
-
381
451
-
-
1
833
Other
$
575
(66)
1,121
1,630
1,624
-
(83)
57
3,228
Total (from
above)
Intangible assets
Property &
equipment
$
2,298
(661)
-
1,121
-
2,758
1,941
-
(83)
58
4,674
$
(20,822)
3,136
(8,016)
-
(120)
(25,822)
3,339
(1,346)
-
(612)
(24,441)
$
(376)
153
-
-
-
(223)
380
-
-
2
159
Total
$
2,298
(661)
1,121
2,758
1,941
-
(83)
58
4,674
Total
$
(18,900)
2,628
(8,016)
1,121
(120)
(23,287)
5,660
(1,346)
(83)
(552)
(19,608)
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 95
Financial statement presentation as at December 31:
Non-current deferred income tax assets
Non-current deferred income tax liabilities
Total
NOTE 13 LONG-TERM DEBT
Term facility (2014 - $41,597 US dollars, 2013 - nil US dollars)
Revolving facility (2014 - $39,000 US dollars, 2013 - $51,300 US dollars)
Deferred financing charges
2014
$
483
(20,091)
(19,608)
2013
$
1,349
(24,636)
(23,287)
December 31, 2014
December 31, 2013
$
177,756
45,244
(919)
222,081
$
175,000
54,563
(1,301)
228,262
— 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, 2014), matures on April 3,
2017, and is repayable in quarterly instalments of $3,375 starting in June 2015 up to April 2017.
The instalments that are due in 2015 have been classified as non-current since the Company has the ability to refinance the term facility
using the undrawn portion of the revolving facility. The revolving facility can also 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.
During the year ended December 31, 2014, the Company converted $45,500 from its term facility to US$41,597. In addition, the
Company reduced the drawings under its revolving facility by US$12,300. As at December 31, 2014, the total amount of long-term debt
included US$41,597 outstanding on the term facility and US$39,000 outstanding on the revolving facility (US$51,300 was outstanding on
the revolving facility as at December 31, 2013).
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, 2014, all debt
covenant requirements were met.
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).
The principal repayments required over the next three years as at December 31, 2014, are as follows:
Years
2015
2016
2017
96
$
10,125
13,500
199,375
223,000
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2014 and 2013 (In thousands of Canadian dollars, unless noted otherwise – except share and per share information) NOTE 14 SHARE CAPITAL AND ACCUMULATED OTHER COMPREHENSIVE INCOME
— AUTHORIZED
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., the holder of the Class B Shares.
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 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 while holders of Class B Shares
are entitled to elect two-thirds of the members of the Board 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.
— PREFERRED SHARES
On April 17, 2014, Directors of the Company approved the filings of articles of amendment to create a new class of shares to be designated
as preferred shares (“Preferred Shares”). This amendment was approved by the Company’s shareholders at the annual shareholders’ meeting.
The Preferred Shares would be issuable in series and would rank, both in regards to dividends and return on capital, in priority to the holders
of the Class A Shares, the holders of the Class B Shares and over any other shares ranking junior to the holders of the Preferred Shares. Other
conditions could also be applicable to the holders of the Preferred Shares.
The following table provides details of the issued and outstanding shares:
Balance, December 31, 2012
Stock options exercised
Shares issued as settlement of 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
$
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
Balance, December 31, 2013
46,639,057
388,113
20,798,008
33,096
67,437,065
Issuance of shares
Conversion of hold back shares
Stock options exercised
Shares issued as settlement of purchase price obligations
Transfer from Class B Shares to Class A Shares
149,469
277,578
249,236
642,275
758,258
1,830
3,104
2,245
8,500
1,207
-
-
-
-
-
-
-
-
(758,258)
(1,207)
149,469
277,578
249,236
642,275
-
Balance, December 31, 2014
48,715,873
404,999
20,039,750
31,889
68,755,623
436,888
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 97
1,090
8,500
-
102,066
1,794
421,209
1,830
3,104
2,245
8,500
-
— SHARES ISSUED
2014
Conversion of hold back shares
As part of the acquisition of Bel Air, the Company committed to issue in three tranches over a 32-month period following closing, 832,755
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
($8,781) under the caption: Hold back shares. During the second quarter of 2014, the first tranche amounting to 277,578 of the hold back
shares were issued and effectively converted into Class A Shares and a value of $3,104 was transferred from the caption hold back shares
to share capital.
On the same day as the conversion of the first tranche of the hold back shares into share capital in connection with a related agreement,
the Company issued 149,469 Class A Shares to National Bank of Canada (“National Bank”) for $1,830. The amount of $1,830 was received
on July 2, 2014. These shares were issued upon the exercise by National Bank of its anti-dilution rights, as defined in the Investor Rights
Agreement. The National Bank anti-dilution rights allow National Bank to participate in future issuances of shares upon the occurrence of
certain dilutive events in order for National Bank to maintain its ownership percentage.
In connection with the agreement described above, the Company also issued two subscription receipts to National Bank, each providing
for the issuance of 149,469 Class A Shares, at a pre-determined price of $12.24, to be exchanged into shares concurrently with the second
and third conversion of hold back shares into share capital. The proceeds of these subscription receipts have been transferred to an escrow
account but the release from the escrow is conditional on the issuance of the hold back shares. As such, the amounts have been recorded
as an asset and a liability for an amount of $3,353 of which $1,746 is presented as a current asset/liability.
Shares issued as settlement of purchase price obligations
On November 3, 2014, in connection with the asset purchase agreement of Natcan Investment Management Inc., the Company issued
642,275 Class A Shares for $8,500 as settlement of purchase price obligations.
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. 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.
On October 31, 2013, as part of the acquisition of Wilkinson O’Grady by Fiera USA Holding Inc., the Company issued 144,514 Class A
shares with a value of $1,794 (Note 4).
Transfers
During the year ended December 31, 2014, 758,258 Class B Shares were converted into 758,258 Class A Shares (409,956 Class B Shares
were converted into 409,956 Class A Shares for the year ended December 31, 2013) on a one-for-one basis.
Dividends
During the year ended December 31, 2014, the Company declared $31,229 of dividends ($0.46 per share) on Class A and Class B Shares
($22,590 for the year ended December 31, 2013 ($0.38 per share)) and $400 on hold back shares.
The components of accumulated other comprehensive income as at December 31 include:
Unrealized gain on available-for-sale financial assets
Share of other comprehensive income of joint ventures
Unrealized exchange differences on translating financial statements of foreign operations
December 31, 2014
December 31, 2013
$
553
354
8,944
9,851
$
201
243
1,472
1,916
98
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2014 and 2013 (In thousands of Canadian dollars, unless noted otherwise – except share and per share information) NOTE 15 EARNINGS PER SHARE
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:
Net earnings attributable to shareholders
Weighted average shares outstanding – basic
Effect of dilutive share-based awards
Weighted average shares outstanding – diluted
Basic earnings per share
Diluted earnings per share
For the years ended December 31,
2014
$
27,492
68,578,274
987,478
69,565,752
0.40
0.40
2013
$
14,939
58,576,797
872,215
59,449,012
0.26
0.25
For the year ended December 31, 2014, the calculation of hypothetical conversions does not include 1,140,427 options (448,000 in 2013)
with an anti-dilutive effect.
NOTE 16 SHARE-BASED PAYMENTS
— 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 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 years ended December 31, 2014, and 2013, in the Company’s stock option plan is
presented below:
Outstanding – beginning of year
Granted
Exercised
Forfeited
Expired
Outstanding – end of year
Options exercisable – end of year
December 31, 2014
December 31, 2013
Number of
Class A Share options
Weighted-average
exercise price
Number of
Class A Share options
Weighted-average
exercise price
2,942,522
692,427
(249,236)
(32,176)
(7,500)
3,346,037
1,230,298
$
8.12
13.43
6.77
8.10
5.59
9.32
6.55
2,290,393
823,000
(170,871)
-
-
2,942,522
999,690
$
6.92
10.77
4.84
-
-
8.12
6.48
The following table presents the weighted average assumptions used during the years ended December 31, 2014 and 2013, 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, 2014
December 31, 2013
2.93 to 3.67
1.72 to 2.09
7.5
2.93 to 4.22
1.70 to 2.20
7.5
43.2 to 43.8
43.8 to 44.5
4.31
1,292
3.59
1,372
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.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 99
The following table summarizes the stock options outstanding:
Range of exercise price
Number of Class A
Share options
Options outstanding
Weighted-average
remaining contractual
life in (years)
3.67
6.38 to 8.50
8.51 to 13.89
463,768
1,741,842
1,140,427
5
7
9
Options exercisable
Weighted-average
exercise price
Number of Class A
Share options
Weighted-average
exercise price
$
3.67
8.10
13.49
463,768
766,530
-
$
3.67
8.29
-
— B) DEFERRED SHARE UNIT PLAN
In 2007, the Board 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 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 cancelled the DSU plan; however,
all existing rights and privileges were kept intact. All directors are now compensated in cash.
As at December 31, 2014, management had recorded a liability for an amount of approximately $174 for the 13,681 units ($186 for 13,214
units as at December 31, 2013), outstanding under the DSU Plan.
— C) EMPLOYEE SHARE PURCHASE PLAN
On October 6, 2011, the Board 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 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 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 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.
The following table presents transactions that occurred during the years ended December 31, 2014 and 2013 in the Company’s RSU plans.
Outstanding – beginning of year
Granted
Reinvestments in lieu of dividends
Forfeited
Outstanding – end of year
Number of RSUs outstanding
2014
367,548
166,559
15,573
(9,172)
540,508
2013
125,646
237,071
4,831
-
367,548
As at December 31, 2014, management had recorded a liability for an amount of $2,231 for the 540,508 units ($591 for 367,548 units as at
December 31, 2013), outstanding under the RSU Plan. An expense of $1,640 and $567 was recorded during the years ended December 31,
2014 and 2013, respectively for these grants.
100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2014 and 2013 (In thousands of Canadian dollars, unless noted otherwise – except share and per share information) — E) PERFORMANCE SHARE UNIT PLAN
On October 30, 2013, the Board 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 PSUs in cash or Class A Shares of
the Company with the exception of the September 2, 2014 plan for which the option is at the discretion of the participant. 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 following table summarizes the outstanding PSU awards as at December 31, 2014:
Date of grant
October 30, 2013
January 1, 2014
Vesting schedule
Vesting Date
20% per year
for 5 years
December 31
of each year
Key vesting
performance
conditions
Annualized revenue
growth objective for
private wealth revenues
Payout formula
Multiple of the private
wealth revenues
6.5% on year 1 and 7,
13.5% on year 2 and
6 and 20% on year 3,
4 and 5
December 31
of each year
Annualized revenue
growth objective for
alternative revenues
Multiple of the non-
traditional investment
solution revenues
September 2, 2014
100% in 2017
December 31, 2017
Annualized revenues of
the last quarter of 2017
for closed-end funds
Variable percentage of
annualized revenue for
closed-end funds
All of the above awards are conditional on the continued employment of the participant with the Company.
The following table presents transactions that occurred during the years ended December 31, 2014 and 2013 in the Company’s PSU plans.
Date of grant
Outstanding – December 31, 2012
Granted
Forfeited
Outstanding – December 31, 2013
Granted
Forfeited
Outstanding – December 31, 2014
October 30, 2013
Wilkinson O’Grady
October 30, 2013
Bel Air
January 1, 2014
September 2, 2014
-
147,404
-
147,404
-
-
147,404
-
1,241,667
(43,750)
1,197,917
-
(25,000)
1,172,917
-
-
-
-
307,692
-
307,692
-
-
-
-
107,692
-
107,692
October 30, 2013
During the fourth quarter of 2013, the Company issued PSUs to employees of Bel Air and Wilkinson O’Grady that became employees of the
Company as at October 31, 2013. The PSUs will vest in tranches equivalent to 20% of the total grant in each of the next five years. The annual
vesting of the PSUs is subject to different conditions, including the attainment of an agreed upon annualized revenue growth objective and
the continuance of employment of the participant.
During the fourth quarter of 2014, the October 30, 2013 grant was modified to include revised performance conditions to all former
Bel Air employees that participated in this grant. These conditions aim at better aligning the performance condition applicable to these
employees with each participant’s ability to impact the Company’s results. After giving effect of this modification, the PSUs attributed to
the former Bel Air employees are now subject to the attainment of an agreed upon annualized revenue growth objective solely on the Bel
Air business unit as opposed to the Fiera Private Wealth North America business unit.
The value of each PSU granted to the former Wilkinson O’Grady employees is derived from the value of the Fiera Private Wealth North
America business unit while the value of each PSU granted to the former Bel Air employees is derived from the value of the Bel Air business
unit. The value of the PSUs granted on October 30, 2014 was evaluated at US$13,744.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 101
The attainment of the performance conditions for these two grants and the estimated vesting of the PSUs are reassessed at the end
of each reporting period. The following table summarizes the Company’s estimated vesting of the PSUs for the years ended December 31.
Vesting schedule
Fiscal year
October 30, 2013
Wilkinson O’Grady
October 30, 2013
Bel Air
Year 1
Year 2
Year 3
Year 4
Year 5
2014
2015
2016
2017
2018
0%
0%
0%
0%
0%
100%
100%1
100%
0%
0%
1. Year 2 expected to vest in Year 3 along with Year 3 according to estimates.
An expense of $3,963 and $756 was recorded during the years ended December 31, 2014 and 2013, respectively for these grants.
January 1, 2014
During the first quarter of 2014, the Company issued PSUs to the responsible of the Alternative revenues business unit. The PSUs will vest
in accordance with the following tranches: 6.5% on year 1 and 7, 13.5% on year 2 and 6 and 20% on year 3, 4 and 5. The annual vesting
of the PSUs is subject to different conditions, including the attainment of an agreed upon annualized revenue growth objective and the
continuance of employment of the participant.
The value of the PSUs granted was determined at inception using forecasted revenues of the different payout targets. The value of the
PSUs granted on January 1, 2014 was evaluated at $2,811. The compensation expense is based on the number of PSUs expected to vest based
on the attainment of the performance conditions and is recorded over the vesting period.
The attainment of the performance conditions and the estimated vesting of the PSUs are reassessed at the end of each reporting period. As
at December 31, 2014, the Company does not believe these PSU’s will vest. As such, the Company did not record an expense for this PSU plan.
September 2, 2014
During the third quarter of 2014, the Company issued PSUs to employees of Propel that became employees of the Company as at September 2,
2014. The PSUs will vest on December 31, 2017. The vesting of the PSUs is subject to different conditions, including the attainment of an
agreed upon level of revenues during the last quarter of 2017 for closed-end funds and the continuance of employment of the participant.
The value of the PSUs granted was determined at inception using forecasted revenues of the payout target. The value of the PSUs granted
on September 2, 2014 was evaluated at $435.
The Company intends to settle this grant in cash. As such, the PSUs are recorded at fair value at the end of each reporting period. The
liability for this grant is $43 as at December 31, 2014.
The attainment of the performance conditions and the estimated vesting of the PSUs are reassessed at the end of each reporting period.
As at December 31, 2014, the Company believes that all these PSUs will vest at December 31, 2017.
NOTE 17 POST-EMPLOYMENT BENEFIT OBLIGATIONS
The Company contributes to defined contribution plans for its employees. Contributions for the year ended December 31, 2014 amount to
$2,260 ($1,559 for the year ended December 31, 2013).
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.
102
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2014 and 2013 (In thousands of Canadian dollars, unless noted otherwise – except share and per share information) NOTE 18 EXPENSES BY NATURE
The details of selling, general and administration expense are as follows:
Wages and employee benefits
Travelling and marketing
Reference fees
Rent
Technical Services
Professional fees
Insurance, permits and taxes
Other
The details of wages and employee benefits are as follows:
Salaries and wages
Pension costs
State plans
Share-based compensation
Cash settled share-based compensation
Other
For the years ended December 31,
2014
$
108,289
6,316
5,839
5,071
6,867
4,804
2,588
6,193
145,967
2013
$
68,408
4,460
4,772
3,706
3,747
4,971
1,422
2,871
94,357
For the years ended December 31,
2014
$
91,446
2,260
2,490
5,255
1,683
5,155
108,289
2013
$
58,470
1,559
2,230
2,128
567
3,454
68,408
6,915
510
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
11,800
1,257
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
Deferred revenues
For the years ended December 31,
2014
$
(2,409)
1,045
6,039
(25)
(396)
4,254
2013
$
(16,739)
(486)
9,035
(1,047)
(448)
(9,685)
The following are non-cash items: subscription receipts receivable of $3,353 (current and non-current), subscription receipts obligation
of $3,353 (current and non-current), shares issued as settlement for purchase price obligations of $8,500 (2013 – $8,500), additions to
property and equipment included in accounts payable and accrued liabilities of $164 and additions to intangible assets included in accounts
payable and accrued liabilities of $67.
The changes in non-cash working capital for accounts payable and accrued liabilities exclude the difference between income taxes paid
of $14,346 (2013 – $5,800) and income tax expense of $10,818 (2013 – $10,017) for a net impact of ($3,528) for the year ended December
31, 2014 (2013 – $4,217).
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 103
NOTE 20 COMMITMENTS AND CONTINGENT LIABILITIES
— COMMITMENTS
The Company leases office space and equipment under non-cancellable operating leases expiring at different dates until 2021. Future lease
payments total $21,422 and include the following payments for each of the next five years as at December 31, 2014, and thereafter:
2015
2016
2017
2018
2019
Thereafter
$
8,231
4,505
4,281
2,000
1,233
1,172
— CONTINGENT LIABILITIES
In the normal course of business, the Company is party to business and employee-related claims. The potential outcomes related to existing
matters faced by the Company are not determinable at this time. The Company intends to defend these actions, and management believes
that the resolution of these matters will not have a material adverse effect on the Company’s financial condition.
NOTE 21 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 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, 2014, all regulatory requirements and exemptions were met.
NOTE 22 RELATED PARTY TRANSACTIONS
The Company has carried out the following transactions with shareholders and their related companies, during the years ended December 31.
Base management fees
Performance fees
Selling, general & administrative expenses
Reference fees
Other
Interest on long-term debt
Changes in fair value of derivative financial instruments
Integration cost
Shares issued as settlement of the purchase price obligations
2014
$
45,057
4,233
1,583
1,775
7,864
301
-
8,500
2013
$
39,132
6,114
1,503
1,638
6,934
(847)
183
8,500
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.
The amounts due under the Company’s Credit Facility presented as long-term debt are amounts due to a syndicate of lenders which includes
two related parties of the Company. The derivative financial instruments liability is due to a related company.
The Company has carried out the following transaction with joint ventures: other revenue of $1,202 for the year ended December 31,
2014 ($871 for the year ended December 31, 2013).
104
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2014 and 2013 (In thousands of Canadian dollars, unless noted otherwise – except share and per share information) 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
Canada
United States of America
Revenues
Non-current assets
For the year ended
December 31, 2014
As at December 31,
2014
$
166,544
55,814
$
515,443
166,195
Revenues
Non-current assets
For the year ended
December 31, 2013
As at December 31,
2013
$
145,698
8,029
$
524,067
159,134
Revenues are attributed to countries on the basis of the customer’s location. Non-current assets exclude deferred income taxes.
NOTE 24 SUBSEQUENT EVENT
On February 11, 2015, the Company announced that it had reached an agreement to acquire all of the outstanding shares of Samson Capital
Advisors LLC (“Samson”), a prominent New York–based investment management firm which specializes in global fixed income and currency
investment. The acquisition will enable the Company to create a full-fledged global asset manager in the United States, adding strong
leadership and investment talent in order to further expand the Company’s presence in the market.
Under the terms of the agreement, the purchase price for Samson includes US$19,200 payable in cash to the sellers and US$14,300
worth of Fiera Capital Class A Shares. In addition, the purchase price includes an amount of up to US$15,000 payable over five years if certain
targets are achieved.
The transaction is expected to close during the second quarter of 2015 and is subject to customary conditions, including regulatory
approvals and approval of the TSX.
On March 18, 2015, the Board declared a quarterly dividend of $0.13 per share to shareholders of record as at March 31, 2015 and payable
on April 28, 2015.
FIERA CAPITAL CORPORATION 2014 ANNUAL REPORT | 105
— CORPORATE INFORMATION
Executive Officers
Pierre Blanchette
Sylvain Brosseau
Jean-Guy Desjardins
Violaine Des Roches
Raj Lala
Marcel Larochelle
David Pennycook
Sylvain Roy
Alain St-Hilaire
Robert Trépanier
Paul Vaillancourt
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 and 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
Tuesday, June 2, 2015, 9:30 a.m.
106
fieracapital.com
info@fieracapital.com
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)
New York
FIERA CAPITAL
GLOBAL ASSET MANAGEMENT*
499 Park Avenue, 7th Floor
New York, New York
10022
T 646 449-9058
5657 Spring Garden Road, Box 117
Suite 505
Halifax, Nova Scotia
B3J 3R4
T 902 421-1066
Los Angeles
BEL AIR INVESTMENT ADVISORS*
1999 Avenue of the Stars, Suite 2800
Los Angeles, California
90067
T 310 229-1500
T 1 877 229-1500 (toll free)
San Francisco
WILKINSON O’GRADY & CO., INC.*
BEL AIR INVESTMENT ADVISORS*
499 Park Avenue, 7th Floor
New York, New York
10022
T 212 644-5252
555 Mission Street, Suite 3325
San Francisco, California
94105
T 415 229-4940
*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 (“Bel Air”) and Wilkinson O’Grady & Co., Inc. (“WOCO” and together with Bel Air, the “U.S. Advisers”). Fiera Capital Global
Asset Management is currently a trade name of WOCO. Any investment advisory services of Fiera Capital provided to U.S. persons are (or were) provided by either WOCO d/b/a Fiera Capital Global Asset
Management or Bel Air d/b/a Fiera Asset Management USA, in each case pursuant to a “participating affiliate” arrangement with Fiera Capital as that term is used in relief granted by the staff of the U.S.
Securities and Exchange Commission (the “SEC”). The U.S. Advisers are SEC-registered investment advisers. Unless otherwise indicated, all dollar figures are expressed in Canadian dollars.
The acquisition of Samson Capital Advisors LLC by Fiera Capital Corporation remains subject to customary conditions including certain regulatory approvals.
The information and opinions herein are provided for informational purposes only and are subject to change. The information provided herein does not constitute investment advice and it should not be
relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. Further information on the investment strategy of composites and pooled funds managed by Fiera Capital
Corporation or its affiliates can be found at www.fieracapital.com. Information pertaining to Fiera Capital pooled funds is not to be construed as a public offering of securities in any jurisdictions of Canada.
The offering of units of Fiera Capital pooled funds is made pursuant to the funds’ respective trust agreements and only to those investors in jurisdictions of Canada who meet certain eligibility or minimum
purchase requirements. Important information about Fiera Capital pooled funds, including a statement of the fund’s investment objective, is contained in their trust agreements, a copy of which may be
obtained from Fiera Capital Corporation. Unit values and investment returns will fluctuate. Please read the trust agreement of the pooled funds before investing. Pooled funds are not guaranteed, their
values change frequently and past performance may not be repeated.
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