2018 ANNUAL REPORT
Creating a
World of
Opportunities
From Values to Value
Table of Contents
002
Creating a World
of Opportunities
006
003
Values, Mission
and Vision
010
Message from the
Chairman of the Board and
Chief Executive Officer
A Wide-Ranging,
Performing Solutions
Toolkit
015
018
Global Management Team
2022 Strategic Plan
026
Corporate
Responsibility
028
Board of Directors
005
2018 Financial Highlights
012
Message from the
Global President and
Chief Operating Officer
022
Responsible
Investing
029
Management’s Discussion
and Analysis
085
Consolidated Financial
Statements
137
Corporate
Information
138
Contact Us
Creating a World
of Opportunities
From Values to Value
At Fiera Capital, we believe that values and value creation go
hand in hand. As we strive to position our firm as a top-tier,
multi-strategy global asset manager, passionate about creating
sustainable wealth for clients, we endeavour to remain true to the
values that have characterized us from the very beginning: integrity,
ambition, collaboration, innovation and excellence.
Those underlying values, along with our embrace of what we like to call "the power
of thinking," are what sets Fiera Capital apart, empowering our world-class teams
to devise novel investment solutions that are in tune with market trends and
tailored to add value for clients and shareholders. In short, value creation remains
very much a driver of our growing global reach and reputation.
With an expanding network of offices across Canada, the United States, Europe
and Asia, we are well positioned to offer our customized multi-asset solutions,
exceptional level of engagement and trademark entrepreneurial culture to any
client, anywhere, creating a world of opportunities for investors.
Our team’s strategy is built on capital
preservation for our investors, and 2018 was
one of those years where that premise was
tested by one of the steeper market declines
we have seen in the past 10 years. Yet, we were
able to conserve or even add value for our
clients, which is a testament to the soundness
of our investment philosophy and disciplined
approach. Looking back at our track record,
the team has managed to generate added
value in both up and down markets, without
taking undue risks.
FROM LEFT Andrew Chan Vice President and Portfolio Manager, Global Equities, Nadim Rizk Senior Vice President and Lead Portfolio Manager, Global
Equities, Thomas Horvath Assistant Vice President and Lead Analyst, Global Equities, Laura Cohen Portfolio Specialist, Global Equities
2
Fiera Capital is a global independent asset management firm
with approximately C$136.7 billion in assets under management
("AUM") as at December 31, 2018 delivering customized multi-
asset solutions across traditional and alternative asset classes to
institutional, retail and private wealth clients across North America,
Europe and key markets in Asia. Fiera Capital strives to be at the
forefront of investment-management science and is passionate
about creating sustainable wealth for clients. Fiera Capital trades
under the ticker FSZ on the Toronto Stock Exchange.
Values
Mission
We are at the forefront of investment management
science and passionate about creating sustainable
wealth for our clients.
Vision
Recognized for our talented people and for providing the
best solutions to our clients globally, Fiera Capital aims
to be one of the top 100 asset managers in the world.
Integrity
Ambition
Collaboration
Innovation
Excellence
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 3
Headquartered in
Montreal
750+
Employees
175+
Investment
professionals
Fiera Capital
has offices in
Toronto
Calgary
Vancouver
New York
Boston
Los Angeles
Dayton
London
Frankfurt
Hong Kong
Singapore
World-Class Teams
Commensurate with its growing global reputation, Fiera Capital
continues to extend its reach, fielding new teams and forging
new relationships in established and emerging investment
markets worldwide.
Headquartered in Montreal, Fiera Capital’s network of offices spans North America
and encompasses a steadily expanding presence in key financial centres in Europe
and Asia. New York serves as home base for the U.S. division, Los Angeles is home to
Bel Air Investment Advisors and London is the nerve centre of the European division.
4
2018 Financial Highlights
Assets Under Management
As at December 31,
$58.1B
$77.5B
$86.6B
$101.4B
$116.9B
$128.9B
$136.7B
2012
2013
2014
2015
2016
2017
2018
$136.7B
IN ASSETS
ENTRUSTED TO
FIERA CAPITAL
ON BEHALF
OF CLIENTS
Revenues
EBITDA1
Adjusted EBITDA1
Net Earnings2
Adjusted Net Earnings2
$136.7B
$128.9B
As at December 31, 2018
As at December 31, 2017
$540.3M
$69.2M
$137.5M
($5.0M)
$101.2M
$459.1M
$71.3M
$116.8M
$10.7M
$99.3M
For the 12 months ended December 31, 2018
For the 12 months ended December 31, 2017
Basic EPS2 and Adjusted EPS
$0.97
$1.01
$1.17
$1.21
$1.07
$0.74
$0.59
$0.40
$0.40
$0.26
$0.27
$0.13
$0.06
2012*
2013
2014
2015
2016
2017
-$0.05
2018
Basic Net Earnings Per Share
Basic Adjusted Net Earnings Per Share
6%
18%
18%
$9.3B
YEAR-OVER-YEAR
AUM INCREASE
INCREASE IN
ADJUSTED EBITDA1
INCREASE IN
TOTAL REVENUES
IN NEW
MANDATES WON
1 EBITDA, Adjusted EBITDA, adjusted net earnings and adjusted net earnings per share (adjusted EPS) are not standardized measures prescribed by IFRS.
These non-IFRS measures do not have a standardized meaning and may not be comparable to similar measures used by other companies.
2 Attributable to the Company’s shareholders.
*15 months in Fiscal 2012 due to fiscal year-end change.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 5
MESSAGE FROM THE CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
True to Our Core Values
As the theme of this report – Creating a World of Opportunities... From Values to Value
– rightly suggests, 2018 saw Fiera Capital continue to extend its global reputation
and reach, crafting a world of new opportunities for investors in Europe, Asia and, of
course, right here in North America. We are succeeding in this quest, creating value
for our clients and shareholders, essentially by leveraging the core values that have
defined our firm since it was founded 15 years ago: integrity, ambition, collaboration,
innovation and investment excellence.
Those core values are at the heart of everything we do and are rooted in our
2022 Strategic Plan. Unveiled last October, this road map was designed to help us
realize some ambitious goals we have set for ourselves, including that of becoming
one of the top 100 asset managers in the world.
Positive Financial Results
First, I would like to take a look back at 2018. 2018 was a challenging year for
investment managers, particularly with a fourth quarter characterized by market
fluctuation affecting nearly all sectors. Despite this headwind, we are proud that
most of our fund managers were able to outperform their benchmarks in 2018,
limiting the negative impact of the market depreciation on our total AUM. In
addition, the fact that over two thirds of our assets are invested in fixed income
and alternative strategies helped mitigate some of this impact, a testament to the
benefits of our diversified portfolio.
Even with the high volatility that marked the fourth quarter of 2018, the majority
of our fixed income strategies generated positive results on a relative basis in 2018,
driven by strategic credit allocation and effective duration management.
Our ability to adapt our offering to market dynamics and more effectively meet the
needs of our clients also contributed to our success, with the Active and Strategic Fixed
Income team, who joined us in Canada in 2018, capping off a very strong first year.
Taking a long-term view, our strategies also delivered excellent performance over
the past five-year period, with most of them outperforming their relative benchmarks.
Balanced mandates performed exceptionally well, with a large majority exceeding
their relative benchmarks during the year and generating high-single digit returns
over the past five-year period.
Overall, 2018 was another good year for most equity strategies, as fund
managers maintained their focus on quality. Given the market environment, our
teams were able to demonstrate the resilience of our defensive solutions. Our
strategies generally outperformed their respective benchmarks, with many of them
also ranking in the top quartile. Our teams drove outperformance through optimal
stock selection and favourable weighting in selected sectors.
It was nonetheless a challenging year for hedge funds throughout the industry,
as many were caught off guard by a reversal in fortune during the fourth quarter.
Performance, however, remains solid over the past five years.
Finally, Fiera Capital’s Private Alternatives funds generated strong returns in
2018. These strategies are gaining traction because they offer attractive returns
6
Our 2022 Strategic Plan is
based on four pillars, all of
which support continued
profitable growth and
the advancement of the
firm’s global client-service
capabilities. These pillars
are: people, processes,
performance, and partners.
with a lower degree of volatility and a low correlation to traditional asset classes. To
build on this momentum, we continue to develop solutions to respond to growing
investor demand for alternative investment strategies that generate a steady stream
of returns through investments in real estate, infrastructure, private lending and
agriculture. The strategies we are adding through acquisitions are also contributing
positively to our performance in this asset class.
2022 Strategic Plan
We have always had a strong sense of purpose and strategic direction at Fiera Capital
– embracing an entrepreneurial culture, encouraging innovation and harnessing
what we call “the power of thinking” to devise innovative investment solutions and
establish our firm from the outset as a leader in private alternative solutions.
Fast forward some 15 years, and it became clear that given the firm’s continued rapid
growth and evolution from a Canadian boutique to an emerging North American
and global player, we required a more comprehensive game plan. Hence, from late
2017 through the first half of 2018, we engaged in an ambitious strategic-planning
exercise designed to help us determine the best path forward for the next five years and
ensure Fiera Capital’s continued profitable growth. While this sort of exercise tends to
be dominated by outside advisers and consultants, I am proud that the comprehensive
plan we have adopted and begun to implement was developed almost entirely in
house. The response to our call to action was, in fact, nothing short of remarkable. We
then brought together our Board of Directors to share our plan with them and listen to
their views and input. Credit is due in large measure to our Global President and Chief
Operating Officer, Vincent Duhamel, and Strategic Advisor Monique F. Leroux, who
helmed the planning exercise with an able assist from John Valentini, our then Global
Chief Financial Officer and now President and Chief Executive Officer, Fiera Private
Alternative Investments.
Continued Expansion
We continued to expand our global footprint in 2018, through organic growth
generated by some of our initial offshore ventures and new acquisitions. These
included Hong Kong-based Clearwater Capital Partners, a well-established and
highly regarded Asia-focused credit and special situations firm that brings Asian
growth to Fiera Capital in a major way, and CGOV Asset Management, a prominent
Ontario-based firm focused on high-net-worth and institutional investors, which
not only provides us with additional investment strategies, but also enhances our
distribution capabilities in the wealth management space in Canada.
Embracing Diversity
We recognize that our human capital will continue to be the primary engine of
Fiera Capital’s growth. Accordingly, we are committed to better engaging with our
employees and attracting a more diverse pool of talent, not only in terms of gender
but also ethnicity, culture, religion, education and experience. Simply put, we want
our Fiera Capital teams to be as richly diverse as the broad spectrum of new global
clients we are attracting these days.
With that in mind, December saw the launch of our Global Respect and Inclusion
Policy, which promotes a culture of inclusivity and diversity that will help our firm
attract top talent, drive innovation and creativity, and give us a competitive edge as
we pursue our goal of positioning the firm in the top tier of global asset managers.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 7
MESSAGE FROM THE CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
We will continue to move
forward on our path to
growth, remaining true to
our values, and fostering
the entrepreneurial culture
that has defined the firm
since its inception.
Advancing our Responsible Investing and CSR Agenda
Diversity is just one element of Fiera Capital’s broad Responsible Investing and
Corporate Social Responsibility (CSR) agenda, which we continued to drive forward
throughout 2018. Significant 2018 milestones on the firm’s responsible investment
journey also included the creation of a new Global CSR Committee, which enhances
our ability to focus on CSR-related strategic initiatives across the organization,
involving all investment teams. We also adopted a new Global Proxy Investment Policy,
approved by the Board in March 2019, another key tool for the integration of ESG risk
factors into our investment processes. We take pride in the fact that Fiera Capital was
an early signatory to the United Nations Principles for Responsible Investment (UN
PRI), so I am pleased to note that our firm significantly improved its UN PRI assessment
scores across the board in 2018, earning the organization an A+ grade.
Strategic Priorities
Fiera Capital's clients and shareholders can expect to see continued growth and
diversification of our offering in the private alternatives space, which we will achieve
either by adding depth to existing strategies or expanding our line-up of strategies
with alternative credit, or a combination of both. Meanwhile, our development in the
United States is likely to accelerate, following the recent establishment by our U.S.
Division of a consolidated platform to which assets can be added. Lastly, enhancing
the firm’s distribution capabilities will remain a priority, reflecting the reality of our
increasingly diverse and more global clientele.
Acknowledgements
I wish to express my gratitude to my fellow Board members for their counsel in
2018, during which they provided valuable insight and input for our 2022 Strategic
Plan. I would also like to take this opportunity to formally welcome two new Board
members, Geoff Beattie and Gary Collins. Mr. Beattie, who served as Chief Executive
Officer of The Woodbridge Company Limited and Deputy Chairman of Thomson
Reuters from 1998 to 2013, is currently Chairman and CEO of Generation Capital and
Chairman of Relay Ventures. Mr. Collins is a senior advisor at Lazard Ltd., a leading
global investment bank, and sits on a number of corporate boards, including those of
Chorus Aviation Inc., D-Box Technologies Inc. and Rogers Sugar Ltd. I am confident
that the extensive know-how and experience they bring to the boardroom table will
prove very beneficial to Fiera Capital. Additionally, I want to thank two individuals who
have left our Board, Brian Davis and Arthur Scace, for their many years of service and
contributions to the firm’s success.
In conclusion, I wish to thank all the members of the Global Leadership team
for their collective energy and expertise. Thanks as well to our loyal, hard-working
employees, including the recent new members of our fast-growing family from
Clearwater Capital, CGOV and Palmer Capital. Without your efforts, none of our
2018 accomplishments would have been possible.
Jean-Guy Desjardins
Chairman of the Board and Chief Executive Officer
8
The combination of Fiera Capital
and Clearwater Capital Partners
makes for a great partnership,
bringing Asian-focused credit
and direct-lending solutions to
Fiera Capital, while enabling
our Clearwater Capital team to
deliver some rather compelling
new alternatives opportunities to
clients worldwide. Moreover, the
two companies are an excellent
fit culture-wise, sharing the same
values, including integrity and
a demonstrated commitment to
responsible investing.
FROM LEFT John Valentini President and Chief Executive Officer, Fiera Private Alternative Investments, Rob Petty Co-Founder Clearwater Capital
Partners / Co-CEO and Co-CIO Fiera Capital, Asian Division Amit Gupta Co-Founder Clearwater Capital Partners / Co-CEO and
Co-CIO Fiera Capital, Asian Division
A Wide-Ranging,
Performing Solutions Toolkit
Fiera Capital prides itself on our focus on performance, innovation and clients.
Our investment approach rests on three pillars: delivering alpha, being a leader
in and providing access to alternative investment strategies, and offering customized
solutions to our clients to meet their specific needs.
Alpha Strategies
42%
Equity
Over the 5-year period from January 1, 2014
to December 31, 2018, 89% of our equity
strategies beat their respective benchmarks.*
Top performing equity strategies over
the past 5 years:
> Magna Middle East and North Africa
> Apex – U.S. Mid Cap Strategy
> International Equity Ethical ESG
> All Country World Equity
> International Equity
10%
Alternatives and other
The performance of our alternative investment
strategies is assessed on an absolute return basis.
*Based on asset-weighted returns
10
AUM as at
December 31, 2018
$136.7B
48%
Fixed income
Over the 5-year period from January 1, 2014 to
December 31, 2018, 91% of our fixed income
strategies beat their respective benchmarks.*
Top performing fixed income strategies
over the past 5 years:
> Preferred Shares Relative Value
> Infrastructure Bonds
> Integrated Fixed Income Universe
> Canadian Integrated Fixed Income Short-Term Bond
> Integrated Fixed Income Credit
Access Strategies
We added $1.3 billion in new AUM to our Private Alternative investment strategies in
2018, bringing total AUM to $8.4B as at December 31. We won new mandates across
this investment category as investors are increasingly seeking out this asset class’s
stable and recurring cash flows and the unique level portfolio diversification it brings.
$2.4B
Real estate strategies
$2.2B
Asia-credit strategies
$1.1B
Private lending strategies
$0.3B
Agriculture strategies
$0.1B
Private equity strategies
$2.4B
Infrastructure strategies
Differences due to rounding.
Solutions Strategies
Fiera Capital seeks to remain in tune with our clients, understanding their challenges, objectives and risk profiles in order to design
and build the best solutions for their needs. To that effect, we offer our clients three main categories of solutions strategies:
Asset allocation
Risk management
ESG
• Multi-asset class solutions
• Currency exposure
• Tactical asset allocation
• Volatility
• Liability-driven
• Asset-liability
• Customized ESG
solutions
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 11
MESSAGE FROM THE GLOBAL PRESIDENT AND CHIEF OPERATING OFFICER
Expanding Our
Reputation and Reach
In the final months of 2018, trade tensions, geopolitical uncertainty and slowing
global growth contributed to a tumultuous economy and market environment.
Despite the high degree of volatility, our firm turned in another strong overall
performance in 2018, as investors looked to Fiera Capital as a provider of
innovative solutions designed to help preserve their capital and deliver sustainable
value – thereby underscoring the resiliency of our business model.
Meanwhile, we continued to grow the business, further extending our
international reputation and reach through acquisitions in North America, Europe
and Asia, while rolling out a new five-year strategic plan designed to help us
establish Fiera Capital as a bonafide, top-tier global asset manager.
A Comprehensive Roadmap
The 2022 Strategic Plan was officially launched in September 2018 with the full
support of our Board of Directors. Developed internally by a multi-disciplinary
team, it provides a roadmap for achieving our goal of becoming one of the top
100 asset managers in the world. The plan is based on four pillars that will support
continued profitable growth and the advancement of the firm’s global client-
service capabilities: people, processes, performance, and partners.
One of the major initiatives set out in the strategic plan entails augmenting
and leveraging our global structure. To that end, work has already begun in
the Canadian Division to bring together the technology and operations groups
into a streamlined Business-Solutions team, which will deploy advanced data
and analytics capabilities to help drive improved performance, higher margins
and accelerated growth of AUM – not to mention an enhanced client-service
experience. This is a multi-year, multi-phase initiative, which will not only provide
the impetus for transformation of our Canadian operations but also serve as a
blueprint for the evolution of a scalable global platform capable of supporting all
Fiera Capital operations worldwide.
Our success over the past several years in fusing together several different
legacy platforms in the U.S. Division and consolidating the custodial business for
our Canadian funds demonstrates our ability to deliver on these complex step-
change initiatives.
It’s About Talent
Talent has always driven our performance, which is why people are a core pillar
of the Strategic Plan. It’s about attracting and retaining top-calibre people
who share the values that have defined our firm from the beginning – integrity,
ambition, collaboration, innovation and excellence – and who have a track record
for generating alpha and creating added value for clients and shareholders.
12
Talent has always driven our
performance, which is why
people are a core pillar of the
strategic plan.
Accordingly, I was delighted to welcome a number of key additions to our
Global Management team during 2018. Lucas Pontillo was appointed Executive
Vice President and Global Chief Financial Officer, which enabled former Chief
Financial Officer, John Valentini to focus exclusively on his role as President
and Chief Executive Officer of our rapidly expanding Fiera Private Alternative
Investments. Elsewhere, Kanesh Lakhani was named President and Chief
Executive Officer of our London-based European Division. Richard Nino was
named Executive Vice President, Global Head of Distribution and Chairman,
European Division, a role that includes oversight and coordination, globally. As
well, Daniel Richard, formerly Senior Vice President, Corporate Communications
and Investor Relations, has taken on additional responsibilities as Senior Vice
President, Global Human Resources and Corporate Communications and
Chief Human Resources Officer.
In the same vein, we took another big step forward with the roll-out of our
comprehensive Global Respect and Inclusion Policy. More about this initiative is
included later in this report.
While I am on the topic of exceptional talent, it would be remiss of me
not to also salute two colleagues: our Chairman and Chief Executive Officer,
Jean-Guy Desjardins, and Strategic Advisor, Monique F. Leroux, both of whom
were inducted into the IIAC Investment Industry Hall of Fame in June 2018, in
recognition of their outstanding talent, integrity, leadership and contributions
to the Canadian investment industry. I am sure I speak for our entire Fiera
Capital team in congratulationing them on these well-deserved honours.
Strategic Acquisitions
Our commitment to continue growing and diversifying Fiera Capital’s industry-
leading suite of solutions was underscored by two strategic acquisitions
completed, and a third announced, during 2018.
CGOV Asset Management
Canada, Private Wealth
In May 2018 we invested to expand Fiera Capital’s presence in the Canadian
wealth-management space with the acquisition of CGOV Asset Management,
a prominent Ontario-based firm focused on high-net-worth and institutional
investors.
Clearwater Capital Partners
Asia, Private Alternatives
In August, we acquired Clearwater Capital Partners, a leading Asia focused-
credit and special-situations investment firm. This transaction provided a
rare opportunity to gain entry to the Asian credit space, which represents an
estimated US$50 trillion of investment opportunities. Headquartered in Hong
Kong with offices and teams in major centres across the Asia-Pacific, Clearwater
Capital Partners will offer clients in North America and Europe access to Asian
credit strategies, while giving us a platform to support future expansion across
this fast-growing region.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 13
MESSAGE FROM THE GLOBAL PRESIDENT AND CHIEF OPERATING OFFICER
Palmer Capital Partners
United Kingdom, Private Alternatives
In December, we announced an agreement to further expand our presence in
Europe by acquiring Palmer Capital Partners Limited, a leading U.K.-focused real
estate investment manager based in London, with over £800 million in AUM.
This acquisition, which closed in early 2019, was made through Fiera Properties,
Fiera Capital’s dedicated real estate investment platform, is a perfect fit as we look
to further grow our footprint outside of Canada.
Fiera Capital has long positioned itself as a leader in the private alternative
investments space. These most recent acquisitions mean clients have an even
broader array of opportunities to diversify their portfolios through strategies that
include real estate, infrastructure, private lending, private credit, agriculture and
private equity, sectors that previously offered only limited access to investors. Of
course, the broader offering also provides added opportunities for cross-selling and
collaboration between our various distribution teams.
Combined, the CGOV Asset Management and Clearwater Capital Partners
transactions contributed approximately $6.9 billion to Fiera Capital’s AUM in 2018,
helping us grow our total AUM to $136.7 billion at the end of a very volatile 2018.
The proportion of alternative assets relative to our total AUM continues to grow,
representing $10.6 billion, or 8%, at the end of 2018.
Fiera Infrastructure
Spain and the United Kingdom
Following the opening of an office in London, Fiera Infrastructure bolstered its
European holdings, purchasing a 100% equity interest in IslaLink, a Spain-based
independent telecom fibre-infrastructure platform, and partnering with four
investors in a consortium that acquired Cory Riverside Energy, one of the U.K.’s
leading resource-management, recycling, and energy-recovery companies.
We delivered on a key undertaking
in 2018: the successful consolidation
of the custodial business for all of
Fiera Capital’s Canadian funds with
a single partner. This represents a
milestone achievement that is already
having a positive impact. Our focus
is threefold: providing exemplary
service to our clients, equipping
our employees with the right tools,
and understanding that these two
elements are essential to delivering
value to our shareholders.
FROM LEFT Sebastian Blandizzi Global Chief Technology and Operations Officer, Jean-Philippe Lemay President and Chief Operating Officer,
Canadian Division
14
Environmental, social and
governance considerations
are integrated not only into
our investment processes,
but also how we do business
in general.
Realignment of Retail Investment Strategies
Another noteworthy strategic initiative in 2018 involved the announcement,
in October, sale of nine of Fiera Capital’s retail mutual funds to Canoe Financial
LP, with us maintaining a sub-advisory role in four of those funds. Divesting
these noncore assets enables us to focus more tightly on what we excel at,
namely institutional markets and private wealth. Moreover, Fiera Capital’s
subadvisory relationships, which totaled close to $35 billion in AUM at the
time of divestiture, in February 2019, will be further enhanced by the new
partnership with Canoe Financial.
Renewal of Agreement with National Bank of Canada
We also welcomed the renewal in August 2018 of our AUM agreement with
National Bank of Canada and Natcan Investment Management. Fiera Capital is
pleased to reaffirm its long-standing relationship with National Bank of Canada,
for whom we manage a number of strategies, and we are proud that over the
years we have continued to exceed performance conditions related to the
AUM agreement.
Responsible Investing and Corporate Social Responsibility
In the spring of 2018, we reached another milestone with the launch of our
new Corporate Social Responsibility (CSR) page on Fiera Capital’s corporate
website. This initiative underscored the firm’s commitment to ensuring that
environmental, social and governance considerations are integrated not only into
our investment processes, but also how we do business in general. We appreciate
that our clients want to do business with firms that demonstrate a concern for
sustainability and heightened stewardship of their assets. We are also proud
to be a trusted partner in creating sustainable wealth from which our clients,
shareholders, employees and other stakeholders all stand to benefit.
Global Leadership Team
Jean-Guy Desjardins
Chairman of the Board and Chief
Executive Officer
Jean-Philippe Lemay
President and Chief Operating Officer,
Canadian Division
Vincent Duhamel
Global President and Chief Operating
Officer
John Valentini
President and Chief Executive Officer,
Fiera Private Alternative Investments
Lucas Pontillo
Executive Vice President and Global Chief
Financial Officer
Benjamin S. Thompson
President and Chief Executive Officer,
U.S. Division
Monique F. Leroux
Strategic Advisor and Member of the
Strategic Development Committee
David Sadkin
President,
Bel Air Investment Advisors LLC
Richard Nino
Executive Vice President, Global Head
of Distribution and Chairman,
European Division
Violaine Des Roches
Senior Vice President, Chief Legal and
Chief Compliance Officer and
Corporate Secretary
Daniel Richard
Senior Vice President, Global
Human Resources and Corporate
Communications and Chief Human
Resources Officer
François Bourdon
Global Chief Investment Officer
Kanesh Lakhani
President and Chief Executive
Officer, European Division
Peter Stock
Executive Vice President,
Strategic Development
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 15
MESSAGE FROM THE GLOBAL PRESIDENT AND CHIEF OPERATING OFFICER
Collaboration is a shared value
that is increasingly coming into
play as Fiera Capital grows and
evolves. This more collaborative
approach enables our clients
to experience the strength and
breadth of our organization and
its myriad capabilities. What’s
more, they benefit from unique,
best-in-class, cross-border
investment solutions currently
being developed as a joint effort
by our global teams.
FROM LEFT Ted Ecclestone Executive Vice President and Head of Private Wealth , Canadian Division, Nelly C. Xavier Senior Vice President, Head of
Advisors and Family Offices, Rodrigue Lussier Vice President, Investment Counsellor, Canadian Division, Élyse Léger Vice President, Investment
Counsellor, Canadian Division
New Global Headquarters
As 2019 unfolds, we are looking forward to moving our global head office and
the headquarters of our Canadian Division into the Tour Fiera Capital, situated just
up the street from our current offices in downtown Montreal. While reaffirming
our commitment to Fiera Capital’s home town, the new headquarters will serve as
the nerve centre for the scalable and highly efficient organizational platform we
are putting in place to support the firm’s continued growth. The move is scheduled
for the middle of the year.
Acknowledgements
Before concluding, I would like to take this opportunity to formally thank
my colleagues on the Global Leadership team and employees throughout
the organization for their hard work and commitment throughout a very
eventful year.
As we progress with the implementation of the Strategic Plan, we will
be counting on all our teams to maintain their unwavering focus on value
creation and help us profitably grow Fiera Capital into one of the world's top
100 asset managers.
I am confident that, together, we can make good on these commitments
and meet or exceed the expectations of our clients and shareholders.
Vincent Duhamel
Global President and Chief Operating Officer
16
Using a dynamic strategy focused on
investing in opportunities across a
wide range of industries and partners
in North America and Europe, Fiera
Comox offers a complete private
equity solution for institutional and
high-net-worth investors. What’s more,
the open-ended Comox Private Equity
Fund has the added advantage of
providing more liquidity than is the
norm in this asset class.
In 2018 we forged four partnerships in
three countries across four different
agricultural sectors. Our investments
included a maple syrup business
in Vermont, an almond business
in California, a dairy business in
New Zealand and a cotton and grains
business in Australia. Each of them
are among the largest and most
sophisticated operations in their
respective sectors.
FROM LEFT Patrick Lynch Partner, Fiera Comox (Private Equity), Antoine Bisson-McLernon Partner and Chief Executive
Officer, Fiera Comox, Matthew Corbett Partner, Fiera Comox (Agriculture)
2022 Strategic Plan
Enhancing Global Client-Service Capabilities
and Driving Profitable Growth
August 17, 2018 could well be regarded as a defining moment for Fiera Capital.
This was the day when the Board of Directors gave its stamp of approval to the
2022 Strategic Plan, which provides a roadmap to help drive the firm forward
in its transition from a prominent Canadian asset manager, currently ranked
among the top 150 global asset managers, into the ranks of the world’s top
100 asset managers.
The objective of the new five-year plan, a rigorous internal exercise conducted over twelve months
through a collaborative effort on behalf of all our employees, is to establish Fiera Capital as a top-
tier, global, multi-strategy asset manager with top-quartile embedded strategies, recognized for its
talented people and for providing the best solutions to its clients around the world. The firm began
to execute the 2022 Strategic Plan in September 2018.
The Strategic Plan is based on four pillars that will support the firm’s continued profitable growth
and the advancement of its global client-service capabilities. These pillars are People, Processes,
Performance and Partners. The 2022 Strategic Plan Steering Committee, responsible for overseeing
implementation of the plan and the risks associated with its execution, was co-led by Global President
and Chief Operating Officer Vincent Duhamel and Strategic Advisor Monique F. Leroux.
People
Processes
Fiera Capital recognizes that its people will
continue to be the main engine of its growth. To this
end, the firm is committed to improving employee
engagement as it continues to grow.
The firm is committed to enhancing operations and
customer-service capabilities in order to remain
powerfully relevant and continue delivering an
unparalleled level of service and expertise to its clients
PRIORITIES
– Increasing employee engagement
– Investing in its talent
– Leveraging the power of effective collaboration
PRIORITIES
– Standardizing, automating and digitizing
our processes
– Implementing a global, scalable and flexible
technology architecture
– Improving the integration of acquisitions
– Continuing to innovate with respect to
collaboration and operations
18
PeopleFiera Capital recognizes that its people will continue to be the main engine of its growth. To that end, the firm is committed to improving its employee engagement as it continues to grow. Priorities:• Increasing employee engagement• Investing in its talent • Leveraging the power of effective collaboration.PeopleFiera Capital recognizes that its people will continue to be the main engine of its growth. To that end, the firm is committed to improving its employee engagement as it continues to grow. Priorities:• Increasing employee engagement• Investing in its talent • Leveraging the power of effective collaboration. To be successful as a global firm, it’s
imperative that we have an environment
that fosters integrity, ambition,
collaboration, innovation and excellence,
and that can channel the talent that
comes with a diverse group of highly
skilled professionals. The 2022 Strategic
Plan process is a shining example. We
united the intelligence, team spirit and
commitment of everyone around a
common goal, that of working towards
the future, together.
We want to be recognized as the go-to
firm in Canada and aim to be among
the top 100 asset managers in the
world in terms of the value of assets
under management. This ranking in
itself is not important: what really
matters is the overall positioning of
the firm and increased resources,
reinforcing our ability to attract the
best people and provide the best
value-added solutions for our clients
globally.
Vincent Duhamel
Global President and
Chief Operating Officer
Monique Leroux
Strategic Advisor and
member of the Strategic
Development Committee
Performance
Partners
The firm aims to accelerate growth by adapting and
broadening our offering and distribution capabilities
to more effectively reach global clients and
international markets.
PRIORITIES
– Achieving synergies and cost efficiency across
divisions
– Advancing global product lifecycle development and
optimization
– Driving growth in private alternative investments
– Continuing to secure targeted, disciplined
acquisitions and strategic partnerships
The firm aims to be the investment firm of choice
for existing and potential clients and partners. We
will work closely with our teams around the world to
implement a global brand strategy and best practices
across teams – an initiative that includes refining the
digital client experience. The firm has established
specific retention-rate targets to measure the
effectiveness of this vital pillar.
PRIORITIES
– Responding to the increasing demand for
multi-asset solutions and alternative investments
– Improving the client experience
– Leveraging institutional strengths across channels
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 19
PeopleFiera Capital recognizes that its people will continue to be the main engine of its growth. To that end, the firm is committed to improving its employee engagement as it continues to grow. Priorities:• Increasing employee engagement• Investing in its talent • Leveraging the power of effective collaboration.PeopleFiera Capital recognizes that its people will continue to be the main engine of its growth. To that end, the firm is committed to improving its employee engagement as it continues to grow. Priorities:• Increasing employee engagement• Investing in its talent • Leveraging the power of effective collaboration. 2022 STRATEGIC PLAN
Working Towards the
Future: Executing our Plan
We are in the early stages of executing the
2022 Strategic Plan and the first initiatives are
well underway, each with a specific focus and
purpose in the overall mission. These initiatives,
whether large or small, will have an impact on
our processes, practices and corporate culture.
This is a turning point that will help properly
position Fiera Capital in the coming years.
Distribution Program
Responding to the Needs of Multinational Clients
The main objective of the Distribution Program is to determine
how to leverage the expertise acquired by Fiera Capital across
all of its distribution channels, in order to improve our client
service and business development activities.
As part of its analysis, the team driving the Distribution
Program recognized the need to put in place a clear
governance structure and a strong management team to
lead company-wide distribution. Much work has been done,
particularly to increase collaboration within the company,
in order to better serve clients and consultants around the
world, such as major international financial institutions.
The team is focusing on ensuring that our people at the local
level coordinate their efforts to better understand the needs
of these clients and maximize the benefits of the relationship
of trust that we have built with them.
A Hackathon – derived by
combining the words “hack” and
“marathon” – traditionally involves an
event where developers gather to do
collaborative computer programming
over a period of a few days.
True to the original concept,
hackathons hosted by Fiera Capital
will bring together employees with a
technological background and colleagues
from other departments in an effort to
reinvent some of our processes.
20
Global Product Program
Focusing on Profitable Strategies
The Global Product Program aims to ensure the dynamism
and longevity of Fiera Capital’s investment platform. It
focuses on generating ideas, evaluating products and
launching them in different markets.
Before beginning their work, the group leading the Global
Product Program analyzed the current state of product
development across the firm. They identified several areas
for improvement, such as analyzing the current demand
for various strategies around the world. The group was also
reorganized to promote a diversity of perspectives and ideas,
as well as more closely monitor the evolution of strategies
within each division. This approach is aimed at ensuring
we devote the proper resources to profitable strategies,
while eliminating unprofitable strategies that have limited
opportunity.
Innovation Program
Improving our Processes
The mandate of the Innovation Program is to promote
a culture of innovation among clients, employees
and shareholders.
On January 23 and 24, 2019, the very first edition of
the Fiera Capital Hackathon was held at our head office in
Montreal. This event's inaugural edition brought together
seven hackathoners who shared their experience, knowledge
and creativity to overcome a major challenge. They were
tasked with finding a solution to a very specific, complex
issue that could then be implemented internally to improve
our processes. The hackathon was a great success, with
the team accomplishing their mission and achieving
their objectives.
People Program
Fostering Diversity Across the Firm
The People Program’s mandate is to promote Fiera Capital’s
values and foster employee engagement.
In December of 2018, we launched our new Global
Respect and Inclusion Policy, which aims to promote an
inclusive and diverse culture that will drive innovation as we
pursue our goal of positioning Fiera Capital among the top
100 asset managers in the world.
The policy reflects Fiera Capital’s commitment to
creating a work environment where employees embrace
diversity and original thinking while treating one another
with respect. To be effective, even the most carefully
crafted policies rely on the efforts of the people responsible
for implementing and supporting them. With this in
mind, leadership teams throughout our organization are
fully committed to this policy and determined to make
Fiera Capital an industry leader with respect to diversity. To
read the policy, visit the Corporate Responsibility section of
our website.
The roadmap for our
future: A clear goal
supported by solid
pillars, key objectives
and core values.
Vision
Recognized for our talented people
and for providing the best solutions to
our clients globally, Fiera Capital aims to be
one of the top 100 asset managers in the world.
People
Processes
Performance
Partners
Improve employee
engagement score
to > 80%. Investing
in our people and
leveraging the
power of effective
teamwork.
Leverage global
skills and scalability
of client servicing
and operations to
achieve effective-
ness comparable
to peers.
Improve adjusted
EBITDA margin1.
Be a top-tier global
multi-strategy asset
manager with first
quartile embedded
strategies.
Be the
“go to”
investment firm
of choice.
Key Performance and Financial Objectives
80%
Aim for more
than 80%
engagement.
Top 100
asset managers
in the world.
Client retention
rate > 95%.
Operating margin
comparable to
best-in-class global
multi-asset managers.
Payout ratio in
line with disciplined
management.
Values
Integrity
Ambition
Collaboration
Innovation
Excellence
Mission
We are at the forefront of investment management science
and passionate about creating sustainable wealth for our clients.
1 EBITDA, Adjusted EBITDA, adjusted net earnings and adjusted net earnings per share (adjusted EPS) are
not standardized measures prescribed by IFRS. These non-IFRS measures do not have a standardized meaning
and may not be comparable to similar measures used by other companies.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 21
Responsible
Investing
A Conscientious Steward of Capital
Fiera Capital has been a signatory to the United Nations-supported
Principles for Responsible Investment (UN PRI) since 2009. As a
conscientious steward of capital with a growing global reputation and reach,
Fiera Capital continues to thrive in its approach to responsible investment.
At a minimum, this entails thoroughly integrating the assessment of material
environmental, social and governance (ESG) risk factors into how we
manage assets on behalf of our clients.
Interest in responsible investment practices and sustainable development has been steadily
growing, driven in large part by asset managers like Fiera Capital. The growing number of UN
PRI signatories and the rise of the millennial generation as a force in the marketplace has
accelerated this development. Fiera Capital has been a trusted advisor and asset manager
for many of Canada’s major foundations, endowment funds and religious communities, as
well as high-net-worth individuals, who rely on the firm to construct bespoke portfolios that
reflect their specific values and guidelines.
Our investment teams operate as
autonomous boutiques and have
considerable independence to
implement their strategies. The
CIO Office focuses on promoting
transparency in strategy implementation,
developing more efficient multi-asset
solutions and integrating ESG concepts
suitable to each investment strategy
across the firm.
Additionally, we articulate our outlook
on what the investment world might
look like seven years from now.
FROM LEFT Nicolas Papageorgiou Chief Investment Officer, Canadian Division, François Bourdon Global Chief Investment Officer, Jonathan Lewis Chief
Investment Officer, U.S. Division, Candice Bangsund Vice President and Portfolio Manager, Global Asset Allocation
22
ESG Governance
Direct Engagement
1. ESG Governance
1. ESG Governance
2. ESG Committee
2. ESG Committee
3. Responsible
Investment Policy
3. Responsible
Investment Policy
4. Proxy Voting Policy
4. Proxy Voting Policy
5. Direct Engagement
5. Direct Engagement
Oversight and accountability for Fiera Capital’s responsible
investing activities rests with the Chief Investment Officer
(CIO), global and regional, as well as with the firm’s investment
management teams. However, determining how the
assessment of material ESG risk factors are integrated into
investment processes is left largely to the discretion of the
respective investment teams, who are at liberty to choose a
methodology that best suits their particular investment style or
asset class.
8. Entreprise Risk
Management
8. Entreprise Risk
Management
6. Collaborative
Engagement
6. Collaborative
Engagement
7. Corporate
Governance
7. Corporate
Governance
9. Human Capital
9. Human Capital
The firm believes that the most effective form of engagement
is direct dialogue with the entities in which it invests.
When meeting with companies, portfolio managers seek
to address material ESG issues both on a proactive basis,
to raise awareness of such concerns, as well as a reactive
basis, to revisit past issues and see how management has
addressed them.
10. Building Ties with
Communities
10. Building Ties with
Communities
1. ESG Governance
2. ESG Committee
3. Responsible
Investment Policy
4. Proxy Voting Policy
5. Direct Engagement
Responsible Investment Policy
6. Collaborative
Engagement
7. Corporate
Governance
8. Entreprise Risk
Management
9. Human Capital
10. Building Ties with
Communities
Principles for Responsible
Investment
1. ESG Governance
2. ESG Committee
3. Responsible
Investment Policy
4. Proxy Voting Policy
5. Direct Engagement
6. Collaborative
Engagement
7. Corporate
Governance
Fiera Capital’s Global Responsible Investment Policy provides
a blueprint for how the firm views responsible investing,
as well as a framework for active ownership. It includes
beliefs that guide our engagement with the management of
companies in which the firm invests, in order to address ESG
issues and bring about positive change by helping companies
improve over time. Ultimately, this allows us to better manage
risk across our portfolios.
10. Building Ties with
Communities
8. Entreprise Risk
Management
9. Human Capital
1. ESG Governance
2. ESG Committee
3. Responsible
Investment Policy
4. Proxy Voting Policy
5. Direct Engagement
New Global Proxy Voting Policy
Fiera Capital prides itself on having been an early signatory
to the United Nations Principles for Responsible Investment
(UN PRI), back in 2009. Today, UN PRI boasts more than 1,900
signatories in over 50 countries, including many of the largest
asset owners and managers in the world, with some US$80
trillion in combined assets.
As a signatory, we are guided by UN PRI’s six principles for
responsible investing and commit to:
incorporating ESG issues into our investment analysis and
decision-making processes
being active owners and incorporating ESG issues into our
ownership policies and practices
6. Collaborative
Engagement
7. Corporate
Governance
8. Entreprise Risk
Management
In early 2019, Fiera Capital introduced a new Global Proxy
Voting Policy, which applies to our operations and investments
worldwide.
seeking appropriate disclosure on ESG issues by the entities
in which we invest
9. Human Capital
10. Building Ties with
Communities
Proxy voting is an effective tool that enables us to express
our view on ESG issues. The firm exercises its voting rights with
the goal of maintaining the highest standards of corporate
governance and ensuring the sustainability of business
practices. Preserving those high standards is a prerequisite for
maximizing shareholder value and protecting the interests of all
stakeholders.
The new policy covers an array of potential issues and
concerns ranging from governance and capital structures to
climate-change risk mitigation, takeover defences, executive
compensation, gender-based pay gaps, as well as labour and
human-rights principles.
promoting acceptance and implementation of the
principles within the investment industry
working with the PRI Secretariat and other signatories to
enhance their effectiveness in implementing the principles
reporting on our activities and progress towards
implementing the principles
In 2018, the firm improved its UN PRI assessment scores
across the board and earned a grade of A+ as an organization.
This reflected in large part the efforts of the former ESG
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 23
RESPONSIBLE INVESTING
committee and its successor, the Global Corporate Social
Responsibility Committee, in leveraging Fiera Capital’s core
values, such as collaboration, innovation and excellence in the
areas of CSR and ESG integration.
scoring system will give our investment teams an edge in
making higher quality investment decisions.
Additionally, in February 2019, Judy Temel, Senior
Vice President, Director of Credit Research, Fixed Income
Investments, was invited to join the PRI Advisory Committee
on Credit Ratings. We are excited about this opportunity
to further collaborate with and contribute to PRI by
supporting the Committee in raising awareness among
credit analysis and ratings professionals and understanding
the links between ESG factors and issuer creditworthiness.
We also seek to improve their understanding of different
approaches to integrating ESG into credit analysis, among
other objectives.
1. ESG Governance
6. Collaborative
Engagement
Innovators
Over the course of 2018, our CIO office in Montreal
developed the Responsible Investment Spectrum, below,
a new taxonomy for defining responsible investing. We also
enhanced our tools and techniques designed to improve the
integration and efficacy of ESG risk factor assessments. One
example of such a tool is a proprietary ESG scoring system
developed by the CIO office in New York. We believe this
Promoting Responsible Investing
Throughout the Industry
2. ESG Committee
3. Responsible
Investment Policy
4. Proxy Voting Policy
5. Direct Engagement
In 2018, our investment professionals were spearheading
initiatives aimed at promoting responsible investment
principles and practices throughout the industry.
We were among the participants in a Sustainable
7. Corporate
Governance
9. Human Capital
8. Entreprise Risk
Management
10. Building Ties with
Communities
Investment Roundtable organized by the Public Policy Forum
and the Ivey Foundation in partnership with the Caisse de
dépôt et placement du Québec, Royal Bank of Canada and
Suncor. Elsewhere, Heather Cooke, Senior Vice President,
Investment Solutions, Institutional Markets, and Chair
of Fiera Capital’s global CSR Committee, was invited to
moderate a panel discussion on climate risk at CFA Institute’s
annual Spring pension conference in March 2019. Our CIO
offices in Montreal and New York organized ESG education
sessions in Canada and the United States, to help continue
training our investment teams and distribution partners. As
we continue to push these initiatives and events forward,
we remain an active member of both the Montreal and
Toronto chapters of the Responsible Investment Association
of Canada.
RESPONSIBLE INVESTMENT SPECTRUM
SUSTAINABLE INVESTING
ESG Integration
IMPACT ONLY
Negative/Ethical
Screening
Positive Screening
/Best-in-class
Thematic and Impact
APPROACH
RISK AND
RETURN PROFILE
SOLE FOCUS
PRIMARY FOCUS
DUAL FOCUS
NONE
SOLE
FOCUS
100% IMPACT
IMPACT PROFILE
NONE
SECONDARY FOCUS
CLIENT
OBJECTIVES
100% RETURNS
24
Investors should know that
Fiera Capital is continuing
to integrate ESG risk
factors into its investment
processes, and for good
reason. This is no longer
just about controlling
downside risks or being
seen as a good corporate
citizen. It has been
demonstrated that such
practices can actually
generate alpha.
FROM LEFT Varda Lotan Senior Vice President, Head of European Distribution, Frederick Chenel Senior Vice President, Head of
Consultant Relations and Business Development, Institutional Markets, Tom Clancy Senior Vice President, Institutional Markets
Corporate Responsibility
Adhering to Our Values: Integrity,
Collaboration, Innovation and Excellence
Fiera Capital’s approach to corporate social responsibility (CSR) is aligned with its key
values of integrity, collaboration, innovation and excellence, along with its mission to
create sustainable wealth for clients. The firm strives to achieve excellence through
strong management practices, sound business principles and adherence to the highest
level of ethical conduct.
1. ESG Governance
2. ESG Committee
3. Responsible
Investment Policy
4. Proxy Voting Policy
5. Direct Engagement
6. Collaborative
Engagement
In 2018, the firm significantly
improved its UN PRI assessment
scores across the board and earned
an A+ grade as an organization. This
reflected in large part the efforts
of the former ESG committee and
its successor, the global Corporate
Responsibility Committee, in
leveraging core Fiera Capital values
such as collaboration, innovation
and excellence in the area of CSR
and ESG integration.
Corporate Governance
7. Corporate
Governance
8. Entreprise Risk
Management
9. Human Capital
10. Building Ties with
Communities
Strong corporate governance is both a key element of CSR
and a prerequisite for integrating corporate responsibility
across Fiera Capital. Responsibility for the development,
implementation and oversight of policies and practices rests
with the Board of Directors and the Global Leadership team.
New Global CSR Committee
1. ESG Governance
2. ESG Committee
3. Responsible
Investment Policy
4. Proxy Voting Policy
5. Direct Engagement
The formation of a new global CSR Committee in 2018 was
an important milestone that enabled Fiera Capital to better
focus on CSR-related strategic initiatives across the entire
organization. With the support of top-level management, the
CSR Committee’s role is to ensure that social and governance
considerations are integrated not only into the firm’s
investment processes, but into how we do business in general.
10. Building Ties with
Communities
8. Entreprise Risk
Management
7. Corporate
Governance
9. Human Capital
4. Proxy Voting Policy
5. Direct Engagement
6. Collaborative
Engagement
1. ESG Governance
2. ESG Committee
3. Responsible
Investment Policy
Human Capital and Diversity
6. Collaborative
Engagement
7. Corporate
Governance
8. Entreprise Risk
Management
9. Human Capital
10. Building Ties with
Communities
FROM LEFT Michael Pultrone Analyst, CIO Office Heather Cooke
Senior Vice President - Investment Solutions, Institutional Markets,
Vincent Beaulieu Senior Analyst, Investment Strategies
Investment management is very much a talent-centred
business. We rely on our ability to attract, retain and
motivate strong teams united by a common purpose and
shared passion.
26
This reality is reflected in the 2022 Strategic Plan, which
identifies “People” as one of four pillars considered crucial
to supporting the firm’s continued profitable growth and
advancing its global client-service capabilities. Accordingly,
the firm is committed to improving employee engagement.
To this end, in December 2018, we launched our Global
Respect and Inclusion Policy. This policy encompasses
practices and procedures in areas such as selection and
recruitment, professional development and training,
promotions, recreational programs and more. At its core,
the policy aims to create an environment where employees
embrace diversity and original thinking while treating one
another with respect and providing everyone with the
opportunity to realize their full potential.
1. ESG Governance
2. ESG Committee
4. Proxy Voting Policy
5. Direct Engagement
3. Responsible
Investment Policy
6. Collaborative
Engagement
7. Corporate
Governance
8. Entreprise Risk
Management
9. Human Capital
10. Building Ties with
Communities
Diversity Project
North America
In 2018, Fiera Capital became a founding member of an
ambitious new initiative: the Diversity Project North America.
Developed originally in the UK and now championed in
North America by The National Investment Company
Service Association (NICSA), a not-for-profit industry trade
association, the Diversity Project North America brings
together more than 20 leading asset managers with the goal
of accelerating progress towards a more inclusive culture
across all dynamics, including gender, ethnicity, sexual
orientation, age and disability.
Fiera Capital continued to bolster its reputation as a
champion for the advancement of women in leadership roles,
through its sponsorship of the U.S. division’s third annual
“Spotlight on Women” event, along with new initiatives that
included events to celebrate International Women’s Day
on March 8, 2019.
Fiera Capital’s concept of diversity
is about inclusion. We want to
send a message that our firm
welcomes fresh perspectives,
encourages original thinking
and is receptive to different ways
of doing things. We foster an
environment where the exchange
of ideas, best practices and
recommendations is not only
encouraged, but deep-rooted in
how we operate.
FROM LEFT Nancy Cloutier Vice President, Human Resources, Canadian Division, Éric Boutet
Vice President, Total Rewards and Performance Management, Daniel Richard Senior Vice
President, Global Human Resources and Corporate Communications and Chief Human
Resources Officer, Roxanna Haddad Director, Human Resources, U.S. Division
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 27
Board of Directors
Fiera Capital Corporation’s Board of Directors is composed of experienced, highly qualified
executives and corporate directors committed to ensuring that the firm strives for the highest
standards of corporate governance and ethical behaviour as well as performance excellence.
Jean-Guy Desjardins
Director since 2010
Chairman of the Board and
Chief Executive Officer,
Fiera Capital Corporation
Réal Bellemare3
Director since 2016
Executive Vice President, Finance,
Treasury, Administration and Chief
Financial Officer, Desjardins Group
Gary Collins1,5
Director since 2018
Senior Advisor at Lazard Ltd.
Nitin N. Kumbhani
Director since 2017
Vice Chairman and Chief of Growth
Equity Strategies, Fiera Capital, Inc.
Geoff Beattie1,3
Director since 2018
Chief Executive Officer of Generation
Capital and Chair of Relay Ventures
Sylvain Brosseau
Director since 2010
President and Chief Executive
Officer of Walter Global Asset
Management
Martin Gagnon
Director since 2017
Executive Vice President, Wealth
Management, Co-President and Co-Chief
Executive Officer, National Bank Financial
Raymond Laurin5,6
Director since 2013
Corporate Director, Former Senior
Vice President, Finance and Treasury,
and CFO, Desjardins Group
Jean C. Monty3,4
Director since 2010
Corporate Director, former Chairman
and Chief Executive Officer, BCE Inc.
Todd M. Morgan
Director since 2014
Chairman and Chief Executive Officer,
Bel Air Investment Advisors LLC
Lise Pistono5
Director since 2013
Vice President and Chief Financial
Officer, DJM Capital Inc.
28
David R. Shaw1,2
Lead Director - Director since 2006
Non-executive Chairman of human resources
firm LHH Knightsbridge, former President
and CEO of PepsiCo Canada Beverages
1 Member of the Governance Committee.
2 Chair of the Governance Committee.
3 Member of the Human Resources Committee.
4 Chair of the Human Resources Committee.
5 Member of the Audit and Risk Management Committee.
6 Chair of the Audit and Risk Management Committee.
Management’s Discussion
and Analysis
For the Three- and Twelve-Month Periods Ended December 31, 2018
FINANCIAL HIGHLIGHTS 30
BASIS OF PRESENTATION AND FORWARD-LOOKING STATEMENTS 34
OVERVIEW 35
SIGNIFICANT EVENTS 37
SUBSEQUENT EVENTS 37
MARKET, ECONOMIC AND FUND PERFORMANCE REVIEW 38
FINANCIAL RESULTS 42
RESULTS FROM OPERATIONS AND OVERALL PERFORMANCE - AUM AND REVENUES 45
RESULTS FROM OPERATIONS AND OVERALL PERFORMANCE - EXPENSES 52
NET EARNINGS (LOSSES) 54
NON-IFRS MEASURES 54
LIQUIDITY AND CAPITAL RESOURCES 59
SHARE-BASED PAYMENTS 63
RELATED PARTY TRANSACTIONS 66
CONTROL AND PROCEDURES 67
FINANCIAL INSTRUMENTS 67
SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATION UNCERTAINTIES 72
NEW ACCOUNTING STANDARDS 73
RISK FACTORS 76
MANAGEMENT’S REPORT TO THE SHAREHOLDER 81
ANNUAL REPORT OF THE AUDIT AND RISK MANAGEMENT COMMITTEE 82
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 29
FINANCIAL HIGHLIGHTS
The following management’s discussion and analysis (“MD&A”)
dated March 22, 2019, presents an analysis of the financial
condition and results of the consolidated operations of Fiera Capital
Corporation (the “Company” or “Fiera Capital”) as at and for the
three and twelve-month periods ended December 31, 2018. The
following MD&A should be read in conjunction with the audited
consolidated financial statements including the notes thereto, for
the years ended December 31, 2018 and 2017.
Highlights as at and for the Twelve-Month Period
Ended December 31, 2018
For the year ended December 31, 2018, the Company’s revenue
increased by $81.2 million, or 18%, year-over-year to $540.3 million
and adjusted EBITDA1 increased by $20.7 million, or 18%, year-
over-year, demonstrating the Company’s focus on profitability and
improving shareholder return, even in a year of market correction.
2018 was a challenging year for investment managers as the
fourth quarter was characterized by negative return affecting nearly
all sectors. Despite this headwind, most of our fund managers
outperformed their benchmarks in 2018, thereby limiting the impact
of the markets.
The Company was also able to minimize the impact of market
volatility on our overall results in 2018. Furthermore, while there
was a tapering of $0.1 billion in organic growth during the year,
new mandates gained were in higher basis point (BPS) strategies
than those of our lost mandates, which we expect will increase the
amount of revenue generated from our AUM going forward.
In addition, our Private Alternative Platform has continued its
rapid growth in 2018. The Company has introduced several new
solutions over the past few years, and we are beginning to see those
results on our top and bottom lines. Moreover, our clients get to
reap the benefits of unique asset classes with stable and recurring
cash flows and low correlations to traditional investment vehicles.
Finally, the acquisitions of Clearwater and CGOV, our two 2018
acquisitions, enabled the Company to establish a footprint in the
Asia credit space and to become one of the largest private wealth
investment managers in Canada. These two acquisitions added a
combined $6.9 billion to our total AUM in 2018.
1. Please refer to the “Non-IFRS Measures” section on page 54 and the
reconciliation to net earnings (loss) IFRS measures.
30 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 Summary of Quarterly Results
The Company’s AUM, total revenues, adjusted EBITDA1, adjusted EBITDA margin1 and net earnings (loss), on a consolidated basis, including
per share amounts, for each of the Company’s most recently completed eight quarterly periods as well as for the years ended December 31,
2018 and 2017, are as follows:
TABLE 1 – QUARTERLY RESULTS (IN $ THOUSANDS EXCEPT AUM IN $ MILLIONS AND PER SHARE DATA)
AUM
Total revenues
Adjusted EBITDA 1
Year Ended
Dec. 31
2018
Dec. 31
2017
Q4
Dec. 31
2018
Q3
Sep. 30
2018
Q2
Jun. 30
2018
Q1
Mar. 31
2018
Q4
Dec. 31
2017
Q3
Sep. 30
2017
Q2
Jun. 30
2017
Q1
Mar. 31
2017
136,675
128,901
136,675
143,475
139,389
131,360
128,901
123,003
125,658
122,063
540,285
459,096
156,963
137,109
126,232
119,981
142,046
107,127
109,349
100,574
Adjusted EBITDA margin 1
25.4%
25.4%
137,483
116,753
39,322
25.1%
36,620
26.7%
32,703
25.9%
28,839
24.0%
36,056
25.4%
27,020
25.2%
28,480
26.0%
25,199
25.1%
Net earnings (loss)
attributable to
Company’s shareholders
PER SHARE – BASIC
Adjusted EBITDA 1
Net earnings (loss)
attributable to the
Company’s shareholders
Adjusted net earnings
attributable to the
Company’s shareholders 1
PER SHARE – DILUTED
Adjusted EBITDA 1
Net earnings (loss)
attributable to the
Company’s shareholders
Adjusted net earnings
attributable to the
Company’s shareholders 1
(5,013)
10,671
(1,709)
995
(2,106)
(2,193)
763
4,603
877
4,428
1.45
1.42
0.41
0.38
0.35
0.32
0.43
0.33
0.35
0.31
(0.05)
0.13
(0.02)
0.01
(0.02)
(0.02)
0.01
0.06
0.01
0.05
1.07
1.21
0.29
0.29
0.26
0.24
0.35
0.28
0.31
0.27
1.45
1.33
0.41
0.36
0.35
0.32
0.43
0.32
0.34
0.30
(0.05)
0.12
(0.02)
0.01
(0.02)
(0.02)
0.01
0.05
0.01
0.05
1.07
1.13
0.29
0.27
0.26
0.24
0.35
0.27
0.30
0.26
1. Please refer to the “Non-IFRS Measures” section on page 54.
Certain totals, subtotals and percentages may not reconcile due to rounding.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 31
AUM and Revenue Trend
The following illustrates the Company’s trends regarding Assets under Management (“AUM”), quarterly and last twelve months (“LTM”)
revenues, LTM Adjusted EBITDA1, LTM Adjusted EBITDA Margin1, LTM Net Earnings (loss) per share, LTM Adjusted Earnings per share1,
as well as the LTM dividend payout.
AUM
122.1
125.7
123.0
128.9
131.4
139.4
143.5
136.7
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
33.7
26.3
62.1
33.8
26.4
65.5
32.9
25.7
64.4
34.6
26.3
68.0
35.3
27.5
68.6
35.7
30.6
73.1
36.1
31.0
76.4
33.4
31.3
72.0
122.1
125.7
123.0
128.9
131.4
139.4
143.5
136.7
412.8
438.1
109.3
107.1
378.5
100.6
459.1
142.0
478.5
495.4
120.0
126.2
525.4
540.3
157.0
137.1
Retail
Private Wealth
Institutional
Total AUM
REVENUES
$B
160
140
120
100
80
60
40
20
0
$M
550
500
450
400
350
100
50
0
Other Revenues
Perfomance Fees
Retail
Private Wealth
Institutional
Total Revenues
LTM Revenues
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
3.7
0.5
27.0
26.8
42.6
100.6
378.5
5.7
1.2
28.6
27.2
46.6
109.3
412.8
4.5
1.6
27.5
26.2
47.3
107.1
438.1
5.5
31.2
29.9
26.5
49.0
142.0
459.1
6.3
1.5
34.0
27.3
50.9
120.0
478.5
5.6
2.7
34.0
29.3
54.7
126.2
495.4
9.0
1.2
34.6
33.6
58.8
137.1
525.4
10.6
17.8
33.3
34.3
60.9
157.0
540.3
1. Please refer to the “Non-IFRS Measures” section on page 54.
32 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 LTM NET EARNINGS, LTM ADJUSTED NET EARNINGS PER SHARE1 AND LTM DIVIDENDS
$
1.50
1.30
1.10
0.90
0.70
0.50
0.30
0.10
-0.10
-0.30
1.19
1.23
1.25
1.21
1.18
1.13
1.14
0.66
0.68
0.70
0.72
0.74
0.76
0.78
1.07
0.80
0.24
0.14
0.19
0.13
0.06
0.03
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
LTM Dividends
LTM Adjusted Net Earnings per Share (EPS)
LTM Net Earnings per Share (EPS)
(0.02)
(0.05)
LTM NET EARNINGS, LTM ADJUSTED EBITDA1 AND LTM ADJUSTED EBITDA MARGIN1
$M
160
140
120
100
80
60
40
20
0
-20
116.2
121.2
122.3
116.8
120.4
124.6
134.2
137.5
30.7%
29.4%
17.9
10.9
27.9%
15.1
25.4%
25.2%
25.2%
25.5%
25.4%
10.7
4.1
1.1
(2.5)
(5.0)
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
LTM Adjusted EBITDA
LTM Net Earnings
LTM Adjusted EBITDA Margin
%
80
70
60
50
40
30
20
10
0
1. Please refer to the “Non-IFRS Measures” section on page 54.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 33
BASIS OF PRESENTATION AND FORWARD-LOOKING STATEMENTS
Forward-Looking Statements
This MD&A contains forward-looking statements. In some cases,
forward-looking statements can be identified by terminology such
as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”,
“estimate”, “predict”, “potential”, “continue”, “target”, “intend”, or
other negative of these terms, or other comparable terminology.
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 investment
performance, Fiera Capital’s ability to retain its existing clients and to
attract new clients, 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
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.
Basis of Presentation
The Company prepares its consolidated financial statements in
accordance with International Financial Reporting Standards (“IFRS”).
The policies applied in the Company’s consolidated financial
statements are based on IFRS issued and outstanding as at
December 31, 2018.
The audited consolidated financial statements include
the accounts of Fiera Capital Corporation and its subsidiaries.
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 consolidated
from the date on which control is obtained by the Company and are
deconsolidated from the date that control ceases. All intercompany
transactions and balances with and amongst the subsidiaries are
eliminated on consolidation.
Non-controlling interest in the earnings (loss) and equity of
subsidiaries are disclosed separately in the consolidated statements
of financial position, earnings (loss), comprehensive income (loss),
and changes in equity.
Where applicable, the subsidiaries’ accounting policies are
changed prior to the business acquisition by the Company to ensure
consistency with the policies adopted by the Company.
Subsequent to the acquisition date, the Company’s share
of earnings of a joint venture is recognized in the consolidated
statements of earnings (loss). The cumulative post-acquisition
movements are adjusted against the carrying amount of
the investment.
Unless otherwise stated, 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.
The following MD&A should also be read in conjunction with the
Company’s 2018 annual audited consolidated financial statements,
which contain a description of the accounting policies used in the
preparation of these financial statements.
The Company presents earnings before interest, taxes,
depreciation and amortization1 (“EBITDA”), adjusted EBITDA1,
adjusted EBITDA per share1, adjusted EBITDA margin1, adjusted
net earnings1 and adjusted net earnings per share1 as non-IFRS
performance measures. These non-IFRS measures do not have
any standardized meaning prescribed by IFRS and may not be
comparable to similar measures presented by other companies. The
definition of these non-IFRS measures and the reconciliation to the
most comparable IFRS measures are presented in the “Non-IFRS
Measures” section of this MD&A.
1. Please refer to the “Non-IFRS Measures” section on page 54.
34 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 In addition to traditional investment strategies, Fiera Capital has
completed acquisitions, entered into joint ventures and developed
partnerships in order to offer its clients alternative investment
strategies spanning a range of sectors and industries, including
infrastructure, agriculture, real estate, private equity assets, private
real estate financing and short-term business financing. Through
its joint ventures with Fiera Infrastructure and Fiera Comox, the
Company provides its clients with the ability to access infrastructure,
agriculture and private equity investments. Through its subsidiaries
Fiera Private Lending and Fiera Properties, Fiera Capital offers its
clients exposure to private financings, including construction
financing, real estate investment and short-term business financing.
The Company’s Clearwater subsidiaries provide clients with exposure
to private lending in Asian credit markets.
OVERVIEW
Company Overview
Fiera Capital is a global independent asset management firm with
over $136 billion in AUM as at December 31, 2018. The Company
delivers customized multi-asset solutions across traditional and
alternative asset classes to institutional, retail and private wealth
clients across North America, Europe and key markets in Asia. The
Company’s approach to investing is rooted in its deep Canadian
heritage, expanding international presence and a commitment
to being both disciplined and entrepreneurial in how it evaluates
opportunities. Its integrated model offers its clients the scale,
resources and reach of a global asset manager coupled with the
client-centric approach of a multi-boutique firm.
The Company is committed to responsible investing and adheres
to its duty to act professionally, responsibly and diligently in the
best interests of its investors and stakeholders with a view to create
long-term, sustainable value. Furthermore, Fiera Capital is of the view
that organizations that understand and successfully manage material
environmental, social and governance factors and associated risks
and opportunities tend to create more resilient, higher quality
businesses and assets, and are therefore better positioned to
deliver sustainable value over the long-term. The Company believes
there are multiple approaches to managing stocks, bonds and
alternative investments.
Fiera Capital’s independent team structure allows it to offer a
diverse range of investment strategies across asset classes and risk
spectrums using a wide variety of investment styles. The Company
believes that its flexible approach allows its investment teams
to adopt integration techniques that are consistent with their
investment philosophy.
To adapt to the investment landscape’s constant evolution, Fiera
Capital’s teams collaborate and seek to draw on the global industry’s
most innovative and diverse offerings to craft strategies that meet
the needs of every client, no matter where they may be located. The
Company adheres to the highest governance and investment risk
management standards and operates with transparency and integrity
to create value for customers and shareholders over the long term.
Fiera Capital also manages several investment funds. These Funds
consist of open-ended and closed-ended investment companies,
alternative mutual funds, limited partnerships and other pooled
funds which invest in a range of asset classes. Until the closing of the
Canoe Transaction on February 22, 2019, the Company also managed
the Fiera Capital Mutual Funds and currently acts as sub-advisor for
certain of such mutual funds.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 35
Company Evolution
The following diagram shows key initiatives, including organic growth and business acquisitions in terms of AUM in the evolution of the
Company since its creation.
2017
NOVEMBER
Acquisition of
remaining interest of
Fiera Properties
DECEMBER
Acquisition of Asia
EM Fund from
City National Rochdale
$2.1B
2018
MAY
Acquisition of CGOV
Asset Management
$5.0B
AUGUST
Acquisition of Clearwater
Capital Partners
$1.8B
2019
Sale of retail mutual funds
to Canoe Financial LP1
Acquisition of 80%
interest in Palmer Capital2
$1.3B
2003
SEPTEMBER
Creation of Fiera Capital
through Acquisition
of Elantis, Desjardins
Group’s Investment
Subsidiary
2005
OCTOBER
Introduction of 1st
Alternative Strategy
Acquisition of Senecal
Investment Counsel
2006
FEBRUARY
Acquisition of
YMG Capital
2008
DECEMBER
Creation of Fiera
Axium Infrastructure
2009
Creation of Foreign
Equity Team
2010
SEPTEMBER
Merger with Sceptre
Investment Counsel
Listing on Toronto
Stock Exchange
Organic
Strategic
2011
SEPTEMBER
Opening of First
U.S. Office
DECEMBER
Creation of
Fiera Properties
2012
APRIL
Acquisition of Natcan
$25B
Acquisition of
Roycom Inc.
$0.5B
NOVEMBER
Acquisition of Canadian
Wealth Management
Group Inc.
$0.6B
2013
JANUARY
Acquisition of Assets from
UBS Global Asset Mgmt.
(Canada) Inc.
$6B
MAY
Acquisition of assets
from GMP Capital Inc.
and creation of
Fiera Quantum
$0.6B
OCTOBER
Acquisitions of Bel Air
Investment Advisors and
Wilkinson O’Grady
$8.5B
2014
SEPTEMBER
Acquisition of Propel
Capital Corporation
$0.2B
2015
OCTOBER
Acquisition of Samson
Capital Advisors LLC
$9.5B
2016
JUNE
Acquisition of Apex
Capital Management
$8.6B
JULY
Entered into joint venture
with Aquila Infrastructure
Management
Creation of Fiera
Infrastructure Inc.
SEPTEMBER
Acquisition of
Larch Lane Advisors LLC
$0.5B
Creation of Fiera Comox
(Agriculture and
Private Equity)
NOVEMBER
Acquisition of
Centria Commerce Inc.
$0.3B
Creation of
Fiera Private Lending
DECEMBER
Acquisition of
Charlemagne Capital
Limited
$2.8B
1. Announced October 2018, closed February 2019
2. Announced December 2018, expected to close after receiving all necessary regulatory approvals
36 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 2018 SIGNIFICANT EVENTS
> 2022 Strategic Plan under way – The execution of the 2022
Strategic Plan commenced in the fourth quarter of 2018 and
the first initiatives are already well under way. These initiatives,
whether large or small, will have an impact on our processes,
practices and corporate culture. This is a turning point that
will help properly position Fiera Capital for the coming years in
order to achieve our goal of becoming one of the top 100 asset
managers in the world.
> Fiera Capital Expands Presence in Asia with Acquisition of
Clearwater Capital Partners – August 9, 2018. The Company
closed its acquisition of Clearwater Capital Partners LLC, an
Asia focused credit and special situations investment firm
headquartered in Hong Kong. The aggregate consideration paid
at closing, subject to various post-closing adjustments, was
approximately US$14.9 million.
> Fiera Capital Acquires Leading High-Net-Worth and
Institutional Investment Firm CGOV Asset Management –
May 31, 2018. Fiera Capital closed its acquisition of CGOV, an
Ontario-based high-net-worth and institutional investment firm
with approximately C$5 billion in assets under management
at closing.
> Expanded presence in the UK with acquisition of Palmer
Capital Partners Limited (“Palmer Capital”) – December 21,
2018. The Company entered into a purchase agreement with
Palmer Capital to acquire an 80% interest in Palmer Capital,
marking its first acquisition of a real estate investment
management business outside of Canada and its second
acquisition in the UK. Palmer Capital has over £800 million in
assets under management with an additional £215.5 million
managed through joint ventures.
> Launch of Fiera Comox Private Equity – December 3, 2018.
Fiera Comox announced the launch of Fiera Comox Private
Equity, enabling the independent investment manager to
offer clients two distinct global private investment strategies:
Agriculture and now, Private Equity.
> Milestone achievement: successfully completed the
streamlining of custodians – November 2018. The Canadian
division celebrated a milestone achievement during the fourth
quarter: the successful completion of a complex multi-phase
initiative launched back in 2015 to address the significant
challenges that stemmed from having multiple vendors
administrating our investment funds. The many benefits of this
achievement include reduced operating costs across the funds,
enhanced operational, regulatory and fiduciary, compliance, and
improved client reporting. These benefits align perfectly with the
objectives of operational scalability and cost efficiency outlined
in the 2022 Strategic Plan.
> Launch of the Global Respect & Inclusion Policy –
December 17, 2018. The policy aims to foster an inclusive and
diverse culture that will drive innovation as we pursue our goal
of positioning Fiera Capital among the top 100 asset managers
in the world. The Global Respect & Inclusion Policy reflects the
Company’s commitment to creating a work environment where
employees embrace diversity and original thinking while treating
one another with respect.
SUBSEQUENT EVENTS
> Strategy to efficiently deploy capital within the
Infrastructure platform – January 29, 2019. Fiera Infrastructure
announced that it entered into a long-term partnership
with EllisDon, one of North America’s most successful
and experienced construction capital groups, to acquire
EllisDon’s interest in its existing portfolio of ten public-private
projects (“PPP”). The completion of these ten projects is
expected to add approximately $100 million to Fiera
Infrastructure’s AUM. Moreover, the Partnership has the right
of first offer over EllisDon’s future PPP for a pre-agreed period
that has the potential to increase AUM significantly.
> Closing of the Canoe transaction – February 22, 2019. The
Company completed the closing of its previously announced
transaction whereby Canoe Financial LP (“Canoe”), a Canadian
mutual fund company, has acquired the rights to manage nine
of the Company’s retail mutual funds. Canoe has also acquired
the Company’s ownership interest in Fiera Capital Funds Inc.,
Fiera Capital’s wholly owned subsidiary and registered mutual
fund dealer and retained Fiera Capital to act as sub-advisor for
four of the nine funds.
> Strengthening of the Private Alternative Investments
Platform with the acquisition of Integrated Asset
Management Corp. (“IAM”) – March 22, 2019. The announced
acquisition of IAM is expected to add over $3 billion in AUM
and committed capital to the Company’s private alternative
investments platform.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 37
MARKET, ECONOMIC AND FUND PERFORMANCE REVIEW
stabilize the global economy in 2019 and provide a buffer as major
central banks take cautious and coordinated steps towards monetary
policy normalization, while “quantitative tightening” (balance sheet
contraction) should ultimately replace an overly-aggressive rate hike
trajectory. Taken together, we believe that its premature to call an
end to the synchronous global expansion, which should provide
some scope for equity market upside as we head into the new year.
Economic Outlook
The narrative for a synchronous global expansion should reassert
itself in 2019, thanks to the accommodative monetary and fiscal
impulse that extends the cycle - though the highly-contentious trade
backdrop threatens to undermine activity.
The Canadian positive employment trends should provide some
solace in 2019, the fortunes for the Canadian economy remain highly
dependent on the much-needed rotation towards business spending
and exports to take over from an exhausted consumer and housing
backdrop. Encouragingly, business investment intensions for 2019
remain upbeat according to Statistics Canada’s latest report on
planned capital expenditures, while healthy growth prospects south
of the border, a competitive Canadian dollar, and simmering trade
tensions should bolster exports in the coming year.
The US economy continues to impress. The consumer is thriving
on a resilient job market and rising wages, while the factory sector
also remains in good health. After several quarters of impressive
performance, growth is expected to downshift to a still-robust pace
as the temporary boost from fiscal and monetary stimulus fades –
though not enough to derail the Federal Reserve’s plans to normalize
policy in the coming year. The fourth quarter GDP results painted
a picture of healthy, albeit moderating growth prospects for the
world’s largest economy. Both consumer and business spending
were positive contributors, while trade and residential investment
acted as a drag at the end of 2018. While some high frequency data
at year-end indeed cooled as the economy contended with the
government shutdown, ongoing trade uncertainties, and elevated
levels of financial market volatility, the good news is that both
consumers and businesses have revealed some renewed optimism
in the latest survey results, suggesting that some of the softness at
year-end may ultimately prove to be transitory in nature.
Looking abroad, while economic momentum in Europe has
faded, growth should revert back to a respectable pace as temporary
factors that were weighing on the economy dissipate. Meanwhile,
a string of natural disasters hindered Japan’s economy in 2018 -
though leading indicators suggest that a rebound is forthcoming as
one-off factors fade. Finally, the fortunes of the UK economy hinge
directly on the outcome of Brexit, which remains highly uncertain
at this time.
Market Review
After an extended period of calm, volatility reasserted itself in 2018.
In stark contrast to 2017, investor sentiment has been extremely
fragile, with financial markets swinging wildly on the back of a myriad
of macroeconomic developments at hand. Notably, investors have
had to contend with an environment of rising borrowing costs,
persistent trade tensions between the world’s two largest economies,
a politically-charged environment in Europe, and some tentative
signs of slowing global growth. In the highly-volatile and illiquid
trading environment, nervous investors have fled indiscriminately
from risky assets.
Global equity markets posted their worst quarterly results since
2011 during the final quarter of 2018. Equity market leadership
shifted dramatically during the quarter, with the US equity market
lagging its global peers after several quarters of outperformance.
Canadian equities also joined the quarterly rout, with the steep
selloff in the energy sector weighing on the resource-levered market.
European bourses were plagued by political anxieties in Italy, France,
and the UK, while Japanese stocks plunged into bear market territory
as the tumultuous trade backdrop countered some decent corporate
profits. Finally, emerging market bourses also declined but managed
to outperform their developed market peers as investor perceptions
for a less-aggressive Federal Reserve stemmed some of the weakness
in risky assets in general.
Meanwhile, fixed income markets posted positive results during
the fourth quarter as investors flocked to the safety of bonds in what
was a tumultuous trading environment. After breaching multi-year
highs, North American bond yields moved lower across the curve
and yield curves bull-flattened, with the decline in the long-end
exceeding that of the short-end. The short-end was pressured lower
as some dovish rhetoric from major central banks saw investors
reign-in their wagers for policy normalization. Meanwhile, the
long-end retreated alongside a softening of inflation expectations,
which moderated in the environment of downgraded expectations
for global growth and lower crude prices. Finally, corporate and
high yield bonds underperformed their government peers, with
deteriorating risk appetite sending credit spreads soaring higher
throughout the quarter.
Taken together, we view the late-2018 pullback in equity markets
as a short-term, sentiment-driven correction within a cyclical bull
market. Encouragingly, the conditions for a pronounced global
economic deceleration remain elusive at this time and the outlook
for global growth remains reasonably bright. Moreover, the fragile
trading relationship between the world’s two largest economies
may have finally crested following the G20 summit in Buenos Aires,
where officials in the US and China demonstrated a willingness to
negotiate. In the meantime, tentative signs of compromise between
the Italian government and the European Union on the state of
Italy’s budget are beginning to show. What’s more, there are some
early signs that the fiscal impulse from both the US and China will
38 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 We have progressively built an investment platform that has
met or exceeded client expectations and is well-suited for the
current environment. Our performing strategies in traditional asset
classes, hedge funds, innovative non-traditional strategies aimed at
diversifying sources of returns, as well as a suite of other solutions are
designed to meet the specific and wide-ranging needs of clients, be
they liability concerns, downside risk management preoccupations,
significant currency exposures, or environmental, social and
governance (“ESG”) and general asset allocation objectives.
We continue to strive to meet the evolving needs of clients
around the world through strategy development that capitalizes on
our evolving view of the world and our vast talent pool. We have the
ability to partner with clients on total portfolio solutions and are
keen to represent a portion of their overall toolkit.
Finally, the Chinese economy demonstrated some preliminary
signs of stabilization at the beginning of 2019 in an encouraging
sign that the stimulative monetary and fiscal impulse may finally be
bearing some fruit. Specifically, retail sales, industrial production, and
fixed asset investment all pointed to a marginal improvement and
surprised to the upside at the end of 2018, while exports rebounded
and new loans hit a record high early-on in 2019. Taken together,
this latest string of economic data has offered some reassurance that
the world’s second largest economy may be finding a floor, which
by extension should have positive implications for global growth
prospects in general. Encouragingly, officials in the US and China
have also demonstrated some willingness to negotiate on the trade
front and are taking some important steps towards making some sort
of deal, which should remove a key overhang for the world’s second
largest economy in 2019.
Summary of Portfolio Performance
Despite the high volatility that marked the fourth quarter of 2018,
most of the Company’s fixed income strategies generated positive
results compared to benchmarks in 2018 driven by successful credit
investments. Over the last five-year period (since inception, when
inception-to-date is less than five years) these strategies delivered
excellent performance, with most of them outperforming their
relative benchmarks.
Balanced mandates performed exceptionally well during the year,
with a large majority beating their relative benchmarks. Performance
over the last five years also significantly beat relevant benchmarks
and generated high-single- digit returns.
2018, overall, was another good year for most equity strategies
as fund managers maintained their quality focus. Most strategies
outperformed their benchmark during the year, with many of those
also ranking in the top quartile. While both our domestic and global
equity strategies have performed remarkably well, the latter has
become the victim of its own success, with capacity tempering as a
result of clients actively seeking it out.
It was a challenging year for hedge funds throughout the industry
as many were caught off guard by the reversal in fortune during the
fourth quarter, but performance over the last 5 years remains solid.
Our Private Alternatives funds performed exceedingly well in
2018. These strategies are gaining more and more traction as a
result of offering attractive returns with a lower degree of volatility
and a low correlation to traditional asset classes. To that effect, the
Company continues to develop solutions to respond to increasing
demand for alternative investment strategies that generate a steady
stream of returns through investments in real estate, infrastructure,
private lending and agriculture.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 39
TABLE 2 – ANNUALIZED RATES OF RETURN AS AT DECEMBER 31, 2018
Strategies
Fixed Income Investment Strategies
Active and Strategic Fixed Income - Active Universe
AUM
($Billion)
64.9
Integrated Fixed Income Universe
Integrated Fixed Income Credit
Tactical Fixed Income Universe
High Yield Bonds
Preferred Share Opportunistic
Infrastructure Bonds
Preferred Shares Relative Value
Active and Strategic Fixed Income - Strategic Universe
Tax Efficient Core Intermediate (Primary Benchmark)
Tax Efficient Core Intermediate (Secondary Benchmark)
Tax Efficient Core Plus
High Grade Core Intermediate (Primary Benchmark)
High Grade Core Intermediate (Secondary Benchmark)
Balanced Investment Strategies
Balanced Core
Balanced Integrated
Equity Investment Strategies
Canadian Equity
Canadian Equity Core
Canadian Equity Opportunities
Canadian Equity Small Cap Core Mix
Canadian Equity Small Cap
US Equity
International Equity
Global Equity Multi Currency in CAD
CGOV Total Equity
Apex Large Cap Growth
Apex Mid Cap Growth
Apex Smid Growth
Apex Small Cap Growth
City National Rochdale Emerg Mkts
Emerging Markets Core Growth
Emerging Markets Growth & Income
Frontier Markets
Alternative Investment Strategies
North American Market Neutral Fund
Long / Short Equity Fund
Diversified Lending Fund
Multi-Strategy Income Fund
3.5
57.7
10.6
Charlemagne OCCO Eastern European Fund
OAKS Emerging & Frontier Opportunities Fund
Infrastructure Fund
Real Estate Fund
Global Agriculture Fund
Properties CORE Mortgage Fund
Fiera Private Lending Construction Financing Fund
Fiera Private Lending Mezzanine Financing Fund
Fiera Private Lending Business Financing Fund
Total AUM
136.7
40 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
1 yr
Added
Value
0.34
0.26
0.13
0.77
Strategy
Return
1.75
1.67
1.23
2.18
-3.59
-0.36
-11.19
1.08
-9.32
1.65
1.42
1.42
1.43
0.89
0.89
-0.66
-1.13
-2.41
-8.10
-17.75
-11.97
-18.72
9.75
0.89
5.73
-1.97
-1.16
3.51
-8.65
-9.92
-23.68
-20.10
12.34
-14.19
0.94
-2.28
8.12
-0.17
3.56
-13.71
7.24
7.20
0.88
6.18
6.86
9.99
11.06
-2.58
1.66
-1.39
0.25
-0.22
-0.13
-0.21
-0.03
-0.23
1.59
1.69
6.48
0.79
-8.87
6.20
-0.55
5.52
6.92
6.22
1.27
0.36
8.26
-1.17
-0.60
-9.11
-5.52
2.23
2.22
-
-
-
-
-
-
-
-
-
-
-
-
5 yrs or Since Inception (SI)*
(SI if inception < 5 yrs)
Quartile
Strategy
Return
Added
Value
Quartile
Inception
Date
Benchmark Name
Notes
Q2
Q2
Q3
Q1
Q4
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Q1
Q1
Q1
Q2
Q4
Q1
Q4
Q1
Q1
Q1
Q3
Q3
Q1
Q4
Q3
Q4
Q4
Q1
Q2
N/A
N/A
N/A
N/A
N/A
Q3
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1.75
4.01
3.93
3.75
0.34
0.46
0.25
0.2
3.51
-0.07
3.72
7.07
1.59
1.11
2.19
2.19
2.98
2.12
2.12
6.98
7.07
7.63
4.98
2.5
2.69
2.22
16.62
9.74
13.75
9.13
10.26
12.26
5.47
2.09
3.40
2.84
0.63
7.19
4.16
7.50
6.38
4.47
4.44
3.41
6.46
6.41
-0.19
6.17
7.06
10.06
7.07
1.06
0.88
1.26
0.19
-0.22
0.33
0.56
0.02
0.12
1.37
1.55
3.57
0.93
-1.56
2.98
2.51
2.54
4.03
3.81
0.81
-0.15
4.83
-0.71
-3.04
1.76
1.19
-1.02
6.51
-
-
-
-
-
-
-
-
-
-
-
-
Q1
Q1
Q3
Q2
Q4
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Q1
Q1
Q1
Q3
Q4
Q2
Q3
Q1
Q1
Q1
Q2
Q2
Q1
Q3
Q4
Q2
Q2
Q4
Q1
N/A
N/A
N/A
N/A
N/A
Q1
N/A
N/A
N/A
N/A
N/A
N/A
N/A
2018-01-01
FTSE Canada Universe
2000-01-01
FTSE TMX Universe
2012-03-01
FTSE Canada Corporate Universe
2000-01-01
FTSE Canada Universe
85% Merrill Lynch High Yield Corp B-BB Hedged
2002-02-01
in CAD, 15% Merrill Lynch High Yield Corp CCC
Hedged in CAD
2015-08-01
SOLACTIVE Preferred Share Laddered Index
2011-08-01
FTSE Canada Provincial Long
2004-02-01
S&P/TSX Preferred Share Index
2017-12-01
FTSE Canada Universe
2007-03-31
Bloomberg Barclays 1-10 Year Municipal Index
2007-03-31
Bloomberg Barclays 1-10 Year AA+ Municipal Index
2012-12-31
Bloomberg Barclays 1-10 Year Municipal Index
2004-12-31
Bloomberg Barclays Intermediate Aggregate Index
2005-01-01
CMBS/ABS/BBB Index
Bloomberg Barclays Intermediate Aggregate Ex
1984-09-01
Balanced Core Blended
2013-04-01
Balanced Integrated Blended
2013-01-01
S&P/TSX Composite
1992-01-01
S&P/TSX Composite
2002-11-01
S&P/TSX Composite
1987-01-01
S&P/TSX Small Cap
1989-01-01
S&P/TSX Small Cap
2009-04-01
S&P 500 CAD
2010-01-01 MSCI EAFE Net CAD
2009-10-01 MSCI World Net CAD
2007-04-01
Russell 1000 Growth
2008-05-01
Russell MidCap Growth
1990-01-01
Russell 2500 Growth
2006-01-01
Russell 2000 Growth
2011-12-14 MSCI Emerging Markets NR USD
2003-07-01 MSCI Emerging Markets Index
2010-07-01 MSCI Emerging Markets Index
2010-07-01 MSCI Frontier Markets Index
1999-04-01
65% MSCI WORLD / 35% S&P/TSX Composite
2007-10-01
Absolute Return
2010-08-01
Absolute Return
2008-04-01
Absolute Return
2009-11-01
Absolute Return
2002-01-01
Absolute Return
2009-12-01
Absolute Return
2010-03-01
Absolute Return
2013-07-01
Absolute Return
2017-07-01
Absolute Return
2017-12-01
Absolute Return
2006-11-22
Absolute Return
2015-07-21
Absolute Return
2013-11-06
Absolute Return
4
4
4
4
4
2
3
4
4
4
4
4
4
4
4
4
4
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018
TABLE 2 – ANNUALIZED RATES OF RETURN AS AT DECEMBER 31, 2018
Strategies
Fixed Income Investment Strategies
Active and Strategic Fixed Income - Active Universe
AUM
($Billion)
64.9
Strategy
Return
Quartile
Strategy
Return
Added
Value
Quartile
5 yrs or Since Inception (SI)*
(SI if inception < 5 yrs)
Integrated Fixed Income Universe
Integrated Fixed Income Credit
Tactical Fixed Income Universe
High Yield Bonds
Preferred Share Opportunistic
Infrastructure Bonds
Preferred Shares Relative Value
Active and Strategic Fixed Income - Strategic Universe
Tax Efficient Core Intermediate (Primary Benchmark)
Tax Efficient Core Intermediate (Secondary Benchmark)
Tax Efficient Core Plus
High Grade Core Intermediate (Primary Benchmark)
High Grade Core Intermediate (Secondary Benchmark)
Balanced Investment Strategies
Balanced Core
Balanced Integrated
Equity Investment Strategies
Canadian Equity
Canadian Equity Core
Canadian Equity Opportunities
Canadian Equity Small Cap Core Mix
Canadian Equity Small Cap
Global Equity Multi Currency in CAD
US Equity
International Equity
CGOV Total Equity
Apex Large Cap Growth
Apex Mid Cap Growth
Apex Smid Growth
Apex Small Cap Growth
City National Rochdale Emerg Mkts
Emerging Markets Core Growth
Emerging Markets Growth & Income
Frontier Markets
Alternative Investment Strategies
North American Market Neutral Fund
Long / Short Equity Fund
Diversified Lending Fund
Multi-Strategy Income Fund
3.5
57.7
10.6
Charlemagne OCCO Eastern European Fund
OAKS Emerging & Frontier Opportunities Fund
Infrastructure Fund
Real Estate Fund
Global Agriculture Fund
Properties CORE Mortgage Fund
Fiera Private Lending Construction Financing Fund
Fiera Private Lending Mezzanine Financing Fund
Fiera Private Lending Business Financing Fund
Total AUM
136.7
-3.59
-0.36
3.51
-0.07
1 yr
Added
Value
0.34
0.26
0.13
0.77
-2.58
1.66
-1.39
0.25
-0.22
-0.13
-0.21
-0.03
-0.23
1.59
1.69
6.48
0.79
-8.87
6.20
-0.55
5.52
6.92
6.22
1.27
0.36
8.26
-1.17
-0.60
-9.11
-5.52
2.23
2.22
-
-
-
-
-
-
-
-
-
-
-
-
1.75
1.67
1.23
2.18
-11.19
1.08
-9.32
1.65
1.42
1.42
1.43
0.89
0.89
-0.66
-1.13
-2.41
-8.10
-17.75
-11.97
-18.72
9.75
0.89
5.73
-1.97
-1.16
3.51
-8.65
-9.92
-23.68
-20.10
12.34
-14.19
0.94
-2.28
8.12
-0.17
3.56
-13.71
7.24
7.20
0.88
6.18
6.86
9.99
11.06
Q2
Q2
Q3
Q1
Q4
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Q1
Q1
Q1
Q2
Q4
Q1
Q4
Q1
Q1
Q1
Q3
Q3
Q1
Q4
Q3
Q4
Q4
Q1
Q2
N/A
N/A
N/A
N/A
N/A
Q3
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1.75
4.01
3.93
3.75
3.72
7.07
1.59
1.11
2.19
2.19
2.98
2.12
2.12
6.98
7.07
7.63
4.98
2.5
2.69
2.22
16.62
9.74
13.75
9.13
10.26
12.26
5.47
2.09
3.40
2.84
0.63
7.19
4.16
7.50
6.38
4.47
4.44
3.41
6.46
6.41
-0.19
6.17
7.06
10.06
7.07
0.34
0.46
0.25
0.2
1.06
0.88
1.26
0.19
-0.22
0.33
0.56
0.02
0.12
1.37
1.55
3.57
0.93
-1.56
2.98
2.51
2.54
4.03
3.81
0.81
-0.15
4.83
-0.71
-3.04
1.76
1.19
-1.02
6.51
-
-
-
-
-
-
-
-
-
-
-
-
Q1
Q1
Q3
Q2
Q4
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Q1
Q1
Q1
Q3
Q4
Q2
Q3
Q1
Q1
Q1
Q2
Q2
Q1
Q3
Q4
Q2
Q2
Q4
Q1
N/A
N/A
N/A
N/A
N/A
Q1
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Inception
Date
Benchmark Name
Notes
2018-01-01
FTSE Canada Universe
2000-01-01
FTSE TMX Universe
2012-03-01
FTSE Canada Corporate Universe
2000-01-01
FTSE Canada Universe
2002-02-01
85% Merrill Lynch High Yield Corp B-BB Hedged
in CAD, 15% Merrill Lynch High Yield Corp CCC
Hedged in CAD
Notes:
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. US Dollar returns.
Important Disclosures:
- All returns are expressed in Canadian dollars, unless indicated otherwise.
2015-08-01
SOLACTIVE Preferred Share Laddered Index
- All performance returns presented above are annualized.
2011-08-01
FTSE Canada Provincial Long
2004-02-01
S&P/TSX Preferred Share Index
2017-12-01
FTSE Canada Universe
2007-03-31
Bloomberg Barclays 1-10 Year Municipal Index
2007-03-31
Bloomberg Barclays 1-10 Year AA+ Municipal Index
2012-12-31
Bloomberg Barclays 1-10 Year Municipal Index
2004-12-31
Bloomberg Barclays Intermediate Aggregate Index
2005-01-01
Bloomberg Barclays Intermediate Aggregate Ex
CMBS/ABS/BBB Index
1984-09-01
Balanced Core Blended
2013-04-01
Balanced Integrated Blended
2013-01-01
S&P/TSX Composite
1992-01-01
S&P/TSX Composite
2002-11-01
S&P/TSX Composite
1987-01-01
S&P/TSX Small Cap
1989-01-01
S&P/TSX Small Cap
2009-04-01
S&P 500 CAD
2010-01-01 MSCI EAFE Net CAD
2009-10-01 MSCI World Net CAD
1999-04-01
65% MSCI WORLD / 35% S&P/TSX Composite
2007-04-01
Russell 1000 Growth
2008-05-01
Russell MidCap Growth
1990-01-01
Russell 2500 Growth
2006-01-01
Russell 2000 Growth
2011-12-14 MSCI Emerging Markets NR USD
2003-07-01 MSCI Emerging Markets Index
2010-07-01 MSCI Emerging Markets Index
2010-07-01 MSCI Frontier Markets Index
2007-10-01
Absolute Return
2010-08-01
Absolute Return
2008-04-01
Absolute Return
2009-11-01
Absolute Return
2002-01-01
Absolute Return
2009-12-01
Absolute Return
2010-03-01
Absolute Return
2013-07-01
Absolute Return
2017-07-01
Absolute Return
2017-12-01
Absolute Return
2006-11-22
Absolute Return
2015-07-21
Absolute Return
2013-11-06
Absolute Return
4
4
4
4
4
2
3
4
4
4
4
4
4
4
4
4
4
- All returns, except alternative strategies and Balanced Fund are presented
gross of management and custodial fees and withholding taxes but net of all
trading expenses.
- Alternative Investment Strategies and Balanced Fund are presented net of
management fees, custodial fees, performance fees and withholding taxes.
- The performance returns above assume reinvestment of all dividends.
- Besides for the alternative strategies, the returns presented for any one line
above represent the returns of a composite of discretionary portfolios.
- Each strategy listed above represents a single discretionary portfolio or group of
discretionary portfolios that collectively represent a unique investment strategy
or composite.
- The since inception date represents the earliest date at which a discretionary
portfolio was in operation within the strategy.
- 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.
- Quartile rankings are provided by eVestment.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 41
FINANCIAL RESULTS
TABLE 3 – CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) AND ASSETS UNDER MANAGEMENT AS AT
AND FOR THE THREE-MONTH PERIODS ENDED DECEMBER 31, 2018 AND 2017, AND SEPTEMBER 30, 2018
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
Expenses
As at
Variance
December 31,
2018
September 30,
2018
December 31,
2017
Quarter over
Quarter
FAV/(UNF) 2
Year over Year
FAV/(UNF) 2
136,675
143,475
128,901
(6,800)
7,774
For the Three-Month Periods Ended
Variance
December 31,
2018
September 30,
2018
December 31,
2017
Quarter over
Quarter
FAV/(UNF) 2
Year over Year
FAV/(UNF) 2
128,561
8,309
9,498
10,595
156,963
126,936
1,133
41
8,999
137,109
105,350
10,039
21,195
5,462
142,046
1,625
7,176
9,457
1,596
19,854
23,211
(1,730)
(11,697)
5,133
14,917
Selling, general and administrative expenses
122,440
106,710
109,457
(15,730)
(12,983)
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, integration and other costs
Acquisition costs
Loss on disposal of intangible assets
Loss on disposal of property and equipment
Realized (gain) loss on investments
Revaluation of assets held-for-sale
Total expenses
Earnings (loss) before income taxes
Income taxes expense (recovery)
Net earnings (loss)
Attributable to:
Company’s shareholders
Non-controlling interest
Net earnings (loss)
BASIC PER SHARE
Adjusted EBITDA 1
Net earnings (loss)
Adjusted net earnings 1
DILUTED PER SHARE
Adjusted EBITDA 1
Net earnings (loss)
Adjusted net earnings 1
560
1,179
12,468
10,147
8,332
3,399
2,966
26
55
(171)
191
544
1,091
11,834
5,393
5,978
871
2,594
-
1
(3)
-
404
964
8,778
4,835
2,880
6,866
1,679
-
42
(128)
-
161,592
135,013
135,777
(4,629)
(3,056)
(1,573)
(1,709)
136
(1,573)
0.41
(0.02)
0.29
0.41
(0.02)
0.29
2,096
969
1,127
995
132
1,127
0.38
0.01
0.29
0.36
0.01
0.27
6,269
5,185
1,084
763
321
1,084
0.43
0.01
0.35
0.43
0.01
0.35
(16)
(88)
(634)
(4,754)
(2,354)
(2,528)
(372)
(26)
(54)
168
(191)
(26,579)
(6,725)
4,025
(2,700)
(2,704)
4
(2,700)
0.03
(0.03)
-
0.05
(0.03)
0.02
(156)
(215)
(3,690)
(5,312)
(5,452)
3,467
(1,287)
(26)
(13)
43
(191)
(25,815)
(10,898)
8,241
(2,657)
(2,472)
(185)
(2,657)
(0.02)
(0.03)
(0.06)
(0.02)
(0.03)
(0.06)
1. Please refer to the “Non-IFRS Measures” section and the related reconciliation on page 54.
2. FAV: Favourable - UNF: Unfavourable.
Certain totals, subtotals and percentages may not reconcile due to rounding.
42 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 TABLE 4 – CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
FOR THE TWELVE-MONTH PERIODS ENDED DECEMBER 31, 2018 AND 2017
Statements of Earnings
(in $ thousands except per share data)
Revenues
Base management fees
Performance fees – Traditional Assets
Performance fees – Alternative Assets
Other 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, integration and other costs
Acquisition costs
Loss on disposal of property and equipment
Loss on disposal of intangible assets
Realized (gain) loss on investments
Revaluation of assets held-for-sale
Earnings (loss) before income taxes
Income taxes expense (recovery)
Net earnings (loss)
Attributable to:
Company’s shareholders
Non-controlling interest
Net earnings (loss)
BASIC PER SHARE
Adjusted EBITDA 1
Net earnings (loss)
Adjusted net earnings 1
DILUTED PER SHARE
Adjusted EBITDA 1
Net earnings (loss)
Adjusted net earnings 1
For the Twelve-Month Periods Ended
Variance
December 31,
2018
December 31,
2017
Year over Year
FAV/(UNF) 2
485,624
13,680
9,422
31,559
540,285
405,056
13,379
21,193
19,468
459,096
425,924
358,454
1,845
4,235
44,813
25,355
24,497
7,586
11,086
56
26
(145)
191
545,469
(5,184)
(429)
(4,755)
(5,013)
258
(4,755)
1.45
(0.05)
1.07
1.45
(0.05)
1.07
2,176
3,817
41,110
11,479
5,852
15,150
5,434
522
371
(137)
-
444,228
14,868
4,156
10,712
10,671
41
10,712
1.42
0.13
1.21
1.33
0.12
1.13
80,568
301
(11,771)
12,091
81,189
(67,470)
331
(418)
(3,703)
(13,876)
(18,645)
7,564
(5,652)
466
345
8
(191)
(101,241)
(20,052)
4,585
(15,467)
(15,684)
217
(15,467)
0.03
(0.18)
(0.14)
0.12
(0.17)
(0.06)
1. Please refer to the “Non-IFRS Measures” Section and the related reconciliation table on page 54.
2. FAV: Favourable - UNF: Unfavourable.
Certain totals, subtotals and percentages may not reconcile due to rounding.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 43
TABLE 5 – SELECTED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION INFORMATION (IN $ THOUSANDS)
December 31, 2018
December 31, 2017
Cash and cash equivalents, restricted cash, investments
Accounts receivable
Other current assets
Total current assets
Goodwill
Intangible assets
Other non-current assets
Total assets
Accounts payable and accrued liabilities
Other current liabilities
Total current liabilities
Long-term debt
Convertible debentures
Purchase price obligations
Deferred income taxes
Other non-current liabilities
Total liabilities
Equity
Attributable to Company’s shareholders
Attributable to Non-controlling interest
Total liabilities and equity
Certain totals, subtotals and percentages may not reconcile due to rounding.
58,335
148,459
50,654
257,448
631,699
529,062
42,398
1,460,607
144,059
46,260
190,319
421,139
79,008
98,221
12,489
25,705
826,881
632,958
768
633,726
1,460,607
47,417
128,398
10,082
185,897
523,885
462,281
32,852
1,204,915
114,008
39,419
153,427
292,417
77,461
58,086
16,014
15,499
612,904
592,545
(534)
592,011
1,204,915
44 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 RESULTS FROM OPERATIONS AND OVERALL PERFORMANCE -
AUM AND REVENUES
Assets under Management
AUM are the main driver of Fiera Capital’s revenues. Fiera Capital’s revenues, for the most part, are calculated as a percentage of the Company’s
AUM. The change in the Company’s AUM is determined by i) the amount of new mandates (“New”); ii) the amount of redemptions (“Lost”);
iii) the amount 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”) and/or business disposals (“Disposals”).
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. Also, the average assets under management (“Average AUM”) for a given period is the average
of the ending value of AUM of the months for this period.
As complementary information, Note 4 of the audited consolidated financial statements for the years ended December 31, 2018, and
2017 presents the Company’s business combinations and other transactions, and is to be read in conjunction with the following discussions.
Also, refer to the Company’s evolution diagram on page 36 for the details and timing of the acquisitions and other business transactions.
The following tables (Tables 6, 7 and 8) provide a summary of changes in the Company’s assets under management:
TABLE 6 – ASSETS UNDER MANAGEMENT1 (IN $ MILLIONS)
AUM - beginning of period
Net variance
Acquisitions
AUM - end of period
Average AUM
For the Three-Month Periods Ended
December 31, 2018
September 30, 2018
December 31, 2017
143,475
(6,800)
-
136,675
137,995
139,389
2,252
1,834
143,475
143,314
123,003
3,811
2,087
128,901
127,830
1. AUM include foreign exchange impact.
Certain totals, subtotals and percentages may not reconcile due to rounding.
TABLE 7 – ASSETS UNDER MANAGEMENT BY CLIENTELE TYPE –
QUARTERLY ACTIVITY CONTINUITY SCHEDULE (IN $ MILLIONS)
Institutional
Private Wealth
Retail
AUM - end of period
September 30,
2018
76,373
30,976
36,126
143,475
New
632
475
291
1,398
Lost
(1,844)
(225)
(422)
(2,491)
Net
Contributions
(592)
(448)
(1,008)
(2,048)
Market
(4,075)
(816)
(2,141)
(7,032)
Foreign
Exchange
Impact
Acquisition
(Disposal)/
Adjustment
December 31,
2018
1,464
1,355
554
3,373
-
-
-
-
71,958
31,317
33,400
136,675
Certain totals, subtotals and percentages may not reconcile due to rounding.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 45
Quarterly Activities
Total AUM were $136.7 billion as at December 31, 2018, representing a decrease of $6.8 billion, or 5%, compared to $143.5 billion as at
September 30, 2018. The lower AUM are due primarily to market depreciation of $7.0 billion, combined with lost mandates of $2.5 billion and
a negative net contribution of $2.0 billion, during the period. These decreases in AUM were partially offset by new mandates of $1.4 billion
during the fourth quarter of 2018. Finally, the US dollar exchange rate fluctuation positively impacted the Company’s AUM by approximately
$3.4 billion during the fourth quarter of 2018. Overall, the market correction in global equities during the quarter was partially offset by
positive returns in fixed income and alternative assets, which together make up 55% of the Company’s AUM.
AUM related to the Institutional clientele were $72.0 billion as at December 31, 2018, representing a decrease of $4.4 billion, or 6%,
compared to $76.4 billion from the quarter ended September 30, 2018. The decrease in AUM was driven primarily by market depreciation of
$4.1 billion, combined with lost mandates of $1.8 billion, as a result of clients consolidating investment service providers or pursuing other
asset classes, as well as negative net contributions of $0.6 billion during the quarter. These decreases were partially offset by new mandates
of $0.6 billion during the quarter, namely in Balanced, Global and International Equity and Alternative mandates. Finally, the US dollar
exchange rate fluctuation positively impacted AUM during the three-month period ended December 31, 2018, by approximately $1.5 billion.
The AUM related to the Private Wealth clientele were $31.3 billion as at December 31, 2018, representing an increase of $0.3 billion,
or 1%, compared to $31.0 billion from the previous quarter ended September 30, 2018. The increase is primarily due to $1.4 billion from
the positive impact of the US dollar exchange rate, combined with new mandates of $0.5 billion, partially offset by market depreciation of
$0.8 billion as well as lost mandates and negative net contribution totaling $0.7 billion during the quarter, mainly due to clients pursuing
other asset classes.
The AUM related to the Retail clientele were $33.4 billion as at December 31, 2018, representing a decrease of $2.7 billion, or 7%,
compared to $36.1 billion from the previous quarter ended September 30, 2018. The decrease is primarily driven by market depreciation of
$2.1 billion, combined with lost mandates and negative net contribution of $1.4 billion during the quarter, mainly due to clients pursuing
other asset classes. This decrease in AUM was partially offset by the positive impact of the US dollar exchange rate and new mandates of
$0.6 billion and $0.3 billion, respectively.
TABLE 8 – ASSETS UNDER MANAGEMENT BY CLIENTELE TYPE –
YEAR-TO-DATE ACTIVITY CONTINUITY SCHEDULE (IN $ MILLIONS)
Institutional
Private Wealth
Retail
AUM - end of period
December 31,
2017
68,038
26,319
34,544
128,901
New
4,643
2,417
2,248
9,308
Lost
(4,465)
(875)
(1,356)
(6,696)
Net
Contributions
(1,316)
(531)
(891)
(2,738)
Certain totals, subtotals and percentages may not reconcile due to rounding.
Foreign
Exchange
Impact
Acquisition
(Disposal)/
Adjustment
December 31,
2018
2,173
2,069
880
5,122
4,916
1,948
-
71,958
31,317
33,400
6,864
136,675
Market
(2,031)
(30)
(2,025)
(4,086)
46 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 Year-to-Date Activity
Total AUM were $136.7 billion as at December 31, 2018, representing an increase of $7.8 billion, or 6%, compared to $128.9 billion as at
December 31, 2017. The increase is due primarily to new mandates of $9.3 billion, combined with new AUM from the CGOV Asset Management
(“CGOV”) and Clearwater acquisitions which added $5.0 billion and $1.8 billion, respectively. These increases in AUM were partially offset
by lost mandates of $6.7 billion, market depreciation of $4.1 billion and negative net contribution of $2.7 billion during the twelve-month
period ended December 31, 2018. Finally, the US dollar exchange rate fluctuation positively impacted AUM during the twelve-month period
ended December 31, 2018, by approximately $5.1 billion.
The following graphs illustrate the breakdown of the Company’s AUM by clientele type and by asset class as at December 31, 2018, and
December 31, 2017, respectively.
AUM BY CLIENTELE TYPE
As at December 31, 2018
As at December 31, 2017
2018
52.6%
22.9%
24.5%
INSTITUTIONAL
PRIVATE WEALTH
RETAIL
52.8%
20.4%
26.8%
2017
AUM BY ASSET CLASS
As at December 31, 2018
As at December 31, 2017
2018
47.5%
42.2%
10.3%
EQUITIES
FIXED INCOME
ALTERNATIVE AND OTHER
41.8%
49.9%
8.3%
2017
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 47
Revenues
The Company’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 Company is also entitled to performance fees. The Company
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 comprised mainly of brokerage and consulting fees which are not AUM-driven, as well as gains
or losses on the foreign exchange hedge contracts.
TABLE 9 – 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,
2018
September 30,
2018
December 31,
2017
Quarter over
Quarter
Year over
Year
60,926
34,341
33,294
128,561
8,309
9,498
17,807
10,595
58,752
33,568
34,616
126,936
1,133
41
1,174
8,999
49,023
26,461
29,866
105,350
10,039
21,195
31,234
5,462
156,963
137,109
142,046
2,174
773
(1,322)
1,625
7,176
9,457
16,633
1,596
19,854
11,903
7,880
3,428
23,211
(1,730)
(11,697)
(13,427)
5,133
14,917
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, 2018, were $157.0 million, representing an increase of $15.0 million, or 11%, compared
to $142.0 million for the same period last year. The year-over-year increase in revenues is mainly due to organic growth resulting from sales
efforts, combined with additional revenues from the Fiera Capital Emerging Markets Fund created following the acquisition of Asia Emerging
Market Fund from City National Rochdale (“CNR transaction”) in December 2017, and from the recent acquisitions of CGOV in May 2018
and Clearwater in August 2018. This increase in revenues was partially offset by lower performance fees recorded in the fourth quarter of
2018 compared to the same period last year.
Management Fees
Management fees were $128.6 million for the fourth quarter ended December 31, 2018, representing an increase of $23.2 million, or 22%,
compared to $105.4 million for the same period last year. The overall increase in management fees by clientele type is as follows:
> Management fees from the Institutional clientele were $60.9 million for the fourth quarter ended December 31, 2018, representing an
increase of $11.9 million, or 24%, compared to $49.0 million for the same quarter last year. The increase in base management fees is
primarily due to additional revenues from the CGOV and Clearwater acquisitions, combined with higher revenues resulting from higher
AUM from new mandates namely from the US and Canada mainly in Global Equity, as well as from the growth in Private Alternative
Investment Strategies.
> Management fees from the Private Wealth clientele were $34.3 million for the fourth quarter ended December 31, 2018, representing an
increase of $7.8 million, or 29%, compared to $26.5 million for the same period last year. The increase is mainly due to the acquisition
of CGOV, combined with a higher AUM base from new mandates in the US.
> Management fees from the Retail clientele were $33.3 million for the fourth quarter ended December 31, 2018, representing an increase
of $3.4 million, or 11%, compared to $29.9 million for the same quarter last year. The increase is mainly attributable to additional revenues
following the CNR transaction.
Performance Fees
Performance fees were $17.8 million for the fourth quarter ended December 31, 2018, compared to $31.2 million for the same period last
year mainly due to lower performance on the emerging market funds.
48 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 Other Revenues
Other revenues were $10.6 million for the fourth quarter ended December 31, 2018, representing an increase of $5.1 million, or 93%,
compared to $5.5 million for the same period last year. The increase is mainly due to higher income from Canada resulting from the change in
revenue recognition following the recent update of IFRS 15 presenting gross revenue as opposed to previously presented on a net basis under
operating expenses with an overall nil impact on net earnings, combined with additional volume from the Private Alternative Investment
strategies and higher other income from the Fiera Capital Emerging Markets Fund created in June 2018 following the CNR transaction in
December 2017, partially offset by a loss of $3.1 million on the forward foreign exchange contracts, compared to a gain of $0.9 million for
the same period last year.
The following graphs illustrate the breakdown of the Company’s revenues for the three-month periods ended December 31, 2018, and
December 31, 2017, respectively:
REVENUES
2018
Q4 2018
Q4 2017
38.8%
21.9%
21.2%
11.4%
6.7%
INSTITUTIONAL
PRIVATE WEALTH
RETAIL
PERFORMANCE FEES
OTHER REVENUES
34.5%
18.7%
21.0%
22.0%
3.8%
2017
Current Quarter versus Previous Quarter
Revenues for the fourth quarter ended December 31, 2018, were $157.0 million, representing an increase of $19.9 million, or 15%, compared
to $137.1 million for the previous quarter ended September 30, 2018. The increase in revenues is mainly due to higher performance fees,
combined with a full quarter of Clearwater, partially offset by a loss on hedging recorded in the fourth quarter, compared to a gain recorded
in the previous quarter. Overall, the market correction at the end of the fourth quarter of 2018 negatively impacted the Company’s revenues,
which were offset by the foreign exchange rate fluctuation, as well as the Company’s organic growth resulting from sales efforts.
Management Fees
Management fees were $128.6 million for the fourth quarter ended December 31, 2018, representing an increase of $1.7 million, or 1%,
compared to $126.9 million for the previous quarter ended September 30, 2018. The following is the breakdown of the management fees
by clientele type:
> Management fees from the Institutional clientele were $60.9 million for the fourth quarter ended December 31, 2018, representing an
increase of $2.1 million, or 4%, compared to $58.8 million for the previous quarter ended September 30, 2018. The sequential increase
is primarily due to a full quarter of revenues from the Clearwater acquisition, combined with new mandates in the US, partially offset by
a reclassification of $1.6 million from Fiera Properties institutional to the Private Wealth segment.
> Management fees from the Private Wealth clientele were $34.3 million for the fourth quarter ended December 31, 2018, representing an
increase of $0.7 million, or 2%, compared to $33.6 million for the previous quarter ended September 30, 2018. The increase is mainly
due to a reclassification of $1.6 million from Fiera Properties institutional, partially offset by lower revenues from US activities.
> Management fees from the Retail clientele were $33.3 million for the fourth quarter ended December 31, 2018, representing a decrease
of $1.3 million, or 4%, compared to $34.6 million for the previous quarter ended September 30, 2018. The decrease is mainly due to
lower base management fees following client redemptions.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 49
Performance Fees
Performance fees were $17.8 million for the fourth quarter ended December 31, 2018, compared to $1.2 million for the previous quarter
ended September 30, 2018. Performance fees are generally recorded in June and December of each year.
Other Revenues
Other revenues were $10.6 million for the fourth quarter ended December 31, 2018, representing a decrease of $1.6 million, or 18%,
compared to $9.0 million for the previous quarter ended September 30, 2018. The increase is mainly due to higher income from Canada
resulting from the change in revenue recognition following the recent update of IFRS 15 presenting gross revenue as opposed to previously
presented on a net basis under operating expenses with an overall nil impact on net earnings, combined with additional volume from the
Private Alternative Investment strategies, partially offset by a loss of $3.1 million on hedging recorded in the fourth quarter, compared to a
gain of $1.1 million recorded in the previous quarter.
TABLE 10 – REVENUES: YEAR-TO-DATE 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
Certain totals, subtotals and percentages may not reconcile due to rounding.
For The Twelve-Month Periods Ended
Variance
December 31, 2018
December 31, 2017
Year over Year
225,229
124,505
135,890
485,624
13,680
9,422
23,102
31,559
540,285
185,452
106,599
113,005
405,056
13,379
21,193
34,572
19,468
459,096
39,777
17,906
22,885
80,568
301
(11,771)
(11,470)
12,091
81,189
50 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 Year-to-Date December 31, 2018, versus Year-to-Date December 31, 2017
Revenues for the twelve-month period ended December 31, 2018, were $540.3 million, representing an increase of $81.2 million, or 18%,
compared to $459.1 million for the same period last year. The year-over-year increase in revenues is mainly due to additional revenues from
the Fiera Capital Emerging Markets fund created in June 2018, following the CNR transaction in December 2017, and the recent acquisitions
of CGOV and Clearwater, combined with organic growth resulting from sales efforts, mostly from the institutional sector as well as growth
in Private Alternative Investment strategies, partially offset by lower performance fees recorded in 2018 compared to 2017.
Management Fees
Management fees for the twelve-month period ended December 31, 2018, were $485.6 million, representing an increase of $80.5 million,
or 20%, compared to $405.1 million for the same period last year. The increase by clientele type is as follows:
> Revenues from the Institutional clientele for the twelve-month period ended December 31, 2018, were $225.2 million, representing an
increase of $39.7 million, or 21%, compared to $185.5 million for the same period last year. The increase in base management fees is
mainly due to higher AUM from new mandates in Global Equity strategies and Private Alternative Investment strategies, combined with
the acquisitions of CGOV and Clearwater.
> Revenues from the Private Wealth clientele for the twelve-month period ended December 31, 2018, were $124.5 million, representing an
increase of $17.9 million, or 17%, compared to $106.6 million for the same period last year. The increase was primarily due to additional
revenues from the CGOV acquisition, combined with higher revenues resulting from organic growth resulting from sales efforts.
> Revenues from the Retail clientele for the twelve-month period ended December 31, 2018, were $135.9 million, representing an increase
of $22.9 million, or 20%, compared to $113.0 million for the same period last year. The increase is mainly attributable to the additional
revenues from the Fiera Capital Emerging Markets fund created in June 2018, following the CNR transaction in December 2017 and from
Fiera Capital Europe.
Performance Fees
Total performance fees were $23.1 million for the twelve-month period ended December 31, 2018, compared to $34.6 million for the same
period last year mainly due to lower performance on the emerging market funds.
Other Revenues
Other revenues were $31.6 million for the twelve-month period ended December 31, 2018, representing an increase of $12.1 million, or
62%, compared to $19.5 million for the same period last year, mostly from the Private Alternative Investment strategies and higher other
income from the Fiera Capital Emerging Markets Fund created in June 2018 following the CNR transaction in December 2017, higher income
from Canada resulting from the change in revenue recognition following the recent update of IFRS 15 presenting gross revenue as opposed
to previously presented on a net basis under operating expenses with an overall nil impact on net earnings, partially offset by a loss of
$4.7 million on the forward foreign exchange contracts on revenues denominated in US dollars, compared to a gain of $2.1 million for the
comparable period last year.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 51
RESULTS FROM OPERATIONS AND OVERALL PERFORMANCE - EXPENSES
Selling, General and Administrative (“SG&A”)
and Managers’ Expenses
Depreciation and Amortization
Current Quarter versus Prior-Year Quarter
SG&A and external managers’ expenses were $123.0 million for
the three-month period ended December 31, 2018, representing
an increase of $13.1 million, or 12%, compared to $109.9 million
for the same period last year. The higher costs are mainly due to
an increase in variable compensation related to long-term cash
compensation agreements with key investment professionals which
aim to secure and contribute to the continued growth in revenues
and in investment strategies, combined with higher volume resulting
from the Company’s growth and acquisitions.
Current Quarter versus Previous Quarter
SG&A and external managers’ expenses were $123.0 million for
the three-month period ended December 31, 2018, representing an
increase of $15.7 million, or 15%, compared to $107.3 million for the
previous quarter ended September 30, 2018. The increase is mainly
attributable to higher performance fees related expenses, as well as
higher volume resulting from the Company’s growth.
Year-to-Date December 31, 2018, versus Year-to-Date
December 31, 2017
SG&A and external managers’ expenses were $427.8 million for the
twelve-month period ended December 31, 2018, representing an
increase of $67.2 million, or 19%, compared to $360.6 million for
the same period last year. The increase in costs is attributable to the
higher volume of operations following the Company’s global growth
and increases in variable compensation related to long-term cash
and share-based compensation agreements with key investment
professionals which aim to secure and contribute to the continued
growth in revenues and investment strategies.
Current Quarter versus Prior-Year Quarter
Depreciation of property and equipment was $1.2 million for the
fourth quarter ended December 31, 2018, representing an increase
of $0.2 million, or 20%, compared to $1.0 million from the
corresponding quarter last year, mainly due to various acquisitions
in 2018.
Amortization of intangible assets was $12.5 million for the
fourth quarter ended December 31, 2018, representing an increase
of $3.7 million, or 42%, compared to $8.8 million for the same
period last year. The increase in amortization of intangible assets is
mainly attributed to various acquisitions.
Current Quarter versus Previous Quarter
Depreciation of property and equipment remained fairly stable
at $1.2 million for the fourth quarter ended December 31, 2018,
when compared to $1.1 million from the previous quarter ended
September 30, 2018.
Amortization of intangible assets was $12.5 million for the
fourth quarter ended December 31, 2018, representing an increase
of $0.7 million, or 6%, compared to $11.8 million for the previous
quarter ended September 30, 2018. The increase is mainly
attributable to the Clearwater acquisition.
Year-to-Date December 31, 2018, versus Year-to-Date
December 31, 2017
Depreciation of property and equipment was $4.2 million for the
twelve-month period ended December 31, 2018, representing an
increase of $0.4 million, or 11%, compared to $3.8 million for the
same period last year.
Amortization of intangible assets was $44.8 million for the
twelve-month period ended December 31, 2018, representing an
increase of $3.7 million, or 9%, compared to $41.1 million for the
same period last year.
As complementary information, Note 4 of the audited
consolidated financial statements for the years ended December 31,
2018, and 2017, presents the details on the acquisition of intangible
assets related to business acquisitions and other transactions.
52 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 Year-to-Date December 31, 2018, versus Year-to-Date
December 31, 2017
The accretion and change in fair value of purchase price obligations
represented a charge of $24.5 million for the twelve-month period
ended December 31, 2018, compared to a charge of $5.9 million
for the same period last year. The increase is mainly due to the CNR
transaction in 2017 and Clearwater acquisition in 2018.
Acquisition and Restructuring, Integration
and Other Costs
Current Quarter versus Prior-Year Quarter
Acquisition and restructuring, integration and other costs were
$6.4 million for the fourth quarter ended December 31, 2018,
representing a decrease of $2.1 million, or 25%, compared to
$8.5 million for the same period last year. The decrease is mainly due
to lower restructuring, integration and other costs, partially offset by
higher acquisition costs during the fourth quarter of 2018 compared
to the same period last year.
Current Quarter versus Previous Quarter
Acquisition and restructuring, integration and other costs were
$6.4 million for the fourth quarter ended December 31, 2018,
representing an increase of $2.9 million, or 83%, compared to
$3.5 million for the previous quarter ended September 30, 2018.
The increase is mainly due to higher restructuring, integration and
other costs in the fourth quarter of 2018, compared to the previous
quarter ended September 30, 2018.
Year-to-Date December 31, 2018, versus Year-to-Date
December 31, 2017
Acquisition and restructuring, integration and other costs were
$18.7 million for the twelve-month period ended December 31,
2018, representing a decrease of $1.9 million, or 9%, compared to
$20.6 million for the same period last year. The decrease is mainly
due to lower restructuring, integration and other costs, partially
offset by higher acquisitions costs for the twelve-month period
ended December 31, 2018, compared to the same period last year.
Interest on Long-Term Debt and Other Financial Charges
Current Quarter versus Prior-Year Quarter
Interest on long-term debt and other financial charges was
$10.1 million for the fourth quarter ended December 31, 2018,
representing an increase of $5.3 million, compared to $4.8 million
for the same quarter last year. The increase is mainly due to the net
impact of cross currency and interest rate swaps, combined with
the remeasurement impact of financial instruments denominated
in foreign currencies, as well as an increased interest expense on the
convertible debentures and long-term debt.
Current Quarter versus Previous Quarter
Interest on long-term debt and other financial charges was
$10.1 million for the fourth quarter ended December 31, 2018,
representing an increase of $4.7 million, compared to $5.4 million
for the previous quarter ended September 30, 2018. The increase
is mainly due to the net impact of cross currency and interest rate
swaps, combined with the remeasurement impact of financial
instruments denominated in foreign currencies, as well as an
increased interest expense on long-term debt.
Year-to-Date December 31, 2018, versus Year-to-Date
December 31, 2017
Interest on long-term debt and other financial charges was
$25.4 million for the twelve-month period ended December 31,
2018, representing an increase of $13.9 million, compared to
$11.5 million for the same period last year. The increase is mainly
due to the net impact of cross currency and interest rate swaps,
combined with the remeasurement impact of financial instruments
denominated in foreign currencies, as well as increased interest
expense on the convertible debentures and debt interest.
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 an expense of $8.3 million for the fourth quarter ended
December 31, 2018, compared to an expense of $2.9 million for
the same quarter last year. The increase is mainly due to the CNR
transaction with corresponding increased revenues.
Current Quarter versus Previous Quarter
The accretion and change in fair value of purchase price obligations
represented a charge of $8.3 million for the fourth quarter ended
December 31, 2018, compared to a charge of $6.0 million for the
previous quarter ended September 30, 2018. The increase is mainly
due to the Clearwater acquisition.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 53
NET EARNINGS (LOSSES)
NON-IFRS MEASURES
Current Quarter versus Prior-Year Quarter
For the fourth quarter ended December 31, 2018, the Company
reported net loss attributable to the Company’s shareholders of
$(1.7) million, or $(0.02) per share (basic and diluted), compared
to $0.8 million, or $0.01 per share (basic and diluted), for the same
quarter last year. The decrease in net earnings is mainly attributable
to higher expenses related to the accretion and change in fair value
of the purchase price obligations of $5.5 million mainly related to the
CNR transaction, partially offset by higher revenues due to volume
and acquisitions.
Current Quarter versus Previous Quarter
For the fourth quarter ended December 31, 2018, the Company
reported net loss attributable to the Company’s shareholders of
$(1.7) million, or $(0.02) per share (basic and diluted), compared to
net earnings of $1.0 million, or $0.01 per share (basic and diluted),
for the previous quarter ended September 30, 2018. The quarter
net loss resulted mainly from the increase in expenses related to
the accretion and change in fair value of purchase price obligations
related to the CNR transaction, combined with the rise in debt
interest and in amortization of intangible assets, partially offset by
higher revenues due to volume and acquisitions.
Year-to-Date December 31, 2018, versus Year-to-Date
December 31, 2017
For the twelve-month period ended December 31, 2018, the
Company recorded net loss attributable to the Company’s
shareholders of $(5.0) million, or $(0.05) per share (basic and
diluted), compared to net earnings of $10.7 million, or $0.13 per
share (basic) and $0.12 (diluted) for the same period last year. The
decrease in net earnings is attributable to higher expenses related
to the accretion and change in fair value of the purchase price
obligations of $18.6 million related to the CNR transaction, partially
offset by higher revenues due to sales efforts, market appreciation
and acquisitions.
54 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
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 highlight trends
in our core business that may not otherwise be apparent when one
relies solely on IFRS measures. 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.
Non-IFRS measures do not have any standardized meaning
prescribed by IFRS and may not be comparable to similar measures
presented by other companies. 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. 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.
We define EBITDA as net earnings (loss) before interest, income
taxes, depreciation and amortization (EBITDA). Adjusted EBITDA
is calculated as EBITDA, adjusted for acquisition, restructuring,
integration and other costs, accretion and change in fair value of
purchase price obligations, realized loss (gain) on investments,
loss on disposal of investments in subsidiaries, gain on disposal
of investments in joint ventures, revaluation of assets held-for-
sale, share of (earnings) loss of joint ventures and share-based
compensation expenses.
We believe that EBITDA and adjusted EBITDA are meaningful
measures as they allow for the evaluation of our core operating
performance from one period to the next without the variations
caused by the impact of the items described above. The Company
considers its core operating activities to be asset management,
investment advisory and related services. Costs related to strategic
initiatives such as business acquisitions, integration of newly acquired
businesses and restructuring are considered non-core. The Company
excludes these items because they affect the comparability of its
financial results among periods and could potentially distort the
analysis of trends in its core business performance. Excluding these
items does not imply they are necessarily non-recurring.
We define the adjusted EBITDA margin as the ratio of
adjusted EBITDA to revenues. It is an important measure of overall
operating performance because it measures Company profitability
from operations.
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 Adjusted EBITDA
The following table presents the Company’s adjusted EBITDA and adjusted EBITDA per share1 for the three and twelve-month periods ended
December 31, 2018, and 2017, as well as for the three-month period ended September 30, 2018:
TABLE 11 – ADJUSTED EBITDA (IN $ THOUSANDS EXCEPT PER SHARE DATA)
Net earnings (Loss)
EBITDA
Adjusted EBITDA
Per share basic
Per share diluted
For the Three-Month Periods Ended
For the Twelve-Month Periods Ended
December 31,
2018
September 30,
2018
December 31,
2017
December 31,
2018
December 31,
2017
(1,573)
19,165
39,322
0.41
0.41
1,127
20,414
36,620
0.38
0.36
1,084
20,846
36,056
0.43
0.43
(4,755)
69,219
137,483
1.45
1.45
10,712
71,274
116,753
1.42
1.33
Certain totals, subtotals and percentages may not reconcile due to rounding.
Current Quarter versus Prior-Year Quarter
For the fourth quarter ended December 31, 2018, adjusted EBITDA was $39.3 million or $0.41 per share (basic and diluted), representing an
increase of $3.2 million, or 9%, compared to $36.1 million, or $0.43 per share (basic and diluted), for the same period last year.
Adjusted EBITDA for the fourth quarter ended December 31, 2018, was higher primarily due to the CNR transaction and the acquisition
of CGOV, combined with revenues from the deployment of the Private Alternative Investment strategies. This increase in revenues was
partially offset by an overall operating expenses increase to support the Company’s growth and expansion.
Current Quarter versus Previous Quarter
For the fourth quarter ended December 31, 2018, adjusted EBITDA was $39.3 million or $0.41 per share (basic and diluted), representing an
increase of $2.7 million, or 7%, compared to $36.6 million or $0.38 per share (basic) and $0.36 (diluted), from the previous quarter ended
September 30, 2018. The sequential increase in adjusted EBITDA is mainly due to higher revenues, partially offset by additional SG&A
expenses to support the Company’s growth.
Year-to-Date December 31, 2018, versus Year-to-Date December 31, 2017
For the twelve-month period ended December 31, 2018, adjusted EBITDA was $137.5 million, or $1.45 per share (basic and diluted),
representing an increase of $20.7 million, or 18%, compared to $116.8 million, or $1.42 per share (basic) and $1.33 (diluted), for the same
period last year.
The increase in adjusted EBITDA for the twelve-month period ended December 31, 2018, is mainly attributable to the CNR transaction
in December 2017, CGOV in May 2018, combined with an increase in revenues resulting from organic growth resulting from sales efforts
driven by global collaboration between our distribution team. This was partially offset by an increase in variable compensation related to
long-term cash agreements with key investment professionals which aim to secure and contribute to the continued growth in revenues and
in investment strategies, combined with higher operating expenses to support the Company’s growth and expansion.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 55
The following table provides a reconciliation between EBITDA, adjusted EBITDA, adjusted EBITDA per share and adjusted EBITDA margin to
the most comparable IFRS measures earnings for each of the Company’s last eight quarters.
TABLE 12 – EBITDA AND ADJUSTED EBITDA RECONCILIATION (IN $ THOUSANDS EXCEPT PER SHARE DATA)
Net earnings (loss)
Income taxes expense (recovery)
Depreciation of property
and equipment
Amortization of intangible assets
Interest on long-term debt
and other financial charges
EBITDA
Restructuring, integration and other costs
Acquisition costs
Accretion and change in fair value of
purchase price obligations
Realized loss (gain) on investments
Loss on disposal of intangible assets and
property and equipment
Revaluation of assets-held-for-sale
Share-based compensation
Adjusted EBITDA
REVENUES
Adjusted EBITDA Margin
Adjusted EBITDA Per Share
Basic
Diluted
Q4
2018
(1,573)
(3,056)
1,179
12,468
10,147
19,165
3,399
2,966
8,332
(171)
81
191
5,359
39,322
Q3
2018
1,127
969
1,091
11,834
5,393
20,414
871
2,594
5,978
(3)
1
-
Q2
2018
(2,215)
1,641
1,018
10,488
5,054
15,986
2,389
2,508
5,720
2
-
-
Q1
2018
(2,093)
17
947
10,022
4,761
13,654
928
3,018
4,467
27
-
-
6,765
36,620
6,098
32,703
6,745
28,839
Q4
2017
1,084
5,185
964
8,778
4,835
20,846
6,866
1,679
2,880
(128)
42
-
3,871
36,056
Q3
2017
4,771
(263)
976
10,487
2,641
18,612
2,357
378
375
2
480
-
4,816
27,020
Q2
2017
504
(797)
956
10,900
1,827
13,390
4,851
1,659
1,289
(8)
371
-
6,928
28,480
Q1
2017
4,353
32
931
10,935
2,177
18,428
1,076
1,718
1,308
(4)
-
-
2,673
25,199
156,963
137,109
126,232
119,981
142,046
107,127
109,349
100,574
25.1%
26.7%
25.9%
24.0%
25.4%
25.2%
26.0%
25.1%
0.41
0.41
0.38
0.36
0.35
0.35
0.32
0.32
0.43
0.43
0.33
0.32
0.35
0.34
0.31
0.30
Certain totals, subtotals and percentages may not reconcile due to rounding.
We define adjusted net earnings as net earnings (loss) attributable to the Company’s shareholders, adjusted for depreciation of property and
equipment, amortization of intangible assets and share-based compensation, as well as after-tax acquisition, restructuring, integration and
other costs, accretion and change in fair value of purchase price obligations, accretion on effective interest on convertible bonds, after-tax
gain on disposal of investment in joint venture and after-tax revaluation of assets held-for-sale, after-tax loss on disposal of investment in
subsidiaries, after-tax gain/loss on revaluation of a purchase price obligation and after-tax gain on acquisition of control of investment in
joint venture, as well as the impact of the US Tax Cuts and Jobs Act in 2017.
Effective December 31, 2017, the Company amended the definition of adjusted net earnings to no longer adjust for after-tax changes in
fair value of derivative financial instruments that are used to hedge the Company’s interest rate or foreign currency exposure. This change was
made to recognize the gain or loss from these derivative financial instruments in net earnings in accordance with the nature of the hedged
item. Comparative figures prior to December 31, 2017, for adjusted net earnings and adjusted net earnings per share (basic and diluted) have
been restated to be consistent with the current presentation.
Effective March 31, 2018, the Company amended the definition of adjusted net earnings to adjust for the accretion and change in fair
value of purchase price obligations. Also, effective September 30, 2018, the Company amended the definition of adjusted net earnings to
adjust for the accretion on effective interest on convertible bonds. Accretion expenses and the gains or losses recognized on the change in
fair value of purchase price obligations arise from contingent consideration arrangements, generally in business combinations which are
considered non-core operations. The fair value of contingent consideration is remeasured at each reporting date and it is determined using
valuation techniques which make use of forecasted net cash flows discounted to present value. Accretion expense (i.e. non-cash interest
expense) brings the present value of the purchase price obligation up to its future value over time. Adjusting accretion expense and change in
fair value of purchase price obligations from adjusted net earnings provides for better comparability of the financial results between periods
where valuation assumptions used by management may introduce volatility in earnings. Comparative figures prior to September 30, 2018, for
adjusted net earnings and adjusted net earnings per share (basic and diluted) have been restated to be consistent with the current presentation.
We believe that adjusted net earnings is a meaningful measure as it allows for the evaluation of the Company’s overall performance
from one period to the next without the variation caused by the impacts of the items described above. The Company excludes these items
because they affect the comparability of its financial results among periods and could potentially distort the analysis of trends in its business
performance. Excluding these items does not imply they are necessarily non-recurring.
56 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 Adjusted Net Earnings
The following table presents the Company’s net earnings (loss) and adjusted net earnings for the three and twelve-month periods ended
December 31, 2018, and 2017, as well as for the three-month period ended September 30, 2018:
TABLE 13 – NET EARNINGS (LOSS) AND ADJUSTED NET EARNINGS (IN $ THOUSANDS EXCEPT PER SHARE DATA)
Net earnings (loss) attributable to the
Company’s shareholders
Depreciation of property and equipment
Amortization of intangible assets
Share-based compensation *
Restructuring, integration and other costs *
Acquisition costs *
Accretion and change in fair value of purchase price
obligations and effective interest on convertible bonds *
Revaluation of assets-held-for-sale *
Impact of US Tax Cuts and Jobs Act on future income taxes
Less: Income taxes on above-mentioned items *
Adjusted net earnings attributable to the
Company’s shareholders
Per share – basic
Net earnings (loss)
Adjusted net earnings
Per share – diluted
Net earnings (loss)
Adjusted net earnings
For the Three-Month Periods Ended
For the Twelve-Month Periods Ended
December 31,
2018
September 30,
2018
December 31,
2017
December 31,
2018
December 31,
2017
(1,709)
1,179
12,468
5,359
3,399
2,966
8,692
191
-
4,294
995
1,091
11,834
6,765
871
2,594
6,285
-
-
2,902
763
964
8,778
3,871
6,866
1,679
2,880
-
6,017
2,580
(5,013)
4,235
44,813
24,967
7,586
11,086
25,819
191
-
12,447
10,671
3,817
41,110
18,287
15,150
5,434
5,852
-
6,017
7,084
28,251
27,533
29,238
101,237
99,254
(0.02)
0.29
(0.02)
0.29
0.01
0.29
0.01
0.27
0.01
0.35
0.01
0.35
(0.05)
1.07
(0.05)
1.07
0.13
1.21
0.12
1.13
Certain totals, subtotals and percentages may not reconcile due to rounding.
Current Quarter versus Prior-Year Quarter
Adjusted net earnings attributable to the Company’s shareholders amounted to $28.3 million, or $0.29 per share (basic and diluted) for the
fourth quarter ended December 31, 2018, compared to $29.2 million, or $0.35 per share (basic and diluted) for the fourth quarter ended
December 31, 2017. Adjusted net earnings for the quarter ended December 31, 2018, reflected net loss, excluding $19.0 million, or $0.20
per share (basic and diluted), of depreciation of property and equipment, amortization of intangible assets and share-based compensation,
as well as $11.0 million, or $0.11 per share (basic and diluted), of acquisition, restructuring, integration and other costs, an expense related
to the accretion and change in fair value of purchase price obligations and the accretion on effective interest on convertible bonds and the
revaluation of assets held-for-sale, net of income taxes.
Current Quarter versus Previous Quarter
For the fourth quarter ended December 31, 2018, the Company recorded adjusted net earnings of $28.3 million, or $0.29 per share (basic and
diluted) representing an increase of $0.1 million compared to $27.5 million, or $0.29 (basic) and $0.27 (diluted) from the previous quarter
ended September 30, 2018. The increase in adjusted net earnings is mainly attributable to higher revenues resulting from performance fees
and higher base management fees, partially offset by higher operating expenses to support the Company’s growth.
Year-to-Date December 31, 2018, versus Year-to-Date December 31, 2017
For the twelve-month period ended December 31, 2018, adjusted net earnings attributable to the Company’s shareholders amounted to
$101.2 million, or $1.07 per share (basic and diluted), compared to $99.3 million, or $1.21 per share (basic) and $1.13 (diluted) for the same
period last year. Adjusted net earnings for the year ended December 31, 2018, reflected net loss, excluding $74.0 million, or $0.78 per share
(basic and diluted), of depreciation of property and equipment, amortization of intangible assets and share-based compensation, as well
as $32.2 million, or $0.34 per share (basic and diluted), of acquisition, restructuring, integration and other costs, an expense related to the
accretion and change in fair value of purchase price obligations and the accretion on effective interest on convertible bonds and the revaluation
of assets held-for-sale, net of income taxes.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 57
The following table provides a reconciliation between adjusted net earnings and adjusted net earnings per share to the most comparable
IFRS measures earnings for each of the Company’s last eight quarters:
TABLE 14 – ADJUSTED NET EARNINGS RECONCILIATION (IN $ THOUSANDS EXCEPT PER SHARE DATA)
Net earnings (loss) attributable to the
Company’s shareholders
Depreciation of property and equipment
Amortization of intangible assets
Share-based compensation *
Restructuring, integration and other costs *
Acquisition costs *
Accretion and change in fair value of
purchase price obligations and effective
interest on convertible bonds *
Revaluation of assets-held-for-sale *
Impact of US Tax Cuts and Jobs Act on
future income taxes
Income taxes on above-mentioned items *
Adjusted net earnings attributable to
the Company’s shareholders
Per share – basic
Net earnings (loss) attributable to
the Company’s shareholders
Adjusted net earnings attributable to
the Company’s shareholders
Per share – diluted
Net earnings (loss) attributable to
the Company’s shareholders
Adjusted net earnings attributable to
the Company’s shareholders
Q4
2018
(1,709)
1,179
12,468
5,359
3,399
2,966
8,692
191
-
4,294
Q3
2018
995
1,091
11,834
6,765
871
2,594
Q2
2018
(2,106)
1,018
10,488
6,098
2,389
2,508
Q1
2018
(2,193)
947
10,022
6,745
928
3,018
6,285
6,058
4,784
-
-
-
-
-
-
2,902
2,661
2,590
Q4
2017
763
964
8,778
3,871
6,866
1,679
2,880
-
6,017
2,580
Q3
2017
4,603
976
10,487
4,816
2,357
378
Q2
2017
877
956
10,900
6,928
4,851
1,659
Q1
2017
4,428
931
10,935
2,673
1,076
1,718
375
1,289
1,308
-
-
-
-
-
-
933
2,340
1,231
28,251
27,533
23,792
21,661
29,238
23,059
25,120
21,838
(0.02)
0.29
(0.02)
0.29
0.01
0.29
0.01
0.27
(0.02)
(0.02)
0.26
0.24
(0.02)
(0.02)
0.26
0.24
0.01
0.35
0.01
0.35
0.06
0.28
0.05
0.27
0.01
0.31
0.01
0.30
0.05
0.27
0.05
0.26
Certain totals, subtotals and percentages may not reconcile due to rounding.
58 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
The Company’s principal uses of cash, other than for operating expenses, include (but are not limited to) dividend payments, debt servicing,
capital expenditures and business acquisitions.
Based on current projections, we expect to have sufficient financial resources available (mainly from the use of our net cash flows from
operations, debt and credit facilities and share capital issuance) to finance our business plan, meet our working capital needs and maintain
an appropriate level of capital spending.
The following table provides additional cash flows information for Fiera Capital:
TABLE 15 – SUMMARY OF CONSOLIDATED STATEMENTS OF CASH FLOWS (IN $ THOUSANDS)
Cash generated by operating activities
Cash (used in) investing activities
Cash generated by (used in) financing activities
Net (decrease) increase in cash and cash equivalent
Effect of exchange rate changes on cash denominated in foreign currencies
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
For The Twelve-Month Periods Ended
December 31, 2018
December 31, 2017
106,294
(110,745)
16,811
12,360
(973)
41,079
52,466
92,524
(24,062)
(65,887)
2,575
(1,606)
40,110
41,079
Year-to-Date Activities
Cash generated from operating activities amounted to $106.3 million for the twelve-month period ended December 31, 2018. This amount
resulted mainly from $107.7 million cash generated from net earnings (loss) adjusted for depreciation and amortization, share-based
compensation, accretion of purchase price obligations, restructuring integration and other costs, interest on long-term debt and other
financial charges, income tax expenses and income tax paid, combined with the positive impact of change in other non-current liabilities of
$1.6 million, partially offset by the negative changes in non-cash operating working capital of $2.9 million (refer to Note 22 of the audited
consolidated financial statements for the years ended December 31, 2018 and 2017).
Cash used in investing activities was $110.7 million for the twelve-month period ended December 31, 2018, resulting mainly from
$53.7 million cash used for the acquisitions of CGOV and Clearwater and from $11.3 million for purchases of intangible assets, combined
with $25.1 million cash used for the settlement of purchase price adjustments and obligations, $18.0 million cash used as seed investment
and $2.5 million cash used for the purchase of property and equipment during the period.
Cash generated by financing activities was $16.8 million for the twelve-month period ended December 31, 2018, resulting mainly from
the $109.3 million increase in long-term debt, a share issuance of $3.2 million, partially offset by dividend payments totalling $73.6 million,
$22.4 million of long-term debt interest payments and financing charges and $1.0 million from the contribution of non-controlling interest
during the period.
The negative impact of exchange rate changes on cash denominated in foreign currencies was $1.0 million during the twelve-month
period ended December 31, 2018.
Year-to-Date December 31, 2018 versus Year-to-Date December 31, 2017
Cash generated from operating activities was $106.3 million for the twelve-month period ended December 31, 2018, compared to
$92.5 million cash generated from operating activities for the same period last year. The positive variation is mainly attributable to higher
adjusted EBITDA year-over-year of $20.7 million as described in the “Adjusted EBITDA” section, combined with the positive variance of
$2.4 million related to realized and unrealized gain (loss) on financial instruments, partially offset by the negative impact in non-cash
operating working capital of $9.2 million.
Cash used in investing activities was $110.7 million for the twelve-month period ended December 31, 2018, compared to $24.1 million
cash used in investing activities for the same period last year. The increase in cash used in investing activities is mainly attributable to the
$53.7 million increase in business acquisition activities of, combined with higher cash used as settlement of purchase price adjustment
and obligations of $21.7 million, higher cash used as seed investment of $23.0 million, partially offset by lower cash used for purchase of
intangible assets of $10.2 million.
Cash generated from financing activities was $16.8 million for the twelve-month period ended December 31, 2018, compared to
$65.9 million cash used in financing activities for the same period last year. The year-over-year variation is mainly attributable to an
additional amount of $58.8 million related to debt borrowing and share issuance in 2018 following various acquisitions, compared to debt
repayment, share issuance and issuance of convertible debentures activities in 2017, combined with the positive impact of the contribution
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 59
of non-controlling interest of $37.4 million and positive impact of $7.8 million related to the settlement of derivative financial instruments.
These increase in cash in financing activities were partially offset by higher dividend payments of $15.3 million, and higher interest paid on
long-term debt of $4.7 million in 2018 compared to the same period last year.
The exchange rate changes on cash denominated in foreign currencies negatively impacted the cash flow of the Company by $1.0 million
during the twelve-month period ended December 31, 2018, compared to a $1.6 million negative impact for the same period last year.
Long-Term Debt
TABLE 16 – CREDIT FACILITY (IN $ THOUSANDS)
Credit Facility
Term facility
Revolving facility
Other facility
Deferred financing charges
Less current portion
Non-current portion
As at December 31, 2018 As at December 31, 2017
-
422,805
919
(2,197)
421,527
(388)
421,139
156,813
136,725
1,585
(1,352)
293,771
(1,354)
292,417
Credit Facility
On May 28, 2018, the Company entered into the Fifth Amended and Restated Credit Agreement (“Credit Agreement”) with a Canadian
banking syndicate of lenders. The Facility is used for general corporate purposes. It is comprised of a $600 million senior unsecured revolving
facility (“Facility”) which can be drawn in Canadian or US dollars at the discretion of the Company.
Under the terms of the Credit Agreement, there are no minimum repayments until June 30, 2022, the date at which the amount drawn
is repayable in full. At any time, subject to certain terms and conditions, the Company may request an increase in the available Facility by
an amount of up to CA$200 million subject to the acceptance of the individual lenders in the banking syndicate. The Credit Agreement
allows for extensions of the Facility’s maturity date, in one-year increments, at the request of the Company and subject to the acceptance
of a group of lenders within the banking syndicate whose commitments amount in the aggregate, to more than 66 2/3%, subject to certain
terms and conditions.
The Facility bears interest, payable monthly, at variable rates based on the currency in which an amount is drawn and on the quarterly
Funded Debt to EBITDA ratio as defined in the Credit Agreement. The interest rate is based on the Canadian prime rate plus a spread which
varies from 0.0% to 1.5% or, at the discretion of the Company for amounts drawn in US dollars, based either on the US base rate plus a
spread varying from 0.0% to 1.5% or the LIBOR rate plus a spread varying from 1.0% to 2.5%.
Prior to May 28, 2018, the Fourth Amended and Restated Credit Agreement (the “Previous Credit Agreement”) included a US$125 million
term (non-revolving) facility and a CA$350 million senior unsecured revolving facility which could be drawn in Canadian or US dollars at
the discretion of the Company.
Under the terms of the Previous Credit Agreement, there were no minimum repayments on the term facility until May 31, 2019, and until
March 25, 2020, for the revolving facility, at which dates the amounts drawn were repayable in full. On May 28, 2018, the term facility was
terminated and balances drawn on that date were converted to the Facility.
There were no changes to the interest rates applicable on the Previous Credit Facility. As at December 31, 2018, the total amount drawn on
the Facility was CA$123.5 million and US$219.4 million (CA$299.305 million) (CA$74 million and US$50 million (CA$62.725 million) on the
revolving facility, and US$125 million (CA$156.813 million) on the term facility under the Previous Credit Agreement at December 31, 2017).
The renegotiation of the Credit Agreement was treated as a modification under IFRS 9 – Financial Instruments and transaction fees of
$1.466 million associated with the Facility and $1.034 million associated with the Previous Credit Agreement were capitalized to the Facility
as long-term debt in the consolidated statements of financial position.
Under the terms of the Credit Agreement and the Previous Credit Agreement, the Company must satisfy certain restrictive covenants
including minimum financial ratios. These restrictions include maintaining a maximum ratio of Funded Debt to EBITDA and a minimum
Interest Coverage Ratio as defined in the Credit Agreement and the Previous Credit Agreement. EBITDA, a non IFRS financial measure,
includes consolidated earnings (losses) before interest, income taxes, depreciation, amortization and other non-cash items, and excludes
extraordinary and unusual items including non-recurring items and certain purchase price obligations as well as certain other adjustments
outlined in the Credit Agreement. As at December 31, 2018, all restrictive covenants under the Credit Agreement were met and these were
also met at December 31, 2017 under the terms of the Previous Credit Agreement. The Credit Agreement also includes covenants that
limit the ability of the Company and certain of its subsidiaries that are specifically included in the Credit Agreement as borrowing parties
and therefore are guarantors to the Facility, to engage in specified types of transactions and thus imposes certain operating and financing
restrictions on these entities.
60 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 Other Facilities
As at December 31, 2018, one of the Company’s subsidiaries has an outstanding bank loan in the amount of $0.231 million of which quarterly
payments of CA$0.131 million are required (respectively CA$0.756 million and CA$0.131 million as at December 31, 2017). The loan bears
interest at prime plus 0.25% to 1.25% which is based on the ratio of senior debt to EBITDA (a non-IFRS financial measure defined in the loan
agreement) and matures on June 30, 2019. All debt covenant requirements were met as at December 31, 2018 and December 31, 2017. In
March 2017, this subsidiary amended its credit agreement to include a leasing facility. As at December 31, 2018, the outstanding balance of
this loan is CA$0.688 million (CA$0.829 million at December 31, 2017), of which monthly payments of CA$0.015 million are required. As
at December 31, 2018, the current and non-current portions of the loan are $0.157 million and $0.531 million respectively. This subsidiary
also has a line of credit with a limit of CA$0.750 million. It bears interest at prime plus up to 0.25% to 1% which is also based on the ratio
of senior debt EBITDA and has no fixed maturity date. As at December 31, 2018 the subsidiary had not drawn on the line of credit (nil as at
December 31, 2017).
In January 2019, this subsidiary repaid the outstanding balances of the bank loan and the lease facility which had a balance as at December
31, 2018 of $0.231 million and $0.688 million respectively.
Another subsidiary of the Company has a line of credit with a dollar limit of CA$0.95 million. It bears interest at prime plus 1.50% and
has no fixed maturity date. As at December 31, 2018 the subsidiary had not drawn on the line of credit (nil as at December 31, 2017).
Convertible Debentures
TABLE 17 – CONVERTIBLE DEBENTURES (IN $ THOUSANDS)
Face value
Less:
Issuance costs 1
Equity component (net of issuance costs of $224)
Cumulative accretion expense on equity component
Balance, end of period
As at December 31, 2018 As at December 31, 2017
86,250
(4,031)
(4,568)
1,357
79,008
86,250
(4,269)
(4,555)
35
77,461
(1) During the twelve-month period ended December 31, 2018, the Company revised the issuance costs and effective interest rate in order to reflect differences between
issuance costs estimated at the date of issuance of the unsecured convertible debentures and the invoices subsequently received.
On December 21, 2017, the Company issued 86,250 unsecured convertible debentures at 5% maturing on June 23, 2023, with interest
payable semi-annually in arrears on June 30 and December 31 of each year starting June 30, 2018, for gross proceeds of CA$86.25 million.
The convertible debentures are convertible at the option of the holder at a conversion price of $18.85 per Class A subordinate shares (“Class A
Shares”). The convertible debentures are not redeemable by the Company before June 30, 2021. The convertible debentures are redeemable
by the Company at a price of $0.001 million per convertible debenture, plus accrued and unpaid interest, on or after June 30, 2021, and prior
to June 30, 2022, (provided that the weighted average trading price of the Class A Shares on the TSX for the 20 consecutive trading days
ending five days preceding the date on which the notice of redemption is given, is not less than 125% of the conversion price of $18.85 per
share). On or after June 30, 2022, but prior to the maturity date, the Company may redeem on not more than 60 days and not less than
30 days prior notice, at a price of $0.001 million per convertible debenture, plus accrued and unpaid interest.
In 2017, the proceeds of the convertible debentures were used to finance the cash portion of the repurchase of Fiera Properties’ remaining
45.0% non-controlling interest, to reduce indebtedness under the Credit Facility and for general corporate purposes.
During the year ended December 31, 2018, an amount of $4.431 million (2017 – nil) was paid representing the accrued cash interest
from the issuance date of the unsecured convertible debentures to December 31, 2018.
Share Capital
As at December 31, 2018, the Company had 77,556,288 Class A shares and 19,412,401 Class B special voting shares for a total of 96,968,689
outstanding shares compared to 70,249,199 Class A shares and 19,444,490 Class B special voting shares for a total of 89,693,689 outstanding
shares as at December 31, 2017.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 61
Capital Management
The Company’s capital comprises share capital, retained earnings (deficit), long-term debt and convertible debentures, less cash and cash
equivalents. The Company manages its capital to ensure there are adequate capital resources while maximizing the return to shareholders
through the optimization of the debt and equity balance and to maintain compliance with regulatory requirements and certain restrictive
covenants required by the lender of the debt. As at December 31, 2018 and 2017, the Company and one of its subsidiaries subject to
calculations of excess working capital as required by National Instrument 31-103 Registration Requirements and Exemptions, calculated on
a non-consolidated basis, and they have complied with their respective calculations. The Company and its subsidiaries have also complied
with their restrictive debt covenants under the various credit facilities.
In order to maintain or adjust its capital structure, the Company may issue shares, proceed to the issuance or repayment of debt or
redeem convertible debentures.
Contractual Obligations
The Company has the following contractual obligations as at December 31, 2018:
TABLE 18 – CONTRACTUAL OBLIGATIONS ($ IN THOUSANDS)
Long-Term Debt
Purchase Price Obligations
Convertible Debentures
Operating Leases
Total Obligations
Carrying
Amount
423,724
130,708
79,008
n/a
n/a
Total
423,724
313,314
86,250
134,174
957,462
2019
388
31,511
-
21,090
52,989
2020
531
41,744
-
17,471
59,746
2021
-
41,930
-
17,073
59,003
2022
422,805
41,740
-
14,993
479,538
2023
Thereafter
-
31,508
86,250
14,164
131,922
-
124,881
-
49,383
174,264
Contingent Liabilities
In the normal course of business, the Company and its subsidiaries may be 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.
62 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 SHARE-BASED PAYMENTS
Stock Option Plan
Under the Company’s 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. The Board may determine
the maximum term for which options are granted and will become exercisable and whether the options will be exercisable in instalments
or pursuant to a vesting schedule.
A summary of the changes that occurred in the Company’s stock option plans during the twelve-month periods ended December 31, 2018,
and 2017, is presented below:
TABLE 19 – OPTIONS TRANSACTIONS
Outstanding – beginning of year
Granted
Exercised
Forfeited
Outstanding – end of year
Options exercisable – end of year
2018
2017
Number of
Class A Share Options
Weighted-Average
Exercise Price ($)
Number of
Class A Share Options
Weighted-Average
Exercise Price ($)
4,183,852
305,000
(391,409)
(120,252)
3,977,191
1,281,812
11.86
12.22
8.07
13.63
12.21
11.20
2,799,345
1,892,000
(397,100)
(110,393)
4,183,852
859,473
10.25
13.41
7.34
13.64
11.86
8.17
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. 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.
One DSU is equivalent to one Class A Share of the Company. The Company recorded an expense (recovery) of ($0.012 million) for
this plan during year ended December 31, 2018 (expense of $0.013 million during the year ended December 31, 2017) and an amount of
$0.098 million was paid out. As at December 31, 2018, the Company had a liability for an amount of $0.095 million for the 8,395 units
outstanding under the DSU plan ($0.205 million for 15,767 units as at December 31, 2017).
Restricted Share Unit (“RSU”) Plan
On April 12, 2018, the Board approved an amended and restated RSU Plan mainly to include various tax considerations and to specify that
the Company may, at its discretion, settle the RSU awards in cash or in shares. The purpose of this plan is to provide eligible employees with
the opportunity to acquire RSUs in order to retain key employees and to permit them to participate in the growth and development of the
Company and to better align the interests of participants with the long-term interests of shareholders of the Company.
The following table presents transactions that occurred in the Company’s RSU Plan during the years ended December 31, 2018 and 2017.
TABLE 20 – RSU TRANSACTIONS
Outstanding – beginning of year
Granted
Reinvestments in lieu of dividends
Vested 1
Forfeited
Outstanding – end of year
1. 47,252 restricted share units were settled in cash (2017 – 65,867).
2018
608,635
-
24,610
(374,685)
-
258,560
2017
456,303
566,686
19,124
(420,407)
(13,071)
608,635
One RSU is equivalent to one Class A Share of the Company. The Company recorded an expense of $3.176 million and $5.715 million for these
grants during the years ended December 31, 2018 and 2017, respectively. During the year ended December 31, 2018, 327,433 Class A Shares
(2017 – 354,540) were issued as settlement of RSU vested and $0.585 million was paid in cash (2017 – $0.908 million). As at December 31,
2018, the Company had a liability in the amount of $1.759 million for the 258,560 units outstanding under the RSU Plan ($3.075 million
for 608,635 units as at December 31, 2017).
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 63
Restricted Share Unit Plan – Cash (“RSU Cash”)
On April 12, 2018, the Board approved an amended and restated RSU cash plan mainly to include various tax considerations. The purpose of
this plan is to provide eligible employees with the opportunity to acquire restricted share units in order to retain key employees and to permit
them to participate in the growth and development of the Company and to better align the interests of participants with the long-term
interests of shareholders of the Company. All RSUs granted under this plan will be settled in cash. The following table presents transactions
that occurred in the Company’s RSU Plan during the years ended December 31, 2018 and 2017:
TABLE 21 – RSU CASH TRANSACTIONS
Outstanding – beginning of year
Granted
Reinvestments in lieu of dividends
Vested
Forfeited
Outstanding units – end of year
2018
504,380
154,693
37,936
(167,974)
(727)
528,308
2017
316,133
185,256
21,963
-
(18,972)
504,380
RSU cash units are equivalent to one Class A Share of the Company. The Company recorded an expense of $2.254 million and $1.886 million
for these grants during the years ended December 31, 2018 and 2017, respectively. During the year ended December 31, 2018, 167,974 units
vested (2017 – nil), an amount of $0.396 million was paid as settlement of 32,607 units and the remaining 135,367 units were settled in
January 2019. As at December 31, 2018, the Company had a liability totalling $4.305 million for the 528,308 units outstanding ($2.435 million
for the 504,380 units as at December 31, 2017).
Restricted Share Plan (“RSP”)
On October 30, 2015, in relation with the acquisition of Samson, the Board adopted a restricted share plan for the purposes of retaining
certain employees and providing them with the opportunity to participate in the growth and development of the Company. The restricted
shares vest over a three-year period with one third vesting each year. The restricted shares are entitled to dividends and have voting rights.
The plan administrator reinvests the proceeds of the dividends received into additional shares of the Company.
On October 30, 2015, the Company issued 224,699 restricted shares. In conjunction with the restricted share issuance, the Company
issued 224,699 Class A Shares which were held in escrow. During the year ended December 31, 2018, the last tranche of this plan vested
and 78,548 Class A Shares (2017 – 79,022) that vested were released from escrow and 4,060 restricted shares were forfeited and cancelled
(2017 – 431).
The Company recorded an expense of $0.284 million and $0.672 million for the years ended December 31, 2018 and 2017, respectively
for this grant.
As at December 31, 2018, there were no longer any restricted shares outstanding. Therefore, on March 21, 2019 the Board approved the
termination of the Restricted share plan effective as at such date.
PSU and UAR Plan Applicable to Business Units
On April 12, 2018, the Board approved an amended and restated PSU plan applicable to Business Units (“BU”) mainly to include various
tax considerations. Performance share units are provided to eligible employees at an award value which is determined by the Board as the
original value of the award. The number of performance share units awarded to a participant as of the award date is calculated by dividing
the award value by the value of the PSU BU as determined by the Board at each award date.
PSUs are considered granted when the award notice is approved by the Board and is accepted by the employee. The vesting date is the
date at which all vesting terms and conditions set forth in the PSU plan applicable to BU and the employee’s award notice have been satisfied.
Vested PSUs are settled in accordance with the terms of the plan. The settlement date value is determined by the product of the number
of PSUs vested and the value of the PSU on the applicable vesting date.
In June 2018, the Company amended its Performance Share Unit Plan applicable to Business Units (PSU applicable to BU) plan to include
an ability to grant Unit Appreciation Rights applicable to Business Units (UAR applicable to BU).
64 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 PSU Applicable to BU
The Company recorded the following expense relating to PSU plans applicable to BU during the years ended December 31, 2018 and 2017:
TABLE 22 – PSU PLAN APPLICABLE TO BU TRANSACTIONS (IN $ THOUSANDS)
Equity-settled grants
Cash-settled grants
Total expense
2018
$
6,229
7,297
13,526
2017
$
7,493
886
8,379
During the year ended December 31, 2018, the total award value granted under the Company’s PSU plans applicable to BUs was $6.575 million.
A total of 616,948 Class A Shares were issued during the year ended December 31, 2018 as settlement of PSU applicable to BUs. Vested units
will be settled in 2019 through the issuance of Class A Share.
During the year ended December 31, 2017, the total award value granted under the Company’s PSU plans applicable to BUs was
$10.752 million. Certain PSU applicable to BUs representing a total value of $5.211 million vested. A total of 206,197 Class A Shares were
issued during the year ended December 31, 2017 as settlement of PSU applicable to BUs.
PSU Plan
On April 12, 2018, the Board approved an amended and restated PSU Plan mainly to include various tax considerations and to specify that
the Company may, at its discretion, settle the PSU awards in cash or in shares. PSUs are provided to eligible employees at an award value
which is determined by the Board as the original value of the award. The number of PSUs awarded to a participant as of the award date is
calculated by dividing the award value by the market value on the award date. One PSU is equivalent to one Class A Share of the Company.
The Company recorded the following expense relating to PSU plans during the years ended December 31, 2018 and 2017:
TABLE 23 – PSU TRANSACTIONS (IN $ THOUSANDS)
Equity-settled grants
Cash-settled grants
Total expense
2018
$
1,292
1,126
2,418
2017
$
140
1,110
1,250
The total award value granted to eligible employees under the Company’s PSU plans for the years ended December 31, 2018 and 2017
was $4.828 million and $1.2 million respectively. A total of 19,819 Class A Shares were issued during the year ended December 31, 2018 as
settlement of PSU vested in 2017 (2017 – 35,325). Vested units will be settled in 2019 through the issuance of Class A Shares.
Stock Option Plans in the Company’s Subsidiaries
One of the Company’s subsidiaries has a stock option plan which is based on the shares of the respective subsidiary entity. This plan is
accounted for as a cash-settled plan. During the year ended December 31, 2017, another subsidiary’s stock option plan was discontinued.
The Company’s subsidiaries stock option expense in the statements of consolidated net earnings (loss) for the year ended December 31,
2018 was $2.568 million ($0.855 million for the year ended December 31, 2017). The subsidiary paid an amount of $0.651 million during
the year ended December 31, 2018 as settlement of stock options exercised. The cash settled share-based liability is $3.956 million in the
statements of financial position as at December 31, 2018 ($2.039 million as at December 31, 2017).
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 65
RELATED PARTY TRANSACTIONS
In the normal course of business, the Company carries out transactions with related parties which include two related shareholders or with
entities under the same common control as these related shareholders.
Under a former agreement with a related shareholder, this related shareholder was entitled to appoint two of the four directors of the
Company that the holders of Class A Shares are entitled to elect, as long as it holds, directly or indirectly, at least 20% of the outstanding
Class A Shares and Class B Shares, together, on a non-diluted basis. Following the closing of the Company’s bought deal financing comprised
of unsecured convertible debentures and of a Class A Share issuance on December 21, 2017 and subsequent shareholder transactions, the
related party’s beneficial ownership is approximately 18.0% of the Company’s issued and outstanding shares as at December 31, 2018 (19.6
% as at December 31, 2017) and as a result, such agreement terminated and the related party no longer has the right to designate two
appointees to the Company’s Board. This related shareholder is one of the two co-lead arrangers and one of the lenders to the Company’s
Credit Facility and is the counterparty to the derivative financial instruments presented as being with a related entity in the table below.
At December 31, 2018, the other related shareholder indirectly owns Class B Special Voting Shares representing approximately 7.4% of the
Company’s issued and outstanding shares (8.1% as at December 31, 2017) and pursuant to the terms of a shareholders’ agreement between
this related shareholder and an entity related to the Company, the related shareholder is entitled to appoint two of the eight directors of the
Company that the holders of Class B Shares are entitled to elect. In order to maintain the rights described above, the related shareholder is
required to maintain a minimum ownership level in the Company and a specified minimum level of assets under management. This related
shareholder is one of the two co-lead arrangers and one of the lenders to the Company’s Credit Facility.
The following table presents transactions either directly with the two related shareholders or with entities under the same common control
as these related shareholders for the twelve-month periods ended December 31, 2018 and 2017:
TABLE 24 – RELATED PARTY TRANSACTIONS (IN $ THOUSANDS)
Base management fees
Performance fees
Other revenues
Selling, general & administrative expenses
Reference fees
Other
Interest on long-term debt
Net (gain) loss in fair value of derivative financial instruments included in
interest on long-term debt and other financial charges
Acquisition costs
Shares issued as settlement of a purchase price obligation
Cash consideration as settlement of a purchase price obligation
2018
$
44,154
3,779
367
1,701
613
15,946
(3,093)
-
-
8,500
2017
$
43,334
3,767
4,823
1,639
785
15,859
4,487
252
8,500
-
The 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.
66 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 CONTROL AND PROCEDURES
The Chairman of the Board and Chief Executive Officer (“CEO”) and
the Executive Vice President, Global Chief Financial Officer, together
with Management, are responsible for establishing and maintaining
adequate disclosure controls and procedures (“DC&P”) and internal
controls over financial reporting (“ICFR”), as defined in National
Instrument 52-109.
Fiera Capital Corporation’s (“Company”) internal control
framework is based on the criteria published in the Internal Control-
Integrated Framework (COSO framework 2013) published 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 the operating effectiveness of the Company’s DC&P and
ICFR as at December 31, 2018, and have concluded that they were
effective. Furthermore, no significant changes to the internal controls
over financial reporting occurred during the year ended December 31,
2018 except as described below:
On May 31, 2018, the Company acquired substantially all of the
assets and assumed certain liabilities of CGOV Asset Management
(“CGOV”). The institutional segment has been fully integrated to
the Company’s platforms. On the other hand, the Company has
considered to maintain the CGOV platforms for the Private Wealth
segment. The CGOV – Private Wealth segment is comprised of 1.6%
of revenues as other P&L and balance sheet figures are included
in the Fiera Capital – Canadian division figures of the consolidated
financial statements for the year ended December 31, 2018, which
the accounting system used to prepare the financial information
does not provide the statement of CGOV – Private Wealth financial
information. In the coming months, management will complete its
review of the design of ICFR for CGOV – Private Wealth segment
and assess its effectiveness.
FINANCIAL INSTRUMENTS
The Company, through its financial assets and liabilities, has exposure
to the following risks from its financial instruments: market risk,
credit risk, interest rate risk, currency risk and liquidity risk. The
following analysis provides a measurement risk as at December 31,
2018 and 2017.
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 linked to investment
returns and the Company’s ability to attract and retain clients.
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.
Additional information about Fiera Capital Corporation, including the Company’s
most recent audited annual financial statements and annual information form, is
available on SEDAR at www.sedar.com.
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.
Appreciation or depreciation in the fair value of equity securities
affect the amount and timing of recognition of gains and losses
on equity securities and mutual fund and pooled fund investments
in the Company’s portfolio resulting in 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 fair value of the equity,
mutual fund and fixed income financial assets held.
The Company’s portfolio managers monitor the risks of the
portfolio as part of its daily operations. The Company’s portfolio of
equity and equity-related securities as at December 31, 2018 and
2017 is comprised of mutual fund and pooled fund investments and
other securities with a fair value of $4.857 million as at December 31,
2018 and $5.408 million as at December 31, 2017. Mutual fund and
pooled fund investments are comprised of a well-diversified portfolio
of investments in equities and bonds.
A 10% change in the fair value of the Company’s equity and
equity-related holdings as at December 31, 2018 and 2017 would
have an impact of increasing or decreasing comprehensive income
by $0.486 million and $0.541 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 and cash equivalents, restricted cash, investments and
accounts receivable. The carrying amounts of financial assets on the
consolidated statements of financial position, other than derivative
financial instruments represent the Company’s maximum exposure
to credit risk at the consolidated statements of financial position
dates.
The credit risk on cash and cash equivalents and restricted cash is
limited because the counterparties are commercial banks or financial
institutions with high credit ratings assigned by independent 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. No customer represents more than 10%
of the Company’s accounts receivable as at December 31, 2018
and 2017.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 67
Interest Rate Risk
The Company is exposed to interest rate risk through its cash and
cash equivalents 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 contract, the Company agrees with
the counterparty to exchange, at specified intervals, the difference
between the fixed contract rate and floating-rate interest amounts
calculated by reference to the agreed notional amounts.
Currency Risk
Currency risk is the risk that the fair value or future cash flows of
a financial instrument will fluctuate because of changes in foreign
exchange rates. The Company’s exposure relates to cash and cash
equivalents, accounts receivable, derivative financial instruments,
accounts payable and accrued liabilities, purchase price obligations
and long-term debt denominated in US dollars and the operations
of its US businesses, Fiera Capital (Europe) and Clearwater 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 balances outstanding (excluding long-term
debt) as at December 31, 2018, a 5% increase/decrease of the
US dollar against the Canadian dollar would result in an increase/
decrease in total comprehensive income of $0.568 million (2017 -
$1.846 million). The above calculation does not include the US
dollar long-term debt, which is partially hedged by a long-term
asset in the same currency. This long-term asset is not included in
the consolidated statements of financial position given that it is an
intercompany balance and is eliminated on consolidation.
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.
Fair Value
Investments
The cost and fair value of investments recorded at fair value through
profit or loss was $4.574 million and $4.857 million, respectively,
as at December 31, 2018 ($2.848 million and $2.933 million
respectively as at December 31, 2017). An unrealized loss of
$0.623 million was recognized in other revenues during the year
ended December 31, 2018 (gain of $1.237 million during the year
ended December 31, 2017).
As at December 31, 2017, the cost and fair value of investments
recorded as available-for-sale was $2.296 million and $2.475 million
respectively. As a result of the adoption of IFRS 9 on January 1,
2018, the Company reclassified its equity securities classified as
available-for-sale under IAS 39 to fair value through profit or loss
and reclassified an unrealized gain of $0.161 million (net of income
taxes of $0.018 million) from accumulated other comprehensive
income to retained earnings (deficit).
Convertible debentures
The convertible debentures are recorded at an amortized cost
of $79.008 million as at December 31, 2018 ($77.461 million as
at December 31, 2017). The fair value based on market quotes is
$87.544 million as at December 31, 2018 ($88.018 million as at
December 31, 2017).
Long-term debt
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.
Derivative Financial Instruments
The Company’s derivative financial instruments consist of interest
rate and cross currency swap contracts and foreign exchange forward
contracts which are presented at fair value on the consolidated
statements of financial position.
The fair value of derivative that are not traded on an active
market is determined using valuation techniques which maximize
the use of 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. To the extent
practicable, valuation techniques incorporate all factors that market
participants would consider in setting a price and they are consistent
with accepted economic methods for valuing financial instruments.
The Company determines the fair value of its foreign exchange
forward contracts by calculating the difference between the forward
exchange rates at the measurement date and the contractual
forward price for the residual maturity of the contract. The Company
determines the fair value of its interest rate swap contracts by
applying valuation techniques.
68 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 Net gains (losses), fair value and the notional amount of derivatives by term to maturity are as follows:
$ thousands
Foreign Exchange Contracts
a) Forward foreign exchange contracts –
held for trading
b) Cross currency swaps – held for trading
Interest rate contracts
c) Swap contracts – held for trading
d) Swap contracts – cash flow hedges
For the year ended
December 31,
2018
Net gain (loss) on
derivatives
$
(5,294)
4,700
(1,770)
-
As at December 31, 2018
Fair value
Notional amount: term to maturity
Asset
(Liability)
Less than 1 year
From 1 to 5 years
Over 5 years
$
-
1,083
860
4,506
$
$
45,374
80,000
(1,672)
-
(1,560)
-
-
-
190,000
230,550
$
-
-
Presentation of the derivative financial instruments in the Financial Statements as at December 31 is as follows:
$ thousands
Current derivative financial instrument assets 1
Non-current derivative financial instrument assets
Current derivative financial instrument liabilities
Non-current derivative financial instrument liabilities
1.
Included in prepaid expenses and other assets on the consolidated statements of financial position.
2018
$
1,083
5,366
(1,672)
(1,560)
$
-
-
-
-
2017
$
497
3,484
-
-
a) Forward Foreign Exchange Contracts
Forward Foreign Exchange Contracts - Held for Trading
The Company enters into forward exchange contracts to manage
the currency fluctuation risk associated with estimated revenues
denominated in US dollars. The gain or loss on these derivative
financial instruments is recognized in the consolidated statement
of earnings in accordance with the nature of the hedged item and
therefore, as other revenues.
Company
The Company enters into forward exchange contracts to manage
the currency fluctuation risk associated with estimated revenues
denominated in US dollars.
In December 2016, the Company entered into a series of average
rate forward foreign exchange contracts to manage the currency
fluctuation risk associated with estimated revenues denominated
in US dollars for the year ended December 31, 2017. In August 2017,
the series of average rate forward foreign exchange contracts, which
matured one-by-one on a monthly basis until December 2017, was
converted into month-end spot rate forward exchange contracts.
Since August 2017, the Company enters into month-end spot rate
forward exchange contracts with various terms to maturity that aim
to manage the currency fluctuation risk associated with up to twelve
months of estimated future revenues in US dollars.
Forward foreign exchange contracts are recognized at fair value
at the date the contracts are entered into and are subsequently
remeasured to fair value through profit or loss at the end of each
reporting period. The gain or loss on these derivative financial
instruments is recognized in the consolidated statement of
earnings (loss) in accordance with the nature of the hedged item
and therefore, as other revenues.
The Company recorded a loss of $4.673 million during the
year ended December 31, 2018 (gain of $2.148 million for the year
ended December 31, 2017) and paid $2.939 million as settlement of
contracts that matured during the year (received $1.974 million during
the year ended December 31, 2017). The fair value of the foreign
exchange contracts is a liability of $1.237 million as at December 31,
2018 (asset of $0.497 million as at December 31, 2017).
Subsidiaries
One of the Company’s subsidiaries enters into forward exchange
contracts to manage the currency fluctuation risk associated with
estimated revenues denominated in Euros and British pounds. The
subsidiary recorded a loss of $0.621 million and a gain $0.260 million
during the years ended December 31, 2018 and 2017, respectively. A
total of $0.186 million was paid during the year ended December 31,
2018 as settlement of the contracts.
As at December 31, 2018, the fair value of these contracts was a
liability of $0.435 million (nil as at December 31, 2017).
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 69
b) Cross Currency Swaps – Held for Trading
Under the terms of the Company’s revolving facility, the Company
can borrow either in US dollars based on US base rate plus a spread
varying from 0.0% to 1.5% or the LIBOR rate plus a spread varying
from 1.0% to 2.5%, or in Canadian dollars based on the Canadian
prime rate plus a spread varying from 0.0% to 1.5%. To benefit from
interest cost savings, the Company has effectively created, as at
December 31, 2018, a synthetic equivalent to a Canadian dollar
revolving facility at CDOR plus 1.57% on CA$80.0 million (nil as at
December 31, 2017) by borrowing against the US dollar revolving
facility, the equivalent of CA$80.0 million (US$59.4 million) (nil
as at December 31, 2017) at LIBOR plus 2.25%, and swapping it
into CDOR plus 1.57% with a one-month cross currency swap. The
contract was entered into on December 31, 2018 and matures on
January 31, 2019.
The objective of this strategy was to provide cost savings
without currency risk since the terms of the US LIBOR financing
and the cross currency swap are exactly matched (US dollar notional
amount, LIBOR rate, trade and maturity dates). Losses (gains) on
cross currency swaps are offset by equivalent gains (losses) on the
translation of the US denominated economically hedged portion of
the revolving facility since the financing terms are exactly matched.
The net gain or loss on these derivative financial instruments
is recognized in the consolidated statements of earnings (loss) in
accordance with the nature of the economically hedged item, the
revolving facility, and therefore is presented in interest on long-term
debt and other financial charges. The Company recorded a gain of
$4.7 million during the year ended December 31, 2018, with no net
impact on earnings as described above (loss of $7.95 million during
the year ended December 31, 2017). A total of $3.617 million was
received during the year ended December 31, 2018 as settlement
of these contracts ($9.272 million was paid during the year ended
December 31, 2017).
The fair value of the cross currency swap contracts was
an asset of $1.083 million as at December 31, 2018 (nil as at
December 31, 2017).
c) Interest Rate Swap Contract – Held for Trading
The Company enters into interest rate swap contracts to manage
the impact of the interest rate fluctuations on its credit facility
denominated in Canadian dollars
On May 1, 2012, the Company entered into an interest rate
swap contract with an original amortizing notional amount of
CA$108 million. The contract consisted of exchanging the variable
interest rate based on a one-month CDOR rate for a fixed rate of
1.835%. Interest was settled on a monthly basis. The interest swap
matured on April 3, 2017 and an amount of $0.074 million was paid
as settlement of this contract.
On May 31, 2017, the Company entered into an interest rate
swap contract with an original amortizing notional amount of
CA$100 million at inception and maturing on May 31, 2022. As at
December 31, 2018, the notional amount was CA$30 million (2017 –
CA$30 million). The contract consists of exchanging the variable
interest rate based on a one-month CDOR rate for a fixed rate of
1.335%. The Company received an amount of $2.188 million as a
crystallized gain, in December 2017, when the notional amount of the
contract decreased from CA$100 million to CA$30 million. Interest
is settled on a monthly basis.
In March 2018, the Company entered into two interest rate
swap contracts with original notional amounts of CA$10 million
and CA$40 million at inception and maturing on May 31, 2022.
The contracts consist of exchanging the variable interest rate
based on a one-month CDOR rate for a fixed rate of 2.350% (on
CA$10 million notional contract) and 2.358% (on CA$40 million
notional contract). Interest is settled on a monthly basis.
In May 2018, the Company entered into an interest rate swap
contract with an original notional amount of CA$47 million maturing
on May 31, 2022. The contract consists of exchanging the variable
interest rate based on a one-month CDOR rate for a fixed rate of
2.430%. Interest is settled on a monthly basis.
In September 2018, the Company entered into an interest rate
swap contract with an original notional amount of CA$18 million
maturing on May 31, 2022. The contract consists of exchanging the
variable interest rate based on a one-month CDOR rate for a fixed
rate of 2.530%. Interest is settled on a monthly basis.
In October 2018, the Company entered into an interest rate
swap contract with an original notional amount of CA$45 million
maturing on May 31, 2022. The contract consists of exchanging the
variable interest rate based on a one-month CDOR rate for a fixed
rate of 2.703%. Interest is settled on a monthly basis.
The net gain or loss on these derivative financial instruments
is recognized in the consolidated statement of earnings (loss)
with interest on long-term debt and other financial charges. The
Company recorded a loss of $1.77 million during the year ended
December 31, 2018 (gain of $3.463 million during the year ended
December 31, 2017).
The fair value of the interest rate swap contracts is an asset of
$0.86 million and a liability of $1.56 million as at December 31, 2018
(asset of $1.07 million as at December 31, 2017).
70 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 e) Call Option
On December 1, 2018, Fiera Capital Inc. (“FCI”), wholly-owned
subsidiary of the Company, entered into an agreement with
Wilkinson Global Capital Partners LLC (the “Partners”) by which
the Partners have the right, but not the obligation, to purchase all,
but not less than all, of the Company’s equity interest in WGAM,
a wholly-owned subsidiary of the Company that manages special
client accounts under investment advisory agreements. The call
right can be exercised at any time during the period from January 1,
2021 (the call commencement date) until January 1, 2023 (the call
expiration date)or on an earlier date at the discretion of FCI. If the
Partners do not exercise the call option by the call expiration date or
within 30 days of notice, the call option will expire. The call exercise
price is designed to represent the fair value of the WGAM business.
Since the call option price is based on the estimated fair value of
the WGAM business and it is not exercisable at December 31, 2018,
this derivative financial instrument has no financial impact in the
Company’s consolidated financial statements.
d) Interest Rate Swap Contracts – Cash Flow Hedges
The Company enters into US dollar interest rate swap contracts to
manage the impact of the interest rate fluctuations on its credit
facility denominated in US dollars.
On May 31, 2017, the Company entered into two US dollar
interest rate swap contracts with original notional amounts of
US$125 million and US$44 million respectively at inception and
maturing on May 31, 2022. The contracts consist of exchanging the
variable interest rate based on a one-month LIBOR rate for a fixed
rate of 1.84%. Interest is settled on a monthly basis.
On May 31, 2018, the Company entered into a US dollar interest
rate swap contract with an original notional amount of US$11 million
maturing on May 31, 2022. The contract consisted of exchanging the
variable interest rate based on a one-month LIBOR rate for a fixed
rate of 2.655%. Interest was settled on a monthly basis. This contract
was unwound in November 2018 and an amount of $0.162 million
was received as settlement. This realized gain was reclassified from
other comprehensive income to interest on long-term debt and other
financial charges on the consolidated statement of earnings (loss).
These contracts are designated as cash flows hedges and satisfy
the requirements for hedge accounting. The effective portion of
changes in the fair value of these contracts are recognized in other
comprehensive income and accumulated in a hedging reserve.
The Company recorded a gain in other comprehensive income of
$1.833 million (net of income taxes of $0.259 million) during the year
ended December 31, 2018 (gain of $2.094 million (net of income
taxes of $0.32 million) during the year ended December 31, 2017).
The ineffective portion of changes in fair value is recognized
immediately in profit or loss in the consolidated statement of
earnings (loss). There is no ineffective portion on these contracts
for the years ended December 31, 2018 and 2017.
The fair value of the interest rate swap contracts designated as
cash flow hedges is an asset of $4.506 million as at December 31,
2018 (asset of $2.414 million as at December 31, 2017).
The Company remains exposed to fluctuations in the US base
or LIBOR rates on the difference between the US dollar credit
facility and the notional amounts of the US dollar interest rate
swap contracts. The drawings in US dollars on the credit facility are
US$219.4 million as at December 31, 2018 (US$50 million on the
revolving facility and US$125 million on the term facility under the
previous credit agreement as at December 31, 2017).
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 71
SIGNIFICANT ACCOUNTING
JUDGMENTS AND ESTIMATION
UNCERTAINTIES
This MD&A is prepared with reference to the audited consolidated
financial statements for the years ended December 31, 2018
and 2017. A summary of the Company’s significant accounting
judgments and estimation uncertainties are presented in Note 3 to
the Company’s audited consolidated financial statements for the
years ended December 31, 2018 and 2017. Some of the Company’s
accounting policies, as required under IFRS, require the Management
to make subjective, complex judgments and estimates to matters
that are inherent to uncertainties.
The fair value of purchase price obligations is determined using
a discounted cash flow analysis which makes use of unobservable
inputs such as expected cash flows and risk adjusted discount
rates. Expected cash flows are estimated based on the terms of the
contractual arrangements and the Company’s knowledge of the
business and how the current economic environment is likely to
impact it.
Purchase price obligations are Level 3 financial liabilities. The
Company has used valuation techniques to record the fair value
of the liabilities at the reporting date. The Company analyzed
the characteristics of the liability being valued, including the
circumstances and the information available as at the valuation date
and selected the most appropriate valuation technique.
Purchase Price Obligation – CNR:
A reasonable change in unobservable inputs would not result in
a significant change in the fair value of purchase price obligations
other than for the acquisition of City National Rochdale (“CNR”) in
December 2017, which is presented below.
The main Level 3 inputs used by the Company to value the
purchase price obligations of CNR are derived from the following
items and determined as follows:
> Annual revenue growth factors, such as market rate and net
contributions rate, are estimated based on internal and external
data and publications, economic conditions, and the specific
characteristics of the financial liability. A higher annual revenue
growth factor will result in a higher fair value. To assess the fair
value as at December 31, 2018, the Company used a 9% and 10%
respectively for market growth and net contributions.
> The risk-adjusted discount rate is determined by adjusting a
risk-free rate to reflect the specific risks associated with the
financial liability. The discount rate is the input used to bring the
future cash flows to their present value. A higher discount rate
would result in a lower fair value. To assess the fair value as at
December 31, 2018, the Company used a discount rate of 41%.
The discounted cash flow method was used to measure the
present value of the expected future cash flows to be paid to CNR
as contingent consideration. The fair value of the CNR purchase
price obligation as at December 31, 2018 was CA$74.118 million
(US$54.331 million) and CA$60.574 million (US$47 million) as at
December 31, 2017.
The significant unobservable inputs are annual revenue growth
factors, market growth and net contributions, and the risk-adjusted
discount rate.
> A variance of 350 basis points in the market growth rate, as an
increase or (decrease), would result in an increase (decrease) of
approximately CA$5.39 million (US$4 million) in the fair value
of the purchase price obligation.
> A variance of 300 basis points in the net contributions rate, as an
increase or (decrease) would result in an increase (decrease) of
approximately CA$2.69 million (US$2 million) in the fair value
of the purchase price obligation.
> A variance of 200 basis points in the risk-adjusted discount rate,
as an increase (discount), would result in a decrease (increase) of
approximately CA$2.69 million (US$2 million) in the fair value
of the purchase price obligation.
Due to the unobservable nature of the inputs, there may be
uncertainty about the valuation of these financial instruments and
using reasonably possible alternative assumptions would change
the fair value. Moreover, the relationship between the risk-adjusted
discount rate and the other unobservable inputs does not necessarily
have direct relationship and different inter-relationships could be
reasonably applied. The Company varied the significant unobservable
inputs such as the Risk-adjusted discount rate, the market growth
and the net contributions and established a reasonable fair value
range that could result in a CA$8.08 million (US$6 million) increase
or decrease in the fair value of the purchase price obligation as at
December 31, 2018 (nil as at December 31, 2017).
Purchase Price Obligation – Clearwater:
The discounted cash flow method was used to measure the present
value of the expected future cash flows to be paid to the sellers as
contingent consideration. The fair value of the Clearwater purchase
price obligation as at December 31, 2018 was CA$39.955 million
(US$28.553 million) and CA$35.055 million (US$27 million) as at
August 9, 2018.
The main Level 3 inputs used by the Company to value the
Clearwater purchase price obligations are derived from unobservable
inputs of revenue and earnings before interest, taxes, depreciation
and amortization (“EBITDA”) forecasts, management’s estimates of
revenue from cross-selling, and the risk-adjusted discount rate. The
discount rate is the input used to bring the future cash flow to their
present value. Company used a discount rate between 10% and 15%.
72 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 Due to the unobservable nature of the inputs, there may be
uncertainty about the valuation of these Level 3 financial instruments
and using reasonably possible alternative assumptions would
change the fair value. Moreover, the relationship between the risk-
adjusted discount rate and the other unobservable inputs does not
necessarily have direct relationship and different inter-relationships
could be reasonably applied. The Company varied the significant
unobservable inputs such as the risk-adjusted discount rate, revenue,
EBITDA, and cross-selling forecasts and established a reasonable
fair value range between CA$35.47 million (US$26 million) and
CA$40.925 million (US$30 million) for its purchase price obligation
as at December 31, 2018.
NEW ACCOUNTING STANDARDS
Adoption of New IFRS
On January 1, 2018, the Company adopted the following new
IFRS standards.
IFRS 9 – Financial Instruments
IFRS 9 replaced IAS 39 – Financial Instruments: Recognition and
Measurement and was mandatorily effective for annual periods
beginning on or after January 1, 2018. As permitted by IFRS 9, the
Company has taken the exemption not to restate the comparative
information in the consolidated financial statements with respect
to classification and measurement requirements. The retrospective
impact of applying IFRS 9 was accounted for through adjustments to
the opening balance of retained earnings (deficit) and accumulated
other comprehensive income as at January 1, 2018.
The adoption of IFRS 9 did not have a significant impact on the
Company’s consolidated financial statements.
Classification and measurement
IFRS 9 retains the existing requirements in IAS 39 for the classification
and measurement of financial liabilities. However, it eliminates the
previous IAS 39 categories for financial assets of held to maturity,
loans and receivables and available-for-sale.
Under IFRS 9, all equity instrument financial assets must
be classified as at fair value through profit or loss. However, the
Company may, at initial recognition of a non-trading equity
instrument, irrevocably elect to designate the instrument as at fair
value through other comprehensive income with no subsequent
reclassification of gains and losses to net earnings. This election
is made on an investment-by-investment basis. Dividends will
continue to be recognized in net earnings (loss). This designation
is also available for existing non-trading equity instruments at the
date of IFRS 9 adoption. Derivative financial instruments continue
to be measured at fair value through profit or loss.
The original measurement categories under IAS 39 and the
new measurement categories under IFRS 9 for each class of the
Company’s financial assets as at January 1, 2018 are disclosed in
Note 3. There were no changes to the measurement categories under
IFRS 9 for the Company’s financial liabilities as at January 1, 2018.
Financial assets will not be reclassified subsequent to their initial
recognition, unless the Company identifies changes in the business
model in managing financial assets.
As a result of the application of the classification and
measurement requirements of IFRS 9, on January 1, 2018, the
Company reclassified its equity securities classified as available-for-
sale under IAS 39 to fair value through profit or loss and therefore
reclassified an unrealized gain of $0.161 million from accumulated
other comprehensive income to retained earnings (deficit).
Impairment
IFRS 9 replaces the “incurred loss” model in IAS 39 with an “expected
credit loss” (“ECL”) model. The new ECL impairment model applies
to financial assets measured at amortized cost, contract assets and
debt investments at fair value through other comprehensive income,
but not to investments in equity instruments. Under IFRS 9, credit
losses are recognized earlier than under IAS 39.
The Company’s financial assets subject to the new impairment
model are cash and cash equivalents, accounts receivable and long-
term receivable. The new impairment guidance using an expected
credit loss model did not have a significant impact on the carrying
amounts of the Company’s accounts receivable or long-term
receivable as the Company has had negligible credit losses.
Hedge accounting
The hedge accounting requirements under IAS 39 may continue
to be applied until the IASB finalizes its macro hedge accounting
project. As permitted, the Company elected not to adopt the general
hedge accounting requirements of IFRS 9 and instead chose to
continue to apply the requirements in IAS 39 – Financial instruments:
recognition and measurement.
The Company also adopted amendments to the revised
hedge accounting disclosures required by IFRS 7 – Financial
Instruments: Disclosures.
IFRS 15 – Revenue from Contracts with Customers
IFRS 15 replaced IAS 18 – Revenue and was mandatorily effective
for annual periods beginning on or after January 1, 2018. The new
standard specifies a five-step approach to determine how and
when to recognize revenue and requires additional disclosures. The
Company completed an impact assessment for all major revenue
streams, reviewed contracts and analyzed revenue recognized by
the Company.
The objective of IFRS 15 is to establish the principles that an
entity shall apply to report useful information to users of financial
statements about the nature, amount, timing, and uncertainty of
revenue and cash flow arising from a contract with a customer.
The Company elected to adopt IFRS 15 using the modified
retrospective approach with the effect of initially applying this
standard at the date of initial application (January 1, 2018). However,
the adoption of IFRS 15 did not have a significant impact on the
ongoing recognition of the Company’s revenues or net earnings
(loss) and therefore there were no opening retained earnings (deficit)
adjustments required as at January 1, 2018.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 73
Revised IFRS, Interpretations and Amendments
The following revised standards are effective for annual periods
beginning on January 1, 2018. Their adoption did not have a
significant impact on the amounts reported or disclosures made in
these financial statements.
Amendments to IFRS 2 – Share-based payments
In June 2016, the IASB published amendments to IFRS 2 – Share-
based payments. The amendments clarify the standard in relation to
the accounting for cash-settled share-based payment transactions
that include a performance condition, the classification of share-
based payment transactions with net settlement features, and the
accounting for modifications of share-based payment transactions
from cash-settled to equity-settled.
IFRIC 22 – Foreign Currency Transactions and
Advance Consideration
In December 2016, the IASB published IFRIC 22 – Foreign Currency
Transactions and Advance Consideration to clarify the exchange rate
that should be used for transactions that include the receipt or
payment of advance consideration in a foreign currency.
New Standards and Interpretations Not Yet Adopted
IFRS 16 – Leases
In January 2016, the IASB issued IFRS 16 – Leases. It supersedes the
IASB’s current lease standard, IAS 17 – Leases, which required lessees
and lessors to classify their leases as either finance leases or operating
leases and to account for those two types of leases differently. IFRS
16 introduces a single lessee accounting model and requires a lessee
to recognize an asset representing the right to use the underlying
asset and a financial liability representing an obligation to make lease
payments. The Company expects to apply the recognition exemption
for low-value leases. This new standard will come into effect for
annual periods beginning on or after January 1, 2019.
The Company has assessed the impact that the initial application
of IFRS 16 will have on its consolidated financial statements, as
described below.
Leases for which the Company is a Lessee
The Company will recognise right-of-use assets and lease liabilities
for its leases of office facilities, equipment and other assets that meet
the definition of a lease. The nature of expenses related to leases
will change under IFRS 16, because the Company will recognise a
depreciation charge for right-of-use assets and an interest expense
on lease liabilities. Previously, under IFRS 17, the Company recognised
operating lease expenses on a straight-line basis over the term of
the lease, and recognised assets and liabilities only to the extent
that there was a timing difference between actual lease payments
and the expense recognised. The Company will apply this standard
from its mandatory adoption date of January 1, 2019. The Company
intends to apply the simplified transition approach and will not
restate comparative amounts for the year prior to first adoption.
Right-of-use assets will be measured on transition at the amount of
the lease liability on adoption (adjusted for any prepaid or accrued
lease payments).
At transition, lease liabilities were measured as the present value
of the remaining lease payments, discounted at the Company’s
incremental borrowing rate as at January 1, 2019. Right-of-use assets
are measured at an amount equal to the lease liability, adjusted by
the amount of any prepaid or accrued lease payments.
Low-value leases will continue to be recognized as an expense in
the consolidated statement of earnings (loss). Operating cash flows
will increase and financing cash flows will decrease as repayment of
the principle portion of the lease liabilities will be classified as cash
flow from financing activities.
The Company’s activities as a lessor are not material and the
Company does not expect any significant impact on the consolidated
financial statements, however some additional disclosures may
be required.
The Company does not expect the adoption of IFRS 16 to impact
its ability to comply with restrictive covenants including minimum
financial ratios applicable to its Credit Facility.
74 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 IFRIC 23 – Uncertainty over Income Tax Treatments
In June 2017, the IASB issued IFRIC 23 – Uncertainty over Income
Tax Treatments. The interpretation addresses the determination
of taxable profit (tax loss), tax bases, unused tax losses, unused
tax credits and tax rates, when there is uncertainty over income
tax treatment under IAS 12. It specifically considers whether tax
treatments should be considered collectively, assumptions for
taxation authorities’ examinations, the determination of taxable
profit (tax loss), tax bases, unused tax losses, unused tax credits
and tax rates and the effect of changes in facts and circumstances.
This new interpretation is applicable to annual reporting periods
beginning on or after January 1, 2019. The Company is evaluating
the impact of this interpretation on its consolidated financial
statements however it is not expected to have a significant impact
for the Company.
Annual Improvements to IFRS (2015-2017) Cycle
In December 2017, the IASB issued Annual Improvements to
IFRS Standards 2015–2017 Cycle. The pronouncement contains
amendments to four International Financial Reporting Standards
(IFRS) as result of the IASB’s annual improvements project. The
amendments to IFRS 3 – Business combinations clarify that when
an entity obtains control of a business that is a joint operation,
it remeasures previously held interests in that business. The
amendments to IFRS 11 – Joint arrangements clarify that when an
entity obtains joint control of a business that is a joint operation, the
entity does not remeasure previously held interests in that business.
The amendments to IAS 12 – Income taxes clarify that all
income tax consequences of dividends should be recognized in
profit or loss, regardless of how the tax arises. The amendments
to IAS 23 – Borrowing costs clarify that if any specific borrowing
remains outstanding after the related asset is ready for its intended
use or sale, that borrowing becomes part of the funds that an entity
borrows generally when calculating the capitalisation rate on general
borrowings. These amendments are effective for annual periods
beginning on or after January 1, 2019. The Company is evaluating
the impact of these amendments on its consolidated financial
statements however it is not expected to have a significant impact
for the Company.
There are no other standards that are not yet effective and that
would be expected to have a material impact on the Company
in the current or future reporting periods and on foreseeable
future transactions.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 75
RISK FACTORS
Risks Related to the Business
Risks Related to Performance and Investing the AUM
Fiera Capital’s business is subject to a number of risk factors,
including but not limited to the following:
Reputational Risk
Reputational risk is the potential that adverse publicity, whether true
or not, may cause a decline in Fiera Capital’s earnings or client base
due to its impact on Fiera Capital’s corporate image. Reputational risk
is inherent in virtually all of 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, reputational risk
is part of Fiera Capital’s risk management framework and is a key
part of the code of ethics and conduct which all of Fiera Capital’s
employees are required to observe.
Regulatory and Litigation Risks
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.
Monitoring and responding to the rapidly changing securities
regulatory environment, both in Canada and abroad, requires
significant managerial, operational and financial resources.
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. Any change
in the securities regulatory framework or 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.
Litigation risk is inherent in the asset 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 secondary market civil liability regime in certain jurisdictions,
dissatisfied shareholders may more easily make claims against Fiera
Capital, its directors and its officers.
Fiera Capital maintains various types of insurance to cover certain
potential risks and regularly evaluates the adequacy of this coverage.
There is no guarantee that Fiera Capital’s insurance coverage will be
adequate to cover all risks relating to its business.
Investment Performance
Poor investment performance, whether relative to Fiera Capital’s
competitors or otherwise, could result in the withdrawal of cash
by existing clients in favour of better performing products and an
inability for Fiera Capital to attract new clients. 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’s inability to retain existing clients and attract
new clients, could have an adverse impact on Fiera Capital’s AUM,
management fees, profitability and growth prospects.
Fiera Capital cannot guarantee it will be able to achieve or
maintain any particular level of AUM and cannot guarantee it will
be able to achieve positive relative returns, retain existing clients or
attract new clients.
Investment of the AUM
The assets, investment strategies and vehicles (the “Investments”)
into which the Funds’ and Managed Accounts’ AUM are invested
are subject to risks which could have a negative effect on the value
and/or performance of such Investments, including but not limited
to some or all of the following risks:
> external market and economic conditions beyond the Company’s
control such as regulatory environments and changes thereto,
global and national political situations and economic uncertainty;
> interest rates, inflation rates and availability of credit;
> currency risk and foreign investment risk;
> special investment techniques, such as short selling, leveraging,
hedging, using derivatives or options and concentration of
investment holdings, carry their own particular risks;
> the competitive environment for investments means there
may be uncertainty in identifying and completing investment
transactions which may result in less favourable investment
terms than would otherwise be the case;
> Investments may be made in entities that the Company does
not control and may therefore be subject to business, financial
or management decisions which the Company does not agree
with or do not serve the Company’s interests; and
> the due diligence undertaken in connection with a particular
Investment may not reveal all facts relevant to whether such
Investment will be favourable.
The failure by Fiera Capital to appropriately manage and address
Investments’ risk could have a material adverse effect on Fiera
Capital’s results of operations and financial condition.
76 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 Insurance Coverage
Fiera Capital holds various types of insurance, including directors’
and officers’, errors and omissions, general commercial liability and
a financial institution bond. The adequacy of insurance coverage
is evaluated on an ongoing basis, including the cost relative to
the benefits.
There can be no assurance that claims will not exceed the limits
of available insurance coverage or that any claim or claims will be
ultimately satisfied by an insurer, nor can there be any assurance that
Fiera Capital will be able to obtain insurance coverage on favourable
economic terms in the future.
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 the business, financial condition or profitability.
Growth and Integration of Acquired Businesses
Future growth will depend on, among other things, the ability to
efficiently operate to address growth and realize the anticipated
synergies, benefits and cost savings from integration of any
businesses acquired by Fiera Capital. The maintenance of the
current operations and the integration of any acquired businesses
may result in significant challenges, and management of Fiera
Capital may face difficulties to accomplish integrations smoothly
or successfully or without expending significant amounts of
managerial, operational or financial resources. Moreover, through
acquisitions Fiera Capital may be exposed to inconsistencies in
standards, internal controls, procedures and policies that adversely
affect the ability of management of Fiera Capital to maintain
relationships with customers, suppliers, employees or to achieve
the anticipated benefits.
Any inability of Fiera Capital to successfully manage its growth
or the integration of acquired businesses, including governance,
regulatory processes, information technology platforms, operational
processes and financial reporting processes, could have a material
adverse effect on the business, financial condition and results of
operations of Fiera Capital.
Growth in Fiera Capital’s AUM
An important component of investment performance is the
availability of appropriate investment opportunities for new client
assets in a timely manner. 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.
Any inability to identify sufficient investment opportunities for
new client assets in a timely manner, could be adversely affected
upon Fiera Capital’s results of operations and financial condition
Fiera Capital may elect to limit its growth and reduce the rate at
which it receives new client assets.
Key Employees
Fiera Capital’s business is dependent on the highly-skilled and often
highly-specialized individuals it employs. The contributions of these
individuals to Fiera Capital’s asset management, investment risk
management and client service teams are important to retaining
clients and attracting new clients. Given the growth in total AUM in
the asset 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, and it is always a risk that management
personnel or other key employees may decide to leave Fiera Capital.
Additionally, in the face of increasing competition for experienced
professionals in the industry, there is a risk that Fiera Capital will
be unable to recruit high quality new employees with the desired
qualifications in a timely manner, when required.
The loss of the services of management personnel or other key
employees and an inability to recruit high quality new employees
could materially adversely affect the business, financial condition or
profitability of Fiera Capital.
Fiera Capital devotes considerable resources to recruiting,
training and compensating key employees, as well as measures to
encourage them to remain with Fiera Capital. Compensation related
measures include providing a stock option plan, a restricted share
unit plan, a performance share unit plan, a performance share unit
and unit appreciation right plan applicable to business units and a
short-term incentive plan, as well as a working environment that
fosters employee satisfaction.
Further, 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. As a result, such increased expenses could adversely affect
the business, financial condition or profitability of Fiera Capital.
Competitive Pressures
The asset management industry (including the alternative investment
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. They may also propose or develop ranges of products
and service offerings that are more attractive to existing or potential
clients of Fiera Capital.
Competition could have a material adverse effect on Fiera
Capital’s management fees or performance fees and there can be
no assurance that Fiera Capital will be able to compete effectively.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 77
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.
Investment Valuation
Valuation of certain 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 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, as well as alternative investments (e.g. real estate,
infrastructure and private lending) and emerging market investments,
as well as certain types of hedge funds.
Fiera Capital may incur substantial costs in rectifying pricing
errors caused by the misstatement of investment values.
Funds are audited by external auditors in order to assess
whether the Funds’ financial statements are fairly stated in all
material respects in accordance with the applicable financial
reporting standards.
Client Commitment
The agreements pursuant to which Fiera Capital manages its clients’
assets, in accordance with industry practice, may be terminated upon
short notice. Clients that are invested in units of the Funds may
have their units redeemed upon short notice as well. The loss of any
major client or of a significant number of existing clients could have
a material adverse effect on Fiera Capital’s results of operations and
financial condition.
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.
Asset Management Industry
Fiera Capital’s ability to generate revenues has been significantly
influenced by the growth experienced in the asset management
industry and by Fiera Capital’s relative performance within the
asset management industry. The historical growth of the asset
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 asset 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 revenues.
Major Customer
Fiera Capital entered into the AUM Agreement as part of the
Natcan Transaction and National Bank is presently Fiera Capital’s
largest client, representing a significant portion of Fiera Capital’s
$136.7 billion in AUM. Termination of the 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.
Conflicts of Interest
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. The failure by Fiera Capital to
appropriately manage and address conflicts of interest and 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.
Employee Misconduct or Error
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 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.
78 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 Other enterprise 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 strategic, technologic,
operational, financial, legal and regulatory risks requires, among
other things, policies and procedures including the segregation of
duties. These policies and procedures may not be fully effective in
managing these risks. A failure by Fiera Capital to manage risks in
its portfolios and activities could materially adversely affect Fiera
Capital’s business, financial condition or profitability.
In order to reduce this risk, Fiera Capital adopted risk
management practices that are under the oversight of Fiera Capital’s
Audit and Risk Management Committee.
Fund Operating Expenses
If the AUM in the Funds decline to the point that charging the
full fund operating expenses to the Funds results in weakening
management expense ratios or the Funds becoming uncompetitive,
Fiera Capital may choose to absorb some of these expenses.
Any such discretionary decision will result in an increase in
expenses for Fiera Capital and a decrease in profitability.
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, breach of client contracts, reputational
harm or legal liability, which in turn could materially adversely affect
Fiera Capital’s business, financial condition or profitability. Despite
being reviewed on an annual basis, there is no guarantee that the
disaster recovery plan maintained by the Company will be adequate
in mitigating the impacts of such a disaster.
Information Security Policies, Procedures
and Capabilities
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 resides on or
is transmitted through them. The administrative services provided
by Fiera Capital depend on software supplied by third-parties. An
externally caused information security incident, such as a cyber
attack or a virus or worm, or an internally-caused issue, such
as failure to control access to sensitive systems, affecting such
administrative services could materially interrupt Fiera Capital’s
business operations or cause disclosure or modification of sensitive
or confidential information.
Security breach, information security issue experienced by or
failure of key third parties, the loss of use of these third parties’
products, problems or errors related to such products, termination
or failure to renew the term of a third party agreement, 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.
Fiera Capital has established information security controls,
defined by a governance framework and processes that are intended
to protect information and computer systems including information
security risk assessments and privacy impact assessments.
Notwithstanding these measures, the cyber security threats are
rapidly and constantly changing, and there remains a possibility that
processes and controls in place could be unsuccessful in preventing a
security breach. Fiera Capital may be vulnerable, and work with third
parties who may also be vulnerable to computer viruses and other
types of malicious software, cyber-attacks and hacking attempts
from unauthorized persons, the physical theft of computer systems,
internal programming or human errors, fraud, or other disruptive
problems or events. There is also a risk that certain internal controls
fail, which could also exacerbate any consequences from such events.
Enterprise Risk Management
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.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 79
In addition, the Fifth Amended and Restated Credit Agreement
requires Fiera Capital to meet certain financial ratios and tests, and
provides that the occurrence of an acquisition of control of Fiera
Capital will cause an event of default.
A failure to comply with these covenants, including a failure to
meet the financial tests or ratios, could result in an event of default
under the Fifth Amended and Restated Credit Agreement.
Although at present 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 be restricted in its ability to engage in mergers, acquisitions or
dispositions of assets.
Interest Risk
A portion of Fiera Capital’s indebtedness, including the borrowings
under the Fifth 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 income and cash
flows would decrease.
Failure to manage interest risks could materially adversely affect
Fiera Capital’s business, financial condition or profitability.
To hedge some of the interest rate risk it is exposed to via its
borrowing under the Fifth Amended and Restated Credit Agreement,
Fiera Capital has contracted interest rate swaps that fix a portion
of interest rate payments. Given that changes in the fair values of
derivatives must be reported in the Company’s financial statements,
interest rate fluctuations may have an impact on the reported profits
and loss of Fiera Capital on a quarterly basis, thus creating some
volatility in reported earnings.
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. A significant portion of the Company’s earnings
and net assets is denominated in US dollars. The Company’s main
exposure relates to cash, purchase price obligations and long-
term debt denominated in US dollars and the operations of its US
subsidiaries and Fiera Europe which are predominantly in US dollars.
The Company and certain of its subsidiaries manage currency risk by
entering into currency hedging contracts relating to US dollars and
various other currencies.
Future events that may significantly increase or decrease the
risk of future movement in the exchange rates for these currencies
cannot be predicted. Fluctuations in exchange rates between the
Canadian dollar and such currencies may have an adverse effect on
the Company’s results and financial condition.
Risks Related to Structure and Shares
Major Shareholders
As of the date hereof, National Bank holds approximately 18.0% of
the outstanding voting shares of Fiera Capital, by way of its wholly-
owned subsidiary Natcan. Mr. Jean-Guy Desjardins indirectly owns
approximately 36.5% of the outstanding voting interest of Fiera
L.P., a controlling shareholder of Fiera Capital holding 26.2% of
the outstanding voting shares of Fiera Capital. Desjardins Financial
Holding Inc. (“DFH”), a direct wholly-owned subsidiary of FCD, owns
28.3% of the outstanding voting interest of Fiera L.P. DFH proposed
for election two of the current eight directors of Fiera Capital that
the holders of Class B Special Voting Shares are entitled to appoint.
Mr. Desjardins is in a position to exercise significant control over
matters of Fiera Capital requiring shareholder approval, including
the election of directors and the determination of significant
corporate actions.
Potential Dilution
Fiera Capital is authorized to issue an unlimited number of Class A
Subordinate Voting Shares, Class B Special Voting Shares and
Preferred Shares and may decide to issue additional Shares or
Preferred Shares in order to finance investment projects or raise
liquidity, which could dilute the share ownership.
Further, under the Sceptre Investor Agreement, Fiera L.P. benefits
from the Fiera L.P. Anti-Dilution Rights (as defined below), which
is described in this AIF under the section “Description of Material
Contracts - Sceptre Investor Agreement”. As a result of an issuance
pursuant to the Fiera L.P. Anti-Dilution Rights, the share ownership
of Fiera Capital would be diluted.
Additionally, Fiera Capital may determine to redeem outstanding
Debentures (as defined below) for Class A Subordinate Voting Shares
or to repay outstanding principal amounts thereunder at maturity
of the Debentures by issuing additional Class A Subordinate Voting
Shares. The issuance of additional Class A Subordinate Voting Shares
may have a dilutive effect on Fiera Capital’s shareholders and an
adverse impact on the price of Class A Subordinate Voting Shares.
Risks Related to the Company’s Liquidity and
Financial Position
Indebtedness
The Fifth Amended and Restated Credit Agreement contains various
covenants that limit the ability of Fiera Capital and certain of its
subsidiaries (collectively, the “Borrower Parties”) to engage in
specified types of transactions and imposes significant operating
restrictions, which may prevent the Borrower Parties from pursuing
certain business opportunities and taking certain actions that may
be in their interest.
These covenants may limit the Borrower Parties’ ability to take
actions that it believes would profit its business, and may make
it difficult for Fiera Capital to successfully execute its business
strategy or effectively compete with companies that are not
similarly restricted.
80 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Management’s Discussion and AnalysisFor the Three- and Twelve-Month Periods Ended December 31, 2018 MANAGEMENT’S REPORT TO THE SHAREHOLDER
Management of Fiera Capital Corporation is responsible for 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 (“IFRS”). The preparation of financial statements in conformity with IFRS
requires the use of certain critical estimates and requires management to exercise its judgement in the process of
applying the Corporation’s accounting policies.
In fulfilling its responsibilities, management has designed and maintained a control environment, as well as a
governance structure, and developed policies and procedures to provide reasonable assurance that the Corporation’s
assets are safeguarded and to ensure that transactions are accurately authorized and recorded.
Operating under the Board of Directors, the Audit and Risk Management Committee meets periodically with
management and with the independent auditor. The Audit and Risk Management Committee reviews the consolidated
financial statements and recommends their approval by the Board of Directors.
The independent auditor has unrestricted access to the Audit and Risk Management Committee. The Corporation’s
independent auditor, Deloitte LLP, is responsible for auditing the consolidated financial statements and to issue an
opinion on these financial statements. Their report is provided herein.
/s/ Jean-Guy Desjardins
Chairman of the Board and
Chief Executive Officer
/s/ Vincent Duhamel
Global President and
Chief Operating Officer
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 81
ANNUAL REPORT OF THE AUDIT AND RISK MANAGEMENT COMMITTEE
To Our Shareholders
Fiera Capital Corporation (“Fiera Capital” or the “Company”) is committed to providing high-quality, reliable and relevant
financial reporting. Accordingly, Fiera Capital ensures it maintains appropriate accounting practices, effective internal
controls and strong risk management practices.
Fiera Capital’s Audit and Risk Management Committee (“Committee”) actively assists the Board of Directors (“Board”)
in fulfilling its oversight responsibilities in the following areas:
i) the integrity of Fiera Capital’s interim and annual consolidated financial statements, as well as related information,
including their respective Management’s Discussion and Analysis and the Annual Information Form (“AIF”);
ii) the adequacy of the design and the effectiveness of the application of Fiera Capital’s system of disclosure controls
and procedures, as well as of its system of internal controls with respect to Fiera Capital’s financial reporting, asset
protection and fraud detection;
iii) the evaluation of Fiera Capital’s external auditor including its qualifications, independence and appointment;
iv) the appropriateness of Fiera Capital’s risk management program and practices;
v) Fiera’s compliance with legal and regulatory requirements, as well as with its ethical standards; and
vi) any assignments or functions as delegated to it by the Board.
The Committee examines the information resulting from this governance process every quarter.
In connection with fulfilling its duties, the Committee met four times in 2018. Senior members of Fiera Capital’s
management team attended these meetings. The agenda of the meetings included systematic private sessions,
respectively with Fiera Capital’s Global President and Chief Operating Officer, Executive Vice President and Global
Chief Financial Officer, and Senior Vice President, Chief Legal and Chief Compliance Officer and Legal Secretary. In
these private sessions, the Committee and the aforementioned senior management Officers had discussions regarding
Fiera Capital’s financial disclosures, financial and non-financial risk management, as well as legal, accounting, auditing
and internal control matters. Such meetings support direct communication between the Committee and the senior
management maintaining their independence
Audit and Risk Management Committee Charter
The Committee is governed by the Audit and Risk Management Committee Charter (the “Charter”). The Charter is
contained in the Company’s AIF, which is available on Fiera Capital’s website (www.fieracapital.com). The Charter is
examined at least annually to review the Committee’s responsibilities and ensure its compliance with the most current
regulatory requirements.
The Charter was reviewed and approved by the Board on March 21, 2019. In accordance with sound corporate
governance practices, the Committee annually reviews its efficiency and effectiveness in executing its mandate as set
out in its Charter. In 2018, the self-assessment of the Committee was effected through a formal questionnaire distributed
and reviewed by the Governance Committee of the Board.
The Committee reports to Fiera Capital’s Board on a quarterly basis and, when necessary, makes recommendations.
82
Independent auditor
Fiera Capital’s independent auditor, Deloitte LLP (“Deloitte”), reports directly to the Committee, which has sole
authority over its appointment or discharge if required, its oversight, its compensation, and its annual evaluation.
The Committee supervises the work of Deloitte and examines its audit proposal, its mandate, its annual audit
strategy, its interim and annual reports, its communications to management, and associated management’s comments
and action plans. At each meeting, the Committee holds discussions with Deloitte within an in-camera private session.
The audit results, the internal control over financial reporting review, as well as the overall quality of financial reporting
are reviewed and discussed with Deloitte.
The Committee contributes to ensuring the independence of the auditor by approving all audit and non-audit
services to be conducted by Deloitte in accordance with Fiera Capital’s Pre-Approval of the External Audit and Non-
Audit Services Policy.
The Chair of the Committee meets with Deloitte at least on a quarterly basis to foster open dialogue.
In 2018, the Committee reviewed and discussed with management its assessment of the independent auditor. The
Committee concluded to recommend the reappointment of Deloitte as independent auditor of Fiera Capital.
Audit and Risk Management Committee Activities for Fiscal Year 2018
In 2018, in addition to its statutory responsibilities, the following activities were conducted by the Committee:
> Monitored the internal control over the financial reporting program based on the criteria of the 2013 COSO framework
for ensuring the requirements of NI 52-109 were met;
> Oversaw the implementation on an information security program;
> Oversaw the development of a “top risks” dashboard based on key risk indicators;
> Oversaw the Audit Quality Indicators which help measure and evaluate the quality of the external audit;
> Reviewed the most recent report summarizing the audit quality results of external and internal inspections of Deloitte;
> Reviewed Fiera Capital’s use of non-IFRS financial measures disclosed in public documents to ensure compliance
with regulatory guidance;
> Oversaw the impact and implementation of new IFRS standards;
> Reviewed the corporate insurance coverage program;
> Oversaw the implementation of Fiera Capital’s new accounting system;
> Reviewed and monitored the inspection reports issued by the Autorité des marchés financiers;
> Held in-camera discussions with the Global President & Chief Operating Officer, Global Chief Financial Officer,
Chief Compliance Officer and the Chairman of the Human Resources Committee of the Board; and
> Reviewed and approved the Committee’s annual work plan and objectives.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 83
Audit and Risk Management Committee Training Sessions
In 2018, the Committee attended the following training sessions: i) an update of the latest trends in cyber security and
also a review on cyber insurance, ii) an update on upcoming IFRS standards, iii) a review of the US Tax Reform, iv) a
review of the market perspectives, competitive landscape, and industry & regulatory trends.
Audit and Risk Management Committee Membership
The Committee’s membership comprises three directors of which two are independent (Mr. Raymond Laurin and Mr.
Gary Collins) and the third (Mrs. Lise Pistono) appointed under the section 3.3(2) exemption in NI 52-110 as disclosed
in the Company’s AIF.
Education and Experience of Audit and Risk Management Committee Members
The following is a brief description of the qualifications, education and experience of each current member of the
Committee that are relevant to the execution of their responsibilities as members of the Committee:
Mr. Laurin, FCPA, FCA, Adm.A, ASC, is a Corporate Director. During his 32-year career with Desjardins Group, he
served namely as Senior Vice President, Finance and Treasury, and Chief Financial Officer. 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 professionnels agréés du Québec.
Mr. Gary Collins is a senior advisor at Lazard Ltd., a global investment bank. In addition, Mr. Collins is a director of
Chorus Aviation Inc., D-Box Technologies Inc. and Rogers Sugar Ltd. Mr. Collins has also previously served as a director
on the boards of Catalyst Paper Corporation and Liquor Stores North America. Mr. Collins served as the President of
Coastal Contacts Inc. Prior to that, Mr. Collins was the President and Chief Executive Officer of Harmony Airways and
was also a member of the British Columbia Legislative Assembly and served as Minister of Finance.
Mrs. Pistono, CPA, CA, is Vice President and Chief Financial Officer of DJM Capital Inc. Previously, she was with KPMG
supporting public companies in their financial disclosure requirements and served as a senior finance officer for a Bell
Canada subsidiary, as well as a private office furniture and supplies company. Mrs. Pistono also has over 20 years of
teaching experience at HEC Montréal in Applied Economics, Quantitative Methods and Accounting.
The members of the Audit and Risk Management Committee
Raymond Laurin, Chair
Gary Collins
Lise Pistono
March 22, 2019
Montreal
84
Consolidated
Financial Statements
December 31, 2018 and 2017
INDEPENDENT AUDITOR’S REPORT 87
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) 89
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) 90
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 91
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 92
CONSOLIDATED STATEMENTS OF CASH FLOWS 94
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 95
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 85
86 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Fiera Capital Corporation
Opinion
We have audited the consolidated financial statements of Fiera Capital Corporation and its subsidiaries (the “Company”),
which comprise the consolidated statements of financial position as at December 31, 2018 and 2017, and the consolidated
statements of earnings (loss), comprehensive income (loss), changes in equity and cash flows for the years then ended,
and notes to the consolidated financial statements, including a summary of significant accounting policies (collectively
referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the
Company as at December 31, 2018 and 2017, and its financial performance and its cash flows for the years then ended
in accordance with International Financial Reporting Standards (“IFRS”).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”).
Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Statements section of our report. We are independent of the Company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Other Information
Management is responsible for the other information. The other information comprises:
> Management’s Discussion and Analysis
> The information, other than the financial statements and our auditor’s report thereon, in the Annual Report.
Our opinion on the financial statements does not cover the other information and we do not and will not express any form
of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the
other information identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we
have performed on this other information, we conclude that there is a material misstatement of this other information,
we are required to report that fact in this auditor’s report. We have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If, based on the work
we will perform on this other information, we conclude that there is a material misstatement of this other information,
we are required to report that fact to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS,
and for such internal control as management determines is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but
to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 87
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
Canadian GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
> Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control.
> Obtain an understanding of internal control relevant to the audit 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
Company’s internal control.
> Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
> Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant
doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or,
if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to
continue as a going concern.
> Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and
whether the financial statements represent the underlying transactions and events in a manner that achieves fair
presentation.
> Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision
and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Chantal Leclerc.
/s/ Deloitte LLP 1
March 21, 2019
Montreal, Quebec
___________________
1. CPA auditor, CA, public accountancy permit No. A121444
88 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
(In thousands of Canadian dollars, except per share data)
For the years ended December 31,
Revenues
Base management fees
Performance fees
Other revenues (Note 11)
Expenses
Selling, general and administrative expenses (Note 20)
External managers
Amortization of intangible assets (Note 9)
Depreciation of property and equipment (Note 10)
Restructuring, integration and other costs (Note 5)
Acquisition costs
Earnings before under-noted items
Realized gain on investments
Loss on disposal of intangible assets (Note 9)
Loss on disposal of property and equipment (Note 10)
Interest on long-term debt and other financial charges (Note 21)
Accretion and change in fair value of purchase price obligations
Revaluation of assets held-for-sale (Note 4)
Earnings (loss) before income taxes
Income tax expense (recovery) (Note 13)
Net earnings (loss)
Net earnings (loss) attributable to:
Company’s shareholders
Non-controlling interest
Net earnings (loss) per share (Note 17)
Basic
Diluted
The accompanying notes are an integral part of these consolidated financial statements.
2018
$
485,624
23,102
31,559
540,285
425,924
1,845
44,813
4,235
7,586
11,086
495,489
44,796
(145)
26
56
25,355
24,497
191
(5,184)
(429)
(4,755)
(5,013)
258
(4,755)
(0.05)
(0.05)
2017
$
405,056
34,572
19,468
459,096
358,454
2,176
41,110
3,817
15,150
5,434
426,141
32,955
(137)
371
522
11,479
5,852
–
14,868
4,156
10,712
10,671
41
10,712
0.13
0.12
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 89
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands of Canadian dollars)
For the years ended December 31,
Net earnings (loss)
Other comprehensive income (loss):
Items that may be reclassified subsequently to earnings:
Unrealized gain on available-for-sale financial assets (net of income taxes of $17 in 2017)
Reclassification of gain on disposal of investments (net of income tax recovery of $3 in 2017)
Cash flow hedges (net of income taxes of $259 in 2018 and $320 in 2017) (Note 11)
Unrealized foreign exchange differences on translating financial statements of foreign operations
Other comprehensive income (loss)
Comprehensive income (loss)
Comprehensive income (loss) attributable to:
Company’s shareholders
Non-controlling interest
The accompanying notes are an integral part of these consolidated financial statements.
2018
$
2017
$
(4,755)
10,712
–
–
1,833
22,960
24,793
20,038
19,780
258
20,038
156
(24)
2,094
(17,300)
(15,074)
(4,362)
(4,403)
41
(4,362)
90 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Consolidated Financial Statements CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands of Canadian dollars)
As at December 31,
Assets
Current assets
Cash and cash equivalents
Restricted cash
Accounts receivable (Note 8)
Assets held-for-sale (Note 4 and 7)
Investments (Note 11)
Prepaid expenses and other assets
Non-current assets
Goodwill (Note 9)
Intangible assets (Note 9)
Property and equipment (Note 10)
Derivative financial instruments (Note 11)
Deferred income taxes (Note 13)
Deferred charges and other
Liabilities
Current liabilities
Accounts payable and accrued liabilities (Note 12)
Current portion of purchase price obligations (Note 11)
Restructuring provisions (Note 5)
Derivative financial instruments (Note 11)
Current portion of long-term debt (Note 14)
Amounts due to related parties
Client deposits and deferred revenues
Amounts due to holders of redeemable units (Note 7)
Deferred income taxes on assets held-for-sale (Note 4)
Non-current liabilities
Long-term debt (Note 14)
Convertible debentures (Note 15)
Derivative financial instruments (Note 11)
Purchase price obligations (Note 11)
Long-term restructuring provisions (Note 5)
Cash settled share-based liabilities (Note 18)
Other non-current liabilities
Deferred lease obligations
Lease inducements
Deferred income taxes (Note 13)
Equity attributable to:
Company’s shareholders
Non-controlling interest
2018
$
52,466
1,012
148,459
35,711
4,857
14,943
257,448
631,699
529,062
16,499
5,366
20,093
440
2017
$
41,079
930
128,398
–
5,408
10,082
185,897
523,885
462,281
16,572
3,484
11,665
1,131
1,460,607
1,204,915
144,059
32,487
2,289
1,672
388
2,599
727
5,394
704
114,008
31,050
5,273
–
1,354
1,241
501
–
–
190,319
153,427
421,139
79,008
1,560
98,221
715
10,470
4,670
3,955
4,335
12,489
826,881
632,958
768
633,726
1,460,607
292,417
77,461
–
58,086
715
3,087
3,338
3,939
4,420
16,014
612,904
592,545
(534)
592,011
1,204,915
The accompanying notes are an integral part of these consolidated financial statements.
Approved by the Board of Directors
/s/ Jean-Guy Desjardins
Director
/s/ Raymond Laurin
Director
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 91
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands of Canadian dollars)
For the years ended December 31,
Balance, December 31, 2016
Net earnings
Other comprehensive income (loss)
Comprehensive income (loss)
Share-based compensation expense
Performance and restricted share units vested
Restricted shares vested
Stock options exercised
Shares issued as part of a business combination
Issuance of convertible debentures, net of tax
Extinguishment of puttable financial instrument liabilities
Net change in non-controlling interest
Loss on dilution of non-controlling interest
Shares issued as settlement of purchase price obligations
Shares issued as part of equity financing
Cancellation of shares
Conversion of holdback shares
Dividends
Balance, December 31, 2017
Change in accounting policy – impact of IFRS 9
Net earnings (loss)
Other comprehensive income
Comprehensive income (loss)
Share-based compensation expense
Performance and restricted share units vested
Restricted shares vested
Adjustment to transaction costs on previously issued shares
Stock options exercised
Shares issued as part of a business combination
Net change in non-controlling interest
Shares issued as settlement of purchase price obligations
Cancellation of shares
Dividends
Balance, December 31, 2018
Notes
Share capital
Restricted and
holdback shares
$
582,134
–
–
–
–
13,612
–
3,816
500
–
–
–
–
8,478
79,484
(4)
3,566
–
691,586
–
–
–
–
–
9,072
–
192
4,172
66,708
–
4,076
(191)
–
775,615
18
16
16
4
15
11
16
16
16
16
16
2,16
18
16
16
16
4,16
4,16
16
16
$
1,848
–
–
–
–
–
854
–
–
–
–
–
–
–
–
4
(3,566)
–
(860)
–
–
–
–
–
–
821
–
–
–
–
5,501
39
–
5,501
Contributed
surplus
$
16,285
–
–
–
9,707
(8,323)
(854)
(902)
–
–
2,747
–
–
–
–
–
–
18,660
–
–
–
–
10,813
(5,164)
(821)
–
(1,013)
–
–
–
–
–
22,475
The accompanying notes are an integral part of these consolidated financial statements.
92 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Convertible
debentures equity
component
Accumulated
other
comprehensive
income
Equity
attributable to
Company’s
shareholders
Non-controlling
interest
Retained
earnings
(deficit)
$
(62,129)
10,671
10,671
(24,174)
(57,563)
(133,195)
161
(5,013)
(5,013)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,330
3,330
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9
28,098
(15,074)
(15,074)
13,024
(161)
24,793
24,793
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
566,236
10,671
(15,074)
(4,403)
9,707
5,289
–
2,914
500
3,330
2,747
(24,174)
8,478
79,484
(57,563)
592,545
(5,013)
24,793
19,780
10,813
3,908
–
201
3,159
66,708
–
9,577
(152)
(73,581)
632,958
(54,771)
24,174
30,409
$
41
–
41
113
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(500)
(534)
258
258
1,044
768
Total
equity
$
596,645
10,712
(15,074)
(4,362)
9,820
5,289
–
2,914
500
3,330
2,747
(54,771)
8,478
79,484
(58,063)
592,011
(4,755)
24,793
20,038
10,813
3,908
–
201
3,159
66,708
1,044
9,577
(152)
(73,581)
633,726
–
–
–
–
3,339
37,656
(73,581)
(211,628)
Consolidated Financial Statements CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands of Canadian dollars)
For the years ended December 31,
Balance, December 31, 2016
Net earnings
Other comprehensive income (loss)
Comprehensive income (loss)
Share-based compensation expense
Performance and restricted share units vested
Restricted shares vested
Stock options exercised
Shares issued as part of a business combination
Issuance of convertible debentures, net of tax
Extinguishment of puttable financial instrument liabilities
Net change in non-controlling interest
Loss on dilution of non-controlling interest
Shares issued as settlement of purchase price obligations
Shares issued as part of equity financing
Cancellation of shares
Conversion of holdback shares
Dividends
Balance, December 31, 2017
Net earnings (loss)
Other comprehensive income
Comprehensive income (loss)
Change in accounting policy – impact of IFRS 9
Share-based compensation expense
Performance and restricted share units vested
Restricted shares vested
Adjustment to transaction costs on previously issued shares
Stock options exercised
Shares issued as part of a business combination
Net change in non-controlling interest
Shares issued as settlement of purchase price obligations
Cancellation of shares
Dividends
Balance, December 31, 2018
Notes
Share capital
Restricted and
holdback shares
Contributed
surplus
582,134
1,848
16,285
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
13,612
3,816
500
8,478
79,484
(4)
3,566
691,586
9,072
192
4,172
66,708
4,076
(191)
775,615
18
16
16
4
15
11
16
16
16
16
16
2,16
18
16
16
16
4,16
4,16
16
16
$
–
–
–
–
–
–
–
–
–
–
–
–
–
4
–
–
–
–
–
–
–
–
–
–
–
854
(3,566)
(860)
821
5,501
39
–
5,501
9,707
(8,323)
(854)
(902)
2,747
18,660
10,813
(5,164)
(821)
(1,013)
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Convertible
debentures equity
component
$
–
–
–
–
–
–
–
–
–
3,330
–
–
–
–
–
–
–
–
3,330
–
–
–
–
–
–
–
9
–
–
–
–
–
–
The accompanying notes are an integral part of these consolidated financial statements.
22,475
3,339
Retained
earnings
(deficit)
$
(62,129)
10,671
–
10,671
–
–
–
–
–
–
–
–
(24,174)
–
–
–
–
(57,563)
(133,195)
161
(5,013)
–
(5,013)
–
–
–
–
–
–
–
–
–
(73,581)
(211,628)
Accumulated
other
comprehensive
income
Equity
attributable to
Company’s
shareholders
Non-controlling
interest
$
28,098
–
(15,074)
(15,074)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
13,024
(161)
–
24,793
24,793
–
–
–
–
–
–
–
–
–
–
37,656
$
566,236
10,671
(15,074)
(4,403)
9,707
5,289
–
2,914
500
3,330
2,747
–
(24,174)
8,478
79,484
–
–
(57,563)
592,545
–
(5,013)
24,793
19,780
10,813
3,908
–
201
3,159
66,708
–
9,577
(152)
(73,581)
632,958
$
30,409
41
–
41
113
–
–
–
–
–
–
(54,771)
24,174
–
–
–
–
(500)
(534)
–
258
–
258
–
–
–
–
–
–
1,044
–
–
–
768
Total
equity
$
596,645
10,712
(15,074)
(4,362)
9,820
5,289
–
2,914
500
3,330
2,747
(54,771)
–
8,478
79,484
–
–
(58,063)
592,011
–
(4,755)
24,793
20,038
10,813
3,908
–
201
3,159
66,708
1,044
9,577
(152)
(73,581)
633,726
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 93
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Canadian dollars)
For the years ended December 31,
Operating activities
Net earnings (loss)
Adjustments for:
Amortization of intangible assets and depreciation of property and equipment
Amortization of deferred charges
Loss on disposal of intangible assets and property and equipment
Accretion and change in fair value of purchase price obligations
Lease inducements and deferred lease obligations
Share-based compensation expense
Cash settled share-based compensation expense
Restructuring, integration and other costs
Interest on long-term debt and other financial charges
Income tax expense (recovery)
Income tax paid
Revaluation of assets held-for-sale
Realized and unrealized (gain) loss on financial instruments
Realized (gain) loss on investments
Other non-current liabilities
Changes in non-cash operating working capital items (Note 22)
Net cash generated from operating activities
Investing activities
Business combinations (Note 4)
Settlement of purchase price adjustments and obligations
Investments, net
Purchase of property and equipment
Acquisition of intangible assets
Proceeds from disposal of intangible assets and property and equipment
Settlement of puttable financial instrument liabilities
Deferred lease obligations and lease inducements
Deferred charges and other
Restricted cash
Net cash used in investing activities
Financing activities
Settlement of share-based compensation
Dividends paid
Issuance of share capital less issuance costs of $7 ($4,141 in 2017)
Contribution (purchase) of non-controlling interest
Long-term debt, net
Interest paid on long-term debt
Settlement of derivative financial instruments
Issuance of convertible debentures (less issuance costs of $4,269 in 2017)
Financing charges
Net cash generated by (used in) financing activities
Net increase in cash and cash equivalents
Effects of exchange rate changes on cash denominated in foreign currencies
Cash and cash equivalents – beginning of year
Cash and cash equivalents – end of year
The accompanying notes are an integral part of these consolidated financial statements.
94 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
2018
$
(4,755)
49,048
390
82
24,497
(1,223)
10,813
14,155
(2,984)
25,355
(429)
(7,916)
191
674
(231)
1,550
(2,923)
106,294
(53,706)
(25,107)
(17,969)
(2,512)
(11,297)
–
–
–
(141)
(13)
(110,745)
(1,333)
(73,581)
3,151
1,044
109,261
(20,890)
654
–
(1,495)
16,811
12,360
(973)
41,079
52,466
2017
$
10,712
44,927
572
893
5,852
(872)
9,820
8,466
3,374
11,479
4,156
(13,417)
–
(1,717)
(137)
2,100
6,316
92,524
–
(3,431)
5,029
(3,238)
(21,543)
1,052
(2,753)
1,338
(191)
(325)
(24,062)
(1,382)
(58,312)
82,067
(36,324)
(110,888)
(16,145)
(7,158)
82,465
(210)
(65,887)
2,575
(1,606)
40,110
41,079
Consolidated Financial Statements Notes to the Consolidated
Financial Statements
December 31, 2018 and 2017
NOTE 1 DESCRIPTION OF BUSINESS 96
NOTE 2 BASIS OF PRESENTATION AND ADOPTION OF NEW IFRS 96
NOTE 3 SIGNIFICANT ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATION UNCERTAINTY 97
NOTE 4 BUSINESS COMBINATIONS AND OTHER TRANSACTIONS 106
NOTE 5 RESTRUCTURING, INTEGRATION AND OTHER COSTS 109
NOTE 6
INVESTMENTS 110
NOTE 7 STRUCTURED ENTITIES 111
NOTE 8 ACCOUNTS RECEIVABLE 112
NOTE 9 GOODWILL AND INTANGIBLE ASSETS 113
NOTE 10 PROPERTY AND EQUIPMENT 114
NOTE 11 FINANCIAL INSTRUMENTS 115
NOTE 12 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 123
NOTE 13 INCOME TAXES 124
NOTE 14 LONG-TERM DEBT 125
NOTE 15 CONVERTIBLE DEBENTURES 126
NOTE 16 SHARE CAPITAL AND ACCUMULATED OTHER COMPREHENSIVE INCOME 127
NOTE 17 EARNINGS (LOSS) PER SHARE 129
NOTE 18 SHARE-BASED PAYMENTS 129
NOTE 19 POST-EMPLOYMENT BENEFIT OBLIGATIONS 132
NOTE 20 EXPENSES BY NATURE 133
NOTE 21 INTEREST ON LONG-TERM DEBT AND OTHER FINANCIAL CHARGES 133
NOTE 22 ADDITIONAL INFORMATION RELATING TO CONSOLIDATED STATEMENTS OF CASH FLOWS 134
NOTE 23 COMMITMENTS AND CONTINGENT LIABILITIES 134
NOTE 24 CAPITAL MANAGEMENT 135
NOTE 25 RELATED PARTY TRANSACTIONS 135
NOTE 26 SEGMENT REPORTING 136
NOTE 27 SUBSEQUENT EVENTS 136
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 95
1. Description of business
Fiera Capital Corporation (“Fiera Capital” or the “Company”) was
incorporated as Fry & Company (Investment Management) Limited
in 1955 and is incorporated under the laws of the Province of Ontario.
The Company is a global asset management firm which offers a wide
range of traditional and alternative investment solutions, including
depth and expertise in asset allocation. The Company provides
investment advisory and related services to institutional investors,
private wealth clients and retail investors.
The Company’s head office is located at 1501 McGill College
Avenue, Suite 800, Montréal, Quebec, Canada. The Company’s
shares are listed on the Toronto Stock Exchange (“TSX”) under the
symbol “FSZ”.
The Company’s Board of Directors (the “Board”) approved the
consolidated financial statements for the years ended December 31,
2018 and 2017, on March 21, 2019.
2. Basis of presentation and adoption of new IFRS
COMPLIANCE WITH IFRS
The Company prepares its consolidated financial statements in
accordance with International Financial Reporting Standards (“IFRS”).
The policies applied in these consolidated financial statements
are based on IFRS issued and outstanding as at December 31, 2018.
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.
ADOPTION OF NEW IFRS
On January 1, 2018, the Company adopted the following new
IFRS standards.
IFRS 9 – Financial Instruments
IFRS 9 replaced IAS 39 – Financial Instruments: Recognition and
Measurement and was mandatorily effective for annual periods
beginning on or after January 1, 2018. As permitted by IFRS 9, the
Company has taken the exemption not to restate the comparative
information in the consolidated financial statements with respect
to classification and measurement requirements. The retrospective
impact of applying IFRS 9 was accounted for through adjustments to
the opening balance of retained earnings (deficit) and accumulated
other comprehensive income as at January 1, 2018.
The adoption of IFRS 9 did not have a significant impact on the
Company’s consolidated financial statements.
Classification and measurement
IFRS 9 retains the existing requirements in IAS 39 for the classification
and measurement of financial liabilities. However, it eliminates the
previous IAS 39 categories for financial assets of held to maturity,
loans and receivables and available-for-sale.
Under IFRS 9, all equity instrument financial assets must
be classified as at fair value through profit or loss. However, the
Company may, at initial recognition of a non-trading equity
instrument, irrevocably elect to designate the instrument as at fair
value through other comprehensive income with no subsequent
reclassification of gains and losses to net earnings. This election is
96 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
made on an investment-by-investment basis. Dividends will continue
to be recognized in net earnings. This designation is also available
for existing non-trading equity instruments at the date of IFRS 9
adoption. Derivative financial instruments continue to be measured
at fair value through profit or loss.
The original measurement categories under IAS 39 and the
new measurement categories under IFRS 9 for each class of the
Company’s financial assets as at January 1, 2018 are disclosed in
Note 3. There were no changes to the measurement categories under
IFRS 9 for the Company’s financial liabilities as at January 1, 2018.
Financial assets will not be reclassified subsequent to their initial
recognition, unless the Company identifies changes in the business
model in managing financial assets.
As a result of the application of the classification and
measurement requirements of IFRS 9, on January 1, 2018, the
Company reclassified its equity securities classified as available-for-
sale under IAS 39 to fair value through profit or loss and therefore
reclassified an unrealized gain of $161 from accumulated other
comprehensive income to retained earnings (deficit).
Impairment
IFRS 9 replaces the “incurred loss” model in IAS 39 with an “expected
credit loss” (“ECL”) model. The new ECL impairment model applies
to financial assets measured at amortized cost, contract assets and
debt investments at fair value through other comprehensive income,
but not to investments in equity instruments. Under IFRS 9, credit
losses are recognized earlier than under IAS 39.
The Company’s financial assets subject to the new impairment
model are cash and cash equivalents, accounts receivable and long-
term receivable. The new impairment guidance using an expected
credit loss model did not have a significant impact on the carrying
amounts of the Company’s accounts receivable or long-term
receivable as the Company has had negligible credit losses.
Hedge accounting
The hedge accounting requirements under IAS 39 may continue
to be applied until the IASB finalizes its macro hedge accounting
project. As permitted, the Company elected not to adopt the general
hedge accounting requirements of IFRS 9 and instead chose to
continue to apply the requirements in IAS 39 – Financial instruments:
recognition and measurement.
Notes to the Consolidated Financial StatementsDecember 31, 2018 and 2017(in thousands of Canadian dollars, unless noted otherwise – except share and per share information) The Company also adopted amendments to the revised hedge
accounting disclosures required by IFRS 7 – Financial Instruments:
Disclosures.
IFRS 15 – Revenue from Contracts with Customers
IFRS 15 replaced IAS 18 – Revenue and was mandatorily effective
for annual periods beginning on or after January 1, 2018. The new
standard specifies a five-step approach to determine how and
when to recognize revenue and requires additional disclosures.
The Company completed an impact assessment for all major revenue
streams, reviewed contracts and analyzed revenue recognized by
the Company.
The objective of IFRS 15 is to establish the principles that an
entity shall apply to report useful information to users of financial
statements about the nature, amount, timing, and uncertainty of
revenue and cash flows arising from a contract with a customer.
The Company elected to adopt IFRS 15 using the modified
retrospective approach with the effect of initially applying this
standard at the date of initial application (January 1, 2018). However,
the adoption of IFRS 15 did not have a significant impact on the
ongoing recognition of the Company’s revenues or net earnings (loss)
and therefore there were no opening retained earnings (deficit)
adjustments required as at January 1, 2018.
REVISED IFRS, INTERPRETATIONS
AND AMENDMENTS
The following revised standards are effective for annual periods
beginning on January 1, 2018. Their adoption did not have a
significant impact on the amounts reported or disclosures made in
these financial statements.
Amendments to IFRS 2 – Share-based payments
In June 2016, the IASB published amendments to IFRS 2 – Share-
based payments. The amendments clarify the standard in relation to
the accounting for cash-settled share-based payment transactions
that include a performance condition, the classification of share-
based payment transactions with net settlement features, and the
accounting for modifications of share-based payment transactions
from cash-settled to equity-settled.
IFRIC 22 – Foreign Currency Transactions
and Advance Consideration
In December 2016, the IASB published IFRIC 22 – Foreign Currency
Transactions and Advance Consideration to clarify the exchange rate
that should be used for transactions that include the receipt or
payment of advance consideration in a foreign currency.
3. Significant accounting policies, judgments and estimation uncertainty
SIGNIFICANT ACCOUNTING POLICIES
This note provides a list of significant accounting policies adopted in
the presentation of these consolidated financial statements.
Basis of measurement
The consolidated financial statements have been prepared on a
historical cost basis, except for financial assets and liabilities held
at fair value through profit or loss (including derivatives) and assets
available-for-sale (before IFRS 9 became effective on January 1,
2018), which have been measured at fair value as disclosed in
Note 11 – Financial Instruments.
Consolidation
The consolidated financial statements of the Company include the
accounts of the Company and its subsidiaries (including structured
entities) and its share of interests in joint ventures. All intercompany
transactions and balances with subsidiaries are eliminated on
consolidation.
Subsidiaries (including structured entities) 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 consolidated from the date on which control is obtained by the
Company and are deconsolidated from the date that control ceases.
Non-controlling interests in the earnings and equity of subsidiaries
are disclosed separately in the consolidated statements of financial
position, earnings, comprehensive income (loss), and changes in equity.
Where applicable, the subsidiaries’ accounting policies are modified
at the business acquisition date to ensure that they are consistent with
the policies adopted by the Company.
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 expensed when incurred.
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 statements of earnings. The
determination of fair value involves making estimates relating to assets
acquired and liabilities assumed including among others, intangible
assets, property and equipment and contingent consideration.
Contingent consideration that is classified as a liability is remeasured
at each subsequent reporting date with the corresponding gain or loss
being recognized in the statements of earnings.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 97
Goodwill is measured as the excess of the consideration
transferred over the net amount 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 statements of earnings as a bargain
purchase gain.
Investments in joint ventures
A joint venture is a type of 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’s interests in joint ventures
are accounted for using the equity method of accounting.
Subsequent to the acquisition date, the Company’s share
of earnings of a joint venture is recognized in the consolidated
statements of earnings. The cumulative post-acquisition movements
are adjusted against the carrying amount of the investment.
Where applicable, the joint venture’s accounting policies are
modified prior at the acquisition date to ensure that they are
consistent with the policies adopted by the Company.
The Company assesses at each year end whether there is any
objective evidence that its interests in 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 statements 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.
Foreign currency translation
The Company has prepared and presented these consolidated
financial statements in Canadian dollars, its functional and reporting
currency.
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the date of the
transactions. Foreign exchange gains and losses from the settlement
of foreign currency transactions and from the translation at reporting
date exchange rates for monetary assets and liabilities denominated
in foreign currencies are recognized in the consolidated statements
of earnings. Foreign exchange gains or losses are deferred in equity
if they relate to qualifying cash flow hedges and qualifying net
investment hedges or are attributable to a part of the net investment
in a foreign operation. Non-monetary assets and liabilities
denominated in foreign currencies are translated in Canadian dollars
using 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 into
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.
98 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Translation gains or losses related to foreign operations are
recognized in other comprehensive income (loss) and are reclassified
in earnings on disposal or partial disposal of the investment in the
related foreign operations.
Derivative financial instruments
The Company uses derivative financial instruments including
interest rate and cross currency swaps and forward foreign exchange
contracts, to manage its exposure to foreign exchange, interest rate
and market risks arising from operational, financing and investment
activities. Derivative financial instruments are used only for economic
hedging purposes and not as speculative instruments.
The Company designates certain derivatives as either: fair value,
cash flow or net investment hedges. When hedge accounting is
applied, the Company documents at the inception of the hedging
transaction, the relationship between the hedging instrument
and hedged items as well as its risk management objective and
strategy for undertaking various hedge transactions. The Company
also documents its assessment both at hedge inception and on an
ongoing basis, of whether the derivatives that are used for hedging
transactions have been and will continue to be highly effective in
offsetting changes in fair values and cash flows of hedged items.
Derivative financial instruments are initially recognized at fair
value on the date a derivative contract is entered into and are
subsequently remeasured to their fair value at the end of each
reporting period. The accounting for subsequent changes in fair
value depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the hedged item. For trading
derivatives, gains or losses on remeasurement to fair value are
recognized immediately in profit or loss.
For hedging derivatives, the effective portion of changes in fair
value of derivatives that qualify for hedge accounting are recognized
in other comprehensive income (loss) and accumulated reserves
in equity. The gain or loss relating to the ineffective portion is
recognized immediately in profit and loss.
When a hedging instrument expires, is sold or terminated, or
when a hedge no longer meets the definition for hedge accounting,
any cumulative gains or losses in equity at that time remain in equity
and are recognized when the transaction is ultimately recognized
in profit or loss.
Derivatives are classified as a current when the remaining
maturity of the contract is less than 12 months.
Transaction costs incurred for trading and hedging derivative
financial instruments are recognized in profit or loss as incurred.
Revenue recognition
Revenue is recognized when or as the performance obligations are
satisfied and control of the services is transferred to the Company.
Control either transfers over time or at a point in time, which affects
when revenue is recorded.
Management fees are calculated and invoiced monthly or
quarterly based on daily average assets under management (“AUM”)
or invoiced quarterly in arrears based on the calendar quarter-end
or month-end asset values under management or on an average of
opening and closing AUM for the quarter.
Notes to the Consolidated Financial StatementsDecember 31, 2018 and 2017(in thousands of Canadian dollars, unless noted otherwise – except share and per share information) Performance fees are recognized when the amount to be received
is known and it is highly probable that the revenue recognized will
not result in a subsequent reversal of revenue recognized to date.
This may be earlier than the performance measurement dates
contained in the individual account agreements and which may be
dependent upon performance of the account exceeding agreed-upon
benchmarks over the relevant period.
Other revenues
Other revenues consist mainly of brokerage commissions, consulting
fees, tax planning, unrealized and realized gains or losses on forward
foreign exchange contracts and unrealized gains or losses on short-
term investments.
Deferred revenues
Payments received in advance for services to be provided to external
parties are recorded upon receipt as deferred revenues. These
revenues are recognized in the period in which the related services
are rendered.
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 fair value of share-based payments is measured in accordance
with IFRS 2. Equity-settled share-based payments are measured at
the fair value of the equity instruments at the grant date. The fair
value determined at grant date of the equity-settled share-based
payments is expensed based on cliff vesting or graded vesting,
depending on the individual plans, over the vesting period, based
on the Company’s estimate of equity instruments that will eventually
vest, with a corresponding increase in equity.
For cash-settled share-based payments, a liability is recognized
at the grant date and is remeasured at each reporting period until
the liability is settled, with any changes in fair value recognized in
profit or loss.
Stock options
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.
The vesting period is the period over which all of the specified
vesting conditions are to be satisfied. 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 Deferred Share Unit Plan (“DSU Plan”) is recorded as a share-
based liability since the payments will be made in cash when a
participant ceases to be a director. 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
Class A Shares are recognized in the consolidated statements of
earnings (loss).
The liability related to this plan is classified as current and is
recognized in accounts payable and accrued liabilities. The liability
is derecognized when the DSUs are settled.
A DSU participant’s account is credited with dividend equivalents
in the form of additional DSUs at each dividend payment date, if any,
in respect of which dividends are paid on Class A Shares.
Restricted Share Unit Plan
The Restricted Share Unit Plan (“RSU Plan”) is recorded as a
share-based liability since a portion may be settled in cash, at
the sole discretion of the Company. The liability is remeasured
at each reporting period based on the closing trading price of the
Company’s Class A Shares on the TSX, and is remeasured until the
settlement date. The fair value of the restricted share unit (“RSU”)
is determined at each reporting date and the expense is recorded
over the remaining vesting period on a straight-line basis. When the
Company’s intention is to settle an award in shares, then the fair
value is established at grant date and is not remeasured.
A RSU participant’s account is credited with dividend equivalents
in the form of additional RSUs at each dividend payment date, if any,
in respect of which dividends are paid on Class A Shares.
Restricted Share Unit Plan – cash
This plan is accounted for as a cash-settled share-based liability since
the payments will be made in cash. The liability is remeasured at each
reporting period based on the closing trading price of the Company’s
Class A Shares on the TSX, and is remeasured until the settlement
date. The expense is recorded over the remaining vesting period on
a straight-line basis.
A RSU – cash participant’s account is credited with dividend
equivalents in the form of additional RSUs at each dividend payment
date, if any, in respect of which dividends are paid on Class A Shares.
Performance Share Unit (“PSU”) and Unit Appreciation
Right ("UAR”) Plan applicable to Business Units
(“PSU and UAR plan applicable to BU”)
Under the terms of this plan, the Company grants PSU and UAR at
a value determined by reference to the value of a specific business
unit rather than by reference to the trading price of the Company’s
Class A Shares.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 99
The PSU compensation expense is recognized either based on a
cliff vesting or a graded vesting schedule over the vesting period when
it is probable that the performance targets will be met. The attainment
of the performance conditions and the estimated vesting of the PSUs
are reassessed at the end of each reporting period.
A PSU participant’s account is credited with dividend equivalents
in the form of additional PSUs at each dividend payment date, if any,
in respect of which dividends are paid on Class A Shares.
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 legal, advisors and specialists’ fees.
Earnings per share
Basic earnings per share (“EPS”) is calculated by dividing the net
earnings (loss) for the year attributable to equity owners of the
Company by the weighted average number of shares and holdback
shares outstanding during the year.
Diluted EPS is calculated by adjusting the weighted average
number of shares that would have been outstanding assuming
the conversion of all dilutive share-based awards. 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 trading price per share.
The Company’s potentially dilutive shares include stock options,
RSUs, PSU and UAR applicable to BUs, PSU, contingent purchase
price consideration payable in shares for which management expects
the shares to be issued based on meeting target conditions specified
in the acquisition agreement and convertible debentures.
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-way purchases and sales of financial assets are
recognized on the trade date.
Classification
The Company applied the IFRS 9 classification and measurement
requirements applicable to financial instruments for the year ended
December 31, 2018. The 2017 comparative period has not been
restated and the IAS 39 requirements have been applied.
At the time of grant of any PSU plan applicable to BU or UAR
plan applicable to BU, the Company determines (i) the award value,
(ii) the number of PSU or UAR granted, (iii) the value of each PSU
or UAR granted, (iv) the formula used to determine the value of the
applicable business unit, (v) the vesting terms and conditions, and
(vi) the applicable vesting date(s).
The fair value of equity-settled instruments is measured at the
grant date which is the date at which the Board approves the plan
or when the Company and the participant agree to a share-based
compensation arrangement and requires that the Company and the
participant have a shared understanding of the terms and conditions
of the arrangement. The Company recognizes compensation expense
as of the grant date.
The method of settlement is determined for each grant. Such
methods may include all or a portion of the value of the vested PSU
and UAR payable in Class A Shares or in cash, at the sole discretion of
the Company. The Company’s intention on the settlement method
determines if a plan is accounted for as cash-settled or as equity-
settled. When the payment obligation is settled through the delivery
of shares, the Company determines the total number of the Class A
Shares to be issued based on the total settlement date value divided
by a volume-weighted average price as defined in the plan.
The compensation expense is recognized either based on a cliff
vesting or a graded vesting schedule over the vesting period when it
is probable that the performance targets will be met. The attainment
of the performance conditions and the estimated vesting of the units
are reassessed at the end of each reporting period.
PSU plan
Under the terms of the PSU plan, the Company grants PSUs at a
value determined by reference to the trading price of the Class A
Shares of the Company.
At the time of grant of any PSU plan, the Company determines
(i) the award value, (ii) the number of PSUs granted, (iii) the value of
each PSU granted, (iv) the vesting terms and conditions of the PSUs,
and (v) the applicable vesting date(s).
The fair value of equity instruments is measured at the grant
date which is the date at which the Company and the participant
agree to a share-based compensation arrangement and requires
that the Company and the participant have a shared understanding
of the terms and conditions of the arrangement. For the PSU
plans accounted for as cash-settled, the liability is measured at
each reporting period based on the closing trading price of the
Company’s Class A Shares on the TSX, and is remeasured until the
settlement date.
The method of settlement is determined for each grant.
Such methods may include all or a portion of the value of the vested
PSUs payable in Class A Shares or in cash, at the sole discretion
of the Company. The Company’s intention on the settlement
method determines if a plan is accounted for as cash-settled or as
equity-settled. When the payment obligation is settled through the
delivery of shares, the Company determines the total number of the
Class A Shares to be issued based on the total settlement date value
divided by a volume-weighted average price as defined in the plan.
100 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Notes to the Consolidated Financial StatementsDecember 31, 2018 and 2017(in thousands of Canadian dollars, unless noted otherwise – except share and per share information) At initial recognition, all financial instruments are recorded at
fair value on the consolidated statements of financial position.
Financial assets must be classified as subsequently measured at fair
value through other comprehensive income, at amortized cost, or
at fair value through profit or loss. The Company determines the
classification based on the contractual cash flow characteristics of
the financial assets and on the business model it uses to manage
these financial assets. At initial recognition, financial liabilities are
classified as subsequently measured at amortized cost or at fair value
through profit or loss.
The table below presents the classification of the Company’s
financial instruments under IAS 39 and IFRS 9:
Classification
Original classification under IAS 39
New classification under IFRS 9
Cash and cash equivalents and restricted cash
Loans and receivables
Amortized cost
Investments
Accounts receivable
Long-term receivable 1
Available-for-sale / Fair value through profit or loss
Fair value through profit or loss
Loans and receivables
Loans and receivables
Amortized cost
Amortized cost
Derivative financial instruments
Fair value through profit or loss
Fair value through profit or loss
Accounts payable and accrued liabilities
Financial liabilities at amortized cost
Amounts due to related parties
Client deposits 2
Long-term debt
Financial liabilities at amortized cost
Financial liabilities at amortized cost
Financial liabilities at amortized cost
Convertible debentures – liability component
Financial liabilities at amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Purchase price obligations
Fair value through profit or loss
Fair value through profit or loss
1. Presented in deferred charges and other on the consolidated statements of financial position.
2. Presented in client deposits and deferred revenues on the consolidated statements of financial position.
Classification and measurement of financial
instruments for the year ended December 31, 2018
Financial assets at amortized cost
A financial asset is measured at amortized cost if its contractual terms
give rise on specified dates to cash flow that are solely payments of
principal and interest on the principal amount outstanding, if it is
held within a business model whose objective is to hold assets to
collect contractual cash flows and is not designated at fair value
through profit or loss.
Financial assets at fair value through profit or loss
A financial asset is classified in this category if it is 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 and derivative financial instruments in the consolidated
statements of financial position.
Financial instruments in this category are measured initially
and subsequently at fair value through profit and loss. Transaction
costs are expensed as incurred in the consolidated statements of
earnings (loss). Gains and losses arising from changes in fair value
are presented in the consolidated statements of earnings (loss) in
the period in which they arise. Dividends on financial assets through
profit or loss are recognized in the consolidated statements of
earnings (loss) when the Company’s right to receive dividends is
established. 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.
Financial liabilities at amortized cost
Financial liabilities at amortized cost are recognized initially at fair
value, net of any transaction costs incurred, and subsequently at
amortized cost using the effective interest method.
Financial liabilities at fair value through profit or loss
Amounts that may be payable under written put rights or as
purchase price obligations are initially recorded at their fair value
and subsequently remeasured to fair value at each reporting date.
Classification and measurement of financial
instruments for the year ended December 31, 2017
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market.
With the exception of the long-term receivable, 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 applicable.
On adoption of IFRS 9, the assets previously classified and
measured as loans and receivables were reclassified as financial
assets at amortized cost.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 101
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 statements of earnings (loss)
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 transferred from accumulated other
comprehensive income (loss) to the consolidated statements of
earnings (loss).
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
significant or prolonged decline in the fair value of the investment
below cost.
On adoption of IFRS 9, the assets previously classified and
measured as available-for-sale were reclassified as financial assets
at fair value through profit or loss.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held with
financial institutions, other short-term, highly liquid investments
with original maturities of three months or less that are readily
convertible to known amounts of cash and bank overdrafts.
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, cash held in a segregated account, in
connection with lease arrangements and cash subject to regulatory
restrictions and therefore not available for general use.
Investments
Investments in mutual fund, pooled fund or limited partnership units
are carried at the net asset value reported by the fund manager.
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.
Assets held-for-sale
Non-current assets, or disposal groups comprising assets and
liabilities, are classified as held-for-sale if it is highly probable that
they will be recovered primarily through sale rather than through
continuing use.
Such assets, or disposal groups, are generally measured at the
lower of their carrying amount and fair value less costs to sell.
Any impairment loss on a disposal group is allocated first to
goodwill, and then to the remaining assets and liabilities on a pro
rata basis, except that no loss is allocated to financial assets and
deferred tax assets, which continue to be measured in accordance
with the Company’s other accounting policies. Impairment losses on
initial classification as held-for-sale and subsequent gains and losses
on remeasurement are recognized in the consolidated statements
of earnings (loss) in revaluation of assets held-for-sale.
Once classified as held-for-sale, intangible assets and property
and equipment are no longer amortized or depreciated.
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.
Intangible assets other than goodwill
Intangible assets with an indefinite life such as the asset management
contracts with investment funds are accounted for at historical cost.
Transaction costs, such as professional fees, are capitalized when
they are directly attributable to preparing the intangible asset
for its intended use. The Company expects both the renewal of
these contracts and the cash flows generated by these assets to
continue indefinitely. These investment 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.
Separately acquired finite-life intangible assets are accounted for
at historical cost, less accumulated amortization and impairment
losses. Intangible assets acquired in a business combination are
recognized at fair value at the acquisition date. Other intangible
assets are comprised of trade names, software and non-compete
agreements.
The expected useful lives of finite life customer relationships
and management contracts 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 or management contracts.
102 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Notes to the Consolidated Financial StatementsDecember 31, 2018 and 2017(in thousands of Canadian dollars, unless noted otherwise – except share and per share information) 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 it;
> management can demonstrate the ability to use 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 the intangible asset; and
> costs attributable to the asset can be measured reliably.
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 statements of earnings (loss) in the period in which
they are incurred.
Amortization of finite-life intangible assets is based on their
estimated useful lives using the straight-line method over the
following periods:
Asset management contracts
Customer relationships
Other intangible assets
6 to 10 years
5 to 20 years
2 to 8 years
Property and equipment
Property and equipment are presented at historical 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
expensed in the consolidated statements of earnings (loss) during
the period in which they are incurred.
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 statements of
earnings (loss).
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.
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 amount is greater than its estimated recoverable
amount. 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 “CGUs”).
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 estimated recoverable
amount. Impairment losses are recognized in the consolidated
statements of earnings (loss).
Impairment losses recognized are allocated first to reduce
the carrying amount of any goodwill allocated to the operating
segment, and then to reduce the carrying amounts of the other
assets in the operating segment on a pro rata basis. 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.
The major categories of property and equipment are depreciated
over their estimated useful lives using the straight-line method over
the following periods:
For goodwill impairment testing purposes, the operating
segment represents the lowest level within the Company at which
management monitors goodwill.
Office furniture and equipment
5 to 10 years
Computer equipment
3 years
Leasehold improvements
Shorter of lease term or useful life
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 103
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.
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 statements 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.
Deferred income tax assets and liabilities are presented as
non-current.
Share capital
Class A 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 or options are recognized as a
deduction from equity, net of tax, from the proceeds.
Dividends
Dividends on Class A and Class B shares are recognized when the
dividends are declared and approved by the Company’s Board of
Directors.
Contributed surplus
Contributed surplus is mostly comprised of a reserve for share-based
payments recorded at fair value at the grant date.
SIGNIFICANT ACCOUNTING JUDGMENTS
AND ESTIMATION UNCERTAINTIES
The application of the Company’s accounting policies requires
management to make estimates and use judgment 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.
Restructuring provisions
The Company recognizes termination benefits when employment is
terminated by the Company, or when an employee accepts an offer
of voluntary redundancy in exchange for benefits and the Company
can no longer withdraw the offer of those benefits or when the
Company recognizes costs for a restructuring involving termination
benefits. Benefits payable more than twelve months after the end of
the reporting period are discounted to their present value.
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 significant.
Compound financial instruments
Convertible unsecured subordinated debentures (“convertible
debentures”) issued by the Company are accounted for as compound
financial instruments. The liability component of a compound
financial instrument is measured initially at the fair value of a similar
liability that does not have an equity conversion option. The equity
component is recognized initially as the difference between the fair
value of the compound financial instrument as a whole and the fair
value of the liability component. Any directly attributable transaction
costs are allocated to the liability and equity components in
proportion to their initial carrying amounts.
Subsequent to the initial recognition, the liability component
of a compound financial instrument is measured at amortized cost
using the effective interest method. The equity component of a
compound financial instrument is not remeasured subsequent to
initial recognition.
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 statements of
earnings (loss) on a straight-line basis over the term of the 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 on a straight-line basis
over the lease term.
Income taxes
Income taxes are comprised of current and deferred tax. Income taxes
are recognized in the consolidated statements of earnings (loss),
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.
104 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Notes to the Consolidated Financial StatementsDecember 31, 2018 and 2017(in thousands of Canadian dollars, unless noted otherwise – except share and per share information) 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 expected future assets under management, general
market conditions and current and future cost structures. 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.
Share-based payments
The Company recognizes compensation expense for 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 and
for cash settled transactions, at each subsequent reporting date.
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 and assessing whether it is likely that the applicable
performance conditions will be met, and estimating the number of
units expected to vest.
Impairment of non-financial assets
Goodwill is tested annually for impairment. The recoverable
amount of the operating segment is determined based on a value-
in-use calculation. This calculation requires assumptions and the
use of estimates including growth rates for future cash flows, the
number of years used in the cash flow model, the discount rate and
other estimates.
The recoverable amounts of indefinite-life intangible assets
and finite-life intangible assets are based on the present value of
the expected future cash flows, which involves making estimates
about the future cash flows including projected client attrition rates,
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 identifiable assets acquired including intangible assets and
liabilities assumed including any contingently payable purchase
price obligation. The Company uses valuation techniques, which are
generally based on forecasted future net cash flows discounted to
present value. These valuations are closely linked to the assumptions
used by management on the future performance of the related assets
and the discount rates applied.
Income taxes
The calculation of income tax expense requires significant judgment
in interpreting tax rules and regulations in multiple jurisdictions,
which are subject to change. There are transactions and calculations
for which the ultimate tax determination is uncertain. 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 recognition 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.
NEW STANDARDS AND INTERPRETATIONS
NOT YET ADOPTED
Certain new accounting standards and interpretations have been
published that are not mandatory at December 31, 2018 and have
not been early adopted. The Company’s assessment of the impact of
these new standards and interpretations is summarized as follows:
IFRS 16 – Leases
In January 2016, the IASB issued IFRS 16 – Leases. It supersedes the
IASB’s current lease standard, IAS 17 – Leases, which required lessees
and lessors to classify their leases as either finance leases or operating
leases and to account for those two types of leases differently. IFRS 16
introduces a single lessee accounting model and requires a lessee to
recognize an asset representing the right to use the underlying asset
and a financial liability representing an obligation to make lease
payments. The Company expects to apply the recognition exemption
for low-value leases. This new standard will come into effect for annual
periods beginning on or after January 1, 2019.
The Company has assessed the impact that the initial application
of IFRS 16 will have on its consolidated financial statements, as
described below.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 105
Leases for which the Company is a Lessee
The Company will recognise right-of-use assets and lease liabilities
for its leases of office facilities, equipment and other assets that meet
the definition of a lease. The nature of expenses related to leases
will change under IFRS 16, because the Company will recognize a
depreciation charge for right-of-use assets and an interest expense
on lease liabilities. Previously, under IFRS 17, the Company recognized
operating lease expenses on a straight-line basis over the term of
the lease, and recognized assets and liabilities only to the extent
that there was a timing difference between actual lease payments
and the expense recognized. The Company will apply this standard
from its mandatory adoption date of January 1, 2019. The Company
intends to apply the simplified transition approach and will not
restate comparative amounts for the year prior to first adoption.
Right-of-use assets will be measured on transition at the amount of
the lease liability on adoption (adjusted for any prepaid or accrued
lease payments).
At transition, lease liabilities were measured as the present value
of the remaining lease payments, discounted at the Company’s
incremental borrowing rate as at January 1, 2019. Right-of-use assets
are measured at an amount equal to the lease liability, adjusted by
the amount of any prepaid or accrued lease payments.
Low-value leases will continue to be recognized as an expense in
the consolidated statement of earnings (loss). Operating cash flows
will increase and financing cash flows will decrease as repayment of
the principle portion of the lease liabilities will be classified as cash
flow from financing activities.
The Company’s activities as a lessor are not material and the
Company does not expect any significant impact on the consolidated
financial statements, however some additional disclosures may be
required.
The Company does not expect the adoption of IFRS 16 to impact
its ability to comply with restrictive covenants including minimum
financial ratios applicable to its Credit Facility as described in note 14.
IFRIC 23 – Uncertainty over Income Tax Treatments
In June 2017, the IASB issued IFRIC 23 – Uncertainty over Income
Tax Treatments. The interpretation addresses the determination
of taxable profit (tax loss), tax bases, unused tax losses, unused
tax credits and tax rates, when there is uncertainty over income
tax treatment under IAS 12. It specifically considers whether tax
treatments should be considered collectively, assumptions for
taxation authorities’ examinations, the determination of taxable
profit (tax loss), tax bases, unused tax losses, unused tax credits
and tax rates and the effect of changes in facts and circumstances.
This new interpretation is applicable to annual reporting periods
beginning on or after January 1, 2019. The Company is evaluating
the impact of this interpretation on its consolidated financial
statements however it is not expected to have a significant impact
for the Company.
Annual improvements to IFRS (2015-2017) cycle
In December 2017, the IASB issued Annual Improvements
to IFRS Standards 2015–2017 Cycle. The pronouncement
contains amendments to four International Financial Reporting
Standards (IFRS) as result of the IASB's annual improvements
project. The amendments to IFRS 3 – Business combinations clarify
that when an entity obtains control of a business that is a joint
operation, it remeasures previously held interests in that business.
The amendments to IFRS 11 – Joint arrangements clarify that
when an entity obtains joint control of a business that is a joint
operation, the entity does not remeasure previously held interests
in that business.
The amendments to IAS 12 – Income taxes clarify that all
income tax consequences of dividends should be recognized in
profit or loss, regardless of how the tax arises. The amendments
to IAS 23 – Borrowing costs clarify that if any specific borrowing
remains outstanding after the related asset is ready for its intended
use or sale, that borrowing becomes part of the funds that an entity
borrows generally when calculating the capitalisation rate on general
borrowings. These amendments are effective for annual periods
beginning on or after January 1, 2019. The Company is evaluating
the impact of these amendments on its consolidated financial
statements however it is not expected to have a significant impact
for the Company.
There are no other standards that are not yet effective and that
would be expected to have a material impact on the Company in
the current or future reporting periods and on foreseeable future
transactions.
4. Business combinations and other transactions
DISPOSAL OF FIERA CAPITAL FUNDS INC.
On October 22, 2018, the Company entered into an agreement
with Canoe Financial LP (Canoe), a Canadian mutual fund company,
pursuant to which the Company will sell its interest in Fiera Capital
Funds Inc., a wholly-owned subsidiary and Canadian registered
mutual fund dealer, and its right to manage nine retail mutual funds
which are managed by the Company.
On October 22, 2018, the Company revalued the non-current
assets held-for sale to the lower of their carrying amount and their
fair value less costs to sell and a revaluation adjustment of $191 was
recognized in revaluation of assets held-for-sale in the consolidated
statements of earnings (loss). The intangible assets and property and
equipment are no longer amortized or depreciated from the date
that the assets are classified as held-for-sale. Assets held-for-sale
includes amounts reclassified from intangible assets of $5,280,
goodwill of $6,367 as well as other assets of $337.
106 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Notes to the Consolidated Financial StatementsDecember 31, 2018 and 2017(in thousands of Canadian dollars, unless noted otherwise – except share and per share information) On February 22, 2019, the sale transaction closed and the
Company sold its interest in Fiera Capital Funds Inc. and the nine
retail mutual funds to Canoe who became the trustee, manager and
portfolio manager of these funds for total consideration of $12,075.
The transaction was settled in cash at closing.
CLEARWATER CAPITAL PARTNERS, LLC
On August 9, 2018, the Company acquired the equity interests in
Clearwater Capital Partners, LLC (“Clearwater”), an Asia focused
credit and special situations investment firm headquartered in
Hong Kong.
On the date of closing, the total purchase consideration of
CA$54,339 (US$41,854) included CA$15,579 (US$12,000) paid in
cash to the sellers, the issuance of Class A Shares with a fair value
of CA$11,685 (US$9,000), and fair value of a contingent purchase
price obligations of CA$35,055 (US$27,000) which will be payable
to the sellers if certain terms and conditions are met. The purchase
consideration is subject to an initial net working capital adjustment
and other post-closing adjustments of CA$7,980 (US$6,146) which
were settled at closing as a reduction of the cash consideration paid
at closing.
The Company financed the cash portion of the purchase
consideration with its revolving credit facility (Note 14).
At closing, 982,532 Class A Shares were issued at fair value of
CA$12.18 based on the closing share price on the closing date. Of the
total Class A Shares issued, 245,633 were issued to the sellers on
closing and 736,899 are held in escrow and will be released to the
sellers over a 3-year period following the closing date, subject to
certain terms and conditions, with 88,428 Class A Shares being
released at the first anniversary date of the closing and 324,235
and 324,236 Class A Share respectively being released to the
sellers on the second and third anniversary date of the closing.
The Class A Shares do not have voting rights until their release from
escrow but are entitled to dividends.
The initial fair value of the contingent purchase price
obligations includes several components each of which is based
on a formula based on earnings before interest, taxes, depreciation
and amortization (“EBITDA”) subject to certain adjustments or
management fees and subject to certain thresholds as defined in
the agreement. The maximum amount payable if all the conditions
are met is CA$57,125 (US$44,000).
The present value of forecasted contingent purchase price
obligations was estimated at closing at CA$35,055 (US$27,000).
The purchase price obligations will be settled in cash or Class
A Shares, at the discretion of the Company, if certain terms and
conditions are met.
The transaction was accounted for as a business combination
using the acquisition method.
During the year ended December 31, 2018, the Company finalized
the accounting for this acquisition. In November, 2018, the net
working capital and other purchase price adjustments were finalized
and as a result, 12,702 Class A Shares which had been held in escrow
on account of the seller were released and cancelled (Note 16).
The final purchase price was allocated to the assets acquired
and liabilities assumed based on their estimated fair value at the
acquisition date as follows:
Cash
Other current assets
Property and equipment
Investment in affiliated companies
Other assets
Intangible assets
Goodwill (nil deductible for tax purposes)
Accounts payable and accrued liabilities
Purchase consideration
Cash consideration
Share capital
Fair value of purchase price obligations
Purchase price adjustments
$
2,698
2,058
124
409
26
16,878
46,114
(13,968)
54,339
$
15,579
11,685
35,055
(7,980)
54,339
Goodwill was attributable to an experienced team knowledgeable
in investment advisory and investment management and related
services and the potential for business development in Asia.
Management of Fiera Capital identified intangible assets acquired
from Clearwater which had been accounted for separately from
goodwill. These intangible assets include asset management
contracts valued at CA$16,878 (US$13,000).
The Company incurred acquisition-related costs of $3,598 mainly
composed of legal, financial advisor fees and due diligence costs.
These costs were included in acquisition costs in the consolidated
statements of earnings (loss).
Pro forma impact
The impact of the acquisition for year ended December 31, 2018
on the Company’s base management fees and net earnings (loss)
was as follows:
Base management fees
Net earnings (loss)
$
7,565
(1,338)
If the business combination would have occurred on January 1,
2018, the Company’s consolidated base management fees and net
earnings (loss) for the year ended December 31, 2018 would have
been as follows:
Base management fees
Net earnings (loss)
$
489,857
(6,063)
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 107
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 (loss) include selling, general and
administrative expense, amortization of tangible and intangible assets,
and the elimination of the acquisition, restructuring and integration
costs, as well as related tax effects.
CGOV ASSET MANAGEMENT
On May 31, 2018, the Company acquired substantially all of the
assets and assumed certain liabilities of CGOV Asset Management
(“CGOV”), an Ontario-based investment management firm focused
on high-net-worth and institutional investors. With a client base in
Ontario and Western Canada, the transaction allows Fiera Capital to
be a competitive force in the high-net-worth segment across Canada.
On the date of closing, the total purchase consideration of
$112,285 included $48,200 paid in cash to the seller, the issuance
of Class A Shares with a fair value of $55,136, fair value of contingent
purchase price obligation of $5,501 which will be settled in Class
A Shares subject to certain terms and conditions and an initial net
working capital adjustment of $3,448, which was settled in cash
during the three-month period ended September 2018. At closing,
5,541,561 Class A Shares were issued at fair value of $66,166 based
on the closing share price on the closing date.
Of the total Class A Shares issued, 4,617,783 are held in escrow
and will be released to the seller over a 5-year period following the
closing date, subject to certain terms and conditions, with 419,064
Class A Shares being released at the 18-month anniversary date of the
closing, 2,519,231, 839,744 and 839,744 Class A Shares respectively
being released to the seller on the third, fourth and fifth anniversary
dates of the closing. These escrow shares are entitled to dividends.
The remaining 923,778 Class A Shares issued to the seller and
held in escrow for contingent consideration will be released to
the seller on the fifth anniversary date of the closing, contingent
upon the Company retaining, at the end of a four-year period
following the closing, at least 80% of the institutional assets under
management of CGOV as at the signature date of the Asset Purchase
Agreement. Contingently issuable Class A Shares with a fair value of
$5,501 are included in the initial purchase price consideration and
are recorded as Holdback Shares in the consolidated statements
of changes in equity. This value represents 50% of the total value
of the contingently issuable shares held in escrow and is based
on the Company’s best estimate with regards to satisfaction of
the performance condition. These escrow shares are entitled to
dividends.
The transaction was accounted for as a business combination
using the acquisition method and the purchase price was allocated to
the assets acquired and liabilities assumed based on their estimated
fair value at the acquisition date.
During the three-month period ended December 31, 2018, the
Company finalized the accounting for this acquisition and revised
certain valuation assumptions and adjusted the purchase price
allocation by reducing intangible assets by $4,000 and reducing
deferred income tax liability by $1,060, with a corresponding net
increase to goodwill of $2,940.
108 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
The final purchase price was allocated to the assets acquired
and liabilities assumed based on their estimated fair value at the
acquisition date as follows:
Accounts receivable
Prepaid expenses and other assets
Property and equipment
Intangible assets
Goodwill (nil deductible for tax purposes)
Deferred income taxes
Purchase consideration
Cash consideration
Share capital
Fair value of contingent purchase price obligation
Purchase price adjustment
$
3,380
268
69
63,000
49,492
(3,924)
112,285
$
48,200
55,136
5,501
3,448
112,285
The goodwill is attributable to synergies expected as a result
of the consolidation of the Company’s operations. Management of
Fiera Capital has identified intangible assets acquired from CGOV
which have been accounted for separately from goodwill. These
intangible assets include customer relationships valued at $60,000
and non-compete agreements valued at $3,000.
The Company incurred acquisition-related costs of $1,897
mainly composed of legal, financial advisor, compliance fees and due
diligence costs. These costs were included in acquisition costs in the
consolidated statement of earnings (loss).
The Company financed the cash portion of the acquisition price
with its revolving credit facility (Note 14).
Pro forma impact
The impact of the acquisition for the year ended December 31, 2018
on the Company’s base management fees and net earnings (loss)
was as follows:
Base management fees
Net earnings (loss)
$
12,802
2,024
If the business combination would have occurred on January 1,
2018, the Company’s consolidated base management fees and net
earnings (loss) for the year ended December 31, 2018 would have
been as follows:
Base management fees
Net earnings (loss)
$
494,829
258
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.
Notes to the Consolidated Financial StatementsDecember 31, 2018 and 2017(in thousands of Canadian dollars, unless noted otherwise – except share and per share information) The above pro forma net earnings include selling, general and
administrative expense, amortization of tangible and intangible
assets, and the elimination of the acquisition, restructuring and
integration costs, as well as related tax effects.
CITY NATIONAL ROCHDALE (“CNR”)
On December 1, 2017, the Company entered into an agreement to
acquire a management contract in connection with the City National
Rochdale Emerging Markets Fund (the “CNR Fund”), a mutual fund
that invests primarily in Asian emerging and developed markets.
The transaction was in line with the Company’s global asset
management growth strategy, and provided a complementary
presence in the emerging markets strategy.
On June 4, 2018, the CNR Fund was reorganized and all of its
net assets were transferred to a new Fiera fund. The Fiera fund has
similar investment objectives and strategies and is managed by the
Company’s portfolio management team.
On December 1, 2017, the Company paid an initial purchase
consideration of CA$15,466 (US$12,000) in cash. This amount was
recorded as an indefinite life intangible asset management contract.
Additional contingent consideration is linked to realized fund revenue
and includes an amount up to CA$15,466 (US$12,000) payable over
five years and additional contingent payments payable over the ten-
year term of the agreement.
Contingent payments by the Company to CNR are recorded as
purchase price obligations and represent a financing arrangement
whereby the Company pays management and service fees to the seller
relating to certain qualified client accounts over five-year and ten-year
periods. Contingent payments will be made to the seller depending
on the amount of seller-sourced assets in the CNR Fund and based on
the Morningstar® rating of the CNR Fund.
The initial present value of forecasted contingent consideration
payments to be made to the seller was estimated at CA$60,574
(US$47,000) at December 1, 2017 and CA$60,597 (US$48,304) at
December 31, 2017. This amount was recorded as an indefinite life
intangible asset management contract with a corresponding financial
instrument liability recorded in purchase price obligations.
For the year ended December 31, 2018, the Company recorded an
expense of CA$18,307 (US$14,121) (for the period from December 1,
2017 to December 31, 2017, CA$1,665 (US$1,304)) in accretion and
changes in fair value of purchase price obligations.
The Company incurred acquisition-related costs of CA$1,144
(US$896), mainly composed of legal, financial advisor fees and due
diligence costs. These costs are capitalized to intangible assets.
NATCAN INVESTMENT MANAGEMENT INC.
(“NATCANˮ)
On October 1, 2018, in connection with the asset purchase
agreement of Natcan, the Company paid cash consideration of
$8,500 as settlement of a purchase price obligation.
SAMSON CAPITAL ADVISORS LLC (“SAMSON”)
The purchase price consideration for the 2015 acquisition of Samson
included an initial amount of up to US$4,175 payable over three years
if certain targets are achieved. The second target was met and the
Company paid US$1,391 (CA$1,775) on April 6, 2018.
5. Restructuring, integration and other costs
During the years ended December 31, 2018 and 2017 the Company
recorded the following:
Restructuring provisions related to severance
Other restructuring costs
Integration and other costs
2018
$
3,627
783
3,176
7,586
2017
$
6,893
444
7,813
15,150
Balance, December 31, 2016
Additions during the year
Paid during the year
Balance, December 31, 2017
Additions during the year
Paid during the year
Balance, December 31, 2018
Severance
$
2,594
6,893
(3,499)
5,988
3,627
(6,611)
3,004
Restructuring charges are mainly composed of severance costs
due to corporate reorganizations following business combinations
and other transactions or as a result of the normal evolution of the
business. The change in the restructuring provisions for severance-
related expenses during the years ended December 31, 2018 and
2017 is as follows:
Provision for severance
As at
December 31, 2018
As at
December 31, 2017
Current portion
Non-current portion
Total
$
2,289
715
3,004
$
5,273
715
5,988
INTEGRATION AND OTHER COSTS
Integration costs are mainly composed of professional fees,
relocation and lease related costs and other expenses incurred
as a result of the integration of businesses recently acquired.
During the year ended December 31, 2017, one of the Company’s
subsidiaries recorded an expense of $3,464 resulting from a trading
error (2018 – nil).
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 109
6. Investments
The consolidated financial statements include the accounts of the Company and all of its subsidiaries as at December 31, 2018 and 2017.
The operating subsidiaries and their principal activities are set out in the table below. Unless otherwise stated, they have share capital solely
in ordinary shares that are held directly or indirectly by the Company.
Name
2018
2017
2018
2017
Principal activities
Percentage of equity interest attributable to the Company
Direct
Indirect
Fiera Capital (Asia) Inc. 1
Clearwater Capital Partners, LLC 1
Clearwater Capital Partners Holding, Ltd. 1
Clearwater Capital Partners Singapore Pte Ltd. 1
Clearwater Capital Partners Hong Kong Limited 1
Clearwater Capital Partners, L.P. 1
Clearwater Investment Advisors India Private Limited 1
Fiera Properties Limited
Fiera Properties (Europe) Limited 2
Fiera Properties Debt Strategies Ltd.
Roycom Inc.
Fiera US Holding Inc.
Bel Air Investment Advisors LLC
Bel Air Management LLC
Bel Air Securities LLC
Fiera Capital Inc.
Fiera Capital (Asia) Limited
(formerly City National Rochdale Asia Limited)
Global Diversified Lending GP LLC (formerly, GDLF GP (Canada) Inc.) 3
Wilkinson Global Asset Management LLC 4
Gestion Fiera Capital S.a.r.l.
Fiera Capital (Europe) Limited
Fiera Capital (UK) Limited
Fiera Capital (IOM) Limited
Fiera Capital (Services) Limited
(formerly, Charlemagne Capital (Services) Limited)
Charlemagne Capital (Investments) Limited
Fiera Capital Funds Inc. 5
Fiera Private Lending Inc.
General Partner Centria Capital Start-Up Fund Inc.
General Partner Fiera FP Real Estate Investment Fund I Inc.
General Partner Fiera FP Real Estate Investment Fund II Inc.
General Partner Fiera FP Mezzanine Financing Fund Inc.
General Partner Fiera FP Business Financing Fund Inc.
General Partner Fiera FP Real Estate Financing Fund Inc.
General Partner Centria Capital Fund Inc.
Fiera Infrastructure Inc.
Fiera Infrastructure UK Ltd 6
Fiera Infra GP Inc.
Aquila GP Inc.
Fiera Comox Partners Inc. 7
Fiera Comox US Inc.
100%
–
–
–
–
–
–
–
–
–
–
–
–
–
100%
100%
–
–
–
–
–
–
100%
100%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100%
100%
–
–
–
–
–
–
–
–
100%
100%
100%
100%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
75%
75%
–
–
–
60.4%
–
–
–
–
65%
–
–
100%
100%
100%
100%
100%
100%
–
100%
100%
100%
–
100%
100%
100%
100%
100%
100%
100%
100%
–
100%
100%
100%
100%
–
–
100%
100%
100%
100%
100%
100%
100%
–
100%
100%
100%
–
100%
– Holding company
– Holding company
–
–
–
–
–
–
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
– Holding company
100% Asset management
100% Asset management
– Holding company
100% Asset management
100% Asset management
100% Asset management
100% Asset management
100% Other
100% Asset management
–
Asset management
100% Other
–
Asset management
100% Asset management
100% Asset management
100% Other
100% Asset management
–
–
Asset management
Asset management
100% Asset management
100% Asset management
100% Asset management
100% Asset management
100% Asset management
100% Asset management
100% Asset management
–
Asset management
– Holding company
100% Asset management
100% Asset management
–
Asset management
100% Asset management
1. Fiera Capital (Asia) Inc. was incorporated as a wholly-owned subsidiary on July 4, 2018 and it acquired Clearwater Capital Partners, LLP and its wholly-owned subsidiaries
on August 9, 2018. Business combinations are described in Note 4.
2. In December 2018, the Company incorporated a wholly-owned subsidiary, Fiera Properties (Europe) Limited.
3. In July 2018, the Company’s wholly-owned subsidiary, GDLF FP (Canada) Inc. changed its name to Global Diversified Lending GP LLC.
4. In August 2018, the Company acquired a wholly-owned subsidiary, Wilkinson Global Asset Management LLC.
5. On February 22, 2019, the Company sold its interest in Fiera Capital Funds Inc. (Note 4).
6. In February 2018, the Company incorporated a wholly-owned subsidiary, Fiera Infrastructure UK Ltd.
7.
In April 2018, the Company’s subsidiary Fiera Comox Partners Inc. issued shares and as a result, the Company’s ownership interest in Fiera Comox Partners Inc. decreased
from 65.0% to 60.4%.
110 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Notes to the Consolidated Financial StatementsDecember 31, 2018 and 2017(in thousands of Canadian dollars, unless noted otherwise – except share and per share information) 7. Structured entities
UNCONSOLIDATED STRUCTURED ENTITIES
The Company manages several investment funds which are
unconsolidated structured entities. These investment funds are
open-ended and closed-ended investment companies, mutual
funds, limited partnerships, pooled funds or other investment entities
which invest in a range of assets. Segregated mandates managed
on behalf of clients and investment trusts are not considered
structured entities. The structured entities are generally financed
by the issue of units or shares to investors, although certain funds,
mainly property, infrastructure and private equity funds, are also
permitted to raise financing through loans from third parties.
The Company does not provide a guarantee for the repayment of
any borrowings held by these entities and did not provide financial
support to unconsolidated structured entities during the years ended
December 31, 2018 and 2017.
The Company generates revenues from management and other
fees from providing investment management and related services
to these investment funds. The fees from these investment funds
are calculated based on assets under management or on committed
capital. Investment funds are susceptible to market price risk arising
from uncertainties about future value of the assets they hold.
Market risks are discussed in Note 11 – Financial instruments.
The following table summarizes the carrying value of the
Company’s interests in unconsolidated structured entities recognized
in the consolidated statement of financial position and the assets
under management of unconsolidated structured entities as at
December 31, 2018 and 2017. The Company’s maximum exposure
to loss is the carrying amount of the investment funds held and the
loss of future fees.
The assets and liabilities of the funds controlled by the Company
as at December 31, 2018 are as follows:
Assets
Investment in Short Term Investment Fund
Investment in private equity
Forward currency contracts, at fair value
Cash
Total assets
Liabilities
Forward currency contracts, at fair value
Accrued liabilities
Total liabilities
December 31,
2018
$
2,249
22,536
4
9
24,798
784
21
805
Net assets attributable to holders of redeemable units
23,993
Since the Company has a committed plan to market the funds
and to dispose of its direct holdings within one year, the units held
are available for immediate sale, and management is actively
seeking new investors, the Company has classified the net assets
of the funds as assets held-for-sale in the consolidated statement
of financial position.
The redeemable units that are owned by other unitholders
are presented as a liability for redeemable units in the Company’s
consolidated statement of financial position since the units are
redeemable at the option of the holders.
Company’s interest in investment funds
Assets under management of
unconsolidated structured entities
As at
December 31,
2018
As at
December 31,
2017
$
4,494
$
5,101
34.0 billion
30.0 billion
Fund investments and transfers between
levels of the fair value hierarchy
The investment in private equity is classified as Level 3 (described in
Note 11) and all other investments, cash and derivatives are classified
as Level 2 (Note 11). During the period from which the Company
consolidates the funds and December 31, 2018, there were no
transfers of investments between levels.
CONSOLIDATED STRUCTURED ENTITIES
Investment in managed funds
In its capacity as fund manager, the Company has the ability to direct
the activities of the funds that it manages through its involvement
in the decision-making process. When the Company is also exposed
to the variable returns as the principal unitholder and is deemed to
control the fund, the fund is consolidated.
Level 3
Fair value measurements for Level 3 investments are derived from
valuation techniques. The substitution of one or more data from
these techniques by one or several reasonably possible assumptions
should not result in significant changes in the fair value of these
investments. The fair value of the investment is private equity
has been determined using a discounted cash flow model and
by comparing the fair value to recent transactions. Significant
unobservable inputs in the discounted cash flow model include
expected cash flows and a risk- adjusted discount rate.
The Company did not hold any interests in consolidated
structured entities as at December 31, 2017.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 111
8. Accounts receivable
Trade accounts
Trade accounts – related companies of shareholders
Trade accounts – related parties
Other
The aging of accounts receivable was as follows:
Trade
Current
Aged between 61 – 119 days
Aged greater than 120 days
Total trade
Related companies of shareholders and related parties
Current
Aged between 61 – 119 days
Aged greater than 120 days
Total related companies of shareholders and related parties
Other
As at December 31, 2018, there was a provision for estimated credit losses of $119 (2017 – $19).
As at
December 31, 2018
As at
December 31, 2017
$
120,980
15,006
8,824
3,649
148,459
$
107,839
12,720
2,909
4,930
128,398
As at
December 31, 2018
As at
December 31, 2017
$
$
113,359
5,256
2,365
120,980
23,811
10
9
23,830
3,649
148,459
104,322
2,192
1,325
107,839
14,144
4
1,481
15,629
4,930
128,398
112 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Notes to the Consolidated Financial StatementsDecember 31, 2018 and 2017(in thousands of Canadian dollars, unless noted otherwise – except share and per share information) 9. Goodwill and intangible assets
Indefinite life
Finite-life
Asset
management
contracts
Asset
management
contracts
Customer
relationships
$
$
$
Goodwill
$
For the year ended December 31, 2017
Opening carrying amount
Additions
Additions – internally developed
Business combinations
Disposals
Amortization for the year
Foreign exchange difference
Closing carrying amount
Balance, December 31, 2017
Cost
Accumulated amortization and impairment
Foreign exchange difference
Closing carrying amount
For the year ended December 31, 2018
Opening carrying amount
Additions
Additions – internally developed
Reclassification to assets held-for-sale
Business combinations
Disposals
Amortization for the year
Foreign exchange difference
Closing carrying amount
Balance, December 31, 2018
Cost
Accumulated amortization and impairment
Foreign exchange difference
Closing carrying amount
DERECOGNITION
During the year ended December 31, 2018, the Company
derecognized other intangible assets with a cost of $288 (2017 -
$1,897) and accumulated amortization of $262 (2017 - $526) for no
proceeds (2017 – for proceeds of $1,000). The Company recognized
a loss on disposal of intangible assets of $26 (2017 – loss of $371)
in the consolidated statements of earnings (loss).
During the year ended December 31, 2018, the Company incurred
development costs related to new internally-developed software.
The costs that have been capitalized are presented as additions –
internally developed.
GOODWILL IMPAIRMENT TEST
During the fourth quarters of 2018 and 2017, in the context of its annual
impairment testing, the Company completed its impairment analysis
and assessed the recoverability of its assets. For goodwill impairment
testing purposes, the operating segment represents the lowest level
within the Company at which management monitors goodwill.
Other
$
17,365
2,203
1
–
(1,371)
(4,953)
(774)
12,471
25,611
(13,593)
453
12,471
12,471
946
6,578
–
3,009
(26)
(5,351)
581
18,208
Total
$
458,760
4,414
1
59,862
(1,371)
(41,110)
(18,275)
462,281
611,366
(156,421)
7,336
462,281
462,281
4,848
6,578
(5,280)
80,400
(26)
(44,813)
25,074
529,062
541,030
9,125
83,593
–
–
–
–
–
–
(3,995)
77,184
(17,322)
–
–
(13,150)
523,885
514,847
(1,918)
10,956
523,885
–
–
(2,240)
84,069
85,732
–
(1,663)
84,069
–
(10,659)
(1,703)
53,909
105,666
(50,939)
(818)
53,909
523,885
84,069
53,909
348,677
2,211
–
–
–
(25,498)
(13,558)
311,832
394,357
(91,889)
9,364
311,832
311,832
3,902
–
–
–
–
(5,280)
513
–
–
6,841
86,143
–
–
–
16,878
60,000
–
–
(20,271)
(19,191)
2,272
52,788
15,380
371,923
–
–
(6,367)
95,606
–
–
18,575
631,699
604,086
(1,918)
29,531
631,699
80,965
122,544
458,259
35,856
697,624
–
(71,210)
(111,080)
(18,682)
(200,972)
5,178
86,143
1,454
52,788
24,744
371,923
1,034
18,208
32,410
529,062
Goodwill is monitored by management based on the Company’s
operating segment: asset management. In assessing goodwill
for impairment as at December 31, 2018 and 2017, the Company
compared the aggregate recoverable amount of the operating
segment to the carrying amount. The recoverable amount has been
determined based on the value-in-use using five-year cash flow
budgets and forecasts approved by management and the Board. These
make use of observable market inputs when available. Cash flows
beyond the five-year budget are determined using an expected long-
term growth rate. Key assumptions included the following:
Weighted average growth rate
Discount rate
2018
%
11.0
11.0
2017
%
11.0
11.0
Reasonable changes in key assumptions would not cause the
recoverable amount of goodwill to fall below the carrying value.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 113
IMPAIRMENT TESTS OF INDEFINITE-LIFE
INTANGIBLE ASSETS
In assessing indefinite-life intangible assets for impairment as at
December 31, 2018 and 2017, the Company compared the aggregate
recoverable amount of the assets to their respective carrying
amounts. Key assumptions included the following:
Weighted average growth rate
Discount rate
2018
%
2.5
11.0
2017
%
2.5
11.0
The recoverable amount has been determined based on value-
in-use using indefinite-life five-year cash flow budgets and forecasts
approved by management and the Board. These make use of
observable market inputs when available. Cash flows beyond the
five-year budget are determined using an expected long-term
growth rate of 2.5%. 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 amounts exceeded the carrying amounts and
therefore, there was no impairment.
10. Property and equipment
For the year ended December 31, 2017
Opening carrying amount
Additions
Disposals
Depreciation
Foreign exchange difference
Closing carrying amount
Balance, December 31, 2017
Cost
Accumulated depreciation
Foreign exchange difference
Closing carrying amount
For the year ended December 31, 2018
Opening carrying amount
Additions
Business combinations
Disposals
Depreciation
Foreign exchange difference
Closing carrying amount
Balance, December 31, 2018
Cost
Accumulated depreciation
Foreign exchange difference
Closing carrying amount
Office furniture
& equipment
Computer
equipment
Leasehold
improvements
$
3,859
731
(295)
(914)
(198)
3,183
7,479
(4,170)
(126)
3,183
3,183
372
147
(45)
(931)
191
2,917
7,937
(5,085)
65
2,917
$
2,010
1,565
(25)
(966)
(55)
2,529
5,580
(3,087)
36
2,529
2,529
1,180
93
(11)
(1,325)
108
2,574
6,770
(4,340)
144
2,574
$
12,529
1,198
(269)
(1,937)
(661)
10,860
17,994
(6,512)
(622)
10,860
10,860
1,405
8
-
(1,979)
714
11,008
19,295
(8,379)
92
11,008
Total
$
18,398
3,494
(589)
(3,817)
(914)
16,572
31,053
(13,769)
(712)
16,572
16,572
2,957
248
(56)
(4,235)
1,013
16,499
34,002
(17,804)
301
16,499
During the year ended December 31, 2018, the Company derecognized office furniture and equipment with a cost of $61 (2017 – $435)
and accumulated amortization of $16 (2017 – $140), computer equipment with a cost of $83 (2017 – $62) and accumulated amortization
of $72 (2017 – $37) and leasehold improvements with a cost of $112 (2017 – $512) and accumulated amortization of $112 (2017 – $243),
for no proceeds (2017 – total proceeds of $67 of which $15 was recorded in accounts receivable). During the year ended December 31, 2018,
the Company recognized a loss on disposal of property and equipment of $56 in the consolidated statements of earnings (loss) (2017 – $522).
114 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Notes to the Consolidated Financial StatementsDecember 31, 2018 and 2017(in thousands of Canadian dollars, unless noted otherwise – except share and per share information) 11. Financial instruments
The Company, through its financial assets and liabilities, has
exposure to the following risks from its financial instruments:
market risk, credit risk, interest rate risk, currency risk and
liquidity risk. The following analysis provides a measurement risk
as at December 31, 2018 and 2017. Information on consolidated
structured entity assets held-for-sale (Note 7) is excluded from
the financial instruments note.
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 linked to investment
returns and the Company’s ability to attract and retain clients.
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.
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 managed.
Appreciation or depreciation in the fair value of equity securities
affect the amount and timing of recognition of gains and losses on
equity securities and investment funds in the Company’s portfolio
resulting in 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 fair value of the equity, investment fund and fixed
income financial assets held.
The Company’s portfolio managers monitor the risks of the
portfolio as part of its daily operations. The Company’s portfolio
of equity and equity-related securities as at December 31, 2018
and 2017 is comprised of investment funds and other securities
with a fair value of $4,857 as at December 31, 2018 and $5,408 as
at December 31, 2017. Investment funds are comprised of a well-
diversified portfolio of investments in equities and bonds.
A 10% change in the fair value of the Company’s equity and
equity-related holdings as at December 31, 2018 and 2017 would
have an impact of increasing or decreasing comprehensive income
by $486 and $541 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 and cash equivalents, restricted cash, investments
and accounts receivable. The carrying amounts of financial assets
on the consolidated statements of financial position, other than
derivative financial instruments represent the Company’s maximum
exposure to credit risk at the consolidated statements of financial
position dates.
The credit risk on cash and cash equivalents and restricted cash is
limited because the counterparties are commercial banks or financial
institutions with high credit ratings assigned by independent 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 expected credit losses, 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. No customer represents more than 10% of the
Company’s accounts receivable as at December 31, 2018 and 2017.
INTEREST RATE RISK
The Company is exposed to interest rate risk through its cash and
cash equivalents 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 contracts, the Company agrees with
the counterparty to exchange, at specified intervals, the difference
between the fixed contract rate and floating-rate interest amounts
calculated by reference to the agreed notional amounts.
CURRENCY RISK
Currency risk is the risk that the fair value or future cash flows of
a financial instrument will fluctuate because of changes in foreign
exchange rates. The Company’s exposure relates to cash and cash
equivalents, accounts receivable, derivative financial instruments,
accounts payable and accrued liabilities, purchase price obligations
and long-term debt denominated in US dollars and the operations
of its US businesses, Fiera Capital (Europe) and Clearwater 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.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 115
The consolidated statements of financial position as at
December 31, 2018 and 2017 include the following amounts
expressed in Canadian dollars with respect to financial assets and
liabilities for which cash flows are denominated in US dollars:
Cash and cash equivalents
Restricted cash
Investments
Accounts receivable
Derivative financial instruments
Accounts payable and accrued liabilities
Purchase price obligations
Long-term debt
2018
$
26,954
869
3,516
60,988
3,917
2017
$
17,721
793
4,116
66,184
2,911
(72,604)
(114,950)
(299,305)
(64,800)
(63,848)
(219,538)
Based on the balances outstanding (excluding long-term debt)
as at December 31, 2018, a 5% increase/decrease of the US dollar
against the Canadian dollar would result in an increase/decrease in
total comprehensive income of $568 (2017 – $1,846). The above
calculation does not include the US dollar long-term debt, which
is partially hedged by a long-term asset in the same currency.
This long-term asset is not included in the consolidated statements
of financial position given that it is an intercompany balance and is
eliminated on consolidation.
LIQUIDITY RISK
The Company’s objective is to have sufficient liquidity to meet its liabilities when they become due. The Company monitors its cash and
cash equivalents 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, 2018:
Accounts payable and
accrued liabilities
Amount due to
related parties
Long-term debt 1
Convertible debentures
Purchase price obligations
Carrying
amount
$
2019
$
144,059
144,059
2,599
423,724
79,008
130,708
780,098
2,599
388
–
31,511
178,557
Contractual cash flow commitments
2020
2021
2022
2023
Other
$
–
–
531
–
41,744
42,275
$
–
–
–
–
41,930
41,930
$
–
–
422,805
–
41,740
464,545
$
–
–
–
86,250
31,508
117,758
$
–
–
–
–
124,881
124,881
Total
$
144,059
2,599
423,724
86,250
313,314
969,946
1. Excluding deferred financing charges of $2,197 (Note 14).
FAIR VALUE
Investments
The cost and fair value of investments recorded at fair value
through profit or loss was $4,574 and $4,857, respectively,
as at December 31, 2018 ($2,848 and $2,933 respectively as at
December 31, 2017). An unrealized loss of $623 was recognized in
other revenues during the year ended December 31, 2018 (gain of
$1,237 during the year ended December 31, 2017).
As at December 31, 2017, the cost and fair value of investments
recorded as available-for-sale was $2,296 and $2,475 respectively.
As a result of the adoption of IFRS 9 on January 1, 2018, the Company
reclassified its equity securities classified as available-for-sale under
IAS 39 to fair value through profit or loss and reclassified an unrealized
gain of $161 (net of income taxes of $18) from accumulated other
comprehensive income to retained earnings (deficit).
116 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Convertible debentures
The convertible debentures are recorded at an amortized cost of
$79,008 as at December 31, 2018 ($77,461 as at December 31, 2017).
The fair value based on market quotes is $87,544 as at
December 31, 2018 ($88,018 as at December 31, 2017).
Long-term debt
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.
Derivative financial instruments
The Company’s derivative financial instruments consist of cross
currency swap, interest rate swap and foreign exchange forward
contracts which are presented at fair value on the consolidated
statements of financial position.
Notes to the Consolidated Financial StatementsDecember 31, 2018 and 2017(in thousands of Canadian dollars, unless noted otherwise – except share and per share information) The fair value of derivatives that are not traded on an active market is determined using valuation techniques which maximize the use of
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. To the extent practicable, valuation
techniques incorporate all factors that market participants would consider in setting a price and they are consistent with accepted economic
methods for valuing financial instruments.
The Company determines the fair value of its foreign exchange forward contracts by calculating the difference between the forward
exchange rates at the measurement date and the contractual forward price for the residual maturity of the contract. The Company determines
the fair value of its interest rate swap and cross currency swap contracts by applying valuation techniques.
Net gains (losses), fair value and the notional amount of derivatives by term to maturity are as follows:
For the
year ended
December 31,
2018
Net gain
(loss) on
derivatives
$
(5,294)
4,700
(1,770)
–
For the
year ended
December 31,
2017
Net gain
(loss) on
derivatives
$
2,408
(7,950)
3,463
–
Foreign exchange contracts
a) Forward foreign exchange contracts – held for trading
b) Cross currency swaps – held for trading
Interest rate contracts
c) Swap contracts – held for trading
d) Swap contracts – cash flow hedges
Foreign exchange contracts
a) Forward foreign exchange contracts – held for trading
b) Cross currency swaps – held for trading
Interest rate contracts
c) Swap contracts – held for trading
d) Swap contracts – cash flow hedges
As at December 31, 2018
Fair value
Notional amount: term to maturity
Asset
(Liability)
Less than
1 year
From
1 to 5 years
Over 5 years
$
–
1,083
860
4,506
$
$
45,374
80,000
(1,672)
–
(1,560)
–
–
–
190,000
230,550
$
–
–
As at December 31, 2017
Fair value
Notional amount: term to maturity
Asset
(Liability)
Less than
1 year
From
1 to 5 years
Over 5 years
$
497
–
1,070
2,414
$
–
–
–
–
$
51,875
–
–
–
$
–
–
30,000
212,011
Financial statement presentation as at December 31:
Current derivative financial instrument assets 1
Non-current derivative financial instrument assets
Current derivative financial instrument liabilities
Non-current derivative financial instrument liabilities
1. Included in prepaid expenses and other assets on the consolidated statements of financial position.
2018
$
1,083
5,366
(1,672)
(1,560)
$
–
–
–
–
$
–
–
–
–
2017
$
497
3,484
–
–
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 117
a) Forward foreign exchange contracts
Forward foreign exchange contracts – held for trading
Company
The Company enters into forward exchange contracts to manage
the currency fluctuation risk associated with estimated revenues
denominated in US dollars.
In December 2016, the Company entered into a series of average
rate forward foreign exchange contracts to manage the currency
fluctuation risk associated with estimated revenues denominated
in US dollars for the year ended December 31, 2017. In August 2017,
the series of average rate forward foreign exchange contracts, which
matured one-by-one on a monthly basis until December 2017,
was converted into month-end spot rate forward exchange contracts.
Since August 2017, the Company enters into month-end spot rate
forward exchange contracts with various terms to maturity that aim
to manage the currency fluctuation risk associated with up to twelve
months of estimated future revenues in US dollars.
Forward foreign exchange contracts are recognized at fair value
at the date the contracts are entered into and are subsequently
remeasured to fair value through profit or loss at the end of each
reporting period. The gain or loss on these derivative financial
instruments is recognized in the consolidated statement of
earnings (loss) in accordance with the nature of the hedged item
and therefore, as other revenues.
The Company recorded a loss of $4,673 during the year
ended December 31, 2018 (gain of $2,148 for the year ended
December 31, 2017) and paid $2,939 as settlement of contracts
that matured during the year (received $1,974 during the year ended
December 31, 2017). The fair value of the foreign exchange contracts
is a liability of $1,237 as at December 31, 2018 (asset of $497 as at
December 31, 2017).
Subsidiaries
One of the Company’s subsidiaries enters into forward exchange
contracts to manage the currency fluctuation risk associated with
estimated revenues denominated in Euros and British pounds.
The subsidiary recorded a loss of $621 and a gain $260 during the
years ended December 31, 2018 and 2017, respectively. A total
of $186 was paid during the year ended December 31, 2018 as
settlement of the contracts. As at December 31, 2018, the fair value of
these contracts was a liability of $435 (nil as at December 31, 2017).
b) Cross currency swaps – held for trading
Under the terms of the Company’s revolving facility (Note 14), the
Company can borrow either in US dollars based on US base rate
plus a spread varying from 0.0% to 1.5% or the LIBOR rate plus a
spread varying from 1.0% to 2.5%, or in Canadian dollars based on
the Canadian prime rate plus a spread varying from 0.0% to 1.5%.
To benefit from interest cost savings, the Company has effectively
created, as at December 31, 2018, a synthetic equivalent to a
Canadian dollar revolving facility at CDOR plus 1.57% on CA$80,000
(nil as at December 31, 2017) by borrowing against the US dollar
118 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
revolving facility, the equivalent of CA$80,000 (US$59,400)
(nil as at December 31, 2017) at LIBOR plus 2.25%, and swapping
it into CDOR plus 1.57% with a one-month cross currency swap.
The contract was entered into on December 31, 2018 and matures
on January 31, 2019.
The objective of this strategy was to provide cost savings
without currency risk since the terms of the US LIBOR financing
and the cross currency swap are exactly matched (US dollar notional
amount, LIBOR rate, trade and maturity dates). Losses (gains) on
cross currency swaps are offset by equivalent gains (losses) on the
translation of the US denominated economically hedged portion of
the revolving facility since the financing terms are exactly matched.
The net gain or loss on these derivative financial instruments
is recognized in the consolidated statements of earnings (loss)
in accordance with the nature of the economically hedged item,
the revolving facility, and therefore is presented in interest on long-
term debt and other financial charges. The Company recorded a gain
of $4,700 during the year ended December 31, 2018, with no net
impact on earnings as described above (loss of $7,950 during the year
ended December 31, 2017). A total of $3,617 was received during
the year ended December 31, 2018 as settlement of these contracts
($9,272 was paid during the year ended December 31, 2017).
The fair value of the cross currency swap contracts was an asset
of $1,083 as at December 31, 2018 (nil as at December 31, 2017).
c) Interest rate swap contract – held for trading
The Company enters into interest rate swap contracts to manage
the impact of the interest rate fluctuations on its credit facility
denominated in Canadian dollars
On May 1, 2012, the Company entered into an interest rate
swap contract with an original amortizing notional amount of
CA$108,000. The contract consisted of exchanging the variable
interest rate based on a one-month CDOR rate for a fixed rate
of 1.835%. Interest was settled on a monthly basis. The interest
swap matured on April 3, 2017 and an amount of $74 was paid as
settlement of this contract.
On May 31, 2017, the Company entered into an interest rate
swap contract with an original amortizing notional amount of
CA$100,000 at inception and maturing on May 31, 2022. As at
December 31, 2018, the notional amount was CA$30,000 (2017
– CA$30,000). The contract consists of exchanging the variable
interest rate based on a one-month CDOR rate for a fixed rate of
1.335%. The Company received an amount of $2,188 as a crystallized
gain, in December 2017, when the notional amount of the contract
decreased from CA$100,000 to CA$30,000. Interest is settled on
a monthly basis.
In March 2018, the Company entered into two interest rate
swap contracts with original notional amounts of CA$10,000
and CA$40,000 at inception and maturing on May 31, 2022.
The contracts consist of exchanging the variable interest rate
based on a one-month CDOR rate for a fixed rate of 2.350%
(on CA$10,000 notional contract) and 2.358% (on CA$40,000
notional contract). Interest is settled on a monthly basis.
Notes to the Consolidated Financial StatementsDecember 31, 2018 and 2017(in thousands of Canadian dollars, unless noted otherwise – except share and per share information) In May 2018, the Company entered into an interest rate swap
contract with an original notional amount of CA$47,000 maturing
on May 31, 2022. The contract consists of exchanging the variable
interest rate based on a one-month CDOR rate for a fixed rate of
2.430%. Interest is settled on a monthly basis.
In September 2018, the Company entered into an interest rate
swap contract with an original notional amount of CA$18,000
maturing on May 31, 2022. The contract consists of exchanging the
variable interest rate based on a one-month CDOR rate for a fixed
rate of 2.530%. Interest is settled on a monthly basis.
In October 2018, the Company entered into an interest rate swap
contract with an original notional amount of CA$45,000 maturing
on May 31, 2022. The contract consists of exchanging the variable
interest rate based on a one-month CDOR rate for a fixed rate of
2.703%. Interest is settled on a monthly basis.
The net gain or loss on these derivative financial instruments
is recognized in the consolidated statement of earnings (loss) with
interest on long-term debt and other financial charges. The Company
recorded a loss of $1,770 during the year ended December 31, 2018
(gain of $3,463 during the year ended December 31, 2017).
The fair value of the interest rate swap contracts is an asset of
$860 and a liability of $1,560 as at December 31, 2018 (asset
of $1,070 as at December 31, 2017).
d) Interest rate swap contracts – Cash flow hedges
The Company enters into US dollar interest rate swap contracts to
manage the impact of the interest rate fluctuations on its credit
facility (Note 14) denominated in US dollars.
On May 31, 2017, the Company entered into two US dollar
interest rate swap contracts with original notional amounts of
US$125,000 and US$44,000 respectively at inception and maturing
on May 31, 2022. The contracts consist of exchanging the variable
interest rate based on a one-month LIBOR rate for a fixed rate of
1.84%. Interest is settled on a monthly basis.
On May 31, 2018, the Company entered into a US dollar interest
rate swap contract with an original notional amount of US$11,000
maturing on May 31, 2022. The contract consisted of exchanging the
variable interest rate based on a one-month LIBOR rate for a fixed
rate of 2.655%. Interest was settled on a monthly basis. This contract
was unwound in November 2018 and an amount of $162 was
received as settlement. This realized gain was reclassified from other
comprehensive income to interest on long-term debt and other
financial charges on the consolidated statement of earnings (loss).
These contracts are designated as cash flows hedges and satisfy
the requirements for hedge accounting. The effective portion of
changes in the fair value of these contracts are recognized in other
comprehensive income and accumulated in a hedging reserve.
The Company recorded a gain in other comprehensive income
of $1,833 (net of income taxes of $259) during the year ended
December 31, 2018 (gain of $2,094 (net of income taxes of $320)
during the year ended December 31, 2017).
The ineffective portion of changes in fair value is recognized
immediately in profit or loss in the consolidated statement of
earnings (loss). There is no ineffective portion on these contracts
for the years ended December 31, 2018 and 2017. The fair value of
the interest rate swap contracts designated as cash flow hedges is
an asset of $4,506 as at December 31, 2018 (asset of $2,414 as at
December 31, 2017).
The Company remains exposed to fluctuations in the US base
or LIBOR rates on the difference between the US dollar credit
facility and the notional amounts of the US dollar interest rate
swap contracts. The drawings in US dollars on the credit facility are
US$219,400 as at December 31, 2018 (US$50,000 on the revolving
facility and US$125,000 on the term facility under the previous credit
agreement as at December 31, 2017).
e) Call option
On December 1, 2018, Fiera Capital Inc. (“FCI”), wholly-owned
subsidiary of the Company, entered into an agreement with
Wilkinson Global Capital Partners LLC (the “Partners”) by which
the Partners have the right, but not the obligation, to purchase all,
but not less than all, of the Company’s equity interest in WGAM,
a wholly-owned subsidiary of the Company that manages special
client accounts under investment advisory agreements. The call
right can be exercised at any time during the period from January 1,
2021 (the call commencement date) until January 1, 2023 (the call
expiration date) or on an earlier date at the discretion of FCI. If the
Partners do not exercise the call option by the call expiration date or
within 30 days of notice, the call option will expire. The call exercise
price is designed to represent the fair value of the WGAM business.
Since the call option price is based on the estimated fair value of
the WGAM business and it is not exercisable at December 31, 2018,
this derivative financial instrument has no financial impact in the
Company’s consolidated financial statements.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 119
FINANCIAL INSTRUMENTS BY CATEGORY:
AS AT DECEMBER 31, 2018 – CLASSIFIED UNDER IFRS 9
Assets
Cash and cash equivalents
Restricted cash
Investments
Accounts receivable
Long-term receivable 1
Derivative financial instruments 2
Total
Liabilities
Accounts payable and accrued liabilities
Purchase price obligations
Derivative financial instruments
Amounts due to related parties
Client deposits 3
Long-term debt
Convertible debentures
Total
Amortized
cost
$
52,466
1,012
–
148,459
22
–
201,959
144,059
–
–
2,599
388
421,527
79,008
647,581
Fair value
through
profit or loss
$
–
–
4,857
–
–
6,449
11,306
–
130,708
3,232
–
–
–
–
133,940
1. Presented in deferred charges and other on the consolidated statements of financial position.
2. Includes $1,083 presented in prepaid expenses and other assets on the consolidated statements of financial position.
3. Presented in client deposits and deferred revenues on the consolidated statements of financial position.
AS AT DECEMBER 31, 2017 – CLASSIFIED UNDER IAS 39
Loans and
receivables
Available-
for-sale
Fair value
through
profit or loss
Financial
liabilities at
amortized
cost
Assets
Cash and cash equivalents
Restricted cash
Investments
Accounts receivable
Long-term receivable 1
Derivative financial instruments 2
Total
Liabilities
Accounts payable and accrued liabilities
Purchase price obligations
Amounts due to related parties
Client deposits 3
Long-term debt
Convertible debentures
Total
$
41,079
930
–
128,398
69
–
$
–
–
$
–
–
2,475
2,933
–
–
–
–
–
3,981
6,914
170,476
2,475
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
114,008
89,136
–
–
–
–
89,136
–
1,241
155
293,771
77,461
486,636
1. Presented in deferred charges and other on the consolidated statements of financial position.
2. Includes $497 presented in prepaid expenses and other assets on the consolidated statements of financial position.
3. Presented in client deposits and other revenues on the consolidated statements of financial position.
120 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Total
$
52,466
1,012
4,857
148,459
22
6,449
213,265
144,059
130,708
3,232
2,599
388
421,527
79,008
781,521
Total
$
41,079
930
5,408
128,398
69
3,981
179,865
114,008
89,136
1,241
155
293,771
77,461
575,772
Notes to the Consolidated Financial StatementsDecember 31, 2018 and 2017(in thousands of Canadian dollars, unless noted otherwise – except share and per share information) FAIR VALUE HIERARCHY
The financial assets and liabilities that are recognized on the consolidated statements of financial position at fair value are classified using
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).
The following table presents the financial instruments recorded at fair value in the consolidated statements of financial position, classified
using the fair value hierarchy:
AS AT DECEMBER 31, 2018
Financial assets
Investments
Derivative financial instruments
Total financial assets
Financial liabilities
Purchase price obligations
Derivative financial instruments
Total financial liabilities
AS AT DECEMBER 31, 2017
Financial assets
Investments
Derivative financial instruments
Total financial assets
Financial liabilities
Purchase price obligations
Derivative financial instruments
Total financial liabilities
Level 1
Level 2
Level 3
$
–
–
–
–
–
–
$
4,853
6,449
11,302
–
3,232
3,232
$
4
–
4
130,708
–
130,708
Level 1
Level 2
Level 3
$
–
–
–
–
–
–
$
5,397
3,981
9,378
–
–
–
$
11
–
11
89,136
–
89,136
Total
$
4,857
6,449
11,306
130,708
3,232
133,940
Total
$
5,408
3,981
9,389
89,136
–
89,136
Level 3
The fair value of purchase price obligations is determined using a discounted cash flow analysis which makes use of unobservable inputs such as
expected cash flows and risk adjusted discount rates. Expected cash flows are estimated based on the terms of the contractual arrangements
and the Company’s knowledge of the business and how the current economic environment is likely to impact it.
Purchase price obligations are Level 3 financial liabilities. The Company has used valuation techniques to record the fair value of the
liabilities at the reporting date. The Company analyzed the characteristics of the liability being valued, including the circumstances and the
information available as at the valuation date and selected the most appropriate valuation technique.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 121
Purchase price obligation – CNR:
A reasonable change in unobservable inputs would not result in
a significant change in the fair value of purchase price obligations
other than for the City National Rochdale (“CNR”) liability, which
is presented below.
The main Level 3 inputs used by the Company to value the
purchase price obligations of CNR are derived from the following
unobservable inputs and determined as follows:
> Annual revenue growth factors, such as market rate and net
contributions rate, are estimated based on internal and external
data and publications, economic conditions, and the specific
characteristics of the financial liability. A higher annual revenue
growth factor will result in a higher fair value. To assess the fair
value as at December 31, 2018, the Company used a 9% and 10%
respectively for market growth rate and net contributions rate.
> The risk-adjusted discount rate is determined by adjusting a risk-
free rate to reflect the specific risks associated with the financial
liability. The discount rate is the input used to bring the future
cash flows to their present value. A higher discount rate would
result in a lower fair value. To assess the fair value as at December
31, 2018, the Company used a discount rate of 41%.
The discounted cash flow method was used to measure the
present value of the expected future cash flows to be paid to CNR
as contingent consideration. The fair value of the CNR purchase price
obligation as at December 31, 2018 was CA$74,118 (US$54,331) and
CA$60,574 (US$47,000) as at December 31, 2017.
The significant unobservable inputs are annual revenue growth
factors, market growth and net contributions, and the risk-adjusted
discount rate.
> A variance of 350 basis points in the market growth rate, as
an increase or (decrease), would result in an increase (decrease)
of approximately CA$5,390 (US$4,000) in the fair value of the
purchase price obligation.
> A variance of 300 basis points in the net contributions rate, as
an increase or (decrease) would result in an increase (decrease)
of approximately CA$2,690 (US$2,000) in the fair value of the
purchase price obligation.
> A variance of 200 basis points in the risk-adjusted discount rate,
as an increase (discount), would result in a decrease (increase)
of approximately CA$2,690 (US$2,000) in the fair value of the
purchase price obligation.
Due to the unobservable nature of the inputs, there may be
uncertainty about the valuation of these Level 3 financial instruments
and using reasonably possible alternative assumptions would change
the fair value. Moreover, the relationship between the risk-adjusted
discount rate and the other unobservable inputs does not necessarily
have direct relationship and different inter-relationships could be
reasonably applied. The Company varied the significant unobservable
inputs such as the risk-adjusted discount rate, the market growth and
the net contributions and established a reasonable fair value range
that could result in a CA$8,080 (US6,000) increase or decrease in
the fair value of the purchase price obligation as at December 31,
2018 (nil as at December 31, 2017).
Purchase price obligation – Clearwater:
The discounted cash flow method was used to measure the present
value of the expected future cash flows to be paid to the sellers
as contingent consideration. The fair value of the Clearwater
purchase price obligation as at December 31, 2018 was CA$39,955
(US$28,553) and CA$35,055 (US$27,000) as at August 9, 2018.
The main Level 3 inputs used by the Company to value the
Clearwater purchase price obligations are derived from unobservable
inputs of revenue and earnings before interest, taxes, depreciation
and amortization (“EBITDA”) forecasts, management’s estimates
of revenue from cross-selling, and the risk-adjusted discount rate.
The discount rate is the input used to bring the future cash flow to
their present value. Company used a discount rate between 10%
and 15%.
Due to the unobservable nature of the inputs, there may be
uncertainty about the valuation of these Level 3 financial instruments
and using reasonably possible alternative assumptions would change
the fair value. Moreover, the relationship between the risk-adjusted
discount rate and the other unobservable inputs does not necessarily
have direct relationship and different inter-relationships could be
reasonably applied. The Company varied the significant unobservable
inputs such as the risk-adjusted discount rate, revenue, EBITDA, and
cross-selling forecasts and established a reasonable fair value range
between CA$35,470 (US$26,000) and CA$40,925 (US$30,000)
for its purchase price obligation as at December 31, 2018.
122 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Notes to the Consolidated Financial StatementsDecember 31, 2018 and 2017(in thousands of Canadian dollars, unless noted otherwise – except share and per share information) Reconciliation of Level 3 fair value measurements:
Fair value as at December 31, 2016
Additional purchase price obligations
Settlement of purchase price obligations
Revaluation of a purchase price obligation included in accretion
and change in fair value of purchase price obligations
Total realized and unrealized gains included in other revenues
Total realized and unrealized (losses) included in accretion and
change in fair value of purchase price obligations
Total realized and unrealized gains included in other comprehensive income
Fair value as at December 31, 2017
Fair value as at December 31, 2017
Additional purchase price obligations
Settlement of purchase price obligations
Total realized and unrealized (losses) included in other revenues
Revaluation of a purchase price obligation included in accretion
and change in fair value of purchase price obligations
Total realized and unrealized (losses) included in accretion
and change in fair value of purchase price obligations
Total realized and unrealized (losses) included in interest on long-term
debt and other financial charges
Total realized and unrealized (losses) included in other comprehensive income
Fair value as at December 31, 2018
There were no transfers between levels during the years ended December 31, 2018 and 2017.
12. Accounts payable and accrued liabilities
Trade accounts payable and accrued liabilities
Wages and vacation payable
Bonuses and commissions payable
Cash settled share-based liabilities
Income taxes payable (recoverable)
Sales taxes payable
Total
$
(34,959)
(60,574)
10,363
800
2
(6,617)
1,860
(89,125)
Total
$
(89,125)
(38,503)
29,191
(7)
(852)
Investments
Purchase price
obligations
$
9
–
–
–
2
–
–
11
$
(34,968)
(60,574)
10,363
800
–
(6,617)
1,860
(89,136)
Investments
Purchase price
obligations
$
(89,136)
(38,503)
29,191
–
(852)
$
11
–
–
(7)
–
–
–
–
4
(23,645)
(23,645)
(1,845)
(5,918)
(130,708)
(1,845)
(5,918)
(130,704)
As at
December 31, 2018
As at
December 31, 2018
$
36,298
8,522
86,666
7,525
3,403
1,645
144,059
$
29,555
4,583
76,275
5,528
(2,746)
813
114,008
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 123
13. Income taxes
Income tax expense for the years ended December 31, is as follows:
Current income taxes
Deferred income taxes (recovery)
2018
$
14,060
(14,489)
(429)
2017
$
11,356
(7,200)
4,156
The Company’s income tax expense differs from the amounts that would have been obtained using the combined Canadian federal and
provincial statutory tax rates for the years ended December 31, as follows:
Earnings (loss) before income taxes
Combined federal and provincial statutory tax rates
Income tax expense based on combined statutory income tax rate
Difference between Canadian and foreign statutory rates
Share-based compensation
Non-deductible acquisition costs
Non-deductible accretion and change in fair value of purchase price obligations
Impact of US tax reform
Prior years’ tax adjustments
Other (non-taxable) non-deductible amounts
2018
$
(5,184)
26.7%
(1,382)
(2,305)
1,992
1,811
1,176
–
(1,461)
(260)
(429)
2017
$
14,868
26.5%
3,940
(8,799)
1,751
355
–
6,017
(198)
1,090
4,156
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:
Lease
inducements
& Deferred
lease
obligations
Restructuring
provisions
$
2,980
(827)
–
–
–
–
(141)
2,012
(164)
–
–
–
–
–
136
1,984
$
688
166
–
–
–
–
–
854
(304)
–
–
–
–
–
–
550
Carry
forward
losses
$
9,707
5,971
–
–
–
–
(816)
14,862
1,357
–
–
–
–
(65)
1,124
17,278
Intangible
assets
Property and
equipment
$
(36,086)
5,881
–
–
4,090
–
923
(25,192)
9,242
–
(3,923)
–
704
–
(767)
(19,936)
$
(1,724)
460
–
–
–
–
106
(1,158)
351
–
25
–
–
–
(121)
(903)
Other
$
9,603
(4,451)
(1,225)
1,092
–
(334)
(412)
4,273
4,007
(53)
–
(259)
–
–
663
8,631
Total
$
(14,832)
7,200
(1,225)
1,092
4,090
(334)
(340)
(4,349)
14,489
(53)
(3,898)
(259)
704
(65)
1,035
7,604
Balance, December 31, 2016
Charged to earnings
Convertible debentures (Note 15)
Charged to equity (Note 16)
Business combinations
Charged to other comprehensive income
Foreign exchange difference
Balance, December 31, 2017
Charged to earnings
Convertible debentures (Note 15)
Business combinations (Note 4)
Charged to other comprehensive income
Reclassification to deferred income taxes
on assets held-for-sale
Reclassification to assets held-for-sale
Foreign exchange difference
Balance, December 31, 2018
124 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Notes to the Consolidated Financial StatementsDecember 31, 2018 and 2017(in thousands of Canadian dollars, unless noted otherwise – except share and per share information) Financial statement presentation as at December 31:
Non-current deferred income tax assets
Non-current deferred income tax liabilities
Total
14. Long-term debt
Credit facility
Term facility
Revolving facility
Other facilities
Deferred financing charges
Less current portion
Non-current portion
2018
$
20,093
(12,489)
7,604
2017
$
11,665
(16,014)
(4,349)
As at
December 31, 2018
As at
December 31, 2017
$
–
422,805
919
(2,197)
421,527
(388)
421,139
$
156,813
136,725
1,585
(1,352)
293,771
(1,354)
292,417
CREDIT FACILITY
On May 28, 2018, the Company entered into the Fifth Amended and
Restated Credit Agreement (“Credit Agreement”) with a Canadian
banking syndicate of lenders. The Facility is used for general corporate
purposes. It is comprised of a $600,000 senior unsecured revolving
facility (“Facility”) which can be drawn in Canadian or US dollars at
the discretion of the Company.
Under the terms of the Credit Agreement, there are no
minimum repayments until June 30, 2022, the date at which the
amount drawn is repayable in full. At any time, subject to certain
terms and conditions, the Company may request an increase in the
available Facility by an amount of up to CA$200,000 subject to
the acceptance of the individual lenders in the banking syndicate.
The Credit Agreement allows for extensions of the Facility’s maturity
date, in one-year increments, at the request of the Company and
subject to the acceptance of a group of lenders within the banking
syndicate whose commitments amount in the aggregate, to more
than 66 2/3%, subject to certain terms and conditions.
The Facility bears interest, payable monthly, at variable rates
based on the currency in which an amount is drawn and on the
quarterly Funded Debt to EBITDA ratio as defined in the Credit
Agreement. The interest rate is based on the Canadian prime rate
plus a spread which varies from 0.0% to 1.5% or, at the discretion of
the Company for amounts drawn in US Dollars, based either on the
US base rate plus a spread varying from 0.0% to 1.5% or the LIBOR
rate plus a spread varying from 1.0% to 2.5%.
Prior to May 28, 2018, the Fourth Amended and Restated
Credit Agreement (the “Previous Credit Agreement”) included a
US$125,000 term (non-revolving) facility and a CA$350,000 senior
unsecured revolving facility which could be drawn in Canadian or
US dollars at the discretion of the Company.
Under the terms of the Previous Credit Agreement, there were no
minimum repayments on the term facility until May 31, 2019, and
until March 25, 2020 for the revolving facility, at which dates the
amounts drawn were repayable in full. On May 28, 2018, the term
facility was terminated and balances drawn on that date were
converted to the Facility.
There were no changes to the interest rates applicable on
the Previous Credit Facility. As at December 31, 2018, the total
amount drawn on the Facility was CA$123,500 and US$219,400
(CA$299,305) (CA$74,000 and US$50,000 (CA$62,725) on the
revolving facility, and US$125,000 (CA$156,813) on the term facility
under the Previous Credit Agreement at December 31, 2017).
The renegotiation of the Credit Agreement was treated as a
modification under IFRS 9 – Financial Instruments and transaction
fees of $1,466 associated with the Facility and $1,034 associated
with the Previous Credit Agreement were capitalized to the Facility as
long-term debt in the consolidated statements of financial position.
Under the terms of the Credit Agreement and the Previous
Credit Agreement, the Company must satisfy certain restrictive
covenants including minimum financial ratios. These restrictions
include maintaining a maximum ratio of Funded Debt to EBITDA
and a minimum Interest Coverage Ratio as defined in the Credit
Agreement and the Previous Credit Agreement. EBITDA, a non IFRS
financial measure, includes consolidated earnings (losses) before
interest, income taxes, depreciation, amortization and other non-
cash items, and excludes extraordinary and unusual items including
non-recurring items and certain purchase price obligations as well
as certain other adjustments outlined in the Credit Agreement.
As at December 31, 2018 all restrictive covenants under the Credit
Agreement were met and these were also met at December 31, 2017
under the terms of the Previous Credit Agreement. The Credit
Agreement also includes covenants that limit the ability of the
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 125
Company and certain of its subsidiaries that are specifically included
in the Credit Agreement as borrowing parties and therefore are
guarantors to the Facility, to engage in specified types of transactions
and thus imposes certain operating and financing restrictions on
these entities.
OTHER FACILITIES
As at December 31, 2018, one of the Company’s subsidiaries has
an outstanding bank loan in the amount of $231 of which quarterly
payments of CA$131 are required (respectively CA$756 and CA$131
as at December 31, 2017). The loan bears interest at prime plus
0.25% to 1.25% which is based on the ratio of senior debt to EBITDA
(a non-IFRS financial measure defined in the loan agreement), and
matures on June 30, 2019. All debt covenant requirements were met
as at December 31, 2018 and December 31, 2017. In March 2017,
this subsidiary amended its credit agreement to include a
leasing facility. As at December 31, 2018, the outstanding balance
of this loan is CA$688 (CA$ 829 at December 31, 2017), of which
monthly payments of CA$15 are required. As at December 31, 2018,
the current and non-current portions of the loan are $157 and
$531 respectively. This subsidiary also has a line of credit with a
limit of CA$750. It bears interest at prime plus up to 0.25% to 1%
which is also based on the ratio of senior debt EBITDA and has no
fixed maturity date. As at December 31, 2018 the subsidiary had not
drawn on the line of credit (nil as at December 31, 2017).
In January 2019, this subsidiary repaid the outstanding balances
of the bank loan and the lease facility which had a balance as at
December 31, 2018 of $231 and $688 respectively.
Another subsidiary of the Company has a line of credit with a
dollar limit of CA$950. It bears interest at prime plus 1.50% and
has no fixed maturity date. As at December 31, 2018 the subsidiary
had not drawn on the line of credit (nil as at December 31, 2017).
Reconciliation of long-term debt arising from financing activities for the years ended December 31:
Balance, beginning of year
Cash flows
(Reimbursement)/proceeds from borrowings
Capitalized borrowing costs
Non-cash changes
Changes arising from business combinations
Amortization of deferred financing charges
Foreign exchange difference
Balance, end of year
15. Convertible debentures
Face value
Less:
Issuance costs 1
Equity component (net of issuance costs of $224 in 2018 and $237 in 2017)
Accretion expense on equity component
Balance, end of year
2018
$
293,771
109,261
(1,495)
–
650
19,340
421,527
2018
$
86,250
(4,031)
(4,568)
1,357
79,008
2017
$
430,423
(110,888)
(210)
–
635
(26,189)
293,771
2017
$
86,250
(4,269)
(4,555)
35
77,461
1. During year ended December 31, 2018, the Company revised the issuance costs and effective interest rate in order to reflect differences between issuance costs
estimated at the date of issuance of the unsecured convertible debentures and the invoices subsequently received.
On December 21, 2017, the Company issued 86,250 unsecured
convertible debentures at 5% maturing on June 23, 2023, with
interest payable semi-annually in arrears on June 30 and December 31
of each year starting June 30, 2018, for gross proceeds of CA$86,250.
The convertible debentures are convertible at the option of the
holder at a conversion price of $18.85 per Class A subordinate
shares (“Class A Shares”). The convertible debentures are not
redeemable by the Company before June 30, 2021. The convertible
debentures are redeemable by the Company at a price of $1 per
convertible debenture, plus accrued and unpaid interest, on or
after June 30, 2021 and prior to June 30, 2022 (provided that the
weighted average trading price of the Class A Shares on the TSX for
the 20 consecutive trading days ending five days preceding the date
on which the notice of redemption is given, is not less than 125% of
the conversion price of $18.85 per share). On or after June 30, 2022
but prior to the maturity date, the Company may redeem on not
more than 60 days and not less than 30 days prior notice, at a price
of $1 per convertible debenture, plus accrued and unpaid interest.
126 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Notes to the Consolidated Financial StatementsDecember 31, 2018 and 2017(in thousands of Canadian dollars, unless noted otherwise – except share and per share information) In 2017, the proceeds of the convertible debentures were used
to finance the cash portion of the repurchase of Fiera Properties’
remaining 45.0% non-controlling interest, to reduce indebtedness
under the Credit Facility and for general corporate purposes.
During the year ended December 31, 2018, an amount of $4,431
(2017 – nil) was paid representing the accrued cash interest from
the issuance date of the unsecured convertible debentures to
December 31, 2018.
16. 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.
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,
voting separately as a class, one-third of the members of the Board
while holders of Class B Shares are entitled to elect, voting separately
as a class, 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
The Company is authorized to issue an unlimited number of Preferred
Shares. Preferred Shares are issuable in series and would rank, both in
regard 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 Company has not issued any Preferred Shares.
The following table provides details of the issued, fully paid and outstanding common shares:
As at December 31, 2016
Conversion of holdback shares
Issuance of shares
Shares issued as part of a business combination
Shares issued as settlement of purchase price obligations
Performance and restricted share units settled
Stock options exercised
Shares issued as part of equity financing
Cancellation of shares
Transfers from Class B shares to Class A shares
As at December 31, 2017
Issuance of shares
Class A Shares
Class B Shares
Number
$
Number
$
Number
60,800,655
550,609
19,810,903
31,525
80,611,558
353,928
3,566
38,880
581,602
1,364,052
397,100
6,347,000
(431)
366,413
500
8,478
13,612
3,816
79,484
(4)
583
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(366,413)
(583)
353,928
38,880
581,602
1,364,052
397,100
6,347,000
(431)
–
Total
$
582,134
3,566
500
8,478
13,612
3,816
79,484
(4)
–
70,249,199
660,644
19,444,490
30,942
89,693,689
691,586
Shares issued as part of a business combination (Note 4)
5,600,315
66,708
Shares issued as settlement of purchase price obligations
Performance and restricted share units settled
Stock options exercised
Cancellation of shares
Transfers from Class B Shares to Class A Shares
Adjustment to transaction costs on shares previously issued
335,838
964,200
391,409
(16,762)
32,089
–
4,076
9,072
4,172
(191)
51
192
–
–
–
–
–
(32,089)
–
–
–
–
–
–
(51)
–
5,600,315
66,708
335,838
964,200
391,409
(16,762)
–
–
4,076
9,072
4,172
(191)
–
192
As at December 31, 2018 1
77,556,288
744,724
19,412,401
30,891
96,968,689
775,615
1. Includes 4,125,055 Class A Shares held in escrow in relation with the Apex acquisition (4,950,066 as at December 31, 2017), 4,617,783 Class A Shares held in escrow
in relation with the CGOV acquisition, 724,197 Class A Shares held in escrow in relation with the Clearwater acquisition, nil Class A Shares held in escrow in relation
with the Fiera Private Lending acquisition (formerly “Centria Commerce”) (338,124 as at December 31, 2017) and nil restricted shares held in escrow in relation to
the restricted share plan (81,496 as at December 31, 2017).
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 127
2018
2017
Issuance of shares
Shares issued as part of business combinations
On August 9, 2018, as part of the acquisition of Clearwater, the
Company issued 982,532 Class A shares for $11,723, less issuance
costs of $28.
Conversion of holdback shares
As part of the acquisition of Samson, 353,928 Class A Shares
were issued on May 1, 2017, and an amount of CA$3,566 was
transferred from restricted and holdback shares to share capital in
the consolidated statements of changes in equity.
On May 31, 2018, as part of the acquisition of CGOV, the
Company issued 4,617,783 Class A shares for $55,136, less issuance
costs of $123.
As part of the acquisition of Apex in 2016, the Company issued
5,775,075 Class A Shares. These shares are held in escrow and
one seventh will be released each year over a seven-year period
commencing on the first anniversary of the closing date. The second
tranche vested and 825,011 Class A Shares were released from
escrow on June 1, 2018.
Shares issued as settlement of purchase price obligations
On February 22, 2018, in connection with the asset purchase
agreement of Fiera Private Lending, the Company issued
335,838 Class A Shares for $4,083 as settlement of purchase price
obligations, less issuance costs of $7.
Performance share units and restricted share units
settled
During the year ended December 31, 2018, 964,200 Class A Shares
were issued following the vesting of performance share units and
restricted share units worth $9,072.
Stock option exercised
During the year ended December 31, 2018, 391,409 stock options
were exercised and 391,409 Class A Shares were issued for $4,172.
Cancellation of shares
During the year ended December 31, 2018, 4,060 Class A Shares were
cancelled due to the forfeiture of restricted shares and 12,702 Class A
Shares were cancelled as settlement of purchase price adjustments
related to the Clearwater acquisition.
Issuance of shares
Shares issued as part of business combinations
On December 27, 2017, as part of the acquisition of the remaining
interest of Fiera Properties, the Company issued 38,880 Class A
Shares worth $500.
Shares issued as settlement of purchase price obligations
On October 18, 2017, in connection with the asset purchase
agreement of Natcan Investment Management Inc., the Company
issued 581,602 Class A Shares for $8,500 as settlement of purchase
price obligations, less issuance costs of $22.
Performance shares and restricted shares settled
During the year ended December 31, 2017, 1,364,052 Class A Shares
were issued following the vesting of performance share units and
restricted share units.
Stock option exercised
During the year ended December 31, 2017, 397,100 stock options
were exercised and 397,100 Class A Shares were issued for $3,816.
Shares issued as part of equity financing
On December 21, 2017, the Company completed an equity financing
for gross proceeds of $82,511. The Company issued 6,347,000 Class
A Shares, including the exercise in full of the over-allotment option
of 577,000 Class A Shares at a price of $13.00 per Class A Share
pursuant to a bought deal financing with a syndicate of underwriters.
In connection with this offering, the Company incurred share
issuance costs of $4,119. A separate deferred income tax asset of
$1,092 was recognized.
Transfers
During the year ended December 31, 2018, 32,089 Class B Shares
were converted into Class A Shares on a one-for-one basis.
Cancellation of shares
During the year ended December 31, 2017, 431 Class A Shares were
cancelled due to the forfeiture of restricted shares.
Transfers
During the year ended December 31, 2017, 366,413 Class B Shares
were converted into Class A Shares on a one-for-one basis.
Dividends
During the year ended December 31, 2018, the Company declared
and paid dividends on Class A shares and Class B shares totalling
$73,581 ($0.78 per share) (2017 – $57,563 ($0.70 per share)) of
which $186 were paid on holdback shares (2017 – $118).
128 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Notes to the Consolidated Financial StatementsDecember 31, 2018 and 2017(in thousands of Canadian dollars, unless noted otherwise – except share and per share information) ACCUMULATED OTHER COMPREHENSIVE INCOME
The components of accumulated other comprehensive income as at December 31 include:
Unrealized gain on available-for-sale financial assets
Cash flow hedges
Unrealized exchange differences on translating financial statements of foreign operations
December 31, 2018
December 31, 2017
$
–
3,927
33,729
37,656
$
161
2,094
10,769
13,024
17. Earnings (loss) per share
Earnings (loss) per share and the reconciliation of the number of shares used to calculate basic and diluted earnings (loss) per share are
as follows:
Net earnings (loss) attributable to shareholders
Weighted average shares outstanding – basic
Effect of dilutive share-based awards
Weighted average shares outstanding – diluted
Basic earnings (loss) per share
Diluted earnings (loss) per share
For the years ended December 31,
2018
$
(5,013)
94,665,002
–
94,665,002
(0.05)
(0.05)
2017
$
10,671
82,258,569
5,684,713
87,943,282
0.13
0.12
For the year ended December 31, 2018, the share-based awards and contingent consideration payable in shares of 12,439,808 and
the convertible debentures with a face value of $86,250 were all anti-dilutive. For the year ended December 31, 2017, the calculation
of hypothetical conversions does not include 2,939,631 options or the convertible debentures with a face value of $86,250 as these are
anti-dilutive
18. Share-based payments
A) STOCK OPTION PLAN
Under the Company’s 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. The Board may determine
the maximum term for which options are granted and will become exercisable and whether the options will be exercisable in instalments
or pursuant to a vesting schedule.
A summary of the changes that occurred in the Company’s stock option plan during the years ended December 31, 2018, and 2017,
is presented below:
Outstanding – beginning of year
Granted
Exercised
Forfeited
Outstanding – end of year
Options exercisable – end of year
Number of
Class A Share options
Weighted-average
exercise price
Number of
Class A Share options
Weighted-average
exercise price
2018
2017
4,183,852
305,000
(391,409)
(120,252)
3,977,191
1,281,812
$
11.86
12.22
8.07
13.63
12.21
11.20
2,799,345
1,892,000
(397,100)
(110,393)
4,183,852
859,473
$
10.25
13.41
7.34
13.64
11.86
8.17
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 129
The following table presents the weighted average assumptions used to determine the share-based compensation expense using the Black-
Scholes option-pricing model during the years ended December 31, 2018 and 2017:
Dividend yield (%)
Risk-free interest rate (%)
Expected life (years)
Expected volatility of the share price (%)
Weighted-average fair value ($)
Share-based compensation expense ($)
2018
6.14 to 7.13
2.08 to 2.26
7.5
2017
4.87 to 5.39
1.15 to 1.93
8.9
26.26 to 26.84
24.25 to 38.97
1.41
1,732
2.21
1,402
The expected volatility is based on the historical volatility of the Company’s share price. The risk-free interest rate used is equal to the yield
available on government of Canada bonds at the date of grant with a term equal to the expected life of options.
The following table summarizes the stock options outstanding and exercisable as at December 31, 2018:
Range of exercise price
Number of Class A
Share options
Options outstanding
Weighted-average
remaining contractual
life in years
3.67
5.40 to 8.50
8.51 to 14.77
68,201
574,611
3,334,379
1
3
9
Options exercisable
Weighted-average
exercise price
Number of
Class A Share options
Weighted-average
exercise price
$
3.67
8.05
13.10
68,201
414,611
799,000
$
3.67
8.29
13.35
B) DEFERRED SHARE UNIT (“DSU”) 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. 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.
One DSU is equivalent to one Class A Share of the Company. The Company recorded an expense (recovery) of ($12) for this plan
during year ended December 31, 2018 (expense of $13 during the year ended December 31, 2017) and an amount of $98 was paid out.
As at December 31, 2018, the Company had a liability for an amount of $95 for the 8,395 units outstanding under the DSU plan
($205 for 15,767 units as at December 31, 2017).
C) RESTRICTED SHARE UNIT (“RSU”) PLAN
On April 12, 2018, the Board approved an amended and restated RSU Plan mainly to include various tax considerations and to specify
that the Company may, at its discretion, settle the RSU awards in cash or in shares. The purpose of this plan is to provide eligible employees
with the opportunity to acquire RSUs in order to retain key employees and to permit them to participate in the growth and development of
the Company and to better align the interests of participants with the long-term interests of shareholders of the Company.
The following table presents transactions that occurred in the Company’s RSU Plan during the years ended December 31, 2018 and 2017:
Outstanding units – beginning of year
Granted
Reinvestments in lieu of dividends
Vested 1
Forfeited
Outstanding units – end of year
1. 47,252 restricted share units were settled in cash (2017 – 65,867).
2018
608,635
–
24,610
(374,685)
–
258,560
2017
456,303
566,686
19,124
(420,407)
(13,071)
608,635
One RSU is equivalent to one Class A Share of the Company. The Company recorded an expense of $3,176 and $5,715 for these grants
during the years ended December 31, 2018 and 2017, respectively. During the year ended December 31, 2018, 327,433 Class A Shares (2017 –
354,540) were issued as settlement of RSU vested and $585 was paid in cash (2017 – $908). As at December 31, 2018, the Company had a
liability in the amount of $1,759 for the 258,560 units outstanding under the RSU Plan ($3,075 for 608,635 units as at December 31, 2017).
130 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Notes to the Consolidated Financial StatementsDecember 31, 2018 and 2017(in thousands of Canadian dollars, unless noted otherwise – except share and per share information) D) RESTRICTED SHARE UNIT PLAN – CASH (“RSU CASH”)
On April 12, 2018, the Board approved an amended and restated RSU cash plan mainly to include various tax considerations. The purpose of
this plan is to provide eligible employees with the opportunity to acquire restricted share units in order to retain key employees and to permit
them to participate in the growth and development of the Company and to better align the interests of participants with the long-term
interests of shareholders of the Company. All RSUs granted under this plan will be settled in cash. The following table presents transactions
that occurred in the Company’s RSU Plan during the years ended December 31, 2018 and 2017:
Outstanding units – beginning of year
Granted
Reinvestments in lieu of dividends
Vested
Forfeited
Outstanding units – end of year
2018
504,380
154,693
37,936
(167,974)
(727)
528,308
2017
316,133
185,256
21,963
–
(18,972)
504,380
RSU cash units are equivalent to one Class A Share of the Company. The Company recorded an expense of $2,254 and $1,886 for these
grants during the years ended December 31, 2018 and 2017, respectively. During the year ended December 31, 2018, 167,974 units vested
(2017 – nil), an amount of $396 was paid as settlement of 32,607 units and the remaining 135,367 units were settled in January 2019. As at
December 31, 2018, the Company had a liability totalling $4,305 for the 528,308 units outstanding ($2,435 for the 504,380 units as at
December 31, 2017).
E) RESTRICTED SHARE PLAN
On October 30, 2015, in relation with the acquisition of Samson, the Board adopted a restricted share plan for the purposes of retaining
certain employees and providing them with the opportunity to participate in the growth and development of the Company. The restricted
shares vest over a three-year period with one third vesting each year. The restricted shares are entitled to dividends and have voting rights.
The plan administrator reinvests the proceeds of the dividends received into additional shares of the Company.
On October 30, 2015, the Company issued 224,699 restricted shares. In conjunction with the restricted share issuance, the Company
issued 224,699 Class A Shares which were held in escrow. During the year ended December 31, 2018, the last tranche of this plan vested
and 78,548 Class A Shares (2017 – 79,022) that vested were released from escrow and 4,060 restricted shares were forfeited and cancelled
(2017 – 431).
The Company recorded an expense of $284 and $672 for the years ended December 31, 2018 and 2017, respectively for this grant.
As at December 31, 2018, there were no longer any restricted shares outstanding. Therefore, on March 21, 2019 the Board approved the
termination of the Restricted share plan effective as at such date.
F) PSU AND UAR PLAN APPLICABLE TO BUSINESS UNITS
On April 12, 2018, the Board approved an amended and restated PSU plan applicable to Business Units (“BU”) mainly to include various
tax considerations. Performance share units are provided to eligible employees at an award value which is determined by the Board as the
original value of the award. The number of performance share units awarded to a participant as of the award date is calculated by dividing
the award value by the value of the PSU BU as determined by the Board at each award date.
PSUs are considered granted when the award notice is approved by the Board and is accepted by the employee. The vesting date is the
date at which all vesting terms and conditions set forth in the PSU plan applicable to BU and the employee’s award notice have been satisfied.
Vested PSUs are settled in accordance with the terms of the plan. The settlement date value is determined by the product of the number
of PSUs vested and the value of the PSU on the applicable vesting date.
In June 2018, the Company amended its Performance Share Unit Plan applicable to Business Units (PSU applicable to BU) plan to include
an ability to grant Unit Appreciation Rights applicable to Business Units (UAR applicable to BU).
PSU applicable to BU
The Company recorded the following expense relating to PSU plans applicable to BU during the years ended December 31, 2018 and 2017:
Equity-settled grants
Cash-settled grants
Total expense
2018
$
6,229
7,297
13,526
2017
$
7,493
886
8,379
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 131
During the year ended December 31, 2018, the total award value granted under the Company’s PSU plans applicable to BUs was $6,575.
A total of 616,948 Class A Shares were issued during the year ended December 31, 2018 as settlement of PSU applicable to BUs. Vested units
will be settled in 2019 through the issuance of Class A Shares.
During the year ended December 31, 2017, the total award value granted under the Company’s PSU plans applicable to BUs was $10,752.
Certain PSU applicable to BUs representing a total value of $5,211 vested. A total of 206,197 Class A Shares were issued during the year ended
December 31, 2017 as settlement of PSU applicable to BUs.
UAR applicable to BU
Under the UAR plan applicable to BUs, eligible employees are entitled to receive Class A Shares of the Company for an amount equivalent
to the difference between the business value per unit on the vesting date and the exercise price determined on the grant date. The Company
recorded an expense of $1,276 during the year ended December 31, 2018.
G) PSU PLAN
On April 12, 2018, the Board approved an amended and restated PSU Plan mainly to include various tax considerations and to specify that
the Company may, at its discretion, settle the PSU awards in cash or in shares. PSUs are provided to eligible employees at an award value
which is determined by the Board as the original value of the award. The number of PSUs awarded to a participant as of the award date is
calculated by dividing the award value by the market value on the award date. One PSU unit is equivalent to one Class A Share of the Company.
The Company recorded the following expense relating to PSU plans during the years ended December 31, 2018 and 2017:
Equity-settled grants
Cash-settled grants
Total expense
2018
$
1,292
1,126
2,418
2017
$
140
1,110
1,250
The total award value granted to eligible employees under the Company’s PSU plans for the years ended December 31, 2018 and 2017 was
$4,828 and $1,200 respectively. A total of 19,819 Class A Shares were issued during the year ended December 31, 2018 as settlement of PSU
vested in 2017 (2017 – 35,325). Vested units will be settled in 2019 through the issuance of Class A Shares.
H) STOCK OPTION PLANS IN THE COMPANY’S SUBSIDIARIES
One of the Company’s subsidiaries has a stock option plan which is based on the shares of the respective subsidiary entity. This plan is
accounted for as a cash-settled plan. During the year ended December 31, 2017, another subsidiary’s stock option plan was discontinued.
The Company’s subsidiaries stock option expense in the statements of consolidated net earnings (loss) for the year ended December 31, 2018
was $2,568 ($855 for the year ended December 31, 2017). The subsidiary paid an amount of $651 during the year ended December 31, 2018
as settlement of stock options exercised. The cash settled share-based liability is $3,956 in the statements of financial position as at
December 31, 2018 ($2,039 as at December 31, 2017).
19. Post-employment benefit obligations
The Company contributes to defined contribution plans for its employees. Contributions for the year ended December 31, 2018 amount to
$3,696 ($3,258 for the year ended December 31, 2017).
Subsequent to a business combination in September 2010, the Company assumed the role of sponsor of six individual pension plans
(“IPPs”) 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, 2018 for one plan. The next actuarial valuation date is January 1, 2021
for one plan, June 30, 2021 for one plan and January 1, 2019 for four plans. Each IPP plan will be individually wound up upon the death of the
respective participant or if applicable, their surviving spouse.
132 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Notes to the Consolidated Financial StatementsDecember 31, 2018 and 2017(in thousands of Canadian dollars, unless noted otherwise – except share and per share information) 20. Expenses by nature
The details of selling, general and administration expense are as follows:
Salaries, wages and employee benefits
Travelling and marketing
Reference fees
Rent
Technical services
Professional fees
Insurance, permits and taxes
Other
The details of salaries, wages and employee benefits are as follows:
Salaries and wages
Pension costs
Payroll deductions
Share-based compensation
Cash settled share-based compensation
Other
For the years ended December 31,
2018
$
327,613
12,756
17,746
13,069
26,134
14,291
3,289
11,026
2017
$
275,918
10,999
13,243
11,915
19,674
13,948
3,592
9,165
425,924
358,454
For the years ended December 31,
2018
$
276,192
3,696
19,051
10,813
14,155
3,706
327,613
2017
$
233,496
3,258
17,266
9,820
8,466
3,612
275,918
Key management are those persons having authority and responsibility for planning, directing and controlling the activities of the Company
and include the Company’s directors and key officers. Compensation awarded to key management is as follows:
Salaries and other short-term benefits
Share-based payments
21. Interest on long-term debt and other financial charges
Interest on long-term debt
Interest on convertible debentures
Interest on derivative financial instruments
Amortization of deferred financing charges
Other interest
Foreign exchange
Change in fair value of derivative financial instruments
For the years ended December 31,
2018
$
24,004
5,408
2017
$
18,173
4,119
For the years ended December 31,
2018
$
18,092
5,634
(2,843)
650
1,071
5,844
(3,093)
25,355
2017
$
15,963
118
(190)
635
598
(10,132)
4,487
11,479
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 133
22. Additional information relating to consolidated statements of cash flows
Changes in non-cash operating working capital items
Accounts receivable
Prepaid expenses and other assets
Accounts payable and accrued liabilities
Amounts due to related parties
Client deposits and deferred revenues
The following are non-cash items:
For the years ended December 31,
2018
$
(7,100)
(1,528)
4,532
1,358
(185)
(2,923)
2017
$
(15,937)
(3,929)
25,946
183
53
6,316
During the year ended December 31, 2018, the Company issued Class A Shares of $72,209 (2017 – $500) as part of business combinations,
of $4,083 (2017 – $8,500) as settlement of purchase price obligations and of $9,072 (2017 – $13,612) as settlement for PSUs and RSUs.
The Company also cancelled shares previously issued as part of business combinations of $191 (2017 – $4) and recorded adjustments to
accrued share issuance costs of $241 and accrued issuance costs related to the convertible debentures of $238 (share issuance costs of $783
and issuance costs related to the convertible debentures of $484 in 2017) included in accounts payable and accrued liabilities. During the
year ended December 31, 2017, the conversion of holdback shares of $3,566, and the extinguishment with an offset to equity of $2,747 of
puttable financial instrument liabilities were also non-cash items.
Additions to property and equipment included in accounts payable and accrued liabilities of $179 (2017 – $256), additions to intangible
assets included in accounts payable and accrued liabilities of $129 (2017 – $94) are non-cash items during the year ended December 31, 2018.
The changes in non-cash working capital for accounts payable and accrued liabilities exclude the difference between income taxes paid of
$7,916 (2017 – $13,417) and income tax expense of $14,060 (2017 – $11,356) for a net impact of $6,144 for the year ended December 31, 2018
(2017 – $2,061).
23. Commitments and contingent liabilities
COMMITMENTS
The Company leases office space and equipment under non-cancellable operating leases expiring at different dates until 2035. Commitments
include future lease payments totalling $100,967.
The total payments for each of the next five years, and thereafter for commitments are as follows:
2019
2020
2021
2022
2023
Thereafter
$
21,090
17,471
17,073
14,993
14,164
49,383
134,174
CONTINGENT LIABILITIES
In the normal course of business, the Company and its subsidiaries may be 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.
134 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Notes to the Consolidated Financial StatementsDecember 31, 2018 and 2017(in thousands of Canadian dollars, unless noted otherwise – except share and per share information) 24. Capital management
The Company’s capital comprises share capital, retained earnings (deficit), long-term debt and convertible debentures, less cash and cash
equivalents. 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. As at December 31, 2018 and 2017, the Company and one of its subsidiaries are subject to
calculations of excess working capital as required by National Instrument 31-103 Registration Requirements and Exemptions, calculated on
a non-consolidated basis, and they have complied with their respective calculations. The Company and its subsidiaries have also complied
with their restrictive debt covenants under the various credit facilities.
In order to maintain or adjust its capital structure, the Company may issue shares, proceed to the issuance or repayment of debt or
redeem convertible debentures.
25. Related party transactions
In the normal course of business, the Company carries out transactions with related parties which include two related shareholders or with
entities under the same common control as these related shareholders.
Under a former agreement with a related shareholder, this related shareholder was entitled to appoint two of the four directors of the
Company that the holders of Class A Shares are entitled to elect, as long as it holds, directly or indirectly, at least 20% of the outstanding
Class A Shares and Class B Shares, together, on a non-diluted basis. Following the closing of the Company’s bought deal financing comprised of
unsecured convertible debentures (Note 15) and of a Class A Share issuance on December 21, 2017 and subsequent shareholder transactions,
the related party’s beneficial ownership is approximately 18.0% of the Company’s issued and outstanding shares as at December 31, 2018
(19.6 % as at December 31, 2017) and as a result, such agreement terminated and the related party no longer has the right to designate
two appointees to the Company’s Board. This related shareholder is one of the two co-lead arrangers and one of lenders to the Company’s
Credit Facility and is the counterparty to the derivative financial instruments presented as being with a related entity in the table below.
At December 31, 2018, the other related shareholder indirectly owns Class B Special Voting Shares representing approximately 7.4% of the
Company’s issued and outstanding shares (8.1% as at December 31, 2017) and pursuant to the terms of a shareholders’ agreement between
this related shareholder and an entity related to the Company, the related shareholder is entitled to appoint two of the eight directors of the
Company that the holders of Class B Shares are entitled to elect. In order to maintain the rights described above, the related shareholder is
required to maintain a minimum ownership level in the Company and a specified minimum level of assets under management. This related
shareholder is one of the two co-lead arrangers and one of the lenders to the Company’s Credit Facility.
The following table presents transactions either directly with the two related shareholders or with entities under the same common control
as these related shareholders:
Base management fees
Performance fees
Other revenues
Selling, general & administrative expenses
Reference fees
Other
Interest on long-term debt
Net (gain) loss in fair value of derivative financial instruments included
in interest on long-term debt and other financial charges
Acquisition costs
Shares issued as settlement of a purchase price obligation
Cash consideration as settlement of a purchase price obligation
2018
$
44,154
3,779
367
1,701
613
15,946
(3,093)
–
–
8,500
2017
$
43,334
3,767
4,823
1,639
785
15,859
4,487
252
8,500
–
The 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.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 135
26. Segment reporting
The Company has determined that there is one reportable segment, asset management services. The geographical information is provided
in the following table:
Canada
United States of America
Europe and other
Canada
United States of America
Europe and other
Revenues
Non-current assets
For the year ended
December 31, 2018
As at
December 31, 2018
$
268,547
198,261
73,477
540,285
$
599,334
472,472
105,872
1,177,678
Revenues
Non-current assets
For the year ended
December 31, 2017
As at
December 31, 2017
$
223,818
157,818
77,460
459,096
$
514,222
450,032
39,546
1,003,800
Revenues are attributed to countries on the basis of the customer’s location. As at December 31, 2018, non-current assets exclude deferred
income taxes of $20,093 and financial instruments of $5,388 ($11,665 and $3,553 respectively as at December 31, 2017).
27. Subsequent events
Palmer Capital Partners Limited
On December 21, 2018, the Company entered into a purchase agreement with Palmer Capital Partners Limited (“Palmer Capital”), pursuant
to which the Company will acquire an 80% interest in Palmer Capital, a UK focused real estate investment manager, based in London, UK.
The Palmer Capital management shareholders will retain a 20% equity interest in Palmer Capital. The transaction is expected to be completed
once the closing conditions including obtaining regulatory approvals have been satisfied.
Integrated Asset Management
On March 21, 2019, the Company entered into a definitive agreement with Integrated Asset Management Corp. (“IAM”) under which the
Company will acquire all of the outstanding common shares of IAM. The transaction will be implemented by way of a court-approved plan
of arrangement under the Business Corporations Act (Ontario). The transaction is expected to be completed once the closing conditions,
including shareholder, court, and regulatory approvals have been satisfied.
Dividends declared
On March 21, 2019, the Board declared a quarterly dividend of $0.21 per share to shareholders of record as at April 3, 2019 which is payable
on May 1, 2019.
136 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
Notes to the Consolidated Financial StatementsDecember 31, 2018 and 2017(in thousands of Canadian dollars, unless noted otherwise – except share and per share information) Corporate Information
Executive Officers
Jean-Guy Desjardins
Chairman of the Board
and Chief Executive Officer
Vincent Duhamel
Global President and
Chief Operating Officer
Lucas Pontillo
Executive Vice President and Global Chief
Financial Officer
John Valentini
President and Chief Executive Officer,
Fiera Private Alternative Investments
François Bourdon
Global Chief Investment Officer
Violaine Des Roches
Senior Vice President, Chief Legal
and Chief Compliance Officer and
Corporate Secretary
Ted Ecclestone
Executive Vice President and Head of
Private Wealth, Canadian Division
Jean-Philippe Lemay
President and Chief Operating Officer,
Canadian Division
Nicolas Papageorgiou
Chief Investment Officer,
Canadian Division
Daniel Richard
Senior Vice President, Global Human Re-
sources and Corporate Communications
and Chief Human Resources Officer
Benjamin S. Thompson
President and Chief Executive Officer,
U.S. Division
Head Office
1981 McGill College Avenue, Suite 1500
Montreal, Quebec, Canada H3A 0H5
T 514 954-3300
T 1 800 361-3499 (toll free)
F 514 954-5098
info@fieracapital.com
fieracapital.com
Transfer Agent and Registrar for
Fiera Capital Class A Subordinate
voting shares
Computershare Investor Services Inc.
100 University Avenue, 8th Floor
Toronto, Ontario, Canada M5J 2Y1
T 1 800 564-6253
(toll free Canada and United States)
T 514 982-7555
(international direct dial)
computershare.com
Transfer Agent and Registrar
for Fiera Capital Debentures and
Indenture Trustee
Computershare Trust
Company of Canada
1500 Robert-Bourassa Blvd., Suite 700
Montreal, Quebec, Canada H3A 3S8
T 514 982-7888
Auditor
Deloitte LLP
Stock Exchange Listing
• Fiera Capital’s Class-A subordinate
voting shares are listed on the TSX
under the symbol FSZ
• Fiera Capital’s 5.00% convertible
unsecured subordinated debentures
due June 30, 2023, are listed on the
TSX under the symbol FSZDB
Annual and Special Meeting
Centre Mont-Royal
2200 Mansfield Street
Montreal, Quebec, Canada H3A 3R8
Thursday, May 30, 2019, 9:30 a.m.
This document may contain certain forward-looking statements. These statements relate to future events or future performance, and reflect management’s
expectations or beliefs regarding future events, including business and economic conditions and Fiera Capital’s growth, results of operations, performance and
business prospects and opportunities. Such forward-looking statements reflect management’s current beliefs and are based on information currently available to
management. In some cases, forward-looking statements can be identified by terminology such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”,
“potential”, “continue”, “target” or the negative of these terms, or other comparable terminology.
By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and a number of factors could cause actual
events or results to differ materially from the results discussed in the forward-looking statements. In evaluating these statements, readers should specifically
consider various factors that may cause actual results to differ materially from any forward-looking statement.
These factors include, but are not limited to, market and general economic conditions, the nature of the financial services industry, and the risks and uncertainties
detailed from time to time in this Annual Report and Fiera Capital’s interim and annual consolidated financial statements and Management’s Discussion and Analysis
contained herein, as well as Fiera Capital’s Annual Information Form filed on www.sedar.com. These forward-looking statements are made as of the date of this
document, and Fiera Capital assumes no obligation to update or revise them to reflect new events or circumstances, except as required by applicable law.
This document is intended only to provide general information and is not intended to be and should not be construed or relied upon as legal or other professional advice.
Fiera Capital Corporation assumes no liability by providing this guidance to its clients or any other person or entity. The information provided herein may or may not
apply in any particular situation. Users should carefully review the guidance included here to determine applicability. 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. Performance figures pertaining to composites are aggregations of the performance of one or more
client portfolios or pooled funds that represent similar investment strategies. 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. All performance data is time weighted and assumes reinvestment of all distributions
or dividends and does not take into account other charges or income taxes payable that would have reduced returns. Valuations and returns are computed and stated in
Canadian dollars, unless otherwise noted. Past performance is no guarantee of future results and other calculation methods may produce different results. Individual account
or fund performance will vary. Information pertaining to Fiera pooled funds is not to be construed as a public offering of securities in any jurisdictions of Canada or otherwise.
The offering of units of Fiera 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 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.
FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT | 137
Contact Us
NORTH AMERICA
Montreal
Toronto
Calgary
Vancouver
Fiera Capital Corporation
1981 McGill College Avenue
Suite 1500
Montreal, Quebec
H3A 0H5
T 1 800 361-3499
Fiera Capital Corporation
1 Adelaide Street East
Suite 600
Toronto, Ontario
M5C 2V9
T 1 800 994-9002
Fiera Capital Corporation
607 8th Avenue SW
Suite 300
Calgary, Alberta
T2P 0A7
T 403 699-9000
Fiera Capital Corporation
1040 West Georgia Street
Suite 520
Vancouver, British Columbia
V6E 4H1
T 1 877 737-4433
New York
Fiera Capital Inc.
375 Park Avenue
8th Floor
New York, New York
10152
T 212 300-1600
EUROPE
London
Boston
Dayton
Los Angeles
Fiera Capital Inc.
One Lewis Wharf
3rd Floor
Boston, Massachusetts
02110
T 857 264-4900
Fiera Capital Inc.
10050 Innovation Drive
Suite 120
Dayton, Ohio 4
5342
T 937 847-9100
ASIA
Bel Air Investment Advisors
1999 Avenue of the Stars
Suite 3200
Los Angeles, California
90067
T 1 877 229-1500
Frankfurt
Hong Kong
Singapore
Fiera Capital (UK) Limited
39 St James’s Street
London, United Kingdom
SW1A 1JD
T +44 20 7518 2100
Fiera Capital (UK) Limited
Walther-von-Cronberg-Platz 13
Frankfurt, Germany
60594
T +49 69 9202 0750
Clearwater Capital Partners
Suite 3205
No. 9 Queen’s Road Central
Hong Kong
T 852-3713-4800
Clearwater Capital Partners
6 Temasek Boulevard
#38-03
Suntec Tower 4
Singapore 038986
IMPORTANT DISCLOSURES
Fiera Capital Corporation is a global asset management firm with affiliates in various
jurisdictions (collectively, “Fiera Capital”). The information and opinions expressed
herein relate to Fiera Capital’s investment advisory services and investment funds and
are provided for informational purposes only. It is subject to change and should not be
relied upon as the basis of any investment or disposition decisions. While not exhaustive
in nature, these Important Disclosures provide important information about Fiera Capital
and its services and are intended to be read and understood in association with all
materials available at Fiera Capital’s websites.
Past performance is no guarantee of future results. All investments pose the risk of loss
and there is no guarantee that any of the benefits expressed herein will be achieved or
realized. Valuations and returns are computed and stated in Canadian dollars, unless
otherwise noted.
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. It does not take into account any investor’s particular investment objectives,
strategies, tax status or investment horizon. There is no representation or warranty as to
the current accuracy of, nor liability for, decisions based on such information. Any opinions
expressed herein reflect a judgment at the date of publication and are subject to change.
Although statements of fact and data contained in this presentation have been obtained
from, and are based upon, sources that we believe to be reliable, we do not guarantee their
accuracy, and any such information may be incomplete or condensed. No liability will be
accepted for any direct, indirect or consequential loss or damage of any kind arising out of
the use of all or any of this material.
Views expressed regarding a particular company, security, industry or market sector
should not be considered an indication of trading intent of any funds or accounts
managed by any Fiera Capital entity.
Each entity of Fiera Capital only provides investment advisory services or offers
investment funds in the jurisdictions where such member and/or the relevant product
is registered or authorized to provide such services pursuant to an exemption from such
registration. These include the entities listed below. Where an entity operates under an
exemption from registration (the “Exempt Entities”), only its jurisdiction of incorporation
is listed. Details on the particular registration and offering exemptions for the Exempt
Entities’ activities are available upon request.
• Fiera Capital Corporation – Canada, registered: (i) in the categories of exempt market
dealer and portfolio manager in all Provinces and Territories of Canada (ii) in the category
of investment fund manager in the Provinces of Ontario, Québec, Newfoundland and
Labrador; (iii) as a commodity trading manager pursuant to the Commodity Futures Act
(Ontario), (iv) as an adviser under the Commodity Futures Act (Manitoba) and, (v) in
Québec, as derivatives portfolio manager pursuant to the Derivatives Act (Québec);
138 | FIERA CAPITAL CORPORATION 2018 ANNUAL REPORT
• Fiera Capital Inc. – United States, registered as (i) an investment adviser with the U.S.
Securities and Exchange Commission (the “SEC”)* and (ii) a commodity pool operator
with the U.S. Commodity Futures Trading Commission.
• Bel Air Investment Advisors LLC—United States, registered as an investment adviser
with the SEC*.
• Wilkinson Global Asset Management LLC - United States, registered as an investment
advisor with the SEC*.
• Fiera Capital (UK) Limited – United Kingdom, authorized and regulated by the Financial
Conduct Authority. United States, registered as an investment adviser with the SEC*.
• Fiera Capital (IOM) Limited – Isle of Man, licensed by the Isle of Man Financial Services
Authority. United States, registered as an investment adviser with the SEC*.
• Palmer Capital Investors Limited - United Kingdom, authorized and regulated by the
Financial Conduct Authority.
• Fiera Properties Limited – A corporation incorporated under the laws of the province of
Ontario (Canada).
• Fiera Private Lending Inc. – A corporation incorporated under the laws of the province of
Québec (Canada).
• Fiera Infrastructure Inc. – A corporation incorporated under the laws of Canada.
• Fiera Comox Partners Inc. – A corporation incorporated under the laws of Canada.
• Clearwater Capital Partners Singapore Pte Ltd. – Singapore, licensed by the Monetary
Authority of Singapore for the provision of Capital Markets Services in Fund Management
and an Exempt Reporting Adviser with the SEC*.
• Clearwater Capital Partners Hong Kong Limited – Hong Kong, licensed by the Securities
and Futures Commission for the provision of Type 9 Asset Management services and an
Exempt Reporting Adviser with the SEC*.
• Clearwater Capital Partners, L.P. – Cayman Islands, registered with the Cayman Islands
Monetary Authority under the category of Securities, Excluded Persons and an Exempt
Reporting Adviser with the SEC*.
* Neither registration with nor regulation by the SEC implies a certain level of skill or
training.
The interior pages of this brochure were printed on
100% post-consumer recycled paper.