INTERIM FINANCIAL STATEMENTS - Jarislowsky …...FTSE TMX Canada Short Term Bond Index (5%) – S&P/TSX Index Capped TR (95%) ± 5,917,522 9.0 ± 5,603,388 8.7 The impact is presented

INTER IM FINANCIAL STATEMENTS

For the per iod ended June 30, 2015

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Financial Statements

The accompanying notes are an integral part of these financial statements.

Statements Interim of Financial Position (Unaudited)(in thousands canadian dollars, except per unit amounts)

June 30, December 31, Note 2015 2014 —————————— —————————— $ $

Assets

Current assetsInvestments 5 65,438 63,648Cash 877 949Subscriptions receivable 126 78Dividends receivable 72 61 —————————— ——————————Total assets 66,513 64,736 —————————— ——————————

Liabilities

Current liabilitiesRedeemed units payable 73 166Accrued expenses 92 89 —————————— ——————————Total liabilities (excluding net assets attributable to holders of redeemable units) 165 255 —————————— ——————————

Net assets attributable to holders of redeemable units 66,348 64,481 —————————— —————————— —————————— ——————————

Net assets attributable to holders of redeemable units per seriesAdvisor Series 34,860 35,434Series F/E 31,486 29,045Series F5 1 1Series T5 1 1 —————————— —————————— 66,348 64,481 —————————— —————————— —————————— ——————————

Net assets attributable to holders of redeemable units per unit, per seriesAdvisor Series 13.88 14.04Series F/E 14.19 14.27Series F5 9.66 9.95Series T5 9.58 9.92

Approved on behalf of the Manager,National Bank Investments Inc.Tina Tremblay-GirardVice-President, Administration and StrategyJonathan DurocherPresident and chief executive officer

Jarislowsky Fraser Select Canadian Equity Fund

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Statements Interim of Comprehensive Income for the 6-month Periods Ended June 30 (Unaudited)(in thousands canadian dollars, except per unit amounts)

Note 2015 2014 —————————— —————————— $ $

Income

Interest income for distribution purposes 2 4Dividends income 1,034 819Other income 26 -Changes in fair value Net realized gains (losses) on sale investments 1,740 430 Net realized gains (losses) on foreign currencies 34 4 Net realized gains (losses) on forwards currency 4 - Change in net unrealized appreciation/depreciation on investments (2,928) 3,872 Change in unrealized gains/losses on foreign currencies 1 (2) —————————— ——————————Total income (87) 5,127 —————————— ——————————

Expenses 9

Management fees 483 390Custodial fees 6 4Audit fees 2 2Legal fees 1 1Rights and deposits 12 8Securityholder reporting costs 16 26Professional fees 4 1Withholding taxes 2 42 35Transaction costs on purchase and sale of investments 10 12 5 —————————— ——————————Total expenses 578 472 —————————— ——————————

Increase (decrease) in net assets attributable to holders of redeemable units (665) 4,655 —————————— —————————— —————————— ——————————

Increase (decrease) in net assets attributable to holders of redeemable units per seriesAdvisor Series (425) 2,504Series F/E (240) 2,151Series F5 - n/aSeries T5 - n/a —————————— —————————— (665) 4,655 —————————— —————————— —————————— ——————————

Increase (decrease) in net assets attributable to holders of redeemable units per unit, per series 2Advisor Series (0.17) 1.12Series F/E (0.11) 1.22Series F5 (0.04) n/aSeries T5 (0.10) n/a

Jarislowsky Fraser Select Canadian Equity Fund (continued)

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Statements Interim of Changes in Net Assets Attributable to Holders of Redeemable Units per Series for the 6-month Periods Ended June 30 (Unaudited)(in thousands canadian dollars)

Advisor Series Series F/E Series F5 Série T5

Note 2015 2014 2015 2014 2015 2015 —————————— —————————— —————————— —————————— —————————— —————————— $ $ $ $ $ $

Net assets attributable to holders of redeemable units, beginning of period 35,434 27,342 29,045 20,386 1 1

—————————— —————————— —————————— —————————— —————————— ——————————

Increase (decrease) in net assets attributable to holders of redeemable units (425) 2,504 (240) 2,151 - -

—————————— —————————— —————————— —————————— —————————— ——————————

Redeemable units transactions 7Proceeds from redeemable units issued 4,890 4,634 5,555 5,032 - -Redemption of redeemable units (5,039) (3,005) (2,874) (1,279) - - —————————— —————————— —————————— —————————— —————————— ——————————Total redeemable units transactions (149) 1,629 2,681 3,753 - - —————————— —————————— —————————— —————————— —————————— ——————————

Net increase (decrease) in net assets attributable to holders of redeemable units (574) 4,133 2,441 5,904 - -

—————————— —————————— —————————— —————————— —————————— ——————————

Net assets attributable to holders of redeemable units, end of period 34,860 31,475 31,486 26,290 1 1

—————————— —————————— —————————— —————————— —————————— —————————— —————————— —————————— —————————— —————————— —————————— ——————————

Redeemable units transactionsRedeemable units outstanding, beginning of period 2,523,107 2,147,741 2,034,770 1,580,670 101 101Redeemable units issued 341,860 354,808 382,576 378,139 - -Redeemable units issued on reinvestments - - - - 3 3Redeemable units redeemed (353,759) (228,936) (198,315) (94,796) - - —————————— —————————— —————————— —————————— —————————— ——————————Redeemable units outstanding, end of period 2,511,208 2,273,613 2,219,031 1,864,013 104 104 —————————— —————————— —————————— —————————— —————————— —————————— —————————— —————————— —————————— —————————— —————————— ——————————


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Statements Interim of Cash Flows for the 6-month Periods Ended June 30 (Unaudited)(in thousands canadian dollars)

Note 2015 2014 —————————— —————————— $ $Cash flows from operating activitiesIncrease (decrease) in net assets attributable to holders of redeemable units (665) 4,655Adjustements for: Net realized gains (losses) on sale investments (1,740) (430) Net realized gains (losses) on foreign currencies (34) (4) Net realized gains (losses) on forwards currency (4) - Change in net unrealized appreciation/depreciation on investments 2,928 (3,872) Change in unrealized gains/losses on foreign currencies (1) 2Purchases of investments (10,321) (8,712)Proceeds from sale and maturity of investments 7,343 2,466Dividends receivable (11) (45)Accrued expenses 3 12 —————————— ——————————Net cash from operating activities (2,502) (5,928) —————————— ——————————

Cash flows used in financing activities 2Proceeds from issuances of redeemable units 10,397 9,899Amounts paid on redemption of redeemable units (8,006) (4,282) —————————— ——————————Net cash used in financing activities 2,391 5,617 —————————— ——————————

Net realized gains (losses) on foreign currencies 34 4Net realized gains (losses) on forwards currency 4 -Change in unrealized gains/losses on foreign currencies 1 (2)Net increase (decrease) for the period (111) (311)Cash (bank overdraft), beginning of period 949 660 —————————— ——————————Cash (bank overdraft), end of period 877 351 —————————— ——————————

Included in cash flows from operating activitiesInterest received 2 4Dividends received, net of withholding taxes 981 739


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Informations on Financial Instruments

Currency Risk (Note 5)

June 30, 2015 December 31, 2014 —————————————————— —————————————————— Percentage of Percentage of Currency Exposition Net Assets Exposition Net Assets—————————————————— ———————— ———————— ———————— ———————— $ % $ %American Dollar 10,110,457 15.4 9,637,842 14.9Euro 1,672,962 2.6 859,971 1.3Japanese Yen (36) (0.0) 451,106 0.7Norwegian Krone n/a n/a 267,996 0.4Pound Sterling 9,675 0.0 575,134 0.9Swiss Franc 264,188 0.4 260,941 0.4

This fund has no investments in other mutual funds.

Numbers shown include monetary and non-monetary instruments.

Based on the assumption that the Canadian Dollar had risen or fallen by 5% in relation toall other currencies, with all other variables held constant, net assets and results of thefund would have varied by approximately $602,862 ($602,650 as at December 31, 2014).

Price Risk (Note 5)

June 30, 2015 December 31, 2014 —————————————————— —————————————————— Impact on Percentage Impact on PercentageThe Funds’ Benchmark net assets of net net assets of net Composition and results assets and results assets—————————————————— ———————— ———————— ———————— ———————— $ % $ %FTSE TMX Canada Short Term Bond Index (5%) – S&P/TSX Index Capped TR (95%) ± 5,917,522 9.0 ± 5,603,388 8.7

The impact is presented in the event that the benchmark’s performance would rise or fallby 10%, with all variables held constant. This impact is presented on a 36-month historicalcorrelation between the fund’s fluctuating performance and the reference index.

Concentration Risk (Note 5)

Percentage of net assets —————————————————————————— June 30, December 31,Asset Mix 2015 2014————————————————————— ————————— —————————

% %Canadian Equity 79.2 81.1Cash, money market

and other Net assets 1.4 1.3International Equity 6.2 6.5US Equity 13.2 11.1

Fair Value of Financial Instruments Table (Note 5)

June 30, 2015 Level 1 Level 2 Level 3 Total—————————————————— ———————— ———————— ———————— ———————— $ $ $ $Common shares 65,438,280 n/a n/a 65,438,280

During the period ended June 30, 2015, there were no significant transfers of investmentsbetween Level 1, Level 2 and Level 3.

December 31, 2014 Level 1 Level 2 Level 3 Total—————————————————— ———————— ———————— ———————— ———————— $ $ $ $Common shares 63,648,281 n/a n/a 63,648,281

During the year ended December 31, 2014, there were no significant transfers of investmentsbetween Level 1, Level 2 and Level 3.

The breakdown of securities between the different levels has been changed due to a changeof classification methodology which better reflects the industry trends.


Schedule of Investments as at June 30, 2015(in canadian dollars)

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Canadian Equities (80.2%)Consumer Discretionary (8.9%)

Aimia Inc. 76,200 1,278,291 1,036,320Canadian Tire Ltd., Class A 12,710 976,849 1,697,802Corus Entertainment Inc., Class B 37,620 796,738 627,125Gildan Activewear Inc. 17,000 685,205 705,330Thomson Reuters Corp. 37,390 1,396,727 1,778,268

————————— ————————— 5,133,810 5,844,845

————————— —————————Consumer Staples (8.5%)

Alimentation Couche-Tard Inc., Class B 13,190 700,794 704,742George Weston Ltd. 4,200 309,319 412,062Jean Coutu Group Inc., Class A 21,830 254,082 506,456Loblaw Companies Ltd. 29,646 1,264,071 1,870,070Metro Inc. 61,170 977,520 2,050,418

————————— ————————— 3,505,786 5,543,748

————————— —————————Energy (20.9%)

AltaGas Ltd. 22,670 950,298 862,367ARC Resources Ltd. 29,600 719,823 633,440Cameco Corp. 48,830 1,090,492 872,592Canadian Natural Resources Ltd. 59,380 2,359,092 2,012,982Cenovus Energy Inc. 81,450 2,403,909 1,626,556Enbridge Inc. 39,640 1,661,796 2,315,372Inter Pipeline Ltd. 23,420 580,196 672,154Keyera Corp. 18,040 390,602 752,268Pembina Pipeline Corporation 18,340 519,600 740,386Suncor Energy Inc. 65,960 2,388,369 2,269,024Vermilion Energy Inc. 17,900 1,214,495 965,705

————————— ————————— 14,278,672 13,722,846

————————— —————————Financials (25.4%)

Bank of Nova Scotia 52,740 3,127,447 3,400,148Great-West Lifeco Inc. 33,880 926,825 1,231,877Industrial Alliance, Insurance & Financial Services Inc. 22,510 939,354 945,645Intact Financial Corp. 15,630 1,060,318 1,356,528Manulife Financial Corp. 88,980 1,567,383 2,065,226Royal Bank of Canada 46,150 2,791,106 3,524,937Toronto-Dominion Bank 77,180 3,276,494 4,093,627

————————— ————————— 13,688,927 16,617,988

————————— —————————Industrials (8.8%)

CAE Inc. 61,120 750,377 908,854Canadian National Railway Co. 30,900 1,396,521 2,226,654SNC-Lavalin Group Inc. 35,420 1,867,765 1,486,223Stantec Inc. 30,600 907,290 1,116,900

————————— ————————— 4,921,953 5,738,631

————————— —————————Information Technology (4.9%)

CGI Group Inc., Class A 21,340 1,166,103 1,042,459Descartes Systems Group Inc./The 42,230 642,522 846,712Open Text Corp. 25,700 1,021,613 1,303,761

————————— ————————— 2,830,238 3,192,932

————————— —————————Materials (1.1%)

Potash Corporation of Saskatchewan Inc. 18,640 782,285 720,995 ————————— —————————Utilities (1.7%)

Canadian Utilities Ltd., Class A 11,640 311,822 418,691Innergex Renewable Energy Inc. 68,180 717,470 724,072

————————— ————————— 1,029,292 1,142,763

————————— —————————

Total Canadian Equities 46,170,963 52,524,748 ————————— —————————

Global Equities (19.4%)Australia (0.3%)

BHP Billiton Ltd., ADR 4,010 278,178 203,896 ————————— —————————France (3.2%)

AXA 22,600 681,910 712,071Lafarge SA 4,000 329,103 329,990Louis Vuitton Moet Hennessy 1,740 298,120 380,794Sanofi-Aventis, ADR 7,400 306,361 456,215Schneider Electric SA 2,900 223,941 250,107

————————— ————————— 1,839,435 2,129,177

————————— —————————Germany (1,3%)

Bayer AG 2,340 296,374 476,809Siemens Ag 3,760 452,070 412,051

————————— ————————— 748,444 888,860

————————— —————————Switzerland (0.5%)

Nestlé SA 2,930 165,063 264,187Nestlé SA, ADR 500 28,886 45,064

————————— ————————— 193,949 309,252

————————— —————————United Kingdom (0.9%)

HSBC Holdings PLC, ADR 10,538 575,534 589,919United States (13.2%)3M Co. 2,210 213,117 425,747Becton, Dickinson and Co. 2,510 197,546 444,103Borg Warner Inc. 4,880 309,088 346,325CA Technologies Inc. 11,740 400,551 429,487Capital One Financial Corp. 6,900 674,453 757,876DaVita Inc. 6,700 679,740 664,861General Electric Co. 14,900 509,802 494,470Google Inc. 231 - 150,177Google Inc., Class A 231 206,477 155,812IMS Health Holdings Inc. 13,600 503,900 520,633International Business Machines Corp. 1,780 304,882 361,629Johnson & Johnson 3,420 213,856 416,095Microsoft Corp. 9,020 359,361 497,393Noble Energy Inc. 12,200 651,454 650,349Oracle Corp. 10,200 344,451 513,414PepsiCo Inc. 3,110 203,229 362,569US Bancorp 9,360 327,272 507,374Verisk Analytics Inc. 4,380 397,143 398,042Walgreens Boots Alliance Inc. 6,600 222,039 696,073

————————— ————————— 6,718,361 8,792,429

————————— —————————

Total Global Equities 10,353,901 12,913,532 ————————— —————————

Total Investments (98.6%) 56,524,864* 65,438,280 ————————— —————————

Cash and Other Net Assets (1.4%) 909,892 —————————

Net Assets (100%) 66,348,172 ————————— —————————* Average cost of Investments as at December 31, 2014 is $51,806,449.

Number Average Fair of Shares Cost Value ————————— ————————— ————————— $ $

Number Average Fair of Shares Cost Value ————————— ————————— ————————— $ $


as at June 30, 2015 and December 31, 2014 (Unaudited)

Notes to Financial Statements

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NOTE 1: GENERAL INFORMATION

The following are open-ended mutual fund trusts formed under thelaws of the Province of Ontario by an instrument of trust on thefollowing dates:

Funds Date EstablishedJarislowsky Fraser Select Income Fund October 7, 2010Jarislowsky Fraser Select Balanced Fund October 7, 2010Jarislowsky Fraser Select Canadian Equity Fund October 7, 2010

Collectively the mutual fund trusts and the mutual fund corporationsare known as the “Funds.” The manager of the Funds, National BankInvestments Inc. (hereafter the “Manager”), and the trustee of theFunds, Natcan Trust Company, are wholly-owned subsidiaries ofNational Bank of Canada. The headquarters, which is also the Funds’principal place of business, is located at 1100 Robert-BourassaStreet, 10th floor, Montreal, Quebec, H3B 2G7, Canada.

The Board of Directors of National Bank Investments Inc. authorizedthe publication of these financial statements on August 12th, 2015.

The Funds are a pool of money contributed to by many investors withsimilar investment objectives in order to make a collectiveinvestment. Management of these investments is performed byspecialists who act as portfolio advisors. The portfolio advisorinvests the assets based on the objectives of the investment Fund.The portfolio may be invested in several different securities at thesame time, enabling investors to diversify their investments in amanner in which they would not be able to achieve on their own.Mutual funds invest in a variety of securities such as equitysecurities, bonds, debentures, and money market instruments andalso keep a portion of the portfolio in cash. Each investment type isassociated with a different risk and return potential. The investmentobjectives of each Fund are detailed in their Prospectus.

Funds can provide six series of units called Advisor, E, F, F5, O andT5 Series. Each series is intended for a type of investor and includesmanagement fees and administrative expenses that are listed inNote 9.

Advisor and T5 Series are offered to all investors with either theinitial sales charge option, deferred sales charge option or low salescharge option. The distinction between Advisor Series securities andT5 Series securities is based on the distribution policy. T5 Seriessecurities are intended for investors seeking to obtain regular fixedmonthly distributions.

E Series units are intended for independent investors who have anaccount with a dealer which offers discount brokerage services andwhich has entered into an agreement with National Bank InvestmentsInc. The management fees for this series are lower.

F Series and F5 Series units are only offered to investors with a fixedfee account with dealers who have entered into an agreement withNational Bank Investments Inc. These investors pay their dealerannual compensation based on the asset value of their accountinstead of commissions on each trade.

The distinction between F Series securities and F5 Series securitiesis based on the distribution policy. F5 Series securities are intendedfor investors seeking to obtain regular fixed monthly distributions.

O Series units are only available to selected investors that haveentered into an O Series account agreement with National BankInvestments Inc. O Series units are offered on a no-load basis.

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Basis of presentationThe presented Funds’ interim financial statements were prepared inaccordance with International Financial Reporting Standards(hereafter, “IFRS”), published in CPA Canada Handbook includingInternational Accounting Standard IAS 34 – Interim FinancialReporting as well as the standards governed by Regulation 81-106Respecting Investment Fund Continuous Disclosure. These financialstatements have been prepared under the historical costconvention, as modified by the revaluation of financial assets andliabilities at fair value through profit or loss (“FVTPL”).

2.1 Financial instruments

a) ClassificationThe Funds classify their financial instruments in the followingcategories in accordance with IAS 39 Financial Instruments –Recognitionand Measurement:

Financial assets and liabilities at fair value through profit or loss:The assets and liabilities at FVTPL include the financial assets andliabilities classified as held for trading or those satisfies certainconditions and are designated as being at FVTPL upon initial recognition.

A financial asset or liability at FVTPL is an investment classified asheld for trading if it has been acquired principally for the purposeof selling in the near term; on initial recognition it is a part of aportfolio of identified financial instruments that are managedtogether, and has a recent actual pattern of short-term profit taking;or is a derivative. The investments are designated in this categorybecause they are managed on a fair value basis according to theFunds’ investment strategy.

Financials assets and liabilities at FVTPL on the Statement of FinancialPosition included: investments which included fixed incomesecurities, shares, mutual funds, index equivalents and gains/lossesand income from these financials instruments on the Statements ofComprehensive Income included: Net realized gains (losses) on saleinvestments, Net realized gains (losses) on foreign currencies,Change in net unrealized appreciation/depreciation on investments,Change in unrealized gains/losses on foreign currencies.

Financial assets classified in loans and receivables:Loans and receivables are non-derivative financial assets with fixedor determinable payments that are not quoted in an active market.In this category, the Funds have included cash, subscriptionsreceivable, proceeds from sale of investments receivable, interestreceivable, dividends receivable and other assets receivable.


26

Notes to Financial Statements (continued)

Financial liabilities at amortized cost:This category includes all financial liabilities, except those classifiedas held for trading. In this category, the Funds have included bankoverdrafts, redeemed units payable, accrued expenses, interestpayable, dividends payable, investments payable and distributionspayable.

b) RecognitionInvestment transactions are accounted for on the trade date. Incomeand expenses are recorded using the accrual basis of accounting.The interest income for distribution purposes presented in theStatement of Comprehensive Income is the nominal interestamount. Interest income receivable is shown separately in theStatements of Financial Position based on the debt instruments’stated rates of interest. The Funds do not amortize the premiumspaid or discounts received upon the purchase of fixed incomesecurities. Dividend income is recognized on the ex-dividend date.Foreign revenue is presented before withholding taxes deducted byforeign countries. Withholding taxes deducted by foreign countriesare recorded separately in the Statement of Comprehensive Incomeunder “Withholding taxes”. Gains or losses arising from investmenttransactions and unrealized appreciation or depreciation oninvestments are determined from the cost using the average cost basis.

The income, the realized and unrealized gains (losses) are allocatedamong the different series to pro rata basis of net assets value ofeach series.

Transaction costs, such as brokerage commissions, incurred at thetime of purchase and sale of investments by the Funds arerecognized as “Transaction costs on purchase and sale ofinvestments” in the Statement of Comprehensive Income.

c) Measurement

Initial measurementUpon initial measurement, the Funds’ financial instruments aremeasured at fair value, which, in the case of financial instrumentsmeasured subsequently at amortized cost, is increased by thetransaction costs.

Subsequent measurementFinancial instruments classified as financial assets and liabilities atFVTPL are measured at fair value. Changes in the fair value of thesefinancial instruments are recorded in the unrealized net gains(losses).

The Funds ‘obligations regarding net assets attributable to holdersof redeemable units is recorded at the redemption value as at thedate of the Statement of Financial Position.

All other financial assets and liabilities are measured at amortizedcost. Given the short term of these financial instruments, their valueat amortized cost is similar to their fair value.

Refer to Note 5 for the description of fair value.

d) DerecognitionFinancial assets are derecognized when the contractual rights to thecash flows from the investments have expired or when the Fundshave significantly transferred the risk and financial reward of theirparticipation (ownership). Financial liabilities are derecognizedwhen the obligation specified in the contract is discharged,cancelled or expired. Realized gains and losses are recognizedbased on the average cost method and included in the profit andloss of the period ended in which they occur.

e) Impairment of financial assetsAt each closing date, the Funds verify whether there is objectiveevidence of impairment of their financial assets at amortized cost.If such evidence exists, the Funds recognize an impairment losswhich corresponds to the difference between the amortized cost ofthe financial asset and the present value of the estimated futurecash flows, discounted using the instrument’s original effectiveinterest rate. Impairment losses relating to financial assets atamortized cost are reversed in subsequent years if the amount ofthe loss decreases and the decrease can be related objectively toan event occurring after the impairment was recognized.

2.2 CashCash includes cash deposits with various financial institutions, thatis, cash and bank overdrafts if applicable.

2.3 Redeemable unitsThe Funds’ obligation in respect of the outstanding redeemableunits is at the request of the unit holder. Also, the units include acontractual obligation to distribute any net income and net realizedcapital gains at least annually. Therefore, the ongoing redemptionfeature is not the units only contractual obligation and the unitsseries’do not have identical characteristics: difference in distributionpolicy for management fees and commissions. Consequently, theFunds’outstanding redeemable units (refer to Note 3) are classified asfinancial liabilities in accordance with the requirements of IAS 32,Financial Instruments: Presentation (“IAS 32”).

2.4 Valuation of unitsFor the purposes of treatment of the operations of the unitholdersin accordance with National Instrument 81-106 InformationContinuous investment funds, the net asset value (“NAV”) of a Fundextends of the difference between total of its assets and itsliabilities. The NAV of a unit of each series within a Fund isdetermined each business day when the Toronto Stock Exchange isopen by dividing the NAV attributable to each series by the numberof units outstanding for the corresponding series. Funds issue unitsat NAV. The unitholder may request redemption or exchange of allevaluation dates at the NAV.


27


Net assets attributable to redeemable unitholders refers to the netassets calculated in accordance with IFRS. For the calculation of thenet asset attributable to redeemable unitholders, assets andliabilities are measured at fair value. The net assets attributable toredeemable unitholders of a unit is calculated by dividing the netassets attributable to redeemable unitholders by the number ofunits then outstanding. The increase or decrease in net assets fromoperations per unit redeemable represents the increase or decreasein net assets attributable to redeemable unitholders for the perioddivided by the average number of units outstanding during the period.

Canadian Securities Administrators (“CSA”) regulations allow theFunds to respect the IFRS provisions for financial statements reporting,without changing their method of calculating the transactional NAVfor transaction processing purposes unitholders of the Fund. Asrequired by the CSA, a reconciliation of the transactional NAV per unitand the net assets per unit calculated under IFRS of the Funds ispresented in note 6 of the financial statements.

2.5 Increase or decrease in net assets/equity attributable toholders of redeemable units per unit

The increase or decrease in net assets attributable to operations perunit presented in the Statement of Comprehensive Income representsthe increase or decrease in net assets attributable to holders ofredeemable units for the period, divided by the average number ofunits outstanding during the period.

2.6 Units issuance and redemptionUnits are issued or redeemed at the NAV on the last business day ofthe year ended during which the deposit for the purchase of units wasreceived or the redemption of units request was received by the trusteewithin the deadlines stipulated in the trust agreement. The Statementsof Changes in Net Assets attribuable to holders of redeemable unitsidentify changes in capital of the Fund in the presented periods.

2.7 Distributions to unitholdersThe net income and net realized capital gains of each Fund aredistributed to unitholders of the Fund according to the periodprovided in the following table, pro rata to the units held by them.Unrealized gains and losses are included in the net assetsattributable to unitholders. However, they will be distributed tounitholders once only the gain or loss is realized. Capital losses arenot distributed to unitholders but are retained by the Funds to beapplied against future capital gains.

The net income of the Funds and net capital gains are paid tounitholders, based on the following table:

Distribution Distribution of Net Realized Funds of Net Income Capital GainsJarislowsky Fraser Select Income Fund*

Series Advisor Monthly AnnuallySeries F/E Monthly Annually

Jarislowsky Fraser Select Balanced FundSeries Advisor Quarterly AnnuallySeries F/E Quarterly AnnuallySeries F5 Monthly AnnuallySeries T5 Monthly Annually

Jarislowsky Fraser Select Canadian Equity FundSeries Advisor Annually AnnuallySeries F/E Annually AnnuallySeries F5 Monthly AnnuallySeries T5 Monthly Annually

* These funds may also distribute return of capital on a monthly basis.

All annual distributions take place in December of each year.

2.8 Foreign currency translationThe Funds’ purchases and redemptions are denominated in Canadiandollars. The functional and presentation currency of the Funds is theCanadian dollar.

The fair value of investments, other assets and liabilitiesdenominated in foreign currencies is translated into the functionalcurrency at the exchange rate in effect as at the date of the Statementof Financial Position.

Foreign currency transactions are translated into the functionalcurrency of the Funds, using the exchange rates prevailing at thedates of the transactions (closing rate). Foreign exchange gains andlosses resulting from the settlement of such transactions and fromthe remeasurement of monetary items at period-end exchange ratesare recognized in the Statement of Comprehensive Income under“Change in unrealized gains/losses on foreign currencies” and “Netrealized gains (losses) on sale of investments”.

2.9 TaxesThe Funds are currently subject to withholding taxes imposed bycertain countries on investment income and capital gains. Suchincome and gains are recorded on a gross basis and the relatedwithholding taxes are shown as a tax expense in the Statement ofComprehensive Income.

Pursuant to the Income Tax Act (Canada) and the Taxation Act(hereafter, collectively, the “Tax Acts”), the Funds qualify as mutualfund trusts, all of their net income for tax purposes and sufficientcapital gains realized in any year are distributed to unitholders suchthat no income tax is payable by these Funds.


28


Therefore, the Funds do not recognize any income tax. Given thatthese Funds do not record any income tax expenses, the tax savingslinked to capital and non-capital losses was not recorded as adeferred income tax asset in the Statement of Financial Position.

NOTE 3: ACCOUNTING ESTIMATES AND CRITICAL JUDGMENTS

When preparing the financial statements, the Funds’ Managementundertakes a number of judgments, estimates and assumptionsabout the recognition and measurement of assets, liabilities,income and expenses.

Significant judgementsThe following are significant management judgments in applyingthe accounting policies of the Funds that have the most significanteffect on the financial statements.

Functional currencyThe Manager considers the Canadian dollar to be the functionalcurrency in which the Funds operates, because it is the currencywhich, in their opinion, most faithfully represents the economiceffects of the underlying transactions, events and conditions of theFunds. Moreover, the Canadian dollar is the currency in which theFunds assess their performance. The Funds issue and redeem theirunits in Canadian dollars.

Units classificationThe criteria contained within IAS 32 Financial Instruments:Presentation will result in the classification of the units as liabitieswithin the Funds’ Statement of Financial Position, unless allconditions required for equity classification are met. All the units ofthe Funds are presented as liabilities.

Estimation uncertaintiesInformation about estimates and assumptions that have the mostsignificant effect on recognition and measurement of assets,liabilities, income and expenses is provided below.

Fair value of financial instrumentsAs described in Note 5 – Financial instruments disclosures, theManager has taken a position when the closing price does not fallwithin that day’s bid-ask spread. IFRSs stipulate that the Managermust determine the traded price by considering the character thatis most representative of fair value based on the specific facts andcircumstances. Management has taken the position that when sucha situation arises investments are measured at the bid price.

Furthermore, the Manager exercises its judgment in selecting theappropriate valuation technique for financial instruments that arenot listed on an active market. The valuation techniques used arethose that are currently applied by market participants.

NOTE 4: CHANGES IN ACCOUNTING STANDARDS THAT ARE NOT YET IN EFFECT

At the date of authorization of these financial statements, certainnew standards, amendments and interpretations to existingstandards have been published by the International AccountingStandards Board (hereafter, “IASB”) but are not yet effective, andhave not been early adopted by the Funds.

Information on the new standard that could be relevant for theFunds’ financial statements is presented below.

IFRS 9 Financial Instruments (IFRS 9)In July 2014, the IASB published IFRS 9 which replaces IAS 39Financial Instruments: Recognition and Measurement. IFRS 9introduces improvements which include a logical model forclassification and measurement of financial assets, a single,forward-looking “expected loss” impairment model and asubstantially-reformed approach to hedge accounting. IFRS 9 iseffective for annual reporting periods beginning on or after January1, 2018. Earlier application is permitted. The Funds have not yetassess the impact of this new standard on their financialstatements.

The Manager does not expect that the new standards andinterpretations that have been published will have an impact on thefinancial statements of the Funds.

NOTE 5: FINANCIAL INSTRUMENT DISCLOSURES

Financial risksInvestment activities of the Funds expose them to some financialrisks. The basic types of risk to which the Funds are exposed are thecredit risk, liquidity risk, market risk, and concentration risk. TheFunds’ Manager seeks to maximize returns derived for the level ofrisk to which the Funds are exposed and seeks to minimize theserisks by entrusting the management of the Funds’ portfolios toseasoned portfolio management advisors who oversee dailyportfolio management based on market events and the investmentpolicy of each Fund.

Tables quantifying the various financial risks are presentedfollowing the statement of cash flows for each of the funds for whichexposure to risk is important at the end of the year/period. Thesepresented analyses of sensibility may differ from actual results andthe differences could be significant.

Credit riskCredit risk is the risk that a commitment with the Fund is notrespected by the counterparty of the financial instrument. TheFunds’ credit risk is derived primarily from debt securities. The fairvalue of investments represents the maximum credit risk as at theend of the period. The fair value of a financial instrument reflectsthe creditworthiness and the credit rating of the issuer. The Funds’


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policy with respect to credit risk management is to invest in financialassets whose credit rating is established by recognized credit ratingagencies. Credit risk is reduced by the choice of financial assets witha good reputation and having previously been subjected to arigorous credit assessment. A table containing the distribution ofsecurities under their credit rating is presented following theStatement of Cash Flows for each fund whose exposure to credit riskis significant at the end of the period.

The securities transactions are settled upon delivery by brokers. Thedefault risk is considered low because the supply of securities isconducted once the broker has received payment. The transactionfails when a party fails to meet its commitments.

The Funds are exposed to deposit credit risk. If the securitycustodian becomes insolvent, the Funds may encounter a delay inaccessing their assets. This risk is limited given that the securitycustodian is under the control of the National Bank of Canada, areputable financial institution with an excellent credit rating.

In accordance with the investment restrictions, the Funds may notinvest more than 10% of their net assets in a single issuer with theexception of securities issued by the Government of Canada, whichhave a good credit rating.

In accordance with the investment policy of the Funds, the creditrisk is monitored regularly by the Funds’ Manager. In addition, theportfolio manager responsibility to ensure that invests in securitiesrespecting the credit rating standards for each Fund, as itsmanagement mandate.

Liquidity riskLiquidity risk is defined as the risk of a Fund having difficultymeeting its obligations or making a commitment, resulting in itscreditors incurring a financial loss. The unitholders may redeemtheir units each valuation day. The Funds may not purchase anilliquid asset if, by following this acquisition, more than 10% of theirNAV would consist of illiquid assets and cannot have invested morethan 15% of their NAV in illiquid assets for 90 days or more. Sincethe Funds invest in active markets, they can dispose of their assetsquickly. The Funds may invest in unlisted derivatives, debt securitiesand equity securities that are not traded on an active market. As aresult, the Funds may not be able to quickly liquidate theirinvestments in these instruments at amounts which approximatetheir fair values, or be able to respond to specific events such asdeterioration in the creditworthiness of any particular issuer. Inaccordance with the Funds’ policy, the Manager monitors theliquidity position on a daily basis. Redeemable units are redeemableon demand at the holder’s option. Maturities for other financialliabilities are within three months for all Funds. The Funds maintaina cash flow and short-term investment level that the Funds’ Managerdeems sufficient to maintain the required liquidities.

Market riskThe Fund’s investments are subject to market risk which is the riskthat the fair value or future

INTERIM FINANCIAL STATEMENTS - Jarislowsky …...FTSE TMX Canada Short Term Bond Index (5%) – S&P/TSX Index Capped TR (95%) ± 5,917,522 9.0 ± 5,603,388 8.7 The impact is presented

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