Financial Statements of
LEITH WHEELER BALANCED FUND
Years ended December 31, 2014 and 2013
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying financial statements of Leith Wheeler Balanced Fund (the “Fund”) have been
prepared by the Manager, Leith Wheeler Investment Counsel Ltd. The Manager is responsible for the
preparation and presentation of the Fund’s financial statements and the development of internal
controls over the financial reporting process.
The Board of Directors of the Manager is responsible for reviewing and approving the financial
statements and for overseeing the Manager’s performance of its financial reporting responsibilities. The
Board of Directors has approved the accompanying financial statements of the Fund.
KPMG LLP, the external auditors of the Fund, were appointed by the Manager. As explained in their
auditors’ report, KPMG LLP have audited the financial statements in accordance with Canadian
generally accepted auditing standards to enable them to express to the unitholders their opinion on the
financial statements. Their auditors’ report is included in this Annual Report.
Leith Wheeler Investment Counsel Ltd.
“James F. Gilliland”
President and Chief Executive Officer
March 25, 2015
“Cecilia Wong”
Chief Financial Officer
KPMG LLP
PO Box 10426 777 Dunsmuir Street
Vancouver BC V7Y 1K3
Canada
Telephone
Fax
Internet
(604) 691-3000
(604) 691-3031
www.kpmg.ca
INDEPENDENT AUDITORS’ REPORT
To the Unitholders of Leith Wheeler Balanced Fund
We have audited the accompanying financial statements of Leith Wheeler Balanced Fund, which
comprise the statements of financial position as at December 31, 2014, December 31, 2013 and
January 1, 2013, the statements of comprehensive income, changes in net assets attributable to
holders of redeemable units and cash flows for the years ended December 31, 2014 and December 31,
2013, and notes, comprising a summary of significant accounting policies and other explanatory
information.
The Manager’s Responsibility for the Financial Statements
The Manager is responsible for the preparation and fair presentation of these financial statements in
accordance with International Financial Reporting Standards, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on our judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, we consider internal control relevant to the entity's preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's
internal control. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by the Manager, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to
provide a basis for our audit opinion.
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
Leith Wheeler Balanced Fund
Page 2
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of
Leith Wheeler Balanced Fund as at December 31, 2014, December 31, 2013 and January 1, 2013, its
financial performance and its cash flows, for the years ended December 31, 2014 and December 31,
2013, in accordance with International Financial Reporting Standards.
Chartered Accountants
March 25, 2015
Vancouver, Canada
LEITH WHEELER BALANCED FUND
Statements of Financial Position
(expressed in $000s except for per unit amounts)
Note
December 31,
2014
December 31,
2013
January 1,
2013
Assets
Cash
$
106
$
177
$
107
Balances due from brokers
216
17
-
Interest and dividends receivable
237
207
160
Subscriptions receivable
217
-
168
84,293
74,499
57,391
85,069
74,900
57,826
68
16
24
162
136
120
40
37
135
270
189
279
Investments
Liabilities
Balances due to brokers
Management fees payable
1
Redemptions payable
Net assets attributable to holders of
redeemable units
$
84,799
$
74,711
$
57,547
Net assets attributable to holders of
redeemable units per unit
$
24.09
$
23.10
$
20.14
The accompanying notes are an integral part of these financial statements.
Approved on behalf of the Board of Directors of
Leith Wheeler Investment Counsel Ltd.,
in its capacity as Manager.
“James F. Gilliland”
“Jonathon D. Palfrey”
Director
1
Director
LEITH WHEELER BALANCED FUND
Statements of Comprehensive Income
(expressed in $000s except for per unit amounts)
Years ended December 31, 2014 and 2013
Note
Revenue:
Interest for distribution purposes
Dividend income
Other income
Changes in fair value of investments:
Net realized gain (loss)
Net change in unrealized appreciation (depreciation)
2014
$
Total revenue
Expenses:
Management fees
Withholding taxes
GST/HST
Commissions and transaction costs
1
2
Total operating expenses
Management fee distributions
1
$
Increase (decrease) in net assets attributable to holders of
redeemable units from operations excluding distributions
1
770
1025
1
2,970
2,056
1,466
7,800
7,291
11,062
899
91
59
27
709
72
46
24
1,076
851
(327)
Net operating expenses
Distributions to holders of redeemable units:
From net investment income
From net realized gains on investments
Management fee distributions
1,020
1,245
-
2013
(255)
749
596
6,542
10,466
(1,235)
(1,782)
(327)
(960)
(303)
(255)
(3,344)
(1,518)
Increase (decrease) in net assets attributable to holders of
redeemable units
$
3,198
$
8,948
Increase (decrease) in net assets attributable to holders of
redeemable units per unit (excluding distributions)
$
1.94
$
3.50
The accompanying notes are an integral part of these financial statements.
2
LEITH WHEELER BALANCED FUND
Statements of Changes in Net Assets Attributable to Holders of Redeemable Units
(expressed in $000s)
Years ended December 31, 2014 and 2013
Note
Balance, beginning of year
2014
$
Increase (decrease) in net assets attributable to
holders of redeemable units
74,711
2013
$
3,198
Redeemable unit transactions:
Issue of redeemable units
Reinvestment of distributions
Redemption of redeemable units
Net increase (decrease) from redeemable
unit transactions
8,948
11,281
3,008
(7,399)
15,474
1,262
(8,520)
6,890
Balance, end of year
$
The accompanying notes are an integral part of these financial statements.
3
84,799
57,547
8,216
$
74,711
LEITH WHEELER BALANCED FUND
Statements of Cash Flows
(expressed in $000s)
Years ended December 31, 2014 and 2013
Note
2014
2013
Cash provided by (used in):
Operating activities:
Increase (decrease) in net assets attributable to
holders of redeemable units
Adjustments for:
Net realized (gain) loss from investments
Net change in unrealized (appreciation)
depreciation from investments
Balances due from brokers
Interest for distribution purposes
Dividend income
Payable to brokers
Management fees payable
Redemptions payable
Subscriptions receivable
Proceeds from sale of investments
Purchases of investments
Interest received
Dividends received
$
Financing activities:
Proceeds from issue of redeemable units
Payments on redemption of redeemable units
Reinvestment of distributions
3,198
$
8,948
(2,970)
(1,466)
(2,056)
(199)
(1,020)
(1,245)
52
26
3
(217)
35,464
(40,232)
998
1,237
(7,800)
(17)
(770)
(1,025)
(8)
16
(98)
168
32,869
(40,711)
732
1,016
(6,961)
(8,146)
11,281
(7,399)
3,008
15,474
(8,520)
1,262
6,890
8,216
Net increase (decrease) in cash
(71)
70
Cash, beginning of year
177
107
Cash, end of year
$
The accompanying notes are an integral part of these financial statements.
4
106
$
177
LEITH WHEELER BALANCED FUND
Schedule of Investment Portfolio
(expressed in $000s)
December 31, 2014
Security
Coupon
Rate %
Maturity Par Value
Fair
Value
Cost
BONDS AND GUARANTEES
Corporate Bonds and Guarantees:
Alliance Pipeline Limited Partnership
Alliance Pipeline Limited Partnership
Alliance Pipeline Limited Partnership
AltaLink LP
AltaLink LP
AltaLink LP
American Express Canada Credit Corp.
Anheuser-Busch InBev Finance Inc.
Arrow Lakes Power
Bank of Montreal
Bank of Montreal
Bank of Montreal
Bank of Montreal
Bank of Montreal
Bank of Nova Scotia
Bank of Nova Scotia
Bank of Nova Scotia
Bank of Nova Scotia
Bank of Nova Scotia
BCIMC Realty Corp.
Bell Canada
Bell Canada
Bell Canada
BRP Finance ULC
Canadian Imperial Bank of Commerce
Canadian Imperial Bank of Commerce
Canadian Imperial Bank of Commerce
Canadian Imperial Bank of Commerce
Canadian Imperial Bank of Commerce
Canadian Real Estate Investment Trust
Canadian Western Bank
Capital Desjardins Inc.
Choice Properties Real Estate Investment Trust
Choice Properties Real Estate Investment Trust
Column Canada Issuer Corp Series 2006- WEM
Cominar Real Estate Investment Trust
Canadian Utilities Ltd.
Enbridge Gas Distribution Inc.
Enbridge Gas Distribution Inc.
Enbridge Gas Distribution Inc.
Enbridge Inc.
First Capital Realty Inc.
FortisAlberta Inc.
GE Capital Canada Funding Co.
GE Capital Canada Funding Co.
Great-West Lifeco Inc.
H&R Real Estate Investment Trust
Home Trust Co.
HSBC Bank of Canada
Hydro One Inc.
Hydro One Inc.
Hydro One Inc.
Integrated Team Solutions PCH Partnership
Manulife Bank of Canada
Manufacturers Life Insurance
Maritimes & Northeast Pipeline LP
7.230
5.546
6.765
3.621
3.668
3.399
2.310
2.375
5.516
6.170
3.120
3.400
3.490
2.960
6.650
2.242
2.462
2.400
2.873
2.650
3.500
3.350
3.250
5.250
2.350
2.350
4.110
2.220
3.000
3.676
2.104
5.541
3.000
4.903
4.934
4.230
4.722
1.850
1.850
4.040
4.260
3.950
4.540
2.420
4.400
6.740
4.778
2.350
2.491
6.930
2.780
5.490
2.235
2.383
4.210
6.900
30-Jun-15 $
31-Dec-23
31-Dec-25
17-Sep-20
06-Nov-23
06-Jun-24
29-Mar-18
25-Jan-18
05-Apr-41
28-Mar-18
19-Sep-19
23-Apr-21
10-Jun-16
02-Aug-16
22-Jan-16
22-Mar-18
14-Mar-19
28-Oct-19
04-Jun-21
29-Jun-17
10-Sep-18
18-Jun-19
17-Jun-20
05-Nov-18
18-Oct-17
24-Jun-19
30-Apr-15
07-Mar-18
28-Oct-19
24-Jul-18
26-Jun-17
01-Jun-16
20-Sep-19
05-Jul-23
15-Jan-22
04-Dec-19
09-Sep-43
24-Apr-17
24-Apr-17
23-Nov-20
01-Feb-21
05-Dec-22
18-Oct-41
31-May-18
08-Feb-18
24-Nov-31
27-Jul-16
24-May-17
13-May-19
01-Jun-32
09-Oct-18
16-Jul-40
09-Dec-16
17-Oct-16
18-Nov-16
30-Nov-19
5
1
116
54
241
203
152
115
157
61
46
139
275
74
374
406
296
111
140
165
89
122
78
170
210
245
54
390
327
44
143
168
109
174
177
206
120
24
126
141
114
57
100
83
273
16
56
129
107
12
28
165
102
122
98
81
17
$
16
128
65
257
208
152
113
157
61
52
139
284
77
382
459
292
111
140
165
89
122
80
169
227
247
54
407
323
44
142
168
121
174
185
220
120
26
126
141
123
61
98
84
275
16
72
136
107
12
37
166
113
122
98
85
21
$
1
127
64
258
217
158
116
158
72
52
141
290
76
381
426
299
113
141
169
91
127
81
175
230
248
54
393
330
44
147
168
114
176
194
215
124
28
128
141
125
61
103
93
277
17
75
134
107
12
40
170
130
123
99
84
19
% of Net
Assets
LEITH WHEELER BALANCED FUND
Schedule of Investment Portfolio (continued)
(expressed in $000s)
December 31, 2014
Security
Coupon
Rate %
Maturity Par Value
Fair
Value
Cost
% of Net
Assets
BONDS AND GUARANTEES (continued)
Corporate Bonds and Guarantees (continued):
Maritimes & Northeast Pipeline LP
Merrill Lynch Financial Assets Inc. 04-Can14 B
Merrill Lynch Financial Assets Inc. 04-Can14 C
Merrill Lynch Financial Assets Inc. 05-Can15 C
Merrill Lynch Financial Assets Inc. 05-Can16 C
Merrill Lynch Financial Assets Inc. 05-Can17 C
Merrill Lynch Financial Assets Inc. 06-Can18 C
National Bank of Canada
North Battleford Power LP
OMERS Realty Corp.
Ontario School Boards Financing Corp.
Plenary Humber LP
Plenary Properties LTAP LP
Real Estate Asset Liquidity Trust 06-2 B
Rogers Communications Inc.
Royal Bank of Canada
Royal Bank of Canada
Royal Bank of Canada
Royal Bank of Canada
Royal Bank of Canada
Royal Bank of Canada
Saputo Inc.
Schooner Trust 05-4 B
Schooner Trust 05-4 C
Shaw Communications Inc.
Spectra Energy Corp.
Sun Life Financial
TELUS Corp.
TELUS Corp.
The Toronto-Dominion Bank
The Toronto-Dominion Bank
The Toronto-Dominion Bank
The Toronto-Dominion Bank
The Toronto-Dominion Bank
The Toronto-Dominion Bank
Thomson Reuters Corp.
TMX Group Ltd.
TransCanada PipeLines Ltd.
Union Gas Ltd.
University of Ontario Institute of Technology
Wells Fargo Canada Corp.
Westcoast Energy Inc.
Westcoast Energy Inc.
Federal Bonds and Guarantees:
Canadian Government Bond
Canadian Government Bond
Canadian Government Bond
Canadian Government Bond
Canadian Government Bond
Canadian Government Bond
Canadian Government Bond
Canadian Government Bond
Canadian Government Bond
Canadian Government Bond
4.340
5.482
5.600
5.265
4.803
4.931
5.040
2.050
4.958
2.470
5.376
2.633
6.288
4.708
5.340
3.450
3.040
2.770
2.890
2.260
2.860
2.650
4.523
4.573
5.500
5.350
4.380
3.750
3.600
2.171
5.480
3.230
2.550
2.563
2.447
3.369
1.975
9.450
2.760
6.351
2.774
3.430
8.500
1.500
1.250
4.250
1.750
1.500
5.750
5.750
5.000
4.000
3.500
30-Nov-19 $
12-Mar-15
12-Mar-15
12-Mar-15
12-Jul-15
12-Nov-15
12-Mar-16
11-Jan-16
31-Dec-32
12-Nov-19
25-Jun-32
18-Aug-15
31-Jan-44
12-Sep-16
22-Mar-21
29-Sep-21
17-Jul-19
11-Dec-18
11-Oct-18
12-Mar-18
04-Mar-21
26-Nov-19
12-Sep-15
12-Sep-15
07-Dec-20
27-Apr-18
02-Mar-17
17-Jan-25
26-Jan-21
02-Apr-18
02-Apr-15
24-Jul-24
22-Dec-21
24-Jun-20
02-Apr-19
23-May-19
03-Oct-16
20-Mar-18
02-Jun-21
15-Oct-34
09-Feb-17
12-Sep-24
04-Sep-18
01-Aug-15
01-Mar-15
01-Jun-41
01-Sep-19
01-Jun-23
01-Jun-29
01-Jun-33
01-Jun-37
01-Jun-41
01-Dec-45
6
102
47
98
95
122
105
112
24
64
96
58
249
90
99
80
169
108
190
85
287
440
210
228
102
123
161
152
141
134
63
505
138
141
238
314
124
89
120
139
125
108
111
11
37
106
59
45
112
272
40
157
272
1,038
$
105
47
99
94
122
105
111
24
64
96
68
248
95
99
80
169
108
191
85
282
441
210
228
90
129
178
157
141
134
63
542
139
141
238
314
125
89
154
139
125
110
111
14
14,373
37
107
65
46
108
366
57
217
333
1,201
$
105
47
98
96
123
107
115
24
72
97
67
250
118
103
91
173
110
195
88
290
450
212
231
103
140
178
160
145
141
64
510
142
141
241
318
128
89
146
141
148
110
112
13
14,568
37
106
65
46
110
395
61
231
361
1,303
17.2
LEITH WHEELER BALANCED FUND
Schedule of Investment Portfolio (continued)
(expressed in $000s)
December 31, 2014
Security
Coupon
Rate %
Maturity Par Value
Fair
Value
Cost
% of Net
Assets
BONDS AND GUARANTEES (continued)
Federal Bonds and Guarantees (continuted):
Canadian Government Bond
Canada Housing Trust
Canada Housing Trust
Canada Housing Trust
Canadian Mortgage Pools 97591051
Canadian Mortgage Pools 97537187
Canadian Mortgage Pools 97595656
Canadian Mortgage Pools 97500982
Canadian Mortgage Pools 97502444
Provincial/Municipal Bonds and Guarantees:
City of Toronto Canada
Municipal Finance Authority of British Columbia
Municipal Finance Authority of British Columbia
Province of Alberta
Province of Alberta
Province of British Columbia
Province of British Columbia
Province of Manitoba
Province of New Brunswick
Province of Nova Scotia
Province of Ontario
Province of Ontario
Province of Ontario
Province of Ontario
Province of Ontario
Province of Ontario
Province of Ontario
Province of Ontario
Province of Ontario
Province of Ontario
Province of Ontario
Province of Quebec
Province of Quebec
Province of Quebec
Province of Quebec
Province of Quebec
Province of Quebec
Province of Saskatchewan
2.750
1.325
4.100
3.800
1.700
1.700
1.650
1.650
1.800
5.342
4.450
4.978
4.500
3.500
4.950
4.300
6.300
4.550
4.400
6.200
5.850
3.450
5.500
1.370
4.200
4.000
3.150
2.850
8.000
4.650
3.000
6.250
5.000
4.500
4.250
6.000
5.000
01-Dec-64 $
15-Sep-16
15-Dec-18
15-Jun-21
15-Aug-17
01-Dec-17
01-Jan-18
01-Apr-18
15-Dec-18
18-Jul-27
01-Jun-20
06-Apr-25
01-Dec-40
01-Jun-31
18-Jun-40
18-Jun-42
05-Mar-31
26-Mar-37
01-Jun-42
02-Jun-31
08-Mar-33
02-Jun-45
02-Jun-18
26-Aug-19
02-Jun-20
02-Jun-21
02-Jun-22
02-Jun-23
02-Jun-26
02-Jun-41
01-Sep-23
01-Jun-32
01-Dec-41
01-Dec-20
01-Dec-21
01-Oct-29
05-Mar-37
50
665
149
177
86
154
15
29
76
39
44
31
98
177
406
34
160
218
139
233
24
502
97
633
6
319
1,549
195
200
815
323
178
245
567
364
144
232
TOTAL BONDS AND GUARANTEES
$
52
668
163
194
85
152
15
28
74
3,968
$
56
667
164
197
87
155
15
29
77
4,162
4.9
45
49
35
107
178
460
35
181
216
162
302
32
505
114
633
7
342
1,570
192
269
921
318
207
283
620
391
186
250
8,610
26,951
45
50
35
121
189
533
41
226
258
165
326
33
519
110
634
7
355
1,638
201
301
1,011
335
250
316
645
411
193
300
9,248
27,978
10.9
33.0
435
548
373
242
1,598
410
462
749
354
1,975
2.3
36
427
463
52
1,502
1,554
1.8
CANADIAN EQUITY
Consumer Discretionary:
Aimia Inc.
BRP Inc.
Canadian Tire Corp. Ltd. Class A
Hudson's Bay Co.
28,100
19,100
6,100
14,400
Consumer Staple:
High Liner Foods Inc.
Saputo Inc.
2,300
43,000
7
LEITH WHEELER BALANCED FUND
Schedule of Investment Portfolio (continued)
(expressed in $000s)
December 31, 2014
Number of
Holdings
Security
Fair
Value
Cost
% of Net
Assets
CANADIAN EQUITY (continued)
Energy:
Calfrac Well Services Ltd.
Cameco Corp.
Canadian Natural Resources Ltd.
Cardinal Energy Ltd.
Encana Corp.
Mullen Group Ltd.
NuVista Energy Ltd.
Prairiesky Royalty Ltd
Raging River Exploration Inc.
Tourmaline Oil Corp.
15,500
33,100
25,100
17,000
61,300
19,600
20,500
5,200
18,600
20,800
Financials:
Bank of Nova Scotia
Bank of Montreal
Canadian Western Bank
CI Financial Corp.
Canadian Imperial Bank of Commerce
Element Financial Corp.
First Capital Realty Inc.
Home Capital Group Inc.
Industrial Alliance Insurance and Financial Services Inc.
Manulife Financial Corp.
National Bank of Canada
Royal Bank of Canada
Sun Life Financial Inc.
The Toronto-Dominion Bank
14,000
1,400
8,700
21,300
9,500
29,300
15,500
17,200
3,400
44,100
4,600
20,600
17,100
34,800
Industrials:
Canadian National Railway Co.
Finning International Inc.
Progressive Waste Solutions
Toromont Industries Ltd.
Westjet Airlines Ltd.
16,900
34,800
400
41,529
12,000
Information Technology:
Constellation Software Inc.
Open Text Corp.
2,050
10,630
Materials:
Agrium Inc
Capstone Mining Corp
First Quantum Minerals Ltd.
Labrador Iron Ore Royalty Corp.
Teck Resources Ltd. Class B
700
33,900
33,200
12,800
28,600
Utilities:
Brookfield Infrastructure Partners LP
Superior Plus Corp.
23,742
20,700
TOTAL CANADIAN EQUITY
8
$
180
662
913
264
1,476
470
174
173
123
663
5,098
$
155
631
902
230
991
418
152
159
136
804
4,578
5.4
620
114
224
710
878
386
274
461
131
717
166
969
652
984
7,286
928
115
285
688
948
414
289
825
151
978
227
1,653
717
1,933
10,151
12.0
497
738
11
297
210
1,753
1,352
878
14
1,184
401
3,829
4.5
123
519
642
708
719
1,427
1.7
70
91
639
408
1,015
2,223
77
69
548
238
454
1,386
1.6
770
221
991
20,054
1,155
249
1,404
26,304
1.6
30.9
LEITH WHEELER BALANCED FUND
Schedule of Investment Portfolio (continued)
(in thousands)
December 31, 2014
Number of
Holdings
Security
Fair
Value
Cost
% of Net
Assets
FOREIGN EQUITY
Consumer Discretionary:
Bed Bath & Beyond Inc.
Carnival Corp.
Gannett Co. Inc.
Gentex Corp.
Lennar Corp. Class B
Mattel, Inc.
Walt Disney Co.
500
9,900
17,500
2,200
1,200
4,100
1,400
Consumer Staple:
Coca-Cola Co.
Procter & Gamble Co.
Sysco Corp.
Walgreens Boots Alliance, Inc.
8,800
6,200
8,700
3,600
Energy:
Apache Corp.
Denbury Resources Inc.
Nabors Industries Ltd.
Tidewater Inc.
World Fuel Services Corp.
8,000
33,200
6,900
7,800
1,200
Financials:
American Express Co.
Berkshire Hathaway Inc. Class B
Cullen/Frost Bankers Inc.
Markel Corp.
Valley National Bank Corp
Washington Federal Inc.
Wells Fargo & Co.
Westamerica Bancorporation
800
3,800
1,800
1,280
22,600
17,200
13,200
1,900
Health Care:
Becton Dickinson and Co.
Covidien PLC
Dentsply International Inc.
Johnson & Johnson
Merck & Co. Inc.
Pfizer Inc.
1,900
300
2,200
4,600
4,600
11,100
Industrials:
3M Co.
Carlisle Companies Inc.
General Dynamics Corp.
Granite Construction Inc.
Heartland Express Inc.
Jacobs Engineering Group Inc.
Rockwell Collins Inc.
United Technologies Corp.
3,100
1,400
800
4,200
4,400
3,100
1,000
1,700
Information Technology:
Altera Corp.
Flir Systems Inc.
Google Inc. Class A
Google Inc. Class C
5,700
6,200
149
131
9
$
34
406
567
37
32
149
58
1,283
$
44
521
649
92
50
147
153
1,656
2.0
247
410
265
121
1,043
431
655
401
318
1,805
2.1
672
487
155
383
53
1,750
582
313
104
293
65
1,357
1.6
30
292
104
526
243
350
416
95
2,056
86
662
148
1,014
255
442
839
108
3,554
4.2
142
20
82
313
189
266
1,012
307
36
136
558
303
401
1,741
2.1
259
96
54
127
69
169
70
147
991
591
147
128
185
138
161
98
226
1,674
2.0
192
169
84
0
244
232
92
80
LEITH WHEELER BALANCED FUND
Schedule of Investment Portfolio (continued)
(expressed in $000s)
December 31, 2014
Number of
Holdings
Security
Fair
Value
Cost
% of Net
Assets
FOREIGN EQUITY (continued)
Information Technology (continued):
Intel Corp.
Microsoft Corp.
9,000
8,400
International Fund:
Leith Wheeler International Equity Plus Fund, Series A
$
1,415,964
Materials:
Bemis Co. Inc.
3,100
Utilities:
MDU Resources Group Inc.
13,500
TOTAL FOREIGN EQUITY
MONEY MARKET SECURITIES
TRANSACTION COSTS
205
236
886
$
379
453
1,480
1.7
13,139
13,139
13,372
13,372
15.8
95
95
163
163
0.2
309
309
22,564
367
367
27,169
0.4
32.1
2,842
2,842
3.4
84,293
99.4
506
0.6
84,799
100.0
(18)
$
TOTAL INVESTMENT PORTFOLIO
OTHER ASSETS LESS LIABILITIES
NET ASSETS
The accompanying notes are an integral part of these financial statements.
10
72,393
$
LEITH WHEELER BALANCED FUND
Notes to Financial Statements - Fund Specific Information
(tabular amounts expressed in $000s)
Years ended December 31, 2014 and 2013
The Leith Wheeler Balanced Fund (the “Fund”) has one class of units outstanding with no series. Please read all
references to series in these financial statements as class.
The Fund Specific Information contained herein should be read in conjunction with the “Notes to Financial
Statements - General Information Related to all Leith Wheeler Investment Funds” beginning after the “Notes to
Financial Statements - Fund Specific Information”.
1.
Management fees and expenses:
Management fees are calculated at a maximum of 1.10% per annum, before GST/HST, of the daily Net Asset
Value of the Fund. Management fee distributions for the year ended December 31, 2014 were approximately
$327,000 (2013 - $255,000).
2.
Withholding tax and other income taxes:
Certain dividends and interest income received by the Fund are subject to withholding tax imposed in the
country of origin. During the year, the average withholding tax rate was 15% (2013 - 14%).
The Fund has capital losses of nil (2013 - nil) available for utilization against capital gains in future years. The
Fund has non-capital losses of nil (2013 - nil) available for utilization against net realized capital gains or noncapital gains in future years.
3.
Redeemable units:
The redeemable unit transactions for the Fund during the years ended December 31, 2014 and 2013, are as
follows:
Outstanding
units at
beginning of year
Purchased
during
the year
Reinvested
distributions
3,234
2,858
469
711
124
57
2014
2013
4.
Redeemed
during
the year
(306)
(392)
Outstanding
units at
end of year
3,521
3,234
Financial risk management:
The investment objective of the Fund is to provide investors with a relatively stable, superior long-term rate of
return, through a balanced portfolio of common shares and fixed income securities.
For a comprehensive discussion of the risks applicable to the Fund refer to note 6 under the “General
Information related to all Leith Wheeler Investment Funds”. Financial risks applicable to the Fund are
discussed in more detail below.
11
LEITH WHEELER BALANCED FUND
Notes to Financial Statements - Fund Specific Information
(tabular amounts expressed in $000s)
Years ended December 31, 2014 and 2013
4.
Financial risk management (continued):
(a) Credit risk:
The majority of the credit risk to which the Fund is exposed is concentrated in debt securities. Credit risk
arising from other financial instruments is not considered significant.
At December 31, 2014 and
December 31 2013, the Fund was invested in debt securities with the following credit quality:
Rating:
AAA
AA
A
BBB
Total
2014
2013
20.0%
38.0%
29.7%
12.3%
21.5%
34.5%
34.7%
9.3%
100.0%
100.0%
Credit ratings are obtained from Standard & Poor's, Moody's, Fitch and/or Dominion Bond Rating
Services. Where one or more rating is obtained for a security, the most common rating has been used.
(b) Liquidity risk:
The Fund’s redeemable units are due on demand. The Fund’s remaining liabilities are due within twelve
months of the period-end of the Fund.
(c) Market risk:
(i)
Interest rate risk:
The table below summarizes the Fund’s exposure to interest rate risk by remaining term to maturity
as at:
Term to maturity
2014
% of total
debt securities
2013
% of total
debt securities
Less than 1 year
1 - 5 years
5 - 10 years
> 10 years
7.1%
35.1%
28.1%
29.7%
1.9%
44.0%
27.3%
26.8%
100.0%
100.0%
Total debt securities
The Manager has determined that a fluctuation in interest rates of 100 basis points is reasonably
possible, considering the economic environment in which the Fund operates. As at December 31,
2014 and 2013, had interest rates increased or decreased by 100 basis points, with all other factors
remaining constant, net assets attributable to redeemable units would have increased or decreased
by approximately $1,988,000 and $1,580,000, respectively. In practice, actual results may differ from
this sensitivity analysis and the difference could be material.
12
LEITH WHEELER BALANCED FUND
Notes to Financial Statements - Fund Specific Information
(tabular amounts expressed in $000s)
Years ended December 31, 2014 and 2013
4.
Financial risk management (continued):
(c) Market risk: (continued)
(ii) Currency risk:
At the reporting date, the carrying value of the Fund’s net financial assets and financial liabilities held
in individual foreign currencies expressed in Canadian dollars and as a percentage of its net assets
were as follows:
Currency exposure
December 31,
December 31,
2014
2013
Percentage of net assets
December 31,
December 31,
2014
2013
US Dollar
Euro
British Pound
Japanese Yen
Swiss Franc
Hong Kong Dollar
Brazilian Real
Netherland Antillean Guilder
Cayman Islands Dollar
Indian Rupee
Danish Krone
Jersey Pound
Swedish Krona
South Korean Won
Chinese Yuan Renminbi
Russian Ruble
New Taiwan Dollar
Columbian Peso
Mexican Peso
Indonesian Rupiah
$
13,181
3,673
2,325
1,049
1,027
913
542
472
383
361
309
269
264
130
-
$
12,835
4,049
1,847
1,284
1,235
432
385
122
423
758
218
180
166
91
39
15.5%
4.3%
2.7%
1.2%
1.2%
1.1%
0.6%
0.6%
0.5%
0.4%
0.4%
0.3%
0.3%
0.2%
-
17.2%
5.4%
2.4%
1.7%
1.7%
0.6%
0.5%
0.2%
0.6%
1.0%
0.3%
0.2%
0.2%
0.1%
0.1%
Total
$
24,898
$
24,064
29.4%
32.2%
As at December 31, 2014 and 2013, had the Canadian dollar strengthened or weakened by 1% in
relation to all foreign currencies, with all other factors remaining constant, net assets attributable to
redeemable units would have increased or decreased by approximately $248,000 and $241,000,
respectively. In practice, actual results may differ from this sensitivity analysis and the difference
could be material.
(iii) Other price risk:
For this Fund, the most significant exposure to other price risk arises from its investment in equity
securities, both directly and indirectly through holdings in underlying investment funds.
As at
December 31, 2014 and 2013, had the relevant benchmark/broad-based indices increased or
decreased by 5%, with all other variables held constant, the net assets attributable to holders of
redeemable units would have increased or decreased by approximately $2,674,000 and $3,724,000,
respectively. In practice, actual results may differ from this sensitivity analysis and these differences
could be material.
13
LEITH WHEELER BALANCED FUND
Notes to Financial Statements - Fund Specific Information
(tabular amounts expressed in $000s)
Years ended December 31, 2014 and 2013
5.
Fair value of financial instruments:
For a general discussion of the Fund’s fair value measurements, refer to note 7 under the “General Information
related to all Leith Wheeler Investment Funds”.
(a) Fair value hierarchy - financial instruments measured at fair value:
The table below analyses financial instruments measured at fair value at the reporting date by the level
in the fair value hierarchy into which the fair value measurement is categorized. The amounts are based
on the values recognized in the statement of financial position.
All fair value measurements below are recurring.
December 31, 2014
Short Term Notes
Bonds
(including Mortgage Backed Securities)
Equities - Long
Investment Fund units
Level 1
$
$
40,101
13,372
$
December 31, 2013
Short Term Notes
Bonds
(including Mortgage Backed Securities)
Equities - Long
Investment Fund units
-
Level 2
53,473
-
$
48,175
30,820
$
2,295
$
26,324
$
-
$
-
$
-
84,293
Total
$
$
2,842
27,978
40,101
13,372
Level 3
24,029
$
-
Total
-
Level 2
36,059
12,116
$
$
27,978
-
Level 1
$
2,842
Level 3
2,295
24,029
36,059
12,116
$
74,499
During the year, there were no transfers of financial instruments between the three levels (2013 - nil).
14
LEITH WHEELER BALANCED FUND
Notes to Financial Statements - Fund Specific Information
(tabular amounts expressed in $000s)
Years ended December 31, 2014 and 2013
6.
Involvement with structured entities:
The table below describes the types of structured entities that in which the Fund holds an interest.
Entity
Nature and purpose
Interest held by the Fund
Investment Funds
To manage assets on behalf of
third party investors and
generate fees for the investment
manager.
Investment in units issued by
the underlying investment funds.
These vehicles are financed
through the issue of units to
investors.
The table below sets out interests held by the Fund in structured entities. The maximum exposure to loss is
the carrying amount of the investment in the underlying funds held.
December 31, 2014
Number of
investee
funds held
Investment fund holding
Underlying Fund
Leith Wheeler International
Equity Plus Fund, Series A
1
Total net
assets of
investee funds
$
Carrying amount
included in
investments
15,693
$
13,372
Principal place
of business
Country of
Domicile
Ownership
interest
Carrying amount
included in
investments in
statement of
financial position
Canada
Canada
85.2%
13,372
Number of
investee
funds held
Total net
assets of
investee funds
Carrying amount
included in
investments
December 31, 2013
Investment fund holding
Underlying Fund
Leith Wheeler International
Equity Plus Fund, Series A
1
Principal place
of business
Country of
Domicile
Canada
Canada
15
$
14,539
Ownership
interest
$
12,116
Carrying amount
included in
investments in
statement of
financial position
83.3%
12,116
LEITH WHEELER BALANCED FUND
Notes to Financial Statements - Fund Specific Information
(tabular amounts expressed in $000s)
Years ended December 31, 2014 and 2013
6.
Involvement with structured entities (continued):
During 2014 and 2013, the Fund did not provide financial support to this structured entity and has no intention
of providing financial or other support. The Fund can redeem its units in the above investment fund at any
time, subject to their being sufficient liquidity in the underlying fund.
7.
Related party transactions:
At December 31, 2014, the Fund owned 1,415,964 Series A units (2013 - 1,294,380) of the Leith Wheeler
International Equity Plus Fund, which is a fund under common management.
During the year, the Fund earned approximately $292,000 in dividend income (2013 - $201,000), $13,000 in
interest income (2013 - $2,000), and nil in capital gains (2013 - nil) on that investment. No additional
management fees are paid by the Fund to the Manager in respect of holding units of this underlying investment
fund.
16
LEITH WHEELER BALANCED FUND
Notes to Financial Statements - General Information Related to all Leith Wheeler Investment Funds
(tabular amounts expressed in $000s)
Years ended December 31, 2014 and 2013
1.
Reporting entity:
The Leith Wheeler Investment Funds (individually, a “Fund” and collectively, the “Funds”) consist of:
Fund
Inception
Leith Wheeler Balanced Fund
Leith Wheeler Canadian Dividend Fund
Leith Wheeler Canadian Equity Fund
Leith Wheeler Corporate Fixed Income Fund
Leith Wheeler Fixed Income Fund
Leith Wheeler Income Advantage Fund
Leith Wheeler International Equity Plus Fund
Leith Wheeler Money Market Fund
Leith Wheeler U.S. Equity Fund
September 22, 1987
December 21, 2010
April 27, 1994
May 29, 2014
April 27, 1994
December 21, 2010
October 31, 2007
April 27, 1994
April 27, 1994
The Funds were established under the laws of British Columbia pursuant to various trust indentures between
Leith Wheeler Investment Counsel Ltd., as manager (the “Manager”), and Canada Trust Company, as trustee.
The Funds’ trustee is CIBC Mellon Trust Company and the Funds’ custodian is the Canadian Imperial Bank
of Commerce.
The trust indentures for all the above Funds, with the exception of the Leith Wheeler Balanced Fund, allow for
an unlimited number of series and an unlimited number of units of each series. Currently authorized series of
units are as follows: Series A units do not carry any management fees and are available to investors that
satisfy certain criteria related to the nature of the investors and certain other matters as established by the
Manager; Series B units carry a management fee and are available to all other investors. In all other respects
the two series are equal. The Balanced Fund has only one class of units outstanding with no series. The
Leith Wheeler Money Market Fund only has Series B units outstanding. All other remaining Funds have
Series A and Series B units outstanding.
The information provided in these financial statements and notes thereto is for the years ended and
December 31, 2014 and 2013. In the year a Fund or series is established, “period” represents the period from
inception to December 31 of that fiscal year.
The general information related to all Funds presented here should be read in conjunction with each respective
Fund’s “Notes to Financial Statements - Fund Specific Information”.
The Funds are unit trusts domiciled in Canada. The address of the Funds’ registered office is at 1500 - 400
Burrard Street, Vancouver B.C., V6C 3A6.
17
LEITH WHEELER BALANCED FUND
Notes to Financial Statements - General Information Related to all Leith Wheeler Investment Funds
(tabular amounts expressed in $000s)
Years ended December 31, 2014 and 2013
2.
Basis of preparation:
(a) Statement of compliance:
The financial statements of the Funds have been prepared in compliance with International Financial
Reporting Standards (“IFRS”).
This is the first time that the Funds have prepared their financial
statements in accordance with IFRS, and IFRS 1 (First - Time Adoption of International Financial
Reporting Standards) has been applied.
The Funds previously prepared financial statements in
accordance with Canadian Generally Accepted Accounting Principles (“Canadian GAAP”). Details of
transition from Canadian GAAP to IFRS are provided in note 8. The financial statements were authorized
for issue by the Manager on March 25, 2015.
(b) Basis of measurement:
The financial statements have been prepared on a historical cost basis except for investments and
derivatives, which are measured at fair value.
(c) Functional and presentation currency:
These financial statements are presented in Canadian dollars, which are the Funds’ functional currency.
(d) Use of estimates and judgment:
The preparation of financial statements in conformity with IFRS requires the Manager to make judgments,
estimates and assumptions that affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are
recognized in the period in which the estimates are revised and in any future period affected.
3.
Significant accounting policies:
The accounting policies set out below have been applied consistently to all periods presented in these financial
statements.
(a) Financial instruments:
(i)
Recognition and measurement:
Financial instruments are required to be classified into one of the following categories: held-fortrading, fair value through profit or loss (“FVTPL”), available-for-sale, loans and receivables, assets
held-to-maturity, and other financial liabilities. All financial instruments are measured at fair value on
initial recognition. Measurement in subsequent periods depends on the classification of the financial
instrument. Transaction costs are included in the initial carrying amount of financial instruments
except for financial instruments classified as held-for-trading or fair value through profit or loss in
which case transaction costs are expensed as incurred.
18
LEITH WHEELER BALANCED FUND
Notes to Financial Statements - General Information Related to all Leith Wheeler Investment Funds
(tabular amounts expressed in $000s)
Years ended December 31, 2014 and 2013
3.
Significant accounting policies (continued):
(a) Financial instruments (continued):
(i)
Recognition and measurement (continued):
Financial assets and financial liabilities held for trading or at fair value through profit or loss are
recognized initially on the trade date, which is the date on which the Funds become a party to the
contractual provisions of the instrument. Other financial assets and financial liabilities are recognized
on the date on which they are originated. The Funds derecognize a financial liability when its
contractual obligations are discharged, cancelled or expire.
Financial assets and liabilities are offset and the net amount presented in the statement of net assets
only when the Funds have a legal right to offset the amounts and intends either to settle on a net
basis or to realize the asset and settle the liability simultaneously.
The Funds have not classified any financial instruments as available-for-sale or assets held to
maturity.
(ii) Held-for-trading and fair value through profit and loss:
Financial instruments classified as held-for-trading or FVTPL are subsequently measured at fair
value at each reporting period with changes in fair value recognized in the statement of
comprehensive income in the period in which they occur. The Funds’ derivative financial assets and
derivative financial liabilities are classified as held-for-trading. The Funds’ investments in securities
are designated as FVTPL.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value of financial assets
and liabilities traded in active markets (such as publicly traded derivatives and marketable securities)
are based on quoted market prices at the close of trading on the reporting date. The Funds use the
last traded market price for both financial assets and financial liabilities where the last traded price
falls within that day’s bid-ask spread. In circumstances where the last traded price is not within the
bid-ask spread, the Manager determines the point within the bid-ask spread that is most
representative of fair value based on the specific facts and circumstances. The Funds’ policy is to
recognize transfers into and out of the fair value hierarchy levels as of the date of the event or change
in circumstances giving rise to the transfer.
The fair value of financial assets and liabilities that are not traded in an active market, including nonpublicly traded derivative instruments, is determined using valuation techniques.
Valuation
techniques also include the use of comparable recent arm’s length transactions, reference to other
instruments that are substantially the same, discounted cash flow analysis, and others commonly
used by market participants and which make the maximum use of observable inputs. Should the
value of the financial asset or liability, in the opinion of the Manager, be inaccurate, unreliable or not
readily available, the fair value is estimated on the basis of the most recently reported information of
a similar financial asset or liability.
19
LEITH WHEELER BALANCED FUND
Notes to Financial Statements - General Information Related to all Leith Wheeler Investment Funds
(tabular amounts expressed in $000s)
Years ended December 31, 2014 and 2013
3.
Significant accounting policies (continued):
(a) Financial instruments (continued):
(iii) Loans and receivables:
Loans and receivables are financial assets with fixed or determinable payments that are not quoted
in an active market. Such assets are recognized initially at fair value plus any directly attributable
transaction costs. Subsequent measurement of loans and receivables is at amortized cost, less any
impairment losses. The Funds classify cash, subscriptions receivable, balances due from brokers,
and interest and dividends receivable, as loans and receivables.
(iv) Other financial liabilities:
Other financial liabilities are initially measured at fair value, net of transaction costs, and are
subsequently measured at amortized cost. The Fund’s other financial liabilities are comprised of
redemptions payable, balances due to brokers, management fees payable, due to manager,
accounts payable and distributions payable.
(b) Redeemable units:
The Funds classify financial instruments issued as financial liabilities or equity instruments in accordance
with the substance of the contractual terms of the instruments. The redeemable units, which are classified
as financial liabilities at FVTPL and measured at redemption amount, provide investors with the right to
require redemption, subject to available liquidity, for cash at a unit price based on the Funds’ valuation
policies at each redemption date.
Distributions to holders of redeemable units are recognized in
comprehensive income when they are authorized and no longer at the discretion of the Manager.
(c) Increase (decrease) in net assets attributable to holders of redeemable units per unit (excluding
distributions):
The increase (decrease) in net assets attributable to holders of redeemable units per unit (excluding
distributions) is calculated by dividing the increase (decrease) in net assets attributable to holders of
redeemable units, prior to the deduction of distributions recognized in comprehensive income, by the
weighted average number of units outstanding during the year.
(d) Foreign exchange:
The financial statements of the Funds are denominated in Canadian dollars. Foreign denominated
investments and other foreign denominated assets and liabilities are translated into Canadian dollars
using the exchange rates prevailing on each valuation date. Purchases and sales of investments, as well
as income and expense transactions denominated in foreign currencies, are translated using exchange
rates prevailing on the date of the transaction. Foreign currency gains and losses are recognized in the
statement of comprehensive income.
20
LEITH WHEELER BALANCED FUND
Notes to Financial Statements - General Information Related to all Leith Wheeler Investment Funds
(tabular amounts expressed in $000s)
Years ended December 31, 2014 and 2013
3.
Significant accounting policies (continued):
(e) Income recognition:
Interest for distribution purposes shown on the statement of comprehensive income represents the
coupon interest received by the Funds accounted for on an accrual basis. The Funds do not amortize
premiums paid or discounts received on the purchase of fixed and variable income securities except for
zero coupon bonds which are amortized on a straight-line basis. Dividend income is recognized on the
date that the right to receive payment is established, which for quoted equity securities is usually the exdividend date. Income and capital gains distributions from pooled fund investments are recorded at the
distribution date and maintain the same classification. Portfolio transactions are recorded on the trade
date.
Realized
gains
and
losses
arising
from
the
sale
of
investments
and
unrealized
appreciation/depreciation in investments are determined on the average cost basis of the respective
investments. Average cost does not include amortization of premiums or discounts on fixed income
securities with the exception of zero coupon bonds.
(f)
Income taxes:
The Funds qualify as unit trusts under the Income Tax Act (Canada). All of the Funds’ net income for tax
purposes and net capital gains realized in any period are required to be distributed to unitholders such
that no income tax is payable by the Funds. As a result, the Funds do not record income taxes.
Net capital losses are available to be carried forward indefinitely and applied against future net realized
capital gains. Non-capital losses may be carried forward up to 20 years to reduce future taxable income
(g) New standards and interpretations not yet adopted:
A number of new standards, amendments to standards and interpretations are not yet effective for year
ended December 31, 2014, and have not been applied in preparing these financial statements. None of
these will have a significant effect on the financial statement of the Funds, with the possible exception of
IFRS 9, Financial Instruments.
IFRS 9 deals with recognition, derecognition, classification and measurement of financial statements and
its requirements and represent a significant change from the existing requirements in IAS 39, Financial
Instruments: Recognition and Measurement, in respect of financial assets. The standard contains two
primary measurement categories for financial assets: amortized cost and fair value. A financial asset would
be measured at amortized cost if it is held within a business model whose objective is to hold assets in
order to collect contractual cash flows, and the asset’s contractual terms give rise on specified dates to
cash flows that are solely payments of principal and interest on the principal outstanding. All other financial
assets would be measured at fair value. The standard eliminates the existing IAS 39 categories of heldto-maturity, available-for-sale and loans and receivables.
The standard is effective for annual periods beginning on or after January 1, 2018. The Funds intend to
adopt IFRS 9 in their financial statements for the annual period beginning on January 1, 2018. The Funds’
Manager is currently in the process of evaluating the potential effect of this standard. The standard is not
expected to have a significant impact on the financial statements since the Funds’ financial assets are
currently measured at fair value or amortized cost.
21
LEITH WHEELER BALANCED FUND
Notes to Financial Statements - General Information Related to all Leith Wheeler Investment Funds
(tabular amounts expressed in $000s)
Years ended December 31, 2014 and 2013
4.
Related party transactions:
(a) Management fees:
The Manager is paid a management fee by the Funds, calculated daily and paid quarterly, as
compensation for its services. No management fees are paid by the Funds with respect to Series A units.
Series A unitholders pay a negotiated fee directly to the Manager outside of the Fund for investment
management services.
(b) Operating expenses:
The Manager is also entitled to reimbursement of reasonable operating expenses incurred on behalf of
the Fund in connection with charges made for registry and transfer agency services, dividend and
distribution crediting services, services required in connection with the provision of information and reports
to unitholders and holding unitholders’ meetings, interest expense, accounting, audit, recordkeeping and
legal fees, and custodian and safekeeping charges. The Funds pay brokerage commissions and taxes.
The Manager has at times absorbed certain expenses incurred on behalf of the Funds, in which case
such amounts are shown as a deduction from expenses in the respective Fund’s statement of
comprehensive income. The Manager is under no legal obligation to continue these arrangements, and
may terminate them at any time.
5.
Capital management:
The redeemable units issued by the Funds represent the capital of the Funds. The Funds are not subject to
any internally or externally imposed restrictions on its capital.
The Funds’ objectives in managing the
redeemable units are to ensure a stable base to maximize returns to all investors, and to manage liquidity risk
arising from redemptions.
6.
Financial risk management:
The following is a general discussion of the financial risks to which the Funds are exposed. Refer to the
discussion on financial risk management (note 4) in the Fund Specific Information following each Fund’s
financial statements for information specific to the respective Fund.
Risk management framework:
The Funds use financial instruments in order to achieve their respective investment objectives. The Funds’
investments are presented in each Fund’s respective schedule of investment portfolio, which groups securities
by asset type, geographic region and/or market segment.
The use of financial instruments subjects the Funds to a variety of financial instrument risks. The Funds’ risk
management practices include setting investment policies to limit exposures to financial instrument risks and
employing experienced and professional investment advisors to invest the Funds’ capital in securities within
the constraints of investment policies. The Manager regularly monitors the Funds advisors’ performance and
compliance with the investment policies.
22
LEITH WHEELER BALANCED FUND
Notes to Financial Statements - General Information Related to all Leith Wheeler Investment Funds
(tabular amounts expressed in $000s)
Years ended December 31, 2014 and 2013
6.
Financial risk management (continued):
The significant financial instrument risks, to which the Funds are exposed, along with the specific risk
management practices related to those risks, are discussed below.
(a) Credit risk:
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or
commitment that it has entered into with the Fund, resulting in a financial loss to the Fund. It arises
principally from debt securities held, and from derivative financial assets, cash and cash equivalents, and
other receivables due to the Fund. The carrying value of these financial instruments as recorded in the
statements of financial position reflects the Fund’s maximum exposure to credit risk.
The risk management strategy for the Funds is to invest primarily in debt obligations of high credit quality
issuers and to limit the amount of credit exposure with respect to any one corporate issuer.
Credit risk is mitigated by investing primarily in rated instruments. The Funds receive daily rating updates,
which are reviewed accordingly. Credit risk is monitored on a daily basis by the Manager in accordance
with the Funds’ investment policies. If the credit risk is not in accordance with the investment policy or
guidelines of the Fund, then the Manager is obliged to rebalance the portfolio as soon as practicable.
The Funds’ activities may give rise to settlement risk. Settlement risk is the risk of loss due to the failure
of an entity to honor its obligations to deliver cash, securities, or other assets as contractually agreed.
For the majority of transactions, the Funds mitigate this risk by conducting settlements through a broker
to ensure that a trade is settled only when both parties have fulfilled their contractual settlement
obligations.
(b) Liquidity risk:
Liquidity risk is the risk that the Funds will encounter difficulty in meeting the obligations associated with
their financial liabilities that are settled by delivering cash or another financial asset.
The Funds’ policy and the Manager’s approach to managing liquidity is to ensure, as far as possible, that
it will always have sufficient liquidity to meet its liabilities when due, including estimated redemptions of
units, without incurring unacceptable losses or risking damage to the Funds’ reputation.
The Funds’ prospectus provides for the daily cash redemptions of redeemable units and the Funds are
therefore exposed to the liquidity risk of meeting unitholder redemptions at any time.
Liquidity risk is managed by investing the majority of a Funds’ assets in investments that are traded in an
active market and can be readily disposed. In addition, the Funds retain sufficient cash and cash
equivalent positions to maintain liquidity. The Funds are also subject to the requirements of Nl 81-102,
where each respective Fund shall not purchase an illiquid asset if, immediately after the purchase, more
than 10 percent of the net assets of that particular Fund, taken at market value at the time of purchase,
would consist of illiquid assets.
23
LEITH WHEELER BALANCED FUND
Notes to Financial Statements - General Information Related to all Leith Wheeler Investment Funds
(tabular amounts expressed in $000s)
Years ended December 31, 2014 and 2013
6.
Financial risk management (continued):
(c) Market risk:
Market risk is the risk that changes in market prices, such as interest rates, foreign exchange rates and
equity prices will affect the Funds’ income or the fair value of their holdings of financial instruments.
The Funds’ market risk is managed on a daily basis by the Manager in accordance with the policies and
procedures in place.
(i)
Interest rate risk:
Interest rate risk is the risk that the fair value or future cash flows of interest-bearing financial
instruments will fluctuate as a result of changes in market interest rates. In general, as interest rates
rise, the fair value of interest bearing financial instruments will fall. Financial instruments with a longer
term to maturity will generally have a higher interest rate risk.
Interest rate risk management practices include setting target durations based on the appropriate
benchmark indices and monitoring the Funds’ durations relative to the benchmarks. If interest rates
are anticipated to rise, the Funds’ durations can be shortened to limit potential losses. Conversely,
if interest rates are anticipated to fall, the durations can be lengthened to increase potential gains.
(ii) Currency risk:
Currency risk is the risk that the value of investments denominated in currencies, other than the
functional currency of a Fund, will fluctuate due to changes in foreign exchange rates. Equities in
foreign markets are exposed to currency risk as the prices denominated in foreign currencies are
converted to a Fund’s functional currency in determining fair value.
(iii) Other price risk:
Other price risk is the risk that the fair value of financial instruments will fluctuate as a result of
changes in market prices (other than those arising from interest rate risk or currency risk), whether
caused by factors specific to an individual investment or its issuer, or factors affecting all instruments
traded in the market.
Other price risk is moderated by the Manager through a careful selection of securities within specified
limits and the Funds’ price risk is managed through diversification of the respective Fund. The
Manager monitors the Funds’ overall market positions on a daily basis and positions are maintained
within established ranges.
24
LEITH WHEELER BALANCED FUND
Notes to Financial Statements - General Information Related to all Leith Wheeler Investment Funds
(tabular amounts expressed in $000s)
Years ended December 31, 2014 and 2013
7.
Fair value of financial instruments:
(a) Valuation models:
The Funds measure fair values using the following fair value hierarchy that reflects the significance of the
inputs used in making the measurements.
Level 1:
inputs that are quoted market prices (unadjusted) in active markets for identical instruments.
Level 2:
inputs other than quoted prices included within Level 1 that are observable either directly (i.e.,
as prices) or indirectly (i.e., derived from prices).
Level 3:
inputs that are unobservable.
The fair values of financial assets and financial liabilities that are traded in active markets are based on
quoted market prices or dealer price quotations. Observable prices and model inputs are usually available
in the market for listed debt and equity securities, and exchange-traded derivatives, such as futures. The
availability of observable market prices and model inputs reduces the need for management judgment
and estimation and reduces the uncertainty associated with the determination of fair values. Where
observable market prices and model inputs are not available, the Funds determine fair values using other
valuation techniques. The objective of valuation techniques is to arrive at a fair value measurement that
reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly
transaction between market participants at the measurement date.
The Funds equity positions are classified as Level 1 when the security is actively traded and a reliable
quoted market price is observable.
Investments in securities of another investment funds are classified as Level 1 when the investment fund
is actively traded and a reliable price is observable.
Bonds and other debt securities are valued based on a matrix pricing process using multiple dealer
quotations or alternative pricing sources supported by observable inputs and are classified within Level 2.
Short-term investments and money market securities are classified as Level 2 as these instruments are
valued at amortized cost, which approximates their fair value.
The Funds’ net assets attributable to holders of redeemable units are classified as Level 2 since the
carrying amount approximates fair value as the units are measured as the redemption amount.
Refer to the fair value of financial instruments (note 5) in the Fund Specific Information following each
Fund’s respective financial statements for further discussion of the respective Fund’s fair value
measurements.
(b) Financial instruments not measured at fair value:
The carrying value of cash, subscriptions receivable, balances due from brokers, interest and dividends
receivable, redemptions payable, balances due to brokers, management fees payable, due to Manager,
accounts payable, and distributions payable, approximates their fair value given their short-term
nature. These financial instruments are classified as Level 2 in the fair value hierarchy because while
prices are available, there is no active market for these instruments.
25
LEITH WHEELER BALANCED FUND
Notes to Financial Statements - General Information Related to all Leith Wheeler Investment Funds
(tabular amounts expressed in $000s)
Years ended December 31, 2014 and 2013
8.
Transition to IFRS:
Other than the Leith Wheeler Corporate Fixed Income Fund, which commenced operations in 2014 and
accordingly has applied IFRS consistently since commencement, the Funds previously prepared financial
statements in accordance with Canadian GAAP. The nature and the effect of the Funds’ transition from
Canadian GAAP to IFRS is summarized below.
(a) Transition elections:
The only voluntary exemption adopted by the Funds upon transition was the ability to designate a financial
asset or financial liability at FVTPL upon transition to IFRS. All financial assets designated at FVTPL
upon transition were previously carried at fair value under Canadian GAAP as required by Accounting
Guideline 18, Investment Companies, accordingly no adjustments to measurement were required.
(b) Statements of cash flows:
Under Canadian GAAP, the Funds were exempt from providing statements of cash flows. IAS 1 requires
that a complete set of financial statements include a statement of cash flows for the current and
comparative periods, without exception. As a result, the Funds have presented the required statements
of cash flows.
(c) Reconciliation of equity and comprehensive income as previously reported under Canadian GAAP to
IFRS:
December 31,
2013
Equity
January 1,
2013
Leith Wheeler Balanced Fund:
Equity as reported under Canadian GAAP
Revaluation of investments at FVTPL (refer to note (e) below)
$
74,684
27
$
57,503
44
Net assets attributable to holders of redeemable units
$
74,711
$
57,547
Leith Wheeler Canadian Dividend Fund:
Equity as reported under Canadian GAAP
Revaluation of investments at FVTPL (refer to note (e) below)
$
51,322
101
$
28,559
56
Net assets attributable to holders of redeemable units
$
51,423
$
28,615
26
LEITH WHEELER BALANCED FUND
Notes to Financial Statements - General Information Related to all Leith Wheeler Investment Funds
(tabular amounts expressed in $000s)
Years ended December 31, 2014 and 2013
8.
Transition to IFRS (continued):
(c) Reconciliation of equity and comprehensive income as previously reported under Canadian GAAP to
IFRS (continued):
Equity
December 31,
2013
January 1,
2013
Leith Wheeler Canadian Equity Fund:
Equity as reported under Canadian GAAP
Revaluation of investments at FVTPL (refer to note (e) below)
$ 1,919,633
2,068
$ 1,480,798
3,539
Net assets attributable to holders of redeemable units
$ 1,921,701
$ 1,484,337
Leith Wheeler Fixed Income Fund:
Equity as reported under Canadian GAAP
Revaluation of investments at FVTPL (refer to note (e) below)
$
258,646
-
$
324,996
-
Net assets attributable to holders of redeemable units
$
258,646
$
324,996
Leith Wheeler Income Advantage Fund:
Equity as reported under Canadian GAAP
Revaluation of investments at FVTPL (refer to note (e) below)
$
55,920
12
$
37,862
9
Net assets attributable to holders of redeemable units
$
55,932
$
37,871
Leith Wheeler International Equity Plus Fund:
Equity as reported under Canadian GAAP
Revaluation of investments at FVTPL (refer to note (e) below)
$
14,527
12
$
10,663
39
Net assets attributable to holders of redeemable units
$
14,539
$
10,702
Leith Wheeler Money Market Fund:
Equity as reported under Canadian GAAP
Revaluation of investments at FVTPL (refer to note (e) below)
$
28,896
-
$
30,050
-
Net assets attributable to holders of redeemable units
$
28,896
$
30,050
Leith Wheeler U.S. Equity Fund:
Equity as reported under Canadian GAAP
Revaluation of investments at FVTPL (refer to note (e) below)
$
238,059
24
$
151,512
(27)
Net assets attributable to holders of redeemable units
$
238,083
$
151,485
27
LEITH WHEELER BALANCED FUND
Notes to Financial Statements - General Information Related to all Leith Wheeler Investment Funds
(tabular amounts expressed in $000s)
Years ended December 31, 2014 and 2013
8.
Transition to IFRS (continued):
(c) Reconciliation of equity and comprehensive income as previously reported under Canadian GAAP to
IFRS (continued):
Year ended
December 31,
2013
Comprehensive income
Leith Wheeler Balanced Fund:
Comprehensive income as reported under Canadian GAAP
Reclassification of distributions to holders of redeemable
units to comprehensive income (refer to note (d) below)
Revaluation of investments at FVTPL (refer to note (e) below)
$
(1,263)
(17)
Increase (decrease) in net assets attributable to holders of redeemable units
Leith Wheeler Canadian Dividend Fund:
Comprehensive income as reported under Canadian GAAP
Reclassification of distributions to holders of redeemable
units to comprehensive income (refer to note (d) below)
Revaluation of investments at FVTPL (refer to note (e) below)
Increase (decrease) in net assets attributable to holders of redeemable units
Leith Wheeler Canadian Equity Fund:
Comprehensive income as reported under Canadian GAAP
Reclassification of distributions to holders of redeemable
units to comprehensive income (refer to note (d) below)
Revaluation of investments at FVTPL (refer to note (e) below)
Increase (decrease) in net assets attributable to holders of redeemable units
Leith Wheeler Fixed Income Fund:
Comprehensive income as reported under Canadian GAAP
Reclassification of distributions to holders of redeemable
units to comprehensive income (refer to note (d) below)
Revaluation of investments at FVTPL (refer to note (e) below)
Increase (decrease) in net assets attributable to holders of redeemable units
Leith Wheeler Income Advantage Fund:
Comprehensive income as reported under Canadian GAAP
Reclassification of distributions to holders of redeemable
units to comprehensive income (refer to note (d) below)
Revaluation of investments at FVTPL (refer to note (e) below)
Increase (decrease) in net assets attributable to holders of redeemable units
28
10,228
$
8,948
$
8,879
(3,704)
45
$
5,220
$
382,952
(82,790)
(1,471)
$
298,691
$
(2,564)
(11,491)
-
$
(14,055)
$
3,996
(2,183)
3
$
1,816
LEITH WHEELER BALANCED FUND
Notes to Financial Statements - General Information Related to all Leith Wheeler Investment Funds
(tabular amounts expressed in $000s)
Years ended December 31, 2014 and 2013
8.
Transition to IFRS (continued):
(c) Reconciliation of equity and comprehensive income as previously reported under Canadian GAAP to
IFRS (continued):
Year ended
December 31,
2013
Comprehensive income
Leith Wheeler International Equity Plus Fund:
Comprehensive income as reported under Canadian GAAP
Reclassification of distributions to holders of redeemable
units to comprehensive income (refer to note (d) below)
Revaluation of investments at FVTPL (refer to note (e) below)
Increase (decrease) in net assets attributable to holders of redeemable units
Leith Wheeler Money Market Fund:
Comprehensive income as reported under Canadian GAAP
Reclassification of distributions to holders of redeemable
units to comprehensive income (refer to note (d) below)
Revaluation of investments at FVTPL (refer to note (e) below)
Increase (decrease) in net assets attributable to holders of redeemable units
Leith Wheeler U.S. Equity Fund:
Comprehensive income as reported under Canadian GAAP
Reclassification of distributions to holders of redeemable
units to comprehensive income (refer to note (d) below)
Revaluation of investments at FVTPL (refer to note (e) below)
Increase (decrease) in net assets attributable to holders of redeemable units
$
2,759
(220)
(27)
$
2,512
$
98
(98)
-
$
-
$
66,225
(3,191)
51
$
63,085
(d) Classification of redeemable units issued by the Funds:
On transition to IFRS, the Manager has reassessed whether the Funds’ units meet the criteria in IAS 32
for classification as equity. Under Canadian GAAP, the Funds accounted for the redeemable units as
equity. Under IFRS, IAS 32 requires that units or shares of an entity which include a contractual obligation
for the issuer to repurchase or redeem them for cash or another financial asset be classified as financial
liability. The Funds’ units do not meet the criteria in IAS 32 for classification as equity and therefore, have
been reclassified as financial liabilities on transition to IFRS. Accordingly, distributions to holders of the
Funds’ redeemable units have been reclassified as finance costs and have been expensed in the Funds’
statements of comprehensive income.
29
LEITH WHEELER BALANCED FUND
Notes to Financial Statements - General Information Related to all Leith Wheeler Investment Funds
(tabular amounts expressed in $000s)
Years ended December 31, 2014 and 2013
8.
Transition to IFRS (continued):
(e) Revaluation of investments at FVTPL:
Under Canadian GAAP, the Fund measured the fair values of its investments in accordance with
Section 3855, Financial Instruments - Recognition and Measurement, which required the use of bid prices
for long positions and ask prices for short positions, to the extent such prices are available. Under IFRS,
the Funds measure the fair values of its investments using the guidance in IFRS 13, Fair Value
Measurement (“IFRS 13”), which requires that if an asset or a liability has a bid price and an ask price,
then its fair value is to be based on a price within the bid-ask spread that is most representative of fair
value.
It also allows the use of closing trading price or other pricing conventions that are used by market
participants as a practical expedient for fair value measurements within a bid-ask spread. As a result,
upon adoption of IFRS 13 an adjustment was recognized to increase the carrying amount of the Funds’
investments at January 1, 2013, December 31, 2014 and 2013. The impact of this adjustment was to
increase the Funds’ increase (decrease) in net assets attributable to holders of redeemable units by the
following:
Year ended December 31, 2013:
Fund name
Adjustment to
Investments at
January 1,
2013
Leith Wheeler Balanced Fund
Leith Wheeler Canadian Dividend Fund
Leith Wheeler Canadian Equity Fund
Leith Wheeler Fixed Income Fund
Leith Wheeler Income Advantage Fund
Leith Wheeler International Equity Plus Fund
Leith Wheeler Money Market Fund
Leith Wheeler U.S. Equity Fund
(f)
$
44
56
3,539
9
39
(27)
Adjustments to
investments at
December 31,
2013
$
Net impact of
adjustment
27
101
2,068
12
12
24
$
(17)
45
(1,471)
3
(27)
51
Reclassification adjustments:
In addition to the measurement adjustments noted above, the Funds reclassified certain amounts upon
transition in order to conform to its financial statement presentation under IFRS. Withholding taxes for
the year ended December 31, 2013 which were previously netted against dividend income under
Canadian GAAP, have been reclassified and presented separately as expense under IFRS.
30