SO IS THE FONDS. - Fonds de solidarité FTQ

Transcription

YOU ARE
ESSENTIAL .
SO IS THE FONDS.
ANNUAL AND
2013
SUSTAINABILITY REPORT
WWW
ONLINE
FONDSFTQ.COM/
2013REPORT
OU R M I SS I ON
TABLE OF
CONTENTS
EDITORIAL SECTION
MESSAGE FROM
THE CHAIRMAN OF THE BOARD
AND THE PRESIDENT AND CEO
HIGHLIGHTS
1
2
SUSTAINABLE
DEVELOPMENT
ETHICS AND
GOVERNANCE
3
4
OUR SOCIAL
IMPACT
OUR
SHAREHOLDERS
6
8
OUR ECONOMIC
IMPACT
OUR
PARTNERS
10
12
OUR ENVIRONMENTAL
IMPACT
OUR
EMPLOYEES
16
18
CREATE,
MAINTAIN OR
PROTECT JOBS
Invest in companies impacting the Québec economy
and offer them services to further their development
and create, maintain or protect jobs.
TRAIN
WORKERS
Promote economic training for workers so
they can increase their influence on the economic
FOLLOW-UP
ON OBJECTIVES
THE MANAGEMENT
COMMITTEE
20
22
THE BOARD
OF DIRECTORS
THE GOVERNING BODIES
OF THE FONDS AND THE UNION
23
23
development of Québec.
DEVELOP THE
QUÉBEC ECONOMY
THE GRI
INDEX
24
FINANCIAL SECTION
MANAGEMENT DISCUSSION
AND ANALYSIS
FINANCIAL
STATEMENTS
26
41
Stimulate the Québec economy through strategic
investments that benefit both Québec workers
and companies alike.
PREPARE FOR
RETIREMENT
Make workers aware of the need to save for retirement
and encourage them to do so, as well as encourage
them to participate in the development of the economy
by purchasing Fonds shares.
FONDS DE SOLIDARITÉ F TQ 2013
M ESSAG E F ROM T H E C H A I R M A N O F THE BOA R D A N D THE PR ESI DEN T A N D C EO
01
TRUST
ON THE FOLLOWING PAGES YOU WILL FIND THE OVERALL RESULTS OF THE FONDS
DE SOLIDARITÉ FTQ FOR THE LATEST FINANCIAL YEAR ENDED MAY 31, 2013.
THE FONDS GENERATED A POSITIVE RETURN FOR THE NINTH CONSECUTIVE
SIX-MONTH PERIOD, DESPITE STILL DIFFICULT AND UNCERTAIN GLOBAL ECONOMIC
CONDITIONS. WE ARE THEREFORE PROUD OF OUR ACHIEVEMENTS, OUR RETURN
OF 5.3% AND OUR NET EARNINGS OF $458 MILLION. WE WERE THEREBY ABLE
TO INCREASE THE VALUE OF OUR SHARES TO $27.98 AS AT JULY 5, 2013.
The Fonds: values first
For 30 years now, the Fonds de solidarité FTQ
has significantly contributed to Québec’s
economic development. Even before the
notions of sustainable development
and corporate social responsibility, which
we fully adhere to, were created, the Fonds’
mission and activities were already built
around economic and social concerns and
priorities. The Fonds was founded on values
of social and economic solidarity: promoting
jobs, training workers, developing the Québec
economy through strategic investments
and helping workers adequately prepare
for retirement.
In addition, since its creation, the Fonds
has designed tools and adopted exceptional
practices, such as the social audit and
economic training for workers in the
workplace, to thoroughly manage its
investments and turn them into what is today
called responsible investments. It created,
trained and deployed an extensive network
of local representatives (LRs) to represent
it and promote retirement savings to workers
in Québec companies.
This multi-faceted mission the Fonds adopted
in 1983—which was an innovation at the
time—was a significant challenge! And
30 years later, we are pleased to be able to
say that we successfully met the challenge.
This is why our 2,395 partner companies and
our hundreds of thousands of shareholders
appreciate the Fonds.
A major contribution
to financing companies
During the last financial year, the Fonds
invested a total of $521 million. Including
its network of regional funds, the Fonds
invested in 137 companies in more than
25 industries, including both technology and
traditional industries.
The proportion of the Fonds de solidarité FTQ’s
net assets that is committed in Québec
companies in the form of unsecured
investments—therefore at risk—exceeds
66%. The Fonds supports SMEs: it helps
them grow and position themselves in their
markets in an increasingly competitive and
challenging international context.
The investments of the Fonds and its
network have led to creating, maintaining or
protecting 170,915 jobs in partner companies
as at May 31, 2013.
FROM 2004 TO 2013, THE FONDS HAS
COMMITTED $5.5 BILLION OF UNSECURED
RISK CAPITAL TO PARTNER COMPANIES!
During the financial years 2004 to 2013, i.e.
a 10-year period, the Fonds has committed
$5.5 billion of unsecured risk capital
(development capital) to partner companies.
Of this amount, $2.2 billion have been
invested in venture capital either directly in
private companies ($1.2 billion) or indirectly
in private funds ($1.0 billion) in Québec and
Canada (see the chart on page 30). If we
include the massive investments we have
made in Québec companies over the 30 years
the Fonds has been operating, the number of
jobs created, maintained or protected would
stand today at over half a million!
Grateful partners
Over the years, and especially in the last
one, Québec entrepreneurs have told us how
much they appreciate us. Many of them, from
many regions of Québec, confirmed that
without the Fonds’ support and trust, they
would not have been able to face international
competition. Many would not have been
able to keep their decision-making centres
in Québec, while others would probably no
longer have been able to continue operating.
Thanks to the patient capital the Fonds
provided these companies, often during
economic downturns, thousands of workers
were able to keep their jobs, and thousands of
others were offered one (see page 15).
SINCE THE CREATION OF THE FONDS,
THE NUMBER OF JOBS CREATED, MAINTAINED
OR PROTECTED WOULD STAND TODAY AT
OVER HALF A MILLION!
A major contribution to developing
retirement savings
Where does the Fonds de solidarité FTQ
get the money it invests in companies?
Essentially, it comes from its shareholders’
savings. Over the last 30 years, the Fonds
created the largest pool of retirement savings
invested in private companies in Québec.
Most importantly, since the 1980s, when it
was created, the Fonds has contributed to
creating a better savings “culture” in Québec,
the habit of regularly contributing to an RRSP
among hundreds of thousands of workers.
Despite all this, there still remains a lot of
progress to make on this front, and the Fonds
is working at it every day. In fact, according
to the Innovating for a Sustainable Retirement
System Report (also called the D’Amours
Report), written by a committee of experts
at the request of the government of Québec,
1.9 million workers do not participate in
any kind of group retirement plan, which
represents 47% of all workers in Québec.
Almost one in two Quebecers will therefore
not have any income from a group retirement
plan when they retire. That is very disturbing.
workers to save for their retirement is an
integral part of our mission. The Fonds now
has more than 615,000 shareholders and it is
there for them, to convince them of the need
for saving and to encourage them to set up
individual retirement savings that will let them
have decent living conditions when they retire.
OVER THE LAST 30 YEARS, THE FONDS
CREATED THE LARGEST POOL OF
RETIREMENT SAVINGS INVESTED IN PRIVATE
COMPANIES IN QUÉBEC.
A question of trust
If the Fonds de solidarité FTQ has reached
the strategic size it has today, it is because it
earned the trust of its shareholders, partner
companies and financial partners.
This trust lets us support large sections
of the Québec economy and encourage
middle-class workers to save for retirement
while contributing to Québec’s economic
development.
We would like to thank our shareholders,
partner companies and financial partners
for the immense trust they have placed in us
over the years. We would also like to thank
the members of the Board of Directors and
other governing bodies of the Fonds for
their important contribution. A warm thank
you also goes out to the employees of the
Fonds and its network as well as to the LRs
for their work and unwavering commitment
to the Fonds’ mission.
Rest assured that we will continue to
work competently and creatively to meet
Quebecers’ expectations.
Therefore, based on this report, we need to
“support workers in their efforts to save more
for retirement.” And that’s exactly what the
Fonds de solidarité FTQ does. Encouraging
MICHEL ARSENAULT
YVON BOLDUC
Chairman of the Board of Directors
President and CEO
HIGHLIGHTS
KEY DATA (FOR THE YEARS ENDED MAY 31)
2013
2012
2011
2010
256
458
247
215
256
650
222
600
9,301
332,441
8,525
320,629
8,178
315,504
7,294
305,951
(in millions of $; except Class A shares outstanding: number in thousands)
Statements of Operations
Revenues
Net earnings (net loss)
Balance Sheets
Net assets
Class A shares outstanding
Total operating expense ratio*
1.4%
1.5%
1.5%
2009
239
(919)
6,375
291,733
1.5%
1.7%
* The total operating expense ratio does not include capital tax and is calculated as stipulated in the Regulation Respecting Development Capital Investment Fund Continuous Disclosure.
ANNUAL RATE OF RETURN OF THE FONDS *
5.2%
5.0%
2004
2005
9.2%
7.1%
6.0%
8.8%
2.6%
2006
2008
2007
( 11 M O N T H S )
2009
2010
2011
- 12.6%
NET VALUE
PER SHARE
NUMBER OF PARTNER
COMPANIES
FAIR VALUE OF DEVELOPMENT
CAPITAL INVESTMENTS1
DEVELOPMENT CAPITAL
INVESTMENTS 1
SHARE
ISSUES
SHARE
REDEMPTIONS
( I N D O L L A RS)
( FONDS AND NE TWOR K)
( IN MIL L IONS OF $)
(IN MILLIONS OF $)
(IN MILLIONS OF $)
(IN MILLI ON S OF $)
2013
$27.98
2013
2,395
2013
2012
26.59
2012
2,239
2012
2011
2011
25.92
2010
2013
2012
- 1.2%
* Net earnings (net loss) per share divided by the share price at the beginning of the year.
This return does not take into account tax credits granted to shareholders.
2009
21.78
(AS AT MAY 31)
$6,144 M
2010
2,052
2009
2,000
(AS AT MAY 31)
2013
$521 M
2012
5,757
2011
2,129
2010
23.84
2009
5.3%
(FOR THE YEARS ENDED MAY 31)
908 2
2011
5,207
501
2009
(AS AT MAY 31)
$855 M
2013
2012
767
2012
2011
733
2010
4,784
4,598
2013
848 3
$542 M
620
2011
698
2010
660
2010
2009
655
2009
NUMBER OF JOBS CREATED,
MAINTAINED OR PROTECTED
IN QUÉBEC BY THE FONDS
AND ITS NETWORK
2013
170,915
2013
2012
168,577
2012
2011
465
594,287
583,235
2010
150,133
2009
647
615,664
2011
160,789
2010
341
NUMBER OF
SHAREHOLDERS
577,511
2009
142,902
(AS AT MAY 31)
570,889
(AS AT MAY 31)
1. These investments include funds committed but not disbursed as well as guarantees and suretyships.
2. This amount takes into account the investment of $300 million made in SSQ Financial Group.
3. This amount does not take into account investments of $500 million made in the programs announced in the budget of the Government of Québec.
REDEMPTION BREAKDOWN BY CRITERION
RETIREMENT AND
EARLY RETIREMENT
NUMBER:
VALUE:
34,838
ACCESS TO HOME
OWNERSHIP
% OF TOTAL:
NUMBER:
VALUE:
84%
3,910
$34 M
$453 M
DEATH, DISABILITY,
REDEMPTION WITHIN 60 DAYS
% OF TOTAL:
6%
SHAREHOLDER PROFILE
A TOTAL OF
NUMBER:
VALUE:
1,940
$29 M
(FOR THE YEAR ENDED MAY 31, 2013)
UNFORESEEN EVENTS
6%
NUMBER:
VALUE:
3,793
$18 M
45,273
REDEMPTIONS
(JOB LOSS OR OTHER)
% OF TOTAL:
A TOTAL OF
% OF TOTAL:
3%
RETURN
TO STUDIES
NUMBER:
VALUE:
327
615,664
NUMBER:
$2 M
JOBS
(AS AT MAY 31, 2013)
OTHER CRITERIA
(CAPITAL INJECTION INTO A BUSINESS,
EMIGRATION, REDEMPTION OF PENSION CREDITS,
INELIGIBILITY FOR TAX CREDITS)
87,297
52,693
TOTAL
87,297
48,570
INDIRECT JOBS
35,048
56%
FONDS DE
SOLIDARITÉ FTQ
26,882
REGIONAL AND
LOCAL FUNDS
7,722
SPECIALIZED FUNDS
INDUCED JOBS
NON-UNIONIZED
273,448
DIRECT JOBS
170,915
UNIONIZED
NUMBER:
1%
(AS AT MAY 31, 2013)
DIRECT JOBS
342,216
% OF TOTAL:
$6 M
170,915 JOBS CREATED, MAINTAINED OR PROTECTED IN QUÉBEC THROUGH THE INVESTMENTS OF THE FONDS AND ITS NETWORK*
SHAREHOLDERS
NUMBER:
VALUE:
465
Taking into account past and current relationships, it is estimated that over 500,000 jobs
were created, maintained or protected in Québec by the Fonds and its network from 1990 to 2013.
44%
* By partner companies in the portfolio as at May 31, 2013.
CHANGE IN DEVELOPMENT CAPITAL INVESTMENTS (AT COST) 1
Balance as at May 31, 2012
Number
$M
%
(FOR THE YEAR ENDED MAY 31, 2013)
Investments
Number
$M
Disinvestments
%
Number
$M
Balance as at May 31, 2013
%
Number
$M
%
Regions2
Western Québec
23
137
3
7
6
1
7
11
3
23
132
3
Montréal Region
115
2,274
44
33
254
50
40
163
46
121
2,365
44
Central Québec
17
150
3
2
2
–
9
7
2
17
145
3
Québec City Region
32
716
14
6
28
5
9
55
16
35
689
13
Eastern Québec
29
171
3
4
21
4
13
13
4
23
179
3
All of Québec
48
1,414
27
6
161
32
14
87
25
51
1,488
28
Outside Québec
Total
Sectors
Real estate
Regional development3
Industries, services, natural resources and consumer
New economy
Total
32
304
6
4
39
8
10
14
4
35
329
6
296
5,166
100
62
511
100
102
350
100
305
5,327
100
8
4
450
9
2
48
9
1
56
16
4
442
22
434
8
3
15
3
2
7
2
22
442
8
191
3,065
59
42
352
69
72
196
56
197
3,221
61
79
1,217
24
15
96
19
27
91
26
82
1,222
23
296
5,166
100
62
511
100
102
350
100
305
5,327
100
1. These investments exclude the securities in the Entreprises publiques québécoises à faible capitalisation portfolio (which represented investments of $10 million during the year) and include funds committed but not disbursed as well as guarantees and suretyships.
2. Regional groupings: Western Québec: Abitibi-Témiscamingue/Outaouais. Montréal Region: Montréal/Laval/Laurentides/Montérégie/Lanaudière. Central Québec: Estrie/Mauricie/Centre-du-Québec. Québec City Region: Capitale-Nationale/Chaudière-Appalaches.
Eastern Québec: Bas-Saint-Laurent/Saguenay–Lac-Saint-Jean/Gaspésie–Îles-de-la-Madeleine/Côte-Nord/Nord-du-Québec. All of Québec: Investments impacting more than one region. Outside Québec: Investments in companies headquartered outside Québec.
3. Regional funds, local funds and regional investment companies.
SUSTA I N A BLE DEV ELO PM EN T
THE INSEPARABLE
SOCIAL, ECONOMIC
AND ENVIRONMENTAL
DIMENSIONS
SOCIAL
E N V I R O N M E N TA L
The Fonds issues, for the fourth consecutive year, its Annual and Sustainability
Report (ASR) prepared using the guidelines of the Global Reporting Initiative (GRI),
which are used throughout the world. In 2012 alone, close to 3,500 companies
and organizations filed, on a voluntary basis, sustainability reports in accordance
with the GRI.
Extra-financial impact
In addition to describing the activities of the Fonds de
solidarité FTQ for the 2012-2013 financial year and presenting
its financial data as at May 31, 2013, this report outlines
the Fonds’ global performance in terms of sustainable
development, thereby including the extra-financial impact
of its mission and activities. The Fonds places, as part
of a continuous improvement approach, the comprehensive
development of the economy at the very core of human
wellbeing. To do this, it takes into account the three
dimensions identified by the GRI: social, economic and
environmental. If these three inseparable aspects are not
considered, development will necessarily not be balanced.
30 years of sustainable and responsible development
Sustainable and responsible development is somehow part
of the Fonds de solidarité FTQ’s DNA as it is closely related to
its mission. Sustainable development (SD), which includes
socially responsible investment (SRI), is not outside the scope
of the Fonds’ operations; it is intrinsically related to its values
and practices.
The Fonds was created 30 years ago to stimulate the Québec
economy through investments that would benefit Québec
workers and companies and, since then, its social and
economic impact has continually increased. Yet, the Fonds’
actions are still based on the same two essential components,
present from day one, in 1983: encouraging workers to save
for retirement and channeling savings into strengthening the
Québec economy by investing in companies.
A significant influence
The need for an institution such as the Fonds de solidarité FTQ
was clearly felt in 1983, when Québec was in the midst
of an economic and social crisis. As a socially responsible
investor, the Fonds continues, 30 years later, to have a
significant influence on the prosperity of Quebecers,
companies and communities.
SUSTA IN A B LE D EV E LO P M E N T
AND SOCIA LLY R ES P O NS I B L E
I N VEST M EN T
A “SUSTAINABLE DEVELOPMENT” DAY
To ensure that the activities of its various sectors related to
sustainable development (SD), which, for the Fonds, is reflected in
its socially responsible investment (SRI) approach, are optimally
and coherently integrated, the Fonds de solidarité FTQ established
an SD/SRI Coordination Committee in 2009. This Committee,
which initially supported the production of the Fonds’ annual report
that integrated its first sustainability report, in 2010, has evolved
considerably over the years. Comprised of five persons at the
outset, the Committee now encompasses a group of about thirty
Fonds employees who voluntarily participate in its activities.
Training
The SD/SRI Coordination Committee held an initial meeting on
March 15, 2013, which was attended by all of these employees.
This day included a training session on sustainable development
and socially responsible investment issues, the ultimate goal being
to submit to the Fonds’ governing bodies a draft Integrated SD/SRI
Policy during the 2013-2014 financial year. This new policy will form
part of the Risk Management Policy.
03
ECONOMIC
S U S TA I N A B L E
To be sustainable, development should integrate these three dimensions:
social, economic and environmental.
C ON T E X T AND PAR AME T ERS
Content of this report
The determination of the content, quality and boundary of
this report is based on the methodology recommended by the
GRI. We have used the indicators in GRI version 3.1 as well as
those in the financial services sector supplement.
This rigorous process is based on principles such as
materiality, stakeholder involvement, completeness,
accuracy and clarity. The GRI Guidelines are available at:
| globalreporting.org |
Material data
To select the subjects and indicators that reflect the
significant social, economic and environmental impact of
the Fonds de solidarité FTQ or that are likely to substantively
influence the assessments and decisions of our stakeholders,
we performed a materiality test, as we do every year. This test
allows us to determine the priority information that we must
disclose in this report to adequately consider the concerns
related to our industry and those of our stakeholders.
The Fonds’ management has performed an internal
review of the content and boundary of this report and
confirmed that they adequately reflect the Fonds’ impact
on Québec society.
CARBON-NEUTRAL ANNUAL MEETINGS
Once again this year, the Fonds de solidarité FTQ retained Planetair
to reduce the environmental impact of its annual general meeting.
Accordingly, the quantity of greenhouse gas (GHG) emissions
related to transportation, lodging and meals for the attendees
that could not completely be eliminated was evaluated, and a
monetary amount was paid to Planetair to offset those emissions.
This money is invested in renewable energy and energy efficiency
projects. That’s action that counts!
SAL ADE XPRESS
Saladexpress, a Fonds partner company located in Saint-Rémi,
in the heart of vegetable heaven, processes fresh, ready-to-use
vegetables for use by consumers as well as professional cooks and
the industry. The company is proud of what it achieves every day
to support sustainable development.
Complying with the 4Rs principles (reduce, reuse, recycle, reclaim),
Saladexpress recycles or reuses close to 100% of the 3,000 tonnes
of residual materials resulting from its vegetable processing
operations each year. Of these materials, 90% is organic waste that
is used in animal feed, and 10% is cardboard or plastic packaging
waste that is recycled. What a great way to give back to Earth what
it gives us!
A report that reflects our whole network
This report includes financial data and information on some
investment activities of the Fonds régionaux de solidarité FTQ,
the Fonds locaux de solidarité FTQ and the Fonds immobiliers
de solidarité FTQ, which are all part of our broad investment
network. However, this report mainly covers the activities that
are under the direct control of the Fonds de solidarité FTQ’s
head office.
Each partner reports its activities
According to the approach proposed by the GRI, the Fonds
de solidarité FTQ only has to report its own direct activities;
it does not have to include the activities of its 2,395 partner
companies. It is however important to note that the Fonds
encourages its partner companies to adopt responsible
behaviours in all respects: for example, it develops for them
information tools to make them aware of the importance of
sustainable development.
Who is this report for?
This report is directly for the people and groups that are,
according to the GRI terminology, our stakeholders. These are
the individuals, organizations, communities and other social
players that are affected by the Fonds de solidarité FTQ’s
mission or activities; in other words, those who may influence
its choices or have an interest in its activities.
Our stakeholders
The main stakeholders with whom the Fonds engages in
dialogue are listed below. We are committed to properly
identifying their needs and concerns and to quickly and
efficiently meeting their expectations.
– Our shareholders
– Our business partners
– Québec society and government authorities
– Our employees
– Our local representatives (LRs)
– The FTQ and Québec’s unions
Which period is covered?
We are presenting in this report data related to all the social,
economic and environmental indicators established by the
GRI for the last financial year of the Fonds de solidarité FTQ
(June 1, 2012 to May 31, 2013). These data reflect the situation
of the Fonds for that period, were collected and validated by
the Fonds professionals responsible for this report and were
also read by our independent auditors.
A complete report
This fourth Annual and Sustainability Report of the Fonds
de solidarité FTQ complies with GRI’s Application Level A as
it reflects the highest number of indicators required by the
process. For more details, see the GRI Index on page 24.
04
ETHICS A ND GOV ERN AN CE
TRANSPARENCY
AND CONTINUOUS
IMPROVEMENT
The Autorité des marchés financiers
Pursuant to the Incorporation Act of the Fonds, the Autorité
des marchés financiers (AMF) inspects the internal affairs
and activities of the Fonds to verify, among other things,
compliance with this Act; in addition, it carries out other
functions in regards to the Fonds, which is a reporting issuer
as defined in the Securities Act.
| fondsftq.com/documentation-centre |
OVER THE YEARS, THE FONDS HAS
DEVELOPED AND REGULARLY UPDATED
MANAGEMENT POLICIES, STANDARDS,
GUIDELINES AND PROCEDURES
TO STRENGTHEN AND CONSOLIDATE
ITS GOVERNANCE.
Transparency is a fundamental element of the Fonds de solidarité FTQ’s reporting
process. As a result of its mission and values, the Fonds fully adheres to the principle
of clear and transparent communication, which forms the basis of a reliable
and credible GRI approach.
Sustainable development encompasses the concept
of sustainability, which is only possible in a continuous
improvement context, which also requires open
communications and transparency. Therefore, over
the years, the Fonds has developed and regularly updated
management policies, standards, guidelines and
procedures to strengthen and consolidate its governance.
The United Nations Global Compact
The Fonds de solidarité FTQ adhered, in 2009, to the United
Nations Global Compact. The goal of this initiative is to bring
companies together to advance ten universal principles.
These principles are grouped into four major areas: human
rights, labour standards, anti-corruption and environment.
See the GRI Index on page 24 for more details.
New charters
Transparency and competence go hand in hand with sound
governance. To that end, in addition to the Board of Directors,
the Executive Committee, the Financial Assets Management
Committee, the Audit Committee, the Valuation Committee
and the Ethics Committee charters that were already in place,
the Fonds adopted during the last financial year new charters
for its Investment Special Boards.
Regulation 52-109
In addition to being subject to the AMF’s inspection, the Fonds
decided to apply Canadian Securities Regulation 52-109
respecting certification of financial disclosures in its sixmonth period and annual reports. The Fonds is not required
to comply with these strict principles; it chose to do so on a
voluntary basis, with a view to complying with governance
best practices.
The four Special Boards (and the governing bodies of
the Fonds immobilier de solidarité FTQ, for investments
in real estate projects) are responsible for authorizing
development capital investments of less than $5 million and
for recommending to the Board of Directors investments of
$5 million or more (except for the mining portfolio, for which
the limit is $1 million). The members of these Special Boards
come from civil society, and the majority of them must not
be related to either the Fonds or the FTQ.
It is with this in mind that the Fonds implemented several
years ago a financial compliance framework called Confor.
This framework covers the controls that provide reasonable
assurance that the financial information prepared and
reported by the Fonds is reliable and that its financial
statements are prepared in accordance with Canadian
generally accepted accounting principles.
This approach allows us to choose investments in a context
where the complementary skills of our professionals and
individuals external to the Fonds are taken into account.
| fondsftq.com/governance |
Twice rather than once
The Fonds de solidarité FTQ undergoes a complete financial
statement audit process twice a year, as provided for in its
Incorporation Act. This process is under the responsibility
of two external audit firms: Raymond Chabot Grant Thornton
and Deloitte.
Day-to-day management
The Board of Directors, which comprises 17 members, relies
on the Management Committee of the Fonds, which is made
up of six members, to directly and competently manage the
Fonds’ day-to-day operations.
The Fonds management is responsible for designing
and maintaining internal control over financial reporting
and disclosure controls and procedures. It must periodically
evaluate their design and effectiveness.
A QUÉ BEC N E T WORK O F R ES PO NS I B L E I NV ESTO RS !
An important symposium on responsible investment was held in Montréal on February 19, 2013.
This symposium was an opportunity to create the first major group of responsible investors in Québec,
the Réseau PRI Québec.
The event was really well attended and attracted some 200 participants, including the general public.
PRI (Principles for Responsible Investment) signatory members undertook to apply the following
six principles issued by the United Nations Environment Programme Finance Initiative (UNEP FI):
1. We will incorporate environmental, social and
governance (ESG) issues into investment
analysis and decision-making processes.
2. We will be active owners and incorporate ESG
issues into our ownership policies and practices.
3. We will seek appropriate disclosure on ESG
issues by the entities in which we invest.
4. We will promote acceptance and implementation
of the Principles within the investment industry.
5. We will work together to enhance our
effectiveness in implementing the Principles.
fondsftq.com/documentation-centre
6. We will each report on our activities and progress
towards implementing the Principles.
WHICH PRI SIGNATORIES ARE MEMBERS OF THE RÉSE AU?
HAVING MORE SWAY
All in all, as of February 19, 2013, the Réseau PRI Québec was
comprised of 26 institutional signatories, including (in alphabetical
order) Addenda Capital, Bâtirente, Caisse d’économie solidaire
Desjardins, Caisse de dépôt et placement du Québec, Desjardins
Funds, Fondaction CSN, Fonds de solidarité FTQ, Hexavest, HR
Strategies, Mercer, Montrusco Bolton Investments, SSQ Financial
Group and the pension plans of Université de Montréal and
Université du Québec.
The objective of this network is to have more sway with
companies or on topics that are relevant to all PRI signatory
investors. One of its missions is to make investors aware of the
importance of integrating environmental, social and governance
considerations into their investment activities and decisions. By
combining their expertise, the signatories can also emphasize
responsible investment best practices. unpri.org
The Fonds de solidarité FTQ
published a special issue of
LE PARTENAIRE PME, an
institutional newsletter, on
this symposium and socially
responsible investments.
Among the symposium’s panelists were MARIO TREMBLAY, Vice-President, Public and Corporate
Affairs, Fonds de solidarité FTQ; CHRISTIAN GODIN, Senior Vice President, Head of Equities,
Montrusco Bolton Investments; and OLIVIER GAMACHE, President and Chief Executive Officer,
Groupe Investissement Responsable.
ETHI CS A N D GOV ER N A N C E
OP TIMIZING RESP ONSIBLE INVESTMENT
Investing responsibly is a daily challenge because it involves complex social, human,
environmental and governance issues that are evolving in a market globalization context.
Aware of these challenges, the Fonds de solidarité FTQ strives to maintain investment
approaches that are consistent with its values and mission.
Consequently, since the Fonds de solidarité FTQ adhered to
the Principles for Responsible Investment (PRI) in 2011, it has
used the services of SHARE (Shareholder Association for
Research & Education), a not-for-profit organization, to ensure
better monitoring of its responsible investments in
Canadian large-capitalization securities. SHARE may intervene
at shareholders’ meetings, by proposing resolutions or
debating resolutions that were already submitted or, more
directly, by contacting certain companies. But, regardless
of the way it is done, the objective is the same: engaging
companies in a dialogue to improve some of their governance,
human rights or environment protection practices. SHARE
intervenes in its capacity as representative of an investor
group that includes the Fonds; this organization is therefore
taking action on behalf of the Fonds.
| share.ca |
SHARE’S OBJECTIVE: ENGAGING
COMPANIES IN A DIALOGUE TO IMPROVE
SOME OF THEIR PRACTICES.
Vigilant shareholders
Shareholders are increasingly interested by sustainable
development issues, and investors pay further attention
to the environmental, social and governance performance
of their investments. Financial performance alone is not
enough; both individual and institutional investors want their
investments to reflect their values as closely as possible.
TH E FO NDS
SUP P O RTS T HE VALU ES
P RO MOT E D BY
TH E UN I T E D NAT I O NS
GLO BAL CO MPACT,
WH I C H R E L AT E
TO H UM AN R I G HTS ,
L A BOUR STAN DAR DS ,
A N TI -CO R RU PT I O N
AN D TH E E NV I RO NME N T.
ENGAGEMENT AND RESPONSIBLE
INVESTMENT ACTIVITIES
05
STATEM EN T O N BA N G L A D ES H
Following the recent fires and other catastrophes
at several apparel manufacturing plants in
Bangladesh, Michel Arsenault, Chairman of the
Board of Directors of the Fonds de solidarité FTQ,
and Yvon Bolduc, President and CEO, jointly signed,
in May 2013, the Investor Statement initiated
by the Committee on Workers’ Capital (CWC) to
voice their outrage at these unacceptable events.
This statement calls on leaders of that industry
to implement systemic reforms that will ensure
worker safety and welfare. The executive officers
of the Fonds de solidarité FTQ have thus engaged
major apparel companies and retailers to foster
responsible procurement practices.
Here are a few examples of engagements and
activities undertaken by SHARE on our behalf from
January 2012 to March 2013 on environmental,
social and governance fronts.
ENVIRONMENTAL
– Climate risk disclosure – SHARE continued its annual
campaign advocating for additional climate risk
disclosure by encouraging companies to respond to
their 2013 Carbon Disclosure Project (CDP questionnaire
or otherwise disclose their management of climate
change-related risks and opportunities).
– Hydraulic fracturing – SHARE requested companies
with hydraulic fracturing operations to provide
improved disclosures on the processes they use and
the impact of this technique, and it visited well sites
in the United States.
SOCIAL
– Human rights – SHARE produced a discussion paper
on investors’ human rights expectations and circulated
it for comment to mining sector companies. Then,
it contacted several Canadian mining companies to
follow up and seek feedback on this document entitled
Investor Expectations on Human Rights Performance
for Mining Companies.
– Phosphate rock – SHARE continued its engagement
with companies that use phosphate rock coming from
the Non-Self Governing Territory of the Western Sahara
to discuss the production conditions of this mineral
ore in that region.
W HEN STAYI N G
I S N O LO N G ER P OSS I BL E …
The Fonds de solidarité FTQ chose to take its
shareholder seat in the companies in which it invests,
which means that it intervenes rather than withdraws
when they make decisions, and to thereby have the
opportunity to influence these choices. And that’s
what it does in the vast majority of cases.
However, when exceptional conditions warrant it, the
Fonds may decide to exclude from its portfolio the
securities of companies that refuse to engage, do
not systematically comply with local or international
law or use practices that are not consistent with its
fundamental values. This is why the Fonds does not
invest, for instance, in tobacco or arms companies
(companies with 10% or more of gross sales arising
from the manufacturing or sale of weapons).
In this annual analysis, the Fonds de solidarité FTQ
is also supported and guided by Groupe investissement
responsable (GIR), a Montréal-based company.
Following the analysis of environmental, social and
sound governance (ESG) issues related to each of the
securities in its portfolio, GIR proposes to the Fonds
some directions to help it make informed decisions,
in accordance with internationally accepted socially
responsible investment best practices and ESG criteria.
GOVERNANCE
– Executive compensation – SHARE initiated and pursued
its engagement with companies on improved executive
compensation disclosure.
– Board gender diversity – SHARE wrote to targeted
companies on the topic of gender diversity on
corporate boards and provided a set of recommendations
intended to assist those boards in improving their
gender diversity.
Socially responsible investment (SRI) is a form of investing that takes into account environmental, social
and governance criteria in addition to the financial aspects. Institutions that make SRIs are actively engaging
the companies in which they invest. To paraphrase LCL (Crédit lyonnais), a major French bank, SRI is the
financial translation of sustainable development for savings products.
In a study performed from
1998 to 2006, two researchers
from New York University
and the University of Oxford
analyzed the performance
of 1,214 companies included
in the S&P 500 and
Russell 3000 indexes and
demonstrated that the “greatest
profitability accrues to the
companies with the highest
commitment to sustainability.”
Source: Network for Business Sustainability, January 2013.
06
OUR SOCIAL IMPACT
OUR SOCIAL
IMPACT
A SOCI A L LY R ESP ON SI B L E
I N V ESTOR SI N CE 19 83
FROM ITS INCEPTION, THE FONDS DE SOLIDARITÉ FTQ
WAS A SOCIALLY RESPONSIBLE INVESTOR THAT FOLLOWS
A SUSTAINABLE DEVELOPMENT APPROACH. BELOW IS A BRIEF
SUMMARY, IN THREE MAIN STAGES, OF THE FONDS’
ACHIEVEMENTS OVER THE PAST 30 YEARS.
1
OUR UNION DNA PUTTING DOWN ROOTS
(1983 TO 2000)
– The Fonds de solidarité FTQ’s Incorporation Act:
The importance that the Fonds places on jobs and
economic development, economic training for workers
and the involvement of workers in the development
of companies is entrenched in the Act. For more details
on the Fonds’ Incorporation Act:
| fondsftq.com/documentation-centre |
– Local development: The Fonds locaux de solidarité (FLS),
created in 1991, and the Fonds régionaux de solidarité
(FRS), created in 1995, form an investment network
that is close to the communities, enables local people to
participate in investment decisions and, in the case of FLS,
offers entrepreneurial microcredit.
– Appropriate tools: Starting in 1983, the Fonds developed
effective tools to measure the risks and the social and
economic impact of its investments:
• Social audit: This audit is performed before each
investment in a potential partner company. Its goal
is to analyze the extra-financial aspects of these
companies, such as management, human resource
management, workplace health and safety issues
or the position of the company in the community
where it operates;
• Exit audit: Concerned with the impact of its investments
on the communities where it makes a commitment,
the Fonds is highly transparent by performing, in
addition to a social audit, an exit audit to appropriately
assess the socio-economic impact that could result
from its disinvestments;
• Economic training (see details on page 7) ;
• Due diligence review process: This is the traditional
process undertaken before any investment to assess
whether the company will generate a satisfactory
return in the future. This process results in a good
understanding of the operations, financial condition
and strengths of a company and the challenges it faces
in its economic and financial environment;
• Investment policy: In addition to the social audit and
due diligence review, the Fonds adopted an investment
policy that sets out the main principles and guidelines
that orient its investments. It also includes all the issues
related to the social, economic and environmental
context. This policy is regularly updated, in particular
to integrate the aspects related to sustainable
development and corporate social responsibility.
2
MEETING SPECIFIC NEEDS
(2001 TO 2008)
– Adopting the Code of Conduct for International
Business Dealings. Adopted several years ago, in the wake
of globalization, the Code of Conduct for International
Business Dealings was revised during the last financial
year. This Code applies to the Fonds partner companies
that have operations outside Canada, generally in
emerging countries, and to their suppliers. It provides a
solid framework for the activities of the Fonds based on,
among other factors, compliance with the United Nations
Global Compact principles.
| fondsftq.com/international-code |
– Developing guidance on voting rights. As the
shareholder of hundreds of listed companies, the Fonds
de solidarité FTQ wishes to exercise its “ownership
rights” to help these companies to, on one hand, adopt
governance practices that are more modern and more
respectful of their shareholders and stakeholders and,
on the other hand, implement measures to become better
corporate citizens. Accordingly, the Fonds adopted,
several years ago, a series of guidelines on voting as
a shareholder of listed companies. This guidance was
revised once again during the last financial year as part
of a continuous improvement process.
| fondsftq.com/vote-entreprises | (in French only)
3
THINKING GLOBALLY, ACTING LOCALLY
(2009 TO 2013)
– In 2009
• CreatedaSustainableDevelopmentandSocially
Responsible Investment Multisectoral Internal
Committee, which guides and supports the various
business sectors of the Fonds.
• AdheredtotheGlobalReportingInitiative(GRI),
the essential reference for sustainable development
and socially responsible investment disclosures,
and the basis for the Fonds’ Annual and
Sustainability Report.
• AdheredtotheUnitedNationsGlobalCompact
(see the GRI Index on page 24).
– In 2011
• AdheredtothesixPrinciplesforResponsibleInvestment
(PRI) issued by the United Nations (see page 4).
• CarriedoutprojectsrelatedtotheFonds’environmental
concerns: Green Committee comprised of Fonds
employees, BOMA BESt and LEED EB certifications
for the head office, measures promoting sustainable
transportation, responsible procurement policy, etc.
2010
OUR FIRST
ANNUAL AND
SUSTAINABILITY
REPORT
– In 2012-2013
• Developed guidelines for practices related to sustainable
development and social responsibility in mining project
management. In all of their exploration activities,
the mining companies in which the Fonds invests must
diligently take technically proven and economically
feasible measures to adequately protect the environment
and ensure the health and safety of workers.
• CreatedtheCarbon Credit Committee – This
Committee’s mission includes monitoring legislation
and markets to enable us to: develop our knowledge
and expertise in the carbon credit sector; create tools
to improve the Fonds specialists’ interventions with
our partner companies in that respect; and inform the
employees of the Fonds and its network on this topic.
• AdheredtothestandardsoftheHedge Fund Standards
Board (HFSB) – The HFSB is a major standard-setting
body for the hedge fund industry. Its standards, which
are in addition to the rules already prescribed by
public policies, are a powerful mechanism for creating
a framework of transparency, integrity and sound
governance. The Fonds encourages the managers of
this asset class to apply these transparency principles.
| hfsb.org |
OU R SO C I A L I M PACT
07
ECONOMIC TRAINING: A FUNDAMENTAL VALUE
Understanding the issues and engaging in a dialogue underlie
every social and economic change. The open and transparent
communications that result from the training sessions given by the
Fondation de la formation économique of the Fonds de solidarité FTQ
are therefore drivers of change. This is especially the case in the
way workers perceive the role they can play to ensure the longevity,
if not the growth, of the company that employs them and thereby
contribute to protecting, maintaining and creating jobs.
THE BASIC PREMISE
If employees better understand the real issues facing the company,
they will more easily be part of the solution. Their creativity,
their knowledge and their experience will be drawn upon in all the
departments of the company, such as sales and marketing, production
and human resources.
AN INTEGRAL PART OF OUR MISSION
This understanding must go beyond the mere knowledge of
the company’s financial issues. Employees must also be aware
of organizational and extra-financial issues: what are the major
challenges the company must face to operate in its market?
The economic impact of a company on its environment and
its community, which involves in particular protecting or creating
jobs, forms the basis of its success.
TRAINING TAILORED TO RE ALIT Y
The training offered to the Fonds de solidarité FTQ’s partner
companies is tailored to the reality of each company in order
to reflect the economic and social context specific to each of them.
While previously limited to the financial aspects, in recent years
training in partner companies has started to also address all
the factors likely to influence the development of companies, such
as markets and customers, the impact of exchange rates, price
fluctuations, etc.
After each session, participants are asked to reflect on the tangible
impact that this training might have on their daily activities and
to take ownership of the notions covered to create positive changes
for the company.
BELIEVING IS SUCCEEDING!
TRAINING ACTIVITIES
Whether offered in a unionized or non-unionized environment,
training sessions are based on communication practices that
promote employee involvement in the development of the company.
Experience shows that this is an essential condition to the success
of any company; it also shows that when the management of
a company believes that engaging in a dialogue with employees
is important to gain a common understanding of financial and
organizational issues, the company is successful.
FO R T H E Y E A R E N D E D M AY 3 1 , 2 0 1 3
Local representatives (LRs)
Economic training for workers
Network members
Students
Total
P
PARTICIPANTS
COURSES
3,613
1,345
1,113
331
6,402
137
83
42
19
281
Contributing to Québec’s economic development through strategic
investments that benefit both workers and companies alike is at the
core of the Fonds de solidarité FTQ’s mission. This is why offering
training to workers so that they can increase their influence on the
economic development is also an integral part of the socio-economic
mission of the Fonds de solidarité FTQ.
GOOD RELATIONS WITH COMMUNITIES
The Fonds de solidarité FTQ
supports many community
organizations and also supports
its regional and local investment
network and its partners that
are also committed to promoting
humanitarian and charitable
activities in which their employees
volunteer. This is one of our
ways to stay close to people and
value their contribution to our
society. Here are a few examples
of the Fonds’ involvement.
REWARDING
PERSISTENCE!
INTERNATIONAL SUMMIT
OF COOPERATIVES
L A COOP FÉDÉRÉE:
A GOOD NEIGHBOURHOOD GUIDE
The Fonds de solidarité FTQ was very pleased
to financially support, as Silver Partner, the
first International Summit of Cooperatives,
which was held in Québec City in October 2012.
This summit, which was a pivotal event of the
International Year of Cooperatives, was attended
by over 2,800 representatives and future leaders
of cooperatives and mutuals from 91 countries.
Participants came together to engage in in-depth
discussions on the business challenges facing
the cooperative and mutualist movements.
The other objectives of the event were to help
facilitate networking and inter-cooperation, inform
governments, regulatory authorities and the general
public more on the cooperative model and find
concrete ways to stimulate the development of this
sector at the local, national and international levels.
Cooperatives and mutuals contribute to the socioeconomic wellbeing of people and communities and
to a balanced and more stable plural economy; they
are an important part of the world economy and
contribute to sustainable development.
Last March, La Coop fédérée, a Fonds de solidarité FTQ partner
company, published a tool for its entire network entitled Guide d’aide
au bon voisinage (A good neighbourhood guide). The neighbourhood
mentioned in this guide includes much more than the people in
the communities where La Coop fédérée operates—it’s all the
individuals and organizations affected by its activities; in other words,
its stakeholders.
Domaine Pinnacle’s ice cider is world-renowned;
many well-known wine critics, chefs and sommeliers
have lauded its qualities. And in December 2012, the
Domaine was awarded, at the Canadian Wine Awards
ceremony, the first, second and third places in the
Top Québec Products category for three of its ciders!
TRANSPORTATION
FOR A BET TER LIFE
Many years of work
“This success is the result of many years of work!
In the beginning, we wanted to produce ice cider
in Québec; it’s only afterwards that we gauged the
international potential of this cider. Over time, we
expanded our production with other quality products,
and we place a great deal of emphasis on tourism
with our boutique, which is greatly appreciated,”
explains Mr. Crawford.
In March 2013, Mr. Charles Crawford, President
of Domaine Pinnacle, emerged as the big winner of
the 28th Grands Prix du tourisme Desjardins des
Cantons-de-l’Est by winning the Tourism Personality
of the Year Award. A man of vision, Mr. Crawford
founded this family business in 2000, in Frelighsburg,
and the Domaine quickly became the world’s largest
ice cider producer.
CENTRAIDE CAMPAIGN
Once again, in 2012, with the support and community
commitment of its employees and its network,
the Fonds de solidarité FTQ participated in the
Centraide campaign. Through this gesture of true
solidarity, of which we are very proud, we were able
to raise $223,456.
A partner company of the Fonds régional de
solidarité FTQ Estrie, the Domaine has 96 employees.
domainepinnacle.com
DONATIONS RAISED
FOR CENTRAIDE:
$223,456
The guide explains that, nowadays, companies must be good
citizens, respect others and protect the environment, and that
the inconveniences they may cause are no longer tolerated by
the community. For many of them, this situation is confusing because
they must adjust their processes accordingly. The guide uses these
daily concerns of entrepreneurs as a basis to explain in a practical
way what sustainable development and corporate social
responsibility really are: how to adapt the economic objectives
of a company to the wellbeing of society and the enhancement
of the environment.
To consult the guide:
lacoop.coop/voisinage
(in French only)
The Fonds de solidarité FTQ is proud to have been a
partner of the “Transportation for a Better Life” project
of the Fondation Monique-Fitz-Back, an organization
whose mission is to promote education related to the
environment and a healthy living environment, within
the perspective of sustainable development.
This project was launched to stimulate reflection
and encourage the involvement of young people
with respect to the challenges raised by
transportation. Young people were asked to
observe their surroundings and then imagine living
environments that are more respectful of people
and the environment.
As part of this project, 3,300 students participated in
the “Transportation of the future: my vision” drawing
contest. The drawings of finalists and winners
will be part of exhibitions that will tour several
CORPORATE SOCIAL
RESPONSIBILITY
The Fonds de solidarité FTQ was a major partner
of the 9th Summer School of the Institut du
Nouveau Monde (INM), a citizenship school for
people aged 15 to 35, which was in session from
AUDREY CONSTANTINEAU , St-Nom-De-Jésus School,
Commission scolaire de Montréal, 2012-2013 contest
finalist, Montréal/Laval, Cycle Three
libraries, while those of winners will be exhibited in
over 1,300 buses of the Montréal, Laval and Lévis
transportation corporations as well as in the buses
of the Réseau de transport de la Capitale and the
Association québécoise du transport intermunicipal
et municipal.
August 16 to 19, 2012 in Montréal and attended by
over 525 people. The Fonds was the exclusive partner
of the Environment and sustainable development
curriculum of the School, in which participants
carried out tangible projects related to this theme.
The Fonds was also present notably through the
participation of Mario Tremblay, its Vice-President,
Public and Corporate Affairs, in a round table on
corporate social responsibility.
08
OUR SHA REHOLD ERS
NET
ASSETS OF
$9.3 BILLION
BEHIND THE NUMBERS, THERE ARE PEOPLE:
615,664
SHAREHOLDERS
During the financial year ended May 31, 2013, the Shareholder Services sector maintained
its three strategic axes—developing systematic savings, mobilizing the local representative (LR) network and
building shareholder loyalty—and it achieved very positive results: the 2012-2013 campaign has been
the second best in the history of the Fonds de solidarité FTQ.
Shareholders’ trust: always there!
The Fonds de solidarité FTQ collected
subscriptions allowing it to issue shares
totalling $855 million, compared to
$767 million in the previous year. In addition,
42,984 new shareholders joined the Fonds.
Therefore, as at May 31, 2013, the Fonds
had 615,664 shareholders, up 21,377 since
May 31, 2012.
The Fonds’ performance, stability and
financial strength were once again assets
for encouraging its shareholders to
continue subscribing and for attracting new
shareholders. Its presence during the RRSP
period (in particular through its LR network
across Québec) allowed it to increase the
amount of annual lump-sum subscriptions
by 20%, reaching $424 million compared to
$354 million for the previous financial year.
MY ONLINE ACCOU N T
Online transactions also played an important role
during the year: our shareholders, including the
17,073 new shareholders, used the Fonds’ website
to carry out transactions totalling $166 million.
Our LRs, essential
Fonds ambassadors
Beyond the advertizing campaigns it runs
in various media, the Fonds can count on a
network of over 2,000 LRs who are members
of FTQ-affiliated unions and unions the
Fonds has agreements with to meet its
objectives. From Gatineau to Gaspé, and
from Baie-Comeau to Sherbrooke, LRs
promote the Fonds in their workplaces
without financial reward. Every day, they
explain the Fonds’ objectives to their
coworkers and encourage them to subscribe
to the Fonds so they can save for retirement
while contributing to Québec’s job and
economic development. Many LRs also work
in one of the 50 or so field offices that the
Fonds opens throughout Québec during the
RRSP period. The LR network is supported
by a team of Fonds coordinators, and a
service group, created especially for them,
provides them with the tools they need and
answers their questions at all times.
It should also be highlighted that our LRs
receive continuing education, which is
provided in collaboration with the Fondation
de la formation économique, to update their
knowledge and thereby continue to explain
the Fonds’ mission and RRSP.
A SAV I NGS CU LT URE
For 30 years, the Fonds de solidarité FTQ has been
promoting retirement savings to workers, and it
can be said that, by doing so, it has significantly
contributed to creating a savings culture in Québec.
Today, thanks to subscription through payroll
deduction, hundreds of thousands of people have
made a habit of saving because of the Fonds de
solidarité FTQ and the awareness-raising work
done by its LR network in the workplace.
The Fonds currently has 615,664 shareholders.
Over one third of them had never contributed
to an RRSP prior to contributing to the Fonds de
solidarité FTQ. In addition, approximately 80% of
our shareholders hold a complementary RRSP from
another financial institution.
OU R SHA R EHO LDERS
09
AN
INCRE ASING
NUMBER
OF YOUNG
SAVERS
WITH THE 2012-2013
RRSP CAMPAIGN,
THE FONDS INCREASED
BY 27% THE NUMBER
OF ENROLMENTS OF
PEOPLE UNDER THE
AGE OF 40.
1.9 MILLION
WORKERS DO NOT
PARTICIPATE
IN A GROUP
RETIREMENT PLAN.
THIS REPRESENTS
47% OF QUÉBEC’S
WORKERS.
Fortunately, payroll deduction exists
In 2012-2013, many shareholders chose
once again to contribute to their RRSP
through payroll deduction. Subscriptions
through payroll deduction actually represent
the largest portion of our cash inflows,
thanks mainly to our LR network. The efforts
made to recruit new shareholders who would
contribute through payroll deduction and the
increase in the number of workplace blitzes
during the year (up 22% compared to the
prior year) have borne fruit: in 2012-2013,
an additional 13,327 shareholders chose
payroll deduction.
SÉCU RIFO N DS
The volume of redemptions amounted
to $542 million for the year, compared to
$620 million as at May 31, 2012. Most
redemptions ($453 million) were made for
retirements, and 74% of amounts disbursed
for these redemptions were paid to
shareholders who were under the age of 65.
In addition, an increasing number of retiring
shareholders rely on SÉCURIFONDS Inc., a
financial services firm created by the Fonds de
solidarité FTQ whose authorized distributor is
SSQ, Life Insurance Company Inc., for planning
and ensuring their financial security.
For the past few years, the Fonds
de solidarité FTQ’s communication
strategies have been aimed mainly
at people under the age of 40 and
members of cultural communities.
And these efforts are paying off:
with the 2012-2013 RRSP campaign,
the Fonds increased by 27% the
number of enrolments of people under
the age of 40, an impressive increase,
especially after the results of the
previous campaign, when the number
of new enrolments in this age group
had jumped 39%. Furthermore,
as young people are more likely to take
advantage of the Home Buyers’ Plan
(HBP), redemptions made to enable
shareholders to buy their first home
totalled $34 million for the financial
year. It should also be noted that the
Fonds’ presence in English-speaking
media contributed to increasing its
recognition by the general public.
Satisfied shareholders
All these good results show to what extent
the Fonds shareholders are aware of
the importance of saving for retirement.
Making workers aware of the need to save
for retirement and encouraging them to do
so has been part of the Fonds’ mission for
30 years!
In the last survey, conducted in 2012,
the overall satisfaction rate of the Fonds
shareholders, who were questioned on
about 30 points covering some of the Fonds’
deepest values, was close to 90%, a very
good result!
AN INCREASING
NUMBER OF
RETIRING
SHAREHOLDERS
RELY ON
SÉCURIFONDS.
fondsftq.com/securifonds
10
OUR ECONOMIC I MPACT
OUR ECONOMIC
IMPACT
STU DY O N TAX-A DVANTAGED FUNDS
DELOITTE CONDUCTED A STUDY THAT ACCURATELY DESCRIBES
THE ACTIVITIES AND PERFORMANCE OF THE THREE QUÉBEC
TAX-ADVANTAGED FUNDS: THE FONDS DE SOLIDARITÉ FTQ, FONDACTION
CSN AND CAPITAL RÉGIONAL ET COOPÉRATIF DESJARDINS. THIS STUDY
EXPLAINS THE POSITION THESE FUNDS HOLD IN THE QUÉBEC CHAIN
OF CORPORATE FINANCING, AND HIGHLIGHTS THEIR FINANCIAL
AND EXTRA-FINANCIAL PERFORMANCE, WHICH IS WHAT SETS THEM
APART FROM OTHER INVESTMENT FUNDS.
One of the points covered in this study (see the chart below) clearly demonstrates Québec’s
robust performance in the area of venture capital. In fact, the tax-advantaged funds in Québec
such as the Fonds de solidarité FTQ, the largest labour-sponsored fund in Canada, better
address the financing needs of SMEs. As such, Québec’s position compares favourably, ranking
third among the OECD member countries most active in venture capital.
VENTURE CAPITAL AS A % OF GDP, 2009
Source: OECD
QUÉBEC
0.200%
0.150%
0.083%
CANADA
0.100%
ONTARIO
0.033%
0.050%
0.019%
The importance of the Fonds de solidarité FTQ
to the Québec economy
Based on Deloitte’s study, the Board of Trade of Metropolitan
Montreal (BTMM) issued in May 2013 the Report on the
Importance of Labour-Sponsored Funds for the Economy of
Metropolitan Montreal that discusses the economic weight
of the Fonds de solidarité FTQ and Fondaction CSN. Michel
Leblanc, Chairman of the BTMM, stated at the time that
“our economy greatly benefits from the action of these two
pillars of our financial ecosystem.”
We cite many statistics and data from this report in this
Annual and Sustainability Report.
You can download the report here:
| btmm.qc.ca |
The issue of savings
These two analyses also address the issue of savings and
demonstrate the undeniable role that tax-advantaged funds
play in developing strong individual saving habits, particularly
with regards to saving for retirement. “Many of the
shareholders of the Fonds de solidarité FTQ and of Fondaction
CSN save more regularly and have a tendency to diversify
their retirement savings sources, a behaviour that should be
encouraged considering the demographic challenge that all
of Québec is currently facing and the weak savings rate of
Quebecers,” explained the Chairman of the BTMM.
Y
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AT THE HE ART OF LOCAL ECONOMIES
Fonds locaux de solidarité FTQ heads
a network of 85 local funds that spans the
entire province: from Gatineau to the
Îles-de-la-Madeleine, from Coaticook to
James Bay. In fact, of the development
territories designated by the Québec
government, 85 are covered by a local fund.
This network, which has been built up over
the years through the efforts of elected
municipal leaders and their local partners,
supports local economies by contributing to
the development of SMEs and creating and
maintaining sustainable and quality jobs.
The involvement of the Québec Federation
of Municipalities (FQM), a partner of the
network from the outset, should also
be noted.
A WINNING PARTNERSHIP
Companies have access to financing from
local funds through the intermediary of
their region’s Local Development Centres
(LDC), which also provides a team of
professionals whose job is to promote
the development of local companies
(in Montréal, the Community Economic
Development Corporations operate
as LDCs). The 85 teams working daily
in these organizations are supported by
600 volunteers who sit on investment
committees, and thereby contribute to
driving our economy.
Fonds locaux de solidarité FTQ invests
in local funds and offers professional
services to LDCs to develop and support
entrepreneurship, job creation and the local
economy to ensure the vitality of the regions.
In this way, Fonds locaux de solidarité FTQ
contributes to the execution of the Fonds de
solidarité FTQ’s mission. Local funds provide
financing up to $100,000.
During the last year, the 85 local funds
financed 251 business projects, which
represent investments of $6.78 million.
Over the last 21 years, 3,106 projects were
supported and over 28,700 jobs were
created or maintained.
INVESTING TO CRE ATE VALUE IN T HE REGIONS
The Fonds régionaux de solidarité FTQ (FRS)
employ 57 creative and committed people
in 16 offices across Québec and strengthen
the Québec economy with their valuecreating investments. The FRS boards
of directors are made up of locals who add
valuable knowledge of the specific socioeconomic conditions of each region.
company selected one of the FRS each
week to support it in its development! And
during the financial year, these investments
led to creating, maintaining or protecting
2,547 jobs.
EFFORTS THAT ARE BE ARING FRUIT
The FRS, which offer financing from
$100,000 to $2 million, are an integral part
of the Fonds de solidarité FTQ’s network.
They help facilitate the regional companies’
access to the Fonds’ services. In addition
to encouraging jobs through their
During the last financial year ended
March 31, 2013, the FRS invested
$33.4 million in 77 Québec companies.
Of those, 54 were new partners of the
FRS: in other words, on average, a new
SP
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SW
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ED
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0.000%
QUÉBEC IS
ON PAR WITH
THE TOP
VENTURE CAPITAL
COUNTRIES IN
THE OECD.
A REGIONAL IMPACT THAT BENEFITS
ALL OF QUÉBEC
investments and supporting the start-up
and succession of companies, they seek
to maximize their impact in the regions by
making available locally the various services
offered by the greater Fonds network, such
as subscription and economic training.
As such, each dollar that workers invest
for their retirement goes a long way;
used by Québec companies to innovate
and grow, these investments generate
positive economic spinoffs in all the
regions of Québec.
11
OU R ECO N O M I C I M PACT
THE DIRECT ECONOMIC IMPACT
OF THE FONDS
DIRECT ECONOMIC IMPACT OF THE FONDS
FO R T H E Y E A R S E N D E D M AY 31
2013
2012
Interest and dividend revenues
255,897
247,418
Realized gains on development capital investments and other
investments and change in unrealized appreciation or depreciation
349,810
118,863
Operating costs (goods and services purchased from suppliers)
51,708
51,767
Salaries and related benefits
75,296
70,239
534,912
620,177
20,710
29,090
869
915
(in thousands of $)
The table opposite presents financial data that demonstrate
the significance of the activities of the Fonds de solidarité FTQ
and how the Fonds creates wealth for its stakeholders.
Direct economic value created (reflected in share value)
This table should not be used as a substitute for the Fonds’
financial statements; it is intended to present certain financial
data identified as material in accordance with the GRI.
Direct economic value distributed in Québec society
Payments to shareholders (shares redeemed)1
Payments to governments (income and other taxes)
Investments in the community (donations and sponsorships)
1. The Fonds does not pay any dividends.
COMMENTS FROM DANIEL DENIS,
PARTNER AND ECONOMIST, KPMG /SECOR
ECONOMIC IMPACT ON QUÉBEC
The contribution of the Fonds partner companies to the Québec
economy continued to grow in size in 2012: their activities
generated added value estimated at $11.5 billion in Québec.
The economic wealth created by the Fonds partner companies
therefore climbed 6.7% compared to 2011. The Fonds partner
companies thus gained more weight in the Québec economy
in 2012, as the overall growth rate in Québec was a little less
than 4% in the same period. This higher performance is
the result of both the growth in activities of companies already
in the portfolio and the increased number of companies in
the portfolio.
R E L AT E D TO G O O D S A N D S E R V I C E S P R O D U C E D
B Y T H E FO N D S PA R T N E R C O M PA N I E S (2 0 1 2)
DIRECT
EFFECT
INDIRECT
EFFECT
TOTAL
EFFECT
7,762,000
3,763,000
11,525,000
87,297
48,570
135,867
88.9
77.5
84.8
Value added
to base prices
(in thousands of $)
Jobs (in person-years)
Value added per job
(in thousands of $)
Source: KPMG/SECOR analysis and results of the ISQ’s input-output model.
$11.5 BILLION
In addition, the value added per job was $85,000 in 2012,
which is a sizable increase over 2011 (5.1%) and well outpaces
inflation for the year (2.1%). This growth is mainly due to the
stronger addition of jobs in higher value-added sectors. With
nearly $89,000 of value added per direct job, the Fonds partner
companies contribute to growing Québec’s absolute and
relative wealth.
N O G R AN TS
ECONOMIC VALUE ADDED IN
QUÉBEC BY THE FONDS PARTNER
COMPANIES IN 2012
THE FONDS AND THE ÉCOLE D’ENTREPRENEURSHIP
DE BE AUCE: T WO BURSARIES EVERY YE AR
At the Fonds de solidarité FTQ, we understand the
magnitude of the daily challenges that entrepreneurs
face, particularly young ones. This is why the Fonds
is proud to partner with the École d’entrepreneurship
de Beauce and contribute to developing excellence
in Québec entrepreneurship. Each year the Fonds
awards a bursary to two entrepreneurs enrolled
in the school to cover part of their tuition. The
École d’entrepreneurship de Beauce provides the
entrepreneurs of tomorrow training, which is given
by high-level entrepreneurs. To date, the Fonds
de solidarité FTQ has supported the following
six entrepreneurs through this bursary program:
Simon Labrecque (Air Ambiant), Guillaume
Leprohon (Leprohon), Marie-Claire Filion (Industrie
Bourgneuf), Yannick Gardner (Les Aciers Solider),
François Dubuc (Nitek Laser) and Robert Michaud
(Ramp-Art). All of these bursary recipients are heads
of companies or are highly positioned within the
companies they work for. The study program lasts
two years.
RENDE Z-VOUS
CONSEIL 2012
THE FONDS
AND THE 2013
MERCURIADES GAL A
The most recent Rendez-vous conseil held by
the Fonds de solidarité FTQ was in November
2012, where the over 80 people in attendance
were mainly directors of Fonds partner companies,
but also representatives and guests of the
Fonds and its network (including the chair of
the board of directors of certain Fonds régionaux
de solidarité FTQ). These meetings allow directors
to update their knowledge in areas such as law,
for instance, and discuss current major issues,
such as governance. It should be recalled that
around 75 directors are appointed by the Fonds
de solidarité FTQ to the boards of its partner
companies: these people play a major strategic
role that is very appreciated by the leaders of
our partner companies. To do this, they need
to fundamentally understand their role and their
responsibilities, and the Fonds fully supports
them on this front.
The Fonds partner companies supported 135,867 direct and
indirect jobs in 2012, which is a better performance in this area
than the overall Québec economy. Total jobs supported by the
Fonds partner companies increased 1.1% in 2012 compared
to 2011, while overall employment only grew 0.8% in Québec
during the same period.
eebeauce.com
The Fonds de solidarité FTQ does not receive government grants.
However, the Fonds’ shareholders receive tax credits
of 30% (15% from the Government of Québec and 15% from
the federal government) on a maximum annual contribution
of $5,000.
GAÉTAN MORIN RECEIVES AN AWARD FROM THE AEMQ
In November 2012, the Quebec Mineral Exploration
Association (AEMQ) handed out its annual awards,
and Gaétan Morin, Executive Vice-President,
Corporate Development and Investments at the
Fonds de solidarité FTQ received the 2012 Economic
Actor in Mineral Exploration Award. This award is
given to an individual or an organization of the
business and/or finance and/or law domain that
has significantly contributed to the mineral
exploration industry.
The AEMQ recognizes and honours the dynamism
and entrepreneurship of individuals and companies
involved in the development of Québec’s mining
exploration industry.
JEAN WILHELMY and JEAN-MARC WASSEF, from the Fonds,
and YANNICK GARDNER (center), from Les Aciers Solider
The Fonds de solidarité FTQ sponsored the gala
of the Fédération des chambres de commerce
du Québec’s 33rd Mercuriades, held on April 11,
2013, where President of Honour Yvon Bolduc,
the Fonds’ President and CEO, handed out awards
to 19 Québec-based companies.
The Mercuriades recognize the excellence of
Québec companies, and highlight and showcase
the hard work, skills, persistence and creativity
of Québec entrepreneurs.
Mr. Morin, who has worked for the Fonds since 1989,
has a master’s degree in economic geology and
studied geology and finance at Université du Québec
à Montréal.
GAÉTAN MORIN ,
Executive VicePresident, Corporate
Development and
Investments,
Fonds de solidarité FTQ
It should also be noted that the Fonds de
solidarité FTQ has worked with other institutions
active in the mining sector to formalize guidelines
for practices related to sustainable development
and social responsibility in mining project
management (see page 6).
YOUR MONEY AT WORK
Mr. Bolduc noted in his speech that the Fonds’ mission
is to create and protect jobs, and the Fonds supports
entrepreneurs as they develop their companies.
“You are building our economic future,” he told the
participants. “We need your passion, dedication and
energy to continue to drive our economy.”
Since June 2012, the Fonds de solidarité FTQ
has produced sixty-second TV spots called Your
money at work. These are short news stories on our
shareholder-owners who visit some Fonds partner
companies across Québec. These RRSP holders can
see how the money they invest helps SMEs—and the
regions where they operate—develop. It’s one way to
clearly show how savings are driving our economy!
These news stories are aired three times a day in
primetime on TVA and LCN, and since recently, on
SRC-RDI and CTV.
You can watch them at:
yourmoneyatwork.ca
“YOU ARE BUILDING OUR ECONOMIC FUTURE”
– YVON BOLDUC
12
OUR PA RTNERS
OVER
500,000 JOBS
BEHIND THE WORK , THERE ARE IDE AS:
2,395
PARTNER COMPANIES
The Fonds de solidarité FTQ’s strategy aims to strengthen companies in all the sectors of the
Québec economy, throughout the province. With patient capital, the Fonds supports companies’ development
projects, such as making acquisitions, penetrating new markets, or integrating new technology.
The Fonds also aims to strengthen the position of Québec companies facing intense international competition
and help them retain their decision centres in Québec.
Strengthening Québec’s companies
Capital dedicated to Québec SMEs remains a Fonds priority: accordingly, as at May 31, 2013,
82% of the partner companies of the Fonds and its network of regional funds had fewer than
100 employees.
A M A J O R CO NTRIBUT IO N TO F IN A N CIN G CO MPA N IES
The following are a few examples of investments the Fonds made during the 2012-2013
financial year to fulfil its mission:
One of the most important aspects of the Fonds’ mission is to contribute to Québec’s economic development
by making investments that benefit companies while creating, maintaining and protecting thousands of jobs
in Québec.
– $4.75 million in Sojag, a garden furniture
and accessories company, to finance a
transfer of ownership.
The Fonds transforms its shareholders’ retirement savings into capital that it provides to Québec’s SMEs.
No other Québec retirement savings vehicle contributes such large amounts to meet the financing needs of
businesses. Generally, a country’s economy does well when its SMEs do well! As such, the complementary
and long-term capital SMEs receive from the Fonds contributes to their development and overall good health.
– $2 million in Sail Outdoors, an additional
investment in this outdoor, hunting,
fishing, camping and water sports
products store to support its expansion
in Ontario.
– $8 million in Premier Tech, an additional
investment in this leading player in the
horticulture, agriculture, industrial
equipment and environmental technology
industries to support the expansion of its
horticulture division in Europe.
– $12 million in AJW Technique, a company
that provides a broad range of airplane
component repair and overhaul services,
to buy back certain assets from Aveos.
– $15 million in Athos services
commémoratifs, a group of funeral
homes, to help Québec shareholders
buy back the majority of the
company’s shares.
– $15 million in Vision7 International,
one of the 25 best international
communications companies in the world,
to refinance its debt. The company has
two divisions: Cossette and EDC,
a network of specialized agencies.
– $17.2 million in Distech Controls, a major
player in the global building automation
industry, to return control of the company
to Québec shareholders.
OU R PA RTN ERS
Unique and crucial financing
The Report on the Importance of LabourSponsored Funds to the Economy of
Metropolitan Montreal, issued last May by
the Board of Trade of Metropolitan Montreal
(see page 10) clearly shows that the Fonds
de solidarité FTQ is active throughout a
business’ growth cycle, from seeding to
maturity. In fact, the Fonds often invests
money in companies that are just starting
up—which is known as venture capital, and
the risk may be high, but the Fonds, with
its long-term vision, is able to be patient. It
also invests in companies that already have
a viable product, a fairly developed market,
a solid customer base and steadily growing
revenues, to help them grow, at various
moments in their growth—this growth capital
is therefore intended to help them increase
their production capacity or strengthen
their position, for example. The Fonds
invests in companies in both the high-tech
and traditional sectors, thereby meeting
various market and entrepreneur needs. The
Fonds supports its partner companies by
providing them access to specialists from its
multidisciplinary teams.
THE FONDS
KNOWS THE
SME MANAGERS’
CONCERNS WELL.
13
FROM 2004 TO 2013,
THE FONDS HAS
COMMITTED $5.5 BILLION
OF UNSECURED RISK
CAPITAL TO PARTNER
COMPANIES!
TA K I N G T H E PU LS E O F ENTREP RENEURS
Twice a year, the Fonds de solidarité FTQ “goes out in the field” to survey some 300 Québec
SME managers to get a clearer picture of their perception of their company’s position and
the economic climate in general. This survey is conducted by Leger – The Research Intelligence
Group and is used to create and publish the Fonds de solidarité FTQ – Les Affaires SME
Confidence Index.
To be able to determine their level of confidence regarding the future of their companies, we ask
them questions on their sales forecasts, hiring or layoff expectations, how easy (or not) it is to find
financing and even the measures they expect to take to increase their productivity. We also try
to find out what worries them most, because the Fonds can be a better strategic player for SMEs
if it understands their perceptions, behaviours and the decisions they wish to make.
The last survey, conducted in March 2013, clearly showed that the cost of operations and labour
recruitment were of major concern to entrepreneurs. Nearly 40% of respondents also believed
that the U.S. budget crisis would have an impact on their companies.
fondsftq.com/smeconfidenceindex
THE SME CONFIDENCE
INDEX HAS DECREASED
SINCE 2011.
MARC H
2013
MAY
2012
MAY
2011
62.7%
65.8%
70.0%
BUILDING PROFITABLE , J OB- C R E AT ING P ROJ ECTS
The Fonds immobilier de solidarité FTQ invests in all sectors of the real estate industry:
residential, office, commercial and industrial buildings. In the residential sector, it aims to satisfy the
needs of a wide-ranging customer base by giving preference to projects suited to first-time home
buyers as well as buyers of secondary residences, while at the same time meeting the needs of
low- and middle-income families. The Fonds immobilier team is made up of 32 specialists—market
analysts, architects, urban planners, appraisers, legal experts, accountants and financial experts—
whose diverse expertise provides a real benefit to its partners.
Since its inception in 1991, the Fonds immobilier has generated positive returns year after year, and
its last financial year was no different. As at May 31, 2013, the Fonds immobilier was participating
in developing and building 29 projects with a total value of approximately $1.3 billion; once completed,
they will generate close to 10,000 jobs, based on the Institut de la statistique du Québec’s labour
calculator. As at the same date, it owned 38 buildings under management and 19 million square feet
of land to develop future projects.
Tour des Canadiens
The Fonds immobilier de solidarité FTQ’s last financial year saw the unprecedented success
of the Tour des Canadiens project: 99% of the 552 condominiums were sold in just a few months.
In response to this phenomenal result, the promoters decided to increase the number of floors
of this already emblematic building next to the Bell Centre to 50, making it one of the tallest buildings
in downtown Montréal.
Community projects
The Fonds immobilier manages assets of $33.5 million that are dedicated to affordable-housing,
social and community-focused projects. In the last financial year, $3.6 million was invested to
renovate the 178 apartments of the Terrasse Mousseau complex in Longueuil. Bâtir son quartier,
a social economy enterprise, is managing the project and is working with its social and municipal
partners to improve the quality of life of the tenants.
ONCE COMPLETED,
THE FONDS IMMOBILIER’S
ONGOING PROJECTS
AS AT MAY 31, 2013
WILL GENERATE CLOSE
TO 10,000 JOBS.
14
OUR PA RTNERS (CO N TI N UED)
$908 MI LLI O N I N
46 S PEC I ALI Z E D F U N DS…
THAT DR I VE
OUR ECO N O MY !
Each of the small circles in this chart represents
a private specialized fund in which the Fonds de
solidarité FTQ invested. They are grouped by colour,
each representing a sector: life sciences, information
technology and communications, cleantech and all
Vimac
Milestone
Medica Fund
North
Fonds
BioInnovation
Pappas
Ventures
III
technology sectors. These private funds invest
directly in companies (Teralys Capital, as a “fund of
funds,” is the exception, as it invests in specialized
funds). By investing in a private specialized fund, the
Fonds de solidarité FTQ contributes to the financial
ProQuest
Investments
III
AmorChem
ProQuest
Investments
IV
Cycle-C3E
Fund
VantagePoint
Cleantech II
support that the fund gives to dozens of companies
in promising sectors. Some of these companies are
shown in the chart.
Cycle
Capital
Fund I
Emerald
Cleantech
Fund II
AgeChem
Ontario
Venture
Capital Fund
Rho
Ventures
VI
GeneChem
Technologies
GeneChem
Therapeutics
Lumira
Capital II
Teralys
Capital
MSBI
FSIT
Lumira
Capital I
PRIVATE SPECIALIZED FUNDS
IN WHICH THE FONDS DE SOLIDARITÉ FTQ
HAS INVESTED
(AS AT MAY 31, 2013)
Argo II
iNovia II
FSIC
Pappas
Ventures IV
Go Capital
CTI
Life Sciences
Fund
CTI sciences
de la vie II
Vertex III
Sanderling
Ventures
VII
Vimac ESF
Annex
Fund
19 SPECIALIZED FUNDS IN
Real
Investment
Fund
IT AND TELECOMMUNICATIONS
$247 MILLION COMMITTED
LIFE SCIENCES
GTI V
Fonds
Soutien
Montréal
CLEANTECH
5,908 JOBS
CREATED, MAINTAINED
OR PROTECTED IN QUÉBEC
$908 MILLION
IN 46 SPECIALIZED FUNDS
QUÉBEC INC.: IN ACQU IS ITION MO DE !
Comments from GAÉTAN MORIN, Executive Vice-President, Corporate Development
and Investments, Fonds de solidarité FTQ 1
Therefore, for each Québec company that
is acquired by foreign interests, we buy
2.6 companies. This is a testament to the
vitality of Québec’s companies.
Vimac Early
Stage
Fund
Propulsion III
AND
When a Québec company is acquired by foreign
interests, it can sometimes mean lost jobs and
diminished positive socio-economic spinoffs
generated from head offices or decision-making
centres being in Québec. But in 2012, Québec
companies made 29 acquisitions of foreign
companies (valued at $11.9 billion); during the
same period, 11 Québec companies were acquired
by foreign companies (transactions totalling
$2.5 billion).
ID Fund
JL Albright
IV Venture
8 DIVERSIFIED FUNDS
Entrepia
Fund North
St-Lawrence
Capital
The importance of access to capital
Québec is well positioned in the current financial
ecosystem, but acquisitions require capital. A dip
in the level of investments in companies could
have unfortunate consequences, such as slowing
down the rate of acquisitions in favour of foreign
“predators,” or, more importantly, leading decision
centres to leave Québec when their presence is
fundamental to our economy.
The Fonds de solidarité FTQ and its patient
capital is there to support Québec’s companies
in their growth.
1. Mr. Morin travelled across Québec during the last financial year to
highlight, in particular, how important it is for our Québec businesses
to be well capitalized in order to avoid slowing down the rate of
acquisitions in favour of foreign companies, which could lead major
decision centres to leave Québec.
VantagePoint
2006
BDR
Rho
Canada I
GSM
Capital
Brightspark
II
Rho Fund
Investors
A ripple effect
The Fonds’ investment activities complement
the investment activities conducted by
other investors, as the Fonds’ ability to
invest is not limited by a specific horizon.
In addition, the Fonds invests in sectors that
are less serviced by specialized funds or by
government programs. As such, the Fonds
is heavily involved in investments made
in companies in the seeding phase in Québec
and in venture capital investments in
traditional sectors. The Fonds makes these
investments directly or through specialized
funds in which it invests. The Fonds is also a
leading investor in several specialized funds,
thereby playing a pivotal role that has a ripple
effect on these specialized funds.
Novacap
Technologies
III
Lastly, it should be noted that the Fonds de
solidarité FTQ’s work is countercyclical: as
its history shows, the Fonds sustains a high
level of investments when the economy
slows down. It demonstrated this once
again in 2008-2009, a difficult period when
investment liquidities became increasingly
scarce for companies.
OU R PA RTN ERS
15
GRATEFUL
PARTNERS
PATIENT CA P ITA L
FO R COMPANI ES
T H E FO NDS :
H E LP I NG DR I V E OU R GROW T H
“Without the Fonds de solidarité FTQ, Leger –
The Research Intelligence Group would not have
become the largest Canadian-owned survey and
market study company (with over 600 employees
and offices in Canada, the United States and Europe).
It takes solid financial support to succeed in business,
and the Fonds stands apart from other investors
through its ability to take more risks and provide
patient capital.
“We needed the Fonds de solidarité FTQ when
TeraXion’s management wanted to buy back the
company, which would have otherwise become
majority-owned by foreign interests. Without the
support from the Fonds, among others, TeraXion
would probably not be in Québec anymore. The Fonds
was a kind of catalyst, and since January 2010, not
only have we remained in Québec, but we have also
doubled our sales. And we want to keep growing!”
For many companies, the Québec market is too small,
and expanding into the rest of Canada or the world is
the only way to survive. The first acquisition I made,
in Toronto in 2000, came with many challenges. First,
no bank would have assumed the risk of financing this
project to establish a Francophone firm there. I paid
too much and made several mistakes. My Toronto
partner did not keep his promises, his client list was
not strong and his staff was not very motivated.
Making the acquisition profitable and turning it into a
success ended up taking five years: it took patience.
But I quickly learned from my mistakes and then made
seven profitable acquisitions.
“AND TODAY THERE ARE PROMISING
PROJECTS ACROSS QUÉBEC
THAT WILL NOT SURVIVE WITHOUT
THE FONDS’ SUPPORT.”
In Québec, nearly 2,400 companies benefit from the
Fonds de solidarité FTQ’s support. Several would
not have succeeded in obtaining financing anywhere
else. And today there are promising projects across
Québec that will not survive without the Fonds’
support. This is why a majority of SME owners support
the Fonds de solidarité FTQ in its economic mission
and oppose any measure that could have a negative
effect on many companies, future jobs and the overall
Québec economy.”
– JEAN-MARC LÉGER, President and Founder of Leger –
The Research Intelligence Group
leger360.com
“WITHOUT THE SUPPORT FROM THE
FONDS, TERAXION WOULD PROBABLY
NOT BE IN QUÉBEC ANYMORE.”
– ALAIN-JACQUES SIMARD, CEO of TeraXion, a
company specialized in manufacturing communication
system components. With 160 employees, it is one of
the most profitable companies in its industry.
teraxion.com
ESS E NT I A L
FI NA NC I A L SU P P O RT
“We went through a difficult period in the 1990s.
In 1993, we didn’t have sufficient capital to comply
with the regulatory authorities’ standards, and we
risked losing our operating license. The Fonds de
solidarité FTQ supported us with venture capital.
Honestly, without the Fonds’ support, I don’t know
what would have become of SSQ Financial Group and
the 600 employees we had at the time. In addition,
without the Fonds’ support, several companies would
not have been created, and several others would
have disappeared.”
“WITHOUT THE FONDS’ SUPPORT,
I DON’T KNOW WHAT WOULD
HAVE BECOME OF SSQ FINANCIAL
GROUP AND THE 600 EMPLOYEES
WE HAD AT THE TIME.”
VE N T URE CA P ITA L TO
BE T T E R P OSIT IO N T HE CO MPA N Y
“Coveo’s success today is in large part due to the
investment from the Fonds de solidarité FTQ and its
partners. The Fonds played a critical role by taking
the risk of investing $6 million over the last six years.
This investment allowed us to be ranked 34th (Canadawide) in the Deloitte’s Technology Fast 50 during
the same period.”
“COVEO’S SUCCESS TODAY IS IN
LARGE PART DUE TO THE INVESTMENT
FROM THE FONDS.”
– JEAN LAVIGUEUR, Senior Vice President and Chief
Financial Officer, Coveo, a company specialized in
enterprise search solutions.
coveo.com
T HE FO N DS,
A ST RAT EGIC PA RT N E R
“Our company, Chantiers Chibougamau, is located
in the Nord-du-Québec region. Out of all the
investment funds and institutional investors, the
Fonds de solidarité FTQ is the only one that has an
office in our region. The Fonds plays a tangible role
there, acting as the catalyst that materializes business
projects that are sometimes outside the norm and
always ambitious. In fact, the Fonds’ specialists
coach SME managers on growing or transferring
their company unlike any other institutional investor.
During the last five years, the Fonds also patiently
won our trust. It has become a strategic ally in
exploring with us new projects that will create even
more collective wealth and jobs!
“THE FONDS HAS BECOME A STRATEGIC
ALLY IN EXPLORING WITH US NEW
PROJECTS THAT WILL CREATE EVEN
MORE COLLECTIVE WEALTH AND JOBS!”
Group, which now has 2,000 employees and over
$3 billion in sales.
Lastly, we cannot fail to mention the proactive role,
so critical given the poverty of current retirement
plans, that the Fonds plays in empowering individuals
and encouraging our workers to save.”
ssq.ca
– FRÉDÉRIC VERREAULT, Spokesperson, Chantiers
– RENÉ HAMEL, Chief Executive Officer of SSQ Financial
Chibougamau, a Fonds partner company that employs
over 600 people and has experienced rapid development
over the last 15 years.
chibou.com
16
OUR ENVIRONMEN TAL I MPACT
OUR ENVIRONMENTAL
IMPACT
DURING THE 2012-2013 FINANCIAL YEAR, THE FONDS DE SOLIDARITÉ FTQ ACHIEVED SUBSTANTIAL SUCCESS
IN TERMS OF IMPROVING THE ENVIRONMENTAL PERFORMANCE OF ITS HEAD OFFICE. THE HEAD OFFICE BUILDING OBTAINED
THE LEVEL 4 BOMA BESt CERTIFICATION; THIS CERTIFICATION LEVEL, THE HIGHEST ON THE SCALE,
IS AWARDED WHEN OVER 90% OF THE ENVIRONMENTAL MANAGEMENT PRACTICES RECOGNIZED BY BOMA ARE APPLIED.
MEASURES RELATED TO SUSTAINABLE TRANSPORTATION WERE ALSO SUCCESSFUL. THESE MEASURES
HAVE BEEN IMPROVED YEAR AFTER YEAR TO REDUCE GREENHOUSE GAS EMISSIONS (GHG), IMPROVE EMPLOYEE
QUALITY OF LIFE AND CONTRIBUTE TO THE DEVELOPMENT OF PUBLIC TRANSPORTATION IN QUÉBEC.
RESIDUAL MATERIALS
THE FONDS’ HEAD OFFICE
RECYCLING RATE
2013
65.5%
2012
52.1%
CONSUMPTION OF RAW AND RECYCLED MATERIALS
97%
RAW MATERIALS CONSUMPTION
AND PERCENTAGE
OF RECYCLED MATERIALS
2013
144 tonnes
2012
145 tonnes
2011
166 tonnes
97%
94%
94%
The Fonds continues with its residual materials
management approach in order to meet the
waste reduction goals set out in the Québec
Residual Materials Management Policy and the
accompanying 2011-2015 Action Plan. A study
carried out from November 26 to 30, 2012 by
NI Environment1 revealed that the Fonds’ head office
recycling rate is 65.5%, which is approximately
10% more than the minimum rate recommended
under this Policy. This is a sharp improvement
over last year, when the recycling rate was 52.1%.
The implementation of a composting system,
for instance, avoided sending over 12 tonnes of
materials to landfills during the financial year.
OF CONSUMED MATERIALS
ARE DERIVED FROM
RECYCLED MATERIALS
Consumption of raw materials—paper and
envelopes, promotional materials, kitchen supplies,
ink cartridges, paper towels and tissue paper—
totalled 144 tonnes for the last financial year,
which is similar to the previous year (145 tonnes).
However, the percentage of consumed materials
derived from recycled materials continued to
increase and stood at 97%; in comparison, it was
only 77% in 2009-2010.
WATER
Water consumption decreased by 22% during
the last financial year compared to the prior
year. This is due, among other factors, to the
replacement of 13-litre toilets by 4.8-litre toilets,
the optimization of urinal flushing and the
installation of faucet aerators.
REDUCTION OF
22%
The Fonds’ water consumption is solely for
domestic purposes, and waste water is sent
to the sewer system. The Fonds does not release
any residual materials in the environment,
and did not incur any fines or sanctions for
environmental matters.
SUSTAINABLE TRANSPORTATION
13%
INCREASE IN
RECYCLED RESIDUAL
MATERIALS
THE FONDS RECEIVED
TWO AWARDS
PRIX DISTINCTION
– Centre de gestion des déplacements de
Développement économique Saint-Laurent
(DESTL)
DESTL presented this award to the Fonds in
recognition of its efforts to reduce dependence
on cars and optimize its employees’ transportation
conditions. The Fonds distinguished itself by the
series of measures it implemented, including several
awareness-raising campaigns and information
booths to present alternatives to solo driving.
PRIX LE ADERS EN TRANSPORT DURABLE
– Centre de gestion des déplacements de
Développement économique Saint-Laurent
1. The studies carried out by NI Environment do not take into account
construction waste, the volumes and characteristics of which vary
from time to time based on the work that is performed.
This award highlights the outstanding work
of companies that are firmly committed to
implementing policies and measures promoting
sustainable transportation. Whether through
efforts made to encourage carpooling, incentives
to use public transportation or workshops
facilitated by Vélo Québec, the measures
adopted by the Fonds since October 2010 are
bearing fruit!
DENIS LECLERC, Executive Vice-President,
Shareholder Services and President of
the Fondation de la formation économique
(left), received the award with
ALAIN HOULE , coordinator for the Fonds’
sustainable transportation activities.
OU R EN V I RO N M EN TA L I M PACT
GREENHOUSE GAS EMISSIONS (GHG)
TOTAL GHG EMISSIONS
2013
1,678 tonnes
2012
1,015 tonnes
17
ENERGY CONSUMPTION
During the last financial year, GHG emissions
totalled 1,678 tonnes compared to 1,015 tonnes for
the prior year. This increase is mainly attributable
to emissions generated by employees commuting
between their home and the head office, which
is accounted for in 2012-2013 for the first time.
The Fonds’ head office building located in
Montréal sources its energy from electricity,
natural gas, fuel oil and propane. Renewable energy
represented 92% of total energy consumption,
an exceptional proportion.
Total energy consumption went up 4% in 2012-2013
(24,106 GJ) compared to 2011-2012 (23,177 GJ),
partly due to colder temperatures during the
2012-2013 winter, which increased natural gas
consumption for the following year.
As the 2011-2012 financial year was unusual in
terms of low energy consumption, it is preferable
to compare our results with the 2010-2011 financial
year. The following table shows that natural gas
and electricity consumed in 2012-2013 decreased
37% and 7%, respectively, compared to 2010-2011.
This resulted in a reduction in total measured
energy consumption of 9%, and 8% when
changes in temperatures are taken into account
(adjusted consumption).
GHG EMISSIONS
SOURCE
CARBON DIOXIDE EQUIVALENT (TONNES OF CO2e)
TOTAL EMISSION
(DIRECT OR INDIRECT)
Natural gas
66
Refrigerant
31
Fuel oil and propane
9
Electricity
6
OTHER RELEVANT
INDIRECT EMISSIONS
SOURCE
Business transportation and courier
900
Employee commuting
601
Residual materials
Total
ENERGY CONSUMPTION (GJ)
65
112
1,566
1,678
FINANCIAL YEAR
Electricity
Natural gas
Fuel oil and propane
NOx, SOx and other air pollutant emissions are
calculated using data on fossil fuel consumption
(natural gas, diesel, propane and gas) and
electricity consumption. In 2012-2013, excluding
emissions related to commuting, emissions
totalled 4.5 tonnes, compared to 4.1 tonnes for
the prior year. This change is attributable to an
increase in business transportation.
The Fonds de solidarité FTQ has a goods and
services procurement policy under which
it buys first and foremost from suppliers in
Québec. The Fonds also favours purchasing
from partner companies, either from Québec
or the rest of Canada, whose employees are
unionized. Other important criteria are also
considered when selecting suppliers, such
as product quality and cost, the companies’
financial health and social and environmental
concerns, as well as their compliance with
agreements entered into.
2010-2011
22,602
24,276
7%
1,374
2,181
37%
130
132
2%
Total measured energy1
24,106
26,589
9%
Total adjusted energy2
24,715
26,820
8%
ENERGY INTENSITY (ekWh/ft 2/yr)
PROMOTING LOCAL PROCUREMENT
REDUCTION
2012-2013
FONDS’ HEAD OFFICE
18.6
AVERAGE LEVEL 4
BOMA BESt CERTIFIED BUILDINGS
19.6
AVERAGE BOMA BESt CERTIFIED BUILDINGS
AVERAGE CANADIAN BUILDINGS
36.7
30.8
Another way to assess the energy performance
of a building is to measure its average energy
intensity, calculated as kilowatt hour per square foot
per year (ekWh/ft2/yr), which can also be used to
compare the performance of various buildings.
The opposite graph shows that the energy intensity
of the Fonds’ head office is lower than that of
buildings with the highest level of BOMA certification,
which demonstrates that the Fonds’ head office
building is very efficient.
During the last financial year, 88% of the
Fonds’ purchases of goods and services were
made from suppliers in Québec.
1. Measured energy consumption represents the amount of energy actually consumed in the head office building, i.e. energy billed by suppliers.
TO REDUCE GHG EMISSIONS AND PRESENT ALTERNATIVES TO SOLO DRIVING, THE FONDS
IMPLEMENTED A SERIES OF MEASURES, INCLUDING SEVERAL AWARENESS-RAISING CAMPAIGNS
AND INFORMATION BOOTHS FOR ITS EMPLOYEES.
2. Adjusted energy consumption takes into account changes in temperatures from one year to the next. It corresponds to the energy that would have
been consumed if the temperature had been equal to the average temperature from 1971 to 2000, which is the benchmark used to adjust annual
energy consumption. Temperature differences between years are therefore eliminated since consumption is based on the same temperature
benchmark, making it possible to determine whether our energy efficiency has improved.
18
OUR EMP LOYEES
615,664 SHAREHOLDERS
BEHIND THE PEOPLE, THERE IS COMMITMENT:
449
EMPLOYEES
CUSTODIANS OF OUR MISSION
30 Y E A RS A N D IN G OOD H E A LT H !
The Fonds de solidarité FTQ is 30 years old. These 30 years are the result of the sustained and diligent
work of our employees, our remarkable achievements and a wonderful collective prosperity that continues
to grow over time. These are all key factors for success.
Our ever present creativity is what distinguishes us. Whether it is through our human resource management
practices that are continuously updated, or our openness to improving the health and wellness program
offered to our employees, we are always in the vanguard when it comes to new ways to promote a healthy
and dynamic workplace.
,
Humanely managing resources
In the last financial year, the Fonds de
solidarité FTQ focused on major issues
related to work organization. With more
and more people retiring, it is imperative
to ensure knowledge transfer within the
organization. As such, when employees
announce their plans to retire, we must
reflect on the needs that must be met
to ensure optimal work organization.
As a complement, training to prepare for
retirement is provided to eligible employees.
The objective of this training is to facilitate
the employees’ and the organization’s
transition to this very important stage of life.
The success of this activity to date validates
the importance of continuing to provide
such coaching to ensure that transitions are
completed humanely.
Building the future
With the large number of employees who
will be retiring in the coming years, the face
of the Fonds will change. Efforts will need
to be made to welcome and integrate a new
generation of workers. It is crucial for the
Fonds to continue having its employees
feel like they belong to the organization
and share its vision and values. Through
our partnership with the employees’ union,
we can take on these major challenges,
as we have taken them on in the past.
With average seniority of 13 years, our
employees truly understand and take pride
in the Fonds de solidarité FTQ’s mission.
We therefore want to ensure that this
pride and sense of belonging continue
for the years and generations to come,
as our employees are our best partners
and ambassadors!
IT IS CRUCIAL FOR THE FONDS TO
CONTINUE HAVING ITS EMPLOYEES
FEEL LIKE THEY BELONG TO THE
ORGANIZATION AND SHARE ITS
VISION AND VALUES.
OU R EM PLOYEES
The vast majority of the Fonds’ employees
work in Montréal (442 people, 98%); the
remaining employees (7 people, 2%) work
in Québec City.
The remuneration structure of the Fonds de
solidarité FTQ does not provide for bonuses
to employees and management.
The Fonds de solidarité FTQ provides quality
permanent jobs to 449 people. Nearly 86%
of the Fonds’ employees (384 out of 449)
are unionized. In addition, the regional funds,
local funds and real estate funds respectively
have 57, 8 and 32 employees.
The collective agreement, signed in 2010 for
a five-year period, requires that the employer
give a one-month written notice to the
union about any reorganization projects or
elimination of positions.
WITH MORE AND
MORE PEOPLE RETIRING,
IT IS IMPERATIVE
TO ENSURE KNOWLEDGE
TRANSFER WITHIN
THE ORGANIZATION.
The table opposite presents the total number
of days the Fonds’ permanent employees
were absent from work, which includes
absence days paid by the Fonds (absences
due to health conditions, accidents or a
particular situation affecting the employee)
and absences paid by the Fonds’ permanent
employee group insurance plan. Absences
are expressed in person-years, with one
person-year representing 1,820 hours
(52 weeks times 35 hours per week). The
total figure for work time during the period
does not represent exactly the number of
permanent employees as at May 31, 2013,
as work time data take into account
the timing of the arrival or departure of
permanent employees during the year.
BRE AKDOWN OF PERMANENT EMPLOYEES
A S AT M AY 31, 2 013
AGE
Less than 35 years
35 to 44 years
45 to 54 years
55 years and up
Total
WOMEN
MEN
TOTAL
%
13
45
120
62
240
12
60
77
60
209
25
105
197
122
449
5.5
23.4
43.9
27.2
100.0
Average age
Gender
50
53.5%
49
46.5%
49
100.0
EMPLOYMENT CATEGORIES
Managers
Professionals
Technical and
office personnel
Total
24
100
41
136
65
236
14.5
52.5
116
240
32
209
148
449
33.0
100.0
Employees who retired during the financial
year were on average 60 years of age. The
average age of employees who resigned was 45.
Excluding retirements, the turnover rate for
employees was 1.8%, which is remarkably low.
During the financial year, 14 permanent
employees of the Fonds (4 women and
10 men – 1 manager, 10 professionals and
3 technical and office personnel) took
maternity, paternity or adoption leave. All of
these people are still employed by the Fonds.
WITH AVERAGE
SENIORITY OF
13 YEARS, OUR
EMPLOYEES TRULY
UNDERSTAND
AND TAKE PRIDE
IN THE FONDS DE
SOLIDARITÉ FTQ’S
MISSION.
CHANGE IN PERMANENT EMPLOYEES
F R O M J U N E 1, 2 012 TO M AY 31, 2 013
WOMEN
Number of permanent employees
as at May 31, 2012
Hirings
Retirements
Resignations
Number of permanent employees
as at May 31, 2013
MEN
TOTAL
244
9
(10)
(3)
205
12
(3)
(5)
449
21
(13)
(8)
240
209
449
PERMANENT EMPLOYEES’ WORKPL ACE AT TENDANCE AND ABSENCES
( I N P E R S O N -Y E A R S )
F R O M J U N E 1, 2 012 TO M AY 31, 2 013
WOMEN
Absences
Work time
Absenteeism rate
11.6
237.2
4.9%
The work-related accident situation is as
follows: there was one accident at the end
of the year; the employee has not yet
returned to work. The number of lost work
days during the year resulting from this
accident was minimal.
MEN
3.9
206.1
1.9%
TOTAL
15.5
443.3
3.5%
NEARLY 86% OF
THE FONDS’ EMPLOYEES
ARE UNIONIZED.
EMPLOYEE TRAINING
RATIO OF WOMEN’S SAL ARY TO MEN’S SAL ARY
FO R T H E Y E A R E N D E D M AY 31, 2 013
A S AT M AY 31, 2 013
NUMBER OF
EMPLOYEES WHO
ATTENDED TRAINING
TOTAL NUMBER
OF HOURS
OF TRAINING
AVERAGE HOURS
OF TRAINING
PER EMPLOYEE
Managers
Professionals
Technical and office personnel
67
203
132
402
3,036
5,296
1,497
9,829
45
26
11
24
Temporary or student personnel
Total
65
467
1,226
11,055
19
24
Women
Men
Total
253
214
467
5,478
5,577
11,055
22
26
24
EMPLOYMENT
CATEGORIES
19
EMPLOYMENT CATEGORIES
Managers
Professionals
Technical and office personnel
WE ARE ALWAYS IN
THE VANGUARD WHEN
IT COMES TO NEW
WAYS TO PROMOTE A
HEALTHY AND DYNAMIC
WORKPLACE.
0.78
0.86
0.97
Our salary structure complies with
the applicable pay equity legislation. The
difference between the average women’s
salary and the average men’s salary is due,
among other things, to the difference in the
breakdown of women and men in the levels
making up each of these categories.
20
SUSTAINA B LE DEVELO P MEN T AN D RES P O N S I B L E I NV EST M E NT OBJ ECT I V ES
ENVIRONMENTAL OBJECTIVES
2012-2013 OBJECTIVES
FOLLOW-UP
The Fonds’ annual general meetings have been carbon-neutral since 2007.
Wishing to go further, the Fonds will gradually take steps to make all its other
meetings carbon-neutral by 2016.
This objective related to annual general meetings has been fully achieved and the next annual general meeting of the Fonds,
to be held on September 28, 2013, will also be carbon-neutral. With respect to other meetings, this objective will also be achieved
in the next financial year.
The Fonds will also strengthen its adherence to eco-responsible principles in organizing
meetings and events to be held at its head office and off-premises.
Ongoing.
The Fonds will raise awareness among its employees working at its head office and tenants
of the head office building of the necessary actions to take to reach its eco-responsible
electricity consumption objectives.
We have started to work toward achieving this objective; as this objective spans more than one financial year, we will continue
our work in 2013-2014.
Following an energy consumption audit, the Fonds will compare its head office’s current
performance against the best performances achieved elsewhere on this front, and
will continue to carry out energy savings projects in an optimal manner based on existing
market best practices.
The Fonds will implement a new IT platform to control its head office mechanical
systems (heating, ventilation and air conditioning). With this change, we will be able
to better monitor the operation of this equipment and the air quality while improving
occupant comfort.
The Fonds has set the objective of reducing by 10% its drinking water consumption by 2014.
Water consumption
reduction reached 22%,
twice the objective set
for 2012-2013.
Following a water use efficiency audit, the Fonds will develop and prioritize new
opportunities to reduce water consumption beyond the objective it had set.
To reduce by 2% to 5% a year the quantity of residual materials sent from its head office
to landfills, the Fonds will intensify its information and awareness-raising campaign
on residual materials management targeting its employees working at its head office
and tenants of the head office building.
This reduction objective has
been achieved for 2012-2013.
We will continue to pursue the 2% to 5% annual reduction objective in 2013-2014.
To always reduce its paper consumption, the Fonds will encourage its shareholders to view
their account information online.
We have started to work toward achieving this objective, which involves better paper use; as this objective spans more than one
financial year, we will continue our work in 2013-2014.
The Fonds will continue its efforts to reduce by at least 3% per year, by 2016-2017, its paper
consumption for its head office needs. This measure is in addition to the decision made
two years ago to use Enviro 100 paper, which contains 100% post-consumer FSC-certified
(Forest Stewardship Council) fibre, is EcoLogo-certified and made using biogas.
The Fonds is currently
working toward achieving this
reduction objective (reduction
of almost 2% for 2012-2013).
The Fonds will complete the programming of all its printers so that double-sided becomes
the “default” mode and, to optimize its use, the Fonds will continue to raise its employees’
awareness of good printing habits.
Achieved.
The Fonds will continue its thought process about implementing composting.
Phase I—related to the
building’s dining areas—of
the project to implement a
composting system at head
office has been completed.
To reduce travelling, the Fonds will encourage using videoconferencing for internal
meetings involving external guests.
Achieved.
The Fonds will continue to take steps to obtain Level 4 BOMA BESt certification,
the highest certification level under that program, for its head office.
Achieved: certification has
been obtained (see page 16).
The Fonds will continue to implement its action plan to obtain Gold Level LEED EB
(existing building) certification for its head office by May 31, 2014.
The Fonds will continue to implement the action plan of its Green Committee so that
the employees of its head office can use public transportation and active transportation
(cycling and walking) even more.
Work toward achieving this objective will continue in 2013-2014.
The Fonds will plan Phase II—related to the whole building—by the end of 2014.
In addition, the Fonds will analyze its employees’ travel from home to work to evaluate
the related GHG emissions.
The Fonds will continue to deploy the Responsible Procurement Policy (RPP) it adopted
in 2011 in order to determine the sustainable development practices of its suppliers.
The Fonds will then:
– Prepare a supplier profile based on their level of criticality;
– Favour socially responsible suppliers.
We have started to
work toward achieving
this objective.
Concurrently with the continued deployment of its Responsible Procurement Policy (RPP),
the Fonds will define specific criteria related to the SD/CSR good practices required from its
suppliers and will assess its suppliers using a questionnaire developed from these criteria.
In addition, the Fonds will ensure that the furniture and electronic and computer products
it will buy are, at a minimum, ENERGY STAR and GREENGUARD certified.
The Legal Affairs Department of the Fonds will continue to hold training sessions on Bill 89,
which has substantially amended the Environment Quality Act, and on other regulations
related to sustainable development to help with integrating these new standards into its
partners’ practices.
Training was offered to
the directors of the Fonds
partner companies on
November 14, 2012.
Training will be offered to other groups in 2013-2014.
In addition, the Fonds will prepare a guide on the Environment Quality Act and the measures
to undertake to manage risks related to this Act. This guide will be intended for specialists
of its Investments sector who are corporate directors and external directors who represent
the Fonds on the board of directors of its partner companies.
The guide has been designed.
The guide will be distributed in 2013-2014.
The fonds régionaux and the fonds locaux de solidarité FTQ network and the
Fonds immobilier de solidarité FTQ will adopt an action plan to reduce their direct
environmental footprint.
After adopting guidelines for practices related to sustainable development and social
responsibility in mining project management in 2012, the Fonds will continue to phase in
these guidelines in its partner companies in the mining sector.
The Fonds’ Green Committee will prepare information bulletins on several aspects related
to the environment. These bulletins will be released on the Intranet site for employees.
SUSTA I NA BL E DEV E LO PM EN T A N D R ESPO N SI BLE I N V ESTM EN T O BJ ECTI V ES
21
SOCIO-ECONOMIC OBJECTIVES
FOLLOW-UP
The Fonds will develop an integrated sustainable development and socially responsible
investment policy. This policy will become the anchor point for all the tools that the Fonds
has developed over the years to guide its policies for investing in companies and on capital
markets, its relations with partner companies and all its stakeholders, and its own conduct.
As part of our adhesion to the United Nations’ Principles for Responsible Investment
(PRI), we will organize, as a signatory to these Principles and together with other Québec
signatories, a public activity to raise awareness about the importance and the issues
of responsible investment.
The symposium that
brought together the Québec
PRI signatories was held
on February 19, 2013
(see page 4).
As the public activities held in February 2011 (symposium on retirement) and in
February 2013 (symposium on responsible investment, see page 4) were very
successful, the Fonds will organize, for a third year, an event on an important
socio-economic topic related to its sustainable development and corporate social
responsibility objectives.
2012 is the International Year of Cooperatives, and the Fonds will provide financial support
to the Summit of Cooperatives, which will be held from October 8 to 11, 2012 in Québec City.
The Fonds thus wishes to show its support to cooperatives and mutual companies and to be
a part of the discussions on the issues they face.
Achieved.
2013 will mark the 30th anniversary of the creation of the Fonds de solidarité FTQ. On this
occasion, the Fonds will emphasize the economic and social solidarity of all its stakeholders
and their contribution to the Fonds’ innovations and achievements over these years.
This objective was achieved on schedule, and we will continue to pursue this objective until December 31, 2013.
Following the recent adoption of an integrated risk management policy, the Fonds
will implement this new policy, in particular by reviewing certain processes related to
activities that are more sensitive to financial and extra-financial risks as well as specifically
determining the nature and extent of the risks it takes in relation to its mission and its
tolerance to these risks.
The work toward achieving this objective is progressing well and will continue in 2013-2014. In particular, some processes were
improved in the Other Investments and Investments sectors to better manage certain financial and extra-financial risks.
Further to this determination, the Fonds will also revise its Integrated Financial Assets
Management Policy (IFAM).
The IFAM Policy was reviewed and could be reviewed again based on the additional work to be performed with respect
to integrated risk management during the 2013-2014 financial year.
The Fonds will take stock of the main tax measures and government assistance
programs related to sustainable development projects to which its partner companies
could be eligible.
The list of measures and
programs has been prepared.
The Fonds will communicate this list to the specialists of its Investments sector so they can
adequately inform the Fonds’ partners.
The Fonds will prepare a carbon credit information and intervention guide for the
specialists of the Investments sector.
This guide has been prepared.
The guide will be distributed in the next financial year.
The Fonds will create a reference bank of the main carbon credit and SD/CSR players
and specialists.
The Fonds will then organize, for the members of the Investments sector’s multidisciplinary
teams, training sessions on topics related to carbon credits and SD/CSR as well as on the
carbon credit reference bank it will create.
The Fonds will also prepare an SD/CSR and carbon credit intervention and knowledgesharing plan.
The Board of Directors of
the Fonds adopted, in March
2013, an overhauled version
of its Code of Conduct for
International Business Dealings.
The Fonds will organize meetings to enable the Investments sector’s teams and external
directors who represent the Fonds on the board of directors of its partner companies
to take ownership of the Code and the Fonds régionaux’s executives to tailor it to their
decision-making structures.
It should also be highlighted
that, during the last financial
year, the Fonds adopted:
– New charters for its four
Investment Special Boards
(February 2013);
– Its Guidance on voting rights
(February 2013) :
fondsftq.com /voteentreprises (in French only)
After having offered training on sustainable development and socially responsible
investment to the specialists of its Investments and Other Investments sectors as well as
to the members of its Management Committee and Board of Directors, the Fonds will offer
this training to the specialists of its regional investment network.
This training was offered on
October 17, 2012.
The Fondation de la formation économique will develop training on sustainable
development for the employees of the Fonds partner companies who wish to be better
informed on this topic.
The Fonds will, in collaboration with SHARE, continue the shareholder dialogue it started in
the last financial year about the securities of listed Canadian companies it holds.
Achieved.
The Fonds will, in collaboration with SHARE, continue the shareholder dialogue about
certain securities of listed Canadian companies it holds on governance-related or social or
environmental issues (see page 5).
In addition, the Fonds will continue to search for the appropriate vehicle to pursue its
commitment as a proactive shareholder of non-Canadian public companies. The Fonds will
also continue to use the Montréal-based Groupe investissement responsable (GIR) to exercise
its voting rights in public companies in accordance with its Guidance on voting rights.
We will pursue our efforts to increase the number of shareholders aged 40 and under and
the number of shareholders from cultural communities so that they benefit from the Fonds
RRSP, in particular by subscribing through payroll deduction.
In 2012-2013, the Fonds
increased by 27% the number
of enrolments by new
shareholders under the age of
40 compared to the previous
financial year (see page 9).
Work toward achieving this objective will continue in 2013-2014.
To meet as adequately as possible the needs of all its stakeholders, the Fonds will
periodically take the necessary surveys to measure their satisfaction with its activities and
better understand their concerns and expectations.
We have started to work toward achieving this objective; as this objective spans more than one financial year, we will continue our
work in 2013-2014.
Each issue of the Le Partenaire PME newsletter will continue to contain information about
sustainable development and corporate social responsibility (SD/CSR).
The last issue of
Le Partenaire PME, Special
Edition, published in March
2013, addressed socially
responsible investment.
The Fonds will issue a newsletter three times a year to provide information about the
investment activities of the Fonds and its network and their socio-economic impact on
communities (regions, business people, etc.)
To be ready for the G4 Sustainability Reporting Guidelines, the newest version of the GRI
Guidelines, that will be effective for its 2015 Annual and Sustainability Report, the Fonds will
participate in various consultation and training events scheduled for the next financial year.
22
THE MANAGEMEN T CO MMI T TEE
THE MANAGEMENT COMMITTEE
Y VON BOLDUC
A, E, J
VICE-PRESIDENT,
HUMAN RESOURCES
DENIS LECLERC
G A É TA N M O R I N E
EXECUTIVE VICE-PRESIDENT, SHAREHOLDER SERVICES,
PRESIDENT OF THE FONDATION DE LA FORMATION ÉCONOMIQUE
EXECUTIVE VICE-PRESIDENT, CORPORATE
DEVELOPMENT AND INVESTMENTS
MICHEL PONTBRIAND E
M A R I O T R E M B L AY
EXECUTIVE VICE-PRESIDENT,
FINANCE
VICE-PRESIDENT, PUBLIC AND CORPORATE
AFFAIRS, AND CORPORATE SECRETARY
A
B
C
D
Member of the Executive Committee
Member of the Audit Committee
Member of the Special Board – New Economy
Member of the Special Board – Turnaround and Majority Interests
E Member of the Financial Assets Management Committee
F Member of the Special Board – Mining Portfolio
DA N N Y L E B R AC E U R J
PRESIDENT AND CEO
J
G Member of the Special Board – Traditional Sector
H Member of the Fonds immobilier de solidarité FTQ I, s.e.c. and
Fonds immobilier de solidarité FTQ II, s.e.c. Advisory Committee,
and the Fonds immobilier de solidarité FTQ inc. Board of Directors
I Member of the Valuation Committee
J Member of the Ethics Committee
T H E BOA R D OF D I R ECTORS, T H E GOV ER N I N G BO DI ES O F THE FO N DS A N D THE U N I O N
THE BOARD OF DIRECTORS
1
2
3
A S O F J U LY 1 5 , 2 0 1 3
1
M I C H E L A R S E N A U LT
A, D, G
President, Fédération des
travailleurs et travailleuses
du Québec (FTQ), and Chairman
of the Board of Directors,
2
10
Y VO N B O L D U C
A, E, J
12
DA N I E L B OY E R
5
MICHÈLE COLPRON
E
13
14
7
8
15
16
10
11
12
R É J E A N PA R E N T
13
14
15
17
16
A, B, G, I
P I E R R E- M A U R I C E VA C H O N
Michel Arsenault, Chair
Daniel Boyer
Denise Martin2
Louise St-Cyr2
Pierre-Maurice Vachon2
Daniel Roy, Chair
Pierre Boudreault 2
Michel Gauthier2
Michel Gilbert 2
SPECIAL BOARD –
NEW ECONOMY 1
F
L O U I S E S T- C Y R
René Roy, Chair
Louis Bolduc
Daniel Boyer
Michel M. Lessard2
André Monette2
Claude Normandeau2
Yvon Tessier2
SPECIAL BOARD –
MINING PORTFOLIO 1
MAGALI PICARD
DA N I E L R OY
FONDS IMMOBILIER DE SOLIDARITÉ FTQ I,
S.E.C. AND FONDS IMMOBILIER DE SOLIDARITÉ FTQ II,
S.E.C. ADVISORY COMMITTEE, AND FONDS IMMOBILIER
DE SOLIDARITÉ FTQ INC. BOARD OF DIRECTORS 1
SPECIAL BOARD –
TRADITIONAL SECTOR 1
17
Honorary Professor, HEC Montréal
D E N I S E M A R T I N A, B, D, E, G
Corporate Director, and
Vice-Chair of the Board of
Directors, Fonds de solidarité FTQ
9
Québec Director,
United Steelworkers,
and Vice-President, FTQ
L U C I E L E VA S S E U R
President, Canadian Union
of Public Employees (CUPE),
Québec, and Vice-President, FTQ
8
MICHEL OUIMET
Regional Executive Vice-President,
Québec Region, Public Service
Alliance of Canada (PSAC),
ALAIN DEGRANDPRÉ
President of Joint Council 91,
Teamsters Canada,
7
Former President, Centrale
des syndicats du Québec (CSQ)
Corporate Director
6
6
YVES OUELLET
Executive Vice-President,
Québec, Communications,
Energy and Paperworkers
Union of Canada (CEP),
A, G, H
General Secretary,
Fédération des travailleurs et
travailleuses du Québec (FTQ),
and Secretary of the Board of
5
JEAN-PIERRE OUELLET
General Manager,
FTQ-Construction,
President and Chief Executive
Officer, Fonds de solidarité FTQ
4
4
President, Québec Service
Employees Union (QSEU), Local
298, and Vice-President, FTQ
11
THE GOVERNING BODIES
OF THE FONDS DE SOLIDARITÉ FTQ
In addition to the Board of Directors, the Executive
Committee and the Audit Committee, the Fonds has
the following governing bodies:
S Y LVA I N M A R T I N
Québec Director,
Canadian Auto Workers (CAW),
L O U I S B O L D U C E, H
Executive Assistant
to the National President,
United Food and
Commercial Workers
International Union (UFCW),
and First Vice-President, FTQ
3
9
23
René Roy, Chair
Christine Beaubien2
Sylvie Lalande2
André Monette2
Josée Morin2
Jacques Simard2
SPECIAL BOARD – TURNAROUND
AND MAJORITY INTERESTS 1
A, B, D, G
Michel Arsenault, Chair
Christine Beaubien2
Michel M. Lessard2
Denise Martin2
Jean Perron2
Pierre-Maurice Vachon2
Corporate Director
VALUATION COMMITTEE
MEMBERS OF OUR BOARDS AND COMMITTEES
WHO ARE EXTERNAL TO THE FONDS AND THE FTQ
1
CHRISTINE BEAUBIEN
C, D
14
Corporate Director
2
P I E R R E B O U D R E A U LT
3
MICHÈLE COLPRON
MICHEL GAUTHIER
E
16
F
MICHEL GILBERT
17
DENIS LABRÈCHE
I
18
Corporate Director
7
PIERRE LAFLAMME
S Y LV I E L A L A N D E
19
C
M A R I O L AVA L L É E
E
20
Professor, Finance Department,
Faculté d’administration,
Université de Sherbrooke
10
MICHEL M. LESSARD
DENISE MARTIN
21
ANDRÉ MONETTE
A, B, D, E, G
JOSÉE MORIN
E
7
D
8
9
JACQUES SIMARD
L O U I S E S T- C Y R
Y VON TESSIER
C
10
11
12
MICHEL THÉRIEN
22
C
Corporate Director and
Consultant
Denise Martin, Chair2
Louis Bolduc
Yvon Bolduc
Michèle Colpron2
Mario Lavallée2
Gaétan Morin
Michel Parenteau2
Michel Pontbriand
Michel Thérien2
Yvon Bolduc, Chair
Danny Le Braceur
Laurent Themens
Mario Tremblay
1. All investments must be authorized by a governing body, depending
on the appropriate economic sector. When an investment reaches
a minimum amount of $5 million, it must also be submitted to
the Fonds’ Board of Directors (Mining Portfolio: $1 million).
2. Indicates directors who are external to the Fonds and the FTQ.
A, B, G, I
13
H
(ENSURES COMPLIANCE WITH THE INTEGRATED
FINANCIAL ASSETS MANAGEMENT POLICY)
ETHICS COMMITTEE
14
15
THE UNION
E
P I E R R E- M A U R I C E VA C H O N A, B, D, G
Corporate Director
EXECUTIVE COMMITTEE
16
17
18
Guy Trépanier, Chair
Marie-Claude Rouleau, Executive Vice-Chair
Robert Charpentier, Second Vice-Chair
Josée Lachapelle, Secretary
Julie Proulx, Treasurer
LABOUR AND SOCIAL DELEGATES,
WORKPLACE HEALTH AND SECURITY OFFICIALS,
AND LOCAL REPRESENTATIVES
C, H
Advisor in Management,
Strategic Planning, Mergers
and Acquisitions,
and Corporate Finance
13
M I C H E L PA R E N T E A U
Strategic Advisor and
Corporate Director
D, H
Corporate Director,
and Vice-Chair of the Board of
12
6
Corporate Director
Corporate Director
11
5
Honorary Professor,
HEC Montréal
Corporate Director
9
4
H
Full Professor, Université Laval,
and Director, Cancer Genomics
Laboratory at the CHUQ/CHUL
Research Centre
I
Corporate Director
and Consultant
8
CLAUDE NORMANDEAU
JEAN PERRON
(REVIEWS THE PRIVATE INVESTMENT
VALUATION PROCESS)
FINANCIAL ASSETS
MANAGEMENT COMMITTEE
Corporate Director, and
President and Chief Executive
Officer, Association des cadres
des collèges du Québec
F
Corporate Director
6
I
Corporate Director
Consultant and Professor
at UQAM
5
15
3
Real Estate Consultant
and Corporate Director
Corporate Director
4
MICHEL NADEAU
2
Louise St-Cyr, Chair2
Denis Labrèche2
Pierre Laflamme2
Michel Nadeau2
Executive Director, Institute
for Governance of Private and
Public Organizations (IGPPO)
F
Director and Manager
of mining companies
1
19
20
21
22
Lucie Adam
Samia Aklil
Louise Bergeron
Nathalie Bilodeau
Cédric Brabant
Isabelle Duguay
Johanne Dupont
Peyman Eslami
Nathalie Garcia
Jacques Grégoire
Jean Martel
Gilles de Montigny
Jean-Claude Nadon
Robert Paradis
Martin Rivest
Carole Ruel
Sylvain Tellier
24
THE GR I INDE X
Using the parameters stated on page 3 of this report, we analyzed 72 indicators, of which about 50 have been identified as key or material to our activities. Some of them are supplementary
indicators specific to the financial services sector. This index sets out where the indicators are discussed and provides the information required to enable a good understanding of the profile
and strategies of the Fonds de solidarité FTQ.
We have also linked certain sections of this report with the 10 principles of the United Nations Global Compact.
| globalreporting.org |
STRATEGY AND PROFILE
ASPECT
GRI INDICATORS
PAGES
COMMENTS
GLOBAL COMPACT
STRATEGY AND ANALYSIS
1.1, 1.2
1, 20, 21
I
ORGANIZATIONAL PROFILE
2.1-2.10
2-4, 8-11, 14, 16
A, I
REPORT PARAMETERS
3.1-3.9, 3.12
3, 24, 53
GOVERNANCE
4.1-4.10
4-6, 23
COMMITMENTS TO EXTERNAL INITIATIVES
4.11-4.13
3-7, 10-14
STAKEHOLDER ENGAGEMENT
4.14-4.17
3-15, 18, 19
ECONOMIC PERFORMANCE
EC1-EC4
1, 2, 7-14
I
PRINCIPLE 7
MARKET PRESENCE
EC6, EC7
17-19
EC7: H
PRINCIPLE 6
INDIRECT ECONOMIC IMPACTS
EC8, EC9
7, 10, 11
MATERIALS
EN1, EN2
3, 16
PRINCIPLES 8, 9
ENERGY
EN3, EN4
17
PRINCIPLE 8
WATER
EN8
16
BIODIVERSITY
EN11, EN12
EMISSIONS, EFFLUENTS AND WASTE
EN16, EN17,
A, I
PRINCIPLE 10
PRINCIPLES 1-10
ECO N OM IC
EN V I RONM ENTAL
PRINCIPLE 8
H
3, 7, 16, 17
PRINCIPLES 7, 8
PRINCIPLE 8
EN19-EN23
PRODUCTS AND SERVICES
EN26, EN27
COMPLIANCE
EN28
16
B
EMPLOYMENT
LA1, LA2, LA15
19
LABOUR/MANAGEMENT RELATIONS
LA4, LA5
19
OCCUPATIONAL HEALTH AND SAFETY
LA7, LA8
18, 19
TRAINING AND EDUCATION
LA10
19
DIVERSITY AND EQUAL OPPORTUNITY
LA13, LA14
19, 22, 23
INVESTMENT AND PROCUREMENT PRACTICES
HR1-HR3
3, 6
HR2: D, HR3: H
PRINCIPLES 1-6
NON-DISCRIMINATION
HR4
G
PRINCIPLES 1, 2, 6
FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING
HR5
G
PRINCIPLES 1-3
CHILD LABOUR
HR6
E
PRINCIPLES 1, 2, 5
FORCED AND COMPULSORY LABOUR
HR7
E
PRINCIPLES 1, 2
ASSESSMENT
HR10
REMEDIATION
HR11
G
PRINCIPLES 7, 8
SO C I AL
LABOUR PRACTICES, SOCIAL RELATIONS AND DECENT WORK
PRINCIPLE 6
PRINCIPLES 1, 3
C
PRINCIPLE 1
PRINCIPLES 1, 6
HUMAN RIGHTS
5, 6
PRINCIPLES 1-6
G
PRINCIPLES 1-6
SOCIETY
COMMUNITY
SO1, SO9, SO10
5, 6, 9-13
SO9, SO10: G
CORRUPTION
SO2-SO4
4-6
SO4: G
PUBLIC POLICY
SO5
4-6
COMPLIANCE
SO8
G
CUSTOMER HEALTH AND SAFETY
PR1
F
PRINCIPLE 1
PRODUCT AND SERVICE LABELING
PR3
A
PRINCIPLE 8
MARKETING COMMUNICATIONS
PR6
COMPLIANCE
PR9
PRINCIPLE 10
PRINCIPLES 1-10
PRODUCT RESPONSIBILITY
4, 6, 9
A, G
I N DI CATORS S PECIFI C TO T H E FINA NC IA L SE RVIC ES S ECTO R
PRODUCT AND SERVICE IMPACT
SPECIFIC DISCLOSURE ON MANAGEMENT APPROACH
FS1-FS5
4-6
I
PRODUCT PORTFOLIO
FS6-FS8
2, 5, 7, 9, 10, 12-15
A, I
AUDIT
FS9
4-6
ACTIVE OWNERSHIP
FS10-FS12
4-6
FS13, FS14
8-10
FS15, FS16
7-9
PRODUCT AND SERVICE IMPACT INDICATORS
SOCIETY
COMMUNITY
PRODUCT PERFORMANCE
PRODUCT AND SERVICE LABELING
A. See the prospectus, the annual information form and the notice of meeting to the annual general meeting of shareholders: fondsftq.com.
The indicators appearing in notes B to F, although material, do not apply to the nature of the Fonds.
B. EN26, EN27: The Fonds does not manufacture or sell products and does not offer services that have significant direct environmental impacts.
C. LA8: A very organized healthcare system exists in Québec.
D. HR2: Substantially all of the Fonds’ suppliers are located in Canada, where respect of human rights is a regulated issue.
E. HR6, HR7: Child labour and forced and compulsory labour are regulated issues in Canada.
F. PR1: The Fonds’ services have no negative impact on the health or safety of the users of these services.
G. No case identified.
H. EC7, EN11, EN12 and HR3: These indicators were analyzed but were not identified as material.
I. See the Financial Statements and the Management Discussion and Analysis: fondsftq.com/2013report or sedar.com.
FS15: A
FINANCIAL
SECTION
2013
MANAGEMENT DISCUSSION AND ANALYSIS
698
465
5,207
620
5,757
542
6,144
Redemptions of shares
***
****
4,784
341
660
577,511
0.03
7.93
233.20
1.54
305,951
7,294
600
222
2010
4,598
647
655
570,889
0.02
6.71
179.65
1.70
291,733
6,375
(919)
239
2009
1
The total operating expense ratio is obtained as follows: by dividing expenses (excluding capital tax) for the year, as shown in the Statement of Operations, by
the average net assets for that year.
The portfolio turnover rate reflects the number of changes made to the composition of the portfolio. There is not necessarily a relationship between a high
turnover rate and the portfolio’s performance.
The trading expense ratio represents transaction costs expressed as a percentage of average net assets.
These investments include funds committed but not disbursed as well as guarantees and suretyships.
Fair value of development capital investments****
**
*
583,235
Number of shareholders (number)
767
0.02
0.02
0.02
594,287
11.38
172.57
12.09
158.61
8.44
115.57
855
1.47
1.46
1.44
615,664
315,504
320,629
332,441
Issues of shares
Trading expense ratio*** (%)
Total operating expense ratio* (%)
Portfolio turnover rate**:
Development capital investments (%)
Other investments (%)
Class A shares outstanding (number, in thousands)
650
8,178
215
8,525
458
Net earnings (net loss)
9,301
256
247
256
Net assets
2011
2012
2013
Revenues
(in millions of dollars, unless otherwise specified)
Years ended May 31
RATIOS AND SUPPLEMENTAL DATA
The following tables show selected key financial information about the Fonds and are intended to help you understand the Fonds’
financial performance for the past five financial years. This information is derived from the Fonds’ audited financial statements. The
Fonds’ results are discussed under “Results of Operations” on page 27.
FINANCIAL HIGHLIGHTS
You can get a copy of the annual financial statements at your request, and at no cost, by calling us at 514-383-3663 or toll free at
1-800-567-3663, by writing to us at 8717 Berri Street, Montréal, Québec H2M 2T9 or by visiting our website at www.fondsftq.com or the
SEDAR website at www.sedar.com. You can also obtain a copy of the interim documents in this same manner.
The Fonds is subject to the Regulation Respecting Development Capital Investment Fund Continuous Disclosure (the “Regulation”)
and, as such, applies the requirements of this Regulation, notably to its financial statements and its MD&A.
This MD&A contains forward-looking statements about the Fonds’ activities, results, and strategies that should be interpreted with caution.
These forecasts necessarily involve assumptions, uncertainties and risks; it is therefore possible that a number of factors may cause them
not to materialize. Legislative or regulatory changes, economic and business conditions and the level of competition are some examples of
major factors that may influence, sometimes significantly, the accuracy of the forward-looking statements in this MD&A. This MD&A is dated
June 27, 2013.
This Management Discussion and Analysis (“MD&A”) is intended to help the readers to assess, through the eyes of management, the
Fonds de solidarité FTQ’s (the “Fonds”) results and financial condition and the material changes therein during the financial year ended
May 31, 2013. The annual MD&A complements and supplements the financial statements and contains financial highlights, but does not
contain the complete annual financial statements of the Fonds. To facilitate understanding of events and uncertainties presented herein,
this MD&A should be read together with the financial statements and the notes thereto.
THE YEAR ENDED MAY 31, 2013
MANAGEMENT DISCUSSION AND ANALYSIS FOR
FOR THE YEAR ENDED MAY 31, 2013
FONDS DE SOLIDARITÉ DES TRAVAILLEURS DU QUÉBEC (F.T.Q.)
0.68
1.41
Net assets per share, beginning of year*
27.98
26.59
1.48
0.26
(0.08)
(0.38)
0.82
2011
25.92
-
(0.02)
2.10
23.84
1.51
0.22
(0.09)
(0.37)
0.74
The amount of net assets per share is based on the actual number of shares outstanding at the relevant time.
The increase (decrease) from operations is based on the weighted-average number of shares outstanding during the financial year.
2010
23.84
0.07
(0.02)
2.01
21.78
(2.25)
(1.31)
(0.05)
(0.37)
0.82
2009
21.78
-
(0.11)
(3.16)
25.05
In the United States, the great uncertainty surrounding the “fiscal cliff” for the better part of 2012 that could have triggered a recession
has lifted somewhat following the partial agreement concluded on January 1, 2013. Despite the fact that this agreement introduced tax
increases that will reduce their disposable income, households seem to have demonstrated some resilience, at least in the opening
months of 2013, judging by the growth in retail sales, the strengthening of manufacturing and non-manufacturing indexes, and the rising
consumer confidence index. However, this strong relative performance in consumption appears to have started to slacken off beginning
in March and continued to do so in April. The labour market experienced a similar loss of momentum: after adding an average of
237,000 jobs per month between November 2012 and February 2013, only 142,000, 149,000 and 175,000 jobs were added in March,
April and May 2013, respectively.
In the Eurozone, despite financial strains easing over the last 12 months – particularly as a result of the launch by the European Central
Bank of a program under which it may purchase unlimited amounts of bonds from countries that sought assistance from the European
bailout fund – and some economic indicators beginning to show improvement toward the end of 2012, the recession that officially began
in 2011 is far from over. Even the indicators that are slightly improving are still at levels that in many cases suggest sharp dips in GDP.
In other words, everything seems to point to a deepening recession in the Eurozone, particularly in the countries with more fragile
economies such as Greece, Italy, Spain and Portugal. Nevertheless, during the last 12 months, the European political authorities and
financial community managed to succeed in navigating the storm, mostly because of Germany. This country however showed clear
signs that its economy was contracting in the fourth quarter of 2012. This was short lived, however, as the situation seemed to rebound
as early as the following quarter, contrary to the situation in France where the economic indicators suggest stagnation at best.
Over the last 12 months, the global economic and financial environment has remained tense. Austerity programs and economic,
financial and political uncertainty continued to dampen growth in industrialized countries, many of which are also grappling with major
structural problems. The economic situation in many emerging countries, including China and India, was worrisome for most of 2012;
these countries saw their growth, which was fast paced until then, taper off in particular due to the weakness of the global economy and,
especially, of the European economy, which reduced the level of their exports. All this tension created volatility in commodity prices,
including copper, gold and oil. There are still many economic and financial issues around the world, and there are still many obstacles
on the road to greater stability.
World and the United States
ECONOMIC CONDITIONS
*
**
Net assets per share, end of year*
Variance from the transfer of Class G shares
-
0.22
0.77
Unrealized gains (losses)
(0.01)
0.16
0.30
Realized gains (losses)
-
(0.09)
(0.05)
Income tax and capital tax
(0.02)
(0.39)
(0.40)
Total operating expenses
Variance from issues and redemptions of shares
0.78
0.79
Interest and dividends
Increase (decrease) from operations**:
2012
25.92
2013
26.59
(in dollars)
Years ended May 31
CHANGE IN NET ASSETS PER SHARE
26
3
For the financial year ended May 31, 2013, the Fonds recorded net earnings of $458 million, compared to net earnings of $215 million
for the prior year. With this result for the year, the Fonds generated a return of 5.3%, up from the return of 2.6% experienced for the
previous year in much less favourable stock market conditions. The value of the Fonds’ shares therefore increased by $1.39 compared
to the price reported in July 2012 and by $0.78 compared to January 2013 to stand at $27.98 as at July 5, 2013. The Fonds also
reached new historic highs as at May 31, 2013 as it increased its number of shareholders to 615,664 and its net assets to $9.3 billion.
OVERALL RESULT
RESULTS OF OPERATIONS
4,053
8,550
4,497
47.4
100.0
52.6
Weight
%
2012
(0.1)
4.4
(1.5)
(0.3)
2.6
0.2
2.3
9.2
Return
%
1
Canadian neutral balanced funds, as compiled by globefund.com
4
• the positive return of 11.0% generated by our portfolio of listed securities during the year. This return is essentially explained by the
good performance of the stock markets during the last 12 months. For the previous year, this portfolio had recorded a negative return
of 7.0%, when the stock market conditions were much less favourable.
• the return of 6.7% generated by our private securities and specialized funds portfolio during the year (compared to 12.5% for the
previous year, when significant gains had been realized on the disposal of some of our investments, including the investment we held
in Enobia Pharma). This performance is essentially attributable to the general strength of the portfolio, which produced interest and
dividend revenues and, in addition, generated an increase in value during the year;
The performance of the Investments sector is influenced by various factors, particularly the behaviour of the financial markets as well as the
economic and business conditions in which our partner companies operate, and by the dynamic management of our investments. The
gross return of 7.4% of the Investments sector for the year is largely explained by the following:
The Investments sector earned a gross return of 7.4% for the year, down from the gross return of 9.2% generated for the prior year.
Taking into account this return and given the level of mission-driven investments made by the Fonds during the year, the assets in this
sector represented $4.9 billion or 52.7% of assets under management as at May 31, 2013 (52.6% as at May 31, 2012).
The assets managed by the Investments sector are essentially mission-driven development capital investments made by the Fonds in
public and private companies in the form of shares, units or loans. To stabilize its return, the Fonds favours a fair balance between
investments in the form of loans – that are usually unsecured and provide a current return through interest payments –, investments in
shares – that potentially generate a higher return but involve an increased level of volatility –, and investments in specialized fund units
– that allow the Fonds to better diversify its portfolio while bringing private and foreign capital inflows to Québec. Development capital
investments are governed by the Fonds’ Investment Policy, which is an important component of its Integrated Financial Assets
Management Policy.
Investments sector
SECTOR RESULTS
The economic uncertainty that persisted around the wold during the last 12 months continued to impact the performance of many
financial institutions, including the Fonds.
MANAGEMENT DISCUSSION OF FINANCIAL PERFORMANCE
6.6
6.9
(1.4)
(0.2)
5.3
2.3
2.9
7.4
Return
%
Assets under
management at
end of year*
$M
Assets under management at end of year refer to the fair value, at the end of the year, of the assets managed by the Investments and Other Investments sectors and
used to generate revenues presented in the Statement of Operations. This amount differs from the amount of assets presented in the financial statements, which
includes, unlike assets under management, notes from the liquidity surpluses of regional and local funds and certain specialized funds, among other things.
Other investments represent the remaining assets not invested in partner companies. Managed by the Other Investments sector, they consist of the following portfolios:
bonds, cash and money market, sector-based shares, absolute return strategies, international infrastructure funds and high-income.
**
*
During the last 12 months, short-term (2 years) and long-term (10 years) Canadian government bond interest rates fluctuated, however,
as at May 31, 2013, they were slightly higher compared to May 31, 2012. Provincial and investment-grade corporation credit spreads
also fluctuated during this period; however, both were narrower as at May 31, 2013 compared to May 31, 2012.
In Québec, economic growth continued to be relatively weak during the last 12 months, mainly due to the waning household
consumption and lower foreign trade. Signs of a slowdown also began to appear in the residential sector, which saw a dip in home sales
(existing and new) following the federal government’s tightening of mortgage rules. The unemployment rate was 7.7% in May 2013,
slightly lower than the 7.8% rate recorded in May 2012; this rate is higher than the rates for Canada (7.1%) and for Ontario (7.3%).
47.3
100.0
4,411
9,321
Other investments**
Total operating expenses
Income tax
Fonds return (annual)
Fonds return (1st six-month period)
Fonds return (2nd six-month period)
52.7
4,910
Development capital investments
2013
Weight
%
Over the last 12 months, the Canadian economy was not shielded from the economic sluggishness and uncertainty that spread around
the world; its loss of momentum is really tangible. During this period, the real estate market slowdown persisted, as evidenced by the
slump in residential investments. Inversely, non-residential investments continued to grow, but their contribution to economic growth
was offset in part by a reduction in government spending due to the fight against the deficit. Domestic demand only rose slightly due to
the weakness in consumer spending resulting from dampening credit and improvement in household balance sheets. Foreign trade was
hobbled by a weaker global demand and deteriorating competitiveness. On the inflation front, the annual variation of the Canadian CPI
has averaged 1.0% since May 2012. The unemployment rate decreased from 7.3% in May 2012 to 7.1% in May 2013. The Canadian
dollar traded at $US 0.97 on May 31, 2013, the same value as on May 31, 2012. The discount rate has remained unchanged at 1%
since September 2010.
Assets under
management at
end of year*
$M
Years ended May 31
Canada and Québec
FONDS RETURN
As a result of its mission, a significant portion of the Fonds de solidarité FTQ’s portfolio is comprised of private securities and
specialized funds. Consequently, the Fonds did not benefit from the full effect of the increase on the stock markets that occurred during
the year. In fact, the Fonds’ asset allocation tends to limit its return potential in a bull market such as we have experienced in the last
financial year, while the opposite occurs in a bear market. In that respect, the Fonds had been able to achieve, for the financial year
ended May 31, 2012, a return that exceeded the average return of Canadian balanced mutual funds 1 ; this was largely attributable to its
performance for the first six-month period, when stock markets declined.
Generally speaking, the U.S. economy grew in booms and busts over the last 12 months. After seeing GDP growth slow down in the
first two quarters of 2012 mainly due to the lack of household and corporate confidence in the economy and the persistence of financial
fears related to Europe, the U.S. economy posted improved GDP growth in the third quarter of 2012. This growth shrank in the following
quarter then rebounded in the first quarter of 2013. On the other hand, the savings rate remained low (averaging 3.7% since May 31,
2012). Despite a slowing labour market beginning in March 2013, the overall unemployment rate dropped over the last 12 months: it
was 7.6% in May 2013, compared to 8.2% in May 2012. In addition, residential investment is looking up after several lean years, and
house prices tend to rise, which should help consumers better weather higher taxes. In terms of inflation, the annual variation in the
U.S. CPI has averaged 1.7% since May 2012. Lastly, the key interest rate has remained unchanged at 0.25% since December 2008.
27
3
2,427
1,984
9,321
4,042
868
Assets under
management
at end of year*
$M
26.0
21.3
100.0
43.4
9.3
Weight
%
2013
2.4
12.1
6.9
6.7
11.0
Return
%
2,304
1,749
8,550
3,796
701
Assets under
management
at end of year*
$M
26.9
20.5
100.0
44.4
8.2
Weight
%
2012
7.1
(9.6)
4.4
12.5
(7.0)
Return
%
3
2
These sectors are materials, energy, consumer staples, utilities and telecommunications.
Other securities are comprised of the following portfolios: absolute return strategies, international infrastructure funds and high-income.
5
For the financial year ended May 31, 2013, the ratio of total operating expenses to net average assets for the year, calculated using
the method prescribed in the Regulation, was 1.4% (1.5% for the previous year). Expressed in dollars, total operating expenses
amounted to $129.9 million for the year ended May 31, 2013, compared to $122.1 million for the previous year. This increase is largely
attributable to the increase in salaries and benefits as well as in expenses related to the advertising and information campaigns.
Total operating expenses consist mainly of expenses related to assets under management, shareholder services, subscription
activities, systems and controls and their improvement, prospecting and monitoring of partner companies, personnel and all other
resources the Fonds de solidarité FTQ requires to achieve its mission and meet its objectives. Although it is essential that the Fonds
has available resources to achieve its mission, it is also fundamental that it controls its expenses. Year after year, the Fonds was able
to maintain its total operating expenses at a level it considers to be low.
TOTAL OPERATING EXPENSES
Other investments
Fixed-income securities
Sector-based shares and other securities
Private securities and specialized funds
Listed securities
Year ended May 31
RETURN BY ASSET CLASS
• the return of 2.4% on our fixed-income securities portfolio for the year, compared to 7.1% for the previous year. This return is mainly
explained by interest revenues generated by the portfolio. The difference in returns compared to the prior year is essentially
attributable to the decrease, in 2011-2012, in interest rates for Government of Canada securities, which increased the value of bonds
included in the portfolio.
• the increase in stock markets, which led to a positive return of 12.1% for the sector-based shares and other securities portfolios.
This performance followed a negative return of 9.6% for the prior year, when the stock market conditions were bearish both in Canada
and internationally;
2
The evolution of interest rates and the performance of the stock markets are the determining factors in analyzing the performance of the
Other Investments sector. Accordingly, the results achieved by this sector are influenced by the behaviour of the financial markets and
the conditions affecting the Fonds’ economic environment. The positive gross return of 6.6% of the Other Investments sector for the
year is largely explained by the following:
For the year, the Other Investments sector earned a positive gross return of 6.6%, up from the negative gross return of 0.1% recorded
for the prior year. The assets of this sector represented $4.4 billion or 47.3% of the Fonds’ assets under management as at May 31,
2013 (47.4% as at May 31, 2012).
The Fonds also has lines of credit available for its working capital requirements. As at May 31, 2013, these lines of credit were unused.
Cash flows from investment activities of the Fonds represented a net cash outflow of $388 million for the year, compared to
$372 million for the previous year. Cash needed to support net investments (acquisitions less proceeds from disposals) in partner
companies was provided by both the cash flows from operating activities and the cash flows from financing activities of the Fonds
discussed above.
Cash flows from financing activities of the Fonds totalled $271 million for the year, compared to $209 million for the prior year. These
cash flows for the year resulted mainly from issues of shares amounting to $855 million ($767 million for the previous year) less
redemptions of shares totalling $535 million 4 ($620 million for the previous year).
4
This amount is presented on a cash basis and therefore includes the change in amounts payable between May 31, 2012 and May 31, 2013.
6
The Fonds de solidarité FTQ is a union-based development capital investment fund that was born out of the Fédération des travailleurs
et travailleuses du Québec. Created in 1983 under the Act to Establish the Fonds de solidarité des travailleurs du Québec (F.T.Q.), the
Fonds endeavours to collect the savings of Quebecers who want to participate in creating and maintaining jobs, in order to improve the
situation of workers and to stimulate the Québec economy. The Fonds’ mission also includes raising awareness and encouraging
workers to save for retirement as well as providing economic training to workers.
MISSION AND OBJECTIVES
MISSION OF THE FONDS DE SOLIDARITÉ FTQ, OBJECTIVES AND STRATEGIES
In accordance with its Integrated Financial Assets Management Policy, the Fonds uses derivative financial instruments in particular to
safeguard the value of its assets, to facilitate the management of its portfolios, to modify its asset allocation without increasing or
decreasing the amounts managed by internal and external specialists and to improve its returns within allocated risk limits (see the “Risk
Management” section on page 36 for more details).
In addition, balance sheet other investments increased by $247 million during the year to settle at $4.4 billion as at May 31, 2013
($4.1 billion as at May 31, 2012). This increase is explained, among other factors, by the excess net cash inflows (issues of shares
less redemptions of shares) for the year that were not used to make development capital investments.
Balance sheet development capital investments increased from $4.9 billion as at May 31, 2012 to $5.3 billion as at May 31, 2013. This
$380 million increase mainly resulted from our net disbursed investments of $216 million (disbursed investments of $507 million less
disinvestments of $291 million) and the increase in value of our development capital investments during the year. On a commitment
basis, the Fonds made development capital investments of $521 million during the year, compared to $908 million for the prior year,
which included a $300 million investment in SSQ Financial Group. On the other hand, funds committed but not disbursed increased
from $822 million as at May 31, 2012 to $838 million as at May 31, 2013.
Balance sheet and off-balance sheet items
28
Cash flows from operating activities of the Fonds totalled $112 million for the year, down from $171 million for the previous year.
Changes in these cash flows mainly resulted from our current operations.
Cash flows
ANALYSIS OF CASH FLOWS, BALANCE SHEET AND OFF-BALANCE SHEET ITEMS
Other Investments sector
The Other Investments sector manages the Fonds’ assets that are not invested in partner companies. Other investments consist of the
following portfolios: bonds, cash and money market, sector-based shares, absolute return strategies, international infrastructure funds
and high-income. As with development capital investments, other investments are managed in accordance with the Integrated Financial
Assets Management Policy, which targets sound diversification of the Fonds’ financial assets. Under this policy, a sufficient portion of
financial assets must be invested in a way that allows the Fonds to meet its liquidity needs, to produce current revenue sufficient to
cover its expenses and to contribute to the generation of a reasonable return to its shareholders.
6
5
Please see the prospectus for more information.
For more on this, please see the “60% rule” section of this MD&A.
7
When shareholders buy shares of the Fonds, an entire process is set into motion. A portion of the money collected from shareholders
(in consideration of which the Fonds issues them shares) is first invested by the Fonds, pursuant to its mission, in shares, units or loans
in private and public companies in Québec, or in companies that generate economic spinoffs in Québec. The investments made by the
Fonds in compliance with its mission represent the development capital investments portfolio, and the companies in which the Fonds
invests become partner companies of the Fonds. Pursuant to the Fonds’ Incorporation Act, this portion invested in partner companies
must comply with the 60% rule 6 . To ensure sound diversification of its financial assets, the other portion of the money collected but not
invested in Fonds partner companies is invested in other financial instruments in a way that allows the Fonds to meet its liquidity needs,
to produce current revenue sufficient to cover expenses and to contribute to the generation of a reasonable return to the shareholders.
All of these other financial investments represent the other investments portfolio. The Fonds’ interests in partner companies are
qualified as patient capital as they are intended to be held over an investment horizon generally ranging from 5 to 7 years, depending on
the financial instrument used. The sums raised when an interest held by the Fonds is sold or bought back (disinvestment) are
reinvested in other companies or used to reimburse shareholders who request a share redemption, in accordance with our retirement or
early retirement criteria. On average, shareholders request a redemption approximately 10 years after their first share purchase. During
this 10-year average period, given the Fonds’ investment horizon, the shareholders’ money would therefore have been invested in
development capital more than 1.5 times.
The business model the Fonds uses to achieve its mission can be illustrated as follows:
Since the phase-out of the 15% federal tax credit was announced, the Fonds has undertook a detailed analysis of the impact this could
have on its business model, strategies and various policies, particularly the Integrated Financial Assets Management Policy. This
analysis will be continued during the next financial year, based on the development of the legislative measures that the federal
government will propose on that matter.
STRATEGIES
The Fonds’ mission is supported by both levels of government since shares of the Fonds qualify for RRSPs and give rise to a 15% tax
credit at both the Québec and federal tax levels, for a total of 30% 5. The maximum tax credit is $1,500 per year, which corresponds to a
purchase of $5,000 of shares. However, it should be noted that in the federal budget tabled on March 21, 2013, the government of
Canada announced its intention to phase out until 2017 the 15% tax credit it grants to labour-sponsored fund shareholders. The credit
remains at 15% until the taxpayer’s 2014 tax year (therefore including any contributions made in the first 60 days of 2015 and applied
to the 2014 tax year), and will then be phased out until 2017. The Québec tax credit of 15% remains in place. Consequently, for the
taxpayer’s 2013 and 2014 tax years, total credits will continue to be 30%. The federal government had also announced in its budget
that it would hold consultations on this measure until May 31, 2013. However, on May 23, 2013, it announced that it would hold new
consultations until July 23, 2013; these consultations would precede the eventual release of draft legislation for comment. In this
context, it is important to point out that the federal government’s intentions, as set out in its budget, are only for the time being a
proposal that will not come into force until an act implementing the phase-out of the tax credit is adopted.
8
Online transactions didn’t slacken off either: 17,073 new shareholders enrolled through the Fonds’ website, and lump-sum subscriptions
totalling close to $166 million were collected through the various virtual channels.
Thanks in large part to our LR network, subscriptions through payroll deduction continue to represent the largest proportion of the
Fonds’ subscriptions. Our efforts to recruit new shareholders who contribute to their RRSP through payroll deduction combined with the
increase in workplace blitzes (22% more than last year) paid off: 13,327 additional shareholders chose payroll deduction in 2012-2013.
But beyond this axis of communication and the various means the Fonds uses to get the word out, it can also count, to meet its
objectives, on a network of 2,077 LRs from FTQ-affiliated unions as well as unions the Fonds has agreements with. These LRs
promote, on a voluntary basis, the Fonds in their workplace across Québec, both in factories and in professional environments. They
explain the Fonds' objectives and encourage their coworkers to subscribe to Fonds shares and thereby contribute to Québec's
economic development while saving for retirement. The network is also supported by a team of coordinators and an LR service group is
dedicated specifically to it. Our LRs receive continuing education, which is provided in collaboration with the Fondation de la formation
économique, to mobilize them around the Fonds’ mission and the development of systematic savings.
Despite a rising long-term trend, the volume of redemptions dipped this year, amounting to $542 million as at May 31, 2013, compared
to $620 million as at May 31, 2012. This reduction in redemptions does not hide the fact that the Fonds needs to renew its shareholder
base. This is why for several years now its communication strategies have mainly targeted young people and cultural communities. On
that front, during the financial year, the number of new enrolments by people under the age of 40 increased by 27% compared to the
previous year.
Its financial performance and strength, publicity campaign, targeted marketing mailings, increased presence (particularly through its LR
network throughout Québec) during the RRSP period have all allowed the Fonds to increase the amount of lump-sum subscriptions by
20%, reaching $424 million (compared to $354 million for the previous financial year).
For the financial year ended May 31, 2013, the Fonds collected subscriptions allowing it to issue shares totalling $855 million, compared
to $767 million in the previous year. The number of new shareholders totalled 42,984, which helped the Fonds reach a new historic high
of 615,664 shareholders as at May 31, 2013.
The Shareholder Services sector strategies are built on three axes: developing systematic savings, mobilizing the LR (local
representatives) network and building shareholder loyalty.
The Shareholder Services sector
The high volatility of financial and stock markets during recent financial years resulted in significantly modifying the actual weight of
these various asset classes, which led the Fonds to rebalance its portfolio a few times. These rebalancings were made to comply with
the limits and guidelines of the Integrated Financial Assets Management Policy regarding the target asset allocation. They were also a
way to actively manage the portfolio within the limits set out by this policy to improve the return/risk profile, taking into consideration the
general movement and erratic behaviour of financial and stock markets.
The Integrated Financial Assets Management Policy takes into account actual and expected changes in the Fonds’ business,
particularly the expected increase in redemptions due to aging shareholders and the increase in the size of the portfolio of missiondriven development capital investments. In fact, the weight of investments disbursed by the Fonds, which was 53% as at May 31, 2013,
should gradually increase. This policy allows the Fonds to maintain the desired balance among the various components of the Fonds’
balance sheet and to review the target weight of each asset class with a view to maintaining the desired return/risk profile and continue
to meet shareholders’ expectations. In general, the Fonds may modify its targets depending on the circumstances and events that occur
in the next few years.
To implement its mission and to reach its objectives, the Fonds deployed various strategies, both from a global management
perspective and by sector. Therefore, in an overall perspective, the Fonds implemented an Integrated Financial Assets Management
Policy under which it manages its financial assets in an integrated and comprehensive way to produce a reasonable return for its
shareholders while mitigating the volatility of the return from a six-month period to the next. Accordingly, the assets in the other
investments portfolio are allocated in a way that is complementary to the portfolio of mission-driven investments made in partner
companies. This strategy allows the Fonds to obtain, overall, the desired return/risk ratio.
29
7
Venture capital comprises high-risk investments made directly or indirectly by the Fonds in companies in the start-up or early development stage, particularly in
the new economy sector.
9
As the following graph illustrates, during the financial years 2004 to 2013, i.e. a 10-year period, the Fonds has committed $5.5 billion of
unsecured risk capital (development capital) to partner companies. Of this amount, $2.2 billion have been invested in venture capital 7
either directly in private companies ($1.2 billion) or indirectly in private funds ($1.0 billion) in Québec and Canada. The investments
made by the Fonds in private funds had a structuring effect on the Québec venture capital industry and allowed these private funds to
raise several additional billions of dollars.
To fulfill its Québec economic development and job creation mission, the Fonds invests significantly in the form of unsecured risk capital
(development capital) in partner companies. To have an accurate idea of the Fonds’ efforts in Québec’s economic development, we
must go beyond the image given by the portfolio as at a particular date and look at amounts invested in the form of unsecured risk
capital (development capital) over a certain period.
Multidisciplinary teams support our investment specialists with their expertise: legal, tax, business valuation, market study, due
diligence, labour relations and public market departments. A due diligence committee reviews all files submitted to governing bodies to
identify the associated risks taking into consideration the Fonds’ mission. In addition, to deal with more difficult situations, the Senior
Vice-President, Turnaround Management and Special Projects, together with the Vice-President, Legal Affairs, very closely monitors
investments that entail greater credit risk.
Every year the Fonds undertakes an analysis to determine the sectors that will be prioritized given the behaviour of the financial
markets and the economic and business conditions of the various sectors, as well as based on the dynamic management of its
investments. The priorities are determined within the risk management framework implemented by the Investments sector several years
ago, which helped improving the quality of the portfolio and stabilizing the return.
8
These investments include funds committed but not disbursed as well as guarantees and suretyships.
The Fonds expects to comply with all the limits and rules set out in its Incorporation Act over the next several years.
10
As at May 31, 2013, the value of average qualified investments 8 amounted to $5.5 billion or 66.0% of the average net assets of the
previous financial year (compared to 67.0% as at May 31, 2012). Since the minimum percentage prescribed was reached as at May 31,
2013, the amount of share issues for the 2013-2014 financial year will not be limited by the 60% rule. As at May 31, 2013, the Fonds
was also in compliance with all other limits and rules set out in its Incorporation Act.
Even though market volatility is not something new, the fluctuations that result may, given the size of the Fonds, make it more difficult to
manage the 60% rule. Accordingly, the 2012 budget of the Government of Québec proposed to amend the Fonds’ Incorporation Act to
allow flexibility in the calculation of average qualified investments. It would therefore be possible, under certain conditions, to include in
the calculation excess qualified investments with respect to the 60% rule made in the two financial years preceding the current financial
year.
The 60% rule set out in the Fonds’ Incorporation Act stipulates that the Fonds’ average unsecured investments in qualified business
enterprises must represent at least 60% of its average net assets of the previous financial year. The remaining assets may be invested
in other financial vehicles for asset diversification and sound management purposes. The calculation method for this rule is based on
the value of the Fonds’ assets, which depends in part on interest rate fluctuations and on the performance of stock markets and the
economy in general.
60% RULE
The activities of the Other Investments sector fall under the responsibility of two separate Vice-Presidents: the Vice-President,
Marketable Securities Portfolio Management and the Vice-President, Financial Management and Strategy. This structure helps the
Fonds continue prioritizing the optimization of its return/risk ratio despite the increasing complexity of financial markets.
During the last financial year, other changes affecting the Other Investments sector and being phased in beginning on June 1, 2013,
were made to the Integrated Financial Assets Management Policy. On one hand, the equity benchmark index will be switched from an
in-house index composed of five sectors to the S&P/TSX and MSCI Global 10 sector indexes, and on the other hand, the absolute
return strategies category will be gradually liquidated, except for the portfolio comprised of hedge fund managers selected internally.
These changes are mainly intended to optimize the Fonds’ return/risk ratio.
Over the last few years, based on the changes in the weight of its development capital investments, the Fonds was led to aim for a
gradual reduction of its bond portfolio. The transactions required subsequent to these modifications to the target asset allocation were
executed in an orderly fashion so the Fonds would not hurt its return.
Using derivative financial instruments provides active management of market risks the Fonds is exposed to. When appropriate, the
Other Investments sector develops a risk management strategy, which must be authorized by the appropriate governing bodies, to
minimize the Fonds’ exposure to volatility in foreign exchange rates or stock market prices.
For portfolios managed externally, the Fonds retains the services of specialized managers which allows optimizing the management of
those portfolios. One of the benefits of this kind of management is the implementation of specialized management strategies, such as
active management of the duration of the bond portfolio, which targets generating added value for the portfolios in question through the
expertise the selected specialists have in the area. The Fonds also held for a few years an overlay management portfolio managed by
an external manager specialized in bonds. This portfolio has been gradually eliminated during the year.
The assets of the Other Investments sector are managed internally by a team of specialists and externally by specialized managers.
The internal team of specialists manages the money market portfolio, part of the bond portfolio, the high-income portfolio and a portfolio
comprised of hedge fund managers. The portfolios that are managed internally represented $2.0 billion as at May 31, 2013, or 47% of
the total amount of other investments (45% as at May 31, 2012). To improve the overall performance of these portfolios, the Fonds’
specialists have some latitude in buying and selling securities; these transactions must comply with the limits and guidelines of the
Integrated Financial Assets Management Policy and are overseen by the Financial Assets Management Committee.
In managing the balance of assets not invested in partner companies (presented under “Other Investments” in the financial statements),
the Other Investments sector is governed by the Integrated Financial Assets Management Policy which targets sound diversification of
the Fonds’ financial assets. A sufficient portion of financial assets must be invested in a way that allows the Fonds to meet its liquidity
needs, to produce current revenue sufficient to cover expenses and to contribute to the generation of a reasonable return to the
shareholders, who generally invested in the Fonds for their retirement.
The Investments sector’s strategies, which support the Fonds' achievement of its mission regarding development capital investments in
Québec's economy, are integrated in the global perspective defined by the Integrated Financial Assets Management Policy, which
includes the Investment Policy, and vary, among other things, depending on fluctuations of the 60% rule which the Fonds must follow
pursuant to its Incorporation Act (for more on this, see the "60% Rule" section).
To enable risk diversification, the Fonds allocates its investment portfolio among various economic sectors. Generally, the Fonds holds
a minority interest in the companies it invests in, however it may exceptionally, in very specific situations, hold a majority or all the
shares of a company. Over the years, this approach to investing has allowed the Fonds to develop extensive knowledge of the various
sectors in which it invests, and its partner companies highly value the expertise this has allowed it to develop.
The Other Investments sector
The Investments sector
30
11
The following table presents only the significant differences between GAAP currently applied by the Fonds and IFRS. While noteworthy,
these differences do not necessarily have a significant impact on the Fonds’ financial statements. This table was prepared based on
current standards that would be effective as at the date of transition; however, certain standards could be amended and the Fonds
could reassess its position as needed. The impact assessment reflects the results of the analysis based on the current situation.
Main expected changes
The Fonds continuously monitors the development of IFRS to assess its impact.
During the change integration phase, we will keep accounting records both under GAAP and IFRS to be able to present comparative
information upon transition. In addition, the Fonds deployed its training plans, which are intended to upgrade the knowledge of its
accounting staff and other stakeholders of the organization who are affected by the IFRS conversion.
The part of the second phase dealing with standards assessment, detailed analysis and issue resolution was completed in May 2010. It
included a more detailed analysis of the IFRS and the differences with current Canadian standards and their interpretations in order to
identify the impact the conversion will have on processes, systems and the financial statements. In the coming months, the Fonds will
prepare draft financial statements in accordance with the new standards.
The first phase was completed before the end of the financial year ended May 31, 2009. This phase included identifying the IFRS
having an impact on the Fonds as well as the main issues and priorities to assess in the context of the Fonds.
The Fonds adopted an IFRS conversion plan comprising three phases: a diagnostic phase; a standards assessment, detailed analysis,
issue resolution and model financial statements preparation phase; and a change integration phase.
IFRS conversion plan
In 2008, the Accounting Standards Board of Canada (AcSB) announced that publicly accountable enterprises would have to replace
Canadian generally accepted accounting principles (GAAP) by IFRS in their financial statements for the years beginning on or after
January 1, 2011. Then, in December 2011, the AcSB confirmed that investment companies, as defined in the Accounting Guideline on
investment companies of the Canadian Institute of Chartered Accountants (CICA) Handbook, will have to apply IFRS for the first time to
their interim and annual financial statements for the years beginning on or after January 1, 2014, at the latest. The Fonds intends to
meet this first-time adoption date and will therefore apply IFRS for the first time to prepare its financial statements for the six-month
period ending November 30, 2014.
INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
The Fonds does not anticipate adopting new accounting policies that would significantly affect its net earnings for the financial year
ending May 31, 2014 or its net assets per share as at May 31, 2014.
ACCOUNTING POLICIES
RECENT DEVELOPMENTS
Financial instruments – fair
value
Financial instruments
Consolidation
Accounting policy
Under IFRS, if an asset measured at fair value
has a bid price and an ask price, the price
within the bid-ask spread that is most
representative of fair value in the circumstances
must be used to measure fair value.
Under GAAP, listed financial instruments are
measured at the closing bid price at the balance
sheet date.
Other than for financial instruments subject to
consolidation, as described above, IFRS that
apply to financial instruments are similar to
GAAP.
Under GAAP, the Fonds recognizes all its
development capital investments and other
investments at fair value, in accordance with
accounting principles applicable to investment
companies.
On October 31, 2012, the International
Accounting Standards Board (IASB), the
international standard-setting organization,
issued a document entitled Investment Entities
(amendments to IFRS 10, IFRS 12 and IAS 27),
which defines investment entities and provides
for an exception to the consolidation principle
for such entities. Under this exception,
investment entities measure their investments
in controlled entities at fair value – instead of
consolidating them – and recognize changes in
fair value in profit or loss. In addition, the
document specifies certain disclosure
requirements regarding these investments in
controlled entities.
Under GAAP, investment companies meeting
certain criteria recognize their investments at
fair value, in accordance with Accounting
Guideline AcG-18, Investment Companies. This
rule applies to all investments, including those
in entities in which the investment company
holds more than 50% of voting shares and
those in entities over which it exercises control.
Main differences between GAAP and IFRS
The Fonds will use the most
pertinent fair value within the bid
price and ask price range.
The Fonds will recognize all its
financial instruments at fair value,
as it currently does.
The Fonds is currently assessing
the disclosure requirements under
IFRS.
IFRS now provide for an
accounting treatment for controlled
entities that is similar to the
treatment currently applied by the
Fonds. The Fonds meets the
definition of an investment entity
set out in the recent amendments
to the standards.
The Fonds does not currently
prepare consolidated financial
statements and recognizes all its
development capital investments
and other investments at fair value.
Impact on financial statements
12
31
Employee benefits
Investment property
IFRS require that each component of an item of
property, plant and equipment be depreciated
separately when such item of property, plant
and equipment is comprised of components to
which different depreciation rates apply. One
impact of this requirement is that more
components are recognized under IFRS than
under GAAP.
Property and
equipment (Capital
assets)
Under GAAP, the actuarial gains or losses of
defined benefit pension plans that exceed the
“corridor” are amortized over the average
remaining service period of active employees.
This option to defer the recognition of gains and
losses, which was previously allowed by IFRS,
has been eliminated with the issuance of an
amendment to IAS 19 Employee Benefits.
Under IFRS, past service cost of defined benefit
pension plans for which benefits are already
vested is immediately expensed. Under GAAP,
it is usually amortized over the average
remaining service period of active employees.
GAAP do not include a specific definition of
investment property.
However, investment entities are required to
apply the fair value model, thereby eliminating
the above-mentioned choice.
Under IFRS, an investment property is defined
as a property held to earn rentals or for capital
appreciation, or both. An investment property
may be measured using the cost model or the
fair value model.
Upon transition to IFRS, IFRS 1 First-Time
Adoption of International Financial Reporting
Standards allows an entity to use the fair value
of an item of property, plant and equipment as
its deemed cost as at the date of transition.
Under IFRS, an item of property, plant and
equipment may be measured using the cost
model or the revaluation model. GAAP preclude
the remeasurement of property, plant and
equipment at fair value.
Accounting policy
The Fonds will recognize all net
actuarial losses of pension plans in net
assets.
The vested portion of past service cost
will have to be immediately recognized
in net assets.
The Fonds will measure this portion of
the buildings that it leases out at fair
value.
The Fonds will reclassify in its balance
sheet the portion of the buildings that it
leases out.
After the transition, the Fonds expects
to continue using the cost model to
measure its property and equipment.
The Fonds expects to use the fair
value of its buildings as their deemed
cost as at the date of transition.
The list of the specific components of
the Fonds’ buildings is currently being
developed.
13
Under IFRS, refundable taxes are recognized
only when dividends or transfers from retained
earnings to share capital giving right to a refund
of these taxes are realized and approved by the
Board of Directors. As such, the calculation of
future income taxes cannot reflect the
favourable effect of refundable taxes.
Under GAAP, the portion of income taxes paid
that will be refundable in the future upon the
payment of dividends or a transfer from
retained earnings to share capital must be
recognized as an asset. In addition, income tax
rates used in the calculation of future income
taxes already include the favourable effect of
refundable taxes.
Future income taxes will be
recognized for unrealized
appreciations and depreciations.
As a result of these differences,
refundable tax balances will have to
be written off as at the date of
transition and the amount of future
income taxes will have to be
adjusted.
14
The Fonds believes that the IFRS conversion will not require major changes to its information systems, its data processing procedures
and its various activities. The Fonds also believes that its current internal control over financial reporting and disclosure controls and
procedures will be sufficient and adequate for adopting IFRS and meeting their related disclosure requirements.
The amounts of the main differences between GAAP and IFRS described above are currently being assessed. However, they should
not have a significant impact on net assets, net earnings and net earnings per share.
Income taxes
Accounting policy
32
As at May 31, 2013, the Fonds’ assets under management were broken down as follows:
This section presents the past performance of the Fonds. The past performance of the Fonds does not necessarily indicate how it will
perform in the future.
15
Let’s take, for example, a shareholder who has invested an equal amount each year through payroll deduction. Including the Québec and
federal labour-sponsored fund tax credits (each amounting to 15%) that this shareholder has received, at the current value of $27.98 per
share, this shareholder earned an annual compound return of 13.9% and 10.3% for a 7-year and 10-year period, respectively. In addition to
this return, the shareholder can receive additional tax benefits if he holds his Fonds shares in an RRSP.
ANNUAL COMPOUND RETURNS TO THE SHAREHOLDER (INCLUDING TAX CREDITS)
Since the inception of the Fonds, the annual compound return to the shareholder has been 3.7%.
The annual compound return to the shareholder is calculated by taking into account the annualized change in the price per share over the
periods indicated. This return sometimes differs from the annual performance of the Fonds since, as explained above, it does not take into
account the dilutive or accretive effect of share issues and redemptions made during the year.
At the current value of $27.98 per share, a shareholder who has invested at the beginning of each of the periods indicated below earns
the following annual compound returns:
ANNUAL COMPOUND RETURNS TO THE SHAREHOLDER
The annual performance of the Fonds is calculated by dividing net earnings (net loss) per share for the financial year by the price per
share at the beginning of the financial year. Such performance sometimes differs from the annual compound return to the shareholder
because the annual performance of the Fonds is calculated taking into account share issues and redemptions made during the year,
which have a dilutive or accretive effect on net earnings (net loss) per share, as the case may be.
The following chart shows the Fonds’ annual performance and illustrates how the Fonds’ performance has changed from year to year
for the last ten financial years.
YEAR-BY-YEAR RETURNS OF THE FONDS
SUMMARY OF INVESTMENT PORTFOLIO
PAST PERFORMANCE
47.4
1.3
24.8
17.0
2.6
1.1
0.6
52.8
31.4
12.1
9.3
% of net assets
33
Province of Ontario
Province of Québec
Financement-Québec
Government of Canada
Canada Housing Trust No. 1
Laurentian Bank of Canada
Q-BLK Strategic Partners, Inc.
FRM Diversified II Fund SPC
12
11
10
9
16
Hedge funds are included in the absolute return strategies portfolio.
High-dividend shares are included in the high-income portfolio.
Despite their relatively important weight in the overall portfolio of the Fonds, these issuers do not constitute a significant concentration risk given the large
number of investees.
Includes all of the Fonds’ investments in SSQ, Life Insurance Company Inc. and its subsidiaries, SSQ Insurance Company Inc. and SSQ General Insurance
Company Inc. Includes also the Fonds’ investment in SSQ, Mutual Holding Inc.
5.3%
3.1%
2.3%
1.8%
1.6%
1.3%
0.8%
0.8%
17.0
49.1
32.1
% of net assets
** The 8 issuers representing, as a group, 17.0% of the Fonds’ net assets
are:
This summary of investment portfolio may change due to ongoing portfolio transactions of the Fonds.
Atrium Innovations inc.
Camoplast Solideal inc.
Cogeco Câble inc.
Corporation Financière L'Excellence ltée
Entreprises publiques québécoises à faible capitalisation 11
FinTaxi, s.e.c.
Fonds immobilier de solidarité FTQ inc.11
Fonds immobilier de solidarité FTQ I, s.e.c.11
Fonds immobilier de solidarité FTQ II, s.e.c.11
Gestion TFI inc.
Metro inc.
Société de gestion d'actifs forestiers Solifor, société en commandite11
SSQ Financial Group 12
TMX Group Limited
Transcontinental Inc.
Trencap s.e.c.
VC, société en commandite
* The 17 issuers representing, as a group, 32.1% of the Fonds’ net
assets are:
(17 issuers) *
Other investments
(8 issuers)**
Issuers
As at May 31, 2013, the issuers of the top 25 positions held by the Fonds, of which 17 are part of the development capital investments
portfolio and 8 are part of the other investments portfolio, were as follows:
Cash and money market
Bonds
Sector-based shares
Hedge funds 9
High-dividend shares 10
International infrastructure funds
Other investments
Private securities
Specialized funds
Listed securities
Asset classes
13
13
17
Since 1998, the Fonds has been authorized by the Minister of Finance of Québec to invest outside Québec provided certain clearly defined conditions are met,
notably with regards to economic spinoffs in Québec. The main groups of eligible investments are private funds outside Québec, companies impacting the
Québec economy and large-scale investment projects (financing for expansion, modernization, productivity improvement).
Lastly, during the financial year, the Fonds made an investment of $5.2 million in Cellfish Media, a company meeting the company
impacting the Québec economy criteria ($7.5 million in the previous year).
The Fonds made two investments in private funds outside of Québec totalling $29.7 million during the financial year. As mentioned
previously, a $10 million investment was made in Sanderling Ventures VII (Canada), L.P., a U.S. investment fund specialized in life
sciences, while $19.7 million was invested in FCPR Aerofund III, a French investment fund specialized in the aerospace industry. The
eligibility of the investments in these two foreign funds is conditional to these two funds reinvesting in Québec companies an amount at
least equivalent to the amount invested by the Fonds. These private funds should also provide their current and future partner companies in
Québec with the specific expertise or international network necessary for their development.
In the category of companies undertaking large-scale projects in Québec, the Fonds made two investments totalling $19.0 million
($39.7 million in the previous year), including $15 million in Vision 7 International ULC, a company incorporated in Alberta that is the parent
company of Cossette Communications, the largest marketing communication company in Québec.
Over the years, the Fonds made investments pursuant to the Policy for Investment Outside Québec that have had significant economic
spinoffs for Québec. During the financial year, the Fonds invested $53.9 million ($47.2 million in the previous year) in five companies in
accordance with this policy.
POLICY FOR INVESTMENT OUTSIDE QUÉBEC
Furthermore, the Fonds invested $12 million in AJW Technique to relaunch Aveos, thereby contributing to the creation of 300 jobs in the
aerospace industry by 2015.
In venture capital, the Fonds collaborated directly, with an investment of $17.2 million, to repatriate to Canada control of Distech
Controls, a leader in energy management solutions; this transaction will help create jobs in Québec in the green technology industry and
strengthen Québec’s position in the economy of tomorrow. In addition, in partnership with investors from other parts of the world, the
Fonds participated in the financing of a project in Québec related to the lead product of Thrasos Innovation, a private, clinical stage,
biotherapeutics company focused on the treatment of kidney diseases; the Fonds invested $7.1 million in this company. In addition, the
Fonds was involved in the capitalization of two private venture capital funds: $25 million in Fonds CTI Sciences de la vie, s.e.c. and
$10 million in Sanderling Ventures VII (Canada), L.P. – discussed below – as well as in a $6.7 million co-investment agreement with the
Fonds de solidarité FTQ investissements croissance I, s.e.c.
In the services industry, the Fonds contributed, with a $15 million investment in Athos services commémoratifs, to the return to Québec
ownership of two flagships of the funeral industry: Lépine Cloutier, in Québec City and Urgel Bourgie, in Montréal. As part of the
international development plan of Premier Tech, world leader in the horticulture and agriculture, industrial equipment and environmental
technology industries, the Fonds reinvested $8 million; this is the Fonds’ fourth investment in this company based in Rivière-du-Loup. In
addition, a new investment of $2 million in Sail Outdoors will allow the company to continue the regional expansion of its store network
in Ontario and Québec over the 2013 to 2015 period.
In particular, the Fonds made a $75 million commitment (announced last year) in the new Fonds Valorisation Bois. This investment fund
for high value-added wood transformation will help businesses in the forestry industry move, among other things, into new niches such
as green construction, green energy and green chemicals, which are all supported by the forestry industry.
In keeping with its mission, the Fonds made investments over the financial year that contributed to creating, maintaining or saving
quality jobs in different sectors of the Québec economy. In the current, still uncertain economic conditions, the Fonds continues to play
an active role in the development and growth of Québec companies. As such, during the financial year, the Fonds invested $521 million,
on a commitment basis, to support Québec entrepreneurs in their development projects.
CONTRIBUTION TO QUÉBEC’S ECONOMIC DEVELOPMENT
The Fonds de solidarité FTQ generally offers $2 million and up for large companies.
The fonds régionaux de solidarité FTQ, which cover all of Québec, generally offer capital ranging from $100,000 to $2 million to
meet the needs of businesses in their region.
The local solidarity funds, created by the Fonds and the Québec Federation of Municipalities, generally offer $5,000 to $100,000 to
small businesses.
The fonds immobiliers de solidarité FTQ are specialized in real estate investment and development. Their main objective is to create
and save jobs through building or renovating major office buildings and commercial, industrial, institutional and residential
properties.
The other specialized funds form an investment network in Québec and abroad that invests in assorted industries. The Fonds’
commitment to this network continued in 2012-2013, with the ongoing goal to facilitate Québec SMEs’ access to capital in all their
stages of development.
As at May 31, 2013
DISTRIBUTION OF INVESTMENTS BY NETWORK COMPONENTS (AT COST)
The following graph shows the breakdown of the Fonds’ investments based on its various network components:
18
Québec entrepreneurs have had access to the entire Fonds investment network through its website: www.fondsftq.com. In addition to
searching for our financing projects and for members of our teams of experts, this one-stop shop for investment provides details on the
Fonds, the regional funds, the local funds and the real estate funds.
•
•
•
•
•
34
Since its inception in 1983, the Fonds has built a solid investment network that provides entrepreneurs who follow their ambitions with patient
capital based on their needs. A veritable business hub brimming with ideas, talent and knowledge, this network offers the Fonds' partner
companies the opportunity to share their concerns with other SMEs, learn from past experiences and forge new business ties. The Fonds’
investment network revolves around five levels of investment:
THE FONDS DE SOLIDARITÉ FTQ INVESTMENT NETWORK
19
In Québec, consumer spending remained very weak and there is no indication that this will change in the coming months. Business
investment is also at anaemic levels, as are export data. The weakness of global economic conditions and the strength of the Canadian
dollar weigh heavily on exports. The residential market seems to be slowing down, which is another factor of uncertainty. Québec’s
GDP growth in the coming months should be relatively weak.
In Canada, analysts have been closely monitoring the slowdown in the real estate industry for a few months. Unlike in several other
industrialized countries, the Canadian real estate sector was not very affected by the last financial crisis. To avoid overheating, the Bank
of Canada took several measures to stifle demand in this sector. These measures seem to have borne fruit judging by the diminished
activity in the Canadian real estate market in most provinces. This reduction in real estate activity obviously puts downward pressure on
domestic demand and, ultimately, GDP. Since the Canadian government expects to continue cutting spending in the attempt to reach a
zero deficit, all that is left to drive growth is Canadian consumers. But, since they are already deeply in debt, they should focus more in
the next few months on rebalancing their financial situation rather than buying on credit. Given the above-mentioned points, combined
with weak global demand for its export products, Canadian GDP growth should slow down in the coming months. The discount rate
should not be revised up or down in 2013. Given current economic conditions, we forecast that over the next few months the Canadian
dollar will fluctuate between $US0.93 and $US1.04, while interest rates on Canadian 10-year and 30-year bonds should vary in a range
not exceeding plus or minus 50 basis points.
Canada and Québec
In the United States, negotiations surrounding the “fiscal cliff” and the partial agreement that was concluded had no major impact on the
markets. The politicians postponed the most critical decisions, particularly those concerning the debt ceiling and adopting a budget.
However, sooner or later, the Americans will want to know what is happening with their public finances. The question is even more
relevant as certain economic indicators that, all in all, performed well in the opening months of 2013, showed signs of weakness starting
in March 2013. Put another way, the economic situation in the United States which, at the start of 2013, seemed to be setting up for a
promising year, may ultimately not have enough momentum to offset the cooling in public spending and higher taxes if the economic
indicators continue to trend downward in the next few months, the end result of which would be lower U.S. GDP. We should remain
prudent regarding the economic growth outlook in light of the seasonal phenomenon of optimism in the first months of the year that the
U.S. economy has experienced for several years now, and has shown to be a false start each time. Caution should also be exercised
with respect to the economic outlook following the June 19, 2013 statement by the U.S. Federal Reserve (the Fed) according to which it
intends to slow down, starting in fall 2013, the pace of its purchases of U.S. Treasury bonds and mortgage-backed securities if the
economy and the labour market continue to improve. This third round of quantitative easing might even slow down further at the
beginning of 2014 and end in the middle of the year. This announcement had a negative effect on several stock indexes and a positive
effect on the U.S. dollar and the 10-year U.S. Treasury bills. In addition, the Fed set two indicators to be reached: an unemployment
rate below 6.5% and an inflation rate near or under 2.0%. In general, the goal of the Fed’s strategies is to give the government the time
it needs to implement fiscal measures that will fix structural problems.
Economic conditions in Europe continue to be difficult, and generally, leading economic indicators don’t seem to suggest short- or
medium-term improvement. As such, it seems that for the next few quarters the Eurozone will continue to be mired in the recession that
has persisted since 2011. The bond purchase program orchestrated by the European Central Bank has so far been successful in
lowering financial tensions and soothing fears of a potential collapse of the Eurozone. However, political uncertainty in certain countries,
such as Spain and Italy, where recent elections have returned unconvincing results (no majority government), clearly show that the
Eurozone continues to struggle and the situation remains fragile. While the economic outlook in France will likely still be challenging in
2013, the only source of comfort comes from the German economy (main driver in the Eurozone), where certain leading economic
indicators suggest that in the coming quarters GDP will grow compared to its fall 2012 trough.
World and the United States
Based on the results for the first quarter of 2013, the situation seems to be improving. In fact, venture capital investments in Québec totalled
$227 million, more than four times the $54 million invested during the same period in 2012, and 51% higher than the investments in the final
quarter of 2012. In addition, the number of companies that received venture capital investments rose from 39 in the first quarter of 2012 to
48 for the first three months of 2013. It remains to be seen if this situation is only temporary or rather marks a new trend.
While Québec represented 32% of all venture capital investments in Canada in 2011, its share was only 28% in 2012, despite a sharp rise
in investment activity in the fourth quarter of 2012. However, taking into consideration only the last six months of 2012, the Québec’s market
share was 37% of investments across the country. A total of 147 Québec-based companies received venture capital investments in 2012
(compared to 191 companies in 2011).
14
20
The information presented in this section only concerns the venture capital category and is therefore not representative of the Fonds’ overall development capital
investments. In addition, most of the information presented in this section covers the 2012 calendar year, which is different than the Fonds’ financial year.
In this context, it is clear that making Quebecers aware of savings and encouraging them to save, which is an integral part of the Fonds’
mission, remains at the center of our priorities, especially with regards to young people. On this point, we believe that the communication
strategy that we designed specifically for them as well as the involvement of our network of 2,077 LRs, our return, and the tax credits our
shares give rise to are all features that contributed, once again in 2012-2013, to the Fonds’ shares keeping their advantageous position
among all the retirement savings products available on the market.
Savers in Québec have the lowest savings intentions for 2013 in the country, with $5,477 on average and are also in last place for
RRSP contributions for the 2012 tax year, with $3,049 on average. Given these results, it seems evident that Quebecers should take
saving more seriously in the future and find a way to save even more.
This trend is confirmed by a BMO Financial Group survey, which showed that Canadians’ total savings should climb approximately $600
on average in 2013, to reach $9,859. But these additional amounts could well be invested somewhere other than an RRSP if the
decrease in the average amount contributed to an RRSP in Canada for the 2012 tax year compared to the prior year continues.
According to SOM’s survey, the TFSA is what could benefit from this: there are more holders of TFSAs than before, and they seem to
use them more as a retirement savings vehicle.
The Canada and Québec economies are currently experiencing rather weak growth, particularly due to reduced consumer spending,
and the outlook for the next few years are hardly more optimistic. According to some specialists, the reduction in consumer spending
would largely be the result of income stagnation and debt accumulation. In fact, debt rises faster than income: the level of Canadian
household debt jumped 11.4% in 2012, rising from 152% to 163.4% of personal disposable income. However, in theory, debt does not
seem to impact Canadians’ intentions to save. According to a SOM survey, more than 50% of individuals aged 35-64 say they are
saving more than they did 10 years ago.
THE SAVINGS MARKET AND RRSP
35
In 2012, the level of activity on the North American venture capital market varied from one region to the next. While funds invested dropped
10% in the United States, activity remained stable in Canada compared to 2011, with investments of $1.5 billion. Québec saw a decrease in
activity with $409 million of venture capital invested in 2012 compared to $486 million in 2011.
TRENDS IN THE VENTURE CAPITAL INDUSTRY 14
OUTLOOK AND TRENDS
ECONOMIC AND FINANCIAL OUTLOOK
15
21
The outlook presented in this MD&A reflects the Fonds’ expectations with respect to future events, based on information available to the Fonds as at June 27, 2013,
and presupposes certain risks, uncertainties and assumptions. Many factors, several of which are beyond our control, may cause the Fonds’ actual results,
performance, or achievements to differ materially from explicit or implicit expected future results, performance, or achievements.
The integrated risk management approach was also designed to improve risk governance, monitoring and reporting. To this end, the
Board of Directors of the Fonds adopted, in May 2012, the Integrated Risk Management Policy, a new policy that sets out the Fonds’
requirements in that regard while specifying the responsibilities of the main stakeholders involved. This new policy has been effective
since June 1, 2012 and continued to be implemented throughout the financial year.
During the year ended May 31, 2013, the risk management approach continued to evolve, after the Fonds undertook, a few years ago,
a process to implement an integrated risk management framework. The objective of this process was essentially to provide the Fonds’
management with an overall vision of all risks to ensure that they are managed in accordance with their degree of importance. The
production of an integrated risk profile allowed prioritizing the key financial and non-financial risks to which the Fonds is exposed, before
and after considering the effectiveness of the controls implemented to mitigate the Fonds’ exposure to these risks. A mitigation strategy
was developed for some of these risks, and action plans were set up and deployed. In addition, the Fonds produces on a quarterly
basis a risk scorecard. This scorecard, which is integrated into its corporate scorecard, allows management to monitor the evolution of
risks with respect to its business objectives and the organization's strategies.
The Fonds manages all its financial instruments in an integrated, comprehensive manner in accordance with the standards set out in
the Integrated Financial Assets Management Policy adopted by the Board of Directors. This policy covers both development capital
investments and other investments. It sets goals, guidelines and several limits so that the Fonds’ management can ensure that the
target return/risk profile is reached. The Fonds uses derivative financial instruments in particular to safeguard the value of its assets, to
facilitate the management of its portfolios, to modify its asset allocation without increasing or decreasing the amounts managed by
internal and external specialists and to improve its returns within allocated risk limits.
Notice to readers: The following paragraphs and the sections on market risk, credit and counterparty risk and liquidity risk form an
integral part of the financial statements on which an unmodified opinion was expressed in an independent auditors’ report dated
June 27, 2013.
Sound risk management practices are vital to the success of the Fonds de solidarité FTQ. We manage our risk within a framework
taking into account the nature of our activities and the risks we can reasonably assume considering the desired return/risk ratio and
shareholder expectations. To that end, we capitalize on a structured process to determine, measure and control the significant risks
with which we must contend.
RISK MANAGEMENT
However, and as noted previously, since the announcement of the phase-out of the 15% federal tax credit, the Fonds has undertook a
detailed analysis of the impact this could have on its business model, financial outlook and various short-, medium- and long-term
strategies.
With projected share issues higher than anticipated redemptions, the Fonds’ net assets should increase over the 2013-2014 financial year.
This being said, net cash inflows (shares issues less shares redemptions) could be lower than in the previous years, particularly because of
the anticipated increase in share redemptions, as previously mentioned in this report. Consequently, considering the current 60% rule level,
the volume of investments made by the Fonds will likely not exceed the average level of investments recorded in the last financial years.
While the Fonds is confident it will reach its return objective over a long period, the annual return depends on current economic conditions
and the ups and downs of the stock and financial markets. Therefore, the Fonds’ return over the 2013-2014 year will be greatly influenced
by stock market returns. The return for private securities is also linked to the general performance of the economy and may be lower than
their historic average returns, particularly because of an increase in the cost of credit, adverse impact of economic conditions, the volatility
of the Canadian dollar compared to the U.S. dollar and the effects of foreign competition. The Fonds is targeting a ratio of total operating
expenses to average net assets similar to the ratio achieved for the financial year ended May 31, 2013.
Based on current financial and economic outlooks, and given our mission and investment strategy, we are anticipating an average annual
return of 2.5% to 3%. This return does not take into account the tax credits granted to shareholders upon purchasing shares of the Fonds
and is subject to significant volatility on a six-month or annual basis.
FONDS OUTLOOK 15
Defining the Fonds’ risk tolerance for each risk category using a quantitative threshold or objective for financial risks and a
qualitative statement for risks that are more difficult to measure.
•
22
The Fonds performs sensitivity analyses and simulations to inform senior management of material levels of market risk exposure. It
uses derivative financial instruments to reduce its market risk exposure and safeguard the value of its assets. The following table
presents a sensitivity analysis for each of the three market risk categories to which the Fonds’ financial assets are exposed, namely
changes in interest rates, listed share prices and exchange rates. These analyses reflect the changes made to existing hedging levels
aimed at reducing the Fonds’ exposure to interest rate risk and currency risk.
For the portion of the bond portfolio that is internally managed, it had been agreed in April 2012 to eliminate hedges against an increase
in interest rates as rate markets would provide a window for action. During the financial year 2012-2013, the hedge level for this portion
of the portfolio gradually moved towards this objective. As at May 31, 2013, hedges against an increase in interest rates for this portion
of the portfolio had completely been eliminated (16.5% as at May 31, 2012).
A few years ago, in response to the significant appreciation of the Canadian dollar, the Fonds decided to gradually reduce from 100% to
50% the hedge of its sector-based shares portfolio against currency risk. The Fonds met this objective during the most recently ended
financial year. The sector-based shares hedging ratio was 50% as at May 31, 2013 compared to 52.5% as at May 31, 2012.
The Fonds’ financial assets are especially sensitive to listed share prices and fluctuations in bond interest rates (Canada bond rates and
credit spreads). The Fonds’ financial assets are also sensitive to exchange rate fluctuations, but since most of its transactions are in
Canadian dollars, the Fonds’ direct exposure to currency risk is relatively low. Furthermore, common hedging mechanisms such as
foreign currency forward contracts are generally used for other investments in a foreign currency.
The Fonds manages market risk by allocating its financial assets across several classes. In addition, it invests in various industries
(government and government agencies, financial institutions, technology, manufacturing and primary, services and tourism, regional or
local funds and real estate) and geographic areas, within the limits allowed by its Incorporation Act.
Market risk, which is inherent to the Fonds’ participation in financial markets, represents the risk of losses in value arising from
fluctuations in interest rates, exchange rates and prices of listed financial instruments. More specifically, this risk varies with the financial
markets’ conditions and certain parameters of these markets, such as volatility, that may lower the value of the Fonds’ financial assets
and thus have a negative impact on its Balance Sheet and Statement of Operations. Difficult economic or financial conditions may thus
have a negative impact on the value of the Fonds’ shares.
MARKET RISK
In the normal course of business, the Fonds is exposed to various risks; the principal ones are presented hereafter.
In addition, as the Fonds chose to manage its risks using the principle of subsidiarity, the Fonds’ business sectors have started to
review their procedures and processes to integrate the management of the risks identified in the Integrated Risk Management Policy
into the management of their operations. The review of processes has started in the Other Investments and Investments sectors and
will continue in the other sectors of the Fonds during the next financial year.
The qualitative and quantitative statements resulting from this process will be included in the Integrated Risk Management Policy and
will be reviewed annually. The results of such review will have to be approved by the Board of Directors of the Fonds.
Defining the level of risk that the Fonds is willing to accept in pursuing its strategic objectives, executing its business plan and
fulfilling its mission;
•
More specifically, the Fonds undertook in 2012-2013 a process to qualify and quantify its risk appetite and tolerance. The objectives of
this process are as follows:
36
(77)
77
215
(215)
(134)
134
May 31, 2012
23
The portion attributable to securities issued or guaranteed by the governments of Québec, Ontario or Canada represented 14.1% as at May 31, 2013 (12.7% as at
May 31, 2012).
**
19.7*
13.8**
19.5*
14.1**
The portion attributable to investments that do not constitute a significant concentration risk given the large number of investees represented 9.6% as at May 31,
2013 (9.7% as at May 31, 2012).
May 31, 2012
May 31, 2013
*
Weight of the five largest investments (Development capital investments)
Weight of the five largest issuers or counterparties (Other investments)
(fair value as a percentage of net assets)
EXPOSURE TO CREDIT AND COUNTERPARTY RISK
The Fonds maintains a sound diversification of its assets through the Integrated Financial Assets Management Policy. Compliance with
this policy therefore enables managing the concentration risk associated with the exposure to an issuer or group of issuers with
common characteristics (industries, credit ratings, etc.).
Credit risk is the potential for loss due to the failure of a partner company (financial instruments presented under Development capital
investments), issuer or counterparty in a transaction (financial instruments presented under Other investments) to honour its contractual
obligations or due to a degradation of its financial position. The Fonds manages this risk through several means, including a due
diligence process to ensure that the credit risk level is acceptable.
The Fonds’ exposure to credit risk stems mainly from its mission-driven development capital investments, which are generally
unsecured. Its other investment activities generally entail less of this risk since the counterparties concerned are typically more
financially solid (governments, banks, etc.).
CREDIT AND COUNTERPARTY RISK
The value of unlisted financial instruments in the development capital investments portfolio is established using approved and accepted
valuation techniques. These techniques are based on a set of assumptions that take into account market conditions such as exchange
rates, economic growth and credit spreads as at the valuation date. Since the assumptions used are highly interrelated, a sensitivity
analysis that isolates the impact of one of these variables on the unlisted securities portfolio is not considered to fairly represent the
sensitivity of the results. In addition, the fair value of certain financial instruments, in particular other investments and listed securities in
the development capital investments portfolio, is determined based on external information and, consequently, no other reasonably
possible assumption can be applied to the valuation techniques. Despite this, management assessed the situation for loans, bonds and
advances as well as for unlisted securities valued using the capitalization of cash flows method, and determined that using possible
alternative assumptions would not result in significantly different fair values.
This analysis is performed on bonds held by the Fonds presented under Other investments in the financial statements. In this analysis, the impact on results takes
into account the use of interest rate forward and futures contracts aimed at safeguarding assets.
** This analysis is performed on listed shares held by the Fonds presented under Development capital investments and Other investments in the financial
statements. In this analysis, the impact on results takes into account the use of stock index futures.
*** This analysis is performed on securities denominated in foreign currencies held by the Fonds presented under Development capital investments and Other
investments in the financial statements. In this analysis, the impact on results takes into account the use of foreign currency forward contracts.
*
(94)
94
253
(253)
Change in listed share prices**
10% increase in listed share prices
10% decrease in listed share prices
Change in exchange rates***
10% appreciation of the Canadian dollar
10% depreciation of the Canadian dollar
(179)
179
May 31, 2013
Change in bond interest rates*
1% increase in bond interest rates
1% decrease in bond interest rates
(in millions of dollars)
SENSITIVITY OF THE FONDS’ RESULTS TO MARKET RISK
May 31, 2012
4,562
334
23
4,919
May 31, 2013
4,982
293
24
5,299
Presented using the Standard and Poor’s rating scale.
May 31, 2012
342
801
796
211
4
2,154
May 31, 2013
444
705
973
264
2,386
16
24
Liquid financial assets are comprised of fixed-income securities (cash, bonds and money market securities), listed shares of the other investments portfolio and
certain listed shares of the development capital investments portfolio.
As at May 31, 2013, the ratio of liquid financial assets 16 as a percentage of assets under management was 53.8% (51.5% as at May 31,
2012), demonstrating, in management’s opinion, that the Fonds has the required liquidity to fulfill all its obligations and commitments,
even under potential scenarios that would be less favourable to it.
The Fonds’ Incorporation Act provides that part of the financial assets of the Fonds may be invested in marketable securities on
organized markets, such as stock and bond markets, so it can easily obtain cash. The Fonds also has access to bank credit facilities for
additional liquidities.
The Fonds must be able to obtain the liquidity required to meet its commitments. Liquidity risk is therefore related to the potential for
loss due to its inability to meet such commitments. In certain cases, securities acquired on the market can be subject to resale
restrictions, thus potentially reducing their liquidity.
The Fonds must make disbursements on a daily basis – when it redeems shares held by shareholders, disburses amounts it committed
to invest in partner companies, reimburses notes payable and pays expenses. It is worth noting that the Fonds is required to redeem
shares only in the circumstances set out in its Incorporation Act, or to purchase them by agreement in exceptional situations provided
under a policy adopted for such purpose by the Board of Directors and approved by the Minister of Finance of Québec.
LIQUIDITY RISK
*
AAA
AA
A
BBB
Other
(fair value in millions of dollars)
CLASSIFICATION OF BONDS INCLUDED IN THE OTHER INVESTMENTS PORTFOLIO*
For the other investments portfolio, issuer and counterparty ratings and compliance with exposure limits by borrower or counterparty
contribute to the sound management of the credit and counterparty risk of the portfolio and to the diversification of assets. These criteria
are set based on the risks specific to each asset class and reduce the risk that our results will be materially affected in the event of a
payment default. As at May 31, 2013, the weighted average credit rating of bonds was AA-, as it was as at May 31, 2012.
Compliant with internal criteria
Under watch
In turnaround
(fair value in millions of dollars)
CLASSIFICATION OF THE DEVELOPMENT CAPITAL INVESTMENTS PORTFOLIO
The Fonds regularly re-examines the status of its development capital investments to ensure that they are adequately classified in one of the
following three categories: compliant with internal criteria, under watch or in turnaround. To deal with the more difficult situations, an internal
committee closely monitors investments that entail greater credit risk.
For the development capital investments portfolio, the Fonds approves on an annual basis targets by industries, in keeping with its
internal structure. These targets are set using a risk allocation mechanism. It should be noted that the actual results may however differ
from the industry targets determined based on the investment opportunities on the market. Based on an optimal risk level defined by the
Fonds for this portfolio as a whole by taking into account its mission, the risk allocation mechanism facilitates a more effective
monitoring and control of the portfolio profile and sector allocation by risk level. The return/risk balance of this portfolio is achieved
through a sector-based risk allocation mechanism that takes into account the higher risk of our investments in certain sectors.
The summary of investment portfolio presented previously also discloses relevant information on the credit and counterparty risk
concentration level.
37
Competent, well-trained staff;
A succession management program;
A culture of integrity;
Segregation of incompatible duties;
Adoption of a concept of independence inspired by the securities regulations applicable to public companies;
Delegation of decision-making authority to Special Boards whose majority of members are external to the Fonds and the FTQ;
Monitoring of the development capital investment valuation process;
Implementation of a framework program of financial compliance;
Monitoring of technology development and information security;
A planning process for resumption of activities in the event of business interruption;
Continuous monitoring of changes in applicable legislation, regulations and standards, including the Fonds’ compliance therewith;
Risk identification and assessment when new products or activities are implemented.
25
Strategic risk, which includes competitive risk and risk associated with regulatory changes, refers to the possibility of incurring losses as a
result of ineffective strategies, lack of integrated business strategies or the inability to adapt the strategies to changes in the business
environment. This risk is managed through monitoring and strategic and operational planning processes that seek input from all levels of
the organization; the resulting plans are submitted to the Board of Directors for approval. The Management Committee periodically monitors
the business plans and strategic objectives of the Fonds and each sector. Any strategic decision or change to the Fonds’ already adopted
orientations that could have a material impact is authorized beforehand by the appropriate governing bodies, based on the powers
delegated to them.
The Fonds is also exposed to other risks such as strategic and reputation risks, which could result in negative financial consequences.
OTHER RISKS
During the financial year 2011-2012, the Fonds also undertook an analysis of the risk of fraud and misconduct to which it is exposed.
Although this risk was not assessed as high following this analysis, recommendations to improve its control environment have been
implemented by the Fonds during the most recently ended financial year and additional work will be performed in 2013-2014.
The codes provide for a whistleblowing procedure for cases of non-compliance with the code involving financial or accounting
information or illegal acts.
Codes of ethics and conduct define, among other things, the rules of conduct to be followed by employees, officers and directors to
avoid, for instance, conflict of interest situations. All employees or officers must, in the execution of their duties, put the interests of the
Fonds ahead of their own or those of third parties. They must also avoid placing themselves in a conflict of interest situation, either real,
potential or apparent. The codes of ethics and conduct prohibit, among others, certain personal trading deemed conflictual, including
receiving certain gifts and using any advantage, information or interest related to the Fonds that would be incompatible with the
professional duties and responsibilities of an employee. In addition, the codes forbid the disclosure by directors and employees, for
purposes other than the execution of their duties, of confidential information obtained through such execution. Each year, all employees
must complete a statement of interests held and a statement on the compliance of their conduct with the code.
•
•
•
•
•
•
•
•
•
•
•
•
Effective policies, standards and procedures are implemented to manage this risk. Control principles and mechanisms are monitored
and periodically revised with a view to continuous improvement. The Fonds’ operational risk management and the effectiveness of its
management framework are underpinned by the following guiding principles:
Inherent to all the Fonds’ activities, operational risk is the risk of sustaining losses as a result of the inadequacy or failure of certain processes
or systems in place or due to human factors or external events. This risk also includes legal risk.
OPERATIONAL RISK
26
Our risk governance structure is built upon a series of policies approved by the Board of Directors. The Fonds regularly reassesses
policies, standards, guidelines, and procedures to incorporate the best possible practices. It should be noted that the functions of
Chairman of the Board and President and CEO are separate.
The Management Committee, comprised of the President and CEO and executives, is responsible for the global management of the
Fonds de solidarité FTQ’s operations. Because risk governance is an essential part of integrated financial assets management, the
Fonds has put in place a management framework to ensure that risk management and control strategies and resulting operational
decisions take the established level of acceptable risk into account. An Integrated Risk Management Advisory Committee has also been
set up. The governance structure that supports the Fonds, in particular with respect to risk management, is as follows:
RISK GOVERNANCE
GOVERNANCE
Given the growing use of social media by the Fonds and its employees, the Fonds implemented a Social Media Policy during the financial
year 2011-2012. This policy governs the use of these tools to prevent any harm or damage to the image or the reputation of the Fonds
resulting from such use. All employees were trained following the implementation of this policy.
The application of this policy is monitored by a Disclosure Committee composed of members of the Fonds’ management. The main
responsibilities of this Committee are to set disclosure guidelines, to implement and keep up to date the Disclosure Policy and ensure it
is complied with, and to ensure that relevant and effective disclosure controls and procedures are in place. The Disclosure Committee
reports its activities to the Management Committee.
The Fonds implemented a Disclosure Policy concerning all financial and non-financial information issued and/or disclosed externally and the
information that is communicated internally to a large number of employees. The main objectives of this policy are to provide a disclosure
framework and standards, to ensure that information disclosed is rigorously prepared and validated, to make the Fonds’ employees aware of
disclosure principles, and to specify the roles and responsibilities of the main participants in the disclosure process.
Reputation risk is the risk that negative publicity, whether founded or unfounded, will cause losses, a decrease in liquidity or a decline in the
customer base. The Fonds controls and manages reputation risk through the following, among others: proper training, legal and financial due
diligence for all its capital development investments, sound governance practices, the application of policies and procedures, and ownership
of the codes of ethics and conduct by all officers and employees. The Fonds is a responsible corporate citizen that takes ethical, social and
environmental aspects into consideration when making investment decisions. We have also adopted a voting rights policy with regards to
public partner companies and a code of conduct for international business dealings. The Fonds also ensures that any financial information
released outside the organization is accurate and validated beforehand.
38
Ensuring the Fonds’ mission, Incorporation Act and any other law it is subject to are followed while adhering to its values of solidarity and
responsibility;
Approving the main directions, policies and business strategies of the Fonds, notably in regards to integrated financial assets management
and integrated risk management;
Ensuring there are controls over the Fonds’ management, including over risk management, and ensuring a culture of integrity;
Approving investment recommendations for which it is responsible and monitoring them;
Evaluating the Fonds’ performance on a regular basis.
27
The Audit Committee is comprised entirely of members who are external to the Fonds in accordance with Regulation 52-110
respecting Audit Committees, and its mandate includes: recommending the audited financial statements and MD&A for approval by
the Board of Directors; approving the principles for valuing development capital investments and receiving the Valuation
Committee’s report; enquiring about the effectiveness of internal controls implemented by management and the fact that they are not
overridden; enquiring about the compliance and risk management process for preparing the Fonds’ financial statements and provide
feedback; and receiving the Ethics Committee report and overseeing the application of the code of ethics for Board members. The
Committee also ensures the Fonds complies with the laws, regulations and agreements that govern its operations and that may
have a material financial impact. The Audit Committee reports its activities to the Board of Directors and makes recommendations to
it when necessary.
AUDIT COMMITTEE
Delegate Boards and Committees are responsible for decisions related to development capital investments and, in accordance with
Section 8 of its Incorporation Act, to the purchase by agreement of shares of the Fonds. These Delegate Boards and Committees
include the Executive Committee, the four Special Boards created for the Traditional, New Economy, Mining Portfolio and Turnaround
and Majority Interests sectors as well as the Purchase-by-Agreement Decision-Making Committee, which is responsible for approving
the purchase by agreement requests made by our shareholders. Each development capital investment of $5 million or more must be
authorized by the Board of Directors, or the Executive Committee if the Board of Directors is unable to meet in a timely fashion; in
addition, each of these investments must be recommended by the Special Board overseeing the corresponding activities. All
investments of less than $5 million are under the authority of the corresponding Special Board, except for the Mining Portfolio, whose
limit is $1 million. The four Special Boards are composed of a majority of members who are external to the Fonds and the FTQ, while
the Purchase-by-Agreement Decision-Making Committee is comprised of Fonds employees. The Executive Committee examines, at
least once every six-month period, management’s reports on integrated risk management. Using these reports, the Committee reports
to the Board of Directors, the Audit Committee and the Financial Assets Management Committee, as required. It also recommends
policies for integrated risk management that are proposed by management, as needed.
Members of the Board of Directors are nominated or elected according to the rules set out in the Fonds’ Incorporation Act. In carrying
out its mandate, the Board delegates part of its responsibilities.
•
•
•
•
•
The Board of Directors carries out the following duties:
BOARD OF DIRECTORS, DELEGATE BOARDS AND COMMITTEES
KEY GOVERNING BODIES
The Integrated Financial Assets Management Policy, which is under the Integrated Risk Management Policy, is a key piece of this
management framework. The policy sets out the target financial asset allocation allowing the Fonds to fulfill its mission while meeting
the desired return/risk ratio through sound diversification that helps mitigate the volatility of such return from a six-month period to the
next. This policy also provides objectives, guidelines, and limits within which our managers and specialists must perform their duties to
carry out their mandates. In fact, the Integrated Financial Assets Management Policy is composed of several policies covering general
principles, orientations, and the limits and guidelines applicable to various asset classes, including a separate policy applicable to the
Investments sector. The detailed guidelines and procedures covering the management of financial assets on an operational basis are
presented separately to facilitate their application.
17
28
Using fair value is a best practice recognized by venture capital firms and private equity funds. In short, fair value is defined as the price that would be received to sell
an asset in an orderly transaction between market participants at the measurement date.
Management is responsible for designing and maintaining adequate internal control over financial reporting and disclosure controls and
procedures. It must also periodically evaluate their design and effectiveness.
While not required to apply MI 52-109 issued by the Canadian Securities Administrators, the Fonds has decided to base its work upon the
principles stated in this rule, thereby demonstrating its willingness to respect best practices in financial governance. Our financial
compliance framework program commonly known as Confor applies to controls providing reasonable assurance that the financial
information prepared and reported is reliable and that the financial statements are prepared in accordance with Canadian generally
accepted accounting principles.
FINANCIAL GOVERNANCE
During the year, the Fonds’ valuation principles were updated to reflect the changes proposed in the International Private Equity and
Venture Capital Valuation (IPEV) Guidelines. The changes do not materially affect the Fonds’ valuation principles. The Audit Committee
approved these updated valuation principles in May 2013.
The management framework that governs the procedure for valuing development capital investments is set out in the Regulation
Respecting Development Investment Fund Continuous Disclosure. In particular, the Regulation specifies the minimum qualifications
required for specialized valuators employed by the Fonds as well as the governing body responsible for approving the valuation
principles used. The Regulation also requires that all relevant information about the valuations (excluding publicly traded issuers valued
using market prices) should be provided to an independent valuation committee. In addition, the President and CEO and the Chief
Financial Officer must sign a certification stating that the valuation procedure set out in the Regulation was complied with and confirming
the aggregate fair value of the development capital investments portfolio. This certification has been submitted to the Audit Committee
on a half-year basis since May 31, 2009.
Development capital investments and other investments are recorded on the balance sheet at their fair value 17. However, the majority of
the Fonds’ development capital investments are made in private companies or specialized funds for which a fair value must be
established because the securities issued by these companies or funds are not traded on organized, public markets. Specialized
valuators employed by the Fonds determine the fair value of these investments. These valuators report to the Executive Vice-President,
Finance and follow a structured process comprising several verification and validation steps to ensure the quality, uniformity and
integrity of the work performed and of the resulting fair value.
VALUATION FRAMEWORK
Composed of a majority of qualified valuators independent from the Fonds, the Valuation Committee is mandated to provide a
reasonable assurance that the procedure used for valuing the development capital investments portfolio complies with the procedure
set out in the Regulation Respecting Development Capital Investment Fund Continuous Disclosure. The Valuation Committee reports
on its review to the Audit Committee twice yearly.
VALUATION COMMITTEE
This committee is responsible for monitoring the implementation, compliance with and updating of the Integrated Financial Assets
Management Policy, including the Investment Policy and the policies applicable to the various asset classes of the Other
Investments sector. Its primary mandate is to ensure that asset management is coordinated and linked. In this capacity, it
recommends the overall vision and orientation for financial assets management to the Board of Directors. This committee also
monitors performance and changes in the return/risk ratio and ensures that the Fonds’ activities are in compliance with all its
financial assets management policies and that the Fonds has adequate and sufficient guidelines and procedures. The Financial
Assets Management Committee reports to the Board of Directors twice yearly on its activities and makes recommendations to it
when necessary.
FINANCIAL ASSETS MANAGEMENT COMMITTEE
In addition, an Ethics Committee composed of members of management support the Audit Committee in monitoring the application of
the Fonds’ codes of ethics and conduct.
The implementation process of an integrated risk management framework, that was launched a few years ago and led to the adoption by
the Board of Directors of the Integrated Risk Management Policy in May 2012 (see the “Risk Management” section), also had some effects
on the risk governance structure. The roles and responsibilities of the Fonds’ governing bodies, internal committees and main stakeholders
involved were specified in this policy. The Board of Directors of the Fonds thus reconfirmed its responsibility for integrated risk management
while delegating to the Executive Committee the monitoring of some work and their results in that respect. In addition to the governance
structure, the Integrated Risk Management Policy sets out the organization’s requirements with respect to the integrated management of all
types of risks, ensures that risk management is closely related to the “total” risk appetite and determines an approach whereby all
significant risks and their interrelations are considered in the development of the organization and the maintenance of the return/risk
balance. The Vice-President responsible for the integrated risk management framework reports directly to the President and CEO in
carrying out his duties, and he is supported by the Integrated Risk Management Advisory Committee.
39
29
Disclosure controls and procedures include the processes and mechanisms designed to provide reasonable assurance that financial
information for external purposes is recorded, processed, summarized and reported within the required time period for review and
approval by management and that it is disclosed externally within the time periods specified in the applicable regulations and legislation.
Management, under the supervision of the President and CEO and the Executive Vice-President, Finance, evaluated the design and
effectiveness of disclosure controls and procedures. Based on this evaluation, management concluded that, as at May 31, 2013,
disclosure controls and procedures were adequately designed and effective.
PROCEDURES
CONCLUSIONS ON THE DESIGN AND EFFECTIVENESS OF DISCLOSURE CONTROLS AND
Internal control over financial reporting comprises all the processes and controls in place, including policies and procedures, that govern
the maintenance of accounting records and the preparation of financial statements to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements in accordance with Canadian generally accepted accounting
principles. Management, under the supervision of the President and CEO and the Executive Vice-President, Finance, evaluated the
design and effectiveness of internal control over financial reporting. Based on this evaluation, management concluded that, as at
May 31, 2013, internal control over financial reporting was adequately designed and effective. However, because of its inherent
limitations, internal control over financial reporting may not prevent or detect certain misstatements on a timely basis. During the year ended
May 31, 2013, there was no change in the Fonds’ internal control over financial reporting that has materially affected, or is reasonably likely
to affect, the Fonds’ internal control over financial reporting.
FINANCIAL REPORTING
CONCLUSIONS ON THE DESIGN AND EFFECTIVENESS OF INTERNAL CONTROL OVER
MANAGEMENT’S REPORT ON INTERNAL CONTROLS
Management’s conclusions on the design and effectiveness of internal control over financial reporting and disclosure controls and
procedures are presented hereafter.
A certification was signed by the President and CEO and the Executive Vice-President, Finance for the financial year ended May 31,
2013, confirming their responsibility for this procedure. These certifications are available on SEDAR. A mechanism for sub-certification
by several Fonds executives and managers also supports these certifications.
During the year, the Fonds undertook the necessary work to evaluate the design and effectiveness of internal control over financial
reporting and disclosure controls and procedures using the COSO (Committee of Sponsoring Organizations of the Treadway
Commission) framework, and, for information technology controls, the COBIT (Control Objectives for Information and Related
Technology) framework, two recognized financial governance frameworks.
40
CPA auditor, CA, public accountancy permit No. A105976
------------------------
Montréal, June 27, 2013
1
2
CPA auditor, CA, public accountancy permit No. A125741
-----------------------
ended in accordance with Canadian generally accepted accounting principles.
travailleurs du Québec (F.T.Q.) as at May 31, 2013 and 2012 and the results of its operations and its cash flows for the years then
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fonds de solidarité des
Opinion
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
management, as well as evaluating the overall presentation of the financial statements.
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also
entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the
statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the
procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The
perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance
Auditors’ Responsibility
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
2
Yvon Bolduc, Director
On behalf of the Board of Directors,
Michel Arsenault, Director
The accompanying notes form an integral part of these financial statements.
Contingencies (Note 14)
Net assets per Class A share
Number of Class A shares outstanding (Note 13)
Net assets (Note 13)
27.98
332,441
9,301,300
26.59
320,629
8,524,688
3,913
1,248,891
1,864
816,434
428,544
1,133,664
735,199
Future income taxes (Note 17)
396,601
9,773,579
10,434,964
Accounts payable and other liabilities (Note 12)
93
61,076
13,789
656,836
4,123,020
4,918,765
2012
4,971
62,609
9,172
Notes (Note 10)
Liabilities
Income taxes
Capital assets (Note 9)
Cash
689,183
4,370,186
Accounts receivable and other assets (Note 8)
Other investments (Note 5)
Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian
generally accepted accounting principles, and for such internal control as management determines is necessary to enable the
5,298,843
2013
Development capital investments (Note 4)
Assets
(In thousands $, except net assets per share)
AS AT MAY 31
BALANCE SHEETS
Management's Responsibility for the Financial Statements
then ended, and a summary of significant accounting policies and other explanatory information.
the balance sheets as at May 31, 2013 and 2012, and the statements of operations, changes in net assets and cash flows for the years
We have audited the accompanying financial statements of the Fonds de solidarité des travailleurs du Québec (F.T.Q.), which comprise
To the Shareholders of the Fonds de solidarité des travailleurs du Québec (F.T.Q.)
INDEPENDENT AUDITORS’ REPORT
AS AT MAY 31, 2013 AND 2012
FINANCIAL STATEMENTS
41
1,41
325,734
Weighted average number of Class A shares
Earnings per Class A share
457,888
3
0.68
317,092
214,644
(2,000)
116,863
(1,460)
69,614
348,350
Net earnings
Transaction costs
252,597
76,483
(11,926)
9,981
78,428
80,006
(7,674)
11,197
76,483
Series 2
760
33
727
778
18
760
Subscribed
7,010,355
97,000
Transfers (Note 13)
Balance at end of year
(12,475)
(507,864)
757,066
6,676,628
7,509,247
95,000
4,751
(444,751)
843,892
7,010,355
Series 1
Share Capital – Class A (Note 13)
Change in outstanding redemptions
Share redemptions
Net change in share subscriptions
Change in unrealized appreciation or depreciation
49,249
Net earnings
Balance at beginning of year
Share issues
97,213
97,781
2012
Realized
109,538
Net investment income
27,489
125,270
Transfers (Note 13)
Share redemptions
Share issues
Net earnings
2013
(In thousands $)
FOR THE YEARS ENDED MAY 31
972,070
(3,007)
(77,253)
1,052,330
909,939
1,025
(63,156)
972,070
(Note 13)
Contributed
Surplus
STATEMENTS OF CHANGES IN NET ASSETS
Gains (losses) on development capital investments and other investments
16,500
126,038
122,148
129,859
Income taxes (Note 17)
Net investment income before income taxes
4,974
45,923
32,588
5,630
49,386
Shareholder Services and Economic Training development and administration expenses
Amortization of property and equipment and information systems development
32,229
Development capital investment and other investment expenses
38,663
247,418
255,897
42,614
72,614
174,804
2012
98,348
157,549
2013
Corporate expenses
Expenses (Note 16)
Dividends
Interest (Note 15)
Revenues
(In thousands $, except earnings per share)
STATEMENTS OF OPERATIONS
465,020
(97,000)
555
(22,877)
214,644
369,698
801,330
(95,000)
53
(26,631)
457,888
465,020
Retained
Earnings
4
8,524,688
-
(14,927)
(619,920)
33
767,047
214,644
8,177,811
9,301,300
-
5,829
(542,212)
18
855,089
457,888
8,524,688
Net Assets
42
170,623
111,898
209,178
(534,912)
271,393
Shares redeemed
Cash flows from operating activities include income taxes paid of $25.5 million (2012: $26.1 million).
9,172
13,789
Cash at end of year
(4,617)
Cash at beginning of year
5
13,789
6,372
7,417
(372,384)
(387,908)
2,250
(2,629)
-
(3,335)
8,046,753
(8,067,744)
670,847
(1,018,526)
767,080
(2,282)
Increase (decrease) in cash
Information systems development
Proceeds of disposal of property and equipment
(2,063)
6,055,038
Acquisition of property and equipment
(6,222,907)
Proceeds of disposal of other investments
577,208
Proceeds of disposal of development capital investments
Acquisition of other investments
(792,902)
Acquisition of development capital investments
Investing activities
(620,177)
855,107
Shares issued and subscribed
(201,631)
139,038
(187,840)
Repayment of notes
263,906
(1,972)
(1,498)
975
(1,263)
459,490
(403,672)
615
4,974
16,766
(3,071)
97,781
2012
Issuance of notes
Financing activities
Transaction costs
(2,156)
Accounts payable and other liabilities
(4,878)
Accounts receivable and other assets
Other
37,616
(44,839)
Future income taxes
Income taxes
5,630
(2,049)
Amortization of property and equipment and information systems development
(2,325)
16,859
Interest capitalized on notes
109,538
2013
Interest capitalized on development capital investments
Non-cash items and change in non-cash items
Net investment income
Operating activities
(In thousands $)
STATEMENTS OF CASH FLOWS
Financial assets classified as loans and receivables comprise Accounts receivable and other assets, excluding securities purchased
under reverse repurchase agreements and financial instruments related to securities sold under repurchase agreements. Financial
liabilities classified as other liabilities comprise Notes and Accounts payable and other liabilities, excluding securities sold under
repurchase agreements and derivative financial instruments. These instruments are recognized at amortized cost, which approximates
their fair value.
Financial instruments are recognized at fair value on the transaction date. The cost presented corresponds to the amount paid and is
determined based on average cost, excluding transaction costs.
RECOGNITION OF FINANCIAL INSTRUMENTS
The preparation of financial statements in accordance with Canadian GAAP requires management to make estimates and assumptions,
in particular when determining allowances and the fair value of development capital investments and other investments, that affect the
reported amounts in the financial statements. Actual results could differ from those estimates.
USE OF ESTIMATES
A Statement of Comprehensive Income is not provided as there are no items to include therein.
therein.
The Fonds is an investment company as defined in the Accounting Guideline on investment companies contained in the Canadian
Institute of Chartered Accountants (“CICA”) Handbook and, as such, applies the generally accepted accounting principles (“GAAP”) stated
2. SIGNIFICANT ACCOUNTING POLICIES
Since the minimum percentage prescribed by the 60% rule has been reached as at May 31, 2013, the amount of share issues will not be
limited for the 2013-2014 financial year.
The percentage of average qualified development capital investments to the average net assets of the preceding year was 66.0% as at
May 31, 2013 (2012: 67.0%).
If the Fonds fails to reach this percentage, the share issues giving rise to tax credits for the following financial year are limited to a
prescribed percentage of the total value of shares issued in the preceding financial year, except for shares acquired through payroll
deductions and employer contributions stipulated in agreements concluded at the end of the preceding financial year.
The Fonds may make development capital investments in any business enterprise with or without security. However, in any given
financial year, the proportion of unsecured development capital investments made in qualified business enterprises must represent an
average of at least 60% of the Fonds’ average net assets of the previous financial year.
60% RULE
To this end, the Fonds endeavours to concentrate most of its development capital investments in unsecured investments, mainly in
small and medium-sized enterprises (“SMEs”), located in Québec. As a general rule, the Fonds will take a minority interest in the
projects in which it invests.
d) to promote the development of qualified business enterprises by inviting workers to participate in that development by purchasing
the Fonds’ shares.
c) to stimulate the Québec economy by making strategic investments that will be of benefit to Québec workers and business
enterprises;
b) to promote the training of workers in economic matters to enable them to increase their influence on Québec’s economic
development;
a) to invest in Québec business enterprises and provide them with services in order to create, maintain or protect jobs;
The Fonds de solidarité des travailleurs du Québec (F.T.Q.) (the “Fonds”), incorporated by an Act of the Québec National Assembly, is a
joint-stock company with the following objectives:
STATUTES AND OBJECTIVES OF THE FONDS
1. INCORPORATION ACT
As at May 31, 2013 and 2012
NOTES TO FINANCIAL STATEMENTS
43
33.3
25.0
straight-line
straight-line
2.5
20.0
diminishing balance
straight-line
Rates (%)
Capital assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be
recoverable. An impairment loss is recorded when their carrying amount exceeds the undiscounted cash flows that would result from
their use and eventual disposition. The recognized impairment loss is measured as the amount by which the carrying amount of the
asset exceeds its fair value.
Computer hardware
Office furniture and equipment
Buildings
Property and equipment
Methods
Capital assets are stated at cost and are amortized over their estimated useful life using the following methods and annual rates:
CAPITAL ASSETS
program are recorded under Interest in the Statement of Operations.
price determined by the commitment which approximates their fair value. The revenues resulting from the Fonds’ participation in this
are recorded on the balance sheet at their fair value, while repurchase agreements are recorded on the balance sheet at the repurchase
agreements and repurchase agreements are recognized as secured lending and borrowing transactions. Reverse repurchase agreements
and sales of securities with a simultaneous commitment to resell and repurchase them at a specified price and date. Reverse repurchase
which it is the custodian. Under this program, the Fonds can enter into securities lending transactions, as well as short-term purchases
To generate additional revenues, the Fonds participates in the securities lending program put in place by its trustee for securities of
AGREEMENTS
SECURITIES LENDING, SECURITIES PURCHASED UNDER REVERSE REPURCHASE AGREEMENTS AND SECURITIES SOLD UNDER REPURCHASE
Listed derivative financial instruments are measured at bid price at the close of trading at balance sheet date. Unlisted derivative
financial instruments are measured using appropriate valuation techniques, including discounting future cash flows at the current
rate of return.
c) Derivative financial instruments
Listed financial instruments consist of shares, bonds and money market instruments. These instruments are measured at bid price
at the close of trading at balance sheet date. In exceptional instances, when the market for a financial instrument is not active, such
instrument is then measured using appropriate valuation techniques, including the techniques used for unlisted financial
instruments.
b) Listed financial instruments
Hedge fund units are measured at the fair value set by their respective manager at the date closest to the Fonds’ balance sheet
date.
The fair value is established based on reasonable assumptions that would be considered by parties to an arm’s length transaction.
Certain assumptions may have a material impact on fair value, including those used to determine characteristic cash flows and the
level of risk and future growth rate associated with such cash flows considering economic conditions, the outlook for the relevant
industry segment and conditions specific to the business entreprise.
These instruments are measured at fair value using appropriate valuation techniques and models that may not be principally based
on observable market information. Observable market information is used in valuation models if it is available.
Unlisted financial instruments consist of shares, units and loans and advances.
a) Unlisted financial instruments
All development capital investments and other investments are measured at fair value, established as follows:
MEASUREMENT OF FINANCIAL INSTRUMENTS
FUTURE CHANGES IN ACCOUNTING POLICIES
Fonds’ IFRS transition date is June 1, 2013. The Fonds is currently evaluating the impact of this transition.
conversion plan and will present its first interim financial statements prepared in accordance with IFRS as at November 30, 2014. The
time to interim and annual financial statements for the years beginning on or after January 1, 2014. The Fonds complies with its
companies, as defined in the Accounting Guideline on investment companies of the CICA Handbook, will have to apply IFRS for the first
beginning on or after January 1, 2011, for publicly accountable enterprises. In December 2011, the AcSB confirmed that investment
In 2008, the Accounting Standards Board of Canada (“AcSB”) confirmed that Canadian GAAP will be replaced by IFRS for the years
INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRS”)
3.
Net actuarial gains or losses which are greater than 10% of the accrued benefit obligation or the fair value of the plan assets, whichever
is higher, are amortized over the average remaining service period of active employees. The average remaining service period of
covered active employees is between 9.5 and 11.7 years (2012: between 8.5 and 12.1 years).
For the purposes of calculating the expected return on plan assets, those assets are valued at fair value.
The cost of pensions and other retirement benefits earned by managers and employees is actuarially determined using the projected
benefit method prorated on service and management’s best estimate of expected return on plan assets, salary escalation and
retirement ages of employees.
EMPLOYEE FUTURE BENEFITS
Monetary assets and liabilities and assets and liabilities measured at fair value are translated into Canadian dollars at the exchange rate
prevailing at the balance sheet date. Revenues and expenses denominated in foreign currencies are translated at the exchange rate
prevailing at the transaction date. Foreign exchange gains and losses are recognized in the Statement of Operations.
FOREIGN CURRENCY TRANSLATION
The Fonds uses the asset and liability method of accounting for income taxes. Under this method, future income taxes are recognized
based on the expected future tax consequences of differences between the carrying amounts of balance sheet items and their tax
bases, multiplied by the enacted or substantively enacted income tax rates for the years in which the differences are expected to
reverse. Future income tax assets are recognized to the extent that it is more likely than not that they will be realized.
INCOME TAXES
Realized gains and losses on disposals of development capital investments and other investments, including derivative financial
instruments, are recorded at the time of sale and presented under Gains (losses) on development capital investments and other
investments in the Statement of Operations. The amount is the difference between the proceeds of disposal and the average cost.
c) Gains and losses on development capital investments and other investments
Dividends are recorded as income when they are declared, except for cumulative dividends which are recorded on an accrual basis.
b) Dividends
Interest is recorded on an accrual basis.
a) Interest
REVENUE RECOGNITION
(continued)
As at May 31, 2013 and 2012
As at May 31, 2013 and 2012
(continued)
44
(1,114)
459,145
4,839,698
(1,362)
353,550
108,071
(depreciation)
11,590
1,612,955
2,454,011
761,142
Cost
5,298,843
10,476
1,611,593
2,807,561
869,213
Fair value
4,669,629
29,173
1,592,344
2,381,376
666,736
Cost
249,136
(3,871)
(24,144)
231,649
45,502
(depreciation)
appreciation
Unrealized
413
5.0
Secured
Average effective rate (%)
14.4
7,429
2.81
362,866
2.11
342,346
1 year
Less than
8.1
150
8.5
335,348
6.9
6,009
7.8
628,564
1 to
5 years
Fixed rates
11.6
17,310
7.3
765,852
16.5
4,467
6.9
539,998
more
5 years and
25,302
1,568,200
10,476
1,611,593
1. This average rate includes non-interest bearing advances repayable on demand of $268.9 million (2012: $294.2 million) to a wholly-owned
company. Excluding these advances, the average effective rate would be 8.4% (2012: 12.0%).
9.1
104,134
9.0
100,685
Unsecured
2012
Secured
Unsecured
2013
(In thousands $)
Variable rates
BREAKDOWN BY MATURITY OF LOANS, BONDS AND ADVANCES AT FAIR VALUE
Investment agreements may include clauses providing for conversion and redemption options.
Total
4,918,765
25,302
1,568,200
2,613,025
712,238
Fair value
Development capital investments include securities denominated in foreign currencies, mainly the U.S. dollar, with a fair value of
$286.8 million (2012: $283.7 million).
Loans and advances
Secured
Loans, bonds and advances
Unlisted shares and units
Listed shares
Unsecured
(In thousands $)
appreciation
Unrealized
697,631
Fair value
698,446
Fair value
the regional or local funds
78,430
85,302
907,191
72,141
(185,455)
5,756,796
16,229
821,802
-
4,918,765
249,136
4,669,629
6,144,343
7,814
837,686
-
5,298,843
459,145
4,839,698
Total
16,229
7,814
As well, in the normal course of business, the Fonds enters into various indemnification agreements, usually related to sales of
development capital investments, for the representations and warrantees made as well as to the liability of the Fonds’ directors, officers
or representatives toward partner companies. The latter liability is covered, subject to certain conditions, by liability insurance. Due to
the nature of these agreements, it is impossible to reasonably estimate the maximum amount that the Fonds may have to pay to
counterparties. In management’s opinion, it is highly unlikely that these commitments will result in material additional expenses, taking
into consideration the provisions recorded.
As at May 31, 2013, there is no allowance related to guarantees and suretyships (2012: $4.5 million presented under Accounts payable
and other liabilities).
8,398
7,831
2012
-
7,814
Operating activities and operating lines of credit - without recourse
Operating activities and operating lines of credit - with recourse
2013
(In thousands $)
The Fonds granted guarantees and suretyships that do not generally include a specific maturity and that are irrevocable commitments
by the Fonds to make the payments of partner companies that cannot meet their obligations to third parties for an undiscounted total
maximum amount and for the following purposes:
GUARANTEES AND SURETYSHIPS
Under Section 17 of its Incorporation Act, when the Fonds makes a development capital investment in the form of a guarantee or a suretyship,
it must establish and maintain a reserve equal to at least 50% of the guarantee or suretyship amount for the term thereof. This reserve is
established from Other investments.
2,377,299
9,331
215,802
1,020,505
201,805
818,700
920,814
58,666
(196,165)
1,058,313
226,204
832,109
funds
and real estate
2.
1,336,512
6,898
118,234
2,066,864
241,706
1,825,158
2,591,741
7,814
181,116
90,422
2,312,389
340,696
1,971,693
tourism
Regional or local
Funds committed but not disbursed represent development capital investments that have already been agreed to and for which amounts have
been committed by the Fonds but have not been disbursed at balance sheet date. Disbursements are subject to compliance with the
agreement’s terms and conditions. Of funds committed but not disbursed, an amount of $171.8 million (2012: $248.1 million) represents
credit facilities and project financing for operating companies, having a weighted average maturity of 18 months (2012: 15 months); and an
amount of $665.9 million (2012: $573.7 million) represents commitments that will be disbursed to specialized funds in tranches, having a
weighted average maturity of 8.1 years (2012: 9.3 years). Commitments amounting to $103.6 million (2012: $89.9 million) are denominated
in foreign currencies, mainly the U.S. dollar.
1,135,794
415,625
1,132,950
(17,855)
1,150,805
1,502,185
191,491
80,184
1,230,510
26,567
1,203,943
and primary
Services and
1.
Guarantees and suretyships2
Funds committed but not disbursed1
21,723
(176,520)
Unrealized appreciation (depreciation)
Allocation of investments made by
874,966
1,129,603
406,413
Cost
2012
Guarantees and suretyships2
Funds committed but not
disbursed1
the regional or local funds
25,559
(134,322)
Unrealized appreciation (depreciation)
Allocation of investments made by
831,953
Technology
Cost
2013
(In thousands $)
Manufacturing
BREAKDOWN BY INDUSTRY SEGMENT
The audited Statement of Development Capital Investments, at Cost, is available at the Fonds’ head office, on its Website at
www.fondsftq.com or at www.sedar.com.
2012
4. DEVELOPMENT CAPITAL INVESTMENTS
4. DEVELOPMENT CAPITAL INVESTMENTS
2013
As at May 31, 2013 and 2012
As at May 31, 2013 and 2012
(continued)
45
247,293
4,663
849
1
130,693
848
4,235,012
4,481
4,370,186
2,989
133,682
1,492
4,236,504
4,365,705
2,385,802
60,097
2,325,705
242,630
1,731,761
65,932
1,665,829
Fair value
appreciation
Cost
4,086,000
43
4,085,957
207,346
2,032,824
238,510
1,607,277
Cost
37,020
6,437
30,583
129
120,890
2,540
(92,976)
(depreciation)
appreciation
4,123,020
6,480
4,116,540
207,475
2,153,714
241,050
1,514,301
Fair value
Fair value
2012
Fair value
2013
(In thousands $)
Money market instruments
Average nominal rate (%)
3.1
2.0
205,856
Par value
Cost
206,858
209,031
4.0
Fair value
2012
Average nominal rate (%)
2.1
82,972
Par value
Cost
84,080
84,714
1 year
Less than
Fair value
2013
(In thousands $)
Bonds
BREAKDOWN BY MATURITY
3.9
2.7
674,956
696,094
699,972
3.2
2.2
712,346
733,505
738,618
1 to
5 years
4.4
3.8
516,919
538,235
575,566
4.0
3.2
724,150
764,198
781,930
5 to
10 years
5.8
4.4
167,872
196,441
221,241
6.0
3.9
236,004
296,973
309,429
10 to
20 years
1.0
56,991
90
1.0
1 month
Less than
5.2
4.5
306,258
338,660
395,104
5.1
4.1
293,689
336,942
359,974
20 to
30 years
1.1
150,484
1.0
759
1 to 6
months
3.1
3.0
53,559
54,363
54,973
4.3
3.8
103,369
109,373
111,771
30 years
and more
1.1
207,475
1.0
849
Total
4.3
3.4
1,925,420
2,032,824
2,153,714
4.1
3.1
2,152,530
2,325,705
2,385,802
Total
Other investments include securities denominated in foreign currencies with a fair value of $1,520.9 million (2012: $1,338.5 million),
mainly including $909.8 million (2012: $825.9 million) in U.S. dollars, $199.5 million (2012: $153.2 million) in Euros and
$180.0 million (2012: $170.0 million) in pounds sterling.
Derivative financial instruments
Bonds
Hedge fund units
Listed shares and unlisted units
(In thousands $)
Unrealized
Unrealized
1,633
Written call options
Stock index futures
Interest rate forward contracts
124,603
25,612
931,659
Sales
Interest rate futures
630,656
Purchases
Foreign currency forward contracts
Written put options
1,550
Purchased put options
159,738
67,646
639,582
77,298
9,367
12,636
7,925
1,357,638
31,500
Written put options
Listed stock index option contracts
18,900
11,724
(1,577)
810
(14,481)
-
(2,327)
750
6 months
and more
-
896
-
(1)
(67)
(93)
(179)
254
1 to 6
months
-
-
150
(14,573)
(60)
2
1 month
Less than
Unlisted shares option contracts
Notional amount
Stock index futures
Sales
Purchases
Written put options
Written put options
Unlisted shares option contracts
Fair value1
2013
(In thousand $)
BREAKDOWN BY MATURITY (continued)
The unaudited Statement of Other Investments is available at the Fonds’ head office, on its Website at www.fondsftq.com or at
www.sedar.com.
2012
5. OTHER INVESTMENTS
2013
As at May 31, 2013 and 2012
As at May 31, 2013 and 2012
(continued)
132,528
159,738
1,450,896
1,571,241
707,954
9,367
14,269
13,274
31,500
18,900
(15,248)
-
896
-
149
(14,640)
(93)
(239)
256
(2,327)
750
Total
46
3,494
147,743
359,854
114,215
547,637
25,000
(3,774)
(3,774)
and more
6 months
25,000
3,494
507,597
125,397
1,429,485
578,866
9,012
2,693
(30,660)
(3,774)
-
(5,130)
-
(22,036)
245
(45)
80
Total
1. The fair value of instruments with positive values is $4.5 million (2012: $6.4 million) and is presented under Other investments. The fair value
of those with negative values is $19.7 million (2012: $37.1 million) and is presented under Accounts payable and other liabilities.
Over-the-counter interest rate swaps
Stock index futures
11,182
881,848
Sales
568,341
Purchases
10,525
9,012
2,693
(4,877)
(4,884)
-
(36)
(22,009)
-
(246)
-
(22,000)
8
Notional amount
Over-the-counter interest rate swaps
Stock index futures
Sales
Purchases
(45)
months
1 to 6
80
237
1 month
Less than
Fair value1
2012
(In thousands $)
Derivative financial instruments (continued)
BREAKDOWN BY MATURITY (continued)
551,055
Services and tourism
207,475
4,142,864
2,153,714
1,781,675
4,116,540
667,931
1,047,328
342,384
644,376
1,414,521
26,324
207,475
39,804
19,957
35,243
112,471
26,324
2,153,714
116,876
105,998
98,970
529,820
1,302,050
Level 3: Fair value based on valuation techniques for which all significant inputs are not based on observable market information.
Level 2: Fair value based on quoted prices for similar financial instruments or based on valuation techniques for which all significant
inputs are based on observable market information.
Level 1: Fair value based on quoted market prices (unadjusted) observed on active markets for identical financial instruments.
Financial instruments measured at fair value are classified using a hierarchy that reflects the significance of the inputs used in making
the measurements. This hierarchy has the following levels:
6. FAIR VALUE HIERARCHY
2. Funds committed but not disbursed to international infrastructure funds represent other investments that have already been agreed to and for
which amounts have been committed by the Fonds but have not been disbursed at balance sheet date. Disbursements are subject to
compliance with the agreement’s terms and conditions. These commitments, having a weighted average maturity of 7.4 years
(2012: 9.1 years), are denominated in U.S. dollars.
1. This breakdown does not take into account changes in asset allocation resulting from derivative financial instruments.
Funds committed but not disbursed²
1,755,351
901,526
Manufacturing and primary
Fair value
223,457
79,313
16,903
849
4,365,705
714,504
1,110,126
368,499
574,890
1,597,686
Total
4,382,608
2,385,802
849
849
instruments
Money market
1,995,957
2,385,802
135,429
84,778
96,838
471,920
1,596,837
Bonds
16,903
1,979,054
579,075
Technology
Financial institutions
Government and government agencies
2012
Funds committed but not disbursed²
Fair value
Services and tourism
1,025,348
271,661
Technology
Manufacturing and primary
102,970
hedge fund units
Listed shares,
Financial institutions
Government and government agencies
2013
(In thousands $)
BREAKDOWN OF FAIR VALUE BY INDUSTRY SEGMENT1
unlisted units and
(continued)
As at May 31, 2013 and 2012
As at May 31, 2013 and 2012
(continued)
47
Securities sold under repurchase agreements
Cash
agreements
Securities purchased under reverse repurchase
under repurchase agreements
Financial instruments related to securities sold
Bonds
Hedge fund units
Other investments
Loans and advances
Secured
Listed shares
Unsecured
2012
Cash
agreements
Securities purchased under reverse repurchase
under repurchase agreements
Financial instruments related to securities sold
Bonds
Hedge fund units
Other investments
Loans and advances
Secured
Listed shares
Unsecured
2013
(In thousands $)
2,831,283
2,139,931
2,794,188
2,153,675
(456,950)
(37,095)
325,443
(45)
13,789
2,358,784
1,436,799
131,507
6,400
207,475
2,144,909
472,499
463,393
9,106
80
1,436,719
703,132
703,132
2,802,350
2,552,247
(422,942)
(19,397)
274,123
(332)
9,172
2,821,747
2,543,407
148,819
4,225
2,380,140
256
849
2,375,066
441,607
441,224
383
2
1,674,577
1,674,321
868,830
868,830
1
4,070,571
4,070,571
327,437
8,805
77,582
241,050
3,743,134
25,302
1,104,807
2,613,025
-
4,303,875
4,303,875
315,469
10,736
247,293
57,440
3,988,406
10,476
1,170,369
2,807,561
-
3
247,293
9,172
241,050
13,789
15
9,018,434
(456,950)
(37,140)
325,443
131,507
9,041,785
4,123,020
6,480
207,475
2,153,714
1,514,301
4,918,765
25,302
1,568,200
2,613,025
712,238
9,658,472
(422,942)
(19,729)
274,123
148,819
9,669,029
4,370,186
4,481
849
2,385,802
1,731,761
5,298,843
10,476
1,611,593
2,807,561
869,213
Total
data.
-
-
(539)
-
8,052
(7,513)
-
-
112,411
2,613,025
(307,518)
596,940
185,621
40,148
2,097,834
84,197
(872)
1,104,807
(148,040)
240,387
25,866
(11,165)
997,759
(1,899)
1,170,369
15,0001
(131,260)
182,886
6,146
(7,210)
1,104,807
Unsecured
(459)
25,302
(60,977)
25,729
30,503
(1,114)
31,161
604
10,476
(21,721)
6,500
2,755
(2,360)
25,302
Secured
111,080
3,743,134
(517,074)
863,056
20,356
250,042
3,126,754
82,902
3,988,406
15,000
(337,551)
471,313
(34,293)
130,803
3,743,134
Total
16
1. An unsecured debenture has been transferred from Level 2 to Level 3 since its measurement method is no longer based on observable market
May 31, 2012
of development capital investments held as at
Fair value as at May 31, 2012
Sales and settlements
Purchases
2012
May 31, 2013
of development capital investments held as at
2,807,561
Transfer to Level 3
281,927
(184,570)
Purchases
(24,723)
2,613,025
units
121,902
-
-
Listed shares
Unlisted
shares and
Realized losses
2013
(In thousands $)
DEVELOPMENT CAPITAL INVESTMENTS
The following table shows the reconciliation from beginning balances to ending balances for Level 3 fair values.
(CONTINUED)
Level
As at May 31, 2013 and 2012
As at May 31, 2013 and 2012
(continued)
48
114,819
10,148
241,050
(102,259)
(462)
8,805
(2,699)
2,138
(2,376)
11,742
1,935
10,736
(7)
1,938
-
8,805
Bonds
16,743
327,437
(113,567)
117,211
25,349
(6,479)
304,923
4,265
315,469
(84,675)
69,245
707
2,755
327,437
Total
656,836
689,183
17
37,172
325,443
131,507
73,315
89,399
2012
35,223
274,123
Securities purchased under reverse repurchase agreements
Other
148,819
71,597
159,421
2013
Financial instruments related to securities sold under repurchase agreements
Accrued dividends and interest
investments sold
Accounts receivable relating to development capital investments and other
(In thousands $)
8. ACCOUNTS RECEIVABLE AND OTHER ASSETS
As part of the securities lending program, the trustee receives, in exchange for the securities loaned, guarantees or assets equivalent to
the minimum percentage prescribed by any applicable law or agreement or to a percentage that may vary according to best practices.
Depending on the securities loaned, this percentage is 102% as at May 31, 2013 (2012: ranges from 102% to 106%), and the fair value
of the securities loaned is $84 million (2012: $133 million).
7. SECURITIES LENDING
possible assumption could be used.
units classified as Level 3 is based on the value provided by the general partner or the external manager. Therefore no other reasonably
Since the Fonds does not have access to information on the underlying investments, the fair value of hedge fund units and of certain
situation and determined that using reasonably possible alternative assumptions would not result in significantly different fair values.
fair values. Whenever possible, a sensitivity analysis of changes in significant assumptions is performed. Management assessed the
believes that its fair value measurements are appropriate, using reasonably possible alternative assumptions could result in different
outputs depend on significant assumptions that are based on data that are not observable on the market. Even though management
All Level 3 financial instruments, except for certain units, are measured at fair value using valuation techniques and models whose
other investments held as at May 31, 2012
7,057
77,582
Change in unrealized appreciation or depreciation of
2,392
(8,609)
Purchases
16,154
7,057
216,439
5,685
247,293
(67,615)
68,290
2,124
3,444
241,050
(4,103)
76,742
units
Hedge fund
Realized losses
2012
other investments held as at May 31, 2013
(3,355)
57,440
Change in unrealized appreciation or depreciation of
(17,053)
955
(3,355)
(689)
77,582
unlisted units
Purchases
2013
(In thousands $)
Listed shares and
60,745
14,303
20,283
123,354
Computer hardware
55,478
12,966
17,928
116,554
Computer hardware
NOTES
8,353
61,076
3,431
4,613
2,496
50,536
62,609
4,594
4,315
2,599
51,101
amount
Net carrying
2012
Class A shares, Series 1 and 2 can be exchanged for shares of another series and rank pari passu. However, Class A shares, Series 1
may be issued only to an individual requesting their transfer to a trustee under a registered retirement savings plan.
18
89,290
816,434
76,833
735,199
456,950
28,072
37,140
204,982
Unlimited number of Class A shares to be issued in Series 1 and 2, without par value, voting, redeemable and inalienable unless
approved by a resolution of the Board of Directors.
CLASS A SHARES
Authorized
SHARE CAPITAL
13. NET ASSETS
Accrued expenses and other
422,942
29,833
Share redemptions
19,729
185,862
2013
and other investments purchased
Accounts payable relating to development capital investments
(In thousands $)
12. ACCOUNTS PAYABLE AND OTHER LIABILITIES
As at May 31, 2013 and 2012, the Fonds has credit facilities amounting to $80 million, bearing interest at prime rate and renewable
annually. As at May 31, 2013 and 2012, these facilities are unused.
11. CREDIT FACILITIES
Notes are repayable on demand and bear interest at a rate based on the rate of return of Other investments. Consequently, the fair
value of these notes arising from excess liquidities of regional and local funds and of certain specialized funds corresponds to their
carrying amount. As at May 31, 2013 and 2012, the interest rate is 4%.
10.
1. The net carrying amount of the portion of building that is leased out is $21.2 million (2012: $20.6 million).
14,497
17,945
15,449
67,715
17,179
9,988
Buildings1
2012
15,689
18,659
16,060
70,109
19,008
amortization
Accumulated
Cost
Buildings1
2013
(In thousands $)
9. CAPITAL ASSETS
OTHER INVESTMENTS
As at May 31, 2013 and 2012
As at May 31, 2013 and 2012
(CONTINUED)
49
14. CONTINGENCIES
13. NET ASSETS
– CLASS A
Net assets at end of year
Share redemptions
Share issues
Net earnings
Net assets at beginning of year
2012
Net assets at end of year
Share redemptions
Share issues
Net earnings
Net assets at beginning of year
2013
(In thousands)
NET ASSETS
235
317,218
(555)
(23,393)
29,225
311,941
328,951
(19,837)
31,335
317,218
Number
5,829
8,433,242
(14,927)
(605,970)
757,066
212,353
8,084,720
9,202,881
(533,097)
843,892
453,015
$
8,433,242
Series 1
3,411
(538)
386
3,563
3,490
(339)
418
3,411
Number
Series 2
90,686
(13,950)
9,981
2,291
92,364
97,641
(9,115)
11,197
4,873
90,686
$
760
33
727
778
18
760
$
Subscribed
8,524,688
(14,927)
(619,920)
33
767,047
214,644
8,177,811
9,301,300
5,829
(542,212)
18
855,089
457,888
$
Total
8,524,688
As at May 31, 2013, the Fonds had transferred a cumulative amount of $1,812 million from retained earnings to share capital.
During the year, the Board of Directors approved an increase in the issued and paid-up capital on Class A shares, Series 1 of
$95 million through transfers from retained earnings (2012: $97 million).
Travel and entertainment
Transfers
Amortization of information systems development
Amortization of property and equipment
Rental income
Fees and other income
Custodial fees and trustee’s fees
Shareholder reporting costs
Management fees
Stationery and office supplies
Professional fees
Occupancy expenses and rent
Advertising and information
Salaries and benefits
(In thousands $)
16. OPERATING EXPENSES
917
122,148
1,192
4,057
(4,078)
(6,702)
990
3,247
3,807
3,459
7,443
7,818
10,597
15,142
129,859
4,438
(4,197)
(6,656)
965
3,041
3,806
3,813
6,779
7,244
10,334
18,231
2012
75,451
2013
80,869
Interest totalling $16.9 million (2012: $16.8 million) on the notes is recorded against Interest in the Statement of Operations and
capitalized under Notes.
15. REVENUES
Contributed surplus arises from the reduction in issued and paid-up capital resulting from transfers and the excess of the average
value of share capital over the redemption price. This excess is reduced when shares are redeemed at a price exceeding the average
value of issued share capital, prorata to the redeemed shares.
Contributed surplus
The Fonds is required to redeem shares in the circumstances set out in its Incorporation Act or to redeem them by mutual agreement in
exceptional situations provided under a policy for such purpose adopted by the Fonds’ Board of Directors and approved by the Minister
of Finance of Québec. The redemption price is determined semi-annually based on the value of the Fonds.
Redemption terms
Subscribed capital is money cashed but for which no Class A share can be issued in consideration thereof pursuant to the Fonds’
purchase-by-agreement policy. These Class A shares will be issued at the time set out in such policy at the share price in effect at that
date.
Subscribed
Unlimited number of Class B shares, without par value, non-voting, entitled to a preferential dividend at the rate determined by the
Board of Directors. In the event of liquidation, the Class B shares rank prior to Class A shares.
CLASS B SHARES
Authorized (CONTINUED)
SHARE CAPITAL (CONTINUED)
In the normal course of business, the Fonds is party to claims and litigations that could result in losses. A contingent loss is recognized
when it is likely and can be estimated. Management believes that the aggregate amount of contingent losses, net of losses recognized,
would not have a material adverse effect of the Fonds’ financial position.
As at May 31, 2013 and 2012
As at May 31, 2013 and 2012
(CONTINUED)
50
18.
17. INCOME TAXES
16,500
27,489
13,964
16,500
Other items
2,164
3,913
1,864
1,749
2012
(31,912)
(409)
2,273
Capital assets
Development capital investments and other
2013
(In thousands $)
Items giving rise to future income taxes are as follows:
15,183
(30,345)
Refundable dividend tax on hand
58,376
(14,158)
58,734
(25,853)
2012
Non-taxable dividends
2013
Income taxes based on combined income tax rate of 46.6%
(In thousands $)
The above income taxes are different from the amounts that would be obtained by applying the combined basic tax rate (federal and
provincial) to net investment income before income taxes. The difference is explained as follows:
615
27,489
(2,049)
26,874
18,549
2012
Future
2013
Current
(In thousands $)
Income taxes on net investment income before income taxes are detailed as follows:
Under the Taxation Act (Québec), the Fonds is an open-ended investment company. As such, the Fonds can, in calculating its Québec
taxes, deduct taxable capital gains from its taxable income. Consequently, capital gains realized by the Fonds are not subject to taxes
in Québec.
The Fonds, as a private company, can receive a refund of a portion of the income taxes paid on its investment income through the
refundable dividend tax on hand (RDTOH). The RDTOH is recoverable by increasing the issued and paid-up share capital through a
transfer from retained earnings. This tax of $30.3 million (2012: $31.9 million) was entirely applied against income taxes payable
following transfers approved by the Board of Directors during the year.
For purposes of the Income Tax Act (Canada), the Fonds is subject to the rules applicable to mutual fund corporations. As such, the
Fonds can receive a refund of the income taxes paid on its capital gains by redeeming its shares or by increasing its issued and paid-up
share capital through a transfer from retained earnings. Since these income taxes are refundable and that, in management’s opinion,
the issued and paid-up share capital will be increased sufficiently to recover them, these income taxes are not presented in the
Statement of Operations, but are included in Accounts receivable and other assets. The balance of these income taxes is $7.2 million
(2012: $10.3 million).
As at May 31, 2013 and 2012
As at May 31, 2013 and 2012
4,562
Actuarial loss
(14,212)
Cash and other
0.3
100.0
0.8
100.0
37.4
62.3
37.2
62.0
Bond mutual funds
Equity mutual funds
(1,702)
(138)
653
(2,217)
-
(29)
29
-
2,217
226
(29)
100
87
1,833
2012
(14,012)
362
33,277
(47,651)
112,379
5,476
(1,465)
5,629
9,493
93,246
160,030
19,241
(1,465)
7,009
14,419
120,826
2013
(1,868)
(98)
777
(2,547)
-
(37)
37
-
2,547
163
(37)
103
101
2,217
Insurance plan
2012
Pension plans
(in %)
Funded plan assets are held in trust and their breakdown is as follows:
ADDITIONAL INFORMATION ABOUT PLAN ASSETS
These accrued benefit liabilities are presented under Accounts payable and other liabilities.
Accrued benefit liabilities
-
30,686
Unamortized net actuarial loss
Unamortized past service cost (gain)
(44,898)
Funded status - deficit
Reconciliation of accrued benefit obligation and plan assets
142,750
12,789
Actual return on plan assets
5,549
(1,556)
Benefits paid
13,589
112,379
Employee contributions
Fonds contributions
Plan assets
187,648
(1,556)
Benefits paid
7,879
16,733
160,030
Insurance plan
2013
Pension plans
Interest cost
Current service cost
Accrued benefit obligation
(In thousands $)
Information about the plans is as follows:
The accrued benefit obligation of these plans as determined by independent actuaries and the fair value of plan assets are as at
March 31, 2013. The most recent actuarial valuation of the pension plans for funding and solvency purposes was as at December 31,
2012 and the next valuation will take place as at December 31, 2013.
Also, since July 1, 2003, the Fonds has had an optional personal insurance plan for retired employees.
On January 1, 2001, the Fonds implemented funded and unfunded defined benefit pension plans, which guarantee pension benefits to
most of its employees. Pension benefits under these plans are based on years of service and average annual salary, which represents
the average annual salary over the period of 36 months of consecutive service which results in the highest average.
51
13,789
362
(2,927)
5,518
10,836
203
(40)
(124)
367
163
103
101
Insurance plan
10,318
173
(18,891)
(528)
29,564
19,241
(5,476)
7,009
8,790
Pension plans
3.50
Rate of compensation increase
4.50
3.50
6.00
5.25
3.50
4.50
The Fonds set the maximum annual insurance premium it will assume per retiree and does not expect any increases in the future.
6.00
4.50
3.50
Expected rate of return on plan assets
Discount rate
Rate at end of previous year
Accrued benefit costs recognized
Rate of compensation increase
4.25
5.25
4.50
unaudited Index of the Share of the Fonds in Investments Made by the Specialized Funds, at Cost, are available at the Fonds’ head
22. ADDITIONAL INFORMATION
office, on its Website at www.fondsftq.com or at www.sedar.com.
Rate at end of year
4.25
Insurance plan
2012
Pension plans
Discount rate
Insurance plan
2013
The audited Statement of Development Capital Investments, at Cost, the unaudited Relevé des autres investissements and the
Pension plans
Certain prior year figures have been reclassified to be comparable with those of the current year.
21. COMPARATIVE FIGURES
head office, on its Website at www.fondsftq.com or at www.sedar.com.
management” section of the Management Discussion and Analysis for the year Ended May 31, 2013, which is available at the Fonds’
Risks arising from financial instruments are an integral part the audited Financial Statements and are discussed in the “Risk
20. RISK MANAGEMENT
These loans are presented in the Balance Sheet under Accounts receivable and other assets.
The Fonds granted non-interest bearing loans of $20 million with a fair value of $13.7 million (2012: $13.9 million) to the Fonds
étudiants solidarité travail du Québec (FESTQ), which are considered related to the Fonds because the Fonds appoints some of their
directors together with the Government of Québec.
The Fonds incorporated the Fondation de la formation économique du Fonds de solidarité des travailleurs du Québec (F.T.Q.) (the
“Fondation”) under Part III of the Québec Companies Act and appoints the members of the Fondation’s Board of Directors. The Fonds
granted a loan of $5 million to the Fondation at a variable, contingent interest rate, with a fair value of $3.8 million
(2012: $3.6 million).
The Fonds, of which a majority of directors are elected by the FTQ, agreed to pay $1.8 million to the FTQ for the year ended May 31,
2013 (2012: $1.9 million) under an agreement that calls for compensation to be paid for services rendered in respect of economic
training, social audits, shareholder development, and support and guidance of certain activities. These transactions are measured at the
exchange amount, which is the amount of consideration established and agreed to by the related parties.
Accrued benefit obligation
(in %)
The significant actuarial assumptions used to determine the accrued benefit obligation and the costs recognized for the plans are as
follows:
SIGNIFICANT ACTUARIAL ASSUMPTIONS
172
(40)
(201)
413
226
87
100
Insurance plan
2012
Cash payments for employee future benefits, which comprise contributions made by the Fonds to these funded pension plans and
amounts paid directly to members under unfunded plans totalled $13.6 million (2012: $9.5 million).
Costs recognized in the year
service cost or gain and actual plan amendments
Difference between amortization of past
actuarial loss or gain on accrued benefit obligation
Difference between actuarial loss or gain recognized and actual
return on plan assets
Difference between actual and expected
long-term nature of employee future benefits
Cost before adjustments to recognize the
4,562
(12,789)
Actuarial loss
7,879
Actual return on plan assets
Interest cost
11,184
Pension plans
2013
Current service cost, net of employee contributions
(In thousands $)
Costs recognized in the year were as follows:
ADDITIONAL INFORMATION ABOUT PLAN ASSETS (CONTINUED)
In the normal course of business, the Fonds conducts transactions with related companies that are either controlled by the Fonds or
subject to significant influence by the Fonds. Many of the development capital investments are of such an amount and nature that the
investee is considered a related company. These transactions consist predominantly of interest and dividend revenues on investments
and certain expenses, in particular premiums paid under insurance plans.
19. RELATED PARTY TRANSACTIONS
18.
(CONTINUED)
As at May 31, 2013 and 2012
As at May 31, 2013 and 2012
52
EDITORS
WRITER
Suzanne Hamel
André McDonald
Mario Tremblay
Suzanne Hamel
COLLABORATORS
PHOTOGRAPHER
Daniel Bourcier
Michel Dorion
Roch Dutil
François Girard
Alain Houle
Sylvain Masse
Pierre Surprenant
Yves Lacombe
TRANSLATOR
Jean Marois
DESIGNER
Gauthier designers
WE WOULD LIKE TO THANK EVERYONE WHO CONTRIBUTED
TO THE PRODUCTION OF THIS DOCUMENT.
YOUR CO MMENTS
This Annual and Sustainability Report is designed to inform
the largest possible number of people about the mission of the
Fonds de solidarité FTQ, its achievements and the services it
offers. It includes the financial and extra-financial information
related to the Fonds’ social, economic and environmental
activities for the last financial year, which ended May 31, 2013.
You may also access a version of this report that includes
additional pictures and videos on our website.
Please do not hesitate to send us your comments. We always
welcome the opportunity to better meet the expectations of
our stakeholders.
Public and Corporate Affairs Department
545 Crémazie Blvd. East
Suite 200
Montréal, Québec H2M 2W4
[email protected]
Printed by the unionized workers of Transcontinental Acme Direct on
Rolland Opaque50 paper manufactured in Québec using biogas energy,
EcoLogo and FSC Mixed Sources certified and containing 50% recycled
post-consumer fibre.
6
P
RO
FILES
WWW
R
E
V
O
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I
TO D
ONLIN
ALWAYS AT THE FOREFRONT,
THE FONDS DE SOLIDARITÉ FTQ
CREATED AN INTERACTIVE ANNUAL AND
SUSTAINABILIT Y REPORT THAT IS DESIGNED FOR YOU
BASED ON YOUR INTERESTS.
BE AMONG THE FIRST TO DISCOVER YOUR INVESTOR PROFILE
AND READ OUR REPORT TAILORED FOR YOU.
fondsftq.com/2013report
fondsftq.com
545 Crémazie Blvd. East
Suite 200
Montréal, Québec H2M 2W4
Telephone: 514 383-8383
Fax: 514 383-2502
Toll free: 1 800 361-5017
Shareholder Services
Montréal: 514 383-3663
Toll free: 1 800 567-3663
Legal deposit – 3rd quarter 2013
Bibliothèque nationale du Québec
National Library of Canada
Ce document est également disponible en français.
B-08-00-0284
E

SO IS THE FONDS. - Fonds de solidarité FTQ

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