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STONE MUTUAL FUNDS

Interim Financial Report June 30, 2016

The auditors of the Funds have not performed a review of these financial statements.

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STONE MUTUAL FUNDS TABLE OF CONTENTS

CORPORATE OVERVIEW Pg. 3

STONE & CO. DIVIDEND GROWTH CLASS CANADA Pg. 4 Statements of Financial Position and Comprehensive Income (Loss) Statements of Changes in Net Assets Attributable to Holders of Redeemable Securities Statements of Cash Flows Schedule of Investment Portfolio Fund Specific Notes on Financial Risk Management and Financial Instruments

STONE & CO. RESOURCE PLUS CLASS Pg. 11 Statements of Financial Position and Comprehensive Income (Loss) Statements of Changes in Net Assets Attributable to Holders of Redeemable Securities Statements of Cash Flows Schedule of Investment Portfolio Fund Specific Notes on Financial Risk Management and Financial Instruments

STONE & CO. FLAGSHIP GROWTH & INCOME FUND CANADA Pg. 21 Statements of Financial Position and Comprehensive Income (Loss) Statements of Changes in Net Assets Attributable to Holders of Redeemable Securities Statements of Cash Flows Schedule of Investment Portfolio Fund Specific Notes on Financial Risk Management and Financial Instruments

STONE & CO. FLAGSHIP GLOBAL GROWTH FUND Pg. 32 Statements of Financial Position and Comprehensive Income (Loss) Statements of Changes in Net Assets Attributable to Holders of Redeemable Securities Statements of Cash Flows Schedule of Investment Portfolio Fund Specific Notes on Financial Risk Management and Financial Instruments

STONE & CO. EUROPLUS DIVIDEND GROWTH FUND Pg. 40 Statements of Financial Position and Comprehensive Income (Loss) Statements of Changes in Net Assets Attributable to Holders of Redeemable Securities Statements of Cash Flows Schedule of Investment Portfolio Fund Specific Notes on Financial Risk Management and Financial Instruments NOTES TO THE FINANCIAL STATEMENTS Pg.47 * The Interim Financial Report for the Stone & Co. Flagship Stock Fund Canada will be published as a stand-alone document, not included in these statements.

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STONE MUTUAL FUNDS CORPORATE OVERVIEW

The Stone Mutual Funds (the “Funds”) were originally established by Richard G. Stone in 1995.

Stone Mutual Funds are offered by Stone Asset Management Limited (“SAM”) and are available through registered financial advisors in all provinces and territories of Canada. SAM, as the investment fund manager and the portfolio manager for all Stone Mutual Funds, is responsible for hiring and managing the relationships with our sub-advisors, and provides investment management services for these funds.

SAM has engaged its affiliate, Stone Investment Group Limited (“SIG”) (formerly Stone & Co. Limited) as administrator of the Funds and fund distributor. SIG is based in Toronto with regional sales offices in Canada established in the east coast and southwest Ontario.

Stone Asset Management Limited and GaleForce Administration Services Inc. are wholly-owned subsidiaries of Stone Investment Group Limited, an independent, 100% Canadian-owned wealth management company. Collectively we refer to the companies as “Stone”.

OUR INVESTMENT PRODUCTS

SAM provides investment management services via distinctive investment mandates, overseen daily by the disciplined execution of a proprietary investment process and investment philosophy. Access to SAM investment mandates can be achieved via a family of six open-end mutual funds, a pooled fund, and Private Wealth Management services. SAM’s expertise ranges from servicing Canada’s retail investors working with their financial advisors to the complexities of working directly with Family Offices, endowments and foundations. At Stone, we want our investors to sleep well knowing they’ll have the financial resources to live well.

Should you require any additional information on any of these products, please contact your financial advisor, review our information at www.stoneco.com or on SEDAR at www.sedar.com, or call us at 800 795 1142.

OUR CORPORATE GOVERNANCE

As part of our ongoing commitment, we would like to advise you of our dedication to our corporate governance policies; the way we acknowledge trust. Corporate governance means having the appropriate policies, procedures and structures in place to ensure the independence of the board of directors of a corporation from its management to ensure that the corporation is appropriately managed and directed. The objective of good corporate governance is to ensure that companies are not only well run and profitably managed, but also adhere to high standards of legal and ethical principles as well as conduct.

In the mutual fund industry, good corporate governance is an important consideration for portfolio advisors in selecting the right companies in which to invest. The equivalent concept for mutual fund investors themselves is fiduciary responsibility: the obligation fund managers have to their securityholders to manage fund assets in a prudent fashion.

At Stone, we are committed to our responsibilities on behalf of all those who invest with us. In particular, we are committed to ensuring:

1. Preservation of investor capital through long-term growth exceeding the rate of inflation with an acceptable level of risk as defined by each Fund’s investment objective and strategy.

2. That each individual investment within the Fund portfolios reflects proper corporate governance standards, while still allowing management to maximize securityholder value.

STONE & CO. FUNDS

Stone & Co. Flagship Growth & Income Fund Canada Stone & Co. Flagship Stock Fund Canada

Stone & Co. Flagship Global Growth Fund Stone & Co. EuroPlus Dividend Growth Fund

STONE & CO. CORPORATE FUNDS LIMITED

Stone & Co. Dividend Growth Class Canada Stone & Co. Resource Plus Class

Stone has established an Independent Review Committee whose primary role is to review conflicts of interest as they relate to investment fund management.

In everything we do at Stone, our goal is to provide investors with clarity, comfort and commitment by:

1. Protecting fund assets.

2. Ensuring that all regulatory requirements are satisfied.

3. Ensuring that the investment process and each fund’s Investment Mandate are adhered to.

4. Overseeing fund administration systems.

5. Ensuring that Stone’s Code of Business Conduct and Ethics is adhered to and that all staff go about their work with the interests of our investors first.

STONE & CO. DIVIDEND GROWTH CLASS CANADA

The accompanying Notes to the Financial Statements are an integral part of the financial statements.

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STATEMENTS OF FINANCIAL POSITION AS AT

(in thousands of dollars; per security amounts June 30, 2016 December 31, 2015 are expressed in whole dollars) (Unaudited) (Audited) Assets Current assets Investments (Note 2) $ 360,205 $ 393,848 Cash 38,815 27,059 Dividends receivable 1,072 1,123 Interest receivable 1 1 Receivable for investments sold 177 - Subscriptions receivable 498 776 Derivative assets: Purchased options (Note 2) 3,352 HST refund receivable - 248

404,120 423,055 Liabilities Current liabilities Payable for investments purchased 1,448 - Redemptions payable 896 852 Accounts payable and accrued expenses (Note 8) 311 - Dividends payable 545 - Derivative liabilities: Written options (Note 2) 331 70

3,531 922 Net assets attributable to holders of redeemable securities (Note 3) $ 400,589 $ 422,133

Net assets attributable to holders of redeemable securities per series Series A $ 195,603 $ 201,391 Series B 55,887 64,539 Series C 14,260 17,382 Series F 39,293 36,350 Series L 16,567 17,532 Series T8A 49,012 35,948 Series T8B 27,312 46,148 Series T8C 2,655 2,843

$ 400,589 $ 422,133 Net assets attributable to holders of redeemable securities per security Series A $ 10.36 $ 10.28 Series B 9.66 9.61 Series C 9.68 9.63 Series F 12.26 12.08 Series L 12.57 12.47 Series T8A 7.54 7.71 Series T8B 7.21 7.39 Series T8C 7.24 7.41

Approved on behalf of Stone Asset Management Limited:

Richard G. Stone James Elliott Director Director

STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) FOR THE PERIODS ENDED JUNE 30 (Note 1) (in thousands of dollars; per security amounts are expressed in whole dollars) 2016 2015 Income Net gains (losses) on investments and derivatives (Note 2): Dividends $ 5,663 $ 7,284 Interest for distribution purposes 91 117 Net realized gains (losses) on sale of investments and derivatives 36,466 38,397 Change in unrealized appreciation (depreciation) of investments and derivatives (25,714) (34,644) Net gains (losses) on investments and derivatives 16,506 11,154 Foreign exchange gains (losses) on cash (3,327) 842 Total income (loss) 13,179 11,996 Expenses (Note 4) Management fees 4,516 5,842 Securityholder reporting costs 378 529 Transfer agency fees 331 340 Custodian fees 63 87 Filing fees 12 13 Independent Review Committee fees 5 4 Audit fees 42 47 Legal fees 19 17 Transaction costs (Note 2) 279 145 Foreign withholding taxes 186 162 Total expenses 5,831 7,186 Expenses waived/absorbed by the Manager - - Total expenses (net) 5,831 7,186 Increase (decrease) in net assets attributable to holders of redeemable securities $ 7,348 $ 4,810

Increase (decrease) in net assets attributable to holders of redeemable securities per series Series A $ 3,772 $ 2,191 Series B 778 714 Series C 198 238 Series F 959 440 Series L 239 100 Series T8A 986 334 Series T8B 371 758 Series T8C 45 35

$ 7,348 $ 4,810 Increase (decrease) in net assets attributable to holders of redeemable securities per security Series A $ 0.19 $ 0.10 Series B 0.12 0.08 Series C 0.11 0.11 Series F 0.32 0.16 Series L 0.17 0.08 Series T8A 0.18 0.07 Series T8B 0.07 0.10 Series T8C 0.11 0.08



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STATEMENTS OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE SECURITIES (UNAUDITED) FOR THE PERIODS ENDED JUNE 30 (Note 1)

2016 Series In thousands A B C F L T8A T8B T8C 2016 Total Net assets attributable to holders of redeemable securities, beginning of period $ 201,391 64,539 17,382 36,350 17,532 35,948 46,148 2,843 $ 422,133 Increase (decrease) in net assets attributable to holders of redeemable securities 3,772 778 198 959 239 986 371 45 7,348 Redeemable securityholder transactions Proceeds from issue of redeemable securities 30,660 3,907 3,152 11,729 2,163 20,088 775 - 72,474 Reinvestment of dividends to holders of redeemable securities 2,126 578 142 317 120 188 128 16 3,615 Redemption of redeemable securities (40,033) (13,272) (6,445) (9,674) (3,347) (6,444) (18,678) (138) (98,031) Net securityholder transactions (7,247) (8,787) (3,151) 2,372 (1,064) 13,832 (17,775) (122) (21,942) Dividends to securityholders of redeemable securities Dividends (2,313) (643) (169) (388) (140) (565) (461) (36) (4,715) Capital gains dividends - - - - - - - - - Return of capital - - - - - (1,189) (971) (75) (2,235) Total dividends to securityholders of redeemable securities (2,313) (643) (169) (388) (140) (1,754) (1,432) (111) (6,950) Net assets attributable to holders of redeemable securities, end of period $ 195,603 55,887 14,260 39,293 16,567 49,012 27,312 2,655 $ 400,589

Securities issued and outstanding Securities, beginning of period 19,588 6,719 1,806 3,008 1,406 4,665 6,248 384 Securities issued for cash 3,024 413 330 979 175 2,663 108 - Securities issued on reinvestment of dividends 209 61 15 26 10 25 18 2 Securities redeemed (3,946) (1,408) (678) (808) (273) (856) (2,587) (19) Securities, end of period 18,875 5,785 1,473 3,205 1,318 6,497 3,787 367

2015 Series In thousands A B C F L T8A T8B T8C 2015 Total Net assets attributable to holders of redeemable securities, beginning of period $ 237,174 88,763 24,553 35,114 19,240 39,593 68,878 3,723 $ 517,038 Increase (decrease) in net assets attributable to holders of redeemable securities 2,191 714 238 440 100 334 758 35 4,810 Redeemable securityholder transactions Proceeds from issue of redeemable securities 24,803 2,843 744 9,436 2,647 8,121 4,285 - 52,879 Reinvestment of dividends to holders of redeemable securities 2,341 751 194 295 133 219 191 19 4,143 Redemption of redeemable securities (37,899) (14,755) (5,270) (8,705) (2,717) (5,560) (18,059) (434) (93,399) Net securityholder transactions (10,755) (11,161) (4,332) 1,026 63 2,780 (13,583) (415) (36,377) Dividends to securityholders of redeemable securities Dividends (2,550) (833) (226) (340) (154) (1,144) (1,666) (98) (7,011) Capital gains dividends - - - - - - - - - Return of capital - - - - - (498) (725) (43) (1,266) Total dividends to securityholders of redeemable securities (2,550) (833) (226) (340) (154) (1,642) (2,391) (141) (8,277) Net assets attributable to holders of redeemable securities, end of period $ 226,060 77,483 20,233 36,240 19,249 41,065 53,662 3,202 $ 477,194

Securities issued and outstanding Securities, beginning of period 21,729 8,666 2,393 2,772 1,453 4,552 8,220 443 Securities issued for cash 2,209 271 71 726 195 921 494 - Securities issued on reinvestment of dividends 209 72 19 23 10 25 23 2 Securities redeemed (3,379) (1,407) (501) (671) (200) (625) (2,109) (51) Securities, end of period 20,768 7,602 1,982 2,850 1,458 4,873 6,628 394



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STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE PERIODS ENDED JUNE 30 (Note 1)

in thousands (000’s) 2016 2015

Cash flows from operating activities: $ $

Increase (decrease) in net assets attributable to holders of redeemable securities 7,348 4,810

Adjustments for:

Foreign exchange losses (gains) on cash 745 (288)

Net realized losses (gains) on sale of investments and derivatives (36,466) (38,397)

Change in unrealized depreciation (appreciation) of investments and derivatives 25,714 34,644

Purchases of investments and derivatives (62,861) (50,975)

Proceeds from sale and/or maturity of investments and derivatives 104,165 94,683

Dividends receivable 51 123

Interest receivable - -

Receivable for investments sold (177) -

HST refund receivable 248 271

Accounts payable and accrued expenses 311 271

Payable for investments purchased 1,448 -

Net cash from operating activities 40,526 45,142

Cash flows from financing activities:

Proceeds from issue of redeemable securities 72,752 52,984

Amount paid on redemptions of redeemable securities (97,987) (92,705)

Dividends paid to holders of redeemable securities, net of reinvested dividends (2,790) (3,468)

Net cash from financing activities (28,025) (43,189)

Foreign exchange gains (losses) on cash (745) 288

Net increase (decrease) in cash and cash equivalents during the period 12,501 1,953

Cash and cash equivalents, beginning of period 27,059 27,291

Cash and cash equivalents, end of period $ 38,815 $ 29,532

Supplemental disclosure of cash flow information*:

Interest received $ 91 $ 117

Dividends received, net of withholding tax 5,528 7,245

Cash and cash equivalents are comprised of:

Cash $ 38,815 $ 29,532

Cash equivalents - -

$ 38,815 $ 29,532

*Included as part of cash flows from operating activities.

STONE & CO. DIVIDEND GROWTH CLASS CANADA SCHEDULE OF INVESTMENT PORTFOLIO (UNAUDITED) AS AT JUNE 30, 2016


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Number Average Carrying of shares cost value

or par value Security (000's) (000's) % Consumer Discretionary (5.4%)

30,000 Carter's Inc. $ 3,277 $ 4,148 220,000 Gildan Activewear Inc. 7,840 8,325 201,000 Magna International Inc., Class 'A' 11,831 9,115

22,948 21,588 5.4% Consumer Staples (8.1%)

135,000 Coca-Cola Co. 4,820 7,947 64,000 CVS Health Corp. 7,850 7,958

220,000 Kroger Co. 10,080 10,511 55,000 Sanderson Farms Inc. 4,948 6,189

27,698 32,605 8.1% Energy (14.6%)

218,000 AltaGas Ltd. 6,615 6,845 250,000 Cameco Corp. 4,808 3,548 250,000 Cenovus Energy Inc. 5,912 4,468 235,900 Enbridge Inc. 7,608 12,911 200,000 Inter Pipeline Ltd. 4,910 5,480 125,000 Keyera Corp. 940 4,940

3,800 PrairieSky Royalty Ltd. 98 93 351,500 Suncor Energy Inc. 12,230 12,598

26,300 TransCanada Corp., Subscription Receipts 1,203 1,534 150,000 Vermilion Energy Inc. 7,824 6,171

52,148 58,588 14.6% Financial Services (26.5%)

308,400 Bank of Montreal, 3.90%, Preferred, Class 'B', Series '25', Variable Rate, Callable 6,029 6,106 200,000 Bank of Nova Scotia 8,773 12,662

40,100 Bank of Nova Scotia, Preferred, Series '30', Convertible, Callable 778 799 313,600 Bank of Nova Scotia, Preferred, Series '32', Variable Rate, Convertible, Callable 6,123 6,241 275,000 Brookfield Asset Management Inc., Class 'A' 4,234 11,754

79,000 Element Financial Corp., Preferred, Series 'G', Variable Rate, Perpetual 1,929 1,971 8,000 Fairfax Financial Holdings Ltd. 5,055 5,567

400,000 Manulife Financial Corp. 6,453 7,068 375,000 Power Financial Corp. 10,529 11,119

1,300,000 Pure Industrial Real Estate Trust 3,751 6,695 600,000 Pure Multi-Family REIT L.P., Class 'A' 3,766 4,524 180,000 Royal Bank of Canada 7,662 13,741 240,000 Toronto-Dominion Bank 7,151 13,315 500,000 Tricon Capital Group Inc. 4,345 4,350

76,578 105,912 26.5% Health Care (7.0%)

65,000 Abbott Laboratories 1,373 3,318 15,000 Becton, Dickinson & Co. 2,521 3,304 23,500 Johnson & Johnson 1,576 3,702 60,000 Medtronic PLC 4,517 6,761 33,000 Stryker Corp. 1,693 5,136 95,000 Zoetis Inc. 3,648 5,855

15,328 28,076 7.0% Industrials (6.2%)

5,500 Brookfield Business Partners L.P. 191 135 58,000 Canadian National Railway Co. 1,362 4,425 27,000 Canadian Pacific Railway Ltd. 1,388 4,491 55,000 Matthews International Corp., Class 'A' 2,498 3,974

450,000 Transcontinental Inc., Class 'A' 6,315 7,880 170,000 TransForce Inc. 3,165 4,078

14,919 24,983 6.2%

STONE & CO. DIVIDEND GROWTH CLASS CANADA SCHEDULE OF INVESTMENT PORTFOLIO (UNAUDITED) AS AT JUNE 30, 2016


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or par value Security (000's) (000's) % Information Technology (6.9%)

35,000 Accenture PLC, Class 'A' 1,302 5,149 28,800 CPI Card Group Inc. 172 187 95,000 Fidelity National Information Services Inc. 8,293 9,090 40,000 International Business Machines Corp. 5,591 7,885

100,000 Oracle Corp. 2,569 5,315 17,927 27,626 6.9% Materials (8.1%)

35,000 Agrium Inc. 1,997 4,091 300,000 Chemtrade Logistics Income Fund 4,355 5,352

40,000 Ecolab Inc. 1,910 6,161 35,000 International Flavors and Fragrances Inc. 2,036 5,730 45,000 Monsanto Co. 3,263 6,043 35,000 Praxair Inc. 2,673 5,109

16,234 32,486 8.1% Telecommunication Services (3.3%)

70,000 BCE Inc. 2,172 4,280 90,000 Rogers Communications Inc., Class 'B' 2,609 4,707

100,000 TELUS Corp. 2,136 4,160 6,917 13,147 3.3% Utilities (3.9%)

180,000 Brookfield Infrastructure Partners L.P. 2,258 10,521 107,000 Fortis Inc. 2,813 4,673

5,071 15,194 3.9% Transaction Costs (454) Total Investment Portfolio $ 255,768 360,205 90.0% Purchased Options (0.8%) 2,776 3,352 0.8% Written Options (-0.1%) (331) -0.1% Cash & Other Net Assets (Liabilities) (9.3%) 37,363 9.3% Total Net Assets (100.0%) $ 400,589 100.0%

Percentages shown relate to investments at carrying value to total net assets of the Fund.

Schedule of Purchased Options

Option Number of Number of Expiration Strike Premium Paid Current Value Underlying Security Type Options Shares Date Price (000s) (000s) Newmont Mining Corp. Holding Co. Call 1,750 175,000 2017/01/20 $ 25 USD $ 2,776 $ 3,352

$ 2,776 $ 3,352

Schedule of Written Options

Option Number

of Number of Expiration Strike Premium Received Current Value Underlying Security Type Options Shares Date Price (000s) (000s) CVS Health Corp. Call (640) (64,000) 2016/07/15 $ 95 USD $ (217) $ (122) Magna International Inc., Class 'A' Call (1,000) (100,000) 2016/08/19 52 CAD (59) (25) Sanderson Farms Inc. Call (550) (55,000) 2016/08/19 90 USD (177) (184)

$ (453) $ (331)

STONE & CO. DIVIDEND GROWTH CLASS CANADA FUND SPECIFIC NOTES ON FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (UNAUDITED)

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AS AT JUNE 30, 2016 AND DECEMBER 31, 2015 (in thousands of dollars; per security amounts are expressed in whole dollars)

Risk management The investment objective of the Stone & Co. Dividend Growth Class (the “Fund”) is to achieve above-average long-term capital growth that is consistent with a conservative investment philosophy encompassing a diversified portfolio approach. The Fund invests primarily in equity securities of Canadian companies that demonstrate financial strength and good growth potential. The Fund’s investments may be exposed to a variety of financial instruments risks: market risk (comprised of other market price risk, foreign currency risk and interest rate risk), liquidity risk and credit risk. The Manager of the Fund, Stone Asset Management Limited (“SAM”), aims to manage risk as part of its investment process through the thorough analysis and careful selection of securities and diversification across asset classes and industry sectors. SAM also manages risk by ensuring the portfolio management activities of the Fund comply with its investment objectives and strategies and applicable securities legislation.

Market price risk The value of securities in the Fund’s investment portfolio may be affected by factors specific to the individual securities. Market price fluctuations may also be caused by general economic and financial conditions or industry-specific matters. Political, social and environmental factors can also affect the value of any investment. The value of equity-related securities, such as warrants, options, and convertible securities, is also affected by market price risk.

The most significant exposure to market price risk for the Fund arises from its investment in equity securities. If equity prices on the respective stock exchanges had increased or decreased by 5%, as at June 30, 2016 with all other factors remaining constant, net assets would have increased or decreased by approximately $12,633(December 31, 2015 – $17,225). This change is estimated using the weighted average beta of the Fund’s equity portfolio, which is calculated based on an historical correlation against respective stock exchanges. In practice, actual trading results may differ and the difference could be material.

Foreign currency risk Foreign currency risk arises when financial instruments are denominated in a currency other than the Canadian dollar, the functional currency of the Fund. When a Fund buys an investment priced in a foreign currency and the exchange rate between the Canadian dollar and the foreign currency changes unfavourably, it could reduce the value of the Fund’s investment.

The Fund had exposure to the foreign currency shown below in Canadian dollar terms. Also shown below is the potential impact to the Fund’s net assets, all other variables held constant, as a result of 5% changes in this currency relative to the Canadian dollar. In practice, actual trading results may differ and the difference could be material.

June 30, 2016

Currency Investments Cash Total % of net

assets Impact on net assets

U.S. Dollar 122,334 – 122,334 30.5 6,117

December 31, 2015

Currency Investments Cash Total % of net

assets Impact on net assets

U.S. Dollar 119,635 – 119,635 28.3 5,982

Interest rate risk A Fund that invests in fixed income securities, such as bonds and money market instruments, is sensitive to changes in interest rates. In general, when interest rates are rising, the value of these investments is falling; when interest rates are falling, the value of these investments is rising. Moreover, fixed income securities with longer terms to maturity are usually more sensitive to changes in interest rates. There is minimal sensitivity to changes in interest rates for money market securities since these are usually held to maturity and tend to be short-term in nature. As at June 30, 2016 and December 31, 2015, the Fund did not have significant exposure to interest rate risk.

Liquidity risk Liquidity risk is defined as the risk that a Fund may not be able to settle or meet its obligations on time or at a reasonable price. The Fund is exposed to daily cash redemptions of redeemable securities. The Fund retains sufficient cash and cash equivalent positions to maintain adequate liquidity. The Fund primarily invests in securities that are actively traded in public markets and can be readily disposed of to increase liquidity. The Schedule of Investment Portfolio identifies any securities that are not traded on an active market, being nil% of total net assets as at June 30, 2016 (December 31, 2015 – nil%). As at June 30, 2016 and December 31, 2015, all existing liabilities of the Fund are to be settled within three months.

STONE & CO. DIVIDEND GROWTH CLASS CANADA FUND SPECIFIC NOTES ON FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (UNAUDITED) (continued)

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Weighted average number of securities The following table illustrates the weighted average number of securities outstanding for the periods ended June 30:

Series 2016 2015 A 19,313,454 21,344,746 B 6,187,522 8,022,046

C 1,628,202 2,185,868

F 3,059,334 2,695,381

L 1,342,158 1,464,385

T8A 5,574,882 4,685,658

T8B 5,014,881 7,278,910

T8C 375,933 420,957

Credit risk When a company or government issues a fixed income or debt security, it has an obligation to pay interest and repay a specific amount on the maturity date. Credit risk is the risk that the company or government will not meet that obligation. Credit risk is lower among issuers that have good credit ratings from recognized credit rating agencies and higher among issuers with a low credit rating or no credit rating at all. These securities usually offer high interest rates to compensate for the increased risk. Changes in the credit risk of a security can affect its liquidity making it more difficult to sell.

As at June 30, 2016 and December 31, 2015, the Fund did not have significant exposure to credit risk.

Concentration risk The following table summarizes the portfolio investments held by the Fund:

% of Net Assets

Sector June 30,

2016 December 31,

2015

Consumer Discretionary 5.4 5.6

Consumer Staples 8.1 4.1

Energy 14.6 15.0

Financial Services 26.5 23.2

Health Care 7.0 7.3

Industrials 6.2 9.4

Information Technology 6.9 8.1

Materials 8.1

9.7

Telecommunications Services 3.3 5.2

Utilities 3.9 5.7

Purchased Options 0.8 –

Written Options (0.1) –

Cash & Other Net Assets (Liabilities) 9.3 6.7 Total net assets 100.0 100.0

Fair value disclosure The Fund classifies fair value measurements within a hierarchy that gives highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within

Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: Inputs for the asset or liability that are not based on observable market data.

The following fair value hierarchy table presents information about the Fund’s assets measured at fair value on a recurring basis as at June 30, 2016 and December 31, 2015. There were no transfers between Level 1 and Level 2. June 30, 2016

Level 1 Level 2 Level 3 Total

Equities $360,205 $ – $ – $ 360,205

Total Investment Portfolio $ 360,205 $ – $ – $360,205

Purchased Options $3,352 $ – $ – $3,352

Written Options $ (331) $ – $ – $(331)

December 31, 2015


Equities $ 393,848 $ – $ – $ 393,848

Total Investment Portfolio $ 393,848 $ – $ – $ 393,848

Written Options $ (70) $ – $ – $ (70)

Financial instruments by category The following table presents the net gains (losses) on financial instruments at FVTPL by category for the periods ended June 30:

Net gains (losses)

Category 2016 2015

Financial assets (liabilities) at FVTPL:

HFT $ 1,860 $ 420

Designated at inception 14,646 10,734 Total $ 16,506 $ 11,154

STONE & CO. RESOURCE PLUS CLASS


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STATEMENTS OF FINANCIAL POSITION

AS AT

(in thousands of dollars; per security amounts June 30, 2016 December 31, 2015

are expressed in whole dollars) (Unaudited) (Audited)

Assets

Current assets

Investments (Note 2) $ 4,982 $ 4,979

Cash 469 700


HST refund receivable - 6

5,464 5,698

Liabilities

Current liabilities

Redemptions payable - 10

Accounts payable and accrued expenses (Note 8) 13 -

13 10

Net assets attributable to holders of redeemable securities (Note 3) $ 5,451 $ 5,688

Net assets attributable to holders of redeemable securities per series

Series A $ 4,851 $ 5,129

Series B 139 141

Series F 406 368

Series L 55 50

$ 5,451 $ 5,688

Net assets attributable to holders of redeemable securities per security

Series A $ 2.12 $ 1.93

Series B 2.14 1.95

Series F 5.99 5.42

Series L 6.11 5.57

Approved on behalf of Stone Asset Management Limited:

Richard G. Stone James Elliott

Director Director

STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) FOR THE PERIODS ENDED JUNE 30 (Note 1) (in thousands of dollars; per security amounts are expressed in whole dollars) 2016 2015 Income Net gains (losses) on investments and derivatives (Note 2): Dividends $ 67 $ 128 Net realized gains (losses) on sale of investments and derivatives (688) (244) Change in unrealized appreciation (depreciation) of investments and derivatives 1,206 371 Net gains (losses) on investments and derivatives 585 255 Foreign exchange gains (losses) on cash 1 3 Total income (loss) 586 258 Expenses (Note 4) Management fees 57 101 Securityholder reporting costs 28 39 Transfer agency fees 5 9 Custodian fees 5 7 Filing fees 10 11 Independent Review Committee fees 5 4 Audit fees 11 6 Transaction costs (Note 2) 7 11 Foreign withholding taxes 1 1 Total expenses 129 189 Expenses waived/absorbed by the Manager (43) (38) Total expenses (net) 86 151 Increase (decrease) in net assets attributable to holders of redeemable securities $ 500 $ 107

Increase (decrease) in net assets attributable to holders of redeemable securities per series Series A $ 439 $ 107 Series B 13 (2) Series C* n/a - Series F 43 3 Series L 5 (1)

$ 500 $ 107 Increase (decrease) in net assets attributable to holders of redeemable securities per security Series A $ 0.18 $ 0.03 Series B 0.18 (0.02) Series C* n/a 0.06 Series F 0.60 0.05 Series L 0.54 (0.11)

* On May 25, 2015, all Series C securities were liquidated.



12


2016 Series In thousands A B C* F L 2016 Total Net assets attributable to holders of redeemable securities, beginning of period $ 5,129 141 n/a 368 50 $ 5,688 Increase (decrease) in net assets attributable to holders of redeemable securities 439 13 n/a 43 5 500 Redeemable securityholder transactions Proceeds from issue of redeemable securities 335 9 - 238 - 582 Reinvestment of dividends to holders of redeemable securities - - - - - - Redemption of redeemable securities (1,052) (24) - (243) - (1,319) Net securityholder transactions (717) (15) - (5) - (737) Dividends to securityholders of redeemable securities Dividends - - - - - - Capital gains dividends - - - - - - Return of capital - - - - - - Total dividends to securityholders of redeemable securities - - - - - - Net assets attributable to holders of redeemable securities, end of period $ 4,851 139 n/a 406 55 $ 5,451

Securities issued and outstanding Securities, beginning of period 2,657 115 n/a 68 9 Securities issued for cash 174 4 - 43 - Securities issued on reinvestment of dividends - - - - - Securities redeemed (546) (12) - (43) - Securities, end of period 2,285 107 n/a 68 9

2015 Series In thousands A B C* F L 2015 Total Net assets attributable to holders of redeemable securities, beginning of period $ 8,173 307 2 322 64 $ 8,868 Increase (decrease) in net assets attributable to holders of redeemable securities 107 (2) - 3 (1) 107 Redeemable securityholder transactions Proceeds from issue of redeemable securities 687 - - 80 14 781 Proceeds from issue of Stone FTLP assets 4,335 - - - - 4,335 Reinvestment of dividends to holders of redeemable securities - - - - - - Redemption of redeemable securities (4,371) (60) (2) (12) (9) (4,454) Net securityholder transactions 651 (60) (2) 68 5 662 Dividends to securityholders of redeemable securities Dividends - - - - - - Capital gains dividends - - - - - - Return of capital - - - - - - Total dividends to securityholders of redeemable securities - - - - - - Net assets attributable to holders of redeemable securities, end of period $ 8,931 245 - 393 68 $ 9,637

Securities issued and outstanding Securities, beginning of period 3,107 115 1 44 8 Securities issued for cash 256 - - 12 2 Securities issued for Stone FTLP assets 1,647 - - - - Securities issued on reinvestment of dividends - - - - - Securities redeemed (1,610) (23) (1) (2) (1) Securities, end of period 3,400 92 - 54 9

* On May 25, 2015, all Series C securities were liquidated.



13



in thousands (000's) 2016 2015

Cash flows from operating activities:

Increase (decrease) in net assets attributable to holders of redeemable securities $ 500 $ 107

Adjustments for:

Foreign exchange losses (gains) on cash (1) (4)

Net realized losses (gains) on sale of investments and derivatives 688 244

Change in unrealized depreciation (appreciation) of investments and derivatives (1,206) (371)

Purchases of investments and derivatives** (980) 760


Dividends receivable - -


Receivable for investments sold - -

HST refund receivable 6 9

Accounts payable and accrued expenses - 23

Payable for investments purchased - -

Net cash from operating activities 515 3,383


Proceeds from issue of redeemable securities** 582 800


Dividends paid to holders of redeemable securities, net of reinvested dividends - -

Net cash from financing activities (747) (3,642)

Foreign exchange gains (losses) on cash 1 4

Net increase (decrease) in cash and cash equivalents during the period (232) (259)

Cash and cash equivalents, beginning of period 700 725

Cash and cash equivalents, end of period $ 469 $ 470


Interest received $ - $ -

Dividends received, net of withholding tax 67 126


Cash $ 469 $ 470


$ 469 $ 470

* Included as part of cash flows from operating activities.

** Excludes non-cash items related to the issuance of securities in exchange for the net assets of the Stone FTLP.

STONE & CO. RESOURCE PLUS CLASS SCHEDULE OF INVESTMENT PORTFOLIO (UNAUDITED) AS AT JUNE 30, 2016


14


or par value Security (000's) (000's) % Consumer Staples (8.7%)

5,000 AGT Food and Ingredients Inc. $ 173 $ 177 2,400 Kroger Co. 109 115 3,000 WhiteWave Foods Co., Class 'A' 158 183

440 475 8.7% Energy (55.7%)

20,000 Advantage Oil & Gas Ltd. 123 144 600,000 Alston Energy Inc. * 3 -

10,000 Cameco Corp. 253 142 6,600 Canadian Natural Resources Ltd. 257 263

20,000 Canyon Services Group Inc. 119 113 2,500 Cardinal Energy Ltd. 23 25

12,000 Cenovus Energy Inc. 450 214 10,700 Crescent Point Energy Corp. 318 218 70,000 Fair Sky Resources Inc. * - - 10,000 Gibson Energy Inc. 218 150

380,000 Green Coal Canada Ltd. * - - 303,000 Gryphon Petroleum Corp. * 585 82

4,500 Imperial Oil Ltd. 205 184 8,000 Inter Pipeline Ltd. 196 219 4,600 Keyera Corp. 197 182

3,100,000 Nordic Oil and Gas Ltd., Class 'A' 68 - 200,000 North Sea Energy Inc. 10 12 129,000 Pine Cliff Energy Ltd. 139 120

132 PrairieSky Royalty Ltd. 3 3 1,340,000 Shoal Point Energy Ltd. 27 7 1,000,000 Solara Exploration Ltd., Class 'A' * - -

7,000 Suncor Energy Inc. 261 251 53,000 Surge Energy Inc. 177 135 27,000 TORC Oil & Gas Ltd. 269 222 1,800 TransCanada Corp., Subscription Receipts 82 105 6,000 Vermilion Energy Inc. 296 247

725,000 West Hawk Development Corp. * 4 - 4,283 3,038 55.7% Industrials (2.4%)

7,300 Aecon Group Inc. 116 128 116 128 2.4% Materials (24.6%)

5,883,333 Campbell Resources Inc. * 19 - 1,764,700 Cartier Iron Corp. 190 124

10,180 Castle Resources Inc. 14 - 187,500 Elcora Advanced Materials Corp. * 75 64

93,750 Elcora Advanced Materials Corp., Warrants, 2019/05/05 * - 5 10,000 First Quantum Minerals Ltd. 262 91

200,000 Fletcher Nickel Inc. * 130 - 10,000 Goldcorp Inc. 390 247 20,000 Hudbay Minerals Inc. 211 123 45,000 Lundin Mining Corp. 256 196 1,600 LyondellBasell Industries NV, Class 'A' 138 155

800,000 Mustang Minerals Corp. 59 12 2,150,000 Nuinsco Resources Ltd. * 114 -

400,000 Shear Diamonds Ltd. - - 6,176 Tahoe Resources Inc. 79 120

12,000 Teck Resources Ltd., Class 'B' 384 204 2,321 1,341 24.6%

STONE & CO. RESOURCE PLUS CLASS SCHEDULE OF INVESTMENT PORTFOLIO (UNAUDITED) AS AT JUNE 30, 2016


15


or par value Security (000's) (000's) % Transaction Costs (23) Total Investment Portfolio $ 7,137 4,982 91.4% Cash & Other Net Assets (Liabilities) (8.6%) 469 8.6% Total Net Assets (100.0%) $ 5,451 100.0%

Percentages shown relate to investments at carrying value to total net assets of the fund. *Denotes securities that are restricted and/or not traded on an active market.

STONE & CO. RESOURCE PLUS CLASS FUND SPECIFIC NOTES ON FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (UNAUDITED)

16


Risk management The investment objective of the Stone & Co. Resource Plus Class (the “Fund”) is to provide above-average growth of capital by investing in equity securities of issuers with high growth potential with an emphasis on issuers operating in resource sectors, including oil and gas, mining, minerals and forest products, and in equity securities of companies which support these resource-based companies, as well as in securities of income trusts and royalty trusts in the resource sectors. The Fund may invest in an Exchange-Traded Fund where the Exchange-Traded Fund is managed by Stone Asset Management Limited (the “Underlying Exchange-Traded Fund”).

The Fund’s investments may be exposed to a variety of financial instruments risks: market risk (comprised of other market price risk, foreign currency risk and interest rate risk), liquidity risk and credit risk.

The Manager of the Fund, Stone Asset Management Limited (“SAM”), aims to manage risk as part of its investment process through the thorough analysis and careful selection of securities and diversification within resource sectors.

SAM also manages risk by ensuring the portfolio management activities of the Fund comply with its investment objectives and strategies and applicable securities legislation.

Market price risk The value of securities in the Fund’s investment portfolio may be affected by factors specific to the individual securities. Market price fluctuations may also be caused by general economic and financial conditions or industry-specific matters. Political, social and environmental factors can also affect the value of any investment. The value of equity-related securities, such as warrants, options, and convertible securities, is also affected by market price risk.

The most significant exposure to market price risk for the Fund arises from its investment in equity securities. The Fund moderates this risk through a careful selection of securities within the parameters of the investment strategy. If equity prices on the respective stock exchanges had increased or decreased by 5%, as at June 30, 2016 with all other factors remaining constant, net assets would have increased or decreased by approximately $359 (December 31, 2015 – $341). This change is estimated using the weighted average beta of the Fund’s equity portfolio, which is calculated based on an historical correlation against respective stock exchanges. In practice, actual trading results may differ and the difference could be material.

Foreign currency risk Foreign currency risk arises when financial instruments are denominated in a currency other than the Canadian dollar, the functional currency of the Fund. When a Fund buys an investment priced in a foreign currency and the exchange rate between the Canadian dollar and the foreign currency changes unfavorably, it could reduce the value of the Fund’s investment.

The Fund had exposure to the foreign currency shown below in Canadian dollar terms. Also shown below is the potential impact to the Fund’s net assets, all other variables held constant, as a result of 5% changes in this currency relative to the Canadian dollar. In practice, actual trading results may differ and the difference could be material. June 30, 2016

Currency

Investments

Cash

Total

% of net assets

Impact on net assets

U.S. Dollar 452 311 763 14.0 38

December 31, 2015 Currency

Investments

Cash

Total

% of net assets


U.S. Dollar 774 – 774 13.6 39

Interest rate risk A Fund that invests in fixed income securities, such as bonds and money market instruments, is sensitive to changes in interest rates. In general, when interest rates are rising, the value of these investments is falling; when interest rates are falling, the value of these investments is rising. Moreover, fixed income securities with longer terms to maturity are usually more sensitive to changes in interest rates.

There is minimal sensitivity to changes in interest rates for money market securities since these are usually held to maturity and tend to be short-term in nature.

As at June 30, 2016 and December 31, 2015, the Fund did not have significant exposure to interest rate risk.

Liquidity risk Liquidity risk is defined as the risk that a Fund may not be able to settle or meet its obligations on time or at a reasonable price.

The Fund is exposed to daily cash redemptions of redeemable securities. The Fund retains sufficient cash positions to maintain adequate liquidity. The Fund primarily invests in securities that are actively traded in public markets and can be readily disposed of to increase liquidity. The Schedule of Investment Portfolio identifies any securities that are not traded on an active market, being 2.8% of total net assets as at June 30, 2016 (December 31, 2015 – 1.1%).

As at June 30, 2016 and December 31, 2015, all existing liabilities of the Fund are to be settled within three months.

STONE & CO. RESOURCE PLUS CLASS FUND SPECIFIC NOTES ON FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (UNAUDITED) (continued)

17


Series 2016 2015 A 2,446,367 3,424,269 B 71,260 94,784

C n/a 510

F 71,827 51,575

L 8,994 8,653



Concentration risk The following table summarizes the portfolio investments held by the Fund: % of Net Assets Sector

June 30, 2016

December 31, 2015

Consumer Staples 8.7 –

Energy 55.7 69.4

Information Technology – 2.5

Industrials 2.4 –

Materials 24.6 15.6

Cash & Other Net Assets (Liabilities) 8.6 12.5 Total net assets 100.0 100.0

Fair value disclosure The Fund classifies fair value measurements within a hierarchy that gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are:


Level 2: Inputs other than quoted prices included within

Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).


The following fair value hierarchy table presents information about the Fund’s assets measured at fair value on a recurring basis as at June 30, 2016 and December 31, 2015. There were no transfers between Level 1 and Level 2

June 30, 2016 Level 1 Level 2 Level 3 Total

Equities $4,831 $64 $ 87 $ 4,982

Total Investment Portfolio

$4,831

$64

$ 87

$ 4,982

December 31, 2015


Equities $ 4,922 $ – $ 57 $ 4,979


$ 4,922

$ –

$ 57

$ 4,979


18

During the periods ended June 30, 2016 and December 31, 2015, the reconciliation of investments categorized in Level 3 are as follows:

June 30, 2016

Beginning Balance $ 57

Purchases –

Sales –

Transfers into Level 3 16

Transfers out of Level 3 –

Realized gains (losses) (20)

Change in unrealized appreciation (depreciation) 34

Ending Balance $ 87

Total change in unrealized appreciation (depreciation) during the period for assets held as at June 30, 2016

$ (38)

December 31, 2015


Purchases 2

Sales (38)

Transfers into Level 3 –


Realized gains (losses) –

Change in unrealized appreciation (depreciation) 51 Ending Balance $ 57 Total change in unrealized appreciation (depreciation) during the period for assets held as at December 31, 2015

$ 25

The Portfolio Manager of the Fund is responsible for performing the valuation of fair value measurements included in the financial statements, including Level 3 fair values. The valuation processes and results for recurring measurements are reviewed and approved by the Portfolio Manager of the Fund and the CIO quarterly, and together with the Manager annually. The Portfolio Manager maintains policies for the determination of fair value of portfolio holdings of restricted shares and restricted warrants in public listed entities. The International Private Equity and Venture Capital (“IPEV”) Valuation Guidelines are reviewed for both appropriate valuation methodologies and consistency of the determination of fair value for investments in private companies. The accessibility of information available is also a factor in the determination of appropriate valuation methodologies and, if determined, is reviewed by third parties.


19

Gryphon Petroleum Corp. is an undercapitalized, privately held, junior resource corporation that primarily engages resource operations in joint ventures to explore and extract on properties held or controlled by Gryphon Petroleum Corp. Fair value, which comprises 1.5% of the Fund’s NAV (December 31, 2015 – 1.0%), has been determined based on an assessment of book value and utilization of industry benchmarks. The Fund’s Level 3 securities, other than warrants, primarily consist of junior resource issuers with insignificant revenues and without prospects of additional fund raises, profits or material cash flows, nor prospects for public trading (or the resumption of trading), or public listing and are collectively not significant to the Fund’s Portfolio. Most of these identified securities are in the various process of wind-down, bankruptcy or delisting, resulting in a fair value of nil. The unobservable inputs used in the fair value measurement of these investments were:

Description Fair Value as at

June 30, 2016 Valuation Technique Unobservable Inputs

Amount/Range Shares in private junior oil and gas exploration corporations

$ 82 Industry Benchmarks* Reserve value per BOE proven and probable reserves

$ 6.21 per BOE

Value per net undeveloped acres $ 54.23 per acre Small Cap Cash Flow Multiplier 9.1x

If the benchmarks were increased or decreased by 10%, the change in the fair value of the investment would range from $76 to $88. * GMP and Peters & Co. energy research

Restricted warrants in junior listed resource corporations

$ 5 Black-Scholes pricing model

Discount factor (due to market volatility and the illiquidity of underlying security) on fair value determined under pricing model for restricted hold period

25%

If the discount factors were decreased to 20% or increased to 30%, the change in the fair value of restricted warrants is insignificant.

Description Fair Value as at

December 31, 2015 Valuation Technique Unobservable Inputs

Amount/Range Shares in private junior oil and gas exploration corporations

$ 57 Industry Benchmarks* Reserve value per BOE proven and probable reserves

$ 6.59 per BOE

Value per net undeveloped acres $ 72.04 per acre Small Cap Cash Flow Multiplier 5.2x Small Cap Discount 60%

If the benchmarks were increased or decreased by 10%, the change in the fair value of the investments would range from $55 to $64. * GMP and Peters & Co. energy research

Restricted warrants in junior listed resource corporations

$ – Black-Scholes pricing model

Discount factor (due to market volatility and the illiquidity of underlying security) on fair value determined under pricing model for restricted hold period

25%

If the discount factors were decreased to 20% or increased to 30%, the change in the fair value of restricted warrants is insignificant.


20


Category

Net gains (losses)

2016 2015


HFT $ 3 $ 29

Designated at inception 582 226

Total $ 585 $ 255

STONE & CO. FLAGSHIP GROWTH & INCOME FUND CANADA


21

STATEMENTS OF FINANCIAL POSITION AS AT

(in thousands of dollars; per security amounts June 30, 2016 December 31, 2015 are expressed in whole dollars) (Unaudited) (Audited)

Assets Current assets Investments (Note 2) $ 93,501 $ 99,545 Cash 1,935 2,010 Dividends receivable 57 55 Interest receivable 191 219 Receivable for investments sold 9 928 Subscriptions receivable 112 110 HST refund receivable - 41

95,805 102,908 Liabilities Current liabilities Payable for investments purchased 78 1,184 Redemptions payable 136 101 Accounts payable and accrued expenses (Note 8) 100 32 Distributions payable 363 - Derivative liabilities: Written options (Note 2) 17 4 Unrealized loss on forward foreign currency contracts 41 1

735 1,322 Net assets attributable to holders of redeemable securities (Note 3) $ 95,070 $ 101,586

Net assets attributable to holders of redeemable securities per series Series AA $ 12,744 $ 12,013 Series BB 2,699 3,160 Series FF 4,235 3,051 Series L 4,833 4,363 Series T8A 21,984 19,044 Series T8B 44,476 55,215 Series T8C 4,099 4,740

$ 95,070 $ 101,586 Net assets attributable to holders of redeemable securities per security Series AA $ 18.17 18.56 Series BB 17.53 17.94 Series FF 19.20 19.55 Series L 13.75 14.08 Series T8A 7.71 8.21 Series T8B 7.48 7.98 Series T8C 7.46 7.96

STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) FOR THE PERIODS ENDED JUNE 30 (Note 1) (in thousands of dollars; per security amounts are expressed in whole dollars) 2016 2015 Income Net gains (losses) on investments and derivatives (Note 2): Dividends $ 293 $ 345 Interest for distribution purposes 618 700 Net realized gains (losses) on sale of investments and derivatives 3,348 4,705 Change in unrealized appreciation (depreciation) of investments and derivatives (5,291) 1,012 Net gains (losses) on investments and derivatives (1,032) 6,762 Foreign exchange gains (losses) on cash (185) - Total income (1,217) 6,762 Expenses (Note 4) Management fees (Note 8) 759 877 Securityholder reporting costs 86 100 Transfer agency fees 51 46 Custodian fees 26 25 Filing fees 12 13 Independent Review Committee fees 5 4 Audit fees 12 11 Legal fees 2 2 Transaction costs (Note 2) 13 10 Foreign withholding taxes 9 7 Total expenses 975 1,095 Expenses waived/absorbed by the Manager (1) (15) Total expenses (net) 974 1,080 Increase (decrease) in net assets attributable to holders of redeemable securities $ (2,191) $ 5,682

Increase (decrease) in net assets attributable to holders of redeemable securities per series Series AA $ (237) $ 491 Series BB (75) 191 Series CC* n/a 45 Series FF (34) 103 Series L (94) 132 Series T8A (367) 911 Series T8B (1,275) 3,515 Series T8C (109) 294

$ (2,191) $ 5,682 Increase (decrease) in net assets attributable to holders of redeemable securities per security Series AA $ (0.34) $ 0.91 Series BB (0.45) 0.92 Series CC* n/a 0.97 Series FF (0.18) 0.95 Series L (0.28) 0.60 Series T8A (0.14) 0.42 Series T8B (0.20) 0.44 Series T8C (0.19) 0.43

* On September 4, 2015, all Series CC securities were re-designated to Series L securities.



22


2016 Series In thousands AA BB CC* FF L T8A T8B T8C 2016 Total Net assets attributable to holders of redeemable securities, beginning of period $ 12,013 3,160 n/a 3,051 4,363 19,044 55,215 4,740 $ 101,586 Increase (decrease) in net assets attributable to holders of redeemable securities (237) (75) - (34) (94) (367) (1,275) (109) (2,191) Redeemable securityholder transactions Proceeds from issue of redeemable securities 4,452 395 - 2,339 903 7,296 1,542 25 16,952 Reinvestment of distributions to holders of redeemable securities 8 2 - 2 3 311 471 58 855 Redemption of redeemable securities (3,484) (781) - (1,121) (339) (3,437) (9,466) (433) (19,061) Net securityholder transactions 976 (384) - 1,220 567 4,170 (7,453) (350) (1,254) Distributions to securityholders of redeemable securities Net investment income Dividends - - - - - - - - Capital gains (8) (2) - (2) (3) (245) (571) (52) (883) Return of capital - - - - - (618) (1,440) (130) (2,188) Total distributions to securityholders of redeemable securities (8) (2) - (2) (3) (863) (2,011) (182) (3,071) Net assets attributable to holders of redeemable securities, end of period $ 12,744 2,699 n/a 4,235 4,833 21,984 44,476 4,099 $ 95,070

Securities issued and outstanding Securities, beginning of period 647 176 n/a 156 310 2,319 6,919 596 Securities issued for cash 247 23 - 124 66 935 206 2 Securities issued on reinvestment of distributions - - - - - 40 62 8 Securities redeemed (193) (45) - (59) (25) (443) (1,242) (57) Securities, end of period 701 154 n/a 221 351 2,851 5,945 549

2015 Series In thousands AA BB CC* FF L T8A T8B T8C 2015 Total Net assets attributable to holders of redeemable securities, beginning of period $ 9,377 3,621 856 1,430 2,594 16,469 67,036 5,577 $ 106,960 Increase (decrease) in net assets attributable to holders of redeemable securities 491 191 45 103 132 911 3,515 294 5,682 Redeemable securityholder transactions Proceeds from issue of redeemable securities 1,916 131 77 964 815 3,669 2,812 24 10,408 Reinvestment of distributions to holders of redeemable securities 6 2 - 1 2 272 492 64 839 Redemption of redeemable securities (1,895) (804) (263) (256) (234) (1,864) (11,381) (512) (17,209) Net securityholder transactions 27 (671) (186) 709 583 2,077 (8,077) (424) (5,962) Distributions to securityholders of redeemable securities Net investment income - - - - - - - - - Dividends - - - - - - - - - Capital gains (6) (2) (1) (1) (2) (206) (711) (61) (990) Return of capital - - - - - (510) (1,762) (152) (2,424) Total distributions to securityholders of redeemable securities (6) (2) (1) (1) (2) (716) (2,473) (213) (3,414) Net assets attributable to holders of redeemable securities, end of period $ 9,889 3,139 714 2,241 3,307 18,741 60,001 5,234 $ 103,266

Securities issued and outstanding Securities, beginning of period 547 218 51 80 199 2,010 8,399 701 Securities issued for cash 106 8 5 51 59 432 336 2 Securities issued on reinvestment of distributions - - - - - 32 60 8 Securities redeemed (106) (46) (15) (13) (17) (219) (1,372) (62) Securities, end of period 547 180 41 118 241 2,255 7,423 649

* On September 4, 2015, all Series CC securities were re-designated to Series L securities.



23





Increase (decrease) in net assets attributable to holders of redeemable securities $ (2,191) $ 5,682

Adjustments for:



Change in unrealized depreciation (appreciation) of investments and derivatives 5,291 (1,012)



Dividends receivable (2) 8

Interest receivable 28 69

Receivable for investments sold 919 (2,345)



Payable for investments purchased (1,106) 3,077

Derivative liabilities: unrealized loss on forward currency contracts 40 -

Net cash from operating activities 3,912 11,498




Distributions paid to holders of redeemable securities, net of reinvested distributions (1,853) (2,167)

Net cash from financing activities (3,929) (8,746)


Net increase (decrease) in cash and cash equivalents during the period (17) 2,752

Cash and cash equivalents, beginning of period 2,010 378






Cash $ 1,935 $ 3,136


$ 1,935 $ 3,136


STONE & CO. FLAGSHIP GROWTH & INCOME FUND CANADA SCHEDULE OF INVESTMENT PORTFOLIO (UNAUDITED) AS AT JUNE 30, 2016


24


or par value Security (000's) (000's) % Equities & Investment Funds Consumer Discretionary (1.1%)

1,500 Carter's Inc. 160 207 11,000 Gildan Activewear Inc. 388 416 9,000 Magna International Inc., Class 'A' 529 408

1,077 1,031 1.1% Consumer Staples (1.7%)

6,300 Coca-Cola Co. 189 371 3,200 CVS Health Corp. 392 398

11,500 Kroger Co. 527 549 2,800 Sanderson Farms Inc. 252 315

1,360 1,633 1.7% Energy (3.3%)

12,000 AltaGas Ltd. 364 377 15,000 Cameco Corp. 289 213 16,000 Cenovus Energy Inc. 352 286 12,100 Enbridge Inc. 362 662 9,500 Inter Pipeline Ltd. 233 260 8,000 Keyera Corp. 127 316

180 PrairieSky Royalty Ltd. 5 4 17,900 Suncor Energy Inc. 524 642 1,300 TransCanada Corp., Subscription Receipts 59 76 8,000 Vermilion Energy Inc. 414 329

2,729 3,165 3.3% Financial Services (5.9%)

16,300 Bank of Montreal, 3.90%, Preferred, Class 'B', Series '25', Variable Rate, Callable 318 323 11,000 Bank of Nova Scotia 449 696 1,900 Bank of Nova Scotia, Preferred, Series '30', Convertible, Callable 37 38

15,500 Bank of Nova Scotia, Preferred, Series '32', Variable Rate, Convertible, Callable 301 308 14,000 Brookfield Asset Management Inc., Class 'A' 386 598 5,000 Element Financial Corp., Preferred, Series 'G', Variable Rate, Perpetual 122 125

400 Fairfax Financial Holdings Ltd. 254 278 20,000 Manulife Financial Corp. 323 353 20,000 Power Financial Corp. 641 593 72,000 Pure Industrial Real Estate Trust 194 371 30,000 Pure Multi-Family REIT L.P., Class 'A' 189 226 9,500 Royal Bank of Canada 344 725

13,000 Toronto-Dominion Bank 377 721 26,000 Tricon Capital Group Inc. 226 226

4,161 5,581 5.9% Health Care (1.5%)

3,300 Abbott Laboratories 77 168 700 Becton, Dickinson & Co. 118 154

1,700 Johnson & Johnson 129 268 2,600 Medtronic PLC 183 293 1,500 Stryker Corp. 77 233 4,500 Zoetis Inc. 184 277

768 1,393 1.5%



25


or par value Security (000's) (000's) % Industrials (1.4%)

280 Brookfield Business Partners L.P. 10 7 3,000 Canadian National Railway Co. 65 229 2,000 Canadian Pacific Railway Ltd. 173 333 2,600 Matthews International Corp., Class 'A' 121 188

21,000 Transcontinental Inc., Class 'A' 358 368 9,000 TransForce Inc. 178 216

905 1,341 1.4% Information Technology (1.4%)

1,700 Accenture PLC, Class 'A' 57 250 1,500 CPI Card Group Inc. 9 10 4,500 Fidelity National Information Services Inc. 392 431 2,100 International Business Machines Corp. 254 414 5,000 Oracle Corp. 127 266

839 1,371 1.4% Investment Funds (36.4%)

1,172,697 Stone & Co. EuroPlus Dividend Growth Fund, Series 'A' 12,030 14,166 2,542,000 Stone & Co. Flagship Global Growth Fund, Series 'A' 12,089 20,425

24,119 34,591 36.4% Materials (1.6%)

2,700 Agrium Inc. 160 316 16,000 Chemtrade Logistics Income Fund 257 285 2,000 Ecolab Inc. 95 308 1,900 International Flavors and Fragrances Inc. 111 311 1,800 Praxair Inc. 130 263

753 1,483 1.6% Telecommunications Services (0.8%)

4,000 BCE Inc. 125 245 5,000 Rogers Communications Inc., Class 'B' 174 262 6,000 TELUS Corp. 188 250

487 757 0.8% Utilities (1.3%)

14,000 Brookfield Infrastructure Partners L.P. 212 818 10,000 Fortis Inc. 260 437

472 1,255 1.3%



26


or par value Security (000's) (000's) % Bonds Corporate Bonds (24.2%)

201,000 Algonquin Power Co., Callable, 5.50%, 2018/07/25 207 213 376,000 Algonquin Power Co., Restricted, 4.82%, 2021/02/15 382 401 300,000 Ally Financial Inc., 3.25%, 2018/02/13 373 391 286,000 AltaGas Ltd., Callable, 3.72%, 2021/09/28 296 301 510,000 AltaLink L.P., Series '2016-1', Callable, 2.75%, 2026/05/29 510 526 655,000 Bank of Montreal, Callable, 3.21%, 2018/09/13 688 683 297,000 Bank of Montreal, Variable Rate, Callable, 3.34%, 2025/12/08 297 302 480,000 Bank of Nova Scotia, 1.33%, 2018/05/01 480 480 644,000 Bell Canada, Callable, 3.50%, 2018/09/10 654 671

214,000 Blackbird Infrastructure 407 General Partnership,Series 'B', Variable Rate, Callable, 1.71%, 2021/10/08 212 214

160,000 BRP Finance ULC, Series '3', Callable, 5.25%, 2018/11/05 174 172 575,000 Canadian Imperial Bank of Commerce, 1.70%, 2018/10/09 580 580 197,000 Canadian Imperial Bank of Commerce, 1.90%, 2021/04/26 197 200 159,000 Choice Properties REIT, Series 'E', Callable, 2.30%, 2020/09/14 159 161 198,000 Citigroup Inc., 3.39%, 2021/11/18 198 208 196,000 Citigroup Inc., Series 'MPLE', Restricted, 4.09%, 2025/06/09 197 202 150,000 Diamond 1 Finance Corp. / Diamond 2 Finance Corp., Callable, 8.35%, 2046/07/15 195 210 283,000 Emera Inc., 2.90%, 2023/06/16 283 287 683,000 Enbridge Gas Distribution Inc., Callable, 4.77%, 2021/12/17 789 788 588,000 Enbridge Inc., Callable, 3.16%, 2021/03/11 599 605 341,000 ENMAX Corp., Callable, 3.81%, 2024/12/05 341 360 358,000 First Capital Realty Inc., Series 'K', Callable, 4.95%, 2018/11/30 388 384 150,000 FMC Technologies Inc., 2.00%, 2017/10/01 198 194 269,000 Ford Credit Canada Ltd., 3.14%, 2019/06/14 269 277 795,000 Ford Credit Canada Ltd., Restricted, 2.45%, 2020/05/07 792 799 191,000 FortisBC Energy Inc., Callable, 2.58%, 2026/04/08 191 195 402,000 General Motors Financial of Canada Ltd., Restricted, Callable, 3.08%, 2020/05/22 404 407 193,000 Goldman Sachs Group Inc. (The), 3.55%, 2021/02/12, 3.55%, 2021/02/12 193 204 493,000 Greater Toronto Airports Authority, Callable, 4.53%, 2041/12/02 519 604 300,000 HCA Inc., 3.75%, 2019/03/15 382 404 193,000 Heathrow Funding Ltd., Class 'A-34', Restricted, 3.25%, 2027/05/21 191 199 160,000 HollyFrontier Corp., Callable, 5.88%, 2026/04/01 212 223 396,000 Hydro One Inc., 1.84%, 2021/02/24 400 402 480,000 Hydro One Inc., Callable, 2.77%, 2026/02/24 480 502 279,000 Inter Pipeline Ltd., Callable, 3.78%, 2022/05/30 292 298 377,000 Inter Pipeline Ltd., Callable, 3.84%, 2018/07/30 396 392 234,000 Kraft Canada Inc., Restricted, Callable, 2.70%, 2020/07/06 234 238 169,000 Loblaw Cos. Ltd., Callable, 5.90%, 2036/01/18 194 212 358,000 Lower Mattagami Energy L.P., Series '2011-3', Callable, Restricted, 4.33%, 2021/05/18 402 403 377,000 Lower Mattagami Energy L.P., Series '2014-1', Restricted, Callable, 3.42%, 2024/06/20 404 413 400,000 Morgan Stanley, 3.13%, 2021/08/05 399 416 195,000 NAV Canada, Callable, 3.53%, 2046/02/23 195 208 116,000 Nova Scotia Power Inc., Callable, 3.61%, 2045/05/01 116 116 295,000 NXP BV / NXP Funding LLC, Callable, 4.13%, 2021/06/01 382 390 995,000 OPB Finance Trust, Restricted, Callable, 1.88%, 2022/02/24 995 1,004

92,000 Pembina Pipeline Corp., Callable, 4.89%, 2021/03/29 100 101 908,000 PSP Capital Inc., Series '7', Restricted, 3.29%, 2024/04/04 917 1,008 385,000 Rogers Communications Inc., 2.80%, 2019/03/13 393 396 135,000 Rogers Communications Inc., 6.11%, 2040/08/25 157 170 188,000 Rogers Communications Inc., Callable, 4.00%, 2024/03/13 198 206 196,000 Royal Bank of Canada, 2.26%, 2018/03/12 200 199 610,000 South Coast British Columbia Transportation Authority, 3.05%, 2025/06/04 619 656 171,000 TELUS Corp., 1.50%, 2018/03/27 169 171 739,000 TELUS Corp., Series 'CG', Callable, 5.05%, 2019/12/04 815 815 227,000 Toronto Hydro Corp., Callable, 3.54%, 2021/11/18 249 250



27


or par value Security (000's) (000's) % 453,000 Toronto Hydro Corp., Series '8', Callable, 2.91%, 2023/04/10 469 482 399,000 Toronto-Dominion Bank, 1.69%, 2020/04/02 399 402 393,000 Toronto-Dominion Bank, 2.17%, 2018/04/02 398 399 299,000 Toronto-Dominion Bank, Variable Rate, Callable, 2.98%, 2025/09/30 294 300 270,000 Ventas Canada Finance Ltd., Series 'A', 3.00%, 2019/09/30 269 277 339,000 Wells Fargo Financial Canada Corp., 2.94%, 2019/07/25 352 354

22,437 23,025 24.2% Federal Bonds (7.6%)

1,365,000 Canada Housing Trust No. 1, 1.75%, 2018/06/15 1,391 1,393 1,565,000 Canada Housing Trust No. 1, 1.95%, 2025/12/15 1,571 1,618

920,000 Canada Housing Trust No. 1, 2.35%, 2023/09/15 955 987 2,530,000 Government of Canada, 1.50%, 2026/06/01 2,619 2,634

344,000 Government of Canada, 3.50%, 2045/12/01 468 485 100,000 United States Treasury Note / Bond, 2.50%, 2046/05/15 135 135

7,139 7,252 7.6% Provincial Bonds (10.1%)

1,461,000 Province of British Columbia, 3.20%, 2044/06/18 1,459 1,611 207,000 Province of Manitoba, 4.10%, 2041/03/05 237 249

1,239,000 Province of Ontario, 3.45%, 2045/06/02 1,326 1,412 889,000 Province of Ontario, 4.65%, 2041/06/02 1,090 1,191 798,000 Province of Ontario, 4.70%, 2037/06/02 1,002 1,047 579,000 Province of Quebec, 4.25%, 2043/12/01 658 738 898,000 Province of Quebec, 4.50%, 2019/12/01 1,009 1,002 337,000 Province of Quebec, 5.00%, 2038/12/01 436 460 705,000 Province of Quebec, 6.25%, 2032/06/01 998 1,040 584,000 Province of Quebec, Series 'B112', 3.50%, 2045/12/01 618 666 174,000 Province of Saskatchewan, 3.90%, 2045/06/02 196 207

9,029 9,623 10.1% Transaction Costs (8) Total Investment Portfolio 76,267 93,501 98.3% Written Options (0.0%) (17) 0.0% Unrealized Gains (Losses) on Forward Currency Contracts (0.0%) (41) 0.0% Cash & Other Net Assets (Liabilities) (1.7%) 1,627 1.7% Total Net Assets (100.0%) $ 95,070 100.0%

Percentages shown relate to investments at carrying value to total net assets of the fund.

Schedule of Written Options

Option Number of Number of Expiration Strike Premium Received Current

Value Underlying Security Type Options Shares Date Price (000s) (000s) CVS Health Corp. Call (32) (3,200) 2016/07/15 $ 95 USD $ (11) $ (6) Magna International Inc., Class 'A' Call (45) (4,500) 2016/08/19 52 CAD (3) (1) Sanderson Farms Inc. Call (28) (2,800) 2016/08/19 90 USD (9) (10)

$ (23) $ (17)

Schedule of derivative liabilities - currency forward contracts Currency to be delivered Currency to be received CAD Settlement Credit Fair value Fair value as at Fair value Fair value as at Contract Appreciation Date Counterparty Rating (local) December 31, 2015 (local) December 31, 2015 Price (Depreciation) 2016/07/13 RBC Capital Markets AA $ 24 CAD $ 24 $ 19 USD $ 25 0.77 $ 1 2016/07/13 RBC Capital Markets AA 1,481 USD 1,923 1,882 CAD 1,882 0.77 (41) 2016/07/13 RBC Capital Markets AA 37 USD 49 48 CAD 48 0.77 (1) 2016/07/13 RBC Capital Markets AA 13 USD 17 17 CAD 17 0.77 -

$ (41)

STONE & CO. FLAGSHIP GROWTH & INCOME FUND CANADA FUND SPECIFIC NOTES ON FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (UNAUDITED)

28


Risk management The investment objective of the Stone & Co. Flagship Growth & Income Fund Canada (the “Fund”) is to provide superior investment returns combined with a steady stream of current income by investing primarily in Canadian equity and fixed-income securities. The Fund may invest in other Investment Funds where the other Investment Funds are managed by Stone Asset Management Limited (the “Underlying Investment Funds”).


The Manager of the Fund, Stone Asset Management Limited (“SAM”), aims to manage risk as part of its investment process through the thorough analysis and careful selection of securities and diversification across asset classes and industry sectors. The fixed income component of the Fund is managed by a Portfolio Sub-advisor, Aviva Investors Canada Inc.

SAM also manages risk by ensuring the portfolio management activities of the Fund comply with its investment objectives and strategies and applicable securities legislation.

Market price risk The value of securities in the Fund’s investment portfolio may be affected by factors other than those specific to the individual securities. Market price fluctuations may be caused by general economic and financial conditions or industry-specific matters. Political, social and environmental factors can also affect the value of any investment. The value of equity-related securities, such as warrants, options, and convertible securities, is also affected by market price risk.

The most significant exposure to market price risk for the Fund arises from its investment in equity securities. The Fund and the Underlying Investment Funds moderate this risk through a careful selection of securities within the parameters of the investment strategy. The Fund may be exposed to indirect market price through its pro-rata investment in the Underlying Investment Funds. If equity prices on the respective stock exchanges had increased or decreased by 5%, as at June 30, 2016, with all other factors remaining constant, net assets would have increased or decreased by approximately $1,838 (December 31, 2015 – $2,270). This change is estimated using the weighted average beta of the Fund’s equity portfolio, which is calculated based on an historical correlation against respective stock exchanges.

In practice, actual trading results may differ and the difference could be material.


The Fund had foreign currency risk from direct investments as well as indirect foreign currency risk in its investments in the Underlying Investment Funds. The Fund’s exposure to currency risk is based on its direct investment and on the Fund’s pro-rata share of the Underlying Investment Funds at period end, which are shown below in Canadian dollar terms. Also shown below is the potential impact to the Fund’s net assets, all other variables held constant, as a result of 5% changes in these currencies relative to the Canadian dollar. In practice, actual trading results may differ and the difference could be material.

June 30, 2016

Currency

Investments

Cash

Total

% of net

assets


British Pound 7,882 3 7,885 8.3 394 Danish Krone 445 – 445 0.5 22

Euro 10,112 – 10,112 10.6 506

Hong Kong Dollar 479 – 479 0.5 24

Swiss Franc 2,019 – 2,019 2.1 101

U.S. Dollar 16,625 674 17,299 18.2 865

Totals 37,562 677 38,239 40.2 1,912

December 31, 2015

Currency

Investments

Cash

Total

% of net

assets


British Pound 11,091 – 11,091 10.9 555 Euro 10,509 – 10,509 10.3 525

Hong Kong Dollar 514 – 514 0.5 26

Swedish Krona 178 – 178 0.2 9

Swiss Franc 1,334 – 1,334 1.3 67

U.S. Dollar 18,560 812 19,372 19.1 969

Totals 42,702 812 43,514 42.8 2,177


STONE & CO. FLAGSHIP GROWTH & INCOME FUND CANADA FUND SPECIFIC NOTES ON FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (UNAUDITED) (continued)

29

An increase or decrease of 1% in interest rates would increase or decrease fair value for the period ended June 30, 2016 by $3,309 (December 31, 2015 – $3,080). The Fund’s sensitivity to interest rate changes was estimated using the weighted average duration of the bonds. In practice, actual results may differ from this sensitivity analysis and the difference could be material.

The table below summarizes the exposure to interest rate risks of the Fund and the pro-rata share of the Underlying Investment Funds:

Term of Bonds

Bonds 1 year 1-3 years 3-5 years 5 years Total

June 30, 2016 – 7,397 7,161 25,342 39,900 December 31, 2015 – 10,843 7,274 22,089 40,206


The Fund is exposed to daily cash redemptions of redeemable securities. The Fund and the Underlying Investment Funds retain sufficient cash positions to maintain adequate liquidity. The Fund and the Underlying Investment Funds primarily invest in securities that are actively traded in public markets and can be readily disposed of to increase liquidity. The Schedule of Investment Portfolio identifies any securities that are not traded on an active market, being nil% of total net assets as at June 30, 2016 (December 31, 2015 – nil%).

As at June 30, 2016 and December 31, 2015, all existing liabilities of the Fund and the Underlying Investment Funds are to be settled within three months.


Series 2016 2015 AA 682,785 537,425 BB 165,801 207,466

CC n/a 46,379

FF 191,875 107,800

L 333,912 220,031

T8A 2,595,958 2,174,858

T8B 6,367,646 7,819,079

T8C 576,038 675,392


The Fund is also exposed to counterparty credit risk on currency forward contracts. The counterparty credit risk for currency forward contracts is managed by using counterparties with minimum credit ratings of A and limiting the term of currency forward contracts to 30 days. The credit rating of the counterparty to the Fund’s currency forward contract was AA as at June 30, 2016 (December 31, 2015 – AA).

The Fund and Underlying Investment Funds were invested in debt securities with the following credit ratings:

June 30, 2016 December 31, 2015

Rating*

As percent of net assets (%)

As percent of net assets (%)

AAA 10.4 12.6 AA 12.5 3.6

A 9.5 14.9

BBB 8.3 8.1

BB 1.2 0.4

Total 41.9 39.6 * Credit ratings obtained from the Standard & Poor’s Rating Services.


30


% of Net Assets Sector

June 30, 2016

December 31, 2015

Consumer Discretionary 1.1 1.1 Consumer Staples 1.7 0.8

Corporate Bonds 24.2 19.9

Energy 3.3 3.2

Federal Bonds 7.6 9.7

Financial Services 5.9 4.6

Health Care 1.5 1.6

Industrials 1.4 1.7

Materials 1.6 1.7

Investment Funds 36.4 39.8

Provincial Bonds 10.1 10.0

Information Technology 1.4 1.6

Telecommunications Services 0.8 1.1

Utilities 1.3 1.2

Written Options* – –

Cash & Other Net Assets (Liabilities) 1.7 2.0

Total net assets 100.0 100.0

* is less than 0.05%.

The following table summarizes the portfolio investments by asset type which are held by the Fund:

% of Net Assets

Asset Type

June 30, 2016

December 31, 2015

Equities & Investment Funds 56.4 58.4 Bonds 41.9 39.6

Cash & Other Net Assets (liabilities) 1.7 2.0

Total net assets 100.0 100.0

Fair value disclosure The Fund classifies fair value measurements within a hierarchy that gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are:


Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).


The following fair value hierarchy table presents information about the Fund’s assets measured at fair value on a recurring basis as at June 30, 2016 and December 31, 2015. There were no transfers between Level 1 and Level 2.

June 30, 2016

Level 1

Level 2

Level 3

Total

Equities $ 19,010 $ – $ – $ 19,010 Bonds – 39,900 – 39,900

Investment Funds 34,591 – – 34,591

Total Investment

Portfolio $ 53,601 $ 39,900 $ – $ 93,501

Written Options

$ (17)

$ –

$ –

$ (17)

Derivative Asset* - currency forward

Contracts $ – $ – $ – $ –

Derivative Liability*

- currency forward

contracts $ – $ (41) (1

$ – $ (41)

* As at June 30, 2016, there were four open currency contracts and no amounts were offset.

December 31, 2015


Equities $ 18,955 $ – $ – $ 18,955

Bonds – 40,207 – 40,207 Investment Funds 40,383 – – 40,383


$ 59,338

$ 40,207

$ –

$ 99,545

Written Options $ (4) $ – $ – $ (4)

Derivative Asset*

- currency forward contracts $ – $ 837 $ – $837

Derivative Liability*

- currency forward contracts $ – $ (838) $ – $ (838)

* As at December 31, 2015, there was only one open currency contract and no amounts were offset.


31

During the period ended June 30, 2016, there were no securities categorized as Level 3. During the period ended December 31, 2015, the reconciliation of investments categorized as Level 3 are as follows: December 31, 2015


Purchases –

Sales (9)

Transfers into Level 3 –


Realized gain (loss) (16)

Change in unrealized appreciation (depreciation) –

Ending Balance $ –

Total change in unrealized appreciation (depreciation) during the period for assets held as at December 31, 2015

$ –


Net gains (losses) (loss) Category 2016 2015


HFT $ 68 $ 8

Designated at inception (1,100) 6,754

Total $ (1,032) $ 6,762

STONE & CO. FLAGSHIP GLOBAL GROWTH FUND


32


AS AT



Assets

Current assets


Cash 1,659 6,964


Receivable for investments sold 1,815 -

Subscriptions receivable 115 617


57,889 64,685

Liabilities

Current liabilities

Payable for investments purchased 960 832

Redemptions payable 238 43

Accounts payable and accrued expenses (Note 8) 118 148

Distributions payable 13 -

1,329 1,023



Series A $ 38,997 $ 44,046

Series B 3,726 4,500

Series F 7,459 9,341

Series L 3,812 3,566

Series T8A 2,498 2,121

Series T8B 51 60

Series T8C 17 28

$ 56,560 $ 63,662


Series A $ 8.03 $ 8.87

Series B 7.54 8.34

Series F 9.25 10.16

Series L 19.48 21.55

Series T8A 8.33 9.60

Series T8B 7.93 9.17

Series T8C 7.94 9.18

STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) FOR THE PERIODS ENDED JUNE 30 (Note 1) (in thousands of dollars; per security amounts are expressed in whole dollars) 2016 2015 Income Net gains (losses) on investments and derivatives (Note 2): Dividends $ 440 $ 290 Interest for distribution purposes 2 - Net realized gains (losses) on sale of investments and derivatives 1,956 4,398 Change in unrealized appreciation (depreciation) of investments and derivatives (7,329) 2,231 Net gains (losses) on investments and derivatives (4,931) 6,919 Foreign exchange gains (losses) on cash (146) (71) Total income (5,077) 6,848 Expenses (Note 4) Management fees 631 490 Securityholder reporting costs 85 78 Transfer agency fees 51 31 Custodian fees 12 10 Filing fees 12 13 Independent Review Committee fees 5 4 Audit fees 10 9 Legal fees 2 1 Transaction costs (Note 2) 64 61 Foreign withholding taxes 41 31 Total expenses 913 728 Expenses waived/absorbed by the Manager - - Total expenses (net) 913 728 Increase (decrease) in net assets attributable to holders of redeemable securities $ (5,990) $ 6,120

Increase (decrease) in net assets attributable to holders of redeemable securities per series Series A $ (4,117) $ 4,968 Series B (417) 477 Series C* n/a 12 Series F (859) 293 Series L (369) 230 Series T8A (218) 124 Series T8B (7) 8 Series T8C (3) 8

$ (5,990) $ 6,120 Increase (decrease) in net assets attributable to holders of redeemable securities per security Series A $ (0.82) $ 1.05 Series B (0.81) 1.03 Series C* n/a 1.01 Series F (0.86) 1.20 Series L (1.95) 2.33 Series T8A (0.78) 1.13 Series T8B (0.88) 1.11 Series T8C (1.09) 1.15

* On September 4, 2015, all Series C securities were re-designated as Series L securities.



33


2016 Series In thousands A B C* F L T8A T8B T8C 2016 Total Net assets attributable to holders of redeemable securities, beginning of period $ 44,046 4,500 n/a 9,341 3,566 2,121 60 28 $ 63,662 Increase (decrease) in net assets attributable to holders of redeemable securities (4,117) (417) - (859) (369) (218) (7) (3) (5,990) Redeemable securityholder transactions Proceeds from issue of redeemable securities 9,232 439 - 4,102 1,647 933 - - 16,353 Reinvestment of distributions to holders of redeemable securities - - - - - 39 - 1 40 Redemption of redeemable securities (10,164) (796) - (5,125) (1,032) (266) - (8) (17,391) Net securityholder transactions (932) (357) - (1,023) 615 706 - (7) (998) Distributions to securityholders of redeemable securities Net investment income - - - - - - - - - Dividends - - - - - - - - - Capital gains - - - - - - - - - Return of capital - - - - - (111) (2) (1) (114) Total distributions to securityholders of redeemable securities - - - - - (111) (2) (1) (114) Net assets attributable to holders of redeemable securities, end of period $ 38,997 3,726 n/a 7,459 3,812 2,498 51 17 $ 56,560

Securities issued and outstanding Securities, beginning of period 4,968 540 n/a 920 165 221 6 3 Securities issued for cash 1,127 57 - 434 83 105 - - Securities issued on reinvestment of distributions - - - - - 5 - - Securities redeemed (1,241) (103) - (547) (53) (31) - (1) Securities, end of period 4,854 494 n/a 807 195 300 6 2

2015 Series In thousands A B C* F L T8A T8B T8C 2015 Total Net assets attributable to holders of redeemable securities, beginning of period $ 34,598 3,861 85 1,685 1,469 903 55 62 $ 42,718 Increase (decrease) in net assets attributable to holders of redeemable securities 4,968 477 12 293 230 124 8 8 6,120 Redeemable securityholder transactions Proceeds from issue of redeemable securities 2,494 325 - 1,372 664 256 - - 5,111 Reinvestment of distributions to holders of redeemable securities - - - - - 12 - 1 13 Redemption of redeemable securities (3,799) (1,446) (8) (98) (114) (104) (5) (9) (5,583) Net securityholder transactions (1,305) (1,121) (8) 1,274 550 164 (5) (8) (459) Distributions to securityholders of redeemable securities Net investment income - - - - - - - - - Dividends - - - - - - - - - Capital gains - - - - - - - - - Return of capital - - - - - (36) (2) (2) (40) Total distributions to securityholders of redeemable securities - - - - - (36) (2) (2) (40) Net assets attributable to holders of redeemable securities, end of period $ 38,261 3,217 89 3,252 2,249 1,155 56 59 $ 48,338

Securities issued and outstanding Securities, beginning of period 4,992 591 13 215 87 112 7 8 Securities issued for cash 320 45 - 154 35 29 - - Securities issued on reinvestment of distributions - - - - - 1 - - Securities redeemed (514) (207) (1) (11) (6) (13) (1) (1) Securities, end of period 4,798 429 12 358 116 129 6 7

* On September 4, 2015, all Series C securities were re-designated as Series L securities.



34



in thousands (000's) 2016 2015



Adjustments for:






Dividends receivable (43) (32)

Receivable for investments sold (1,815) 1,230

HST refund receivable 6 -

Accounts payable and accrued liabilities (30) 61

Payable for investments purchased 128 (1,254)

Net cash from operating activities (4,883) 3,075




Distributions paid to holders of redeemable securities, net of reinvested distributions (61) (22)

Net cash from financing activities (401) (1,229)


Net increase (decrease) in cash and cash equivalents during the period (5,284) 1,846

Cash and cash equivalents, beginning of period 6,964 666



Interest received $ 2 $ -



Cash $ 1,659 $ 2,513


$ 1,659 $ 2,513


STONE & CO. FLAGSHIP GLOBAL GROWTH FUND SCHEDULE OF INVESTMENT PORTFOLIO (UNAUDITED) AS AT JUNE 30, 2016


35

Number Average Fair of shares cost value

or par value Security (000's) (000's) % Bermuda (0.7%)

175,000 Oakley Capital Investments Ltd. $ 534 $ 374 534 374 0.7% China (2.3%)

45,000 Tencent Holdings Ltd. 204 1,327 204 1,327 2.3% Denmark (2.2%)

7,000 Pandora AS 1,128 1,231 1,128 1,231 2.2% France (3.6%)

6,000 Essilor International SA 827 1029 15,000 Legrand SA 1,197 1,002

2,024 2,031 3.6% Germany (9.2%)

17,000 AURELIUS SE & Co. KGaA 288 1,293 8,000 Fresenius Medical Care AG 890 901

45,000 Infineon Technologies AG 946 842 2,000 Rational AG 393 1,201

20,000 Scout24 AG 870 962 3,387 5,199 9.2% Ireland (2.9%)

4,116 Kerry Group PLC, Class 'A' 502 474 8,508 Paddy Power Betfair PLC 629 1,166

1,131 1,640 2.9% Luxembourg (1.7%)

2,000 Eurofins Scientific SE 935 963 935 963 1.7% Spain (3.6%)

18,000 Amadeus IT Holding SA, Class 'A' 930 1,020 23,000 Industria de Diseno Textil SA 695 993

1,625 2,013 3.6% Switzerland (1.7%)

38,000 ABB Ltd., Registered 1,012 968 1,012 968 1.7% United Kingdom (14.2%)

100,000 Auto Trader Group PLC 779 614 275,000 Booker Group PLC 741 828

33,000 Bunzl PLC 1,221 1,318 25,000 Dignity PLC 362 1,115 82,398 Just-Eat Holding Ltd. 701 610

105,000 Merlin Entertainments PLC 885 803 320,993 Purplebricks Group PLC 631 752

17,000 Rightmove PLC 173 1,076 80,000 Sage Group PLC (The) 930 897

6,423 8,013 14.2%

STONE & CO. FLAGSHIP GLOBAL GROWTH FUND SCHEDULE OF INVESTMENT PORTFOLIO (UNAUDITED) AS AT JUNE 30, 2016


36

Number Average Fair of shares cost value

or par value Security (000's) (000's) % United States (53.8%)

11,000 A.O. Smith Corp. 561 1,259 22,000 Activision Blizzard Inc. 1,001 1,132 10,000 Adobe Systems Inc. 1,250 1,244 11,000 Align Technology Inc. 862 1,151 1,700 Amazon.com Inc. 279 1,580 5,000 Amgen Inc. 761 988

13,000 Amphenol Corp., Class 'A' 936 968 7,500 Constellation Brands Inc., Class 'A' 501 1,611 5,000 Costco Wholesale Corp. 888 1,020

12,000 Electronic Arts Inc. 1,003 1,181 25,000 Envision Healthcare Holdings Inc. 875 824 7,000 EPAM Systems Inc. 705 585 9,000 Facebook Inc. 311 1,336

10,000 First Republic Bank 942 909 10,000 J.B. Hunt Transport Services Inc. 1,105 1,051 9,000 MasterCard Inc., Class 'A' 381 1,029 8,000 McCormick & Co. Inc. 383 1,108

14,000 Nike Inc., Class 'B' 1,144 1,004 13,000 Norwegian Cruise Line Holdings Ltd. 578 673 23,000 PayPal Holdings Inc. 1,057 1,090 27,000 Pfizer Inc. 1,114 1,235 30,000 Rollins Inc. 892 1,140 6,000 S&P Global Inc. 819 836

10,000 Salesforce.com Inc. 1,028 1,031 10,000 TJX Cos. Inc. 848 1,003 4,000 Ulta Salon, Cosmetics & Fragrance Inc. 1,052 1,265

13,200 Visa Inc., Class 'A' 285 1,271 15,000 WhiteWave Foods Co., Class 'A' 799 914

22,360 30,438 53.8% Transaction Costs (111) Total Investment Portfolio 40,652 54,197 95.9% Cash & Other Net Assets (Liabilities) (4.1%) 2,363 4.1% Total Net Assets (100.0%) $ 56,560 100.0%

Percentages shown relate to investments at fair value to total net assets of the fund.

STONE & CO. FLAGSHIP GLOBAL GROWTH FUND FUND SPECIFIC NOTES ON FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (UNAUDITED)

37


Risk management The investment objective of the Stone & Co. Flagship Global Growth Fund (the “Fund”) is to provide superior long-term investment returns through capital growth. To achieve this objective, the Fund will invest primarily in common shares and debt obligations anywhere in the world other than Canada. The portfolio will predominately consist of large capitalized growth companies anywhere in the world other than Canada.


The Portfolio Sub-Advisor, Rathbone Unit Trust Management Limited, aims to manage risk as part of its investment process through the thorough analysis and careful selection of securities and diversification across asset classes and industry sectors.

The Manager of the Fund, Stone Asset Management Limited (“SAM”), aims to manage risk by ensuring the portfolio management activities of the Fund comply with its investment objectives and strategies and applicable securities legislation.


The most significant exposure to market price risk for the Fund arises from its investment in equity securities. If equity prices on the respective stock exchanges had increased or decreased by 5%, as at June 30, 2016, with all other factors remaining constant, net assets would have increased or decreased by approximately $2,606 (December 31, 2015 – $2,177). This change is estimated using the weighted average beta of the Fund’s equity portfolio, which is calculated based on an historical correlation against respective stock exchanges. In practice, actual trading results may differ and the difference could be material.


The Fund had significant exposure to the foreign currencies shown below in Canadian dollar terms. Also shown below is the potential impact to the Fund’s net assets, all other variables held constant, as a result of 5% changes in these currencies relative to the Canadian dollar. In practice, actual trading results may differ and the difference could be material.

June 30, 2016

Currency

Investments

Cash

Total

% of net

assets


Bermudian Dollar 374 – 374 0.7 19 British Pound 9,553 9 9,562 16.9 478

Danish Krone 1,231 – 1,231 2.2 62

Euro 10,305 – 10,305 18.2 515

Hong Kong Dollar 1,327 – 1,327 2.3 66

Swiss Franc 969 – 969 1.7 48

U.S. Dollar 30,438 – 30,438 53.8 1,522

Totals 54,197 9 54,206 95.9 2,710

December 31, 2015

Currency

Investments

Cash

Total

% of net

assets


Bermudian Dollar 516 – 516 0.8 26 British Pound 13,283 – 13,283 20.9 664

Danish Krone 1,234 – 1,234 1.9 62

Euro 11,386 – 11,386 17.9 569

Hong Kong Dollar 1,230 – 1,230 1.9 62

U.S. Dollar 29,389 – 29,389 46.2 1,469

Totals 57,038 – 57,038 89.6 2,852



STONE & CO. FLAGSHIP GLOBAL GROWTH FUND FUND SPECIFIC NOTES ON FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (UNAUDITED) (continued)

38


The Fund is exposed to daily cash redemptions of redeemable securities. The Fund retains sufficient cash positions to maintain adequate liquidity. The Fund primarily invests in securities that are actively traded in public markets and can be readily disposed of to increase liquidity. The Schedule of Investment Portfolio identifies any securities that are not traded on an active market, being nil% of total net assets as at June 30, 2016 (December 31, 2015 – nil%).

As at June 30, 2016 and December 31, 2015, all existing liabilities of the Fund are to be settled within three month.

Weighted average number of securities

The following table illustrates the weighted average number of securities outstanding for the periods ended June 30:

Series 2016 2015 A 5,060,712 4,732,199 B 509,134 459,789

C n/a 12,165

F 1,001,490 244,414

L 187,917 98,787

T8A 283,044 109,932

T8B 6,494 6,546

T8C 2,507 7,123




% of Net Assets

Country

June 30, 2016

December 31, 2015

Bermuda 0.7 0.8 China 2.3 1.9

Denmark 2.2 1.9 Finland – 1.4 France 3.6 3.0

Germany 9.2 6.9

Ireland 2.9 1.3

Italy – 1.6

Luxembourg 1.7 1.5

Spain 3.6 3.5

Switzerland 1.7 –

United Kingdom 14.2 20.9

United States 53.8 44.9

Cash & Other Net Assets (Liabilities) 4.1 10.4

Total net assets 100.0 100.0 Fair value disclosure The Fund classifies fair value measurements within a hierarchy that gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are:

Level 1: Quoted prices (unadjusted) in active markets for

identical assets or liabilities.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).


STONE & CO. FLAGSHIP GLOBAL GROWTH FUND FUND SPECIFIC NOTES ON FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (UNAUDITED) (continued)

39


June 30, 2016

Level 1 Level 2 Level 3 Total Equities $ 54,197 $ – $ – $ 54,197 Total Investment Portfolio

$ 54,197

$ –

$ –

$ 54,197

December 31, 2015


$ 57,038

$ –

$ –

$ 57,038


Category

2016

Net gains (losses) 2015


HFT $ – $ –


Total $ (4,931) $ 6,919

STONE & CO. EUROPLUS DIVIDEND GROWTH FUND


40


AS AT



Assets

Current assets


Cash 4,246 3,042


Subscriptions receivable 8 30


33,847 36,674

Liabilities

Current liabilities

Redemptions payable 62 36

Accounts payable and accrued expenses (Note 8) 75 6

Distributions payable 4 -

141 42



Series A $ 19,021 $ 19,040

Series B 395 450

Series F 4,769 5,936

Series L 9,316 10,861

Series T8A 205 345

$ 33,706 $ 36,632


Series A $ 12.08 $ 13.51

Series B 11.58 12.99

Series F 13.09 14.57

Series L 15.44 17.32

Series T8A 6.17 7.23

STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) FOR THE PERIODS ENDED JUNE 30 (Note 1) (in thousands of dollars; per security amounts are expressed in whole dollars) 2016 2015 Income Net gains (losses) on investments and derivatives (Note 2): Dividends $ 845 $ 694 Interest for distribution purposes 2 1 Net realized gains (losses) on sale of investments and derivatives (171) 11 Change in unrealized appreciation (depreciation) of investments and derivatives (4,004) 2,385 Net gains (losses) on investments and derivatives (3,328) 3,091 Foreign exchange gains (losses) on cash (26) (7) Total income (3,354) 3,084 Expenses (Note 4) Management fees 363 343 Securityholder reporting costs 57 64 Transfer agency fees 28 23 Custodian fees 9 6 Filing fees 12 13 Independent Review Committee fees 5 4 Audit fees 9 8 Legal fees 1 1 Transaction costs (Note 2) 9 4 Foreign withholding taxes 78 81 Total expenses 571 547 Expenses waived/absorbed by the Manager (1) - Total expenses (net) 570 547 Increase (decrease) in net assets attributable to holders of redeemable securities $ (3,924) $ 2,537

Increase (decrease) in net assets attributable to holders of redeemable securities per series Series A $ (2,048) $ 1,458 Series B (49) 91 Series C* n/a 4 Series F (621) 330 Series L (1,172) 627 Series T8A (34) 27 Series T8B** n/a -

$ (3,924) $ 2,537 Increase (decrease) in net assets attributable to holders of redeemable securities per security Series A $ (1.40) $ 1.08 Series B (1.42) 1.29 Series C* n/a 1.22 Series F (1.59) 1.05 Series L (1.89) 1.20 Series T8A (0.79) 0.60 Series T8B** n/a 0.11

* On May 7, 2015, all Series C securities were liquidated. ** On January 15, 2015, all Series T8B securities were liquidated.

STONE & CO. EUROPLUS DIVIDEND GROWTH FUND


41


2016 Series In thousands A B C* F L T8A T8B** 2016 Total Net assets attributable to holders of redeemable securities, beginning of period $ 19,040 450 n/a 5,936 10,861 345 n/a $ 36,632 Increase (decrease) in net assets attributable to holders of redeemable securities (2,048) (49) - (621) (1,172) (34) - (3,924) Redeemable securityholder transactions Proceeds from issue of redeemable securities 3,043 51 - 948 1,149 - - 5,191 Reinvestment of distributions to holders of redeemable securities - - - - - 3 - 3 Redemption of redeemable securities (1,013) (58) - (1,495) (1,522) (98) - (4,186) Net securityholder transactions 2,030 (7) - (547) (373) (95) - 1,008 Distributions to securityholders of redeemable securities Net investment income - Dividends - - - - - - - - Capital gains - - - - - - - - Return of capital - - - - - (11) - (11) Total distributions to securityholders of redeemable securities - - - - - (11) - (11) Net assets attributable to holders of redeemable securities, end of period $ 19,021 395 n/a 4,769 9,316 205 n/a $ 33,706

Securities issued and outstanding Securities, beginning of period 1,410 35 n/a 408 627 47 n/a Securities issued for cash 246 4 - 70 73 - - Securities issued on reinvestment of distributions - - - - - 1 - Securities redeemed (82) (5) - (114) (97) (15) - Securities, end of period 1,575 34 n/a 364 603 33 n/a

2015 Series In thousands A B C* F L T8A T8B** 2015 Total Net assets attributable to holders of redeemable securities, beginning of period $ 15,387 927 38 3,385 6,921 283 6 $ 26,947 Increase (decrease) in net assets attributable to holders of redeemable securities 1,458 91 4 330 627 27 - 2,537 Redeemable securityholder transactions Proceeds from issue of redeemable securities 1,894 8 29 1,549 3,672 27 - 7,179 Reinvestment of distributions to holders of redeemable securities - - - - - 5 - 5 Redemption of redeemable securities (991) (229) (71) (329) (1,628) (2) (6) (3,256) Net securityholder transactions 903 (221) (42) 1,220 2,044 30 (6) 3,928 Distributions to securityholders of redeemable securities Net investment income - - - - - - - - Dividends - - - - - - - - Capital gains - - - - - - - - Return of capital - - - - - (12) - (12) Total distributions to securityholders of redeemable securities - - - - - (12) - (12) Net assets attributable to holders of redeemable securities, end of period $ 17,748 797 - 4,935 9,592 328 - $ 33,400

Securities issued and outstanding Securities, beginning of period 1,341 83 3 276 468 43 1 Securities issued for cash 149 2 2 114 225 3 - Securities issued on reinvestment of distributions - - - - - 1 - Securities redeemed (80) (19) (5) (25) (100) - (1) Securities, end of period 1,410 66 - 365 593 47 -

* On May 7, 2015, all Series C securities were liquidated. ** On January 15, 2015, all Series T8B securities were liquidated.

STONE & CO. EUROPLUS DIVIDEND GROWTH FUND STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE PERIODS ENDED JUNE 30 (Note 1)


42




Adjustments for:

Foreign exchange losses (gains) on cash - (7)

Net realized losses (gains) on sale of investments and derivatives 171 (11)


Purchases of investments and derivatives (3,257) (379)


Dividends receivable (66) (65)


Receivable for investments sold - -

HST refund receivable - -


Payable for investments purchased - -

Net cash from operating activities 155 1,312




Distributions paid to holders of redeemable securities, net of reinvested distributions (4) (3)

Net cash from financing activities 1,049 3,846

Foreign exchange gains (losses) on cash - 7

Net increase (decrease) in cash and cash equivalents during the period 1,204 5,158

Cash and cash equivalents, beginning of period 3,042 2,631






Cash $ 4,246 $ 7,796


$ 4,246 $ 7,796


STONE & CO. EUROPLUS DIVIDEND GROWTH FUND SCHEDULE OF INVESTMENT PORTFOLIO (UNAUDITED) AS AT JUNE 30, 2016


43


or par value Security (000's) (000's) % Belgium (7.8%)

9,500 Anheuser-Busch InBev NV $ 884 $ 1,612 17,500 Kinepolis 255 1,013

1,139 2,625 7.8% Finland (5.0%)

10,000 Kone OYJ, Class 'B' 534 595 21,000 Sampo OYJ, Series 'A' 1,163 1,107

1,697 1,702 5.0% France (2.1%)

7,000 Rubis SCA 742 696 742 696 2.1% Germany (10.1%)

12,000 Brenntag AG 852 752 8,000 Henkel AG & Co. KGaA 780 1,118 6,500 SAP AG 452 630

35,000 Takkt AG 715 894 2,799 3,394 10.1% Italy (5.0%)

60,000 Davide Campari-Milano SPA 499 769 30,000 De'Longhi SPA 1,076 925

1,575 1,694 5.0% Netherlands (14.1%)

40,000 Koninklijke Ahold NV 679 1,148 49,216 RELX NV 736 1,108 35,000 Royal Dutch Shell PLC, Class 'A' 1,270 1,246 21,000 Unilever NV 741 1,270

3,426 4,772 14.1% Switzerland (11.8%)

450 Givaudan SA, Registered 1,064 1,173 15,000 Novartis AG, Registered 1,117 1,603 3,500 Roche Holding AG Genusscheine 757 1,195

2,938 3,971 11.8% United Kingdom (31.3%)

15,000 AstraZeneca PLC 1,324 1,163 7,500 Berkeley Group Holdings PLC 514 329

28,000 Bunzl PLC 879 1,119 30,000 GlaxoSmithKline PLC 727 836

200,000 ITV PLC 1,025 624 130,000 Jupiter Fund Management PLC 936 825

15,000 Provident Financial PLC 890 599 11,500 Reckitt Benckiser Group PLC 917 1,495

120,000 Restaurant Group PLC 800 599 25,000 Rio Tinto PLC, Registered 1,238 996 90,000 Sage Group PLC (The) 602 1,008

106,000 Tarsus Group PLC 285 460 110,000 William Hill PLC 525 492

10,662 10,545 31.3% Transaction Costs (90) Total Investment Portfolio 24,888 29,399 87.2% Cash & Other Net Assets (Liabilities) (12.8%) 4,307 12.8% Total Net Assets (100.0%) $ 33,706 100.0%

Percentages shown relate to investments at carrying value to total net assets of the fund.

STONE & CO. EUROPLUS DIVIDEND GROWTH FUND FUND SPECIFIC NOTES ON FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (UNAUDITED)

44


Risk management The investment objective of the Stone & Co. EuroPlus Dividend Growth Fund (the “Fund”) is two-fold: (i) to provide a sustainable stream of income; and (ii) to provide long-term capital growth. The Fund will invest primarily in equity securities of companies in Europe and other developed countries around the world. The Fund will generally have significant investments in European markets. There is no restriction on the economic sectors or geographic areas in which the Fund may invest.


The Portfolio Sub-advisor, Rathbone Unit Trust Management Limited, aims to manage risk as part of its investment process through the thorough analysis and careful selection of securities and diversification across asset classes and industry sectors.

The Manager of the Fund, Stone Asset Management Limited (“SAM”), aims to manage risk by ensuring the portfolio management activities of the Fund comply with its investment objectives and strategies and applicable securities legislation.


The most significant exposure to market price risk for the Fund arises from its investment in equity securities. If equity prices on the respective stock exchanges had increased or decreased by 5%, as at June 30, 2016, with all other factors remaining constant, net assets would have increased or decreased by approximately $1,131 (December 31, 2015 – $1,312). This change is estimated using the weighted average beta of the Fund’s equity portfolio, which is calculated based on an historical correlation against respective stock exchanges. In practice, actual trading results may differ and the difference could be material.


The Fund had significant exposure to the foreign currencies shown below in Canadian dollar terms. Also shown below is the potential impact to the Fund’s net assets, all other variables held constant, as a result of 5% changes in these currencies relative to the Canadian dollar. In practice, actual trading results may differ and the difference could be material.

June 30, 2016

Currency

Investments

Cash

Total

% of net

assets



Swiss Franc 3,971 – 3,971 11.8 199

Totals 29,399 – 29,399 87.2 1,470

December 31, 2015

Currency

Investments

Cash

Total

% of net

assets



Swedish Krona 475 – 475 1.3 24

Swiss Franc 3,547 – 3,547 9.7 177

Totals 33,473 – 33,473 91.4 1,674


There is minimal sensitivity to changes in interest rates for money market securities since these are usually held to maturity and tend to be short-term in nature.


STONE & CO. EUROPLUS DIVIDEND GROWTH FUND FUND SPECIFIC NOTES ON FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (UNAUDITED) (continued)

45


The Fund is exposed to daily cash redemptions of redeemable securities. The Fund retains sufficient cash positions to maintain adequate liquidity. The Fund primarily invests in securities that are actively traded in public markets and can be readily disposed of to increase liquidity. The Schedule of Investment Portfolio identifies any securities that are not traded on an active market, being nil% of total net assets as at June 30, 2016 (December 31, 2015 – nil%).

As at June 30, 2016 and December 31, 2015, all existing liabilities of the Fund are to be settled within three months.


Series 2016 2015

A 1,463,023 1,357,603

B 34,341 70,713

C n/a 3,141

F 390,158 315,528

L 617,153 526,985

T8A 42,852 45,236

T8B n/a 697




% of Net Assets Country

June 30, 2016

December 31, 2015

Belgium 7.8 7.5 Finland 5.0 6.4 France 2.1 5.4 Germany 10.1 5.3 Italy 5.0 4.3 Netherlands 14.1 12.9 Sweden — 1.3 Switzerland 11.8 9.7 United Kingdom 31.3 38.6 Cash & Other Net Assets (Liabilities) 12.8 8.6 Total net assets 100.0 100.0 Fair value disclosure The Fund classifies fair value measurements within a hierarchy that gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3: Inputs for the asset or liability that are not based on observable market data.

STONE & CO. EUROPLUS DIVIDEND GROWTH FUND FUND SPECIFIC NOTES ON FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (UNAUDITED) (continued)

46


June 30, 2016


$ 29,399

$ –

$ –

$ 29,399

December 31, 2015


$ 33,473

$ –

$ –

$ 33,473


Net gains (losses)

Category 2016 2015

Financial assets (liabilities) at FVTPL: HFT $ – $ –


Total $ (3,328) $ 3,091

STONE MUTUAL FUNDS

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)

47

FOR THE PERIODS INDICATED IN NOTE 1.

(in thousands of dollars; per security amounts are expressed in whole dollars)

1. THE FUNDS

The Funds are comprised of four open-ended mutual fund trusts (the “Trusts”) and Stone & Co. Corporate Funds Limited, a mutual fund corporation with two classes of shares (“SCFL” or the “Corporation”). The Trusts and the classes of the Corporation are collectively referred to as the “Funds” and individually, a “Fund”. The Trusts were established under the laws of the Province of Ontario pursuant to a Declaration of Trust and are authorized for each series to issue an unlimited number of securities without par value. SCFL is a corporation continuing under the laws of Canada, having authorized capital consisting of an unlimited number of common securities and twenty-five classes of special securities; currently, only two classes have been established. Each class of special securities may, in turn, issue an unlimited number of securities.

The Funds’ registered office is located at 36 Toronto Street, Suite 710, Toronto, Ontario.

The Funds were established on the following dates:

Fund Series Inception date

Stone & Co. Dividend Growth A November 14, 1957 Class Canada B, C, F August 1, 2003

T8A, T8B, T8C September 1, 2007

L September 1, 2011

Stone & Co. Resource Plus Class A, B July 29, 2005 F September 1, 2014 L September 1, 2011

Stone & Co. Flagship Growth & Income Fund Canada


AA, BB, FF January 5, 2009 L September 1, 2011

Stone & Co. Flagship Global A December 31, 1998 Growth Fund B, F August 1, 2003


L September 1, 2011

Stone & Co. EuroPlus Dividend A, B, F May 2, 2008 Growth Fund T8A May 2, 2008 L September 1, 2011

Series A, Series AA, Series T8A, Series B, Series BB, Series T8B, Series C, Series CC, Series T8C and Series L securities are available to retail investors. Series F and Series FF securities are offered to investors enrolled in a dealer sponsored fee-for-service or wrap program.

Effective December 4, 2009, Series T8B and T8C securities are no longer available for purchase; however, existing Series T8B and T8C securities of a Stone Fund may be exchanged into Series T8B or T8C securities of another Stone Fund.

Effective August 31, 2011, Series B, BB, C and CC securities are no longer available for purchase; however, existing Series B, BB, C, and CC securities of a Stone Fund may be exchanged into Series B, BB, C, or CC securities of another Stone Fund.

On September 7, 2012, all issued Series F securities of the Stone & Co. Flagship Growth & Income Fund Canada were re-designated to Series FF securities.

On March 7, 2013, all issued Series T8C securities of the Stone & Co. EuroPlus Dividend Growth Fund were liquidated.

On January 15, 2015 and May 7, 2015, all issued Series T8B and Series C securities of the Stone & Co. EuroPlus Dividend Growth Fund were liquidated, respectively.

On May 25, 2015, all issued Series C securities of the Stone & Co. Resource Plus Class were liquidated.

On September 4, 2015, all issued Series C securities of the Stone & Co. Flagship Global Growth Fund, Stone & Co. Growth Industries Fund, and Stone & Co. EuroPlus Dividend Growth Fund were re-designated to Series L securities.

On September 4, 2015, all issued Series CC securities of the Stone & Co. Flagship Growth & Income Fund Canada were re-designated to Series L securities.

On June 24, 2016, all issued securities of the Stone & Co. Growth Industries Fund were terminated.

The Funds’ investment activities are managed by Stone Asset Management Limited (“SAM”), the Investment Fund Manager. The Funds’ custodian is CIBC Mellon, the Funds’ transfer agent is International Financial Data Services and the Funds’ administrator is Stone Investment Group Limited (formerly Stone & Co. Limited).

The Schedule of Investment Portfolio of each of the Funds is as at June 30, 2016. The Statements of Financial Position are as at June 30, 2016 and December 31, 2015. The Statements of Comprehensive Income (Loss), Changes in Net Assets Attributable to Holders of Redeemable Securities, and Cash Flows are for the six month periods ended June 30, 2016 and 2015. For Funds or series that started during either period, the information presented is for the period from the Fund or series inception date, respectively, to June 30, 2016 and 2015, as applicable. Throughout these financial statements, reference to the reporting period refers to the reporting period described above.

These financial statements were authorized for issue by the Board of Directors of Stone Asset Management Limited on August 29, 2016.

STONE MUTUAL FUNDS

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) (continued)

48

2. SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance These financial statements have been prepared in compliance with International Financial Reporting Standards (“IFRS”), as published by the International Accounting Standards Board (“IASB”).

(b) Basis of presentation These financial statements are presented in accordance with IFRS and have been prepared on a historical-cost basis, except financial instruments that have been measured at fair value.

The financial statements are presented in Canadian dollars and all values are rounded to the nearest thousand dollars ($000), except where otherwise indicated.

(c) Financial instruments (i) Classification

The Funds classify their financial assets and financial liabilities at initial recognition in accordance with IAS 39 Financial Instruments: Recognition and Measurement, into the following categories:

• Financial assets and liabilities at fair value through profit and loss – this category has two sub-categories:

• Financial assets and liabilities held for trading (“HFT”): financial assets or financial liability are classified as held for trading if they are acquired principally for the purpose of selling and/or repurchasing in the near term and there is evidence of recent actual pattern of short-term profit taking from price fluctuations. Derivatives are also categorized as held for trading. The Funds do not classify any derivatives as hedges in a hedging relationship.

• Financial assets and liabilities designated at fair value through profit or loss at initial recognition (“FVTPL”): financial instruments that are not classified as held for trading but are managed, and their performance is evaluated on a fair value basis in accordance with the Funds’ documented investment strategy. The Funds classify equities, debentures and other interest bearing investments as financial assets and liabilities designated at fair value through profit and loss as the Funds’ policy requires SAM and the Board of Directors of SAM to evaluate the information about these financial assets on a fair value basis together with other related financial information to ensure the Funds are being managed in accordance with their documented investment strategy.

• Receivables are non-derivative financial assets that include interest, dividends, investments sold, subscriptions and HST refund receivables.

• Other financial liabilities – this category includes all financial liabilities, other than those classified as held for trading. The Funds classify payable for investments purchased, redemptions payable, accounts payable and accrued expenses, dividends payable as other financial liabilities.

(ii) Recognition, derecognition and measurement

The Funds recognize a financial asset or a financial liability when they become a party to the contractual provisions of the instrument.

Purchases and sales of investments are recognized on the trade date, which is the date on which the Fund commits to purchase or sell the investment.

Financial assets and financial liabilities classified as fair value through profit or loss are initially recognized at fair value. Transaction costs related to financial instruments are expensed as incurred on the Statements of Comprehensive Income (Loss).

Financial assets are derecognized when the rights to receive cash flows from the investments have expired or the Fund has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognized when the obligation under the liability is discharged, cancelled or expires.

After initial measurement, the Funds measure financial instruments which are classified at fair value through profit or loss, at fair value. Gains and losses arising from changes in the fair value of the financial instruments classified at fair value through profit or loss are presented in the Statements of Comprehensive Income (Loss). Interest for distribution purposes and dividends earned on financial assets are recorded separately in the Statement of Comprehensive Income (Loss). Interest for distribution purposes is recognized as income at the debt instrument’s coupon rates of interest on an accrual basis. Dividends are recognized as income on the ex-dividend date. Distributions received from investment trusts and Underlying Investment Funds are recorded as income for distribution purposes, dividends, capital gains or a return of capital as the case may be. Distributions treated as a return of capital reduce the average cost of the underlying investment.

Loans and receivables are carried at amortized cost. Gains and losses are recognized in profit or loss when the loans and receivables are derecognized or impaired.

Financial liabilities, other than those classified as fair value through profit or loss, referred to here as “other financial liabilities”, are measured at amortized cost. Gains and losses are recognized in profit or loss when the liabilities related to financial instruments are derecognized.

The Fund’s outstanding redeemable securities’ entitlements include a contractual obligation to distribute any net income and net realized capital gains annually in cash (at the request of the security holder) and therefore the ongoing redemption feature is not the securities’ only contractual obligation. Consequently, the Fund’s outstanding redeemable securities are classified as financial liabilities in accordance with the requirements of IAS 32 Financial Instruments: Presentation. The Fund’s obligations for net assets attributable to holders of redeemable securities are presented at their redemption amounts.

STONE MUTUAL FUNDS


49

The value of investments in a Fund’s portfolio can fluctuate on a daily basis as a result of changes in interest rates, market and economic conditions and factors specific to individual securities within the Fund. The level of risk depends on the Fund’s investment objectives and the type of securities it invests in. See the individual “Fund Specific Notes on Financial Risk Management and Financial Instruments” for each Fund for consideration of the financial instrument risks inherent in the financial instruments held by each Fund.

Additional quantitative disclosures are required for Level 3 securities. These are shown in each Fund Specific Notes on Financial Risk Management and Financial Instruments.

(d) Valuation of investments Fair value is the price at which an orderly transaction to sell an asset or paid to transfer a liability would take place between market participants at the measurement date. The fair value of financial assets and liabilities traded in active markets (such as publicly traded derivatives and marketable securities) are based on quoted market prices at the close of trading on the reporting date. The Funds use the last traded market price for both financial assets and financial liabilities where the last traded price falls within the bid-ask spread. The fair value of financial assets and liabilities that are not traded in an active market, including over-the-counter derivatives, is determined using valuation techniques. The Funds use a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Valuation techniques include the use of comparable recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis and other techniques commonly used by market participants and which make the maximum use of observable inputs.

The fair value of investments as at the financial reporting date is determined as follows:

i) Equities

Each listed investment security is valued at the latest close price reported by the principal securities exchange on which the investment is traded. Securities which are traded over-the-counter are priced at the close price quoted by a major dealer in such securities.

ii) Investments in Underlying Investment Funds

Investments in Underlying Investment Funds are valued at the closing Net Asset Value per security (“NAVPS”) of the units owned as calculated by the administrator of the Underlying Investment Funds at the valuation date.

iii) Unlisted warrants

Unlisted warrants are valued based on a pricing model which considers factors such as the market value of the underlying security, strike price, volatility and terms of the warrant.

iv) Options

An option is a contractual arrangement under which the seller (writer) grants the purchaser (holder) the right, but not the obligation, either to buy (a call option) or sell (a put option) at or by a set date or during a set period, a specific amount of securities or a financial instrument at a pre-

determined price. The seller (writer) receives a premium from the purchaser in consideration for the assumption of a market price risk. Purchased options that are exchange traded are valued at the latest close price reported by the principal securities exchange on which the investment is traded; any purchased options that are over the counter are valued at the close price as quoted by a major dealer. The premium paid for purchased options is included in the average costs on the Schedule of Investment Portfolio. When a purchased option expires without being exercised, the premium paid will be treated as a loss and included in the Statements of Comprehensive Income (Loss) as “Net realized gain (loss) on sale of investments and derivatives”. If the purchased option is exercised, the Fund will realize a gain or loss depending on whether the proceeds are greater or less than the premium paid at the time of purchase. When a purchased option is exercised, the cost of the underlying security purchased is increased by the premium paid at the time of purchase. Written option premiums received by the Funds are, so long as the options are outstanding at period end, reflected in the Statements of Financial Position as “Written options”. The liability for written options gets revalued at an amount equal to the current fair value of an option that would have the effect of closing the position. Written options that are exchange traded are valued at the latest close price reported by the principal securities exchange on which the investment was traded; any written options that are over-the-counter are valued at the ask price as quoted by a major dealer. If the option expires without being exercised, the premium received will be treated as a gain and will be included in the Statements of Comprehensive Income (Loss) as “Net realized gain (loss) on sale of investments and derivatives”. If the option is exercised, in the case of a call option, the premium received will be added to the proceeds of disposition of the underlying security and included in the Statements of Comprehensive Income (Loss) as “Net realized gain (loss) on sale of investments and derivatives”. If the option is exercised, in the case of a put option, the cost of the underlying security will be reduced by the amount of premium received and included in the Schedule of Investment Portfolio.

v) Bonds

Bonds are valued based on the latest close prices obtained from recognized independent brokers.

The difference between the total fair value and the total cost of securities in (i) to (v) is included in the “Change in unrealized appreciation (depreciation) of investments and derivatives” on the Statements of Comprehensive Income (Loss).

vi) Short-term investments

Short-term investments are accounted for at fair value, which generally approximates amortized cost.

vii) Forward currency contracts

A forward currency contract is an agreement between two parties (the Fund and the counterparty) to purchase or sell a currency against another currency at a set price on a future date.

Open forward currency contracts are valued at the gain or loss that would arise as a result of closing the position on the valuation date. The unrealized gain or loss on forward currency contracts is reflected in the Statements of Financial Position as “Unrealized gain on forward

STONE MUTUAL FUNDS


50

currency contracts” or “Unrealized loss on forward currency contracts”. The change in unrealized gain or loss for the period is reflected in the Statements of Comprehensive Income (Loss) as “Change in unrealized appreciation (depreciation) of investments and derivatives”. The realized gain or loss on forward currency contracts arises as a result of closing the position on settlement date. The realized gain or loss is reflected in the Statements of Comprehensive Income (Loss) as “Net realized gain (loss) on sale of investments and derivatives”.

viii) Other investments

The value of any security for which, in the opinion of the Investment Manager, the published market quotations are not readily available shall be the fair value as determined by the Investment Manager in accordance with IFRS 13 Fair Value Measurement (“IFRS 13”) methodologies. The fair values of certain securities are determined using valuation models that are based, in part, on assumptions that are not supported by observable market inputs. These methods and procedures may include, but are not limited to, performing comparisons with prices of comparable or similar securities, obtaining valuation related information from issuers, significant market or security-specific events, and/or other analytical data relating to the investment and using other available indication of value. The fair values of such securities are also affected by the credit risks of the issuer, predictability of cash flows and length of time to maturity.

These values are independently assessed internally to ensure that they are reasonable. However, because of the inherent uncertainty of valuation, the estimated fair values for the aforementioned securities may be materially different from the values that would be used had a ready market for the security existed. The frequency with which these procedures are used is unpredictable and may be utilized to a significant extent. The value of securities used for net asset value (“NAV”) calculations under fair value pricing may differ from published prices for the same securities.

(e) Cost of investments The cost of investments represents the amount paid for each security, excluding transaction costs, and is determined on an average cost basis.

(f) Cash and cash equivalents Cash is comprised of cash on deposit with financial institutions and bank overdrafts. Cash equivalents are comprised of highly liquid investments having terms to maturity of 90 days or less.

(g) Foreign currency translation The reporting currency for the Funds is the Canadian dollar, which is also the functional currency given the Funds are domiciled in Canada with subscriptions and redemptions, as well as performance returns, denominated in Canadian dollar.

Foreign currency transactions are translated into Canadian dollars at the rate of exchange prevailing at the date of the transactions. Realized foreign currency gains (losses) on investments are included in the Statements of Comprehensive Income (Loss) in “Net realized gain (loss) on sale of investments and derivatives”. Unrealized foreign currency gains (losses) on investments are included in the Statements of Income (Loss) in “Change in unrealized appreciation (depreciation) of investments and derivatives”. Realized and unrealized exchange gains (losses) on assets, liabilities and investment income denominated in

foreign currencies are included in “Foreign exchange gain (loss) on cash” in the Statements of Comprehensive Income (Loss).

Foreign currency assets and liabilities are translated into Canadian dollars at the prevailing exchange rate at the measurement date.

(h) Securities valuation The series of securities of the Funds are offered for sale on a continuous basis and may be purchased or redeemed on any business day at the NAVPS. A business day is any day the Toronto Stock Exchange (“TSX”) is open for trading. A valuation date is each business day at the close of trading (4 P.M. Toronto time). The NAV of each series of a Fund is the value of the series’ proportionate share of the assets of the Fund less proportionate share of common liabilities and specifically allocated liabilities. The NAVPS of a series of securities of a Fund is calculated by dividing the NAV of the series of the Fund by the total number of securities outstanding in that series.

(i) Increase (decrease) in net assets attributable to holders of redeemable securities per security “Increase (decrease) in net assets attributable to holders of redeemable securities per security” is disclosed in the Statements of Comprehensive Income (Loss) and represents, for each series of securities, the increase or decrease in net assets for the period attributable to that series divided by the weighted average number of securities of the series outstanding during the period, which is disclosed in Fund Specific Notes.

(j) Use of judgments Classification and measurement of investments and application of the fair value option

In classifying and measuring financial instruments held by the Funds, SAM is required to make significant judgments about whether or not the business of the Funds is to invest on a total return basis for the purpose of applying the fair value option for financial assets under IAS 39. The most significant judgments made include the determination that certain investments are held-for-trading and that the fair value option can be applied to those which are not.

3. REDEEMABLE SECURITIES

Securities issued and outstanding represent the redeemable securities of the Funds. Redeemable securities of the Funds are issued and redeemed at the then current NAVPS at the option of the securityholder. Securityholders are entitled to dividends/distributions when declared. Dividends/distributions on securities of the Funds are reinvested in additional securities or at the option of the securityholders, paid in cash, or both.

The Fund’s redeemable securities are classified as financial liabilities due to its ongoing obligation to pay redemptions at the securityholders request and also distribute in cash, if requested, net income and net realized capital gains annually.

The Statements of Changes in Net Assets Attributable to Holders of Redeemable Securities identify changes in the Funds’ capital during the period. The capital of each of the Funds is managed in accordance with each of the Funds’ investment objectives, including managing the liquidity in order to be able to meet redemptions as discussed in the respective Fund Specific Notes on Financial Risk Management and Financial Instruments.

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4. EXPENSES

Management fees The Manager is paid a management fee for managing the Funds’ overall business and day to day operational services.

The management fee for each series is an annualized fee plus applicable taxes based on the Net Asset Value of the respective series of the Fund and is accrued daily and paid monthly. There is no duplication of fees if a Fund invests in an Underlying Stone Investment Fund.

The series of securities issued by the Funds have the following annual management fees: Annual Management Fee (%) Series*

A,

AA, B,

BB, F, Fund T8A T8B T8C FF LStone & Co. Dividend Growth Class Canada

2.00 2.50 2.50 1.00 2.50

Stone & Co. Resource Plus Class 2.00 2.50 2.50 n/a 2.50Stone & Co. Flagship Growth & Income Fund Canada

2.00 2.50 2.50 1.00 2.50

Stone & Co. Flagship Global Growth Fund 2.00 2.50 2.50 1.00 2.50Stone & Co. EuroPlus Dividend Growth Fund

2.00 2.50 2.50 1.00 2.50

*If applicable

Operating fees The Funds pay operating fees (the “Operating Fees”) to SAM for the day to day operational services. The Operating Fees include, but are not limited to: legal and audit fees, transfer agency costs, custodian costs, filing fees, administrative and overhead costs charged by SAM, and the Independent Review Committee of the Funds. Operating fees incurred by the Funds are allocated among the Series on a reasonable basis as determined by the SAM.

At its sole discretion, SAM may waive or absorb expenses otherwise payable by the Funds. The amount of waivers and absorptions can fluctuate from time to time and may be terminated at any time. Amounts absorbed or waived are reported in the Statements of Comprehensive Income (Loss).

Performance fees Under the terms of the Investment Management Agreement, the Portfolio Manager for all Funds is entitled to receive a performance fee (plus applicable taxes) from each Series of securities of the Fund equal to 10 percent of the amount by which the Fund’s Series rate of return exceeds the return of each Fund’s established benchmark since the last time a Performance fee was paid multiplied by the Fund’s average Series NAV during the calendar year. There is no duplication of fees if a Fund invests in an Underlying Stone Investment Fund. Performance fees, inclusive of HST, are reported on the Statements of Comprehensive Income (Loss).

The Funds’ established benchmarks are disclosed in the following table. For all Funds other than the Stone & Co. Resource Plus Class and the Stone & Co. EuroPlus Dividend Growth Fund, performance fees are limited to a maximum of 0.30 percent (plus applicable taxes) of the Funds’ Series average NAV during the calendar year. Such fees are accrued monthly, if applicable, and paid annually.

Fund Name Performance Fee Benchmark Stone & Co. Dividend Growth Class Canada

(i) 80% of the percentage gain or loss of the S&P/TSX Composite (Total Return) Index; plus (ii) 20% of the percentage gain or loss of the S&P 500 (Total Return) Index.

Stone & Co. Resource Plus Class

(i) 50% of the percentage gain or loss of the S&P/TSX Capped Energy (Total Return) Index; plus (ii) 50% of the percentage gain or loss of the S&P/TSX Capped Materials (Total Return) Index.

Stone & Co. Flagship Growth & Income Fund Canada

(i) 40% of the percentage gain or loss of the S&P/TSX Composite (Total Return) Index; plus (ii) 20% of the percentage gain or loss of the S&P 500 (Total Return) Index; plus (iii) 40% of the percentage gain or loss of the DEX Universe Bond Index.

Stone & Co. Flagship Global Growth Fund

MSCI World (Total Return) Index.

Stone & Co. EuroPlus Dividend Growth Fund

MSCI Europe (Total Return) Index.

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52

5. SOFT DOLLAR COMMISSIONS

Brokerage commissions paid to certain brokers may, in addition to paying for the cost of brokerage services in respect of security transactions, also provide for the cost of investment research goods and services and order execution goods and services provided to the investment manager.

The value of such research services included in commissions paid to brokers for the six month periods ended June 30 is as follows:

Fund

Soft Dollar Commissions

2016 2015

Stone & Co. Dividend Growth Class Canada 61 55Stone & Co. Resource Plus Class – –Stone & Co. Flagship Growth & Income Fund Canada 2 2Stone & Co. Flagship Global Growth Fund – –Stone & Co. EuroPlus Dividend Growth Fund – –

6. TAXATION

a) Trusts The Trusts qualify as mutual fund trusts under the Income Tax Act (Canada). All of the Trusts’ net income for tax purposes and realized net capital gains in any taxation year are required to be distributed to securityholders such that no income tax is payable by the Trusts. Since the Trusts do not record income tax expense, deferred tax assets associated with the tax benefits of capital and non-capital losses will not be recognized on the Statements of Financial Position. Withholding taxes imposed by certain countries on investment income and capital gains are recorded as a separate expense item on the Statements of Comprehensive Income (Loss). The Trusts Capital losses realized by the Trust may be carried forward indefinitely to reduce future realized capital gains. Non-capital losses may be carried forward up to twenty years and applied against net taxable capital gains and net income in future years.

STONE MUTUAL FUNDS

NOTES TO THE FINANCIAL STATEMENTS (continued)

53

As at December 31, 2015, the Funds had the following capital and non-capital losses for income tax purposes, as applicable:

Fund CapitalLosses

Total Non- Capital Losses

Non-Capital Losses that Expire In:

2030 2031 2032 2033 2034 2035

Stone & Co. Flagship Growth & Income Fund Canada $ – $ – – – – – – –

Stone & Co. Flagship Global Growth Fund 20,961 241 – – 241 – – –

Stone & Co. EuroPlus Dividend Growth Fund 1,783 168 – – – 33 135 –

b) The Corporation The Corporation qualifies as a Mutual Fund Corporation under the Income Tax Act (Canada). The Corporation computes its net income and net realized gains/losses for income tax purposes as a single entity. The Corporation is subject to a tax of 331⁄3% under Part IV of the Act on the amount of taxable dividends received from taxable Canadian corporations in the year. This tax is fully refundable upon payment of sufficient taxable dividends. Taxes on net taxable realized capital gains are refundable on a formula basis through redemptions or when the Corporation pays a capital gains dividend. Interest and foreign dividends received are taxed at normal corporate rates subject to permitted deductions for expenses of the Corporation and applicable credits or deductions of foreign taxes paid. As a result, the Corporation does not anticipate that it will be subject to any material non-refundable net Canadian income tax.

Income taxes (if any) are allocated to each class of special shares of the Corporation, as applicable, on a reasonable basis.

Capital losses realized by the Corporation may be carried forward indefinitely to reduce future realized capital gains.

Non-capital losses arising for taxation years after March 22, 2004 may be carried forward up to ten years. Non-capital losses arising for taxation years after December 31, 2005 may be carried forward up to twenty years. Non-capital losses can be used to reduce future taxable income or taxable capital gains. The Corporation does not recognize any deferred tax asset relating to loss carryforwards.

As at December 31, 2015, the Corporation had available tax losses as presented below:

Non-Capital Losses that Expire In:

Fund Capital Losses Total Non-Capital Losses 2028 2029 2030 2031 2032 2033

SCFL $ – $ 23,355 225 3,811 9,186 4,887 4,159 1,087

7. INVESTMENTS IN OTHER INVESTMENT ENTITIES

The Funds can invest in other investment funds (“underlying funds”). Each underlying fund invests in a portfolio of assets to generate returns in the form of investment income and capital appreciation for its securityholders. Each underlying fund finances its operations primarily through the issuance of redeemable securities, which are puttable at the securityholder’s option and entitle the securityholder to a proportionate share of the underlying fund’s net assets. The Fund’s interest in the underlying funds, held in the form of redeemable securities, are reported in its Schedule of Investments Portfolio at fair value, which represent the Fund’s maximum exposure on these investments.

As at June 30, 2016 and December 31, 2015, Stone & Co. Flagship Growth & Income Fund Canada held securities of Stone & Co. Flagship Global Growth Fund Series ‘A’ and Stone & Co. EuroPlus Dividend Growth Fund Series ‘A’. The total fair value of the underlying funds held by the Fund are included in “Investments” on the Statements of Financial Position are $20,425 and $14,166, respectively (December 31, 2015 – $26,610 and $13,773). These amounts relating to the underlying funds account for 21.5% and 14.9% of the Fund’s net assets as at June 30, 2016 (December 31, 2015 – 26.2% and 13.6%). The underlying funds’ NAVs range from $63,662 to $56,560 and $36,632 to $33,706 as at June 30, 2016 (June 30, 2015 – $42,718 to $48,338 and $26,947 to $33,400). Distributions earned from underlying funds are included in “Dividends” on the Statements of Comprehensive Income (Loss). The total realized and change in unrealized gains (losses) arising from underlying funds included in the Statements of Comprehensive Income (Loss) for the period ended June 30, 2016 are $4,320 and $548, respectively (June 30, 2015 – $(3,948) and $(1,100)). The Fund does not provide any additional significant financial or other support to the underlying funds.

STONE MUTUAL FUNDS


54

The table below presents additional information on the Fund’s investments in underlying funds where the ownership exceeds 20% of the underlying fund:

Fund Underlying Fund

Country of establishment and principal place of business

Ownership % as at June 30, 2016

Ownership % as at December 31, 2015

Stone & Co. Flagship Growth & Income Fund

Stone & Co. Flagship Global Growth Fund Canada 36.1 41.8

Stone & Co. Flagship Growth & Income Fund

Stone & Co. EuroPlus Dividend Growth Fund

Canada 42.0 37.6

8. RELATED PARTY TRANSACTIONS

(a) Management Fees including HST SAM provides investment management services to each fund and is remunerated based on the NAV of each Fund. The fees are accrued daily and paid monthly to SAM.

Management Fees Paid for the six month period

ended June 30, 2016

Management Fees Paid for the six month period

ended June 30, 2015

Management Fees Payable as at

June 30, 2016

Management Fees Payable as at

December 31, 2015

Stone & Co Dividend Growth Class Canada $ 4,270 $ 5,624 $ 246 $ –

Stone & Co. Resource Plus Class 48 84 9 –

Stone & Co. Flagship Growth & Income Fund Canada 681 741 78 –

Stone & Co. Flagship Global Growth Fund 530 444 101 –

Stone & Co. EuroPlus Dividend Growth Fund 306 309 57 –

(b) Operating Fees including HST SAM provides fund operations and administration services for each Fund. SAM is paid operating fees from each Fund to cover third party fund expenses and SAM’s fund administration costs. The fees are accrued daily and paid monthly to SAM.

Operating Fees Paid for the six month period ended June 30, 2016

Operating Fees Paid for the six month period ended June 30, 2015

Operating Fees Payable as at

June 30, 2016

Operating Fees Payable as at

December 31, 2015

Stone & Co Dividend Growth Class Canada $ 785 $ 984 $ 65 $ –

Stone & Co. Resource Plus Class 17 32 4 –

Stone & Co. Flagship Growth & Income Fund Canada 171 157 22 –

Stone & Co. Flagship Global Growth Fund 160 131 17 –

Stone & Co. EuroPlus Dividend Growth Fund 102 106 18 –

(c) Performance Fees including HST See Note 4

Performance Fees Paid for the six month period

ended June 30, 2016

Performance Fees Paid for the six month period

ended June 30, 2015

Performance Fees Payable as at

June 30, 2016

Performance Fees Payable as at

December 31, 2015

Stone & Co Dividend Growth Class Canada $ – $ – $ – $ –

Stone & Co. Resource Plus Class – – – –

Stone & Co. Flagship Growth & Income Fund Canada 32 – – 32

Stone & Co. Flagship Global Growth Fund 148 – – 148

Stone & Co. EuroPlus Dividend Growth Fund 6 – – 6

STONE MUTUAL FUNDS


55

(d) Expenses absorbed by the Manager Expenses waived by the manager are included in “Expenses waived/absorbed by the Manager” on the Statements of Comprehensive Income (Loss).

(e) Independent Review Committee Fees The total remuneration paid to members of the Independent Review Committee during six month period ended June 30, 2016 was $24 (2015 – $23).

(f) Manager holdings As at June 30, 2016 and December 31, 2015, the Manager did not hold any units/shares of the Stone Funds.

The Manager’s executive staff held units/shares of the Stone Funds as set out in the table below:

Fair Value of Investments

Fund June 30, 2016 December 31, 2015

Stone & Co. Dividend Growth Class Canada $ 74 $ 47

Stone & Co. Resource Plus Class 13 15

Stone & Co. Flagship Growth & Income Fund Canada 64 65

Stone & Co. Flagship Global Growth Fund 142 156

Stone & Co. EuroPlus Dividend Growth Fund 166 185

9. ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED

The final version of IFRS 9, Financial instruments, was issued by the IASB in July 2014 and will replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 introduces a model for classification and measurement, a single, forward-looking ‘expected loss’ impairment model and a substantially reformed approach to hedge accounting. The new single, principle based approach for determining the classification of financial assets is driven by cash flow characteristics and the business model in which an asset is held. The new model also results in a single impairment model being applied to all financial instruments, which will require more timely recognition of expected credit losses. It also includes changes in respect of own credit risk in measuring liabilities elected to be measured at fair value, so that gains caused by the deterioration of an entity’s own credit risk on such liabilities are no longer recognized in profit or loss. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, however is available for early adoption. In addition, the own credit changes can be early applied in isolation without otherwise changing the accounting for financial instruments. The Funds are in the process of assessing the impact of IFRS 9 and have not yet determined when they will adopt the new standard.

56

NOTES

57

NOTES

58

NOTES

59

NOTES

STONE MUTUAL FUNDS

Interim Financial Report

June 30, 2016

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This document may contain forward-looking statements relating to anticipated future events, results, circumstances, performance or expectations that are not historical facts but instead represent our beliefs regarding future events. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that predictions and other forward-looking statements will not prove to be accurate. We caution readers of this document not to place undue reliance on our forward-looking statements as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed or implied in the forward-looking statements. Actual results may differ materially from management expectations as projected in such forward-looking statements for a variety of reasons, including but not limited to: market and general economic conditions, interest rates, regulatory and statutory developments, the effects of competition in the geographic and business areas in which the Fund may invest and the risks detailed from time to time in the Fund’s simplified prospectus. We caution that the foregoing list of factors is not exhaustive and that when relying on forward-looking statements to make decisions with respects to investing in the Fund, investors and others should carefully consider these factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. Due to the potential impact of these factors, the Fund does not undertake, and specifically disclaims, any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law.

STONE ASSET MANAGEMENT LIMITED 36 Toronto Street, Suite 710 | Toronto, Ontario M5C 2C5 | T: 416 364 9188 or 800 336 9528

F: 416 364 8456 | [email protected] | www.stoneco.com

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