audited financial statements educational trust... · 2016-06-24 · plan for the year ended march...

Audited Financial Statements

Global Educational Trust Plan For the year ended March 31, 2014 and period ended March 31, 2013

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Global Educational Trust Plan March 31, 2014 and March 31, 2013

Table of Contents

Management’s Responsibility for Financial Reporting 3

Independent Auditor’s Report 4 - 5

Statements of Net Assets 6

Statements of Operations 7

Statements of Changes in Net Assets 7

Statement of Investment Portfolio 8 - 11

Notes to the Financial Statements 12 - 21

Schedule 1- Educational Assistance Payment Contracts 22

Schedule 2- Reconciliation of Educational Assistance Payment 23

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Management’s Responsibility for Financial Reporting The accompanying audited financial statements of Global Educational Trust Plan (the “Plan”) have been prepared by management and approved by the Board of Directors of the Global Educational Trust Foundation (the “Foundation”) and Global Growth Assets Inc. (“GGAI”). Management is responsible for the information and representations contained in these financial statements. The Board of Directors is responsible for reviewing and approving the financial statements and overseeing management’s performance of its financial reporting responsibilities. Global RESP Corporation (“GRESP), which administers the Plan, maintains appropriate processes to ensure that relevant and reliable financial information is produced. The financial statements have been prepared in accordance with Canadian generally accepted accounting principles and include certain amounts that are based on estimates and judgments. The significant accounting policies, which management believes are appropriate for the Plan, are described in Note 2 to the Financial Statements. Deloitte LLP is the external auditor of the Plan. It has audited the financial statements in accordance with Canadian generally accepted auditing standards to enable it to express to the Planholders of the Plan its opinion on the financial statements. On behalf of the Board of Directors,

Sam Bouji Chief Executive Officer

Toronto, Ontario May 30, 2014

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Deloitte LLP Brookfield Place 181 Bay Street Suite 1400 Toronto ONM5J 2V1 Canada Tel: 416-601-6150 Fax: 416-601-6151 www.deloitte.ca

Independent Auditor’s Report To the Planholders of Global Educational Trust Plan We have audited the accompanying financial statements of Global Education Trust Plan, which comprise the statement of investment portfolio as at March 31, 2014, the statements of net asset as March 31, 2014 and March 31, 2013, and the statements of operations and statements of changes in net assets for the year ended March 31, 2014 and the period from January 1, 2012 to March 31, 2013, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

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Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Global Education Trust Plan as at March 31, 2014 and March 31, 2013, and the results of its operations and changes in its net assets for the year ended March 31, 2014 and the period from January 1, 2012 to March 31, 2013 in accordance with Canadian generally accepted accounting principles.

Chartered Professional Accountants, Chartered Accountants Licensed Public Accountants May 30, 2014

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Global Educational Trust Plan Statements of Net Assets As at March 31, 2014 and March 31, 2013

2014 2013 $ $

Assets

Investments - at fair value; cost - ($509,241,1762013 - $459,060,821) 511,870,694 470,423,472

Cash and cash equivalents 36,529,443 34,990,002 Grants receivable 2,145,885 2,166,206 Accrued interest 3,575,573 3,874,042 Accounts receivable (Note 3) 2,158,543 1,641,118

556,280,138 513,094,840

Liabilities

Subscribers’ contributions (Note 4) 344,529,963 309,190,405 y p Accounts payable (Note 3) 2,837,654 3,126,937 Net assets 208,912,521 200,777,498

Represented byAccumulated government grants

deposits 137,853,382 122,786,725 Accumulated and undistributed investment income

and realized gains on investments 68,442,644 66,611,617 Unrealized appreciation of investments 2,616,495 11,379,156

208,912,521 200,777,498

Approved by the Board of Directors of Global Educational Trust Foundation and Global Growth Assets Inc.

______________________________ Sam BoujiChief Executive Officer, Director

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

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Global Educational Trust Plan Statements of Operations For the year ended March 31, 2014 and for the period from January 1, 2012 to March 31, 2013

2014 2013$ $

Investment incomeInterest 16,697,701 20,399,014

ExpensesAdministration fees (Note 3) 7,067,893 7,024,303 Other 165,874 208,773 Audit costs 137,668 141,095 Independent review committee 8,670 22,036

7,380,105 7,396,207

Net investment income 9,317,596 13,002,807

Realized and unrealized (losses) gains on investmentsNet realized (losses) gains on sale of investments (1,166,538) 6,720,850 (Decrease) increase in unrealized appreciation of investments (8,762,662) 824,201

Net realized and unrealized (losses) gains on investments (9,929,200) 7,545,051

(Decrease) increase in net assets from operations for the period (611,604) 20,547,858

Statements of Changes in Net Assets For the year ended March 31, 2014 and for the period from January 1, 2012 to March 31, 2013

2014 2013$

(Decrease) increase in net assets from operations for the period (611,604) 20,547,858 Government grants received (Note 5)Canada Education Savings Grants (CESG) 16,534,180 21,104,180 Canada Learning Bond (CLB) 3,482,275 4,263,200 Alberta Centennial Education Savings Plan (ACES) 37,190 62,532 Quebec Education Saving Incentive (QESI) 536,020 905,639 Saskatchewan Advantage Grant for Education Savings (SAGES) 1,259 - Payments to nominees

Government grants (4,892,400) (4,853,666) Education assistance payments (5,524,265) (4,390,352) Government grants income (1,427,632) (1,253,118)

Increase in net assets during the period 8,135,023 36,386,273 Net assets, beginning of period 200,777,498 164,391,225

Net assets, end of period 208,912,521 200,777,498 The accompanying notes are an integral part of these financial statements.

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Global Educational Trust Plan Statement of Investment Portfolio As at March 31, 2014

Par Value Cost Fair value$ $ $

Subscribers' contribution invested - 69.10%Government Securities -22.40%Canada Government 1.00% February 1, 2015 14,525,000 14,526,039 14,530,084 Canada Government 5.75% June 1, 2029 17,130,000 23,308,411 23,500,818 Canada Housing Trust 1.39% March 15, 2016 600,000 600,780 607,200 Canada Housing Trust 2.35% September 15, 2023 24,275,000 22,977,918 23,346,967 Canada Housing Trust 2.40% December 15, 2022 29,945,000 29,894,241 29,240,095 Canada Housing Trust 3.80% June15, 2021 29,115,000 32,607,076 31,677,120

123,914,465 122,902,284 Provincial Securities -11.20%British Columbia Province 3.70% December 18, 2020 5,030,000 4,959,982 5,411,576 British Columbia Province 5.70% June18, 2029 5,925,000 6,851,694 7,428,469 British ColumbiaMunicipal Fin Auth 4.60% April 23, 2018 3,230,000 3,217,468 3,563,368 Financement Quebec 2.45% December 1, 2019 500,000 499,950 500,190 Hydro-Quebec 11.00% August 15, 2020 4,615,000 7,182,885 6,876,304 Ontario Province 1.45% September 22, 2017 1,100,000 1,105,599 1,105,940 Ontario Province 4.00% June 2, 2021 19,485,000 20,903,574 21,047,502 Ontario Province 4.20% March 8, 2018 3,030,000 3,333,000 3,301,761 Ontario Province 4.40% June 2, 2019 1,385,000 1,444,140 1,530,494 Ontario Province 6.50% March 8, 2029 7,875,000 11,011,901 10,443,904

60,510,193 61,209,508 Financial Institution Securities -16.80%American Express Canada 4.85% October 3, 2014 800,000 806,400 813,792 Bank of America Bond 4.36% September 21, 2015 340,000 330,133 352,808 Bank of Montreal 2.24% December 11, 2017 695,000 698,948 698,044 Bank of Montreal 3.21% September 13, 2018 3,400,000 3,399,830 3,523,964 Bank of Nova Scotia 3.04% October 18, 2019-24 3,000,000 3,000,000 3,039,540 Bank of Nova Scotia 4.10% June 8, 2017 4,000,000 4,158,520 4,264,920 BMO Fixed Rate Dep Notes, 5.18% June 10, 2015 2,285,000 2,404,402 2,385,974 BMO Fixed Rate Dep Notes, 5.18% June 10, 2015 1,205,000 1,267,884 1,258,249 BNS Senior Deposit Notes, 2.25% May 8, 2015 2,400,000 2,424,207 2,422,608 BNS Senior Deposit Notes, 2.25% May 8, 2015 1,255,000 1,267,731 1,266,822 CIBC 4.11% Callable April 30, 2015-20 2,250,000 2,364,615 2,310,098 CIBC Capital Trust 9.98% June 30, 2019-2108 2,000,000 2,670,060 2,622,420 Enbridge 3.19% December 5, 2022 705,000 692,557 687,276 GE Capital Canada Funding 4.55% January 17, 2017 615,000 628,069 659,575 General Electric Capital Corp. 4.60% January 26,2022 1,000,000 999,760 1,096,550

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

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Financial Institution Securities -16.80% (continued)Great West Lifeco 6.67% March 21,2033 3,000,000 3,297,000 3,834,240 Manulife Financial 4.90% June 2,2014 3,000,000 3,146,820 3,017,100 National Bank 4.93% December 22, 2014-19 3,000,000 3,165,360 3,071,070 National Bank of Canada 2.05% January 11, 2016 1,810,000 1,824,426 1,823,539 Pacific & Western Bank 11.00% February 27, 2019 4,500,000 4,500,000 4,500,000 Pacific & Western Bank 8.00% March 11, 2021 10,000,000 10,000,000 10,000,000 Pacific & Western Bank GIC 4.50% August 3, 2021 10,000,000 10,000,000 9,386,738 RBC Montreal Que SR Dep Note, 2.07% June 17, 2016 2,410,000 2,424,787 2,429,160 RBC Montreal Que SR Dep Note, 2.07% June 17, 2016 1,265,000 1,272,858 1,275,057 Royal Bank of Canada 2.36% September 21, 2017 1,500,000 1,500,000 1,514,340 Royal Bank of Canada 3.66% January 25, 2017 500,000 495,750 524,365 Royal Bank of Canada 3.77% March 30, 2018 3,250,000 3,249,610 3,458,130 Royal Bank of Canada 4.93% July 16, 2025 3,000,000 3,109,590 3,397,650 Scotiabank Tier I Trust 7.80% June 30,2019-2108 1,800,000 1,972,224 2,214,198 Sun Life Financial 4.95% June 1, 2016-36 3,000,000 3,065,700 3,181,230 TD Bank 4.78% December 14,2016-2105 4,500,000 4,119,969 4,823,505 TD Bank 5.83% July 9, 2018-23 2,500,000 2,809,700 2,847,475 TD Bank Fixed rate Deposit Note, 2.95% August 2, 2016 2,275,000 2,342,119 2,340,952 TD Bank Fixed rate Deposit Note, 2.95% August 2, 2016 1,215,000 1,250,882 1,250,223

90,659,911 92,291,612 Principal Protected Notes -18.70%BAC Canada Finance PPN September 15, 2016 4,260,000 4,260,000 4,502,394 BAC Canada Finance Ser 1 PPN August 24, 2017 15,000,000 15,000,000 15,907,500 BNS Global Alpha Strat Dep Nts Ser-1, August 29, 2014 10,000,000 10,000,000 9,824,000 BNS Yorkville Canadian Equity PPN January 24, 2019 10,000,000 10,000,000 10,406,000 BNS Yorkville Canadian Equity PPN June 3, 2020 20,000,000 20,000,000 19,818,000 BNP Paribas Millenium PPN November 10, 2014 3,550,000 3,550,000 3,497,815 JP Morgan ETF Efficiente PPN February 26, 2020 7,100,000 7,100,000 6,512,830 JP Morgan S&P 500 Low IndexPPN January 25, 2021 7,100,000 7,100,000 7,067,340 JP Morgan S&P 500 Low Volatility Index PPN March 14, 2019 4,260,000 4,260,000 4,215,696 JP Morgan STOXX Europe Large 200 PPN August 26, 2020 3,550,000 3,550,000 3,583,370

National Bank of Canada Yorkville PPN March 21, 2018 10,000,000 10,000,000 9,858,000 Toronto Dominion Bank PPN March 22, 2018 7,100,000 7,100,000 7,456,420

101,920,000 102,649,365

Total Subscribers' contribution invested 377,004,569 379,052,769

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

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Government Grants invested - 24.30%Government Securities -11.40%Canada Government 1.00% February 1, 2015 6,910,000 6,910,507 6,912,419 Canada Government 5.75% June 1, 2029 8,625,000 11,736,058 11,832,724 Canada Housing Trust 1.39% March 15, 2016 240,000 240,312 242,880 Canada Housing Trust 2.35% September 15, 2023 14,725,000 13,966,778 14,162,063 Canada Housing Trust 2.40% December 15, 2022 13,960,000 13,933,165 13,631,382 Canada Housing Trust 3.80% June15, 2021 14,215,000 15,925,386 15,465,920

62,712,206 62,247,388 Provincial Securities -5.60%British Columbia Province 3.70% December 18, 2020 1,460,000 1,439,677 1,570,756 British Columbia Province 5.70% June18, 2029 1,395,000 1,622,710 1,748,981 British ColumbiaMunicipal Fin Auth 4.60% April 23, 2018 1,290,000 1,284,995 1,423,141 Financement Quebec 2.45% December 1, 2019 200,000 200,954 200,076 Hydro-Quebec 11.00% August 15, 2020 1,910,000 2,972,496 2,845,881 Ontario Province 1.45% September 22, 2017 425,000 427,163 427,295 Ontario Province 4.00% June 2, 2021 9,125,000 9,701,989 9,856,734 Ontario Province 4.20% March 8, 2018 2,420,000 2,581,094 2,637,050 Ontario Province 4.40% June 2, 2019 1,640,000 1,713,516 1,812,282 Ontario Province 6.50% March 8, 2029 6,025,000 8,422,025 7,990,415

30,366,619 30,512,611 Financial Institution Securities -4.60%American Express Canada 4.85% October 3, 2014 325,000 327,600 330,603 Bank of America Bond 4.36% September 21, 2015 150,000 145,647 155,651 Bank of Montreal 3.21% September 13, 2018 1,700,000 1,699,915 1,761,982 Bank of Nova Scotia 3.04% October 18, 2019-24 1,500,000 1,500,000 1,519,770 Bank of Nova Scotia 4.10% June 8, 2017 2,200,000 2,286,702 2,345,706 CIBC 4.11% Callable April 30, 2015-20 1,500,000 1,576,410 1,540,065 CIBC Capital Trust 9.98% June 30, 2019-2108 1,000,000 1,334,127 1,311,210 GE Capital Canada Funding 4.55% January 17, 2017 250,000 255,313 268,120 General Electric Capital Corp. 4.60% January 26,2022 750,000 749,820 822,413 Great West Lifeco 6.67% March 21,2033 1,500,000 1,717,050 1,917,120 Manulife Financial 4.90% June 2,2014 1,500,000 1,570,090 1,508,550 National Bank 4.93% December 22, 2014-19 1,500,000 1,590,870 1,535,535 Royal Bank of Canada 2.36% September 21, 2017 600,000 600,000 605,736 Royal Bank of Canada 3.66% January 25, 2017 200,000 198,300 209,746 Royal Bank of Canada 3.77% March 30, 2018 1,650,000 1,659,570 1,755,666 Royal Bank of Canada 4.93% July 16, 2025 1,550,000 1,646,336 1,755,453 Scotiabank Tier I Trust 7.80% June 30,2019-2108 800,000 911,208 984,088 Sun Life Financial 4.95% June 1, 2016-36 1,000,000 1,021,900 1,060,410 TD Bank 4.78% December 14,2016-2105 2,000,000 1,818,356 2,143,780 TD Bank 5.83% July 9, 2018-23 1,300,000 1,468,568 1,480,687

24,077,782 25,012,291 The accompanying notes are an integral part of these financial statements.

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Principal Protected Notes -2.70%BAC Canada Finance PPN September 15, 2016 1,740,000 1,740,000 1,839,006

BNP Paribas Millenium PPN November 10, 2014 1,450,000 1,450,000 1,428,685

JP Morgan ETF Efficiente PPN February 26, 2020 2,900,000 2,900,000 2,660,170

JP Morgan S&P 500 Low Index PPN January 25, 2021 2,900,000 2,900,000 2,886,660

JP Morgan S&P 500 Low Volatility Index PPN March 14, 2019 1,740,000 1,740,000 1,721,904

JP Morgan STOXX Europe Large 200 PPN August 26, 2020 1,450,000 1,450,000 1,463,630

Toronto Dominion Bank PPN March 22, 2018 2,900,000 2,900,000 3,045,580 15,080,000 15,045,635

Total Government Grants Invested 132,236,607 132,817,925

Total Subscribers' contribution and Government Grants invested - 93.40% 509,241,176 511,870,694 Cash - 2% 10,773,230 10,773,230 Cash equivalents - 4.60% 25,769,236 25,756,213 Total Investment Portfolio 545,783,642 548,400,137

The accompanying notes are an integral part of these financial statements

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Global Educational Trust Plan Notes to the Financial Statements March 31, 2014 1. Organization and general

The Global Educational Trust Plan (the “Plan”) was established on October 14, 1998. It was administered by the Global Educational Trust Foundation (the “Foundation”) up to September 28, 2010. The Foundation is a not-for-profit organization, incorporated without share capital, under the laws of Canada. The Foundation continues to be the sponsor of the Plan.

Due to the Ontario Securities Commission (“OSC”) implementation of National Instrument (“NI 31-103”) effective September 28, 2010, the Foundation retained Global Growth Assets Inc. (“GGAI”) as administrator and investment fund manager of the Plan. None of the roles and duties of the Trustee, Custodian, Distributor, Portfolio Advisers or Independent Review Committee has changed. The Plan provides a savings vehicle for subscribers to save for a beneficiary’s post-secondary education. The subscriber enters into an Educational Assistance Payment (“EAP”) contract with the Foundation. Global RESP Corporation (“GRESP”), a company incorporated under the Canada Business Corporations Act, is the registered distributor of the Plan.

The Foundation has had a specimen copy of the EAP Contract approved by the Canada Revenue Agency (“CRA”) such that subscriber’s EAP Contracts may be submitted to CRA on the subscriber’s behalf by the Foundation for registration as Registered Education Savings Plans (“RESP”). A subscriber’s plan is an education savings plan and not an RESP until the applicable conditions of the Income Tax Act (Canada) (the “ITA”) are met and registered.

Subscribers to the Plan enter into EAP Contracts with the Foundation. Under an EAP Contract, the subscriber purchases units in the Plan. The subscriber authorizes the Foundation to deduct fees, as outlined in the prospectus, for the purpose of providing services to the Plan. At maturity, payments are made to the beneficiary after meeting the conditions as set out in the EAP Contract.

During 2012, the Plan made the decision to change its year-end to March 31 from December 31. The Plan’s comparative financial statements as at March 31, 2013 and for the period from January 1, 2012 to March 31, 2013 are not entirely comparable as the prior period is for 15 months and the current period is for 12 months.

2. Summary of significant accounting policies Basis of accounting These financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles (“GAAP”) as defined by the Handbook of the Chartered Professional Accountants of Canada (the “CPA Canada Handbook”).

Grants receivable are classified as loans and receivables and are recorded at amortized cost, which approximates fair value. Accounts payable is classified as other financial liabilities and is recorded at amortized cost, which approximates fair value.

Investment income is recognized in the Statement of Operations as it is earned.

Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts. The most significant estimates and assumptions relate to valuation of Principal Protected Notes (“PPNs”) and illiquid bonds. Actual results could differ from those estimates and the differences could be significant.

The following is a summary of significant accounting policies followed by the Plan:

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Global Educational Trust Plan Notes to the Financial Statements March 31, 2014

2. Summary of significant accounting policies (continued)

Government grants Government grants received are recorded in the Statement of Changes in Net Assets as a direct increase in net assets of the Plan. Government grants for which the Plan has applied on behalf of an individual Planholder are recorded on accrual basis. This amount received is dependent on each individual Planholder’s taxation status.

Subscribers’ contributions The Subscribers’ contribution balance reflects only amounts received from subscribers net of deductions and does not include amounts receivable on outstanding contracts. The Subscribers’ contributions meets the definition of a liability and has been recognized as such in the Statements of Net Assets. The Foundation deducts from contributions made by subscribers’ special services fees, account maintenance fees, sales charges and, if applicable, the insurance premiums, prior to depositing the balance of the contributions in the Subscribers’ contributions account.

Sales charges Sales charges are required as part of the initial contribution under each EAP contract. Employer sponsored plans have a fee structure that is management fee based.

Sales charges collected by the Foundation during the reporting period are paid to GRESP.

Investments Investments in bonds are stated at fair values, determined using the bid price at year-end. PPNs are hybrid financial debt instruments issued by governments, Canadian chartered banks and licensed trust and loan companies that have embedded components that change the risk/return profile of the security. Included in this class are structured notes that are debt instruments whose returns are based on indices or underlying assets rather than typical interest payments. PPNs are carried at fair value using pricing methodologies established by management and discussed further in Note 7. The Pacific and Western Bank of Canada (“PWB”) bonds held by the Plan are non-traded and are valued at fair value using industry recognized valuation methods.

Investment transactions are accounted for on a trade date basis. Interest income is recognized using the effective interest method. Realized and unrealized gains (losses) on investments are determined using the average cost method.

Short-term investments Short-term investments consist of investments in money market funds and Government of Canada treasury bills maturing within ninety days to one year from the date of purchase. These investments are carried at fair value.

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2. Summary of significant accounting policies (continued)

Cash and cash equivalents Cash and cash equivalents consist of investments in money market funds and Government of Canada treasury bills maturing within ninety days from the date of purchase. These investments are carried at fair value.

Income taxes The Plan is exempt from income taxes under Section 146.1 of the ITA. The income on the Subscribers’ contributions account is currently exempt from income taxes under the ITA. EAPs, and all accumulated investment income, made to qualified beneficiaries represents income to the beneficiary for the purposes of the ITA.

The amounts contributed by subscribers are not deductible by the subscribers for income tax purposes and are not taxable when returned to subscribers or their designated beneficiaries.

Income paid to the subscribers is considered Accumulated Income Payments (“AIPs”) and is subject to income taxes.

Future accounting policy - International Financial Reporting Standards (“IFRS”) Canadian publicly accountable enterprises, which include investment funds, are required to prepare financial statements in accordance with IFRS, as issued by the International Accounting Standards Board. On December 12, 2011, the Canadian Accounting Standards Board (“AcSB”) amended the deadline for adoption of IFRS for investment companies to fiscal years beginning on or after January 1, 2014.

Accordingly, the Plan will adopt IFRS for its fiscal year beginning April 1, 2014, and will issue its initial financial statements in accordance with IFRS, including comparative information, for the interim period ending September 30, 2014. Management is in process of developing a transition plan, which will include identifying differences between the Plan’s current accounting policies and those it expects to apply under IFRS, as well as any accounting policy and implementation decisions and their resulting impact, if any, on the financial statements of the Plan.

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Global Educational Trust Plan

Notes to the Financial Statements March 31, 2014 3. Related party transactions

a) In consideration for administrative services received, the Plan pays the administrator (GGAI) administration fees of 1.2% per annum of the assets of the Plan. The administration fee changed from 1% to 1.2% effective November 15, 2012. Included in the administration fee are the trustee and investment management and custodian counsel fees.

The Plan’s accounts receivable includes $2,158,543 (2013 - $1,290,543) receivable from the Foundation for discretionary payments made to beneficiaries. The Plan’s accounts payable includes $1,947,992(2013 - $2,582,687) payable to GRESP settled through the Foundation for sales charges and $412,661(2013 - $0) payable to GGAI settled through the Foundation for administration fees.

b) GRESP receives sales charges from subscribers that are deducted from contributions made by subscribers. In addition, 20% to 40% of insurance premiums collected from subscribers who optionally take insurance are remitted by the Foundation to GRESP.

c) Special services fees paid from subscribers’ contributions are remitted by the Foundation to GRESP. The fees principally relate to amounts charged to subscribers in respect of cheques returned and not honored.

4. Subscribers’ contributions

The changes in the subscribers’ contributions for the Plan are as follows:

2014 2013

$ $ Balance, beginning of period 309,190,405 261,554,319 Subscribers' contribution 76,451,040 94,061,617 Sales charges (Note 3) (10,768,530) (16,064,345) Account maintenance fees (1,070,922) (1,107,972) Insurance premiums (Note 3) (416,593) (524,384) Special service fees (Note 3) (525,374) (1,155,006) Principal withdrawals on terminations or return of contribution (28,330,063) (27,573,824) Balance, end of period 344,529,963

309,190,405

5. Government grants

Canada Education Savings Grants (“CESG”) The Federal government encourages saving for post-secondary education by providing CESGs on RESP contributions made subsequent to 1997 for children under 18 years of age. The maximum basic CESG per child is 20% of RESP contributions of up to $2,500 (prior to 2007, it was based on $2,000) made on behalf of each beneficiary in a year. Effective in 2004, additional CESG can be added based on up to the first $500 of RESP yearly contributions at a rate of 10% or 20% when there is eligibility based on family net income.

The maximum lifetime CESG is $7,200. Upon maturity of an EAP Contract and fulfillment of certain criteria established by the Federal government, the CESG contributions and accumulated investment income thereon will be added to EAPs made to qualified students.

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Global Educational Trust Plan Notes to the Financial Statements March 31, 2014 5. Government grants (continued)

Saskatchewan Advantage Grant for Education Savings (“SAGES”) Effective January 1, 2013, the Saskatchewan government provides a grant of 10% on contributions made to the RESP of a child residing in Saskatchewan. The maximum per child per year is $250.

There are special conditions for 16 and 17 year-old beneficiaries of an RESP who are eligible for SAGES. One of the following conditions must apply before SAGES will be paid:

1) A minimum of $100 in annual RESP contributions must have been made (and not withdrawn) in any four years before the end of the calendar year the beneficiary turned 15; or

2) A minimum of $2,000 in RESP contributions must have been made (and not withdrawn) before the end of the calendar year the beneficiary turned 15.

Maximum SAGES payments per child total up to $4,500.

Canada Learning Bond (“CLB”) Effective January 1, 2004, CLB was introduced to provide a source of education savings for children in low-income families.

Each child born on or after January 1, 2004 will be eligible for a CLB in each year that child’s family is entitled to the National Child Benefit (“NCB”) supplement, up to and including the year in which the child turns 15 years of age.

An initial CLB of $500 will be provided for the first year of entitlement for the NCB supplement, which could be any year from the year of birth up to and including the year in which the child turns 15 years of age.

Any subsequent CLB will be in the amount of $100, and will be provided in respect of a child for each year in which the family is entitled to the NCB supplement up to and including the year in which the child turns 15 years of age.

Maximum CLB payments per child total up to $2,000.

The Alberta Centennial Education Savings (“ACES”) Plan Effective January 1, 2005, under the ACES Plan, the Alberta government will contribute $500 to the RESP of every baby born to an Alberta resident in 2005 and beyond.

Grants of $100 will be available to children enrolled in school in Alberta at ages 8, 11 and 14 beginning in 2005 whose parents are residents of Alberta. A child will not have to receive previous grants in order to qualify for subsequent grants. The funds may be transferred to a sibling.

All children born in 2005 and beyond to Alberta residents, or born in 2005 and beyond and adopted by Alberta residents, are eligible for the first time $500 grant.

Children born or adopted outside of Alberta, whose parent(s) or guardian(s) later become Alberta residents are eligible for the grant.

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Global Educational Trust Plan Notes to the Financial Statements March 31, 2014 5. Government grants (continued)

Quebec Education Savings Initiative (“QESI”) The QESI is a tax measure for Quebec resident families giving government benefits for RESPs. Effective February 21, 2007, it is based on the established CESG criteria and consists of a refundable tax credit that is paid directly into an RESP. The QESI pays an additional 50% dollar amount to what the CESG allocations are to eligible beneficiaries. QESI lifetime maximum per beneficiary is $3,600 and the program includes carry forward provisions and additional amounts for lower income families.

6. Fair value of financial instruments The Plan is required to disclose its fair value measurements recognized in the Statements of Net Assets using a fair value hierarchy that reflects the significance of the inputs used to measure fair value into three broad levels. Investments measured at fair value are classified in one of three fair value hierarchy levels, based on the lowest level input that is significant to the fair value measurement in its entirety. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The three fair value hierarchy levels are as follows:

Level 1 - Quoted prices (unadjusted in active markets for identical assets or liabilities;

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

Level 3 -Significant inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The following table presents the Plan’s financial instruments measured at fair value classified by the fair value hierarchy:

Assets measured at fair value as of March 31, 2014Level 1 Level 2 Level 3 Total

$ $ $ $

Cash and cash equivalents 10,773,230 25,756,213 - 36,529,443 Fixed income securities - 370,288,956 23,886,738 394,175,694 PPNs - - 117,695,000 117,695,000 Total 10,773,230 396,045,169 141,581,738 548,400,137

Assets measured at fair value as of March 31, 2013Level 1 Level 2 Level 3 Total

$ $ $ $

Cash and cash equivalents 9,186,350 25,803,652 - 34,990,002 Fixed income securities - 356,855,569 30,725,603 387,581,172 PPNs - - 82,842,300 82,842,300 Total 9,186,350 382,659,221 113,567,903 505,413,474

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6. Fair value of financial instruments (continued) Rollforward of Level 3 securities as of March 31, 2014

$Opening balance 113,567,903 Purchases 35,000,000 Transfers - Sales (7,000,000) Realized gain/(loss) on sales - Increase in unrealized gains 13,835 Closing balance 141,581,738

Rollforward of Level 3 securities as of March 31, 2013$

Opening balance 84,108,600 Purchases 46,000,000 Transfers - Sales (19,824,000) Realized loss on sales (176,000) Increase in unrealized gains 3,459,303 Closing balance 113,567,903

PPNs are carried at fair value using valuation models and use, among others, historical or implied volatility and historical correlation, to compute the present value of the note. The PWB bonds were valued using contractual terms, market inputs and industry standard calculation methodologies.

Financial instruments classified as Level 3 represent the Plan’s investment in certain PPNs and the PWB bonds. These securities are priced based on valuation models. The use of reasonable possible alternative assumptions for valuing the Level 3 financial instruments would not significantly affect the fair value of these instruments.

7. Risks associated with financial instruments and capital management

Capital Management The Plan defines its capital as its net assets and subscribers’ contributions, which consists primarily of its financial instruments. GGAI’s investment objective is to protect principal and deliver a positive return for the Plan.

Risk Management In the normal course of operations the Plan may be exposed to a variety of risks arising from financial instruments. The Plan’s exposures to such risks are concentrated in its investment holdings and are related to market risk (which includes interest rate risk and other price risk), credit risk and liquidity risk.

The Plan’s risk management process includes monitoring compliance with the Plan’s investment policy. The Plan manages the effects of these financial risks to the Plan portfolio performance by retaining and overseeing professional external investment managers. The investment managers

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Global Educational Trust Plan Notes to the Financial Statements March 31, 2014 7. Risks associated with financial instruments and capital management

(continued) regularly monitor the Plan’s positions, market events and manage the investment portfolio within the constraints of the investment policy.

(a) Market risk

(i) Interest rate risk Interest rate risk is the risk of a decrease in the Plan’s yield on interest-bearing investments as a result of fluctuations in market interest rates. There is an inverse relationship between changes in interest rates and changes in the fair value of bonds. This risk is actively managed using duration, yield curve analysis, sector and credit selection. There is reduced risk to interest rate changes for cash and short term investments due to their short-term nature.

The table below summarizes the Plan’s exposure to interest rate risks by remaining term to maturity as at March 31, 2014 and 2013:

As at March 31, 2014, management estimates that if prevailing interest rates had increased or decreased by 1% (2013 - 1%), the total investment portfolio value would decrease by approximately $28 million (2013 - $31 million) or increase by approximately $30 million (2013- $33 million), respectively. This 1% change assumes a parallel shift in the yield curve along with all other variables held constant. In practice the actual trading results may differ materially.

(ii) Other price risk Other price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, other than those arising from interest rate risk. Factors specific to an individual investment, its issuer or all factors affecting other price risk. The asset class that is most impacted by other price risk are PPNs which represent 21.46% (2013- 16.39%) of the portfolio. The return on PPNs are not determinable prior to maturity and instead are linked to the performance of their underlying index and will depend on the extent to which the index return is positive or negative at maturity. A negative return will result in a return of only the principal amount which is protected by the issuer. The risk is managed by security selection and active management by external managers within approved investment policies and manager mandates.

2014 2013% %

Less than 1 year 4.9 5.2 1-3 years 12.2 11.2 3-5 years 16.3 15.2 Greater than 5 years 66.6 68.4 100.0 100.0

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7. Risks associated with financial instruments and capital management (continued)

As at March 31, 2014, if underlying indices prices had increased or decreased by 1% with all other variables held constant, the portfolio amount would have increased or decreased by approximately $548,000 (2013 - $440,500). In practice, the actual trading results may differ materially.

(b) Credit risk Credit risk refers to the ability of the issuer of debt securities to make interest payments and repay principal and sector risk relates to the exposure to changes in a particular industrial, commercial or service sector by virtue of concentration. The Plan’s portfolio comprises bonds issued or guaranteed by federal and provincial governments along with Canadian financial institution corporate debt instruments which constitute its most significant exposure to credit risk. The Plan has a concentration of investments in government and government guaranteed bonds, which are considered by management to be high credit quality investments thereby moderating its credit risk. All of the Plan’s assets are exposed to credit risk.

As at March 31, 2014 and March 31, 2013, the Plan’s credit exposure to long term debt instruments is as follows:

Dominion Bond Rating Service (“DBRS”) was the primary source for obtaining credit ratings. Secondary sources used include Moody’s Investors Service and Standard & Poor’s. Unrated debt instruments are composed of the PPNs, PWB bonds and Guaranteed Investment Certificates.

The maximum risk resulting from financial instruments is determined by the fair value of the financial instruments.

(c) Liquidity risk Liquidity risk is the risk that the Plan may not be able to meet its obligations on time. The Plan’s exposure to liquidity risk is concentrated in principal repayment to subscribers and payments of EAPs. Other financial liabilities are all due within one month.

In mitigation of these risks, the Plan retains sufficient cash and short-term investment positions and primarily invests in securities that are traded in the active markets and can be readily disposed to meet expected cash requirements.

Bond Ratings 2014 2013% %

AAAH/AAA/AAH/AAL 60.9 65.5 AA/AH/A/BBH 32.5 25.9 Unrated 6.6 8.6 Total debt securities 100.0 100.0

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8. Ontario Securities Commission Review In the prior year, the OSC completed a compliance review of GGAI and GRESP (collectively, the “Global Entities”), and noted deficiencies that have been referred to the enforcement branch. An independent consultant worked with the Global Entities to develop and implement improved compliance systems. The remaining terms and conditions imposed by the OSC as part of the compliance review were revoked on April 24, 2014.

The Global Entities and certain officers received letters dated December 4, 2012 from the OSC. The OSC is of the view that these companies and a certain officer made investment decisions on behalf of the Plan without being registered to do so, and (i) failed to refer conflicts of interest in connection with the Plan to the Investment Review Committee; (ii) failed to provide full, true and plain disclosure of material conflicts of interest in the Plan’s 2009 and 2011 prospectuses; (iii) failed to meet the standard required of an investment fund manager; and (iv) failed to establish and maintain suitable compliance systems.

On April 14, 2014, the Global Entities and Sam Bouji, Chief Executive Officer of the Plan, entered into a settlement agreement with the OSC. With respect to GGAI, the settlement agreement permanently suspends Mr. Bouji as the Ultimate Designated Person of the Global Entities. GGAI is required to create and maintain an independent board of directors to be approved by the OSC and to appoint a new independent CEO. In addition, Mr. Bouji will resign as a director and officer of GGAI on the earlier of June 13, 2014 (or January 14, 2015 with respect to his officer position) or the appointment of an independent board of directors to GGAI.

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Global Educational Trust Plan Schedule 1- Educational Assistance Payment Contracts As at March 31, 2014 and March 31, 2013

Principal Government TotalNumber of plus grants plus

units accumulated accumulatedYear of eligibility outstanding income income

$ $ $2000 81 22,566 5,058 27,624 2001 98 9,277 2,070 11,347 2002 470 5,549 1,923 7,472 2003 1,881 55,585 9,976 65,561 2004 5,054 173,869 28,706 202,575 2005 9,155 297,844 70,711 368,555 2006 14,888 460,124 96,048 556,172 2007 21,384 666,622 139,123 805,745 2008 28,110 906,703 195,855 1,102,558 2009 35,246 1,407,036 334,340 1,741,376 2010 47,967 2,729,720 696,281 3,426,001 2011 57,651 4,888,207 1,241,941 6,130,148 2012 74,657 8,927,013 2,318,299 11,245,312 2013 83,958 15,477,221 4,140,067 19,617,288 2014 95,377 30,751,649 7,834,032 38,585,681 2015 107,275 32,950,602 8,833,063 41,783,665 2016 115,337 32,409,032 9,118,074 41,527,106 2017 123,373 31,881,315 9,280,219 41,161,534 2018 135,830 31,777,769 9,551,760 41,329,529 2019 139,262 29,343,333 9,066,684 38,410,017 2020 155,235 29,495,505 9,361,621 38,857,126 2021 156,805 26,514,953 8,996,405 35,511,358 2022 164,852 24,925,023 11,685,778 36,610,801 2023 170,031 22,459,318 11,873,643 34,332,961 2024 184,608 20,611,521 11,632,955 32,244,476 2025 192,181 17,871,581 11,116,974 28,988,555 2026 176,509 13,003,716 9,355,777 22,359,493 2027 156,817 7,553,630 7,005,150 14,558,780 2028 136,470 3,941,933 4,998,961 8,940,894 2029 121,938 1,392,134 3,480,880 4,873,014 2030 94,215 378,654 1,940,312 2,318,966 2031 59,988 156,022 730,110 886,132 2032 5,304 20,546 71,736 92,282 March 31, 2014 2,872,007 393,465,572 155,214,532 548,680,104 March 31, 2013 2,654,326 356,149,032 140,273,509 496,422,541

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Global Educational Trust Plan Schedule 2- Reconciliation of Educational Assistance Payment As at March 31, 2014 and March 31, 2013

Opening Inflow Outflow Closing agreements agreements agreements agreements

The following is a summary of Educational Assistance Paymentcontracts

2014 82,013 4,913 3,851 83,075 2013 79,307 7,720 5,014 82,013

The following reconciles Schedule 1 to the statements of net assets 2014 2013

$ $

Total principal, government grantsand accumulated income(Schedule 1) 548,680,014 496,422,541

Represented in the statements ofnet assets bySubscribers' contributions 344,529,963 309,190,405 Accumulated governmentgrants deposits 137,853,382 122,786,725

Accumulated and undistributed investment income and realized gains on investments 68,442,644 66,611,617

550,825,989 498,588,747 Less: Government grants receivable 2,145,885 2,166,206

548,680,104 496,422,541

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100 Mural Street, Suite 201, Richmond Hill, ON L4B 1J3

(416) 741-7377 1-877-460-7377

www.globalfinancial.ca

http://www.globalfinancial.ca/

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