Scotia Private Fundamental Canadian Equity Pool

Scotia Private Fundamental Canadian Equity Pool Annual Management Report of Fund Performance For the year ended December 31, 2020 This annual management report of fund performance contains Forward-looking statements are not guarantees of future perform- financial highlights but does not contain the complete annual ance and actual results or events could differ materially from financial statements of the investment fund. You can get a copy of those expressed or implied in any forward-looking statements the annual financial statements at your request, and at no cost, by made by the Fund. Any number of important factors could con- calling toll-free 1-800-268-9269, by writing to us at 1832 Asset tribute to these digressions, including, but not limited to, general Management L.P., 1 Adelaide Street East, 28th Floor, Toronto, ON, economic, political and market factors in North America and M5C 2V9 or by visiting our website at www.scotiafunds.com or internationally, such as interest and foreign exchange rates, SEDAR at www.sedar.com. global equity and capital markets, business competition, techno- logical change, changes in government relations, unexpected Securityholders may also contact us using one of these methods to judicial or regulatory proceedings and catastrophic events. We request a copy of the investment fund’s interim financial state- stress that the above mentioned list of important factors is not ments, proxy voting policies and procedures, proxy voting dis- exhaustive. Some of these risks, uncertainties and other factors closure record or quarterly portfolio disclosure. are described in the Fund’s simplified prospectus, under the 1832 Asset Management L.P. is the manager (the “Manager”) of heading “Specific risks of mutual funds”. the fund. In this document, “we”, “us”, “our” and the “Manager” refer to 1832 Asset Management L.P. and the “Fund” refers to We encourage you to consider these and other factors carefully Scotia Private Fundamental Canadian Equity Pool. before making any investment decisions. Forward-looking statements should not be unduly relied upon. Further, you should be The term “net asset value” or “net asset value per unit” in this aware of the fact that the Fund has no specific intention of updat- document refers to the net asset value determined in accordance ing any forward-looking statements whether as a result of new with Part 14 of National Instrument 81-106 – Investment Fund information, future events or otherwise, prior to the release of the Continuous Disclosure (“National Instrument 81-106”); while the next management report of fund performance, and that the term “net assets” or “net assets per unit” refers to total equity or forward-looking statements speak only to the date of this net assets attributable to unitholders of the Fund as determined management report of fund performance. in accordance with International Financial Reporting Standards (“IFRS”). Investment Objective and Strategies Caution Regarding Forward-Looking Statements The Fund’s investment objective is to achieve long term capital growth by investing in a diversified portfolio of equity securities Certain portions of this report, including, but not limited to, primarily issued by Canadian companies. “Recent Developments”, may contain forward-looking statements about the Fund and the underlying funds, as applicable, includ- The Fund seeks to achieve its investment objective by investing ing statements with respect to strategies, risks, expected perform- primarily in large cap stocks issued by Canadian companies with ance events and conditions. Forward-looking statements include high growth potential. statements that are predictive in nature, that depend upon or The portfolio advisor uses a fundamental investment approach refer to future events or conditions, or that include words such as that focuses on high quality businesses with attractive earnings “expects”, “anticipates”, “intends”, “plans”, “believes”, “estimates”, prospects at reasonable valuations. Based on the fundamental “projects” and similar forward-looking expressions or negative analysis, the portfolio advisor identifies investment opportunities versions thereof. that are industry leaders with unrecognized growth potential. In addition, any statement that may be made concerning future performance, strategies or prospects and possible future action by As part of the fundamental research, the portfolio advisor con- the Fund is also a forward-looking statement. Forward-looking ducts detailed and rigorous analysis on: statements are based on current expectations and projections management teams and corporate governance structure about future general economic, political and relevant market factors, such as interest rates, foreign exchange rates, equity and historical earnings track record capital markets, and the general business environment, in each financial leverage case assuming no changes to applicable tax or other laws or government regulation. Expectations and projections about future valuation levels and, events are inherently subject to, among other things, risks and future growth potential uncertainties, some of which may be unforeseeable. Accordingly, current assumptions concerning future economic and other fac- The Fund can invest up to 49% of its total assets in foreign tors may prove to be incorrect at a future date. securities. SCOTIA PRIVATE FUNDAMENTAL CANADIAN EQUITY POOL Risk annual growth projected for the next four years. This translates into a forecasted global e-commerce market of US$4.8 trillion by The risks associated with investing in the Fund are as described in 2021. Shopify’s target market ranges from small start-ups to large, the simplified prospectus. There were no material changes to the multinational brands. Fund over its last completed financial year that affected the over- all level of risk of the Fund. The Fund’s positions in Altus Group Ltd., Brookfield Asset Management Inc. and WSP Global Inc. were increased. Holdings Results of Operations in Canadian Natural Resources, Ltd., Nielsen Holdings NV, Royal Bank of Canada and Vermilion Energy Inc. were exited, while For the year ended December 31, 2020 (the “period”), the Series I Alphabet Inc., UnitedHealth Group Inc. and Winpak were units of the Fund generated a total return of 4.5%. Fund returns decreased. are reported net of all management fees and expenses, unlike the returns of the Fund’s benchmark, which is based on the perform- The Fund’s net asset value increased to $638.8 million at ance of an index that does not pay fees or incur expenses. December 31, 2020, from $398.6 million at December 31, 2019. This change was composed of net sales of $196.7 million, invest- The Fund’s broad-based benchmark, the S&P/TSX Composite ment performance of $43.5 million and cash distributions of $24. Index, returned 5.6% during the same period. In accordance with The investment performance of the Fund includes income and National Instrument 81-106, we have included a comparison to expenses which vary year over year. The Fund’s income and this broad-based index to help you understand the Fund’s expenses changed compared to the previous year mainly as a performance relative to the general performance of the market. result of fluctuations in average net assets, portfolio activity and During the period, the resilience of the economic recovery con- changes in the Fund’s income earning investments. tinued to provide a positive backdrop for financial markets. The The Fund may make distributions at a rate determined by the Canadian equity market rose, benefiting from the strong perform- Manager from time to time. If the aggregate amount of dis- ance of the Information Technology and Materials sectors. tributions exceeds the portion of net income and net realized The Fund underperformed the broad-based benchmark largely as capital gains, the excess will constitute a return of capital. The a result of its lack of exposure to gold stocks. Manager does not believe that the return of capital distributions made by the Fund have a meaningful impact on the Fund’s ability Stock selection in the Information Technology and Materials sec- to implement its investment strategy or to fulfill its investment tors also detracted from performance. In the Materials sector, objective. performance was driven by gold stocks. As a result, the Fund’s holdings, including CCL Industries Inc., Winpak Ltd. and Nutrien Recent Developments Ltd., underperformed. In Information Technology, an underweight position in Shopify Inc. detracted from performance. Although COVID-19 Shopify appears to have an enduring competitive advantage and is The spread of the COVID-19 virus began in late 2019 and led to a expected to experience high growth, the Fund maintained an subsequent and dramatic global shutdown by March 2020 of all but underweight position on valuation concerns. the most essential activities. Many businesses and schools were An underweight position in the Energy sector and overweight posi- closed along with borders as mobility restrictions were put in tion in the Information Technology sector contributed to perform- place around the world. This generated significant headwinds for ance. Magna International Inc. was a top individual contributor to corporate and consumer income which led to an increase in performance. The company is benefiting from a recovery in global financial market volatility. In late March, markets began to see a vehicle production, which is ramping up more quickly than dramatic reversal with

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