ANNUAL REPORT 2013
TABLE OF CONTENTS
Co-Chief Executive Officers' Message
Management's Discussion and Analysis
2
4
Management's Report
26
Auditors' Report
27
Consolidated Financial Statements
28
Notes to Consolidated Financial Statements 31
Shareholder Information
56
Corporate Information
Back Cover
KNOWLEDGE BASED - VALUE FOCUSED
CLAIRVEST IS ONE OF CANADA'S LEADING PROVIDERS
OF PRIVATE EQUITY FINANCING TO MID-MARKET
COMPANIES AND CURRENTLY HAS APPROXIMATELY
C$1.2 BILLION OF CAPITAL UNDER MANAGEMENT.
CLAIRVEST MANAGES ITS OWN CAPITAL AND THAT OF
THIRD PARTIES, THROUGH THE CLAIRVEST EQUITY
PARTNERS LIMITED PARTNERSHIPS.
CLAIRVEST PARTNERS WITH MANAGEMENT TO INVEST IN
PROFITABLE, SMALL AND MID-SIZED NORTH AMERICAN
COMPANIES WITH THE GOAL OF HELPING TO BUILD
VALUE IN THE BUSINESS AND GENERATE SUPERIOR LONG
TERM FINANCIAL RETURNS FOR INVESTORS.
CLAIRVEST SPECIALIZES IN CONSOLIDATING INDUSTRIES
WITHIN A SPECIFIED REGION AND IN THE LOCAL MARKET
CASINO INDUSTRY.
CO-CHIEF EXECUTIVE OFFICERS’ MESSAGE
OUR LONG-TERM APPROACH ONCE
AGAIN REWARDED OUR COMPANY
AND OUR SHAREHOLDERS
FELLOW SHAREHOLDER,
Consistency and discipline have always been the hallmarks of Clairvest's investment strategy. During the past
year, our long-term approach once again rewarded our company and our shareholders. Despite a flat year for
the private equity industry, Clairvest was very busy and completed the year with two new portfolio investments,
a successful exit for PEER 1 and several significant milestones in the existing portfolio. New investments and the
strength of our portfolio contributed to a 10% increase in book value per share for the year ended March 31,
2013, increasing to $23.12, compared to $20.93 in the prior year, despite having average cash balances of 37%
of book value during the year.
As the private equity industry enters 2013, the industry is poised to benefit from strengthening credit markets
and a revival of the deal-making environment. This means that demand for attractive opportunities will be on
the rise, along with valuation multiples. However, while we pay attention to macro trends, Clairvest is not
influenced by the ebbs and flows of the deal-making environment. With our focus on growth investments in
sectors we know and close working partnerships with experienced entrepreneur partners, our eye is fixed on the
long term. We keep our focus on intrinsic value creation and strategic deployment of our investors’ capital. As
we conclude the fiscal year with a strong balance sheet and a solid liquidity position, we are well positioned to
continue putting our proven strategy to work for our investors.
NEW INVESTMENTS
During the fiscal year we added two new investments to the portfolio. Both are within chosen industry niches
and the result of a focused and patient approach to proprietary deal flow. The first investment in Contractors
Rental Supply builds on our experience in the equipment rental space and the second investment in MAG
Defense Services is a result of conscientious research into the a growing sub segment of the specialty aviation
industry. In April 2013, subsequent to year end, we completed an investment in County Waste of Virginia, our
third investment in the solid waste management industry, a core domain for Clairvest since 2005. We are
supporting our former partner from a successful solid waste company investment that we exited in 2011. We
are privileged that we were chosen again as partners and look forward to building on our previous success
together.
2
RESULTS
Our value creation performance continues to be greater than many public market indices. Over the past 17
years, Clairvest has consistently delivered growth in its book value per share, producing a compounded annual
growth rate of 10% including dividends, on an after-tax basis, compared with 6.6% pre-tax for the S&P 500. This
return is the aggregate of high returns on our invested capital and modest money market returns on our cash
balances, which have averaged 36% of our book value over the period, providing our shareholders with a solid
risk adjusted return.
OUR THANKS
The Company's successes are due to the combined efforts of people in many roles. We acknowledge the
consistent hard work and dedications of Clairvest's employees. The exceptional dedication of the management
teams of our investee companies must be noted, along with the commitment of our limited partners, plus the
advice and counsel of our Board of Directors.
Most of all, we extend our appreciation to Clairvest shareholders, for their continued confidence.
B. Jeffrey Parr
Co-Chief Executive Officer
Ken Rotman
Co-Chief Executive Officer
June 25, 2013
3
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2013
June 25, 2013
The Management's Discussion and Analysis ["MD&A"] of financial condition and results of operations analyzes
significant changes in Clairvest Group Inc.'s consolidated financial results, financial position, risks and
opportunities. It should be read in conjunction with the Consolidated Financial Statements.
The following MD&A is the responsibility of Management and is as of June 25, 2013. The Board of
Directors carries out its responsibility for review of this disclosure through its Audit Committee. The Audit
Committee reviews the disclosure and recommends its approval to the Board of Directors. The Board of
Directors has approved this disclosure.
INTRODUCTION
Clairvest Group Inc. ["Clairvest" or the "Company"] is a private equity investor that specializes in partnering with
management teams and other stakeholders of both emerging and established companies. Clairvest invests its
own capital, and that of third parties, through Clairvest Equity Partners Limited Partnership ["CEP"], Clairvest
Equity Partners III Limited Partnership ["CEP III"], Clairvest Equity Partners IV Limited Partnership ["CEP IV"] and
Clairvest Equity Partners IV-A Limited Partnership ["CEP IV-A"] [together, the "CEP Funds"] in a small number of
carefully selected companies that have the potential to generate superior returns.
The Company's shares are traded on the Toronto Stock Exchange under the stock symbol "CVG".
At March 31, 2013, Clairvest had 15 core investments in 8 different industries. Three of these
investments are joint investments with CEP, five are joint investments with CEP III and six are joint investments
with CEP IV and CEP IV-A [together, the "CEP IV Fund"]. Clairvest also holds an investment in Wellington
Financial Fund IV ["Wellington Fund IV"].
OVERVIEW OF FISCAL 2013
An overview of the significant events during fiscal 2013 follows:
Clairvest's book value increased $33.3 million, or $2.19 per share. The increase was primarily due to net
income of $2.36 per share, net of $0.2093 per share in dividends paid.
Clairvest and CEP III sold their interests in PEER 1 Network Enterprises Inc. ["PEER 1"], a global online IT
infrastructure provider based in Vancouver, British Columbia, for cash proceeds of $79.8 million. On a
combined $25.2 million investment, Clairvest and CEP III generated a pre-tax return of 3.2 times and an
internal rate of return of 40% over a 3.5 year investment period. Consistent with its ownership percentage,
Clairvest realized $19.9 million on a $6.3 million investment. During fiscal 2013, Clairvest recorded a $9.5
million pre-tax gain on its investment in PEER 1, inclusive of $0.5 million in foreign exchange gain.
Rivers Casino, a gaming entertainment complex located in Des Plains, Illinois, completed a financing which
resulted in a distribution to its investors. As a result of the financing, Clairvest, the CEP IV Fund and
co-investors received distributions and promissory note repayments totaling US$83.9 million. In addition,
Clairvest, the CEP IV Fund and co-investors also received quarterly distributions, interest and fee payments
which brought total cash proceeds in fiscal 2013 to US$125.9 million against an aggregate original investment
of US$79.9 million. Consistent with its ownership percentage, Clairvest received US$15.8 million on an
original US$8.5 million investment. During fiscal 2013, Clairvest recorded $10.0 million in pre-tax income
from its investment in Rivers Casino, comprised primarily of $13.2 million in distributions and interest
4
MANAGEMENT'S DISCUSSION AND ANALYSIS
income, $0.5 million in fees net of a $3.8 million net unrealized loss as a result of the $13.2 million
distributions received.
Centaur Gaming [formerly Centaur, LLC] completed the acquisition of Indiana Grand Casino and Indiana
Downs Racetrack ["Indiana Grand"], and together with its ownership in Hoosier Park Racing Casino, owns
both racinos in the Indianapolis region. Clairvest, CEP IV, CEP IV-A and other co-investors [the "investors"]
advanced US$9.1 million in promissory notes during the acquisition process and invested US$30.4 million in
support of the acquisition. The investment was by way of unsecured term loans with stapled warrants which
subject to regulatory approval are convertible upon exercise into 35.8% of the Class B units of Centaur
Gaming. Prior to this investment, the investors had an aggregate investment in Centaur Gaming of US$103.5
million in post-petition first and second lien loans, unsecured term loans with stapled warrants and
promissory notes from an unrelated investment partner [the "Investment Partner"]. In conjunction of this
transaction, Centaur Gaming completed a financing which resulted in full repayment of its post-petition first
and second lien loans and promissory notes. The investors received US$91.0 million in principal repayments
during fiscal 2013, comprised of a US$58.6 million full repayment of the post-petition first lien secured loans,
a US$22.2 million full repayment of the post-petition second lien secured loans, US$9.1 million full
repayment of the promissory notes advanced during the acquisition process and US$1.1 million full
repayment of the promissory note from the Investment Partner. Consistent with its ownership, Clairvest had
an investment in Centaur Gaming of US$29.0 million at March 31, 2012 and advanced a US$7.4 million
promissory note during the acquisition process and invested US$8.4 million in unsecured term loans with
stapled warrants in support of the acquisition. The warrants, which subject to regulatory approval, are
convertible upon exercise to 9.9% of Class B units of Centaur Gaming. Clairvest received total principal
repayments of US$30.3 million during fiscal 2013, comprised of US$16.4 million full repayment of the
post-petition first lien secured loans, a US$6.2 million full repayment of the post-petition second lien secured
loans, US$7.4 million full repayment of the promissory note and US$0.3 million full repayment of the
promissory note from the Investment Partner, such that Clairvest's net investment in Centaur Gaming at
March 31, 2013 was US$14.5 million. Subsequent to the financing, Clairvest made a treasury investment in
Centaur Gaming in the form of a US$6.0 million first lien secured loans and a US$6.0 second lien secured
loans, the aggregate carrying value of which at March 31, 2013 was $12.3 million and has been included in
temporary investments on the balance sheet. During fiscal 2013, Clairvest recorded $6.0 million in pre-tax
income from its investment in Centaur Gaming, comprised primarily of $3.8 million in unrealized gains and
$2.0 million in interest income.
Clairvest, CEP III and co-investors earned $12.5 million in dividends through their investment in Chilean
Gaming Holdings, bringing total dividends earned to March 31, 2013 to $17.4 million, or 22% of their invested
capital. Consistent with its ownership, Clairvest earned $4.6 million in dividends through its investment in
Chilean Gaming Holdings, and together with $6.4 million in unrealized gains and $0.8 million in foreign
exchange costs, recorded $10.2 million in pre-tax income from its investment in Chilean Gaming Holdings
during fiscal 2013.
Clairvest made a $6.8 million provision for its investment in Landauer Metropolitan Inc. ["Landauer"], due to
an anticipated material adverse change to the profitability of Landauer in the near term as a result of the
recently completed Medicare competitive bidding process in the United States.
5
MANAGEMENT'S DISCUSSION AND ANALYSIS
Clairvest and the CEP IV Fund invested $39.5 million in CRS Contractors Rental Supply Limited Partnership
["CRS"], a provider of equipment rental services and related merchandise across 21 locations in Ontario,
Canada. Clairvest's portion of the investment is $10.6 million.
Clairvest and the CEP IV Fund invested US$7.0 million in MAG Defense Services ["MAG"], a U.S.-based
specialty aviation and intelligence, surveillance and reconnaissance service provider. Clairvest’s portion of the
investment is US$1.9 million.
Clairvest reached a court approved settlement with certain parties with respect to a $10.0 million loan
advanced during fiscal 2006 and 2007 which was written off during fiscal 2007. Clairvest recorded pre-tax
income of $7.8 million on this settlement, without taking into account litigation and other costs incurred in
the recovery process, substantially all of which have been incurred and recorded as charges against income
as of March 31, 2013. Clairvest continues to seek additional recoveries against parties that are not part of
this settlement.
Clairvest filed a new normal course issuer bid enabling it to make market purchases of up to 756,204 of its
common shares in the 12-month period commencing March 6, 2013. No purchases have been made under
this bid to June 25, 2013. As at June 25, 2013, Clairvest had repurchased a total of 6,595,049 common and
non-voting shares over the last ten years. As at June 25, 2013, 15,124,095 common shares are outstanding.
Clairvest paid an annual ordinary dividend of $0.10 per share and a special dividend of $0.1093 per share,
such that in aggregate, the dividends represented 1% of the March 31, 2012 book value. The dividends were
paid on July 26, 2012 to common shareholders of record as of July 9, 2012. The dividends were eligible
dividends for Canadian income tax purposes.
OUTLOOK
At March 31, 2013, Clairvest's current management team has made 34 platform investments in 10 different
industries and has exited 22 investments which have generated 2.6 times invested capital on realized and
substantially realized investments. From inception, the Company has invested its own capital in every
investment. Clairvest's team of professionals have all invested significant amounts of capital in the Company
which allows Clairvest to approach each investment as owners and shareholders.
At March 31, 2013, Clairvest had $174.5 million in cash, cash equivalents and temporary investments,
access to $95.0 million in credit facilities and $261.1 million of additional capital available through the CEP Funds
to fund new and follow-on investments. With a strong financial position, Clairvest has the ability to support the
growth of its investee companies and to continue its active pursuit of new investment opportunities.
At March 31, 2013, Clairvest had approximately $1.2 billion in capital under management, $834 million
of which is third-party capital. The third-party capital provides Clairvest with a steady stream of revenue over
the next few years and provides the ability for Clairvest to enhance its returns by earning a carried interest.
Clairvest's latest capital pool with the CEP IV Fund totals $467 million, $125 million of which is
committed by Clairvest. At March 31, 2013, 40% of this capital pool has been invested in 6 different
investments. Subsequent to year end, Clairvest and the CEP IV Fund invested a combined US$15.0 million for a
46.9% ownership in County Waste of Virginia ["County Waste"], a private regional solid waste management
company based in West Point, Virginia. Clairvest's portion of the combined investment was US$4.0 million for a
12.6% ownership in County Waste. The investment in County Waste brings capital invested by the CEP IV Fund
to approximately 45% of its committed capital.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS
FORWARD-LOOKING STATEMENTS
A number of the matters discussed in this MD&A deal with potential future circumstances and developments
and may constitute "forward-looking" statements. These forward-looking statements can generally be identified
as such because of the context of the statements and often include words such as the Company "believes",
"anticipates", "expects", "plans", "estimates" or words of a similar nature.
The forward-looking statements are based on current expectations and are subject to known and
unknown risks, uncertainties and other factors which may cause the actual results, performance or
achievements of the Company to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include general and economic business
conditions and regulatory risks. The impact of any one risk factor on a particular forward-looking statement is
not determinable with certainty as such factors are interdependent upon other factors, and management's
course of action would depend upon its assessment of the future, considering all information then available.
All subsequent forward-looking statements, whether written or oral, attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. The
Company assumes no obligation to update forward-looking statements should circumstances or management's
estimates or opinions change.
REGULATORY FILINGS
The Company's continuous disclosure materials,
interim filings, annual MD&A and audited
consolidated financial statements, Annual Information Form, Notice of Annual Meeting of Shareholders and
Proxy Circular are available on the Canadian System for Electronic Document Analysis and Retrieval ["SEDAR"] at
www.sedar.com.
including
7
MANAGEMENT'S DISCUSSION AND ANALYSIS
SUMMARY OF CLAIRVEST'S CORPORATE INVESTMENTS AT MARCH 31, 2013
Investment
Industry
Segment
Geographic
Segment
Ownership
Percentage[17]
Cost of
Investment
[millions]
Net Cash
Investment
[millions][18]
Fair Value of
Investment
[millions][19]
Description of Business
INVESTMENTS MADE ALONGSIDE CLAIRVEST EQUITY PARTNERS
Grey Eagle Casino[1]
Gaming
Canada
Equity
participation
$ ─
$ [5.1]
$ 2.4
Landauer Metropolitan
Inc. ["Landauer"][2]
Healthcare
United
States
14.2%
$ 5.1
$ 5.1
$ 0.1
N-Brook Mortgage LP
["N-Brook"][3]
Financial
Services
Canada
24.1%
$ 3.1
$ 3.1
$ 0.7
INVESTMENTS MADE ALONGSIDE CLAIRVEST EQUITY PARTNERS III
Casino New Brunswick[4]
Gaming
Canada
22.5%
$ 9.8
$ 9.8
$ 2.4
Chilean Gaming
Holdings[5]
Gaming
Chile
36.8%
$ 28.7
$ 23.1
$ 39.5
Kubra Data Transfer
Limited ["Kubra"][6]
Business
Services
Light Tower Rentals Inc.
["Light Tower Rentals"][7]
Equipment
Rental
Lyophilization Services of
New England Inc.
["LSNE"][8]
Contract
Manufacturing
United
States
United
States
United
States
11.5%
$ 2.2
$ [0.8]
$ 12.7
12.6%
$ 8.2
$ 8.2
$ 24.6
12.3%
$ 7.5
$ 7.5
$ 7.6
A charitable casino on Tsuu T'ina First
Nation reserve lands, located southwest
of the city of Calgary, Alberta. CEP also
has an equity participation in the Grey
Eagle Casino.
A supplier of home medical equipment in
northeastern United States. CEP owns
42.6% of Landauer.
A company that originated adjudicated
and underwrote mortgages in Ontario,
British Columbia, Manitoba and Alberta,
Canada. CEP owns 72.3 % of N-Brook.
A gaming entertainment complex located
in Moncton, New Brunswick. CEP III owns
67.5% of Casino New Brunswick.
An investment vehicle which holds an
equity
gaming
in
entertainment complexes in Chile. CEP III
owns 37.7% of Chilean Gaming Holdings.
interest
various
A business process outsourcing company
focused on the distribution of household
bills on behalf of its customers. CEP III
owns 34.5% of Kubra.
An oilfield equipment rental company
operating in major oil and gas drilling
basins in the United States. CEP III owns
37.8% of Light Tower Rentals.
A Manchester, New Hampshire based
organization
contract manufacturing
focused on providing
lyophilization
services to biotech, pharmaceutical and
medical device manufacturers. CEP
III
owns 36.8% of LSNE.
[1]
[2]
[3]
[4]
[5]
[6]
[7]
[8]
Clairvest had funded $5.6 million to Grey Eagle Casino by way of 16% debentures which was repaid in full during fiscal 2012. Clairvest continues to hold units of a limited
partnership which operates Grey Eagle Casino, entitling Clairvest to between 2.8% and 9.6% of the earnings of the casino until December 18, 2022.
Clairvest owns 1,906,250 10% cumulative convertible preferred shares, 748,133 common shares, a US$0.6 million subordinated secured convertible note at 10% interest
per annum and US$0.3 million of bridge loans of Landauer.
Clairvest has funded $5.0 million to N-Brook in the form of partnership units and warehouse loans. The net cash investment and fair value is reduced by $1.9 million as a
result of cash distributions received to date.
Clairvest has funded $9.8 million to Casino New Brunswick by way of debentures and owns units of a limited partnership which operates Casino New Brunswick.
Clairvest owns 30,446,299 units of Chilean Gaming Holdings which holds a 50% interest in Casino Marina del Sol and a 48.8% interest in each of Casino Osorno and
Casino sol Calama.
Clairvest owns 3,250,000 Class A voting common shares of Kubra. The net cash investment is reduced by the $3.0 million in dividends received.
Clairvest owns 5,841,250 Series A convertible preferred shares and 8,428,387 common shares of Light Tower Rentals.
Clairvest owns 6,406,000 Series A 10% cumulative convertible preferred shares, 1,250,000 Series B cumulative preferred shares and a US$0.4 million demand promissory
note of LSNE.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS
Investment
Industry
Segment
Geographic
Segment
Ownership
Percentage[17]
Cost of
Investment
[millions]
Net Cash
Investment
[millions][18]
Fair Value of
Investment
[millions][19]
Description of Business
INVESTMENTS MADE ALONGSIDE CLAIRVEST EQUITY PARTNERS IV
Centaur Gaming
[formerly Centaur, LLC][9]
United
States
Gaming
Debt
interest with
stapled
warrants
$ 14.6
$ 11.8
$ 18.4
CRS Contractors Rental
Supply Limited
Partnership ["CRS"][10]
Equipment
Rental
Canada
13.9%
$ 10.6
$ 10.6
$ 10.6
Discovery Air Inc.
["Discovery Air"][11]
Specialty
Aviation
Canada
Debt
interest
convertible
to 10.5%
$ 22.0
$ 22.0
$ 25.5
Linen King, LLC
["Linen King"][12]
Textile
Rental
Service
United
States
21.7%
$ 2.5
$ 2.5
$ 0.8
MAG Defense Services
["MAG"][13]
Specialty
Aviation
United
States
8.0%
$ 1.9
$ 1.9
$ 1.9
Rivers Casino [14]
Gaming
United
States
5.0%
$ 7.4
$ [6.2] $ 20.7
STANDALONE INVESTMENTS
Wellington Financial
Fund IV ["Wellington
Fund IV"][15]
Financial
Services
OTHER INVESTMENTS[16]
TOTAL INVESTMENTS
Canada
12.6%
$ 12.1
$ 11.5
$ 14.9
$ 0.9
$ 136.7
$ 0.9
$ 105.9
$ [6.4]
$ 176.4
The owner and operator of the Hoosier Park
Racing & Casino and the Indiana Grand
Casino and Indiana Downs Racetrack in the
Indianapolis region. CEP IV and CEP IV-A
have debt interests with stapled warrants.
A provider of equipment rental services and
related merchandise across 21 locations in
Ontario, Canada. CEP IV and CEP IV-A own
32.8% and 5.2% of CRS respectively.
specialty aviation
A
services business
operating across Canada and in selected
locations internationally. CEP IV and CEP IV-
A have a debt interest convertible to 13.2%
and 2.1% in Discovery Air respectively.
An Oklahoma based textile rental company
that provides commercial laundry services,
primarily to hospitals. CEP IV and CEP IV-A
own 51.1% and 8.1% of Linen King
respectively.
A U.S.-based specialty aviation, intelligence,
surveillance and reconnnaissance service
provider. CEP IV and CEP IV-A have Class A
stock convertible to 19.0% and 3.0% interest
respectively.
A gaming entertainment complex located in
Des Plains, Illinois. CEP IV and CEP IV-A own
11.8%
1.9% of Rivers Casino
and
respectively.
Provides debt capital and operating lines to
technology, biotechnology, communications
and industrial product companies in Canada
and the United States.
[9]
[10]
[11]
[12]
[13]
[14]
[15]
Clairvest invested $14.6 million in Centaur Gaming by way of unsecured term loans with stapled warrants which, subject to regulatory approval, are convertible upon
exercise into 9.9% of Class A and Class B units of Centaur Gaming. Clairvest also invested US$6.0 million in first lien secured loans and US$6.0 million in second lien
secured loans from its treasury funds which are included in temporary investments.
Clairvest owns 10,572,805 limited partnership units of CRS.
Clairvest invested $22.0 million in Discovery Air by way of 5.5 year term convertible debentures with a stated interest rate of 10% per annum.
Clairvest owns 2,529,209 Class A units of Linen King.
Clairvest owns 18,737 Class A stock of MAG.
Clairvest owns 9,021,917 units of Rivers Casino and 5,000 units of a minority investor in Rivers Casino. The US$1.1 million promissory note advanced to a minority
investor had been repaid in full during fiscal 2013.
Clairvest has committed to fund $25.1 million to Wellington Fund IV, $12.1 million of which had been funded at March 31, 2013. The net cash investment is reduced by
$0.6 million as a result of income distributions received to date.
[16] Other investments include the fair values attributable to limited partners of Participation III and IV Partnerships as described in note 4[c] and 4[f] to the consolidated
financial statements.
[17] Ownership percentage calculated on a fully diluted basis at March 31, 2013.
[18] Net cash investment is comprised of cost net of dividends, interest and other distributions received but excludes advisory and other fees received, foreign income taxes
incurred by acquisition entities and foreign exchange gains or losses on foreign exchange forward contracts entered into as hedges against Clairvest's foreign
denominated investments.
The determination of fair value incorporates the quoted market value of Clairvest's publicly-traded investments and an estimate of fair value for privately-held
investments. The fair value of foreign exchange forward contracts entered into as hedges against Clairvest's foreign denominated investments is not included in this fair
value.
[19]
9
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL HIGHLIGHTS
Selected Financial Performance Measures
Year ended March 31, [$000's, except number of shares and per share amounts]
Financial Performance Measures
2013
2012
2011
Net realized gains on corporate investments
$ 9,009 $ 545
$ 3,861
Net changes in unrealized gains on corporate investments
Net income
Basic net income per share
Fully diluted net income per share
Dividends declared per share
Financial Condition Measures [as at March 31]
Total assets
Total cash, cash equivalents and temporary investments
Total corporate investments
Total liabilities
Book value
Common shares outstanding
Book value per share
4,598
35,763
2.36
2.32
16,590
22,416
1.46
1.43
0.2093
0.1965
378,936
174,513
176,390
29,248
349,688
338,424
97,583
187,876
21,997
316,427
16,249
19,564
1.23
1.20
0.10
318,860
138,338
162,177
16,458
302,402
15,124,095
15,118,095
15,392,695
23.12
20.93
19.65
Income Statement Highlights
Clairvest's operating results reflect revenue earned from its corporate investments and cash, cash equivalents and
temporary investments and realized and net changes in unrealized gains and losses on its corporate investments. These
results are net of all costs incurred to manage these assets. The operating results of the CEP Funds are not included in
Clairvest's operating results.
Net income for the year ended March 31, 2013 was $35.8 million, versus $22.4 million for the year ended March
31, 2012 and $19.6 million for the year ended March 31, 2011.
Clairvest had net realized gains of $9.0 million in fiscal 2013 versus $0.5 million in fiscal 2012 and $3.9 million in
fiscal 2011. The net realized gains in 2013 resulted primarily from the realization of Clairvest’s investment in PEER 1. The
net realized gains in 2012 resulted primarily from the realization of Clairvest's investment in Hudson Valley Waste. The net
realized gains in 2011 resulted primarily from the realization of Clairvest's investment in Van-Rob. Previously recognized net
unrealized gains of these investments are reversed and netted against net realized gains for the respective year.
Clairvest had net changes in unrealized gains on investments of $4.6 million in fiscal 2013 versus $16.6 million in
fiscal 2012 and $16.2 million in fiscal 2011. Unrealized gains or losses result from changes in the fair value of the
investments from one year to the next and do not reflect foreign exchange revaluations. Clairvest has implemented a
hedging strategy to limit its exposure to changes in the value of foreign denominated currencies relative to the Canadian
dollar by hedging 100% of the fair value of its foreign investments, unless a specific exemption is approved by the Board of
investments are summarized as follows:
Directors. The changes
in unrealized gains or
losses on corporate
10
MANAGEMENT'S DISCUSSION AND ANALYSIS
Net Changes in Unrealized Gains [Losses] on Investments [$000's]
Year ended March 31,
2013
2012
2011
Investments in publicly-traded securities
PEER 1 Network Enterprises Inc.
Investments in privately-held securities
Casino New Brunswick
Centaur Gaming
Chilean Gaming Holdings
Grey Eagle Casino
Hudson Valley Waste Holding, Inc.
Kubra Data Transfer Limited
Landauer Metropolitan Inc.
Light Tower Rentals Inc.
Linen King, LLC
Lyophilization Services of New England Inc.
Rivers Casino [1]
Wellington Financial Fund II
Wellington Financial Fund III / IV
Other investments [2]
$ —
$ 1,504
$ 3,528
—
1,504
3,528
—
3,815
6,395
825
—
[2,744]
[2,598]
1,559
299
—
4,614
[6,907]
2,602
[1,744]
2,360
[3,849]
[26]
[778]
962
6,116
—
[1,389]
15,689
[56]
711
8,796
206
17,266
[4,606]
2,266
—
459
8,387
2,156
[2,936]
7,131
—
784
—
23
538
14,202
[4,198]
[2,180]
[1,481]
$ 4,598
$ 16,590
$ 16,249
[1]
[2]
The net unrealized loss on Rivers Casino during fiscal 2013 was the result of $13.2 million in distributions and interest received during the year.
Includes fair value attributable to limited partners of Participation III and IV Partnerships as described in note 4[c] and 4[f] to the consolidated
financial statements.
Further details on net changes in unrealized gains/losses on investments can be found in the discussion of Clairvest's
corporate investments below.
Net income in fiscal 2013 included distributions and interest income of $32.3 million, dividend income of $4.6
million, management fees from CEP and CEP IV-A of $1.0 million, advisory and other fees from Clairvest's investee
companies of $1.4 million, a realized gain on temporary investments of $7.8 million, administration and other expenses of
$17.9 million, finance and foreign exchange expense of $1.0 million and income tax expense of $6.0 million. Included in
distributions and interest income was $7.5 million in priority distributions from CEP III and CEP IV, $0.9 million in General
Partner income distributions from CEP and $19.9 million in distributions and interest from Clairvest's investee companies.
Included in dividends were dividends totaling $4.6 million from Clairvest's investee companies. Included in administration
and other expenses were management and directors compensation expense totaling $12.4 million, $6.8 million of which is
performance based.
Net income in fiscal 2012 included distributions and interest income of $19.3 million, dividend income of $4.4
million, management fees from CEP and CEP IV-A of $1.1 million, advisory and other fees from Clairvest investee companies
of $2.0 million, administration and other expenses of $15.4 million, finance and foreign exchange expense of $1.7 million
and income tax expense of $4.5 million. Included in distributions and interest income was $7.4 million in priority
11
MANAGEMENT'S DISCUSSION AND ANALYSIS
distributions from CEP III and CEP IV, $2.2 million in General Partner income distributions from CEP and $6.3 million in
distributions and interest from Clairvest's investee companies. Included in dividends were dividends totaling $4.3 million
from Clairvest's investee companies. Included in administration and other expenses were management and directors
compensation expense totaling $10.9 million, $5.3 million of which is performance based.
Net income in fiscal 2011 included distributions and interest income of $14.8 million, dividend income of $0.7
million, management fees from CEP and CEP IV-A of $1.1 million, advisory and other fees from Clairvest investee companies
of $1.0 million, administration and other expenses of $14.0 million, finance and foreign exchange expense of $1.1 million
and income tax expense of $3.1 million. Included in distributions and interest income was $5.6 million in priority
distributions from CEP III and CEP IV, $3.1 million in General Partner income distributions from CEP and $3.0 million in
distributions from Clairvest's investee companies. Included in dividends were dividends totaling $0.5 million from Clairvest's
investee companies. Included in administration and other expenses were management and directors compensation
expense totaling $10.1 million, $4.8 million of which is performance based.
Balance Sheet Highlights
ASSETS
Total assets at March 31, 2013 were $378.9 million, an increase of $40.5 million from $338.4 million at March 31, 2012.
With $174.5 million in cash, cash equivalents and temporary investments ["treasury funds"] and $95.0 million in
credit facilities, Clairvest has sufficient capital and liquidity to support its current and anticipated investments.
At March 31, 2013, the Company's treasury funds were held in cash, money market savings accounts rated R1-
High, corporate bonds rated not below A+, guaranteed investment certificates and investment savings accounts rated not
below A, and a treasury investment in the first and second lien loans of Centaur Gaming [see Notes 3 and 14 to the
consolidated financial statements for a detailed discussion of the Company's treasury funds].
Clairvest has a $75.0 million, committed credit facility with a maturity date of April 30, 2020. The credit facility is
unsecured and bears interest at the rate of 11.0% per annum on drawn amounts and 1.0% per annum on undrawn
amounts. The amount available under the credit facility at March 31, 2013 is $75.0 million.
Clairvest also has a $20.0 million credit facility subject to annual renewals. The credit facility is unsecured and
bears interest at the bank prime rate plus 0.5% per annum. The amount available under the credit facility at March 31, 2013
is $20.0 million, which is based on debt covenants within the banking arrangement.
As is typical of a private equity management firm, Clairvest's main asset is its corporate investments. Corporate
investments decreased $11.5 million to $176.4 million at March 31, 2013. The decrease is comprised primarily of:
Partial return of capital from N-Brook of $1.9 million;
Net return of capital from Centaur Gaming of $14.8 million;
Realization of PEER 1 which was carried at $10.4 million at March 31, 2012;
Repayment of the $4.5 million bridge loan previously advanced to Discovery Air;
Net return of capital from Wellington Fund IV of $1.4 million;
A $10.6 million investment in CRS;
A $1.9 million investment in MAG;
Net follow-on investments totaling $0.1 million in existing investee companies;
Net changes in unrealized gains on corporate investments of $4.6 million; and
Partial return of capital from Rivers Casino of $1.1 million; partially offset by
Interest accrued on debenture investments of $2.5 million and foreign exchange revaluations of $3.1 million.
Corporate investments increased $25.7 million to $187.9 million from March 31, 2011 to March 31, 2012. The
increase primarily resulted from a $26.5 million investment in Discovery Air, a $2.5 million investment in Linen King, $2.4
million in follow-on investments in existing investee companies, net changes in unrealized gains on corporate investment of
$16.6 million, partially offset by the realization of Hudson Valley Waste which was carried at $16.9 million at March 31,
12
MANAGEMENT'S DISCUSSION AND ANALYSIS
2011, repayment of debentures and accrued interest of $7.8 million from Grey Eagle Casino and a net return of capital of
$6.7 million as a result of Centaur Gaming's emergence from Chapter 11 protection.
The cost and fair value of corporate investments described below do not reflect foreign exchange gains or losses
on the foreign exchange forward contracts entered into as hedges against the Company's foreign denominated
investments. A discussion on the activity in each corporate investment held at March 31, 2013 follows.
INVESTMENTS MADE ALONGSIDE CEP
Grey Eagle Casino
At March 31, 2013, Clairvest holds units of a limited partnership which operates Grey Eagle Casino, entitling Clairvest
between 2.8% and 9.6% of the earnings of the casino from the date of commencement of operations, December 19, 2007,
for a period of 15 years.
During fiscal 2013, Clairvest earned $0.4 million in profit distributions from Grey Eagle Casino.
The fair value of $2.4 million at March 31, 2013 reflects management's estimated realizable value on the earnings
entitlement.
Landauer Metropolitan Inc.
At March 31, 2013, Clairvest owned 1,906,250 10% cumulative convertible preferred shares, 748,133 common shares and
$0.2 million in bridge loans which bear interest at a rate of 25% per annum, $0.1 million in bridge loans which bear interest
at a rate of 12% per annum and a $0.6 million subordinated secured convertible note with 10% accrued interest per annum.
The bridge loans are convertible to common shares of Landauer at a rate of $1.0 per share. The subordinated secured
convertible note is convertible to Series B preferred shares at a conversion rate of $1.00 per share or into common shares
at a rate of $0.50 per share. The conversion is at Clairvest's discretion.
During fiscal 2013, management determined that the fair value of Landauer should be written down by $6.8
million due to an anticipated material change to the profitability in the near term as a result of the recently completed
Medicare competitive bidding process in the United States.
The fair value of $0.1 million at March 31, 2013 compares to a cost of $5.1 million. The fair value reflects
management's estimated realizable value and is adjusted for foreign exchange fluctuations.
N-Brook Mortgage LP
During fiscal 2013, Clairvest received cash proceeds totaling $1.9 million from N-Brook Mortgage LP ["N-Brook"], $1.1
million of which was recorded as a full repayment of the variable rate demand debenture and the remaining $0.8 million
was recorded as a return of capital on the limited partnership units.
At March 31, 2013, Clairvest owned 3,931,984 Series 1 limited partnership units and 15 Class A ordinary limited
partnership units of N-Brook.
The fair value of $0.7 million at March 31, 2013 compares to a cost of $3.1 million. The fair value reflects
management's estimated realizable value based on the remaining mortgage portfolio held by N-Brook.
INVESTMENTS MADE ALONGSIDE CEP III
Casino New Brunswick
At March 31, 2013, Clairvest has funded $9.8 million to Casino New Brunswick. Clairvest also holds units of a limited
partnership which operates Casino New Brunswick, entitling Clairvest to 22.5% of the earnings of the casino. Clairvest has
also pledged $5.4 million to a Schedule 1 Canadian chartered bank which has provided debt financing to Casino New
Brunswick. The pledge was made to support the guarantee to fund any operating deficiencies of Casino New Brunswick as
described in the Off-Balance Sheet Arrangements section of the MD&A.
The fair value of $2.4 million at March 31, 2013 compares to cost of $9.8 million. The fair value reflects
management's estimated realizable value as results trail initial estimates when the investment was first completed.
13
MANAGEMENT'S DISCUSSION AND ANALYSIS
Chilean Gaming Holdings
During fiscal 2013, Clairvest earned dividends totaling $4.6 million through its interest in Chilean Gaming Holdings, bringing
total dividends earned to March 31, 2013 to $6.4 million.
The fair value of $39.5 million at March 31, 2013 compares to cost of $28.7 million. The fair value reflects
management's estimated realizable value and is adjusted for foreign exchange fluctuations.
Kubra Data Transfer Limited
At March 31, 2013, Clairvest owned 3,250,000 Class A voting common shares of Kubra.
The fair value of Kubra of $12.7 million compares to a cost of $2.2 million. The fair value reflects management's
estimated realizable value and is adjusted for foreign exchange fluctuations.
Light Tower Rentals Inc.
During fiscal 2013, LTR Equipment Inc. ["LTR Equipment"], a company affiliated with Light Tower Rentals which supplies
certain equipment to Light Tower Rentals, was amalgamated into Light Tower Rentals. As a result of the amalgamation,
Clairvest exchanged the 2,215,736 common shares of LTR Equipment into 8,428,387 common shares of the combined
entity.
At March 31, 2013, Clairvest owned 5,841,250 Series A convertible preferred shares and 8,428,387 common shares
in Light Tower Rentals, representing a 12.6% ownership interest on a fully-diluted basis.
The fair value of $24.6 million at March 31, 2013 compares to cost of $8.2 million. The fair value reflects
management's estimated realizable value and is adjusted for foreign exchange fluctuations.
Lyophilization Services of New England Inc.
During fiscal 2013, Clairvest funded an additional US$0.1 million to LSNE in the form of unsecured loans to further support
the growth of LSNE, bringing total unsecured loans advanced to LSNE by Clairvest to US$1.0 million. On March 31, 2013,
US$0.6 million of unsecured loans were converted to 1,250,000 Series B 10% cumulative preferred shares and the
remaining US$0.4 million of unsecured loans were converted to a promissory note with a stated interest rate of 10% per
annum and repayable on demand.
At March 31, 2013, Clairvest owned 6,406,000 Series A 10% cumulative preferred shares which are convertible into
a 12.3% ownership interest on a fully-diluted basis, 1,250,000 Series B 10% cumulative preferred shares and US$0.4 million
in demand promissory notes.
Also during fiscal 2013, management determined that the fair value of LSNE should be adjusted upward by US$2.4
million.
The fair value of $7.6 million at March 31, 2013 compares to a cost of $7.5 million. The fair value reflects
management's estimated realizable value and is adjusted for foreign exchange fluctuations.
INVESTMENTS MADE ALONGSIDE CEP IV
Centaur Gaming
During fiscal 2013, Centaur Gaming acquired Indiana Grand Casino and Indiana Downs Racetrack ["Indiana Grand"], located
in Shelbyville, Indiana. Clairvest advanced a US$7.4 million promissory note to Centaur Gaming during the acquisition
process and invested an additional US$8.4 million in the form of an unsecured term loan with stapled warrants in support
of this acquisition. The promissory note had a stated interest rate of 3.41% per annum and was repaid in full upon
completion of the acquisition. The warrants, which subject to regulatory approval, are convertible upon exercise into 9.9%
of Class B units of Centaur Gaming.
In conjunction with this acquisition, Centaur Gaming completed a financing and repaid in full the post-petition first
and second lien secured notes with interest accrued to February 20, 2013. The promissory note from an unrelated
investment partner of Centaur Gaming was also repaid in full upon the completion of the financing. During fiscal 2013,
14
MANAGEMENT'S DISCUSSION AND ANALYSIS
Clairvest received cash proceeds totaling US$32.3 million, comprised of a US$16.4 million full repayment on the first lien
secured notes, a US$6.2 million full repayment on the second lien secured notes, a US$0.3 million full repayment on the
promissory note from the unrelated investment partner, a US$7.4 million full repayment on the promissory note advanced
during the acquisition process and US$2.0 million in interest. Immediately following these transactions, Clairvest held
US$13.6 million in term loans with stapled warrants which are convertible upon exercise to 9.9% of Class A and B units in
Centaur Gaming.
The fair value of $18.4 million at March 31, 2013 compares to cost of $14.6 million. The fair value reflects
management’s estimated realizable value and is adjusted for foreign exchange fluctuations.
CRS Contractors Rental Supply Limited Partnership
During fiscal 2013, Clairvest invested $10.6 million for 10,572,805 limited partnership units of CRS, representing an
ownership interest in CRS of 13.9%.
The fair value of $10.6 million at March 31, 2013 compares to a cost of $10.6 million.
Discovery Air Inc.
During fiscal 2013, Discovery Air repaid a $4.5 million bridge loan advanced by Clairvest with a stated interest rate of 9.5%
per annum.
At March 31, 2013, Clairvest held $25.4 million in secured convertible debentures ["Debentures"] of Discovery Air.
The Debentures, which have a 5.5 year term from issuance and are subject to certain early redemption rights in favor of
Discovery Air, had an original principal value of $22.0 million and accrue interest at a rate of 10% per annum and interest is
paid in kind quarterly and compounded on an annual basis. The Debentures and any paid in kind interest are convertible
into 2,939,330 common shares of Discovery Air. At March 31, 2013, the conversion price for the Debentures was $8.68 per
share and the closing quoted market price of a Discovery Air common share was $2.38 per share.
The fair value of $25.5 million at March 31, 2013 compares to cost of $22.0 million, with the difference being
attribute to accrued interest on the Debentures.
Linen King, LLC
At March 31, 2013, Clairvest owned 2,529,209 Class A units of Linen King.
The fair value of $0.8 million at March 31, 2013 compares to a cost of $2.5 million. The fair value reflects
management's estimated realizable value and is adjusted for foreign exchange fluctuations.
MAG Defense Services
During fiscal 2013, Clairvest invested $1.9 million to acquire 18,737 Class A stock of MAG, representing an ownership
interest in MAG of 8.0%.
The fair value of $1.9 million at March 31, 2013 compares to a cost of $1.9 million.
Rivers Casino
During fiscal 2013, Clairvest earned US$3.6 million in quarterly distributions and US$0.5 million in quarterly fees from Rivers
Casino. Clairvest also earned US$0.2 million in interest on the promissory note from a minority investor which invested in
Rivers Casino [the "Minority Investor"] and received US$0.4 million in quarterly principal and interest payments from the
Minority Investor.
Also during fiscal 2013, Rivers Casino completed a financing and as a result made an additional distribution to its
investors. Clairvest received cash proceeds totaling US$9.5 million from this distribution. In addition to the distributions
received from Rivers Casino, the Minority Investor made a US$1.0 million full repayment on the promissory note.
At March 31, 2013, Clairvest owned 9,021,917 units of Rivers Casino and 5,000 units of the Minority Investor.
15
MANAGEMENT'S DISCUSSION AND ANALYSIS
The fair value of $20.7 million at March 31, 2013 compares to a cost of $7.4 million. The fair value reflects management’s
estimated realizable value and is adjusted for foreign exchange fluctuations.
OTHER INVESTMENTS
Wellington Financial Fund III / IV
During fiscal 2013, Wellington Fund IV, a successor of Wellington Financial Fund III ["Wellington Fund III"], was raised. As
part of the closing of Wellington Fund IV, Clairvest transferred its investment and its unfunded commitment in Wellington
Fund III to Wellington Fund IV. Clairvest also increased its commitment in Wellington Fund IV by $0.1 million to $25.1
million in support of the final closing of Wellington Fund IV. Clairvest received a net return of capital of $2.1 million as a
result of the closing of Wellington Fund IV.
Clairvest, as a limited partner, had funded $12.1 million of its $25.1 million commitment to Wellington Fund IV at
March 31, 2013. Clairvest is also entitled to participate in the profits received by the General Partner of Wellington Fund IV.
At March 31, 2013, Clairvest has received income distributions totaling $0.6 million from Wellington Fund IV and its General
Partner, bringing the net cash investment to $11.5 million. In addition, Clairvest received distributions from Wellington
Fund III totaling $8.9 million to March 31, 2013, and is entitled to future profits of up to $0.9 million based on the value of
the remaining assets of Wellington Fund III at March 31, 2013.
The fair value of $14.9 million at March 31, 2013 reflects management's estimated realizable value of Clairvest's
entitlement as a limited partner and a general partner of Wellington Fund IV.
LIABILITIES
Total liabilities at March 31, 2013 were $29.2 million, an increase of $7.2 million from $22.0 million at March 31, 2012.
Performance based compensation accrued and income taxes accrued increased by $3.3 million and $2.9 million respectively
year over year.
TRANSACTIONS WITH RELATED PARTIES
As the Manager of CEP, Clairvest is entitled to a management fee from CEP. Effective January 1, 2011, the CEP management
fee is calculated annually as 1.5% of contributed capital less distributions on account of capital and write-downs of capital
invested. The management fee is reduced to the extent of 75% of fees earned by Clairvest from corporate investments of
CEP. The management fee from CEP ceased effective March 1, 2013. During fiscal 2013, Clairvest earned management fees
of $0.3 million from CEP. As per the Management Agreement, fees of $0.1 million from corporate investments of CEP were
netted against the management fees.
Clairvest, as General Partner of CEP is entitled to participate in distributions made by CEP equal to 10% of net gains
of CEP [the "carried interest"]. During fiscal 2013, Clairvest earned $0.9 million in carried interest from CEP, which brings
total carried interest earned by Clairvest from CEP at March 31, 2013 to $11.1 million. If CEP were to sell its corporate
investments at their current fair values, Clairvest would receive up to $1.0 million in carried interest from CEP. Principals
and employees of Clairvest are entitled to participate in another 10% of carried interest from CEP via a limited partnership
["Participation Partnership"], the general partner of which is Clairvest.
As the General Partner of CEP III, Clairvest is entitled to a priority distribution from CEP III. Effective January 13,
2011, the priority distribution is calculated monthly as 0.1667% of invested capital net of write-downs of capital then
invested. The priority distribution is reduced to the extent of 75% of any fees earned by Clairvest from corporate
investments of CEP III. During fiscal 2013, CEP III declared to Clairvest priority distributions of $1.9 million. As per the
Limited Partnership Agreement, fees of $0.3 million from corporate investments of CEP III were netted against the priority
distributions.
Clairvest is also entitled to a 10% carried interest in respect of CEP III. No carried interest has been earned by
Clairvest from CEP III to March 31, 2013. At March 31, 2013, if CEP III were to sell its corporate investments at their current
fair values, Clairvest would receive up to $11.6 million in carried interest from CEP III. Principals and employees of Clairvest
16
MANAGEMENT'S DISCUSSION AND ANALYSIS
are entitled to participate in another 10% of carried interest from CEP III via a limited partnership ["Participation III
Partnership"], the general partner of which is Clairvest.
Clairvest is required to co-invest alongside CEP III in all investments undertaken by CEP III. CEP III Co-Investment
Limited Partnership ["CEP III Co-Invest"] was established in fiscal 2007 as the investment vehicle for this purpose. CEP III Co-
Invest has two limited partners, one of which is Clairvest, and the other is Participation III Partnership. Participation III
Partnership has invested $1.1 million in CEP III Co-Invest and is entitled to an 8.25% carried interest in respect of CEP III Co-
Invest.
Clairvest is entitled to participate in additional distributions equal to the realizable value on the $1.1 million
invested by Participation III Partnership in CEP III Co-Invest plus the first $0.2 million received by the Participation III
Partnership as described above. At March 31, 2013, $0.3 million has been received by Clairvest. At March 31, 2013, if CEP III
Co-Invest were to sell its corporate investments at their current fair values, Participation III Partnership would receive up to
$4.7 million in carried interest from CEP III Co-Invest based on the terms described above, the amount of which has been
recorded as a reduction to the fair value of corporate investments. To date, CEP III Co-Invest has not made any carried
interest payments to Participation III Partnership.
As General Partner of CEP IV, Clairvest is entitled to a priority distribution from CEP IV. Effective January 14, 2011
to January 13, 2016, being the fifth anniversary of the date of final closing of CEP IV, the priority distribution is calculated
monthly as 0.1667% of committed capital, and thereafter 0.1667% of invested capital net of write-downs of capital then
invested. The priority distribution is reduced to the extent of 63.2% of any fees earned by Clairvest from corporate
investments of CEP IV. During fiscal 2013, CEP IV declared to Clairvest priority distributions of $5.6 million. As per the
Limited Partnership Agreement, fees of $0.3 million from corporate investments of CEP IV were netted against the priority
distributions.
Clairvest is also entitled to a 10% carried interest in respect of CEP IV. No carried interest has been earned by
Clairvest from CEP IV to March 31, 2013. At March 31, 2013, if CEP IV were to sell its corporate investments at their current
fair values, Clairvest would receive up to $4.9 million in carried interest from CEP IV. Principals and employees of Clairvest
are entitled to participate in another 10% of carried interest from CEP IV via a limited partnership ["Participation IV
Partnership"], the general partner of which is Clairvest.
As Manager of CEP IV-A, Clairvest is entitled to a management fee from CEP IV-A. Effective January 14, 2011 to
January 13, 2016, being the fifth anniversary of the date of final closing of CEP IV-A, the CEP IV-A management fee is
calculated monthly as 0.1667% of committed capital; and thereafter 0.1667% of invested capital net of write-downs of
capital then invested. The management fee is reduced to the extent of 10.1% of fees earned by Clairvest from corporate
investments of CEP IV-A and other amounts as provided in the Limited Partnership Agreement. During fiscal 2013, Clairvest
earned management fees of $0.6 million as compensation for its services in the administration of the portfolio of CEP IV-A.
As per the Limited Partnership Agreement, $0.3 million was netted against the management fees.
As General Partner of CEP IV-A, Clairvest is also entitled to a 10% carried interest in respect of CEP IV-A. No carried
interest has been earned by Clairvest from CEP IV-A to March 31, 2013. At March 31, 2013, if CEP IV-A were to sell its
corporate investments at their current fair values, Clairvest would receive up to $0.8 million in carried interest from CEP IV-
A. Principals and employees of Clairvest are entitled to participate in another 10% of carried interest from CEP IV-A via
Participation IV Partnership.
Clairvest is required to co-invest alongside CEP IV and CEP IV-A in all investments undertaken by CEP IV and CEP IV-
A. CEP IV Co-Investment Limited Partnership ["CEP IV Co-Invest"] was established in fiscal 2010 as the investment vehicle
for this purpose. CEP IV Co-Invest has two limited partnerships, one of which is Clairvest, and the other is Participation IV
Partnership. Participation IV Partnership has invested $1.6 million in CEP IV Co-Invest and is entitled to an 8.25% carried
interest in respect of CEP IV Co-Invest.
Clairvest is entitled to participate in distributions equal to the realizable value on the $1.6 million invested by
Participation IV Partnership in CEP IV Co-Invest plus the first $0.4 million received by the Participation IV Partnership as
described above. No amounts have been received by Clairvest at March 31, 2013. At March 31, 2013, if CEP IV Co-Invest
17
MANAGEMENT'S DISCUSSION AND ANALYSIS
were to sell its corporate investments at their current fair values, Participation IV Partnership would receive up to $2.5
million in carried interest from CEP IV Co-Invest based on the terms described above, the amount of which has been
recorded as a reduction to the fair value of corporate investments. To date, CEP IV Co-Invest has not made any carried
interest payments to Participation IV Partnership.
At March 31, 2013, Clairvest had loans receivable from certain officers of Clairvest [the "Officers"] totaling $1.1
million. The loans are interest bearing, have full recourse to the individual and are collateralized by the common shares of
Clairvest owned by the Officers with a market value of $1.4 million. At March 31, 2013, Clairvest also had loans receivable
from certain officers of a company affiliated with Clairvest totaling $0.6 million. The loans are interest bearing and have full
recourse to the individuals. Interest of $35 thousand was earned on these loans during fiscal 2013.
Loans totaling $29.5 million, bearing interest at the Reference Rate in accordance with CEP IV's Limited
Partnership Agreement, were made by the Company to CEP IV during fiscal 2013. During fiscal 2013, $45.6 million of these
loans and loans previously advanced were repaid such that $4.5 million remained outstanding at March 31, 2013, the
amount of which was repaid in full subsequent to year end. Interest of $1.6 million was earned from loans to CEP IV during
fiscal 2013.
Loans totaling $4.7 million, bearing interest at the Reference Rate in accordance with CEP IV-A's Limited
Partnership Agreement, were made by the Company to CEP IV-A during fiscal 2013. During fiscal 2013, $6.9 million of these
loans and loans previously advanced were repaid such that $0.7 million remained outstanding at March 31, 2013, the
amount of which was repaid in full subsequent to year end. Interest of $0.2 million was earned from loans to CEP IV-A
during fiscal 2013.
During fiscal 2013, Clairvest earned $19.9 million in distributions and interest income, $4.6 million in dividend
income and $1.4 million in fee income from its investee companies. At March 31, 2013, Clairvest had accounts receivable
from its investee companies totaling $1.2 million, from CEP totaling $38 thousand, from CEP III totaling $1.6 million, from
CEP IV totaling $3.4 million and from CEP IV-A totaling $0.5 million.
During fiscal 2011, Clairvest and a director of Clairvest entered into an agreement to purchase an aircraft for a
total cost of $3.5 million, $1.7 million of which was paid by Clairvest. The aircraft is owned 50% by Clairvest and 50% by a
director of Clairvest. At March 31, 2013, Clairvest′s portion of the net book value of the aircraft of $1.5 million is recorded in
accounts receivable and other assets. Clairvest received 100% of the incidental rental income of the aircraft and is
responsible for 100% of the operating expenses.
SUMMARY OF QUARTERLY RESULTS
($000's except per share information)
March 31, 2013
December 31, 2012
September 30, 2012
June 30, 2012
March 31, 2012
December 31, 2011
September 30, 2011
June 30, 2011
Gross
Revenue
$
16,086
14,673
12,202
17,673
13,045
22,546
Net
Income
[Loss]
$
10,111
8,445
7,647
9,560
5,348
17,592
2,557
[1,778]
5,825
1,254
Net Income
[Loss] Per
Common Share*
$
Net Income [Loss]
Per Common Share
Fully Diluted*
$
0.67
0.55
0.51
0.63
0.35
0.66
0.54
0.50
0.62
0.34
1.14
[0.11]
0.08
1.12
[0.11]
0.08
* The sum of quarterly net income (loss) per common share may not equal to the full year net income per common share due to rounding and the anti-
dilutive effect on any quarters where the Company reported a net loss.
18
MANAGEMENT'S DISCUSSION AND ANALYSIS
Significant variations arise in the quarterly results due to realized gains and losses on corporate investments, net changes in
unrealized gains and losses on corporate investments which are re-valued on a quarterly basis when conditions warrant an
adjustment to the fair value of the corporate investment, and stock-based compensation due to the movement in the
trading price of Clairvest's common shares.
FOURTH QUARTER RESULTS
Net income for the fourth quarter of fiscal 2013 was $10.1 million compared with a net income of $5.3 million for the
fourth quarter of fiscal 2012. Net income for the fourth quarter of fiscal 2013 is comprised of $8.6 million of net corporate
investment gains, $3.0 million of net operating income, and $1.5 million of income tax expense. This compares with net
corporate investment gains of $6.4 million, $0.1 million of net operating loss, and $1.0 million of income tax expense for the
fourth quarter of fiscal 2012.
The net corporate investment gains of $8.6 million for the fourth quarter of fiscal 2013 comprised of $9.0 million in
net changes in unrealized gains on corporate investments and $0.4 million in realized loss on corporate investments. The
net corporate investment gains of $6.4 million for the fourth quarter of fiscal 2012 comprised primarily of net changes in
unrealized gains on corporate investments.
Distributions and interest income for the quarter were $6.0 million, compared with $5.7 million for the same
quarter last year. Distributions and interest income for the fourth quarter of fiscal 2013 included yield on treasury funds of
$0.8 million, priority distributions of $1.8 million from CEP III and CEP IV, General Partner income distributions of $0.1
million from CEP, interest income from loans advanced to the CEP funds of $0.4 million and $2.9 million of income
distributions and interest income from Clairvest's investee companies. Distributions and interest income for the fourth
quarter of fiscal 2012 included yield on treasury funds of $0.5 million, priority distributions of $1.9 million from CEP III and
CEP IV, interest income from loans advanced to the CEP funds of $0.5 million and $2.8 million of income distributions and
interest income from Clairvest's investee companies.
Dividend income for the quarter was $0.8 million, compared with $0.3 million for the same quarter last year.
Dividend income for the fourth quarter of fiscal 2013 and 2012 was primarily earned through Clairvest's investment in
Chilean Gaming Holdings.
Clairvest earned $0.2 million in management fees during the quarter for its services in the administration of CEP
and CEP IV-A's portfolio and $0.4 million in advisory and other fees from its corporate investments, compared with $0.3
million and $0.3 million, respectively, for the same quarter last year. The CEP and CEP IV-A management fee is reduced
proportionately to fees earned by Clairvest from joint Clairvest/CEP and Clairvest/CEP IV-A corporate investments.
Administration and other expenses for the quarter were $4.1 million, compared with $5.6 million for the same
quarter last year. Included in administration and other expenses for the fourth quarter of fiscal 2013 was $1.6 million of
performance based compensation expense for management and directors, compared with $2.5 million for the same
quarter last year.
Finance and foreign exchange expense of $0.4 million for the quarter included foreign exchange cost of $0.1
million and $0.3 million in interest and fees expensed on the $75.0 million credit facility. Finance and foreign exchange
expense of $1.1 million for the fourth quarter of fiscal 2012 included foreign exchange cost of $0.7 million and $0.3 million
in interest and fees expensed on the $75.0 million credit facility.
OFF-BALANCE SHEET ARRANGEMENTS
Clairvest has committed to co-invest alongside CEP in all investments undertaken by CEP. Clairvest's total co-investment
commitment is $54.7 million, $3.5 million of which remains unfunded at March 31, 2013. Clairvest may only sell all or a
portion of a corporate investment that is a joint investment with CEP if it concurrently sells a proportionate number of
securities of that corporate investment held by CEP.
Clairvest has also committed to co-invest alongside CEP III in all investments undertaken by CEP III. Clairvest's total
co-investment commitment is $75.0 million, $15.2 million of which remains unfunded at March 31, 2013. Clairvest may only
19
MANAGEMENT'S DISCUSSION AND ANALYSIS
sell all or a portion of a corporate investment that is a joint investment with CEP III if it concurrently sells a proportionate
number of securities of that corporate investment held by CEP III.
Clairvest has also committed to co-invest alongside CEP IV and CEP IV-A in all investments undertaken by CEP IV
and CEP IV-A. Clairvest's total co-investment commitment is $125.0 million, $73.1 million of which remains unfunded at
March 31, 2013. Clairvest may only sell all or a portion of a corporate investment that is a joint investment with CEP IV and
CEP IV-A if it concurrently sells a proportionate number of securities of that corporate investment held by CEP IV and CEP
IV-A.
Clairvest has also committed $25.1 million to Wellington Fund IV, $13.0 million of which remains unfunded at
March 31, 2013.
At March 31, 2013, Clairvest has earned profit distributions totaling $3.3 million through its ownership interest in
the General Partners of Wellington Fund III and Wellington Fund IV. Subject to the clawback provisions, Clairvest may be
required to repay up to $0.4 million of these distributions in the event the limited partners of Wellington Fund III and
Wellington Fund IV do not meet their return threshold as specified in the respective Limited Partnership Agreements. At
March 31, 2013, there were no accruals made with respect to the Clawback.
Clairvest has guaranteed up to US$3.4 million of CEP's obligations to a Schedule 1 Canadian Chartered Bank under
CEP's foreign exchange forward contracts with the bank.
Clairvest has guaranteed up to US$15.0 million of CEP III's obligations to a Schedule 1 Canadian Chartered Bank
under CEP III's foreign exchange forward contracts with the bank.
Under Clairvest's Incentive Bonus Program [the "Program"], a bonus of 10% of after-tax cash income and
realizations on certain Clairvest's corporate investments would be paid to management annually as applicable. Amounts are
accrued under this plan to the extent that the cash income and investment realizations have occurred and the bonus has
become payable. At March 31, 2013, $0.6 million has been accrued under the Program. If Clairvest were to sell its corporate
investments at their current fair values, an additional bonus of $2.0 million would be owing to management under this
Program. As no such income and realizations have occurred and the terms of the bonus plan with respect to these
corporate investments have not yet been fulfilled, the $2.0 million has not been accrued at March 31, 2013. The Program
does not apply to the income generated from investments made by Clairvest through CEP III Co-Invest and CEP IV Co-Invest.
During fiscal 2006, Clairvest and a wholly owned subsidiary sold their interests in Signature Security Group
Holdings Pty Limited ["Signature"] and a related company as part of a sale of 100% of Signature and the related company.
As part of the transaction, the subsidiary has indemnified the purchaser for various potential claims. The indemnification
was extinguished during fiscal 2013 and no claims against this indemnification had been made.
Clairvest, together with CEP III, has guaranteed to fund any operating deficiencies of Casino New Brunswick for a
specified period of time. The amount of the guarantee is allocated 75% to CEP III, to the extent that the amounts paid
thereunder are within the limits of the CEP III Limited Partnership Agreement, with the remainder being allocated to
Clairvest. Any amounts paid under the guarantee will result in additional debentures being granted to Clairvest and CEP III,
allocated on the same basis as the participation between Clairvest and CEP III in the guarantee funding. As at March 31,
2013, no amounts subject to this guarantee have been funded. Clairvest has pledged $5.4 million to a Schedule 1 Canadian
chartered bank which has provided debt financing to Casino New Brunswick. The pledge was made to support the
guarantee and is held in a bank account belonging to Clairvest at the Schedule 1 chartered bank which cannot be
withdrawn without consent from the Schedule 1 Canadian chartered bank. Accordingly, it has been classified as restricted
temporary investments on the consolidated balance sheets.
An acquisition entity of Chilean Gaming Holdings and other investors of Casino Sol Calama have entered into a
joint and several guarantees to fund any operating deficiencies upon the opening of Casino Sol Calama for a specified
period of time. Latin Gaming Chile, Casino Sol Calama's operator, has indemnified this acquisition entity with respect to this
guarantee. As at March 31, 2013, no amounts subject to this guarantee have been funded.
As part of the holding structure of Chilean Gaming Holdings, Clairvest, together with CEP III and other co-investors,
had loans totaling $44.6 million at March 31, 2013 through various acquisition entities from an unrelated financial
20
MANAGEMENT'S DISCUSSION AND ANALYSIS
institution, while another acquisition entity held term deposits totaling $44.6 million at March 31, 2013 with the same
financial institution as security for these loans. Clairvest intends to settle the loans, the deposits and related interest
accruals simultaneously upon the divestiture of the investments in Chilean Gaming Holdings, and as a result, the deposits
and the loans, and the interest revenue and expense have been presented on a net basis. Clairvest's ownership of both
acquisition vehicles was 36.8% at March 31, 2013, with CEP III owning 37.7% and the remainder owned by the other co-
investors.
Clairvest has committed to invest US$5.4 million in New Meadowlands Racetrack LLC. No amounts have been
funded at March 31, 2013.
During fiscal 2013, Clairvest reached a court-approved settlement with certain parties with respect to a $10.0
million loan advanced in two tranches of $5.0 million in each of December 2005 and May 2006. Subsequently, the loan was
in default and the collateral arrangements for the loan were mishandled. The loan was written off and Clairvest recorded a
realized loss in its financial statements for the year ended March 31, 2007. Clairvest took legal action against several parties
to recover the funds and has reached a settlement with certain of these parties resulting in a settlement by these parties to
Clairvest of $7.8 million, or 77.5% of the original loan value without taking into account litigation and other costs incurred in
the recovery process, substantially all of which have been incurred and recorded as charges against income as of March 31,
2013. Clairvest continues to seek additional recoveries against parties that are not part of this settlement.
In connection with its normal business operations, Clairvest is from time to time named as a defendant in actions
for damages and costs allegedly sustained by plaintiffs. While it is not possible to estimate the outcome of the various
proceedings at this time, Clairvest does not believe that it will incur any material loss in connection with such actions.
CRITICAL ACCOUNTING ESTIMATES
The preparation of Clairvest's consolidated financial statements in conformity with Canadian generally accepted accounting
principles ["GAAP"] requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and
the reported amounts of income and expenses during the reporting period. On an on-going basis, management reviews its
estimates and assumptions. Changes in facts and circumstances may result in revised estimates, and actual results could
differ from those estimates. The critical accounting estimates that have a material impact on Clairvest's consolidated
financial statements are with respect to corporate investments and future tax asset/liability.
Note 2 to the consolidated financial statements describes Clairvest's accounting policy for temporary and
corporate investments. In accordance with the Canadian Institue of Chartered Accountants ["CICA"] Accounting Guideline
18, "Investment Companies" ["AcG-18"], the Company designated its temporary investments and corporate investments as
held-for-trading and carries them at fair value. Clairvest has also designated its receivables and payables as held-for-trading
in accordance with CICA Handbook Section 3855. Accordingly, each of Clairvest's financial assets and liabilities is fair valued
on each consolidated balance sheet date.
When a financial instrument is initially recognized, its fair value is generally the value of consideration paid or
received. Acquisition costs relating to corporate investments are not included as part of the cost of the investment.
Subsequent to initial recognition, for the fair value of an investment quoted on an active market, the fair value is generally
the bid price on the principal exchange on which the investment is traded. Investments that are escrowed or otherwise
restricted as to sale or transfer are recorded at amounts at fair value which take into account the escrow terms or other
restrictions. In determining the fair value for such investments, the Company considers the nature and length of the
restriction, business risk of the investee company, its stage of development, market potential, relative trading volume and
price volatility, liquidity of the security and the size of Clairvest's ownership block and any other factors that may be
relevant to the ongoing and realizable value of the investments. The amounts at which Clairvest's publicly-traded
investments could be disposed of may differ from this fair value and the differences could be material. Differences could
arise as the value at which significant ownership positions are sold is often different than the quoted market price due to a
21
MANAGEMENT'S DISCUSSION AND ANALYSIS
variety of factors such as premiums paid for large blocks or discounts due to illiquidity. Estimated costs of disposition are
not included in the fair value determination.
In the absence of an active market, the fair values are determined by management using the appropriate valuation
methodologies after considering the history and nature of the business, operating results and financial conditions, the
general economic, industry and market conditions, capital market and transaction market conditions, contractual rights
relating to the investment, public market comparables, private company transactions multiples and, where applicable,
other pertinent considerations. The process of valuing investments for which no active market exists is inevitably based on
inherent uncertainties and the resulting values may differ from values that would have been used had an active market
existed. The amounts at which Clairvest's privately-held investments could be disposed of may differ from the fair value
assigned and the differences could be material. Estimated costs of disposition are not included in the fair value
determination.
In determining the fair value of public company warrants, the underlying security for which is traded on a
recognized securities exchange, and if there are sufficient and reliable observable market inputs, including exercise price
and term of the warrants, market interest rate, and current market price, expected dividends and volatility of the
underlying security, a valuation technique is used. If market inputs are insufficient or unreliable, the warrants are valued at
intrinsic value, which is equal to the higher of the closing bid price of the underlying security, less the exercise price of the
warrant, or nil. For private company warrants, the underlying security for which is not traded on a recognized securities
exchange, the fair value is determined consistently with other investments which do not have an active market as described
above.
A change to an accounting estimate with respect to Clairvest's privately-held corporate investments or publicly-
traded corporate investments would impact corporate investments and unrealized gains/losses on corporate investments.
Note 2 to the consolidated financial statements describes Clairvest's accounting policy for future income taxes. The
process of determining future income tax assets and liabilities requires management to exercise judgment while
considering the anticipated timing of disposal of corporate investments, and proceeds thereon, tax planning strategies,
changes in tax laws and rates, and loss carry-forwards. Future income tax assets are only recognized to the extent that in
the opinion of management, it is more likely than not that the future income tax asset will be realized. A change to an
accounting estimate with respect to future income taxes would impact future tax liability and provision for income taxes.
RISK MANAGEMENT
The private equity investment business involves accepting risk for potential return, and is therefore affected by a number of
economic factors, including changing economic environments, capital markets and interest rates. As a result, the Company
faces various risk factors, inherent in its normal business activities. These risk factors and how the Company manages these
risk factors are described below.
Credit risk
Credit risk is the risk of a financial loss occurring as a result of default of a counterparty on its obligations to the Company.
The Company manages credit risk on corporate investments through thoughtful planning, strict investment criteria,
significant due diligence of investment opportunities and oversight responsibilities with existing investee companies and by
conducting activities in accordance with investment policies that are approved by the Board of Directors. Management's
application of these policies is regularly monitored by the Board of Directors. Management and the Board of Directors
review the financial condition of investee companies regularly.
The Company is also subject to credit risk on its accounts receivable, a significant portion of which is with its
investee companies and its CEP Funds. The Company manages this risk through its oversight responsibilities with existing
investee companies by reviewing the financial condition of investee companies regularly, and through its fiduciary duty as
Manager of the CEP Funds and by maintaining sufficient uncalled capital for the CEP Funds to settle obligations as they
come due.
22
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company is also subject to credit risk on its loans receivables, the majority of which is typically with its CEP
Funds. The Company manages this risk through its fiduciary duty as Manager of the CEP Funds and by maintaining sufficient
uncalled capital for the CEP Funds to settle obligations as they come due.
The Company manages credit risk on cash, cash equivalents and temporary investments by conducting activities in
accordance with the fixed income securities policy that is approved by the Audit Committee. The Company also manages
credit risk by contracting with counterparties which are Schedule 1 Canadian chartered banks or through investment firms
where Clairvest's funds are segregated and held in trust for Clairvest's benefit. Management's application of these policies
is regularly monitored by the Audit Committee. Management and the Audit Committee review credit quality of cash
equivalents and temporary investments regularly.
Market risk
Market risk includes exposure to fluctuations in the market value of the Company's investments, currency rates and interest
rates.
Fluctuations in market interest rates affect the Company's income derived from cash, cash equivalents, and
temporary investments. For financial instruments which yield a floating interest income, the interest received is directly
impacted by the prevailing market interest rate. The fair value of financial instruments which yield a fixed interest income
would change when there is a change in the prevailing market interest rate. The Company manages interest rate risk on
cash, cash equivalents and temporary investments by conducting activities in accordance with the fixed income securities
policy that is approved by the Audit Committee. Management's application of these policies is regularly monitored by the
Audit Committee.
If interest rates were higher or lower by 1%, the potential effect would be an increase or decrease of $0.7 million
to distributions and interest income on a pre-tax basis for the year ended March 31, 2013.
Included in corporate investments are investments for which the fair values have been estimated based on
assumptions that may not be supported by observable market prices. The most significant unobservable input is the
multiple of earnings used for each individual investment. In determining the appropriate multiple, Clairvest considers i]
public company multiples for companies in the same or similar businesses; ii] where information is known and believed to
be reliable, multiples at which recent transactions in the industry occurred; and iii] multiples at which Clairvest invested in
the company, or for follow-on investments or financings. The resulting multiple is adjusted, if necessary, to take into
account differences between the investee company and those the Company selected for comparisons and factors include
public versus private company, company size, same versus similar business, as well as with respect to the sustainability of
the company's earnings and current economic environment. Investments which are valued using the earnings multiple
approach include Casino New Brunswick, Centaur Gaming, Chilean Gaming Holdings, Kubra, Light Tower Rentals, Linen King,
and Rivers Casino. If the Company had used an earnings multiple for each investment that was higher or lower by 0.5 times,
the potential effect would be an increase of $19.3 million or decrease of $19.4 million to the carrying value of corporate
investments and net changes in unrealized gains or losses on corporate investments, on a pre-tax basis for the year ended
March 31, 2013. Earnings multiples used are based on public company valuations as well as private market multiples for
comparable companies.
The Company's corporate investment portfolio is diversified across 15 companies in 8 industries and 3 countries as
at March 31, 2013. The Company has considered current economic events and indicators in the valuation of its corporate
investments.
The Company has implemented a hedging strategy because it has, directly and indirectly, several investments
outside of Canada, currently in the United States and in Chile. In order to limit its exposure to changes in the value of
foreign denominated currencies relative to the Canadian dollar, at March 31, 2013, Clairvest hedges 100% of the fair value
of its foreign investments unless a specific exemption is approved by the Board of Directors.
A number of investee companies are subject to foreign exchange risk. A significant change in foreign exchange
rates can have a significant impact to the profitability of these entities and in turn the Company's carrying value of these
23
MANAGEMENT'S DISCUSSION AND ANALYSIS
corporate investments. The Company manages this risk through oversight responsibilities with existing investee companies
and by reviewing the financial condition of investee companies regularly.
Certain of the Company's corporate investments are also held in the form of debentures. Significant fluctuations in
market interest rates can have a significant impact in the carrying value of these investments.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. Financial
obligations arising from off-balance sheet arrangement have been previously discussed.
The Company maintains a conservative liquidity position that exceeds all liabilities payable on demand. The
Company invests its cash equivalents and temporary investments in liquid assets such that they are available to cover any
potential funding commitments and guarantees. In addition, the Company maintains various credit facilities.
DERIVATIVE FINANCIAL INSTRUMENTS
Clairvest enters into foreign exchange forward contracts primarily to manage the risks arising from fluctuations in exchange
rates on its foreign denominated investments. Clairvest is required to mark to market its foreign-denominated investments,
as well as the foreign exchange forward contracts entered into as hedges against Clairvest's foreign denominated
investments.
At March 31, 2013, Clairvest had entered into foreign exchange forward contracts to sell US$91.6 million and buy
US$4.2 million at an average rate of Canadian $1.0022 per U.S. dollar through to February 2014 and foreign exchange
forward contracts to sell 14.7 billion Chilean Pesos ["CLP"] at an average rate of Canadian $0.002022 per CLP through to
January 2014. The fair value of the US dollar contracts at March 31, 2013 is a loss of $1.2 million and the fair value of the
CLP contracts at March 31, 2013 is a loss of $1.9 million. These contracts have been recognized on the consolidated balance
sheet as derivative instruments.
UPDATED SHARE INFORMATION
At March 31, 2013 and June 25, 2013, Clairvest had 15,124,095 common shares issued and outstanding. At March 31, 2013
and June 25, 2013 Clairvest had 615,000 stock options outstanding, 601,000 of which were exercisable at March 31, 2013
and June 25, 2013. Each option is exercisable for one common share.
During fiscal 2013 and up to June 25, 2013, Clairvest did not purchase or cancel any common shares under its
normal course issuer bids. As at June 25, 2013, Clairvest had repurchased a total of 6,595,049 common and non-voting
shares over the last ten years.
During fiscal 2013, 110,000 options were exercised, 6,000 of which were exercised for shares, increasing share
capital by $0.1 million. The remaining 104,000 were exercised under the cash settlement plan and had no impact on share
capital.
Clairvest paid an ordinary dividend of $0.10 per share on the common shares in each of fiscal 2013, fiscal 2012 and
fiscal 2011. During fiscal 2013 and 2012, Clairvest also paid a special dividend of $0.1093 and $0.0965 per share
respectively, such that in aggregate with the ordinary dividend, represented 1% of the March 31, 2012 and 2011 book
values.
Subsequent to year end, Clairvest declared an annual ordinary dividend of $0.10 per share, and a special dividend
of $0.1312 per share, such that in aggregate, the dividends represent 1% of the March 31, 2013 book value. The dividends
will be payable to common shareholders of record as of July 9, 2013. The dividend will be paid on July 26, 2013. Both
dividends are eligible dividends for Canadian income tax purposes.
24
MANAGEMENT'S DISCUSSION AND ANALYSIS
DISCLOSURE CONTROLS AND INTERNAL CONTROLS OVER FINANCIAL REPORTING
In accordance with National Instrument 52-109, "Certification of Disclosure in Issuers' Annual and Interim Filings", issued by
the Canadian Securities Administrators ["CSA"], Management has evaluated the effectiveness of Clairvest's disclosure
controls and procedures as of March 31, 2013 and concluded that the disclosure controls and procedures are effective in
ensuring that information required to be disclosed by the Company in its corporate filings is recorded, processed,
summarized and reported within the required time period for the year then ended.
National Instrument 52-109 also requires certification from the Chief Executive Officers and Chief Financial Officer
to certify their responsibilities for establishing and maintaining internal controls with regards to the reliability of financial
reporting and the preparation of financial statements in accordance with Canadian GAAP. Management has evaluated
Clairvest's design and operational effectiveness of internal controls over financial reporting for the year ended March 31,
2013. Management has concluded that the design of internal controls over financial reporting are effective and operating
as designed as of March 31, 2013 based on this evaluation. There were no changes in internal controls during the most
recent interim period that has materially affected, or is reasonably likely to materially affect, internal controls over financial
reporting. The Company has not identified any weakness that has materially affected or is reasonably likely to materially
affect the Company's internal control over financial reporting.
TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS
During fiscal 2008, the Canadian Accounting Standards Board ["AcSB"] confirmed the use of International Financial
Reporting Standards ["IFRS"] for all Canadian publicly accountable enterprises for years beginning on or after January 1,
2011. Subsequently, the AcSB approved a three-year deferral from IFRS adoption which would allow Canadian companies
that apply AcG-18 to continue to use existing Canadian GAAP until fiscal years beginning on or after January 1, 2014.
Accordingly, Clairvest will adopt IFRS beginning in the first quarter of fiscal 2015, which begins on April 1, 2014.
During fiscal 2013, the International Accounting Standards Board ["IASB"] issued final amendments to IFRS for
Investment Entities. The amendments provide an exception to the consolidation requirement for entities that meet the
definition of an investment entity and require such entities to measure its investee companies at fair value through profit
and loss. The Company is optimistic that it will qualify as an investment entity as defined by the IASB and that fair value
accounting will continue to be the method for which the Company accounts for its investee companies when it adopts IFRS.
The Company is currently reviewing in detail the final amendments to IFRS for Investment Entities and does not expect the
adoption of IFRS in fiscal 2015 will result in a significant impact to internal controls over financial reporting or the
Company’s information technology systems. Formal communications with the Audit Committee have been established to
ensure timely decisions are made on key issues and risks.
Other significant items which may have a significant impact to the Company's financial reporting and financial
statements include the accounting for share-based compensation, income taxes and the disclosure requirements for
financial instruments and related party transactions.
With respect to the accounting treatment for share-based compensation, the company would be required to cease
vesting share-based compensation on a straight-line basis and adopt the prescribed graded vesting method which will likely
result in front-loading of expenses during the vesting period. Based on its stock options outstanding at March 31, 2013, the
Company currently believes that the effects of this accounting change will not be material.
With respect to income taxes, future income tax positions under IFRS must be evaluated using a probability-based
method which is a different measurement methodology compared to the one currently used by the Company. The
Company is in the process of quantifying the impacts of this methodology change.
The Company continues to monitor new developments to IFRS which may result in additional significant
accounting differences and impacts to internal controls over financial reporting and information technology systems.
25
MANAGEMENT'S REPORT
The accompanying consolidated financial statements of Clairvest Group Inc. were prepared by management, which is
responsible for the integrity and fairness of the financial information presented. These financial statements are prepared in
accordance with Canadian generally accepted accounting principles. The financial information contained elsewhere in the
annual report has been reviewed to ensure consistency with the consolidated financial statements.
Management maintains a system of internal accounting controls designed to provide reasonable assurance that
assets are safeguarded, that transactions are properly authorized and that financial records are properly maintained to
facilitate the preparation of financial statements in a timely manner. Under the supervision of Management, an evaluation
of the effectiveness of the Company’s internal control over financial reporting was carried out for the year ended March 31,
2013. Based on that evaluation, Management concluded that the Company’s internal control over financing reporting was
effective for the year ended March 31, 2013.
The Board of Directors carries out its responsibility for the financial statements in this annual report principally
through its Audit Committee. The Audit Committee, which comprised of four non-management Directors during the year
ended March 31, 2013, meets periodically with management and with external auditors to discuss the scope and results
with respect to financial reporting of the Company. The Audit Committee has reviewed the consolidated financial
statements with management and with the independent auditors. The consolidated financial statements have been
approved by the Board of Directors on the recommendation of the Audit Committee.
Ernst & Young LLP, appointed external auditors by the shareholders, have audited the consolidated financial
statements and their report is included herewith.
B. Jeffrey Parr
Co-Chief Executive Officer and Managing Director
Daniel Cheng
Chief Financial Officer
26
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS OF CLAIRVEST GROUP INC.
TO THE SHAREHOLDERS OF CLAIRVEST GROUP INC.
We have audited the accompanying consolidated financial statements of
, which comprise
We have audited the accompanying consolidated financial statements of Clairvest Group Inc. , which comprise
the consolidated balance sheets as at March 31, 2013 and 2012, and the consolidated statements of income,
the consolidated balance sheets as at March 31, 2013 and 2012, and the consolidated statements of income,
the consolidated balance sheets as at March 31, 2013 and 2012, and the consolidated statements of income,
retained earnings and cash flows for the years then ended, and a summary of significant accounting policies and
retained earnings and cash flows for the years then ended, and a summary of significant accounting policies and
retained earnings and cash flows for the years then ended, and a summary of significant accounting policies and
other explanatory information.
Management's Responsibility for the Consolidated Financial Statements
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements
in accordance with Canadian generally accepted accounti
in accordance with Canadian generally accepted accounti
management determines is necessary to enable the preparation of consolidated financial statements that are
management determines is necessary to enable the preparation of consolidated financial statements that are
management determines is necessary to enable the preparation of consolidated financial statements that are
free from material misstatement, whether due to fraud or error.
free from material misstatement, whether due to fraud or error.
ng principles, and for such internal control as
ng principles, and for such internal control as
Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
ibility is to express an opinion on these consolidated financial statements based on our audits. We
ibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and
require that we comply with ethical requirements and
assurance about whether the consolidated financial statements are free from material misstatement.
assurance about whether the consolidated financial statements are free from material misstatement.
assurance about whether the consolidated financial statements are free from material misstatement.
plan and perform the audit to obtain reasonable
plan and perform the audit to obtain reasonable
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the
consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the
the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error. In making those risk assess ments, the auditors consider internal control relevant to the entity's
ments, the auditors consider internal control relevant to the entity's
ments, the auditors consider internal control relevant to the entity's
preparation and fair presentation of the consolidated financial statements in order to design audit procedures
preparation and fair presentation of the consolidated financial statements in order to design audit procedures
preparation and fair presentation of the consolidated financial statements in order to design audit procedures
essing an opinion on the effectiveness
that are appropriate in the circumstances, but not for the purpose of expr essing an opinion on the effectiveness
that are appropriate in the circumstances, but not for the purpose of expr
of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used
of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used
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
and the reasonableness of accounting estimates made by management, as well as evaluating the overall
and the reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements.
presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to
provide a basis for our audit opinion.
Opinion
s present fairly, in all material respects, the financial position
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position
In our opinion, the consolidated financial statement
as at March 31, 2013 and 2012 and the results of its operations and its cash flows for the
of Clairvest Group Inc. as at March 31, 2013 and 2012 and the results of its operations and its cash flows for the
as at March 31, 2013 and 2012 and the results of its operations and its cash flows for the
years then ended in accordance with Canadian generally accepted accounting principles.
years then ended in accordance with Canadian generally accepted accounting
Toronto, Canada,
June 25, 2013.
27
CONSOLIDATED BALANCE SHEETS
As at March 31
$000's
ASSETS
Cash and cash equivalents [notes 3, 11 and 14]
Temporary investments [notes 3 and 14]
Restricted temporary investments [notes 6[d], 13[j] and 14]
Accounts receivable and other assets [notes 4[g], 4[k] and 7]
Income taxes recoverable
Loans receivable [notes 4[h], 4[i] and 14]
Corporate investments [notes 6 and 14]
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
2013
2012
$ 114,805
$ 32,886
59,708
64,697
5,425
5,430
12,048
15,851
5,195
7,944
5,365
23,740
176,390
187,876
$ 378,936
$ 338,424
Accounts payable and accrued liabilities [notes 10 and 13[h]]
$ 11,255
$ 9,254
Income taxes payable
Derivative instruments [note 12[b]]
Future tax liability [note 8]
Stock-based compensation [note 10]
Contingencies, commitments and guarantees [notes 12 and 13]
Shareholders' equity
Share capital [note 9]
Retained earnings
See accompanying notes
On behalf of the Board:
1,993
1,410
3,115
1,731
6,474
4,148
6,411
5,454
$ 29,248
$ 21,997
$ 79,101
$ 78,438
270,587
237,989
349,688
316,427
$ 378,936
$ 338,424
MICHAEL BREGMAN
Director
JOSEPH J. HEFFERNAN
Director
28
CONSOLIDATED STATEMENTS OF INCOME
For the years ended March 31
$000's [except per share information]
NET INVESTMENT GAINS
2013
2012
Net realized gains on corporate investments [notes 5 and 6[i]]
$ 9,009
$ 545
Net changes in unrealized gains on corporate investments [note 6]
4,598
16,590
OTHER INCOME
Distributions and interest income [notes 4 and 6]
Dividend income [notes 4[j], 6[e] and 6[f]]
Management fees [notes 4[a] and 4[e]]
Advisory and other fees [note 4[j]]
Realized gain on temporary investments [note 13[n]]
EXPENSES
Administration and other expense [notes 10 and 13[h]]
Finance and foreign exchange expense
Income before income taxes
Income tax expense [note 8]
Net income for the year
Basic net income per share [note 9]
Fully-diluted net income per share [note 9]
See accompanying notes
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the years ended March 31
$000's
Retained earnings, beginning of year
Net income for the year
Dividends paid
Purchase and cancellation of shares [note 9]
Retained earnings, end of year
See accompanying notes
13,607
17,135
32,347
19,325
4,596
4,359
974
1,141
1,360
2,013
7,750
—
47,027
26,838
17,899
15,409
961
1,678
18,860
17,087
41,774
26,886
6,011
4,470
$ 35,763
$ 22,416
$ 2.36
$ 1.46
$ 2.32
$ 1.43
2013
2012
$ 237,989
$ 222,491
35,763
22,416
273,752
244,907
[3,165]
[3,025]
—
[3,893]
$ 270,587
$ 237,989
29
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended March 31
$000's
OPERATING ACTIVITIES
Net income for the year
Add [deduct] items not involving a current cash outlay
Amortization of fixed assets
Stock-based compensation expense
Future income tax expense
Net realized gains on corporate investments
Net changes in unrealized gains on corporate investments
2013
2012
$ 35,763
$ 22,416
369
373
1,516
[33]
2,326
1,746
[9,009]
[545]
[4,598]
[16,590]
Non-cash items relating to foreign exchange forward contracts
3,283
2,627
Non-cash items relating to corporate investments
[6,336]
[4,646]
23,314
5,348
Net change in non-cash working capital balances related to operations [note 11]
8,767
Cash provided by [used in] operating activities
32,081
[5,434]
[86]
INVESTING ACTIVITIES
Acquisition of corporate investments
Proceeds on sale of corporate investments
Return of capital from corporate investments
Proceeds on realized foreign exchange forward contracts
Net proceeds on sale of temporary investments
Loans advanced [notes 4[h] and 4[i]]
Receipt of loans advanced [notes 4[h] and 4[i]]
Decrease [increase] in restricted temporary investments
Cash provided by [used in] investing activities
FINANCING ACTIVITIES
Purchase and cancellation of share capital [note 9]
Cash dividends paid
Issuance of share capital [note 9]
Cash used in financing activities
[29,701]
[36,888]
31,219
26,277
29,911
6,693
[1,899]
684
4,989
12,309
[34,168]
[46,431]
52,543
22,817
5
[5,430]
52,899
[19,969]
—
[5,577]
[3,165]
[3,025]
104
211
[3,061]
[8,391]
NET INCREASE [DECREASE] IN CASH AND CASH EQUIVALENTS DURING THE YEAR
81,919
[28,446]
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF YEAR [NOTE 11]
32,886
61,332
114,805
32,886
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid
Interest paid, on gross basis [note 13[l]]
See accompanying notes
$ 2,013
$ 3,223
$ 1,407
$ 1,449
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
1. NATURE OF ACTIVITIES
Clairvest Group Inc. ["Clairvest" or the "Company"] is a private equity investor publicly traded on the Toronto Stock
Exchange ["TSX"] under symbol CVG. The Company, which operates in only one business segment, actively seeks to form
mutually beneficial investments with entrepreneurial corporations. Clairvest invests its own capital, and that of third
parties, through Clairvest Equity Partners Limited Partnership ["CEP"], Clairvest Equity Partners III Limited Partnership
["CEP III"], Clairvest Equity Partners IV Limited Partnership ["CEP IV"] and Clairvest Equity Partners IV-A Limited Partnership
["CEP IV-A"] [together, the "CEP Funds"]. Clairvest contributes financing and strategic expertise to support the growth and
development of its investees in order to create realizable value for all shareholders. Clairvest is incorporated under the laws
of the Province of Ontario.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements have been prepared in accordance with Canadian gnereally accepted accounting
principles ["Canadian GAAP" or "GAAP"] and include the accounts of the Company, its wholly owned subsidiaries and its
pro-rata ownership of various acquisition entities that exist for investing purposes. All intercompany amounts and
transactions have been eliminated upon consolidation.
In accordance with the Canadian Institute of Chartered Accountants ["CICA"] Accounting Guideline 18 "Investment
Companies" ["AcG-18"], the Company designated its temporary investments and its corporate investments as held-for-
trading and carries them at fair value. Clairvest also designated its receivables and payables as held-for-trading in
accordance with the CICA Handbook Section 3855. Accordingly, each of Clairvest's financial assets and liabilities is fair
valued on each consolidated balance sheet date.
Future accounting changes
In February 2008, the Canadian Accounting Standards Board ["AcSB"] confirmed that the use of International Financial
Reporting Standards ["IFRS"] will be required for Canadian publicly accountable enterprises for years beginning on or after
January 1, 2011. Subsequently, the AcSB approved a three-year deferral from IFRS adoption which would allow Canadian
companies that apply AcG-18 to continue to use existing Canadian GAAP until fiscal years beginning on or after January 1,
2014.
During fiscal 2013, the International Accounting Standards Board ["IASB"] issued final amendments to IFRS for
Investment Entities. The amendments provide an exception to the consolidation requirement for entities that meet the
definition of an investment entity and require such entities to measure its investee companies at fair value through profit
and loss.
Clairvest is currently evaluating the impact of adopting IFRS.
Significant accounting policies
The following is a summary of the significant accounting policies of the Company:
[a] Temporary investments and corporate investments
The Company carries its temporary investments and its corporate investments at fair value. When a financial instrument
is initially recognized, its fair value is generally the value of consideration paid or received. Acquisition costs relating to
corporate investments are not included as part of the cost of the investment. Subsequent to initial recognition, for the
fair value of an investment quoted on an active market, the fair value is generally the bid price on the principal
exchange on which the investment is traded. Investments that are escrowed or otherwise restricted as to sale or
transfer are recorded at a value which takes into account the escrow terms or other restrictions. In determining the fair
value for such investments, the Company considers the nature and length of the restriction, business risk of the investee
company, its stage of development, market potential, relative trading volume and price volatility, liquidity of the
security and the size of Clairvest's ownership block and any other factors that may be relevant to the ongoing and
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
realizable value of the investments. The amounts at which Clairvest's publicly traded investments could be disposed of
may differ from this fair value and the differences could be material. Differences could arise as the value at which
significant ownership positions are sold is often different than the quoted market price due to a variety of factors such
as premiums paid for large blocks or discounts due to illiquidity. Estimated costs of disposition are not included in the
fair value determination.
In the absence of an active market, the fair values are determined by management using the appropriate valuation
methodologies after considering the history and nature of the business, operating results and financial conditions, the
general economic, industry and market conditions, capital market and transaction market conditions, contractual rights
relating to the investment, public market comparables, private company transactions multiples and, where applicable,
other pertinent considerations. The process of valuing investments for which no active market exists is inevitably based
on inherent uncertainties and the resulting values may differ from values that would have been used had an active
market existed. The amounts at which Clairvest's privately held investments could be disposed of may differ from the
fair value assigned and the differences could be material. Estimated costs of disposition are not included in the fair value
determination.
In determining the fair value of public company warrants, the underlying security of which is traded on a
recognized securities exchange, if there are sufficient and reliable observable market inputs, including exercise price and
term of the warrants, market interest rate, and current market price, expected dividends and volatility of the underlying
security, a valuation technique is used. If market inputs are insufficient or unreliable, the warrants are valued at intrinsic
value, which is equal to the higher of the closing bid price of the underlying security, less the exercise price of the
warrant, or nil. For private company warrants, the underlying security of which is not traded on a recognized securities
exchange, the fair value is determined consistently with other investments which do not have an active market as
described above.
[b] Foreign currency translation
Income and expenses denominated in foreign currencies are translated into Canadian dollars at exchange rates
prevailing at the transaction date. Monetary assets and liabilities are translated into Canadian dollars at exchange rates
in effect at the consolidated balance sheet dates. Non-monetary assets and liabilities are translated at historical rates.
Exchange gains and losses are included in income in the period in which they occur.
[c] Derivative financial instruments
The Company periodically enters into foreign exchange forward contracts to hedge its exposure to exchange rate
fluctuations on its foreign currency denominated investments. These foreign exchange forward contracts and, where
applicable, their underlying investments, are valued at exchange rates in effect at the consolidated balance sheet dates.
Foreign exchange forward contracts are included on the consolidated balance sheets as derivative instruments and
are valued at fair value representing the estimated amount that the Company would have been required to pay, or
received, had the Company settled the outstanding contracts at the consolidated balance sheet dates. Any unrealized
gains or losses are included in finance and foreign exchange expense in the consolidated statements of income.
[d] Income recognition
Realized gains or losses on disposition of corporate investments and change in unrealized gains or losses in the value of
corporate investments are calculated based on weighted average cost and are reflected in the consolidated statements
of income. Management fees and advisory and other fees are recorded as income on an accrual basis when earned.
Distributions and interest income are recognized on an accrual basis and dividend income is recognized on the ex-
dividend date.
[e] Future income taxes
The Company records future income tax expense or recovery using the asset and liability method. Under this method,
future income taxes reflect the expected future tax consequences of temporary differences between the carrying
amounts of assets and liabilities and their respective income tax bases, as well as certain carryforward items. Future
income tax assets and liabilities are determined for each temporary difference based on the income tax rates that are
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
expected to be in effect when the asset or liability is settled. Future income tax assets are only recognized to the extent
that, in the opinion of management, it is more likely than not that the future income tax asset will be realized.
[f] Stock-based compensation plan
The Company's stock option plan allows for a cash settlement of stock options. As a result, compensation expense is
recognized and recorded as a liability based on the intrinsic value of the outstanding stock options at the consolidated
balance sheet dates and the proportion of their vesting periods that have elapsed. On the exercise of stock options for
shares, the liability recorded with respect to the options and consideration paid by the employees is credited to share
capital. On the exercise of stock options for cash, the liability recorded is reduced and any difference between the
liability accrued and the amount paid is charged to administration and other expense.
[g] Deferred share unit plan
Directors of the Company may elect to receive all or a portion of their compensation in deferred share units ["DSUs"].
On the date directors' fees are payable, the number of DSUs to be credited to a participant is determined by dividing the
amount of the fees to be received by way of DSUs by the market value of a Clairvest common share on the TSX. Upon
redemption of DSUs, the Company pays to the participant a lump sum cash payment equal to the number of DSUs to be
redeemed multiplied by the market value of a Clairvest common share on the TSX on the redemption date. A
participant may redeem his or her DSUs only following termination of board service.
Under the Company's DSU plan, a change in the fair value of the DSUs is charged to administration and other
expense based on the number of DSUs outstanding at the consolidated balance sheet dates multiplied by the market
value of a Clairvest common share on the TSX at the consolidated balance sheet dates.
During fiscal 2008, the DSU plan was amended to also facilitate the issuance of Appreciation Deferred Share Units
["Appreciation DSUs"] to the directors of the Company. Upon redemption of the Appreciation DSUs, the Company pays
to the participant a lump sum cash payment equal to the number of Appreciation DSUs to be redeemed multiplied by
the difference between the market value of a Clairvest common share on the TSX on the redemption date and the
market value of a Clairvest common share on the TSX on the grant date. A participant may redeem his or her
Appreciation DSUs only following termination of board service. Under the Company's DSU plan, the fair value of the
Appreciation DSUs is charged to administration and other expense based on the number of Appreciation DSUs
outstanding at the consolidated balance sheet dates multiplied by the difference between the market value of a
Clairvest common share on the TSX at the consolidated balance sheet dates and the market value of a Clairvest common
share on the TSX on the grant date.
[h] Book value appreciation rights plan
The Company may elect to issue all or a portion of a participant's stock option grant by way of book value appreciation
rights units ["BVARs"]. Upon redemption of BVARs, the Company pays to the participant a lump sum cash payment
equal to the number of BVARs to be redeemed multiplied by the increase in book value per share between the grant
date and the redemption date, and grossed up such that the participant's after-tax proceeds equate to an amount as if
the proceeds were taxed at the capital gains rate. The BVARs vest over a five-year period and the participant may only
redeem his or her BVARs at the earlier of [i] five years from the grant date or [ii] cessation of employment with the
Company.
As the Company's BVAR plan is a cash settled plan, the fair value of the BVARs is charged to administration and
other expense and recorded as a liability over the BVAR vesting period based on the book value per share at the
consolidated balance sheet date of the prior quarter.
[i] Net income per share
Basic net income per share is determined by dividing net income attributable to common shareholders by the weighted
average number of common shares outstanding during the year. Fully-diluted net income per share is determined in
accordance with the treasury stock method and is based on the weighted average number of common shares and
dilutive common share equivalents outstanding during the year.
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
[j] Use of estimates
The preparation of consolidated financial statements in conformity with Canadian GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses
during the reporting periods. Actual results could differ from those estimates.
3. CASH EQUIVALENTS AND TEMPORARY INVESTMENTS
Cash equivalents consist of deposits in investment and money market savings accounts and term deposits which have
maturities of less than 90 days from the date of acquisition. The yield ranges between 1.1% and 4.8% per annum [2012 –
between 0.5% and 4.7%] with a weighted average rate of pre-tax return of 1.2% per annum [2012 – 1.2%].
Temporary investments consist of guaranteed investment certificates and corporate bonds and loans and have
maturities greater than 90 days from the date of acquisition and through to February 2020. The yield on these investments
ranges between 1.7% and 9.2% per annum [2012 – between 1.6% and 4.9%] with a weighted average rate of pre-tax return
of 3.2% per annum [2012 – 2.4%]. The composition of Clairvest's temporary investments at March 31 was as follows:
Guaranteed investment certificates
$ 16,235 $ 28,100
$ 44,335
$ 25,273
2013
Due in 1 year
or less
Due after 1 year
Total
2012
Total
Corporate bonds and loans
Term deposits
Preferred shares
3,061
12,312[1]
––
––
15,373
37,876
51
––
––
––
––
1,497
$ 64,697
[1] In addition to the corporate investment Clairvest made in Centaur Gaming as described in note 6[j], Clairvest also made a treasury investment in Centaur
Gaming during fiscal 2013 in the form of a US$6.0 million first lien secured loans and a US$6.0 million second lien secured loans, the aggregate carrying
value of which at March 31, 2013 was $12.3 million.
$ 40,412
$ 19,296
$ 59,708
4. RELATED PARTY TRANSACTIONS
[a] As the Manager of CEP, Clairvest is entitled to a management fee from CEP. Effective January 1, 2011, the CEP
management fee is calculated annually as 1.5% of contributed capital less distributions on account of capital and write-
downs of capital invested. The management fee is reduced to the extent of 75% of fees earned by Clairvest from
corporate investments of CEP. The management fee from CEP ceased effective March 1, 2013.
During fiscal 2013, Clairvest earned management fees of $0.3 million [2012 – $0.5 million] from CEP. As per the
Management Agreement, fees of $0.1 million [2012 – $0.1 million] from corporate investments of CEP were netted
against the management fees.
Clairvest, as General Partner of CEP, is entitled to participate in distributions made by CEP equal to 10% of net
gains of CEP [the "carried interest"]. During fiscal 2013, Clairvest earned $0.9 million [2012 – $2.2 million] in carried
interest from CEP, which brings total carried interest earned by Clairvest from CEP at March 31, 2013 to $11.1 million
[2012 - $10.2 million]. If CEP were to sell its corporate investments at their current fair values, Clairvest would receive
up to $1.0 million [2012 – $3.6 million] in carried interest from CEP.
Principals and employees of Clairvest are entitled to participate in another 10% of carried interest from CEP via a
limited partnership ["Participation Partnership"], the general partner of which is Clairvest.
[b] As the General Partner of CEP III, Clairvest is entitled to a priority distribution from CEP III. Effective January 13, 2011,
the priority distribution is calculated monthly as 0.1667% of invested capital net of write-downs of capital then
invested. The priority distribution is reduced to the extent of 75% of fees earned by Clairvest from corporate
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
investments of CEP III. During fiscal 2013, CEP III declared to Clairvest priority distributions of $1.9 million [2012 – $2.0
million]. As per the Limited Partnership Agreement, fees of $0.3 million [2012 – $0.3 million] from corporate
investments of CEP III were netted against the priority distributions.
Clairvest is also entitled to a 10% carried interest in respect of CEP III. No carried interest has been earned by
Clairvest from CEP III to March 31, 2013. At March 31, 2013, if CEP III were to sell its corporate investments at their
current fair values, Clairvest would receive up to $11.6 million [2012 – $0.3 million] in carried interest from CEP III.
Principals and employees of Clairvest are entitled to participate in another 10% of carried interest from CEP III via a
limited partnership ["Participation III Partnership"], the general partner of which is Clairvest.
[c] As described in note 13 [b], Clairvest is required to co-invest alongside CEP III in all investments undertaken by CEP III.
CEP III Co-Investment Limited Partnership ["CEP III Co-Invest"] was established in fiscal 2007 as the investment vehicle
for this purpose. CEP III Co-Invest has two limited partners, one of which is Clairvest, and the other is Participation III
Partnership. Participation III Partnership has invested $1.1 million in CEP III Co-Invest and is entitled to an 8.25% carried
interest in respect of CEP III Co-Invest.
Clairvest is entitled to participate in distributions equal to the realizable value on the $1.1 million invested by
Participation III Partnership in CEP III Co-Invest plus the first $0.2 million received by the Participation III Partnership as
described above. At March 31, 2013, $0.3 million [March 2012 – $0.3 million] has been received by Clairvest.
At March 31, 2013, if CEP III Co-Invest were to sell its corporate investments at their current fair values,
Participation III Partnership would receive up to $4.7 million [2012 – $1.9 million] in carried interest from CEP III Co-
Invest based on the terms described above, the amount of which has been recorded as a reduction to the fair value of
corporate investments. To date, CEP III Co-Invest has not made any carried interest payments to Participation III
Partnership.
[d] As General Partner of CEP IV, Clairvest is entitled to a priority distribution from CEP IV. Effective January 14, 2011 to
January 13, 2016, being the fifth anniversary of the date of final closing of CEP IV, the priority distribution is calculated
monthly as 0.1667% of committed capital, and thereafter 0.1667% of invested capital net of write-downs of capital
then invested. The priority distribution is reduced to the extent of 63.2% of any fees earned by Clairvest from corporate
investments of CEP IV. During fiscal 2013, CEP IV declared to Clairvest priority distributions of $5.6 million [2012 – $5.4
million]. As per the Limited Partnership Agreement, fees of $0.3 million [2012 – $0.5 million] from corporate
investments of CEP IV were netted against the priority distributions.
Clairvest is also entitled to a 10% carried interest in respect of CEP IV. No carried interest has been earned by
Clairvest from CEP IV to March 31, 2013. At March 31, 2013, if CEP IV were to sell its corporate investments at their
current fair values, Clairvest would receive up to $4.9 million [2012 – $2.8 million] in carried interest from CEP IV.
Principals and employees of Clairvest are entitled to participate in another 10% of carried interest from CEP IV via a
limited partnership ["Participation IV Partnership"], the general partner of which is Clairvest.
[e] As Manager of CEP IV-A, Clairvest is entitled to a management fee from CEP IV-A. Effective January 14, 2011 to January
13, 2016, being the fifth anniversary of the date of final closing of CEP IV-A, the CEP IV-A management fee is calculated
monthly as 0.1667% of committed capital; and thereafter 0.1667% of invested capital net of write-downs of capital
then invested. The management fee is reduced to the extent of 10.1% of fees earned by Clairvest from corporate
investments of CEP IV-A and other amounts as provided in the Limited Partnership Agreement. During fiscal 2013,
Clairvest earned management fees of $0.6 million [2012 – $0.6 million] as compensation for its services in the
administration of the portfolio of CEP IV-A. As per the Limited Partnership Agreement, $0.3 million [2012 – $0.3 million]
was netted against the management fees.
As General Partner of CEP IV-A, Clairvest is also entitled to a 10% carried interest in respect of CEP IV-A. No carried
interest has been earned by Clairvest from CEP IV-A to March 31, 2013. At March 31, 2013, if CEP IV-A were to sell its
corporate investments at their current fair values, Clairvest would receive up to $0.8 million [2012 – $0.4 million] in
carried interest from CEP IV-A.
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
Principals and employees of Clairvest are entitled to participate in another 10% of carried interest from CEP IV-A
via Participation IV Partnership.
[f] As described in note 13 [c], Clairvest is required to co-invest alongside CEP IV and CEP IV-A in all investments
undertaken by CEP IV and CEP IV-A. CEP IV Co-Investment Limited Partnership ["CEP IV Co-Invest"] was established in
fiscal 2010 as the investment vehicle for this purpose. CEP IV Co-Invest has two limited partnerships, one of which is
Clairvest, and the other is Participation IV Partnership. Participation IV Partnership has invested $1.6 million in CEP IV
Co-Invest and is entitled to an 8.25% carried interest in respect of CEP IV Co-Invest.
Clairvest is entitled to participate in distributions equal to the realizable value on the $1.6 million invested by
Participation IV Partnership in CEP IV Co-Invest plus the first $0.4 million received by the Participation IV Partnership as
described above. No amounts have been received by Clairvest at March 31, 2013.
At March 31, 2013, if CEP IV Co-Invest were to sell its corporate investments at their current fair values,
Participation IV Partnership would receive up to $2.5 million [2012 – $1.2 million] in carried interest from CEP IV Co-
Invest based on the terms described above, the amount of which has been recorded as a reduction to the fair value of
corporate investments. To date, CEP IV Co-Invest has not made any carried interest payments to Participation IV
Partnership.
[g] Included in accounts receivable and other assets are share purchase loans made to certain officers of the Company
totaling $1.1 million [2012 – $0.5 million]. The share purchase loans bear interest which is paid annually, have full
recourse and are collateralized by the common shares of the Company purchased by the officers with a market value of
$1.4 million [2012 – $0.7 million]. Also included in accounts receivable and other assets are other loans made to
certain officers of a company affiliated with Clairvest totaling $0.6 million [2012 – $0.5 million]. The loans to officers of
the affiliated company bear interest which is paid quarterly. Loans are repayable upon departure of the officer.
Interest of $35 thousand [2012 – $35 thousand] was earned on these loans during fiscal 2013. Also included in
accounts receivable and other assets are receivables from Clairvest's investee companies totaling $1.2 million [2012 –
$2.4 million], from CEP totaling $38 thousand [2012 – $0.3 million], from CEP III totaling $1.6 million [2012 – $1.5
million], from CEP IV totaling $3.4 million [2012 – $5.4 million] and from CEP IV-A totaling $0.5 million [2012 – $1.1
million].
[h] Loans totaling $29.5 million [2012 – $36.8 million], bearing interest at the Reference Rate in accordance with CEP IV’s
Limited Partnership Agreement, were made by the Company to CEP IV during fiscal 2013. During fiscal 2013, $45.6
million [2012 – $16.2 million] of these loans and loans previously advanced were repaid such that $4.5 million [2012 -
$20.6 million] remained outstanding at March 31, 2013 and were repaid in full subsequent to year end. Interest of $1.6
million [2012 – $1.0 million] was earned from loans to CEP IV during fiscal 2013.
[i] Loans totaling $4.7 million [2012 – $6.0 million], bearing interest at the Reference Rate in accordance with CEP IV-A’s
Limited Partnership Agreement, were made by the Company to CEP IV-A during fiscal 2013. During fiscal 2013, $6.9
million [2012 – $3.0 million] of these loans and loans previously advanced were repaid such that $0.7 million [2012 -
$3.0 million] remained outstanding at March 31, 2013 and were repaid in full subsequent to year end. Interest of $0.2
million [2012 – $0.1 million] was earned from loans to CEP IV-A during fiscal 2013.
[j] During fiscal 2013, Clairvest earned $19.9 million [2012 – $6.3 million] in distributions and interest income, $4.6 million
[2012 – $4.3 million] in dividend income and $1.4 million [2012 – $2.0 million] in advisory and other fees from its
investee companies.
[k] During fiscal 2011, Clairvest and a director of Clairvest entered into an agreement to purchase an aircraft for a total
cost of $3.5 million, 50% of which was paid by Clairvest. The aircraft is owned 50% by Clairvest and 50% by a director of
Clairvest. At March 31 2013, Clairvest′s portion of the net book value of the aircraft of $1.5 million is recorded in
accounts receivable and other assets. Clairvest receives 100% of the incidental rental income of the aircraft and is
responsible for 100% of the operating expenses.
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
5. NET REALIZED GAINS ON CORPORATE INVESTMENTS
Net realized gains on corporate investments for the years ended March 31, 2013 and 2012 are comprised of the following:
Net realized gains during the year
Previously recognized net unrealized gains
6. CORPORATE INVESTMENTS
Investments alongside CEP
Grey Eagle Casino
Landauer Metropolitan Inc.
N-Brook Mortgage LP
Investments alongside CEP III
Casino New Brunswick
Chilean Gaming Holdings[a]
Kubra Data Transfer Limited
Light Tower Rentals Inc.
Lyophilization Services of New England Inc.
PEER 1 Network Enterprises Inc.
Participation III Partnership Entitlements[b]
Investments alongside CEP IV
Centaur Gaming [formerly Centaur, LLC]
CRS Contractors Rental Supply Limited Partnership
Discovery Air Inc.
Linen King, LLC
MAG Defense Services
Rivers Casino
Participation IV Partnership Entitlements[c]
2013
2012
[4,603]
$ 13,612 $ 8,311
[7,766]
$ 9,009 $ 545
2013
2012
Fair value
Cost
Difference
Fair value
Cost
Difference
$ 2,431 $ 1 $ 2,430 $ 1,605
$ 1
$ 1,604
25
713
5,111
[5,086]
3,124
[2,411]
6,834
2,625
5,111
1,723
5,036
[2,411]
2,448
39,486
12,678
24,580
7,573
––
[4,683]
18,443
10,573
25,521
788
1,904
20,742
9,798
[7,350]
2,448
9,798 [7,350]
28,725
2,150
8,178
7,451
––
––
14,644
10,573
22,045
2,525
1,915
7,413
10,761
10,528
16,402
122
––
[4,683]
31,202
28,725
7,868
21,494
5,098
10,419
[1,918]
2,150
8,178
7,351
6,291
––
2,477
5,718
13,316
[2,253]
4,128
[1,918]
3,799
28,798
28,945
[147]
––
––
––
––
3,476
[1,737]
[11]
13,329
27,701
26,545
1,156
2,523
2,525
[2]
––
25,536
[1,172]
46
––
8,504
––
1
––
17,032
[1,172]
45
Wellington Financial Fund II
20
1
19
[2,494]
––
[2,494]
Wellington Financial Fund III / IV
14,850
12,138
2,712
15,643
13,643
2,000
Other investments
792
910
[118]
1,126
1,129
[3]
175,598
135,792
39,806
186,750
152,804
33,946
$176,390
$136,702
$ 39,688
$187,876
$153,933
$ 33,943
[a] Comprised of Clairvest’s investment in Casino Marina del Sol, Casino Osorno and Casino Sol Calama.
[b] Fair value attributable to limited partners of Participation III Partnership as described in note 4[c].
[c] Fair value attributable to limited partners of Participation IV Partnership as described in note 4[f].
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
The cost and fair value of corporate investments do not reflect foreign exchange gains or losses on the foreign
exchange forward contracts entered into as hedges against these investments [note 12[b]]. Details of each investment are
described below.
[a] Grey Eagle Casino
Grey Eagle Casino is a charitable casino on Tsuu T'ina First Nation reserve lands, located southwest of the City of
Calgary, Alberta. At March 31, 2011, Clairvest held a $5.6 million subordinated debt with a 16% coupon rate. In addition
to the subordinated debt, Clairvest also hold units of a limited partnership which operates Grey Eagle Casino, entitling
Clairvest to between 2.8% and 9.6% of the earnings of the casino until December 18, 2022.
During fiscal 2012, Grey Eagle Casino completed a financing and repaid in full the $5.6 million subordinated debt
and $2.2 million of accrued interest owing to Clairvest, $0.4 million of which was earned during fiscal 2012.
During fiscal 2013, Clairvest earned $0.4 million [2012 – nil] in profit distributions from Grey Eagle Casino.
[b] Landauer Metropolitan Inc. ["Landauer"]
Landauer is a supplier of home medical equipment operating in the northeastern United States.
At March 31, 2013 and 2012, Clairvest owned 1,906,250 10% cumulative convertible preferred shares and 748,133
common shares of Landauer, representing a 14.2% interest on a fully-diluted basis. Clairvest has also advanced bridge
loans totaling US$0.3 million [C$0.3 million] and a US$0.6 million [C$0.6 million] subordinated secured convertible note
to Landauer.
The bridge loans comprised of a US$0.2 million [C$0.2 million] bridge loan which bears interest at a rate of 25% per
annum, payable monthly, and was repayable on April 16, 2010 but remained outstanding as at March 31, 2013, and a
US$0.1 million [C$0.1 million] bridge loan which bears interest at a rate of 12% per annum, payable monthly, and is
repayable on September 24, 2015. Any unpaid interest accrues interest at the same rate. The Company has the option
to convert the bridge loans to common shares of Landauer at a rate of $1.00 per share.
The US$0.6 million subordinated secured convertible note bears interest at a rate of 10% per annum compounding
annually. This note is convertible into Series B preferred shares at a conversion rate of $1.00 per share or into common
shares at a rate of $0.50 per share. The conversion is at Clairvest's discretion.
The cumulative convertible preferred shares are entitled to dividends only in the event that Clairvest does not
convert the preferred shares into common shares. Each convertible preferred share is convertible into one common
share and the conversion is at Clairvest's discretion.
During fiscal 2013, the fair value of Landauer was decreased by $6.8 million to $0.1 million. The decrease in the
fair value was due to an expected material adverse change to the profitability of Landauer in the near term as a result of
the recently completed Medicare competitive bidding process in the United States.
[c] N-Brook Mortgage LP ["N-Brook"]
N-Brook originated, adjudicated and underwrote first-ranking mortgages on owner-occupied, residential real estate in
Ontario, British Columbia and Alberta. During fiscal 2009, N-Brook management made the decision to wind down its
mortgage portfolio.
At March 31, 2012 and 2011, Clairvest had a $5.0 million investment in N-Brook. During fiscal 2013, Clairvest
received cash distributions totaling $1.9 million [2012 – nil] from N-Brook, $1.1 million of which was recorded as a full
repayment of the variable rate demand debenture and the remaining $0.8 million was recorded as a return of capital on
the limited partnership units reducing the fair value of N-Brook to $0.7 million. No gain or loss was recorded as a result
of the partial realization of Clairvest’s investment in N-Brook. Based on the fair value at March 31, 2013, Clairvest is
entitled to receive 24.1% [2012 – 24.1%] of any future recoveries from N-Brook.
[d] Casino New Brunswick
Casino New Brunswick is a gaming entertainment complex located in Moncton, New Brunswick. At March 31, 2011,
Clairvest had invested $9.2 million in Casino New Brunswick.
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
During fiscal 2012, Clairvest funded an additional $0.6 million in Casino New Brunswick, bringing the total
investment in Casino New Brunswick to $9.8 million. The investment was made in the form of debentures with a stated
interest at a rate of 6% per annum. Interest has been waived until further notice effective March 1, 2011. Also during
fiscal 2012, management determined that the fair value of Casino New Brunswick should be written down by $2.7
million bringing cumulative write downs to $7.3 million as a result of performance continuing to trend below initial
estimates. Also during the fiscal 2012, Clairvest pledged $5.4 million to a Schedule 1 Canadian chartered bank which has
provided debt financing to Casino New Brunswick. The pledge was made to support the guarantee to fund any
operating deficiencies of Casino New Brunswick as described in note 13[j].
At March 31, 2013 and 2012, Clairvest also holds units of a limited partnership which operates Casino New
Brunswick, entitling Clairvest to 22.5% of the earnings of the casino.
[e] Chilean Gaming Holdings
Chilean Gaming Holdings is a limited partnership which has a 50.0% ownership interest in Casino Marina del Sol ["Casino
del Sol"] in Concepcion, Chile, and a 48.8% ownership interest in each of Casino Osorno in Osorno, Chile, and Casino Sol
Calama in Calama, Chile.
During fiscal 2012, Chilean Gaming Holdings sold 2.5% of its equity interest in Casino Osorno and Casino Sol
Calama to the operator of Casino del Sol. Clairvest received $0.3 million in cash proceeds and realized a $0.1 million gain
as a result of the sale.
During fiscal 2013, Clairvest earned dividends totaling $4.6 million [2012 – $1.3 million] through its investment in
Chilean Gaming Holdings, bringing dividends earned to March 31, 2013 to $6.4 million [2012 - $1.8 million].
At March 31, 2013 and 2012, Clairvest owned 30,446,299 limited partnership units of Chilean Gaming Holdings,
representing a 36.8% equity interest.
[f] Kubra Data Transfer Limited ["Kubra"]
Kubra is a business process outsourcing company focused on the distribution of household bills on behalf of its
customers.
During fiscal 2012, Clairvest earned dividends totaling $3.0 million from Kubra, against Clairvest’s investment in
Kubra of $2.2 million.
At March 31, 2013 and 2012, Clairvest owned 3,250,000 Class A voting common shares of Kubra, representing an
11.5% interest on a fully-diluted basis.
[g] Light Tower Rentals Inc. ["Light Tower Rentals"]
Light Tower Rentals is an oilfield equipment rental company operating in major oil and gas drilling basins in the United
States. At March 31, 2012 and 2011, Clairvest owned 5,841,250 Series A convertible preferred shares in Light Tower
Rentals, which could be converted into a 10.3% ownership interest on a fully-diluted basis. Each preferred share is
convertible into one common share and the conversion is at Clairvest's discretion. Also at March 31, 2012, Clairvest
owned 2,215,736 common shares in LTR Equipment Inc. ["LTR Equipment"], a company affiliated with Light Tower
Rentals which supplies certain equipment to Light Tower Rentals, representing a 15.3% interest on a fully-diluted basis.
During fiscal 2013, LTR Equipment was amalgamated into Light Tower Rentals. As a result of the amalgamation,
Clairvest exchanged the 2,215,736 common shares of LTR Equipment into 8,428,387 common shares of the combined
entity. No gain or loss was recognized as a result of the amalgamation. As a result of the exchange, Clairvest owned
5,841,250 Series A convertible preferred shares and 8,428,387 common shares of Light Tower Rentals, representing a
12.6% ownership interest on a fully-diluted basis.
[h] Lyophilization Services of New England Inc. ["LSNE"]
LSNE is a Manchester, New Hampshire based contract manufacturing organization focused on providing lyophilization
services to biotech, pharmaceutical and medical device manufacturers. At March 31, 2011, Clairvest owned 6,406,000
Series A 10% cumulative preferred shares of LSNE. The preferred shares are entitled to dividends only in the event that
Clairvest does not convert the preferred shares into common shares. Each preferred share is convertible into one
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
common share and the conversion is at Clairvest's discretion. At March 31, 2011, Clairvest had also advanced US$0.3
million [C$0.3 million] in unsecured loans to LSNE.
During fiscal 2013 and 2012, Clairvest funded an additional US$0.1 million [C$0.1 million] and US$0.6 million [C$0.6
million] to LSNE, respectively, in the form of unsecured loans to further support the growth of LSNE, bringing total
unsecured loans advanced to LSNE by Clairvest to US$1.0 million [C$1.0 million].
On March 31, 2013, US$0.6 million of unsecured loans were converted into 1,250,000 Series B 10% cumulative
preferred shares and the remaining US$0.4 million of unsecured loans were converted into a promissory note with a
stated interest rate of 10% per annum and repayable on demand.
During fiscal 2013, the fair market value of Clairvest’s investment in LSNE was adjusted upward by $2.4 million as a
result of LSNE’s recent growth in earnings, such that Clairvest’s carrying value of LSNE at March 31, 2013 approximates
its cost.
At March 31, 2013, Clairvest owned 6,406,000 Series A 10% cumulative preferred shares which are convertible into
a 12.3% ownership interest on a fully-diluted basis, 1,250,000 Series B cumulative preferred shares and US$0.4 million in
demand promissory notes.
[i] PEER 1 Network Enterprises Inc. ["PEER 1"]
PEER 1 [TSX: PIX] is a global online IT infrastructure provider based in Vancouver, British Columbia. At March 31, 2012
and 2011, Clairvest owned 5,134,618 common shares of PEER 1, representing a 4.2% interest on a fully-diluted basis.
The Company also owned 50,000 stock options of PEER 1 with an exercise price of $1.07 per share.
During fiscal 2013, Clairvest sold its investment in PEER 1 at a price of $3.85 per share. Clairvest realized a gain on
this investment of $13.6 million on the sale, $4.6 million of which had been previously recognized. Clairvest also
recognized a $0.5 million foreign exchange gain on the sale of PEER 1 which was the result of a reversal of foreign
exchange revaluations given PEER 1 was considered a foreign denominated investment in prior periods.
[j] Centaur Gaming [formerly Centaur, LLC]
Centaur Gaming is the owner and operator of Hoosier Park Racing & Casino in Anderson, Indiana, and Indiana Grand
Casino and Indiana Downs Racetrack ["Indiana Grand"] in Shelbyville, Indiana.
At March 31, 2011, Clairvest held US$29.7 million [C$29.9 million] in pre-petition senior secured first lien loans
["Senior Debt"] of Centaur Gaming. As part of the investment, Clairvest also held a US$0.3 million [C$0.3 million]
promissory note from an unrelated investment partner [the "Investment Partner"] for this investment.
During fiscal 2012, Clairvest invested an additional US$5.3 million [C$5.5 million] in the Senior Debt of Centaur
Gaming, bringing the total investment in Centaur Gaming to US$35.3 million [C$35.7 million]. Subsequently, Centaur
Gaming emerged from Chapter 11 protection and implemented its court-approved Plan of Reorganization. As holders of
US$39.1 million face principal value of Senior Debt, Clairvest received US$6.4 million [C$6.7 million] in cash, US$16.4
million in post-petition first lien secured notes, US$6.2 million in post-petition second lien secured notes and US$5.1
million in unsecured term loans with stapled warrants which, subject to regulatory approval, are convertible upon
exercise into 9.9% of the Class A units of Centaur Gaming. The cash received was recorded as a return of capital and no
gain or loss was realized as a result of the exchange.
During fiscal 2013, Centaur Gaming acquired Indiana Grand. Clairvest advanced a US$7.9 million [C$8.0 million]
promissory note to Centaur Gaming during the acquisition process and invested an additional US$8.4 million [C$8.5
million] in the form of an unsecured term loan with stapled warrants in support of this acquisition. The stapled
warrants, subject to regulatory approval, are convertible upon exercise into 9.9% of the Class B units of Centaur Gaming.
The promissory note which had a stated interest rate of 3.41% per annum was repaid in full upon the completion of the
acquisition.
In conjunction with this acquisition, Centaur Gaming completed a financing and repaid in full the post-petition first
and second lien secured notes with interest accrued to February 20, 2013. The promissory notes were also repaid in full
upon the completion of the financing.
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
During fiscal 2013, Clairvest received cash proceeds totaling US$32.3 million, comprised of a US$16.4 million full
repayment on the post-petition first lien secured notes, a US$6.2 million full repayment on the post-petition second lien
secured notes, a US$0.3 million full repayment on the promissory note from the Investment Partner, a US$7.4 million
full repayment on the promissory note advanced to Centaur Gaming during the acquisition process and US$2.0 million
in interest.
At March 31, 2013, Clairvest held US$13.6 million in term loans with stapled warrants which are convertible upon
exercise to 9.9% of Class A and Class B units of Centaur Gaming.
As described in note 3, Clairvest also purchased US$6.0 million in new first lien loans and US$6.0 million in new
second lien loans for its treasury holdings following the completion of the financing.
[k] CRS Contractors Rental Supply Limited Partnership ["CRS"]
CRS is a provider of equipment rental services and related merchandise across 21 locations in Ontario, Canada.
During fiscal 2013, Claivest invested $10.6 million to acquire 10,572,805 limited partnership units of CRS. At March
31, 2013, Clairvest’s ownership interest in CRS is 13.9%.
[l] Discovery Air Inc. ["Discovery Air"]
Discovery Air is a specialty aviation services company operating across Canada and in select locations internationally.
During fiscal 2012, Clairvest invested $22.0 million in secured convertible debentures ["Debentures"] of Discovery
Air. The Debentures, which have a 5.5-year term from issuance and are subject to certain early redemption rights in
favor of Discovery Air, accrue interest at a rate of 10% per annum and interest is paid in kind and compounded on an
annual basis. The Debentures and any paid in kind interest are convertible into 2,939,330 common shares of Discovery
Air, which, together with the 59,521 Discovery Air shares owned prior to this investment, represents a 10.5% ownership
interest in Discovery Air on an "as converted" basis. At March 31, 2013, the conversion price for the Debentures was
$8.68 [2012 - $7.89] per share and the closing quoted market price of a Discovery Air common share was $2.38 [2012 -
$3.98] per share.
Also during fiscal 2012, Clairvest advanced a $4.5 million bridge loan to Discovery Air with a stated interest rate of
9.5% per annum, which was repaid in full during fiscal 2013.
During fiscal 2013, Clairvest earned $2.4 million [2012 - $1.2 million] in interest from its investments in Discovery
Air.
[m]Linen King, LLC ["Linen King"]
Linen King is an Oklahoma-based textile rental company that provides commercial laundry services to the healthcare
and hospitality industries.
During fiscal 2012, Clairvest invested in 2,529,209 Class A units of Linen King. At March 31, 2013 and 2012,
Clairvest’s ownership interest in Linen King is 21.7%.
[n] MAG Defense Services ["MAG"]
MAG is a U.S.-based specialty aviation and intelligence, surveillance and reconnaissance service provider.
During fiscal 2013, Clairvest invested US$1.9 million [C$1.9 million] to acquire 18,737 Class A stock of MAG. At
March 31, 2013, Clairvest’s ownership interest in MAG is 8.0%.
[o] Rivers Casino
Rivers Casino is a gaming entertainment complex located in Des Plaines, Illinois.
At March 31, 2011, Clairvest owned 10,627,066 units of Rivers Casino, 1,605,149 units of which represented bridge
capital in anticipation of the raising of equity from minority investors as required by the Illinois legislature.
During fiscal 2012, Rivers Casino completed the raising of capital from minority investors whereby Clairvest
advanced US$1.1 million [C$1.1 million] in promissory notes to a minority investor [the “Minority Investor”] in support
of the completion of the minority fundraising. The promissory notes paid interest at a rate of 24% per annum and
matured on June 24, 2041. Clairvest also acquired a minority interest in the Minority Investor. As a result of the
completion of minority fundraising, the 1,605,149 units were redeemed at cost.
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
Clairvest earned quarterly distributions and fees as an investor of Rivers Casino, and interest as a promissory
noteholder of the Minority Investor. During fiscal 2013, Clairvest earned $3.6 million [2012 - $1.5 million] in quarterly
distributions and $0.5 million [2012 - $0.3 million] in quarterly fees from Rivers Casino. Clairvest also earned $0.2 million
[2012 - $0.2 million] in interest on the promissory note and received $0.4 million [2012 - $0.1 million] in quarterly
principal and interest payments from the Minority Investor.
Also during fiscal 2013, Rivers Casino completed a financing and as a result made an additional distribution to its
investors. Clairvest received cash proceeds totaling $9.5 million from this distribution which has been recorded in
distributions and interest income. In addition to the distributions received from Rivers Casino, the Minority Investor
made a $1.0 million full repayment on the promissory note.
At March 31, 2013, Clairvest owned 9,021,917 units of Rivers Casino, 5,000 units of the Minority Investor, which in
aggregate represents a 5.0% ownership on a fully-diluted basis.
[p] Wellington Financial Fund II ["Wellington Fund II"]
Wellington Fund II provided debt capital and operating lines to technology, biotechnology, communications and
industrial product companies across Canada. Clairvest, as a limited partner, had committed to fund $20.0 million to
Wellington Fund II. Clairvest's commitment represented a 24.1% interest in Wellington Fund II. Clairvest is also entitled
to participate in the profits received by the General Partner of Wellington Fund II.
During fiscal 2012, Wellington Fund II was liquidated and the remaining assets were distributed to its limited
partners. Clairvest received $0.2 million in cash and securities as a result of the liquidation, which approximated the fair
value ascribed to Wellington Fund II at March 31, 2011. Clairvest continues to hold an interest in the General Partner of
Wellington Fund II at March 31, 2013.
[q] Wellington Financial Fund III / IV
Wellington Financial Fund III ["Wellington Fund III"] is a successor fund to Wellington Fund II which provided debt capital
and operating lines to technology, biotechnology, communications and industrial product companies across Canada and
the United States. Clairvest, as a limited partner, committed to fund $25.0 million to Wellington Fund III. Clairvest's
commitment represented a 16.7% interest in Wellington Fund III. Clairvest was also entitled to participate in the profits
received by the General Partner of Wellington Fund III.
During fiscal 2012, Clairvest invested a further $1.1 million to Wellington Fund III, such that at March 31, 2012,
$13.6 million [2011 – $12.5 million] of Clairvest's commitment had been funded.
During fiscal 2013, Wellington Financial Fund IV ["Wellington Fund IV"], a successor fund of Wellington Fund III, was
raised. As part of the closing of Wellington Fund IV, Clairvest transferred its investment and its unfunded commitment in
Wellington Fund III to Wellington Fund IV. Clairvest also increased its commitment by $0.1 million to $25.1 million in
support of the final closing of Wellington Fund IV. Clairvest received a net return of capital of $2.1 million as a result of
the closings of Wellington Fund IV.
Also during fiscal 2013, Clairvest funded an additional $0.6 million to Wellington Fund IV, bringing total amount
funded to $12.1 million against the $25.1 million commitment. At March 31, 2013, Clairvest's interest in Wellington
Fund IV represented a 12.6% ownership in Wellington Fund IV. Clairvest is also entitled to participate in the profits
received by the General Partner of Wellington Fund IV.
7. CREDIT FACILITIES
Clairvest has a $75.0 million committed credit facility with a maturity date of April 30, 2020. The credit facility bears interest
at 11% per annum on drawn amounts and at 1% per annum on undrawn amounts. The amount available under the credit
facility at March 31, 2013 and 2012 is $75.0 million. No amounts were drawn during fiscal 2013 and 2012. Included in
accounts receivable and other assets at March 31, 2013 is a capitalized closing fee on this facility totaling $0.6 million [2012
– $0.9 million] which is to be amortized on a straight-line basis to April 2015.
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
The Company also has a $20.0 million credit facility available, subject to annual renewals, bearing interest at prime
plus 0.5% per annum. The prime rate at March 31, 2013 and 2012 was 3.0%. The amount available under the credit facility at
March 31, 2013 was $20.0 million [2012 - $17.0 million], which is based on debt covenants within the banking arrangement.
No amounts were drawn during fiscal 2013 and 2012.
8. INCOME TAXES
Income tax expense for the years ended March 31, 2013 and 2012 consist of the following:
Current income tax expense
Future income tax expense
2013
2012
$ 3,685 $ 2,724
2,326
1,746
$ 6,011 $ 4,470
A reconciliation of the income tax expense based on the statutory rate in Canada and the effective rate is as follows:
Income before income taxes
Statutory Canadian income tax rate
Statutory Canadian income taxes
2013
%
2012
%
$ 41,774
$ 26,886
11,070
26.50
26.50
7,461
27.75
27.75
Non-taxable dividends and distributions received
[6,142]
[14.70]
[5,721]
[21.28]
Taxable portion of net investment gains
Non-taxable portion of losses on temporary investments
Non-deductible portion of finance recovery
Non-deductible portion of other expenses
2,421
[1,034]
[454]
1,010
5.80
314
1.17
[2.48]
[1.09]
2.42
189
[383]
603
0.70
[1.42]
2.24
Payment [recovery] of prior years' taxes
[1,663]
[3.98]
Foreign income tax rate differences
Other
150
653
0.36
1.56
455
1,428
124
$ 6,011
14.39
$ 4,470
1.69
5.31
0.47
16.63
Future tax liabilities relate to temporary differences on corporate and temporary investments, derivative instruments,
accounts payable and accrued liabilities and income as follows:
Temporary differences on corporate and temporary investments
Temporary differences on derivative instruments
Temporary differences on accounts payable and accrued liabilities
$ 5,459
[413]
[2,138]
$ 4,075
[229]
[1,445]
2013
2012
Temporary differences on income
Other
2,066
1,500
947
800
$ 6,474
$ 4,148
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
9. SHARE CAPITAL
Authorized
Unlimited number of preference shares issuable in series, with the designation, rights, privileges, restrictions, and
conditions to be determined by the Board of Directors prior to the issue of the first shares of a series.
Unlimited number of common shares
10,000,000 non-voting shares
Issued and outstanding
2013
2012
Common shares, beginning of year
Issued on exercise of stock options
Prior period adjustment relating to share issuances
Purchased and cancelled under normal course issuer bid
Shares
Amount
Shares
Amount
15,118,095
$ 78,438 15,392,695
$ 79,911
6,000
─
─
104
559
50,000
─
211
─
─
[324,600]
[1,684]
Common shares, end of year
15,124,095
$ 79,101 15,118,095
$ 78,438
During fiscal 2012, the Company purchased and cancelled 324,600 common shares under various normal course issuer bids
for a total purchase cost of $5.6 million. The excess of the purchase cost of the 324,600 shares purchased and cancelled
during fiscal 2012 over the average paid-in amount was $3.9 million, the amount of which was charged to retained
earnings.
During fiscal 2013, the Company filed a normal course issuer bid enabling it to make market purchases of up to
756,204 [2012 – 772,135] of its common shares in the 12-month period commencing March 6, 2013 [2012 – March 6,
2012]. During fiscal 2013, the Company made no purchases or cancellations under its normal course issuer bids. In total,
3,429,895 common shares at a cost of $35.3 million have been purchased under all previous normal course issuer bids as at
March 31, 2013 and 2012. An additional 934,200 common and 2,230,954 non-voting shares have been purchased for
cancellation outside of the normal course issuer bid.
15,124,095 [2012 - 15,118,095] common shares were outstanding at March 31, 2013.
The weighted average number of common shares outstanding during
fiscal 2013 was 15,123,635
[2012 - 15,397,724]. The weighted average number of fully-diluted shares outstanding during fiscal 2013 was 15,404,526
[2012 - 15,675,287].
The difference between the basic and fully-diluted net income per share computations for 2013 and 2012 consists
of the following:
Net income
2013
Weighted
average
number of
shares
Per share
amount
Net income
2012
Weighted
average
number of
shares
Per share
amount
Basic net income per share
$ 35,763 15,123,635
$ 2.36 $ 22,416
15,397,724
$ 1.46
Effect of dilutive securities stock options
280,891
277,563
Fully-diluted net income per share
$ 35,763 15,404,526
$ 2.32 $ 22,416 15,675,287
$ 1.43
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
Under the Company's stock option plan, 1,173,856 [2012 – 1,283,856] common shares of the Company have been made
available for issuance to eligible participants. At March 31, 2013, 615,000 [2012 – 725,000] options were outstanding under
the plan, and an additional 558,856 [2012 – 558,856] are available for future grants. Under the plan, options are exercisable
for one common share and the exercise price of the option must equal the market price of the underlying share on the day
preceding the grant date.
Options granted vest over a period of five years. Once vested, options are exercisable at any time until their expiry
10 years after the grant date.
During fiscal 2013, 110,000 [2012 – 252,000] options were exercised, 6,000 [2012 – 50,000] of which were
exercised for shares, increasing share capital by $0.1 million [2012 – $0.2 million]. The remaining 104,000 [2012 – 202,000]
options were exercised under the cash settlement plan and had no impact on share capital. No options were granted during
fiscal 2013 and 2012.
A summary of the status of the Company's stock option plan as at March 31, 2013 and 2012 and changes during
the years then ended are presented below:
Options outstanding, March 31, 2011
Options exercised
Options outstanding, March 31, 2012
Options exercised
Options outstanding, March 31, 2013
Options exercisable, March 31, 2013
*Adjusted for special dividends where applicable
Number
of options
977,000
Weighted average
exercise price
per share*
$ 8.88
[252,000]
725,000
[110,000]
5.57
9.72
5.13
615,000
601,000
$ 10.43
$ 10.39
The following table summarizes information about stock options outstanding and exercisable at March 31, 2013:
Range of exercise prices
$7.00 to $7.99
$9.00 to $9.99
$12.00 to $12.99
* Adjusted for special dividends where applicable
Number
outstanding
50,000
330,000
235,000
615,000
Options outstanding
Weighted average
remaining
contractual life [yrs]
Options exercisable
Weighted average
exercise price*
Number
exercisable
Weighted average
exercise price*
0.2
2.6
4.5
$ 7.07 50,000
$ 7.07
9.32
12.72
330,000
221,000
601,000
9.32
12.73
10. STOCK-BASED COMPENSATION AND OTHER COMPENSATION PLANS
As a result of a cash settlement feature in Clairvest's stock option plan, Clairvest is required to recognize compensation
expense based upon the intrinsic value of the outstanding stock options at the consolidated balance sheet dates, and the
proportion of their vesting periods that have elapsed. For the year ended March 31, 2013, Clairvest recognized a stock-
based compensation expense of $2.9 million (2012 – $1.5 million) as a result of options being vested and an increase in the
trading price of Clairvest common shares. As at March 31, 2013, $6.4 million (2012 – $5.5 million) has been accrued under
the Company's stock option plan, and a further $0.1 million (2012 – $0.3 million) not accrued as those options have not
vested.
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
As at March 31, 2013, a total of 232,215 [2012 – 212,420] DSUs were held by directors of the Company, the accrual
in respect of which was $5.0 million [2012 – $3.8 million] and has been included in accounts payable and accrued liabilities.
For the year ended March 31, 2013, Clairvest recognized an expense of $1.2 million [2012 – $1.0 million] with respect to
DSUs.
As at March 31, 2013, 120,000 [2012 – 120,000] Appreciation DSUs were held by directors of the Company, the
accrual in respect of which is $1.0 million [2012 – $0.6 million] and has been included in accounts payable and accrued
liabilities. For the year ended March 31, 2013, Clairvest recognized an expense of $0.4 million [2012 – $0.3 million] with
respect to Appreciation DSUs.
As at March 31, 2013, a total of 1,238,680 [2012 – 957,601] BVARs were held by employees of Clairvest, the
accrual in respect of which was $2.1 million [2012 – $1.1 million] and has been included in accounts payable and accrued
liabilities, and a further $3.8 million [2012 – $2.4 million] not accrued as those BVARs have not vested. For the year ended
March 31, 2013, Clairvest recognized an expense of $1.6 million [2012 – $1.6 million] with respect to BVARs.
11. CONSOLIDATED STATEMENTS OF CASH FLOWS
The net change in non-cash working capital balances related to operations is detailed as follows:
2013
2012
Accounts receivable and other assets
Income taxes recoverable
Accounts payable and accrued liabilities
Income taxes payable
Cash and cash equivalents at March 31, 2013 and 2012 are comprised of the following:
Cash
Cash equivalents
12.FINANCIAL INSTRUMENTS
[a] Fair value of financial instruments
$ 3,434
$ [6,307]
[2,135]
1,598
1,410
2,749
2,001
583
$ 8,767
$ [5,434]
2013
2012
$ 3,022
$ 3,063
111,783
29,823
$ 114,805
$ 32,886
Cash, cash equivalents, receivables, payables, temporary investments and corporate investments are being carried at
fair value in accordance with the Company's accounting policy as described in note 2 to the consolidated financial
statements.
[b] Foreign exchange forward contracts
As at March 31, 2013, the Company had entered into foreign exchange forward contracts as hedges against its foreign
investments as follows:
Foreign exchange forward contracts to sell US$91.6 million [2012 – US$102.0 million] and buy US$4.2 million [2012
– US$1.4 million] at an average rate of Canadian $1.0022 [2012 – $0.9957] per U.S. dollar through to February 2014. The
fair value of these contracts at March 31, 2013 is a loss of $1.2 million [2012 – $0.2 million] and has been recognized on
the consolidated balance sheets as derivative instruments.
46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
Foreign exchange forward contracts to sell Chilean Pesos ["CLP"] 14.7 billion [2012 – CLP 14.7 billion] at an average rate
of Canadian $0.002022 [2012 – $0.001938] through to January 2014. The fair value of these contracts at March 31, 2013
is a loss of $1.9 million [2012 – $1.5 million] and has been recognized on the consolidated balance sheets as derivative
instruments.
13. CONTINGENCIES, COMMITMENTS AND GUARANTEES
[a] Clairvest has committed to co-invest alongside CEP in all investments undertaken by CEP. Clairvest's total co-investment
commitment is $54.7 million, $3.5 million [2012 – $3.5 million] of which remains outstanding at March 31, 2013.
Clairvest may only sell all or a portion of a corporate investment that is a joint investment with CEP if it concurrently
sells a proportionate number of securities of that corporate investment held by CEP.
[b] Clairvest has also committed to co-invest alongside CEP III in all investments undertaken by CEP III. Clairvest's total co-
investment commitment is $75.0 million, $15.2 million [2012 – $15.2 million] of which remains unfunded at March 31,
2013. Clairvest may only sell all or a portion of a corporate investment that is a joint investment with CEP III if it
concurrently sells a proportionate number of securities of that corporate investment held by CEP III.
[c] Clairvest has also committed to co-invest alongside CEP IV and CEP IV-A in all investments undertaken by CEP IV and CEP
IV-A Clairvest's total co-investment commitment is $125.0 million, $73.1 million [2012 – $75.5 million] of which remains
unfunded at March 31, 2013. Clairvest may only sell all or a portion of a corporate investment that is a joint investment
with CEP IV and CEP IV-A if it concurrently sells a proportionate number of securities of that corporate investment held
by CEP IV and CEP IV-A.
[d] Clairvest has also committed $25.1 million to Wellington Fund IV [2012 - $25.0 million to Wellington Fund III], $13.0
million [2012 - $11.4 million] of which remained unfunded at March 31, 2013.
[e] At March 31, 2013, Clairvest has received profit distributions totaling $3.3 million [2012 – $2.6 million] through its
ownership interest in the General Partner of Wellington Fund III and Wellington Fund IV. Subject to clawback provisions,
Clairvest may be required to repay up to a net $0.4 million [2012 - $1.3 million] of these distributions in the event the
limited partners of Wellington Fund III and Wellington Fund IV do not meet their return threshold as specified in the
respective Limited Partnership Agreements. At March 31, 2013 and 2012, there were no accruals made with respect to
the Clawback.
[f] Clairvest has guaranteed up to US$3.4 million of CEP's obligations to a Schedule 1 Canadian chartered bank under CEP's
foreign exchange forward contracts with the bank.
[g] Clairvest has guaranteed up to US$15.0 million of CEP III's obligations to a Schedule 1 Canadian chartered bank under
CEP III's foreign exchange forward contracts with the bank.
[h] Under Clairvest's Incentive Bonus Program [the "Program"], a bonus of 10% of after-tax cash income and realizations on
certain of Clairvest's corporate investments would be paid to management annually as applicable. Amounts are accrued
under this Program to the extent that the cash income and investment realizations have occurred and the bonus has
become payable. At March 31, 2013, $0.6 million [2012 – $0.8 million] has been accrued under the Program. If Clairvest
were to sell its corporate investments at their current fair values, an additional bonus of $2.0 million [2012 – $1.1
million] would be owing to management under this Program. As no such realizations have occurred and the terms of the
Program with respect to these corporate investments have not yet been fulfilled, the $2.0 million [2012 – $1.1 million]
has not been accrued at March 31, 2013. The Program does not apply to the income generated from investments made
by Clairvest through CEP III Co-Invest and CEP IV Co-Invest.
[i] During fiscal 2006, Clairvest and a wholly owned subsidiary sold their interests in Signature Security Group Holdings Pty
Limited ["Signature"] and a related company as part of a sale of 100% of Signature and the related company. As part of
the transaction, the subsidiary has indemnified the purchaser for various potential claims. The indemnification was
extinguished during fiscal 2013 and no claims against this indemnification had been made.
[j] Clairvest, together with CEP III, has guaranteed to fund any operating deficiencies of Casino New Brunswick for a
specified period of time. The amount of the guarantee is allocated 75% to CEP III, to the extent that the amounts paid
thereunder are within the limits of the CEP III Limited Partnership Agreement, with the remainder being allocated to
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
Clairvest. Any amounts paid under the guarantee will result in additional debentures being granted to Clairvest and CEP
III, allocated on the same basis as the participation between Clairvest and CEP III in the guarantee funding. As at March
31, 2013, no amounts subject to this guarantee have been funded. Clairvest has pledged $5.4 million to a Schedule 1
Canadian chartered bank which has provided debt financing to Casino New Brunswick. The pledge was made to support
the guarantee and is held in a bank account belonging to Clairvest at the Schedule 1 Canadian chartered bank which
cannot be withdrawn without consent from the Schedule 1 Canadian chartered bank. Accordingly, it has been classified
as restricted temporary investments on the consolidated balance sheets.
[k] An acquisition entity of Chilean Gaming Holdings and other investors of Casino Sol Calama have entered into a joint and
several guarantee to fund any operating deficiencies upon the opening of Casino Sol Calama for a specified period of
time. Latin Gaming Chile, Casino Sol Calama’s operator, has indemnified this acquisition entity with respect to this
guarantee. As at March 31, 2013, no amounts subject to this guarantee have been funded.
[l] As part of the holding structure of Chilean Gaming Holdings, Clairvest, together with CEP III and other co-investors, had
loans totaling $44.6 million at March 31, 2013 through various acquisition entities from an unrelated financial
institution, while another acquisition entity held term deposits totaling $44.6 million at March 31, 2013 with the same
financial institution as security for these loans. Clairvest intends to settle the loans, the deposits and related interest
accruals simultaneously upon the divestiture of the investments in Chilean Gaming Holdings, and as a result, the
deposits and the loans, and the interest revenue and expense have been presented on a net basis. Clairvest’s ownership
of both acquisition entities was 36.8% at March 31, 2013, with CEP III owning 37.7% and the remainder owned by the
other co-investors.
[m]Clairvest has committed to invest US$5.4 million in New Meadowlands Racetrack LLC, which operates the
Meadowlands, North America's premier standardbred horse racing track located in East Rutherford, New Jersey. No
amounts have been funded at March 31, 2013.
[n] During fiscal 2013, Clairvest reached a court-approved settlement with certain parties with respect to a $10.0 million
loan advanced in two tranches of $5.0 million in each of December 2005 and May 2006. Subsequently, the loan was in
default and the collateral arrangements for the loan were mishandled. The loan was written off and Clairvest recorded a
realized loss in its consolidated financial statements for the year ended March 31, 2007. Clairvest took legal action
against several parties to recover the funds and has reached a settlement with certain of these parties resulting in a
settlement by these parties to Clairvest of $7.8 million, or 77.5% of the original loan value without taking into account
litigation and other costs incurred in the recovery process, substantially all of which have been incurred and recorded as
charges against income as of March 31, 2013. Clairvest continues to seek additional recoveries against parties that are
not part of this settlement.
[o] In connection with its normal business operations, the Company is from time to time named as a defendant in actions
for damages and costs allegedly sustained by plaintiffs. While it is not possible to estimate the outcome of the various
proceedings at this time, the Company does not believe that it will incur any material loss in connection with such
actions.
48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
14. RISK MANAGEMENT
The private equity investment business involves accepting risk for potential return, and is therefore affected by a number of
economic factors, including changing economic environments, capital markets and interest rates. As a result, the Company
faces various risk factors, inherent in its normal business activities. These risk factors and how the Company manages these
risk factors are described below.
Credit risk
Credit risk is the risk of a financial loss occurring as a result of default of a counterparty on its obligations to the Company.
For the years ended March 31, 2013 and 2012, there were no material income effects on changes of credit risk on financial
assets. The carrying values of financial assets subject to credit exposure at March 31, 2013 and 2012, net of any allowances
for losses, were as follows:
Financial assets
Cash and cash equivalents
Temporary investments
Restricted cash and temporary investments
Accounts receivable
Loans receivable
Corporate investments
Financial liabilities
Accounts payable
Derivative instruments
2013
2012
$ 114,805
$ 32,886
59,708
5,425
8,873
5,365
176,390
64,697
5,430
11,946
23,740
187,876
$ 370,566
$ 326,575
$ 133
$ 377
1,731
$ 2,108
$ 3,248
3,115
The Company manages credit risk on corporate investments through thoughtful planning, strict investment criteria,
significant due diligence of investment opportunities and oversight responsibilities with existing investee companies and by
conducting activities in accordance with investment policies that are approved by the Board of Directors. Management's
application of these policies is regularly monitored by the Board of Directors. Management and the Board of Directors
review the financial condition of investee companies regularly.
The Company is also subject to credit risk on its accounts receivable, a significant portion of which is with its
investee companies and its CEP Funds. The Company manages this risk through its oversight responsibilities with existing
investee companies by reviewing the financial condition of investee companies regularly, and through its fiduciary duty as
Manager of the CEP Funds and by maintaining sufficient uncalled capital for the CEP Funds to settle obligations as they
come due.
The Company is also subject to credit risk on its loans receivables, the majority of which is typically with its CEP
Funds. The Company manages this risk through its fiduciary duty as Manager of the CEP Funds and by maintaining sufficient
uncalled capital for the CEP Funds to settle obligations as they come due.
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
The Company manages credit risk on cash, cash equivalents and temporary investments by conducting activities in
accordance with the fixed income securities policy that is approved by the Audit Committee. The Company also manages
credit risk by contracting with counterparties which are Schedule 1 Canadian chartered banks or through investment firms
where Clairvest's funds are segregated and held in trust for Clairvest's benefit. Management's application of these policies
is regularly monitored by the Audit Committee. Management and the Audit Committee review credit quality of cash
equivalents and temporary investments regularly. As at March 31, 2013 and 2012, the credit ratings, based on the
Dominion Bond Rating Services ["DBRS"] rating scale, with the exception of loans rated below A- which are based on the
Standard and Poor’s ["S&P"] rating scale, for the Company's cash, cash equivalents and temporary investments were as
follows:
Cash and term deposits
Money market savings accounts
R1-High
Guaranteed investment certificates, investment savings accounts
and mutual fund deposits, including restricted temporary investments
AA
AA-
A+
A
Corporate bonds and loans
AA
AA-
A+
A
A-
B+
CCC+
Preferred shares
P-2 low
Total cash, cash equivalents, temporary investments and restricted
Temporary investments
[1] Pertains to Clairvest's treasury investment in Centaur Gaming as described in notes 3 and 6[j].
2013
2012
$ 3,386
$ 3,022
93,463
17,814
59,844
39,272
152
5,052
3,032
3,168
—
—
—
15,212
2,552
—
508
7,980
—
2,929
—
11,755
6,117[1]
6,196[1]
—
—
—
1,497
$ 179,938
$ 103,013
50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
Market risk
Market risk includes exposure to fluctuations in the market value of the Company's investments, currency rates and interest
rates. The following table presents the financial instruments measured at fair value classified by the fair value hierarchy set
out in CICA Handbook Section 3862:
2013
Fair value measurements using
Level 1
Level 2
Level 3
Assets /
liabilities
at fair value
Financial assets
Cash equivalents
Money market savings accounts
$ 93,463 $ —
$ —
$ 93,463
Investment savings accounts
Mutual fund deposits
Temporary investments
Guaranteed investment certificates
Corporate bonds and loans
Restricted temporary investments
Accounts receivable
Loans receivable
18,240
80
111,783
—
3,061
3,061
—
—
—
—
—
—
44,335
12,312
56,647
5,425
—
—
—
—
—
—
—
—
—
18,240
80
111,783
44,335
15,373
59,708
5,425
8,873
8,873
5,365
5,365
Corporate investments
126
—
176,264
176,390
$ 114,970 $ 62,072
$ 190,502 $ 367,544
Financial liabilities
Accounts payable and accrued liabilities
$ —
$ —
$ 133
$ 133
Derivative instruments
—
3,115
—
3,115
$ —
$ 3,115
$ 133
$ 3,248
51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
2012
Fair value measurements using
Level 1
Level 2
Level 3
Assets /
liabilities at fair
value
Financial assets
Cash equivalents
Money market savings accounts
$ 17,814
$ —
$ —
$ 17,814
Investment savings accounts
Term deposits
Temporary investments
Term deposits
11,737
272
29,823
51
—
—
—
—
Guaranteed investment certificates
—
25,273
Corporate bonds and loans
Preferred shares
Restricted temporary investments
Accounts receivable
37,876
1,497
39,424
—
—
Loans receivable
—
—
—
25,273
5,430
—
—
—
—
—
—
—
—
—
—
—
11,737
272
29,823
51
25,273
37,876
1,497
64,697
5,430
11,946
11,946
23,740
23,740
Corporate investments
10,671
—
177,205
187,876
$ 79,918
$ 30,703 $ 212,891
$ 323,512
Financial liabilities
Accounts payable and accrued liabilities
$ —
$ —
$ 377 $ 377
Derivative instruments
—
$ —
1,731
$ 1,731
—
1,731
$ 377 $ 2,108
52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
The following table presents the changes in fair value measurements for instruments included in Level 3 of the fair
value hierarchy set out in CICA Handbook Section 3862:
Fair value
April 1, 2012
Total realized /
unrealized
gains and
foreign exchange
revaluations
included
in earnings
Purchases of
assets / issuances
of liabilities
Sales of
assets /
settlements
of liabilities
Fair value
March 31, 2013
Unrealized gains
and foreign
exchange
revaluations
included in
earnings for
assets and
liabilities for the
year ended
March 31, 2013
for positions
still held
Financial assets
Accounts receivable
$ 11,946 $ —
$ 71,304
$ [74,377] $ 8,873
$ —
Loans receivable
23,740
—
34,168
[52,543]
5,365
—
Corporate investments
177,205
10,555
29,701
[41,197]
176,264
10,555
212,891
10,555 135,173
[168,117]
190,502
10,555
Financial liabilities
Accounts payable
377
—
1,908 [2,152]
133
—
$ 377
$ —
Fair value
April 1, 2011
Total realized /
unrealized gains
and foreign
exchange
revaluations
included in
earnings
$ 1,908
$ [2,152]
$ 133
$ —
Purchases of
assets / issuances
of liabilities
Sales of assets /
settlements of
liabilities
Fair value March
31, 2012
Unrealized gains
and foreign
exchange
revaluations
included in
earnings for
assets and
liabilities for the
year ended
March 31, 2012
for positions
still held
Financial assets
Accounts receivable
$ 5,366
$ —
$ 47,458 $ [40,878]
$ 11,946
$ —
Loans receivable
126
—
46,431
[22,817]
23,740
—
Corporate investments
153,247
20,040
36,888
[32,970]
177,205
19,138
158,739
20,040
130,777
[96,665]
212,891
19,138
Financial liabilities
Accounts payable
176
$ 176
—
1,496 [1,295]
377
—
$ — $ 1,496 $ [1,295] $ 377 $ —
Fluctuations in market interest rates affect the Company's income derived from cash, cash equivalents, and temporary
investments. For financial instruments which yield a floating interest income, the interest received is directly impacted by
the prevailing market interest rate. The fair value of financial instruments which yield a fixed interest income would change
53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
when there is a change in the prevailing market interest rate. The Company manages interest rate risk on cash, cash
equivalents and temporary investments by conducting activities in accordance with the fixed income securities policy that is
approved by the Audit Committee. Management's application of these policies is regularly monitored by the Audit
Committee.
If interest rates were higher or lower by 1% per annum, the potential effect would be an increase or decrease of
$0.7 million to distributions and interest income on a pre-tax basis for the year ended March 31, 2013.
Included in corporate investments are investments for which the fair values have been estimated based on
assumptions that may not be supported by observable market prices. The most significant unobservable input is the
multiple of earnings used for each individual investment. In determining the appropriate multiple, Clairvest considers i]
public company multiples for companies in the same or similar businesses; ii] where information is known and believed to
be reliable, multiples at which recent transactions in the industry occurred; and iii] multiples at which Clairvest invested in
the company, or for follow-on investments or financings. The resulting multiple is adjusted, if necessary, to take into
account differences between the investee company and those the Company selected for comparisons and factors include
public versus private company, company size, same versus similar business, as well as with respect to the sustainability of
the company's earnings and current economic environment. Investments which are valued using the earnings multiple
approach include Casino New Brunswick, Centaur Gaming, Chilean Gaming Holdings, Kubra, Light Tower Rentals, Linen King,
and Rivers Casino. If the Company had used an earnings multiple for each investment that was higher or lower by 0.5 times,
the potential effect would be an increase of $19.3 million or decrease of $19.4 million to the carrying value of corporate
investments and net changes in unrealized gains or losses on corporate investments, on a pre-tax basis for the year ended
March 31, 2013. Earnings multiples used are based on public company valuations as well as private market multiples for
comparable companies.
The Company's corporate investment portfolio is diversified across 15 companies in 8 industries and 3 countries as
at March 31, 2013. Concentration risk by industry and by country is as follows:
2013
Canada
United
States
Chile
Fair value
Canada
2012
United
States
Chile
Fair value
Business services
$ —
$ 12,678
$ — $ 12,678 $ — $ 7,868
$ — $ 7,868
Contract manufacturing
—
7,573
Equipment rental
Financial services
Gaming
10,573
24,580
15,583
—
—
—
—
7,573
35,153
—
—
5,098
21,494
15,583
18,314
—
—
—
—
5,098
21,494
18,314
4,879
39,185
39,486
83,550
4,053
54,334
31,202
89,589
Health and medical elated
Information technology
—
—
25
—
—
—
25
—
—
—
6,834
10,419
—
—
6,834
10,419
Specialty Aviation
25,521
1,904
—
27,425
27,701
—
—
27,701
Textile rental service
—
788
Other
Total
[6,385]
—
$ 50,171 $ 86,733
—
—
788
—
2,523
[6,385]
[1,964]
—
—
—
2,523
[1,964]
$ 39,486 $ 176,390 $ 48,104 $ 108,570
$ 31,202 $ 187,876
The Company has considered current economic events and indicators in the valuation of its corporate investments.
The Company has implemented a hedging strategy because it has, directly and indirectly, several investments
outside of Canada, currently in the United States and in Chile. In order to limit its exposure to changes in the value of
foreign denominated currencies relative to the Canadian dollar, Clairvest hedges 100% of the fair value of its foreign
investments unless a specific exemption is approved by the Board of Directors.
54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013 and 2012 [tabular dollar amounts in thousands, except per share information]
A number of investee companies are subject to foreign exchange risk. A significant change in foreign exchange
rates can have a significant impact to the profitability of these entities and in turn the Company's fair value of these
corporate investments. The Company manages this risk through oversight responsibilities with existing investee companies
and by reviewing the financial condition of investee companies regularly.
Certain of the Company's corporate investments are also held in the form of subordinated debentures. Significant
fluctuations in market interest rates can have a significant impact on the fair value of these investments.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. Note 13
describes the Company's contingencies, commitments and guarantees.
The Company maintains a conservative liquidity position that exceeds all liabilities payable on demand. The
Company invests its cash equivalents and temporary investments in liquid assets such that they are available to cover any
potential funding commitments and guarantees. In addition, the Company maintains various credit facilities.
15. CAPITAL DISCLOSURES
Clairvest considers the capital it manages to be the amounts it has in cash, cash equivalents, temporary investments and
corporate investments. Clairvest also manages the third-party capital committed or invested in the CEP Funds and co-
investments made by other investors. Total capital managed by Clairvest as at March 31, 2013, measured at fair market
value and including capital committed by third-party investors but not yet invested, was $1.2 billion [2012 - $1.2 billion].
Clairvest's objectives in managing capital are to:
Preserve a financially strong company with substantial liquidity such that funds are available to pursue new
acquisitions and growth opportunities as well as to support its operations and the growth of its existing
corporate investments;
Achieve an appropriate risk-adjusted return on capital;
Build the long-term value of its corporate investments; and
Have appropriate levels of committed third-party capital available to invest along with Clairvest's capital. The
management of third-party capital also provides management fees and/or priority distributions to Clairvest
and the ability to enhance Clairvest's returns by earning a carried interest.
At March 31, 2013, Clairvest had non-restricted cash, cash equivalents and temporary investments of $174.5
million [2012 – $97.6 million] and access to $95.0 million [2012 – $92.0 million] through its credit facilities to support its
current and anticipated corporate investments. Clairvest also had $261.1 million [2012 – $291.0 million] of uncalled
committed third-party capital through the CEP Funds at March 31, 2013 to invest along with Clairvest’s capital.
At March 31, 2013 and 2012, Clairvest had no external capital requirements, other than as disclosed in note 13.
16. SUBSEQUENT EVENT
Subsequent to year end, the Company invested US$4.0 million [C$4.1 million] in County Waste of Virginia, LLC ["County
Waste"] a private regional solid waste management company based in West Point, Virginia. The Company’s ownership
interest in County Waste is 12.6%.
17. COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS
The comparative consolidated financial statements have been reclassified from statements previously presented to
conform to the presentation of the 2013 consolidated financial statements.
55
SHAREHOLDER INFORMATION
As at, and for the year ended, March 31, 2013
SHAREHOLDER COMMUNICATION
Clairvest has both the obligation and desire to provide its shareholders with full and continuous disclosure, on a timely
basis, throughout the fiscal year. Annual and quarterly reports are provided as part of this process and the company
releases information on material events through the press, as required. Further disclosure can be found on the company’s
website, www.clairvest.com.
VALUATION MEASURES
Clairvest’s focus is on building the long–term value of its investments. Fair value accounting allows Clairvest to reflect
changes in the value of our investments. The fair value method, however, is not without limitations. Clairvest’s investments
are often carried at values which may vary from the actual realizations.
OUTSTANDING SECURITIES
Share structure
Common shares outstanding
Less holders of 10% or more
Public float[1,2]
Market capitalization[1]
Market value of public float[1,2]
Stock market
Common Shares[3]
Toronto Stock Exchange
15,124,095
9,972,222
5,151,873
$ 332,427,608
$ 113,238,169
Stock symbol
CVG
[1] As at May 31, 2013. [2] Excludes holders of 10% or more of the outstanding common shares. (3) During the year, Clairvest filed a new Normal Course Issuer Bid.
DIVIDEND INFORMATION
Clairvest has consistently paid a dividend over the last twenty-two years. Over the last twenty years the annual ordinary
dividend has been $0.10 per common share. It is Clairvest’s current intention to continue to pay an annual ordinary
dividend.
BOOK VALUE PER SHARE AT MARCH 31
56
$-$2 $4 $6 $8 $10 $12 $14 $16 $18 $20 $22 $24
SHAREHOLDER INFORMATION
As at, and for the year ended, March 31, 2013
SHARE PRICE VS BOOK VALUE PER SHARE
SHARE TRADING VOLUME FISCAL 2013
Common shares
Year to March 31, 2013
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year to March 31, 2012
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
SHAREHOLDER INQUIRIES
Maria Klyuev, Director, Investor Relations & Marketing
416.925.9270
tel:
fax:
416.925.5753
email: mariak@clairvest.com
High
Low
Close
Volume
18.06
18.00
19.98
23.50
15.25
16.00
16.00
19.67
17.01
17.30
17.70
19.90
14.60
15.25
15.40
16.75
17.30
17.80
19.90
20.98
14.85
16.00
15.40
17.41
13,563
19,090
68,439
12,043
101,734
79,570
33,378
394,075
57
TRANSFER AGENT AND REGISTRAR
Investors are encouraged to contact
CIBC Mellon Trust Company
for information regarding their security holdings.
Note: Canadian Stock Transfer Company Inc. acts as the
Administrative Agent for CIBC Mellon Trust Company.
Information can be obtained at:
P.O. Box 700, Station B
Montreal, Québec H3B 3K3
Answerline: 1.800.387.0825
Web: www.canstockta.com
Email: inquiries@canstockta.com
CORPORATE INFORMATION
CORPORATE OFFICE
22 St. Clair Avenue East, Suite 1700
Toronto, Ontario M4T 2S3
Tel: 416.925.9270 Fax: 416.925.5753
Web: www.clairvest.com
AUDITORS
Ernst & Young LLP
THE ANNUAL MEETING OF SHAREHOLDERS
August 13, 2013
St. Andrews Club & Conference Centre,
150 King Street West, 27th Floor
Toronto, Ontario Canada
All Shareholders are encouraged to attend.