ANNUAL REPORT 2015
TABLE OF CONTENTS
Co‐Chief Executive Officers' Message
Management's Discussion and Analysis
2
4
Management's Report
35
Independent Auditors' Report
36
Consolidated Financial Statements
37
Notes to Consolidated Financial Statements 41
Shareholder Information
88
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 C$1.5 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 COMPANIES WITH
THE GOAL OF HELPING TO BUILD VALUE IN THE BUSINESS
AND GENERATE SUPERIOR LONG TERM FINANCIAL
RETURNS FOR INVESTORS.
CO‐CHIEF EXECUTIVE OFFICERS’ MESSAGE
GENERATING SUPERIOR RETURNS THROUGH ONGOING
EMPHASIS ON FUNDAMENTAL VALUE CREATION
FELLOW SHAREHOLDER,
From the PE industry’s perspective, the last twelve months marked a record year for exits, surpassing the all‐
time high by a wide margin. The flow of so much debt and equity capital fuelled returns and realizations and has
infused the industry with renewed confidence.
For Clairvest, fiscal 2015 was an exceptional year by many measures. We took advantage of the frothy market
conditions to complete two material liquidity events at excellent valuations. These transactions brought realized
returns of Clairvest Equity Partners III to 4.7 times invested capital. During the year we successfully closed our
fifth fund, Clairvest Equity Partners V, at its hard cap of $600 million after being materially oversubscribed.
During the fourth quarter, we launched the new fund with an investment in the waste management space. This
is our fifth deal in an industry that has been a core domain for Clairvest for 10 years and the third time we
partnered with the same management team. Being trusted once again has demonstrated our successful
approach to partnership and the value we bring to our investee companies.
Strong realized returns and progress made at many of the existing investee companies drove a material lift to
our book value. For the 12 months ended March 31, 2015, Clairvest’s book value per share grew an impressive
19% to $29.58 from $24.92 a year earlier. The growth was mostly attributable to realized profit and portfolio
value growth, but in part to the recognition of the in‐the‐money value of the carry Clairvest is entitled to receive
on the third party capital it manages, a value which we had previously disclosed in our notes and which we have
earned over the past 2‐4 years. Over the last 15 years, our book value has grown at a compounded annual
growth rate of 10.2%, after tax, despite an average cash balance of 41%. In contrast, the S&P500 has delivered
4.5%, pre‐tax, reflecting solid out‐performance on an absolute and risk‐adjusted basis by your team.
While the numbers tell a great story, what lies behind the numbers is most meaningful. The increase in asset
values came from fundamental value creation, meaning debt reduction and EBITDA growth as opposed to
multiple expansion, which is often affected by exogenous market conditions. While we pay attention to macro
trends, true success, in our view, is partnering with owner operators to build better companies. Our successful
liquidity transactions during the year have definitely benefited from positive market conditions, but these
conditions only serve to augment returns after we build a strategically significant business that others want to
own.
2
CO‐CHIEF EXECUTIVE OFFICERS’ MESSAGE
As we look ahead to the balance of fiscal 2016, we are aware of some challenges. The ongoing limited supply of
qualified companies in which to invest coupled with the resurgence of availability of low‐cost debt and high
public company valuations, have driven rising acquisition multiples. The challenge of how to make appropriate
risk adjusted returns has never been greater and the pressure is on us, your management and fellow
shareholders, to demonstrate new resourcefulness to find companies that could benefit from Private Equity
ownership.
We believe that the reputation we have developed over our 28 year history as partners with ability and integrity
has been and will continue to be the driver of our success. We pride ourselves on the relationships we have
generated and continue to build with our partners and the returns we have delivered. Our track record speaks
to this value creation best; the 26 realized deals originated by the current management team have turned $499
million of invested equity into over $1.5 billion.
IN TRIBUTE
We were deeply saddened by the passing of Joseph L. Rotman, founder of Clairvest. Mr. Rotman founded
Clairvest in 1987 with the vision of using capital and wisdom to support the development of young companies
and entrepreneurs while applying the values of integrity, fairness and partnership. These guiding values are and
will remain core to Clairvest. A great Canadian whose mission was to continually improve everything he touched
in business and in our society at large, Mr. Rotman’s unrelenting entrepreneurial spirit serves as a guiding light
for us all.
Respectfully,
B. Jeffrey Parr
Co‐Chief Executive Officer
Ken Rotman
Co‐Chief Executive Officer
June 24, 2015
3
MANAGEMENT’S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2015
June 24, 2015
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 audited annual consolidated financial statements and related notes for the year ended March 31,
2015 ["consolidated financial statements"].
The following MD&A is the responsibility of Management and is as of June 24, 2015. 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. The Company's shares are
traded on the Toronto Stock Exchange under the stock symbol "CVG".
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"], and Clairvest Equity Partners V Limited Partnership
["CEP V"] and Clairvest Equity Partners V‐A Limited Partnership ["CEP V‐A"] [together, the "CEP Funds"] in a small number of
carefully selected companies that have the potential to generate superior returns.
Clairvest is considered an agent of the CEP Funds which it manages. Accordingly, the financial positions and
operating results of the CEP Funds are not included in Clairvest’s consolidated financial statements.
Clairvest employs various acquisition entities in structuring its investments, all of which are controlled by Clairvest.
These acquisition entities, which are accounted for at fair value in accordance with International Financial Reporting
Standards ["IFRS"] as described in the Critical Accounting Estimates section of the MD&A, include the following:
2141788 Ontario Corporation ["2141788 Ontario"]
CEP III Co‐Investment Limited Partnership ["CEP III Co‐Invest"]
MIP III Limited Partnership ["MIP III"]
CEP IV Co‐Investment Limited Partnership ["CEP IV Co‐Invest"]
MIP IV Limited Partnership ["MIP IV"]
CEP V Co‐Investment Limited Partnership ["CEP V Co‐Invest"]
MIP V Limited Partnership ["MIP V"]
2141788 Ontario, a limited partner of CEP III Co‐Invest and CEP V Co‐Invest, is a wholly‐owned acquisition entity of
Clairvest. Clairvest’s relationship with CEP III Co‐Invest and MIP III, CEP IV Co‐Invest and MIP IV, and CEP V Co‐Invest and
MIP V are described in the Transactions with Related Parties and Off‐Statement of Financial Position Arrangements sections
of the MD&A.
At March 31, 2015, Clairvest, through these acquisition entities, had 18 core investments in 9 different industries
and 3 countries. One of these investments is a joint investment with CEP, four are joint investments with CEP III, eleven are
joint investments with CEP IV and CEP IV‐A [together, the "CEP IV Fund"], and one is a joint investment with CEP V and CEP
V‐A [together, the "CEP V Fund"]. The table below summarizes the status of the CEP Funds as at June 24, 2015:
4
MANAGEMENT’S DISCUSSION AND ANALYSIS
Status of Clairvest Equity Partnerships
[$millions, except number of investments]
Year of Fund
Third Party
Capital
Clairvest
Commitment
Total Capital
Total
Currently
Held
Number of Investments
Clairvest Equity Partners [“CEP”]
2001
164
Clairvest Equity Partners III [“CEP III”]
2006
225
Clairvest Equity Partners IV [“CEP IV”]
2010
342
Clairvest Equity Partners V [“CEP V”]
2015
420
55
75
125
180
219
300
467
600
9
8
11
1
1
4
11
1
Clairvest also holds an investment in Wellington Financial Fund IV ["Wellington Fund IV"].
OVERVIEW OF FISCAL 2015
Clairvest reports under International Financial Reporting Standards ["IFRS"] effective fiscal 2015. Further details of the
Company’s transition to IFRS is described in the Adoption of International Financial Reporting Standards section of the
MD&A.
An overview of the significant events during fiscal 2015 follows:
Overall
Clairvest's book value increased by $48.2 million, or $3.19 per share. The increase was primarily due to net income and
comprehensive income ["net income"] of $3.43 per share, net of $0.2492 per share in dividends paid.
For the year ended March 31, 2015, Clairvest recorded $104.3 million in total revenue, comprised primarily of $37.5
million in net investment gains, $33.5 million in distributions and interest income, $31.3 million in net carried interest
income from the CEP Funds and $2.0 million in other income. Total revenue for the prior fiscal year was $76.3 million.
Net income for the year ended March 31, 2015 was $52.0 million compared to $38.8 million in the prior fiscal year.
At March 31, 2015, Clairvest and its controlled acquisition entities had $835.4 million of capital available for future
acquisitions through its cash, cash equivalents and temporary investments ["treasury funds"], credit facilities and
uncalled capital in the CEP Funds.
Clairvest filed a new normal course issuer bid enabling it to make market purchases of up to 756,705 of its common
shares in the 12‐month period commencing March 6, 2015. No purchases have been made under this bid to June 24,
2015. At June 24, 2015, Clairvest had repurchased a total of 6,595,049 common and non‐voting shares for $68.3 million
over the last eleven years. At June 24, 2015, 15,134,095 common shares are outstanding.
Clairvest paid an annual ordinary dividend of $0.10 per share and a special dividend of $0.1492 per share. The
dividends were paid on July 25, 2014 to common shareholders of record as of July 9, 2014. The dividends were eligible
dividends for Canadian income tax purposes.
Clairvest and CEP
Clairvest and CEP realized on N‐Brook Mortgage LP ["N‐Brook"], a company which originated, adjudicated and
underwrote first‐ranking mortgages on owner‐occupied, residential real estate in Ontario, British Columbia and
Alberta. Over the life of the investment, Clairvest realized a $2.1 million loss, substantially all of which had been
previously recorded in prior fiscal years.
Clairvest/CEP III Co‐Invest and CEP III
CEP III Co‐Invest and CEP III realized on KUBRA Data Transfer Limited ["Kubra"], a business processing outsourcing
company focused on the distribution of household bills on behalf of its customers. CEP III Co‐Invest and CEP III realized
5
MANAGEMENT’S DISCUSSION AND ANALYSIS
proceeds equal to 13.4 times invested capital and an internal rate of return of over 40% over eight years. CEP III Co‐
Invest’s portion of the proceeds was US$35.7 million.
Light Tower Rentals Inc. ["Light Tower Rentals"], an investee company of CEP III Co‐Invest and CEP III, completed a
recapitalization by adding a group of institutional equity investors and a US$330 million bond offering. As part of the
transactions Light Tower Rentals redeemed 41,764,144 common shares from CEP III Co‐Invest and CEP III for pre‐tax
proceeds of US$151.3 million, which is equivalent to a 4.7 times return on investment. Subsequent to the redemptions
CEP III Co‐Invest and CEP III continue to have a 26.7% ownership in Light Tower Rentals. CEP III Co‐Invest’s portion of
the gross proceeds was US$37.9 million and it retained a 6.7% ownership interest subsequent to the redemptions.
Light Tower Rentals is an oilfield equipment rental company operating in major oil and gas drilling basins in the United
States.
Upon completion of the above transactions pertaining to Kubra and Light Tower Rentals, CEP III Co‐Invest distributed
$72.4 million to its limited partners, which include Clairvest, 2141788 Ontario and MIP III. The distributions from CEP III
Co‐Invest to its limited partners resulted in total distribution income of $16.8 million and net investment gains of $28.4
million as reported in Clairvest’s consolidated financial statements.
CEP III also declared and paid $33.3 million in carried interest, 50% of which or $16.6 million was ultimately paid to
Clairvest, and the other 50% or $16.6 million was ultimately paid to the limited partners of MIP III which is accounted
for as management participation.
Clairvest/CEP IV Co‐Invest and CEP IV
CEP IV Co‐Invest, the CEP IV Fund and other co‐investors in Discovery Air Inc. ["Discovery Air"][collectively the
"Discovery Air Investor Group"], acquired 61,876,346 common shares in Discovery Air for a total cost of $23.5 million
representing a 75.5% ownership interest in Discovery Air on a fully diluted basis. Discovery Air is a specialty aviation
services company operating across Canada and in select locations internationally. The Discovery Air Investor Group also
owned $97.3 million in accrued value of convertible debentures issued by Discovery Air immediately after the common
share acquisition. Upon the completion of the common share acquisition, Discovery Air made a $5.0 million partial
repayment towards the convertible debentures. Subsequent to year end, the Discovery Air Investor Group purchased
an additional 4,546,260 common shares in Discovery Air for $1.4 million increasing ownership interest to 81.0%. CEP IV
Co‐Invest’s portion of the investment was $7.6 million for 19,809,915 common shares during fiscal 2015 and 1,455,500
common shares subsequent to year end which increased its ownership in Discovery Air to 25.9% on a fully diluted
basis. CEP IV Co‐Invest’s receipt of the partial repayment on the convertible debentures was $1.6 million.
CEP IV Co‐Invest and the CEP IV Fund invested US$10.1 million in Davenport Land Investments, which comprised two
entities holding real estate surrounding a casino development in Davenport, Iowa ["Davenport North" and "Davenport
South"]. CEP IV Co‐Invest’s portion of the investment was US$2.7 million. Additionally, Clairvest had advanced a US$0.6
million non‐interest bearing loan to a partner to assist funding its 50% ownership in Davenport North. Subsequent to
the investment, Davenport South disposed of certain real estate and distributed to CEP IV Co‐Invest, on an after‐tax
basis, US$0.6 million during the quarter and an additional US$0.8 million subsequent to quarter end.
Clairvest/CEP V Co‐Invest and CEP V
Clairvest, completed the fundraising of the CEP V fund pool, which comprised an $180 million commitment by CEP V
Co‐Invest alongside $420 million from third party investors. This new capital will provide Clairvest with greater scale
and is expected to generate an annual increase in net management fees and priority distributions over the next few
years.
CEP V Co‐Invest and the CEP V Fund invested US$25.6 million in Winters Bros. Waste Systems of Long Island Holdings,
LLC ["Winters Bros. of LI"], which provides commercial, industrial, residential waste collection services and operates an
extensive network of transfer and recycling facilities across Long Island, New York. CEP V Co‐Invest’s portion of the
investment in Winters Bros. of LI was US$7.7 million.
6
MANAGEMENT’S DISCUSSION AND ANALYSIS
OUTLOOK
At March 31, 2015, Clairvest's current management team has made 40 platform investments and has realized or partially
realized on 26 investments which have in aggregate generated 3.1 times invested capital. 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, 2015, Clairvest had $157.2 million in cash, cash equivalents and temporary investments, access to
$95.0 million in credit facilities and $30.9 million of cash in various acquisition entities and $552.3 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.
Subsequent to year end, Clairvest and CEP III announced an agreement for the sale of Casino New Brunswick, a
gaming entertainment complex located in Moncton, New Brunswick, for a total sale price of approximately $95 million.
Clairvest holds its investment in Casino New Brunswick through CEP III Co‐Invest. Subject to regulatory approvals, CEP III
Co‐Invest and CEP III are expected to receive gross proceeds of approximately $55 million, 25% of which, or approximately
$14 million would be realized by CEP III Co‐Invest, compared to the March 31, 2015 carrying value of $8.3 million. The
closing is expected to occur in the fall of 2015. Upon completion of this transaction, Clairvest expects CEP III Co‐Invest to
distribute the sale proceeds to its limited partners in the form of distributions. CEP III is also expected to pay a carried
interest which will equal to 20% of the sale proceeds it will receive from the sale of Casino New Brunswick, 50% of which
will be ultimately paid to Clairvest and 50% will be ultimately paid to the limited partners of MIP III. This transaction is
expected to increase Clairvest’s book value per share by approximately 35 cents from the March 31, 2015 book value per
share of $29.58.
FINANCIAL POSITION AND LIQUIDITY
The following table summarizes the Company’s financial position:
Financial Position
As at, [$000's, except number of shares and per share amounts]
March 31, 2015
March 31, 2014
April 1, 2013
Cash, cash equivalents and temporary investments
$ 157,155
$ 114,792
$ 172,677
Unrealized carried interest from the CEP Funds
Corporate investments, at fair value
Total assets
Total liabilities
Book value
Book value per share
Dividend per share
53,738
291,421
531,207
83,513
56,370
244,029
475,462
76,002
447,694
399,460
29.58
0.2492
26.39
0.2312
36,724
210,235
460,064
96,125
363,939
24.06
0.2093
At March 31, 2015, Clairvest had total assets of $531.2 million, an increase of $55.7 million during fiscal 2015. The increase
was primarily due to increase in corporate investments as described below.
At March 31, 2015, the Company’s treasury funds of $157.2 million were held in cash, money market savings
accounts rated not below R1‐High, investment savings accounts and guaranteed investment certificates rated not below
BBB+, and treasury investments in second lien loans of Centaur Gaming and corporate bonds of Light Tower Rentals [see
Notes 4 and 17 to the consolidated financial statements for a detailed discussion of the Company's treasury funds].
2141788 Ontario Limited also held $27.5 million in cash, investment savings accounts and guarantee investment certificates
7
MANAGEMENT’S DISCUSSION AND ANALYSIS
with consistent ratings to the above. Clairvest also has access to $3.4 million in cash held in various other acquisition
entities which are controlled by Clairvest.
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, 2015 is $75.0 million.
Clairvest also has a $20.0 million credit facility with a Canadian chartered bank. The credit facility, which is subject to annual
renewal, 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, 2015 is $20.0 million, which is based on debt covenants and certain restrictions within the
banking arrangement.
At March 31, 2015, Clairvest had corporate investments with a carrying value of $291.4 million, an increase of
$47.4 million during fiscal 2015. The increase is comprised primarily of $37.5 million of net investment gains and $8.9
million in additional investments. Further details of Clairvest’s indirect investee companies are provided in note 8 to the
consolidated financial statements and in the Supplemental Non‐IFRS Disclosures section of the MD&A.
At March 31, 2015, Clairvest had $83.5 million in total liabilities, $40.6 million of which were payable only upon the
cash realization of certain investments of Clairvest or the CEP Funds. Total liabilities increased by $7.5 million during fiscal
2015 primarily due to increase in share‐based compensation liability.
FINANCIAL RESULTS
The following discussion details the Company’s operating results:
Net income for the year ended March 31, 2015 was $52.0 million compared with net income of $38.8 million for
the year ended March 31, 2014. The following table summarizes the composition of net income and comprehensive
income for the years ended March 31:
Financial Results
Year ended March 31, [$000's, except number of shares and per share amounts]
Net investment gains
Distributions and interest income
Net carried interest income
Other income
Total expenses, excluding income tax
Net income before tax
Income tax
Net income and comprehensive income
Net income and comprehensive income per share
Net income and comprehensive income per share ‐ fully diluted
2015
2014
2013[1]
$ 37,471
33,516
$ 38,927
13,049
$ 13,607
32,347
31,361
1,979
49,035
55,292
3,287
52,005
3.43
3.43
20,248
4,103
32,479
43,848
5,041
38,807
2.56
2.56
−
14,680
18,860
41,774
6,011
35,763
2.36
2.36
[1] Financial results presented under Part V “Pre‐changeover accounting standards” of the Handbook for Chartered Professional Accountants Canada
[“Canadian GAAP”].
Net income in fiscal 2015 included $37.5 million in net investment gains, $33.5 million in distributions and interest income,
$31.4 million in net carried interest income from the CEP Funds, $2.0 million in other income, $49.0 million in total
expenses excluding income tax and $3.3 million in income tax expense. Net investment gains, distributions and net carried
interest income were primarily the result of the events as described in the Clairvest/CEP III Co‐Invest and CEP III subsection
of the Overview section of the MD&A and net changes in the fair values of indirect investee companies held by the
Company’s acquisition entities. Total expenses included $13.4 million in employee compensation and benefits, $8.6 million
in share‐based compensation expense and $20.4 million in management participation.
8
MANAGEMENT’S DISCUSSION AND ANALYSIS
Net income in fiscal 2014 included $38.9 million in net investment gains, $13.0 million in distributions and interest income,
$20.2 million in net carried interest income from the CEP Funds, $4.1 million in other income, $32.5 million in total
expenses excluding income tax and $5.0 million in income tax expense. Net investment gains, distributions and net carried
interest income were primarily the result of net changes in fair values of indirect investee companies held by the
Company’s acquisition entities. Total expenses included $7.4 million in employee compensation and benefits, $5.7 million
in share‐based compensation expense and $13.1 million in management participation.
SUMMARY OF QUARTERLY RESULTS
[$000's except per share information]
March 31, 2015
December 31, 2014
September 30, 2014
June 30, 2014
March 31, 2014
December 31, 2013
September 30, 2013
June 30, 2013
Gross
Revenue
$
32,524
4,330
45,432
22,041
8,746
23,008
32,863
11,710
Net
Income [Loss]
$
19,009
[2,907]
26,362
9,541
2,224
13,255
18,925
4,403
Net Income [Loss]
Per
Common Share*
$
1.25
Net Income
Per Common Share
Fully Diluted*
$
1.25
[0.19]
[0.19]
1.74
0.63
0.15
0.88
1.25
0.29
1.74
0.60
0.15
0.88
1.25
0.29
* 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
dilutive effect on any quarters which may not be applicable for the full year.
Significant variations arise in the quarterly results due to net investment gains, net carried interest income and
management participation which are re‐valued on a quarterly basis when conditions warrant an adjustment to the fair
value of the corporate investment and due to realizations, and share‐based compensation due to the movement in the
trading price and book value of Clairvest's common shares.
FOURTH QUARTER RESULTS
Net income for the fourth quarter of fiscal 2015 was $19.0 million compared with a net income of $2.2 million for the
fourth quarter of fiscal 2014. Gross revenue for the fourth quarter of fiscal 2015 was $32.5 million compared with $8.7
million for the fourth quarter of fiscal 2014. Expenses for the fourth quarter of fiscal 2015 were $13.5 million compared to
$6.5 million for the fourth quarter of fiscal 2014.
Gross revenue for the fourth quarter of fiscal 2015 comprised $2.6 million of net investment gains, $20.9 million of
distribution and interest income, $8.5 million of net carried interest income and $0.5 million in other income. This
compares with net investment gains of $2.8 million, $3.8 million of distribution and interest income, $1.6 million of net
carried interest income and $0.5 million in other income for the fourth quarter of fiscal 2014.
The net investment gains of $2.6 million resulted from net unrealized gains in valuing Clairvest’s acquisition
entities. Also during the quarter ended March 31, 2015, Clairvest received $16.6 million in distributions from its acquisition
entities.
Also included in distributions and interest income for the quarter was yield on treasury funds of $1.3 million and
general partner distributions earned from the CEP Funds of $1.7 million, distributions received from Wellington Fund IV of
$0.7 million and interest income earned from loans advanced to the CEP funds of $0.5 million.
For the fourth quarter of fiscal 2014, net investment gains of $2.8 million resulted from net unrealized gains in
valuing Clairvest’s acquisition entities and distributions and interest income of $3.8 million included yield on treasury funds
9
MANAGEMENT’S DISCUSSION AND ANALYSIS
of $0.7 million, general partner distributions earned from the CEP Funds of $1.7 million and distributions received from
Wellington Fund IV of $0.9 million.
The net carried interest income of $8.5 million for the fourth quarter of fiscal 2015 comprised $8.3 million of
unrealized changes to carried interest payable by the CEP Funds and $0.2 million of realized carried interest from CEP. Net
carried interest income of $1.6 million for the fourth quarter of fiscal 2014 comprised unrealized changes to carried interest
payable by the CEP Funds. Net carried interest income from the CEP Funds is further described in the Transaction with
Related Parties section of the MD&A.
Clairvest earned $0.2 million in management fees during the quarter for its services in the administration of CEP
IV‐A and CEP V‐A's portfolio and $0.3 million in advisory and other fees from its investee companies, compared with $0.2
million and $0.3 million, respectively, for the same quarter last year.
Expenses for the fourth quarter of fiscal 2015 included $3.1 million of management and director compensation
expenses, $6.0 million of management participation, $1.2 million in administrative expenses, $0.2 million in finance and
foreign exchange expenses and $3.0 million in tax expense. This compares with $3.1 million of management and director
compensation expenses, $0.7 million of management participation, $1.6 million in administrative expenses, $0.1 million in
finance and foreign exchange expenses and $1.0 million in tax expense for the fourth quarter of fiscal 2014. Management
participation is further described in the Transaction with Related Parties section of the MD&A.
UPDATED SHARE INFORMATION
At March 31, 2015 and June 24, 2015, Clairvest had 15,134,095 common shares issued and outstanding. At March 31, 2015
and June 24, 2015, Clairvest had 555,000 stock options outstanding all of which were exercisable at March 31, 2015 and
June 24, 2015. Each option is exercisable for one common share.
During fiscal 2015 and up to June 24, 2015, Clairvest did not purchase or cancel any common shares under its
normal course issuer bids. As at June 24, 2015, Clairvest had repurchased a total of 6,595,049 common and non‐voting
shares for total consideration of $68.3 million over the last eleven years.
During fiscal 2015, 10,000 options 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 2015, fiscal 2014 and
fiscal 2013. During fiscal 2015, 2014 and 2013, Clairvest also paid a special dividend of $0.1492, $0.1312 and $0.1093 per
share respectively.
Subsequent to year end, Clairvest declared an annual ordinary dividend of $0.10 per share, and a special dividend
of $0.1958 per share, such that in aggregate, the dividends represent 1% of the March 31, 2015 book value. The dividends
will be payable to common shareholders of record as of July 8, 2015. The dividend will be paid on July 24, 2015. Both
dividends are eligible dividends for Canadian income tax purposes.
CRITICAL ACCOUNTING ESTIMATES
For a discussion of all significant accounting policies, refer to Note 2 of the notes to the consolidated financial statements.
Note 2[m] also includes a discussion of the Company’s critical accounting estimates for the fair values of the Company’s
financial instruments, the recognition of carried interest and corresponding expenses, and the determination of the
Company’s deferred taxes.
Fair value of financial instruments
When a financial asset or liability 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, 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 on sale or
transfer are recorded at amounts at fair values which take into account the escrow terms or other restrictions. In
10
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 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 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 market 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, for which the underlying security 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 estimate with respect to Clairvest’s privately‐held corporate investments or publicly‐traded
corporate investments would impact corporate investments and net investment gains.
Recognition of carried interest and corresponding expenses
The Company carries unrealized carried interest receivable on its consolidated statements of financial position which are
based on the fair values of the financial instruments held by the CEP Funds. As discussed previously, fair values of certain
financial instruments are determined using valuation techniques and by their nature, the use of estimates and assumptions.
Changes in the underlying estimates and assumptions could materially impact the determination of the fair value of these
financial instruments. Imprecision in determining fair value using valuation techniques may affect the calculation of
unrealized carried interest receivable and the resulting accrued liabilities for future payouts relating to these unrealized
carried interest at the statement of financial position date.
Deferred taxes
The process of determining deferred 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 carryforwards. Deferred income tax assets are only recognized to the extent that in
the opinion of management, it is more likely than not that the deferred income tax asset will be realized. A change to an
accounting estimate with respect to deferred income taxes would impact deferred tax liability and income tax expense.
ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
Clairvest adopted IFRS effective fiscal 2015, which began on April 1, 2014. The consolidated financial statements as at and
for the year ended March 31, 2015 were the first Clairvest has prepared in accordance with IFRS 10, "Consolidated Financial
11
MANAGEMENT’S DISCUSSION AND ANALYSIS
Statements", as issued by the International Accounting Standards Board. The adoption of IFRS has not had an impact on the
Company’s operations, strategic decisions and cash flow. The Company’s IFRS accounting policies are provided in Note 2 to
the consolidated financial statements. In addition, Note 3 to the consolidated financial statements presents reconciliations
between the Company’s 2014 Canadian GAAP results and the 2014 IFRS results and explanations of the adjustments to
transition to IFRS. The reconciliations include the consolidated comprehensive income and consolidated cash flows for the
year ended March 31, 2014 as well as a reconciliation of the statement of financial position as at March 31, 2014 and April
1, 2013.
The significant adjustments resulting from the Company’s transition from Canadian GAAP to IFRS are as follows:
Consolidated financial statements
Corporate investments reported under IFRS will generally be higher than under Canadian GAAP due to the requirement
under IFRS for investment entities to fair value their subsidiaries other than those that provide investment‐related services
["acquisition entities"] as described in Note 2 to the consolidated financial statements. As a result of this change, assets and
liabilities which are held by these acquisition entities and which were previously presented as separate statement of
financial position items are now included in the determination of fair value of the Company’s corporate investments. The
Company is also required to record as a liability any entitlements of limited partners of a partnership where the limited
partners are not part of the consolidated group of the Company but where the partnership is required to be consolidated
by the Company. The resulting changes are reclassifications among various line items of the consolidated statements of
financial position and consolidated statements of comprehensive income as disclosed in Note 3 to the consolidated
financial statements with no impact to retained earnings and net income.
Unrealized carried interest and corresponding management bonuses
Under IAS 18 "Revenue", the Company has chosen to recognize unrealized carried interest income receivable from the CEP
Funds. A corresponding accrued liability for management bonus resulting from unrealized carried interest would be
recognized in accordance with IAS 19 "Employee Benefits". The resulting changes, applied retrospectively to the
consolidated statements of financial position, were a $14.4 million increase to retained earnings at April 1, 2013 and a
further $8.0 million after‐tax increase to net income for the year ended March 31, 2014.
Unrealized carried interest and management participation
As previously discussed, the Company is required to record as a liability any entitlements of limited partners of a
partnership where the limited partners are not part of the consolidated group of the Company but where the partnership is
required to be consolidated by the Company. Accordingly, the Company has chosen to recognize that portion of the
unrealized carried interest from the CEP Funds which are not ultimately payable to Clairvest and in accordance with IAS 32
"Financial Instruments: Presentation" and a corresponding liability ["management participation"] is recorded on the
entitlements of the limited partners of MIP III, MIP IV and MIP V, the limited partners of which are principals and employees
of Clairvest. The resulting changes do not impact retained earnings and net income.
Alternative and policy choices under IFRS
The Company has applied the provisions of IFRS 1, "First‐time Adoption of International Financial Reporting Standards"
["IFRS 1"], in its consolidated financial statements. IFRS 1 also provides for certain voluntary exemptions and certain
mandatory exceptions from full retrospective application. The only voluntary exemption adopted by the Company upon
transition was the ability to designate a financial asset or financial liability at fair value through profit or loss ["FVTPL"] upon
transition to IFRS. Accordingly, all of the Company's financial assets have been designated at FVTPL upon transition, all of
which had previously been carried at fair value under Canadian GAAP.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
TRANSACTIONS WITH RELATED PARTIES
The general partner of CEP ["CEP GP"], an entity which is controlled by Clairvest, is entitled to participate in distributions
made by CEP equal to 20% of net gains ["carried interest"] of CEP as governed by its limited partnership agreement. 10% of
the carried interest is allocated to Clairvest and the remaining 10% is allocated to principals and employees of Clairvest via a
limited partnership ["Participation Partnership"], the general partner of which is Clairvest and the limited partners are
principals and employees of Clairvest. The limited partners of Participation Partnership have purchased, at fair market
value, units of the Participation Partnership. From time to time, additional units in Participation Partnership may be
purchased by the limited partners of Participation Partnership. At March 31, 2015, CEP had declared and paid distributions
to CEP GP totaling $23.3 million, 50% of which or $11.6 million was ultimately paid to Clairvest and 50% or $11.6 million
was ultimately paid to the limited partners of Participation Partnership.
At March 31, 2015, if CEP were to sell all of its corporate investments at their current fair values, CEP GP would
receive up to $1.8 million in carried interest from CEP. In accordance with IFRS, Clairvest has recorded the $1.8 million as
carried interest receivable on the consolidated statements of financial position, with the 50% entitlement that will be
ultimately paid to the limited partners of Participation Partnership, or $0.9 million recorded as a management participation
liability on the consolidated statements of financial position.
As a 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 2015, CEP III declared to Clairvest priority distributions of $1.4 million. As per the Limited Partnership
Agreement, fees of $0.2 million from corporate investments of CEP III were netted against the priority distributions.
The general partners of CEP III ["CEP III GPs"] are entitled to a 20% carried interest in respect of CEP III as governed
by its limited partnership agreement. 10% of the carried interest is allocated to Clairvest and the remaining 10% is allocated
to MIP III, the general partner of which is Clairvest and the limited partners of which are principals and employees of
Clairvest. The limited partners of MIP III have purchased, at fair market value, units of the MIP III. From time to time,
additional units in MIP III may be purchased by the limited partners of MIP III. At March 31, 2015, CEP III had declared and
paid distributions to CEP III GP totaling $33.3 million, 50% of which, or $16.6 million, was ultimately paid to Clairvest and
50% or $16.6 million was ultimately paid to the limited partners of MIP III.
At March 31, 2015, if CEP III were to sell all of its corporate investments at their current fair values, CEP III GPs
would receive up to $21.9 million in carried interest from CEP III. In accordance with IFRS, Clairvest has recorded the $21.9
million as carried interest receivable on the consolidated statements of financial position, with the 50% entitlement that
will be ultimately paid to the limited partners of MIP III, or $11.0 million recorded as a management participation liability on
the consolidated statements of financial position.
Clairvest is required to co‐invest alongside CEP III in all investments undertaken by CEP III. CEP III Co‐Invest was
established in fiscal 2007 as the investment vehicle for this purpose. CEP III Co‐Invest has three limited partners, Clairvest,
2141788 Ontario and MIP III. MIP III 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 via the general partner of CEP III Co‐Invest, an entity controlled by Clairvest. At March 31,
2015, CEP III Co‐Invest had declared and paid distributions totaling $4.1 million to MIP III.
Clairvest, as the general partner of MIP III, is entitled to participate in distributions equal to the realizable value on
the $1.1 million invested by MIP III in CEP III Co‐Invest plus the first $0.2 million in distributions received by the MIP III as
described above, and any other distributions to MIP III are the entitlements of the limited partners of MIP III. At March 31,
2015, $2.0 million has been received by Clairvest.
At March 31, 2015, if CEP III Co‐Invest were to sell its corporate investments at their current fair values, the limited
partners of MIP III 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 management participation liability on the consolidated statements of
financial position.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
As general partner of CEP IV, Clairvest is entitled to a priority distribution from CEP IV. Effective January 14, 2011 and to the
date upon which consideration based on committed capital is payable in respect of CEP V [the "CEP IV Investment
Termination Date"], the priority distribution is calculated monthly as 0.1667% per annum of committed capital, and
thereafter, 0.1667% per annum 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. As at March 31, 2015,
the CEP IV Investment Termination Date has not been determined. During fiscal 2015, CEP IV declared to Clairvest priority
distributions of $5.4 million. As per the Limited Partnership Agreement, fees of $0.5 million from corporate investments of
CEP IV were netted against the priority distributions.
The general partners of CEP IV ["CEP IV GPs"] are entitled to a 20% carried interest in respect of CEP IV as governed
by its limited partnership agreement. 10% of the carried interest is allocated to Clairvest and the remaining 10% is allocated
to MIP IV, the general partner of which is Clairvest and the limited partners of which are principals and employees of
Clairvest. The limited partners of MIP IV have purchased, at fair market value, units of the MIP IV. From time to time,
additional units in MIP IV may be purchased by the limited partners of MIP IV. No carried interest has been declared and
paid by CEP IV to CEP IV GP as at March 31, 2015.
At March 31, 2015, if CEP IV were to sell all of its corporate investments at their current fair values, CEP IV GPs
would receive up to $24.6 million in carried interest from CEP IV. In accordance with IFRS, Clairvest has recorded the $24.6
million as carried interest receivable on the consolidated statements of financial position, with the 50% entitlement that
will be ultimately paid to the limited partners of MIP IV, or $12.3 million recorded as a management participation liability
on the consolidated statements of financial position.
As manager of CEP IV‐A, Clairvest is entitled to a management fee from CEP IV‐A. Effective January 14, 2011 and to
the date upon which consideration based on committed capital is payable in respect of CEP V‐A [the "CEP IV‐A Investment
Termination Date"], the 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. As at March 31, 2015, the CEP IV Investment Termination Date has not been determined. During fiscal 2015,
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.
The general partner of CEP IV‐A ["CEP IV‐A GP"], an entity which is controlled by Clairvest, is entitled to a 20%
carried interest in respect of CEP IV‐A as governed by its limited partnership agreement. 10% of the carried interest is
allocated to Clairvest and the remaining 10% is allocated to MIP IV. No carried interest has been declared and paid by CEP
IV‐A to CEP IV‐A GP as at March 31, 2015.
At March 31, 2015, if CEP IV‐A were to sell all of its corporate investments at their current fair values, CEP IV‐A GP
would receive up to $5.4 million in carried interest from CEP IV‐A. In accordance with IFRS, Clairvest has recorded the $5.4
million as carried interest receivable on the consolidated statements of financial position, with the 50% entitlement that
will be ultimately paid to the limited partners of MIP IV, or $2.7 million recorded as a management participation liability on
the consolidated statements of financial position.
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‐Invest was established in fiscal 2010 as the investment vehicle for this purpose. CEP IV Co‐Invest has two
limited partnerships, Clairvest and MIP IV. MIP IV 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 via the general partner of CEP IV Co‐Invest, an entity controlled by Clairvest.
Clairvest, as general partner of MIP IV, is entitled to participate in distributions equal to the realizable value on the
$1.6 million invested by MIP IV in CEP IV Co‐Invest plus the first $0.4 million received by MIP IV as described above, and any
other distributions to MIP IV are the entitlements of the limited partners of MIP IV. No amounts have been received by
Clairvest at March 31, 2015.
At March 31, 2015, if CEP IV Co‐Invest were to sell all of its corporate investments at their current fair values, MIP
IV would receive up to $6.2 million in carried interest from CEP IV Co‐Invest based on the terms described above, the
14
MANAGEMENT’S DISCUSSION AND ANALYSIS
amount of which has been recorded as a management participation liability on the statements of financial position. To
date, CEP IV Co‐Invest has not made any carried interest payments to MIP IV.
As general partner of CEP V, Clairvest is entitled to a priority distribution from CEP V. The priority distribution
calculated as follows: [i] from March 2, 2015 to the CEP IV Investment Termination Date, 0.1667% per annum on capital
allocated to specifically identifiable investments net of any write‐downs of capital invested; [ii] from the CEP IV Investment
Termination Date to the fifth anniversary of the CEP IV Investment Termination Date, 0.1667% per annum of committed
capital; and [iii] thereafter, 0.1667% per annum of invested capital net of write‐downs of capital then invested. As at March
31, 2015, the CEP IV Investment Termination Date has not been determined. During fiscal 2015, CEP V declared to Clairvest
priority distributions of $30 thousand.
The general partners of CEP V ["CEP V GPs"] are entitled to a 20% carried interest in respect of CEP V as governed
by its limited partnership agreement. 10% of the carried interest is allocated to Clairvest and the remaining 10% is allocated
to MIP V, the general partner of which is Clairvest and the limited partners of which are principals and employees of
Clairvest. The limited partners of MIP V have purchased, at fair market value, units of the MIP V. From time to time,
additional units in MIP V may be purchased by the limited partners of MIP V. No carried interest has been declared and
paid by CEP V to CEP V GP as at March 31, 2015.
As manager of CEP V‐A, Clairvest is entitled to a management fee from CEP V‐A. The management fee calculated as
follows: [i] from March 2, 2015 to the CEP IV‐A Investment Termination Date, 0.1667% per annum on capital allocated to
specifically identifiable investments net of any write‐downs of capital invested; [ii] from the CEP IV‐A Investment
Termination Date to the fifth anniversary of the CEP IV‐A Investment Termination Date, 0.1667% per annum of committed
capital; and [iii] thereafter, 0.1667% per annum of invested capital net of write‐downs of capital then invested. As at March
31, 2015, the CEP V‐A Investment Termination Date has not been determined. During fiscal 2015, Clairvest earned
management fees of $6 thousand as compensation for its services in the administration of the portfolio of CEP V‐A.
The general partner of CEP V‐A ["CEP V‐A GP"], an entity which is controlled by Clairvest, are entitled to a 20%
carried interest in respect of CEP V‐A as governed by its limited partnership agreement. 10% of the carried interest is
allocated to Clairvest and the remaining 10% is allocated to MIP V. No carried interest has been declared and paid by CEP
V‐A to CEP V‐A GP as at March 31, 2015.
Clairvest is required to co‐invest alongside CEP V and CEP V‐A in all investments undertaken by CEP V and CEP V‐A.
CEP V Co‐Investment Limited Partnership ["CEP V Co‐Invest"] was established in fiscal 2015 as an investment vehicle for this
purpose. CEP V Co‐Invest has three limited partners, Clairvest, 2141788 Ontario and MIP V. MIP V has invested $2.4 million
in CEP V Co‐Invest and is entitled to an 8.25% carried interest in respect of CEP V Co‐Invest via the general partner of CEP IV
Co‐Invest, an entity controlled by Clairvest.
Clairvest, as the general partner of MIP V, is entitled to participate in distributions equal to the realizable value on
the $2.4 million invested by MIP V in CEP IV Co‐Invest plus the first $1.4 million received by MIP V as described above, and
any other distributions to MIP V are the entitlements of the limited partners of MIP V. No amounts have been received by
Clairvest at March 31, 2015.
Key management at Clairvest are the Co‐Chief Executive Officers ["Co‐CEOs"] and its directors. The Co‐CEOs are
entitled to annual discretionary cash bonuses of up to 175% of their individual annual salary based on individual
performance. There is also an annual objective cash bonus which is based on Clairvest’s Incentive Bonus Program, a stock
option plan and a book value appreciation rights plan. Annual salaries and compensation under these plans paid to the co‐
CEOs during fiscal 2015 was $3.9 million. At March 31, 2015, the total amounts payable to the co‐CEOs under the
aforementioned plans was $11.8 million. Compensation paid to the directors of Clairvest under its Deferred Share Units
Plan and its Appreciation Deferred Share Units Plan during fiscal 2015 was $0.4 million. At March 31, 2015, the total
amounts payable to the directors of Clairvest under the aforementioned plans was $8.1 million.
At March 31, 2015, Clairvest had loans receivable from certain officers of Clairvest [the "Officers"] totaling $2.2
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 $3.2 million. None of these loans were made to key management. At
15
MANAGEMENT’S DISCUSSION AND ANALYSIS
March 31, 2015, Clairvest also had loans receivable from certain officers of a company affiliated with Clairvest totaling $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 $54 thousand was earned on these loans during fiscal 2015.
At March 31, 2014, the Company had advanced to CEP III $15.6 million in loans bearing interest at the prime rate
in accordance with CEP III’s Limited Partnership Agreement. During fiscal 2015, additional loans totaling $2.5 million were
made by the Company to CEP III. Also during fiscal 2015, $15.6 million of these loans were repaid and the remaining $2.5
million were transferred to an acquisition entity of Clairvest. Interest of $0.1 million was earned from loans to CEP III during
fiscal 2015.
At March 31, 2014, the Company had advanced to CEP IV $8.7 million in loans bearing interest at the Reference
Rate in accordance with CEP IV’s Limited Partnership Agreement. During fiscal 2015, additional loans totaling $24.5 million
were made by the Company to CEP IV. Also during fiscal 2015, $25.8 million of these loans were repaid and a further $4.0
million were transferred to an acquisition entity of Clairvest such that $3.4 million remained outstanding at March 31, 2015.
Interest of $0.7 million was earned from loans to CEP IV during fiscal 2015.
At March 31, 2014, the Company had advanced to CEP IV‐A $0.8 million in loans bearing interest at the Reference
Rate in accordance with CEP IV‐A’s Limited Partnership Agreement. During fiscal 2015, additional loans totaling $3.8 million
were made by the Company to CEP IV‐A. Also during fiscal 2015, $4.0 million of these loans were repaid such that $0.6
million remained outstanding at March 31, 2015. Interest of $0.1 million was earned from loans to CEP IV‐A during fiscal
2015.
At March 31, 2014, the Company had advanced to CEP IV Co‐Invest $3.7 million in non‐bearing interest loans.
During fiscal 2015, additional loans totaling $19.8 million were made by the Company to CEP IV Co‐Invest. Also during fiscal
2015, $18.8 million of these loans were repaid such that $4.7 million remained outstanding at March 31, 2015. Subsequent
to year end, an additional $0.5 million of these loans were repaid.
During fiscal 2015, the Company had advanced to CEP V $18.9 million in loans bearing interest at the Reference
Rate in accordance with CEP V’s Limited Partnership Agreement. These loans were repaid in full during fiscal 2015. Interest
of $0.1 million was earned from loans to CEP V during fiscal 2015.
During fiscal 2015, the Company had advanced to CEP V‐A $3.6 million in loans bearing interest at the Reference
Rate in accordance with CEP V‐A’s Limited Partnership Agreement. These loans were repaid in full during fiscal 2015.
Interest of $12 thousand was earned from loans to CEP V‐A during fiscal 2015.
At March 31, 2014, the Company had advanced to 2141788 Ontario $1.0 million in non‐bearing interest loans
which were repaid in full during fiscal 2015.
During fiscal 2015, the Company had advanced to an acquisition entity of a co‐investor of Discovery Air Inc. $2.0
million in non‐interest bearing loans which were repaid in full during the year.
During fiscal 2015, MIP V advanced $2.4 million in non‐interest bearing loans to Clairvest which were repaid in full
during the year.
At March 31, 2014, the CEP III Co‐Invest had advanced $0.2 million in non‐interest bearing loans to Clairvest.
During fiscal 2015, the Clairvest received additional loans of $17.5 million. All loans advanced by CEP III Co‐Invest to
Clairvest were repaid in full during the year.
During fiscal 2015, Clairvest earned $2.3 million in distributions and interest income and $1.3 million in advisory
and other fees from its indirect investee companies. Additionally, acquisition entities of Clairvest which were not
consolidated in accordance with IFRS earned $8.5 million in distributions and interest income, $1.0 million in dividend
income and $0.5 million in advisory and other fees from its investee companies.
At March 31, 2015, Clairvest had accounts receivable from its direct and indirect investee companies totaling $2.9
million, from CEP totaling $3 thousand, from CEP III totaling $1.0 million, from CEP IV totaling $6.2 million, from CEP IV‐A
totaling $0.3 million, from CEP V totaling $1.1 million and from CEP V‐A totaling $0.2 million. Additionally, acquisition
entities of Clairvest which were not consolidated in accordance with IFRS held receivables from Clairvest’s investee
companies totaling $1.2 million.
16
MANAGEMENT’S DISCUSSION AND ANALYSIS
Clairvest has a 50% ownership in an aircraft where the other 50% ownership is held by a related party of Clairvest. Clairvest
received 100% of the incidental rental income of the aircraft and is responsible for 100% of the operating expenses. In
accordance with IFRS, Clairvest has recognized 100% of the net book value of the aircraft and a liability for the 50%
ownership the Company does not own.
OFF‐STATEMENT OF FINACIAL POSITION 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, 2015. 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.
CEP III Co‐Invest has committed to co‐invest alongside CEP III in all investments undertaken by CEP III. CEP III Co‐
Invest's co‐investment commitment is $75.0 million, $15.2 million of which remains unfunded at March 31, 2015. In
accordance with the co‐investment agreement, the proportion of the commitment amongst Clairvest, 2141788 Ontario and
MIP III is at their own discretion. CEP III Co‐Invest 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.
CEP IV Co‐Invest has committed to co‐invest alongside CEP IV and CEP IV‐A in all investments undertaken by CEP IV
and CEP IV‐A. CEP IV's total co‐investment commitment is $125.0 million, $36.8 million of which remains unfunded at
March 31, 2015. In accordance with the co‐investment agreement, the proportion of the commitment between Clairvest
and MIP IV is at their own discretion. CEP IV Co‐Invest 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.
CEP V Co‐Invest has committed to co‐invest alongside CEP V and CEP V‐A in all investments undertaken by CEP V
and CEP V‐A. CEP V Co‐Invest's co‐investment commitment is $180.0 million, $169.9 million of which remains unfunded at
March 31, 2015. In accordance with the co‐investment agreement, the proportion of the commitment between Clairvest,
2141788 Ontario and MIP V is at their own discretion. CEP V Co‐Invest may only sell all or a portion of a corporate
investment that is a joint investment with CEP V and CEP V‐A if it concurrently sells a proportionate number of securities of
that corporate investment held by CEP V and CEP V‐A.
Clairvest has also committed $25.2 million to Wellington Fund IV, $10.8 million of which remains unfunded at
March 31, 2015.
At March 31, 2015, Clairvest has earned profit distributions totaling $4.6 million through its ownership interest in
the General Partners of Wellington Financial Fund III ["Wellington Fund III"] and Wellington Fund IV. Subject to the
clawback provisions, Clairvest may be required to repay up to $1.1 million of these distributions in the event the limited
partners of Wellington Fund IV do not meet their return threshold as specified in the respective Limited Partnership
Agreements. At March 31, 2015, there were no accruals made with respect to the clawback.
Clairvest had 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. The guarantee was reduced to US$10.0 million during
fiscal 2015.
Under Clairvest's Incentive Bonus Program [the "Bonus 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 [the
"Realized Amount"]. At March 31, 2015, the Realized Amount under the Bonus Program was $1.4 million and has been
accrued under the Bonus Program. In accordance with IFRS, Clairvest is also required to record a liability equal to a bonus of
10% of the after‐tax cash income and realizations which are applicable but which have yet to be realized. Accordingly,
Clairvest also recorded a $2.8 million accrued compensation expense liability that would only be payable to management
when the corresponding realization events have occurred. The Bonus Program does not apply to the income generated
from investments made by Clairvest through CEP III Co‐Invest, CEP IV Co‐Invest and CEP V Co‐Invest.
17
MANAGEMENT’S DISCUSSION AND ANALYSIS
Clairvest has guaranteed to fund any cash flow or debt service shortfalls of Casino New Brunswick for a specified period of
time. The amount of the guarantee is allocated, at Clairvest’s discretion, 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 CEP III
Co‐Invest. Any amounts paid under the guarantee will result in additional Casino New Brunswick debentures being granted
to CEP III Co‐Invest and CEP III, allocated on the same basis as the participation between CEP III Co‐Invest and CEP III in the
guarantee funding. As at March 31, 2015, no amounts subject to this guarantee have been funded.
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. Casino Sol Calama's operator has indemnified this acquisition entity with respect to this guarantee. As at March 31,
2015, no amounts subject to this guarantee have been funded or are owing.
As part of the holding structure of Chilean Gaming Holdings, an acquisition entity of CEP III Co‐Invest had loans
totaling $40.7 million at March 31, 2015 through various acquisition entities from an unrelated financial institution, while
another acquisition entity of CEP III Co‐Invest held term deposits totaling $40.7 million at March 31, 2015 with the same
financial institution as security for these loans. CEP III Co‐Invest’s ownership of both acquisition entities was 36.8% at March
31, 2015.
At March 31, 2015, the Company’s had future minimum annual lease payments under non‐cancellable operating
leases for the use of office space of $0.3 million due within one year and $1.7 million due after one year but not more than
five years.
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.
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 year ended March 31, 2015, there were no material income effects on changes of credit risk on financial assets. 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 indirect 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 its indirect investee companies regularly.
The Company is also subject to credit risk on its accounts receivable and loans receivables, a significant portion of
which is with its indirect investee companies and its CEP Funds. The Company manages this risk through its oversight
responsibilities with existing investee companies by reviewing financial conditions of its indirect 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 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
18
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 $1.4 million
to distributions and interest income on a pre‐tax basis for the year ended March 31, 2015.
Included in corporate investments are indirect investee companies 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 before interest, taxes, depreciation and amortization ["EBITDA"] used for each individual investee
company. 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 directly or indirectly 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. Twelve indirect investee companies are valued using the earnings multiple
approach. If the Company had used an earnings multiple for each investee company that was higher or lower by 0.5 times,
the potential effect would be an increase of $23.9 million or a decrease of $27.4 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, 2015. Earnings multiples used are based on public company valuations as well as private market multiples for
comparable companies.
Clairvest may also use information about recent transactions carried out in the market for valuations of private
equity investments when this value is the most representative indication of fair value. The fair value of corproate bonds,
debentures or loans is primarily determined using discounted cash flow technique which uses observable and unobservable
inputs such as discount rates that take into account the risk associated with the investment as well as future cash flows.
For those investments valued based on recent transacations or discounted cash flows, Clairvest has determined there are
no alternative assumptions that would change the fair value significantly at March 31, 2015.
The Company's corporate investment portfolio is diversified across 18 indirect investee companies in 9 industries
and 3 countries as at March 31, 2015. 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. The Company has also advanced loans to indirect investee
companies which are denominated in foreign currency. In order to limit its exposure to changes in the value of foreign
denominated currencies relative to the Canadian dollar, at March 31, 2015, Clairvest and its acquisition entities hedge 100%
of the fair value of its foreign investments and loans 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
19
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‐statement of financial position arrangements have been previously discussed. Accounts
payable, loans payable, and derivative instruments have maturities of less than one year. Management participation
liability, share‐based compensation liability, and amounts accrued under the Bonus Program are only due upon cash
realization or completion of the respective vesting period. Total unfunded commitments to co‐invest alongside the CEP
Funds are $224.5 million at March 31, 2015. The timing of any amounts to be funded under these commitments is
dependent upon the timing of investment acquisitions, which are made at the sole discretion of the Company.
The Company manages liquidity risk by maintaining a conservative liquidity position that exceeds all liabilities
payable on demand. The Company invests its cash, cash equivalents and temporary investments [together, "treasury
funds"] in liquid assets such that they are available to cover any potential funding commitments and guarantees. In
addition, the Company maintains various credit facilities.
At March 31, 2015, Clairvest had treasury funds of $157.2 million and access to $95.0 million through its credit
facilities to support its obligations and current and anticipated corporate investments. Included in corporate investments at
March 31, 2015 was $30.9 million of treasury funds held by acquisition entities of Clairvest. Clairvest also had $552.3 million
of uncalled committed third‐party capital through the CEP Funds at March 31, 2015 to invest along with Clairvest's capital.
DERIVATIVE FINANCIAL INSTRUMENTS
Clairvest and its acquisition entities enter into foreign exchange forward contracts primarily to manage the risks arising
from fluctuations in exchange rates on its foreign denominated investments and loans. Clairvest is required to mark to
market its foreign‐denominated investments, as well as the foreign exchange forward contracts entered into as economic
hedges against Clairvest's foreign denominated investments. During fiscal 2015, the Company realized a $1.0 million loss on
expired foreign exchange forward contracts, which has been recorded in finance and foreign exchange expense in the
consolidated statements of comprehensive income.
At March 31, 2015, Clairvest had entered into foreign exchange forward contracts to sell US$28.9 million at an
average rate of Canadian $1.1175 per U.S. dollar through to August 2015. The fair value of the U.S. dollar contracts at
March 31, 2015 is a loss of $4.3 million. Additionally, acquisition entities of Clairvest had entered into foreign exchange
forward contracts to sell US$99.9 million and buy US$0.6 million at an average rate of Canadian $1.2010 per U.S. dollar
through to January 2016 and foreign exchange forward contracts to sell 14.7 billion Chilean Pesos ["CLP"] at an average rate
of Canadian $0.001909 per CLP through to January 2016. The fair value of the U.S. dollar contracts held by these acquisition
entities at March 31, 2015 is a loss of $6.8 million and the fair value of the CLP contracts at March 31, 2015 is a loss of $1.1
million. These contracts have been included in the fair value of Clairvest’s investments in these acquisition entities.
Included in cash and cash equivalents on the consolidated statements of financial position at March 31, 2015 was
$4.9 million Clairvest had funded to the counterparty as a collateral for its foreign exchange forward contracts and those of
its acquisition entities.
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, 2015 and concluded that the disclosure controls and procedures are effective in
20
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 IFRS. Management has evaluated Clairvest's
design and operational effectiveness of internal controls over financial reporting for the year ended March 31, 2015.
Management has concluded that the design of internal controls over financial reporting are effective and operating as
designed as of March 31, 2015 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.
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, including 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.
USE OF NON‐IFRS MEASURES
This MD&A contains references to "book value" and "book value per share" which are non‐IFRS financial measures. Book
value is calculated as the value of total assets less the value of total liabilities. Book value per share is calculated as book
value divided by the total number of common shares of the Company outstanding as at a specific date. The terms book
value and book value per share do not have any standardized meaning according to IFRS. There is no comparable IFRS
financial measure presented in the Company’s consolidated financial statements and thus no applicable quantitative
reconciliation for such non‐IFRS financial measure. The Company believes that the measure provides information useful to
its shareholders in understanding our performance, and may assist in the evaluation of the Company’s business relative to
that of its peers.
21
MANAGEMENT’S DISCUSSION AND ANALYSIS
SUPPLEMENTAL NON‐IFRS DISCLOSURES
As described in the Transition to IFRS and Critical Accounting Estimates section of the MD&A, Clairvest is required under
IFRS to fair value certain acquisition entities instead of recording its share of the assets, liabilities, revenues and expenses of
these entities. Clairvest is also required to recognize as revenue that portion of the carried interest from the CEP Funds
which are allocated to the principals and employees of Clairvest through various limited partnerships. In addition, Clairvest
is required to record as a liability any entitlements of limited partners of a partnership where the limited partners are not
part of the consolidated group of the Company but where the partnership is required to be consolidated by the Company.
Accordingly, that portion of the carried interest from the CEP Funds that is allocated to the limited partners of MIP III, MIP
IV and MIP V and the carried interest payable to these entities by partnerships which are consolidated by Clairvest
[collectively, the "Management Entitlements"] are recorded as an expense and a liability of the Company. The supplemental
non‐IFRS measures presented in this section are inclusive of the assets, liabilities, revenues and expenses of Clairvest’s
acquisition entities on a pro‐rata basis instead of accounting for them by assigning a fair value, and the Management
Entitlements are on a net basis such that only that portion of the carried interest from the CEP Funds being allocated to
Clairvest is reflected as a receivable and the carried interest payable by partnerships consolidated by Clairvest is netted
against the total fair value of corporate investments. The Company believes the supplemental Non‐IFRS measures provide
investors more insightful information regarding the Company’s financial position and operating performance and such
information is consistent with Management’s evaluation of the business.
22
MANAGEMENT’S DISCUSSION AND ANALYSIS
SUMMARY OF CLAIRVEST'S CORPORATE INVESTMENTS AT MARCH 31, 2015 [NON‐IFRS]
Investment
Industry
Segment
Geographic
Segment
Ownership
Percentage[20]
Cost of
Investment
[millions]
Net Cash
Investment
[millions][21]
Fair Value of
Investment
[millions][22]
Description of Business
INVESTMENTS MADE ALONGSIDE CLAIRVEST EQUITY PARTNERS
Grey Eagle Casino[1]
Gaming
Canada
Equity
participation
$ ─
$ [6.2]
$ 2.7
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.
INVESTMENTS MADE ALONGSIDE CLAIRVEST EQUITY PARTNERS III
Casino New Brunswick[2]
Gaming
Canada
22.5%
$ 9.8
$ 9.1
$ 8.3
Chilean Gaming
Holdings[3]
Gaming
Chile
36.8%
$ 28.7
$ 20.6
$ 34.7
Light Tower Rentals Inc.
["Light Tower Rentals"][4]
Equipment
Rental
Lyophilization Services of
New England Inc.
["LSNE"][5]
Contract
Manufacturing
United
States
United
States
6.7%
$ 2.4
$ [32.5]
$ 11.6
12.3%
$ 7.5
$ 7.5
$ 9.4
gaming
interest
entertainment
A
complex
located in Moncton, New Brunswick. CEP
III owns 67.5% of Casino New Brunswick.
An investment vehicle which holds an
equity
in various gaming
entertainment complexes in Chile. CEP
III owns 37.7% of Chilean Gaming
Holdings.
An oilfield equipment rental company
operating in major oil and gas drilling
basins in the United States. CEP III owns
20.0% of Light Tower Rentals.
A Manchester, New Hampshire based
contract manufacturing organization
focused on providing
lyophilization
services to biotech, pharmaceutical and
medical device manufacturers. CEP III
owns 36.8% of LSNE.
INVESTMENTS MADE ALONGSIDE CLAIRVEST EQUITY PARTNERS IV/CEP IV‐A
Centaur Gaming [6]
Gaming
United
States
Debt interest
with stapled
warrants
$ 14.6
$ 11.8
$ 50.4
Cieslok Media Ltd.
["Cieslok"][7]
Outdoor
Advertising
Canada
24.0%
$ 4.0
$ 4.0
$ 7.4
County Waste of
Virginia, LLC ["County
Waste"][8]
Waste
Management
United
States
12.5%
$ 6.7
$ 6.7
$ 8.2
CRS Contractors Rental
Supply Limited
Partnership ["CRS"][9]
Equipment
Rental
Canada
16.3%
$ 10.6
$ 9.7
$ 17.0
The owner and operator of the Hoosier
in Anderson,
Park Racing & Casino
Indiana and the Indiana Grand Casino
and Indiana Downs Racetrack ["Indiana
Grand Casino"] in Shelbyville, Indiana.
CEP IV and CEP IV‐A have debt interests
with stapled warrants.
A leading Canadian outdoor advertising
firm, operating predominantly
large
format digital and static billboards
throughout major cities in Canada. CEP
IV and CEP IV‐A own 56.7% and 9.0% of
Cieslok respectively.
solid waste
regional
A
management company based in West
Point, Virginia. CEP IV and CEP IV‐A own
29.5% and 4.7% of County Waste
respectively.
An Ontario based equipment rental
commercial,
provider
industrial and infrastracture sectors. CEP
IV and CEP IV‐A own 36.6% and 5.8% of
CRS respectively.
focused
private
on
[1]
[2]
[3]
[4]
[5]
[6]
[7]
[8]
[9]
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 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 3,985,604 common shares in Light Tower Rentals. Clairvest also holds US$7.5 millionin Light Tower Rentals corporate bonds in its treasury funds.
Clairvest owns 6,406,000 Series A 10% cumulative convertible preferred shares, 1,250,000 Series B 10% cumulative preferred shares and a US$0.4 million demand
promissory note in LSNE. Clairvest also advanced short‐term working capital loans totaling US$0.8 million to LSNE which are included in accounts receivable.
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 holds US$10.0 million in Centaur Gaming second lien secured loans in its treasury funds.
Clairvest owns 4,014,989 common shares in Cieslok.
Clairvest owns 6,482.28 Class B units in County Waste.
Clairvest owns 199,900 Class B and 10,572,805 Class C limited partnership units in CRS.
23
MANAGEMENT’S DISCUSSION AND ANALYSIS
Investment
Industry
Segment
Geographic
Segment
Ownership
Percentage[20]
Cost of
Investment
[millions]
Net Cash
Investment
[millions][21]
Fair Value of
Investment
[millions][22]
Description of Business
INVESTMENTS MADE ALONGSIDE CLAIRVEST EQUITY PARTNERS IV/CEP IV‐A
Davenport Land
Investments[10]
United
States
Other
18.7%
[Davenport
North] &
23.0%
[Davenport
South]
$ 3.1
$ 3.0
$ 3.5
Discovery Air Inc.
["Discovery Air"][11]
Specialty
Aviation
Canada
24.2% and
debt interest
$ 29.6
$ 27.9
$ 33.0
Linen King, LLC
["Linen King"][12]
Textile Rental
Service
United
States
21.7%
$ 2.5
$ 2.5
$ 0.8
Momentum Aviation
Group ["MAG"][13]
Specialty
Aviation
United
States
9.6%
$ 2.8
$ 2.8
$ 4.0
New Meadowlands
Racetrack LLC [the
"Meadowlands"][14]
Gaming
Rivers Casino [15]
Gaming
Winters Bros. Waste
Systems of CT, LLC
["Winters Bros. of CT"][16]
Waste
Management
United
States
United
States
United
States
$ 5.6
$ 5.2
$ 7.9
Debt interest
and equity
investment
rights
5.0%
$ 7.5
$ [12.3] $ 25.4
13.4%
$ 8.1
$ 8.1
$ 9.7
INVESTMENTS MADE ALONGSIDE CLAIRVEST EQUITY PARTNERS V/CEP V‐A
Winters Bros. Waste
Systems of Long Island
Holdings, LLC ["Winters
Bros. of LI"][17]
Waste
Management
United
States
14.0%
$ 7.2
$ 7.2
$ 9.7
STANDALONE INVESTMENTS
Wellington Financial
Fund IV ["Wellington
Fund IV"][18]
OTHER INVESTMENTS[19]
TOTAL INVESTMENTS
Financial
Services
Canada
12.6%
$ 14.4
$ 10.4
$ 18.1
$ 1.6
$ 166.7
$ 1.6
$ 87.1
$ [9.3]
$ 252.5
specialty aviation
Comprised of two entities
["Davenport
North" and "Davenport South"] holding real
estate surrounding a casino development in
Davenport, Iowa. CEP IV and CEP IV‐A own
44.1% and 7.0% of Davenport North and
54.3% and 8.5% of Davenport South
respectively.
A
services business
operating across Canada and in selected
locations internationally. CEP IV and CEP IV‐
A have debt interest and own 30.4% and
4.9% of 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
and
speciality
intelligence, surveillance and reconnaissance
service provider. CEP IV and CEP IV‐A have
Class A stock convertible to 22.6% and 3.6%
interest respectively.
Operates
premier
standardbred horse racing track located in
East Rutherford, New Jersey. CEP IV and CEP
interests and equity
IV‐A have debt
investment rights.
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.
A regional solid waste collection, recycling
and disposal company based in Danbury,
Connecticut. CEP IV and CEP IV‐A own 31.6%
and 5.0% of Winters Bros. of CT respectively.
America’s
aviation
North
A private regional solid waste management
company based in Long Island, New York.
CEP V and CEP V‐A own 27.5% and 5.2% of
Winters Bros. of LI respectively.
Provides debt capital and operating lines to
technology, biotechnology, communications
and industrial product companies in Canada
and the United States.
[10]
[11]
[12]
[13]
[14]
[15]
[16]
[17]
[18]
[19]
[20]
[21]
[22]
Clairvest owns 1,408.81 units in Davenport North and 1,298.21 units in Davenport South.
Clairvest owns 19,809,915 common shares and invested $22.0 million in Discovery Air convertible debentures with a stated interest rate of 10% per annum.
Clairvest owns 2,529,209 Class A units of Linen King.
Clairvest owns 26,499 Class A stock in MAG.
Clairvest invested US$5.4 million in the Meadowlands by way of secured convertible debentures with a stated interest rate of 15% per annum. Clairvest also holds
warrants which entitle it to invest in equity securities subject to certain conditions.
Clairvest owns 9,021,917 units in Rivers Casino. Cost of investment and net cash investment [proceeds] exclude the $1.6 million which were funded by MIP IV as
described in note 5[f] to the consolidated financial statements.
Clairvest owns 76,284.8 Class C units of Winters Bros. of CT.
Clairvest owns 1,398,507 Class C units in Winters Bros. of LI. Cost of investment and net cash investment [proceeds] exclude the $2.4 million which were funded by MIP
V as described in note 5[i] to the consolidated financiual statements.
Clairvest has committed to fund $25.2 million to Wellington Fund IV, $14.4 million of which had been funded at March 31, 2015. The net cash investment is reduced by
$3.3 million as a result of income distributions received to date.
Other investments include the fair values attributable to limited partners of MIP III, MIP IV and MIP V as described in note 5[c], 5[f] and 5[i] to the consolidated financial
statements.
Ownership percentage calculated on a fully diluted basis at March 31, 2015.
Net cash investment [proceeds] comprised 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 economic 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 economic hedges against Clairvest's foreign denominated investments is not included
in this fair value.
24
MANAGEMENT’S DISCUSSION AND ANALYSIS
FINANCIAL HIGHLIGHTS [NON‐IFRS]
Financial Performance Measures
Year ended March 31, [$000's, except per share amounts]
2015
2014
Net realized gains [losses] on corporate investments
$ 31,302
$ [25]
Net changes in unrealized gains on corporate investments
Net carried interest income
Other income
Total expenses
Net income before tax
Income taxes
Net income
Basic net income per share
Fully diluted net income per share
Dividends declared per share
Financial Condition Measures
As at March 31, [$000's, except number of shares and per share amounts]
2015
Total assets
Total cash, cash equivalents and temporary investments
Unrealized carried interest from the CEP Funds
Corporate investments, at fair value
Total liabilities
Book value
Common shares outstanding
Book value per share
507,017
188,061
26,869
252,472
59,323
447,694
19,908
15,786
24,318
30,231
61,083
9,078
52,005
3.43
3.43
0.2492
2014
439,961
115,786
28,185
241,066
40,501
399,460
27,581
10,124
27,174
20,018
44,836
6,029
38,807
2.56
2.56
0.2312
2013
397,298
174,513
18,362
176,390
33,359
363,939
15,134,095
15,134,095
15,124,095
29.58
26.39
24.06
Financial Performance Highlights
Clairvest's operating results reflect revenue earned from its corporate investments and cash, cash equivalents and
temporary investments and realized gains 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, 2015 was $52.0 million, versus $38.8 million for the year ended March
31, 2014.
Net realized gains on corporate investments for the year ended March 31, 2015 comprised primarily of a $14.4
million net realized gain on the sale of Kubra and a $16.9 million net realized gain on the partial redemptions from Light
Tower Rentals. Previously recognized net unrealized gains of these investments are reversed and netted against net
realized gains.
Net changes in unrealized gains on corporate investments result from changes in the fair value of the investments
from one quarter to the next and do not reflect foreign exchange revaluations. Clairvest has implemented a foreign
exchange 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
25
MANAGEMENT’S DISCUSSION AND ANALYSIS
Board of Directors. The net changes in unrealized gains or losses on corporate investments for the years ended March 31,
presented on a non‐IFRS basis, are summarized as follows:
Net changes in unrealized gains [losses] on investments [Non‐IFRS]
Year ended March 31, [$000's]
Casino New Brunswick
Centaur Gaming
Cieslok
Chilean Gaming Holdings
CRS
Discovery Air
Grey Eagle Casino
Kubra[1]
Light Tower Rentals[2]
Linen King
LSNE
MAG
N‐Brook[3]
Rivers Casino
Wellington Fund III / IV
Winters Bros. of LI[4]
2015
2014
$ 3,917
5,270
$ 1,958
18,714
3,396
4,915
4,480
[3,008]
579
—
50
—
—
306
—
538
1,954
2,400
—
[7,554]
1,931
—
[301]
8,530
9,010
[141]
[130]
241
297
[959]
[972]
—
Other investments and MIP entitlements[5]
$ 24,797
$ 30,624
$ [4,889]
$ [3,043]
Net changes in unrealized gains on corporate investments [Non‐IFRS]
$ 19,908
$ 27,581
Light Tower Rentals was partially realized during fiscal 2015 as described below.
[1] Kubra was realized during fiscal 2015 as described below.
[2]
[3] N‐Brook was realized during fiscal 2014.
[4] The net changes in unrealized gains for Winters Bros. of LI was the result of Clairvest’s entitlement to MIP V’s investment as described in note 5[i] to
[5]
the consolidated financial statements.
Includes fair value attributable to limited partners of MIP III, MIP IV and MIP V as described in note 5[c], 5[f] and 5[i] to the consolidated financial
statements.
Further details on net changes in unrealized gains/losses on corporate investments can be found in the discussion of each
investee company below.
Net carried interest income for the years ended March 31, presented on a non‐IFRS basis, are summarized as
follows:
Net carried interest income [Non‐IFRS]
Year ended March 31, [$000's]
Realized carried interest from the CEP Funds
Net change in unrealized carried interest from the CEP Funds
Net carried interest income [Non‐IFRS]
2015
2014
$ 17,101
[1,315]
$ 300
9,824
$ 15,786
$ 10,124
26
MANAGEMENT’S DISCUSSION AND ANALYSIS
Clairvest’s entitlements to carried interest from the CEP Funds are described in the Transaction with Related Parties section
of the MD&A.
Other income for the year ended March 31, 2015 was $24.3 million, compared with $27.2 million for the year
ended March 31, 2014. The following table summarizes the other income earned by the Company, presented on a Non‐IFRS
basis:
Other income [Non‐IFRS]
Year ended March 31, [$000's]
Distributions and interest income
Income from treasury funds
Priority distributions from the CEP Funds
Interest income from the CEP Funds
From investee companies:
Casino New Brunswick
Centaur Gaming
County Waste
CRS
Davenport Land Investments
Discovery Air
Grey Eagle Casino
MAG
The Meadowlands
Rivers Casino
Wellington Fund IV
Winters Bros. of CT
Other distributions and interest income
Dividend income
Chilean Gaming Holdings
Management fees from the CEP Funds
Advisory and other fees from investee companies
Realized gain on temporary investments
Other Income [Non‐IFRS]
2015
2014
$ 1,603
$ 3,078
6,885
1,242
282
38
113
408
108
2,111
800
49
968
4,483
1,439
—
290
7,030
398
384
28
2
456
—
2,552
331
111
440
4,260
1,841
8
46
20,819
20,965
981
1,619
648
621
1,870
1,719
—
2,250
$ 24,318
$ 27,174
Included in income on treasury funds for the year ended March 31, 2015 are unrealized losses of $2.0 million on the US$7.5
million Light Tower Rentals corporate bonds purchased under Clairvest’s treasury portfolio.
Priority distributions and management fees earned from the CEP Funds, as described in the Transaction with
Related Parties section of the MD&A, are reduced proportionately to fees earned by Clairvest from joint Clairvest/CEP
Funds corporate investments.
Interest income earned from the CEP Funds are as described in the Transaction with Related Parties section of the
MD&A.
Distributions and interest income from Clairvest’s investee companies are further described below.
27
MANAGEMENT’S DISCUSSION AND ANALYSIS
Total expenses for the year were $30.2 million, compared with $20.0 million for the year ended March 31, 2014. The
following table summarizes expenses incurred by the Company for the years ended March 31, presented on a Non‐IFRS
basis:
Total Expenses, excluding Income Taxes [Non‐IFRS]
Year ended March 31, [$000's]
Employee compensation and benefits
Share‐based compensation expenses
Administration and other expenses
Domain and due diligence expenses
Professional fees
Office and other expenses
Finance and foreign exchange expense
Interest and bank charges
Foreign exchange loss [gain]
Total Expenses, excluding Income Taxes [Non‐IFRS]
2015
2014
$ 14,822
$ 8,586
8,566
1,125
374
3,397
5,742
1,021
1,197
2,713
4,896
4,931
1,189
758
1,185
[426]
1,947
759
$ 30,231
$ 20,018
Included in employee compensation and benefits for the year ended March 31, 2015 was $4.8 million in management
compensation upon the closing of CEP V.
Included in share‐based compensation expenses for the year ended March 31, 2015 was $2.3 million in stock
based compensation, $4.9 million in appreciation of book value appreciation rights ["BVARs"] and $1.4 million in
appreciation of deferred share units ["DSUs"] and appreciated deferred share units ["ADSUs"]. Refer to notes 2[h], 2[i], 2[j]
and 13 to the consolidated financial statements for details of these compensation plans.
FINANCIAL CONDITION HIGHLIGHTS
The following table summarizes the Company’s financial position and liquidity, presented on a non‐IFRS basis:
Financial Position [Non‐IFRS]
As at March 31, [$000's, except number of shares and per share amounts]
2015
2014
Cash, cash equivalents and temporary investments
Unrealized carried interest from the CEP Funds
Fair value of corporate investments
Total liabilities
Book value
Book value per share
$ 188,061
26,869
$ 115,786
28,185
252,472
59,323
447,694
29.58
241,066
40,501
399,460
26.39
Assets
Clairvest’s treasury funds increased during fiscal 2015 as a result of investment realizations as described below.
At March 31, 2015, Clairvest had corporate investments with a carrying value of $252.5 million. The following table
summarizes Clairvest’s corporate investment portfolio, presented on a non‐IFRS basis:
28
MANAGEMENT’S DISCUSSION AND ANALYSIS
March 31, 2015
March 31, 2014
Fair value
Cost
Difference
Fair value
Cost
Difference
$ 2,709
$ 1
$ 2,708
$ 2,130
$ 1
$ 2,129
—
—
—
125
2,240
[2,115]
[1,474]
4,407
9,798
[5,391]
8,324
34,703
9,798
28,754
5,949
—
—
—
11,629
9,380
2,403
7,451
9,226
1,929
29,421
22,930
36,302
8,187
28,754
667
2,150
20,780
8,178
28,124
7,451
736
[4,716]
—
[4,716]
[5,467]
—
[5,467]
50,355
14,644
35,711
39,795
14,644
25,151
7,411
8,210
16,984
3,465
33,036
809
3,980
7,942
25,362
9,662
4,015
6,690
10,573
3,059
29,606
2,525
2,787
5,580
7,508
8,053
3,396
1,520
6,411
4,015
7,092
12,504
4,015
—
6,706
10,573
386
1,931
406
—
—
—
3,430
[1,716]
1,193
2,362
17,854
1,609
28,074
22,045
706
2,884
6,313
21,785
8,433
2,525
2,447
5,580
7,508
8,053
6,029
[1,819]
437
733
14,277
380
[6,171]
—
[6,171]
[4,674]
—
[4,674]
CEP INVESTMENTS
Grey Eagle Casino
N‐Brook
CEP III INVESTMENTS
Casino New Brunswick
Chilean Gaming Holdings[1]
Kubra
Light Tower Rentals
LSNE
MIP III Entitlements[2]
CEP IV INVESTMENTS
Centaur Gaming
Cieslok
County Waste
CRS
Davenport Land Investments
Discovery Air
Linen King
MAG
The Meadowlands
Rivers Casino
Winters Bros. of CT
MIP IV Entitlements[3]
CEP V INVESTMENTS
Winters Bros. of LI
Wellington Fund III/IV
9,713
18,069
7,215
14,375
2,498
3,694
—
—
15,542
13,802
250,856
165,037
85,819
240,504
156,470
—
1,740
84,034
[176]
Other investments
1,616
1,686
[70]
562
738
[1] Comprised of Clairvest’s investment in Casino Marina del Sol, Casino Osorno and Casino Sol Calama.
[2] Fair value attributable to limited partners of MIP III as described in the Transaction with Related Parties section of the MD&A.
[3] Fair value attributable to limited partners of MIP IV as described in the Transaction with Related Parties section of the MD&A.
$ 252,472
$ 166,723
$ 85,749
$ 241,066
$ 157,208
$ 83,858
29
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 economic hedges against the Company's foreign denominated
investments which are described in note 15 to the consolidated financial statements. A discussion on the activity in each
corporate investment held at March 31, 2015 follows:
INVESTMENTS MADE ALONGSIDE CEP
Grey Eagle Casino
At March 31, 2015 and 2014, Clairvest held units in 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 2015, Clairvest earned $0.8 million in profit distributions from Grey Eagle Casino, bringing total profit
distributions earned to March 31, 2015 to $1.5 million.
The fair value of $2.7 million at March 31, 2015 compares to the fair value of $2.1 million at March 31, 2014.
INVESTMENTS MADE THROUGH CEP III CO‐INVEST ALONGSIDE CEP III
Casino New Brunswick
At March 31, 2015 and 2014, Clairvest has funded $9.8 million to Casino New Brunswick in the form of debentures with a
stated interest at a rate of 6% per annum. The interest which had been waived between March 1, 2011 and December 31,
2012, had resumed effective January 1, 2013, with 45% of the interest payable in cash and the remaining 55% payable in‐
kind. Clairvest also holds units of a limited partnership which operates Casino New Brunswick, entitling Clairvest to 22.5% of
the earnings of the casino until December 31, 2030.
During fiscal 2015, Clairvest recorded $0.3 million in interest income, which represents the portion payable in cash.
Also during fiscal 2015, management determined that the fair value of Casino New Brunswick should be adjusted
upward by $3.9 million. The fair value of $8.3 million at March 31, 2015 compares to a fair value of $4.4 million at March
31, 2014 and a cost of $9.8 million. The increase in fair value was due to improved operating performance and reduced
leverage.
Subsequent to year end, Clairvest announced an agreement for the sale of Casino New Brunswick as described in
the Outlook section of the MD&A.
Chilean Gaming Holdings
At March 31, 2015 and 2014, Clairvest owned 30,446,299 limited partnership units in Chilean Gaming Holdings,
representing a 36.8% ownership interest on a fully diluted basis.
During fiscal 2015, Clairvest earned dividends totaling $1.0 million through its interest in Chilean Gaming Holdings,
bringing total dividends earned to March 31, 2015 to $9.0 million.
Also during fiscal 2015, management determined that the fair value of Chilean Gaming Holdings should be
adjusted upward by $4.9 million. The fair value of $34.7 million at March 31, 2015 compares to a fair value of $29.4 million
at March 31, 2014 and a cost of $28.7 million. The increase in fair value was due to improved operating performance and
the fair value is adjusted for foreign exchange fluctuations.
Light Tower Rentals
At March 31, 2014, Clairvest owned 5,841,250 Series A convertible preferred shares and 8,428,387 common shares in Light
Tower Rentals.
During fiscal 2015, Light Tower Rentals, completed a series of financing transactions. In July 2014, Light Tower
Rentals completed a refinancing which included a US$330 million bond offering and a subsequent redemption of common
shares to repatriate funds back to its owners. As part of this transaction, Clairvest converted the 5,841,250 preferred
shares it held to 5,841,250 common shares of Light Tower Rentals on a one‐to‐one basis such that it held 14,269,637
30
MANAGEMENT’S DISCUSSION AND ANALYSIS
common shares immediately after the conversion, 7,284,322 of which were redeemed subsequent to the conversion for
gross proceeds of $26.9 million. Subsequently in August 2014, Light Tower Rentals finalized its recapitalization by adding a
group of institutional equity investors. As part of this transaction, Clairvest purchased 157,003 additional common shares of
Light Tower Rentals for $0.3 million prior to a second redemption of common shares from Light Tower Rentals. Subsequent
to the purchase, Light Tower Rentals redeemed 3,156,714 common shares from Clairvest for gross proceeds of $13.8
million. In aggregate, Clairvest recorded a $14.4 million net realized gain and a $5.8 million reduction to its investment in
Light Tower Rentals during fiscal 2015.
At March 31, 2015, Clairvest owned 3,985,604 common shares in Light Tower Rentals, representing a 6.7%
ownership interest on a fully diluted basis.
The fair value of $11.6 million at March 31, 2015 compares to a cost of $2.4 million. The fair value is adjusted for
foreign exchange fluctuations.
LSNE
At March 31, 2015 and 2014, Clairvest owned 6,406,000 Series A 10% cumulative preferred shares, 1,250,000 Series B 10%
cumulative preferred shares and US$0.4 million in demand promissory notes in LSNE. The Series A 10% cumulative
preferred shares are convertible into a 12.3% ownership interest on a fully diluted basis and the demand promissory notes
have a stated interest rate of 10% per annum.
The fair value of $9.4 million at March 31, 2015 compares to a fair value of $8.2 million at March 31, 2014 and a
cost of $7.5 million. The fair value is adjusted for foreign exchange fluctuations.
Clairvest had also advanced short‐term, working capital loans totaling US$0.8 million to LSNE which is included in
accounts receivable.
INVESTMENTS MADE THROUGH CEP IV CO‐INVEST ALONGSIDE CEP IV
Centaur Gaming
At March 31, 2015 and 2014, 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 $50.4 million at March 31, 2015 compares to a fair value of $39.8 million at March 31, 2014 and a
cost of $14.6 million. The increase in fair value was due to improved operating performance and reduced debt levels. The
fair value is adjusted for foreign exchange fluctuations.
Cieslok
At March 31, 2015 and 2014, Clairvest owned 4,014,989 common shares in Cieslok, representing a 24.0% ownership
interest on a fully diluted basis.
The fair value of $7.4 million at March 31, 2015 compares to a fair value of $4.0 million at March 31, 2014 and a
cost of $4.0 million. The increase in fair value was due to improved operating performance.
County Waste
At March 31, 2014, Clairvest owned 4,539.62 Class B units and US$1.9 million in convertible debentures in County Waste.
The convertible debentures had a stated interest rate of 10% per annum.
During fiscal 2015, Clairvest acquired an additional 1,942.66 Class B units in County Waste. The acquisition was
funded by a $0.3 million follow‐on investment and a $1.9 million partial conversion of principal and accrued interest from
the convertible debentures. The remaining principal of $0.2 million were repaid by County Waste in cash.
At March 31, 2015, Clairvest held 6,482.28 Class B units in County Waste representing a 12.5% ownership interest
on a fully diluted basis.
The fair value of $8.2 million at March 31, 2015 compares to a cost of $6.7 million. The fair value is adjusted for
foreign exchange fluctuations.
31
MANAGEMENT’S DISCUSSION AND ANALYSIS
CRS
At March 31, 2014, Clairvest owned 10,572,805 Class C limited partnership units in CRS.
During fiscal 2015, Clairvest exercised its right to purchase Class B limited partnership units in CRS from a departing
unitholder of CRS at a pre‐determined price. Clairvest purchased 199,990 Class B units in CRS at $0.2 million which was
funded by a return of capital from CRS.
At March 31, 2015, Clairvest held 199,990 Class B units and 10,572,805 Class C units in CRS, representing a 13.4%
ownership interest on a fully diluted basis.
The fair value of $17.0 million at March 31, 2015 compares to a fair value of $12.5 million at March 31, 2014 and a
cost of $10.6 million. The increase in fair value was due to improved operating performance.
Also during fiscal 2015, Clairvest earned $0.4 million in distributions from CRS. As a result of CRS’ flow‐through
status for tax purposes, Clairvest incurred income tax obligations totaling $0.4 million as a result of its investment in CRS.
Davenport Land Investments
During fiscal 2015, Clairvest invested $1.6 million for an 18.7% ownership in Davenport North and $1.5 million for a 23.0%
ownership interest in Davenport South. Clairvest had also advanced a US$0.6 million non‐interest bearing loan to a partner
to help fund its 50% ownership in Davenport North.
During fiscal 2015, Davenport South sold certain real estate and distributed pre‐tax proceeds of US$0.6 million to
Clairvest.
The fair value of $3.5 million at March 31, 2015 compares to a cost of $3.1 million. The fair value is adjusted for
foreign exchange fluctuations.
Subsequent to year end, Davenport South sold additional real estate and distributed pre‐tax proceeds of US$0.8
million to Clairvest.
Discovery Air
At March 31, 2014, Clairvest held $28.0 million in secured convertible debentures ["Debentures"] and owned 53,997
common shares in Discovery Air. The principal amount of the Debentures was $22.0 million with a stated interest rate of
10% per annum.
During fiscal 2015, Clairvest invested an additional $7.5 million for 19,755,918 common shares in Discovery Air.
Also during fiscal 2015, Discovery Air made a $1.6 million payment against the Debentures.
At March 31, 2015 Clairvest held 19,809,915 common shares representing an ownership interest of 24.2% on a
fully diluted basis and Debenrtures with a gross accrued value of $28.5 million which are convertible into an addtional
2,775,218 common shares of Discovery Air at a conversion price of $10.51 per share. At March 31, 2015, the closing quoted
market price of a Discovery Air common share was $0.23 per share.
The fair value of $33.0 million at March 31, 2015 compares to a cost of $29.6 million, with the difference being
attributable to accrued interest on the Debentures net of the decrease in the trading price of the common shares.
Also during fiscal 2015, Clairvest also advanced $1.7 million to Discovery Air in the form of a promissory note
during fiscal 2015 and an additional $5.4 million in promissory notes subsequent to year end. These promissory notes bear
interest at 8.0% per annum and are repayable on or before July 9, 2015.
Subsequent to year end, Clairvest purchased an additional 1,455,500 common shares of Discovery Air at a cost of
$0.4 million. The additional subscription increased Clairvest’s ownership interest in Discovery Air to 25.9% on a fully diluted
basis.
Also subsequent to year end, the maturity date of the Debentures were extended to September 30, 2017.
Linen King
At March 31, 2015 and 2014, Clairvest owned 2,529,209 Class A units in Linen King representing an 21.7% ownership
interest on a fully diluted basis.
32
MANAGEMENT’S DISCUSSION AND ANALYSIS
The fair value of $0.8 million at March 31, 2015 compares to a fair value of $0.7 million at March 31, 2014 and a cost of $2.5
million. The fair value is adjusted for foreign exchange fluctuations.
MAG
At March 31, 2014, Clairvest owned 23,822 Class A stock in MAG. The Class A stock have a stated dividend rate of 10% per
annum and each Class A stock is convertible into 1.0114 common stock of MAG.
During fiscal 2015, Clairvest invested an additional $0.3 million to acquire 2,677 Class A stock in MAG.
At March 31, 2015, Clairvest owned 26,499 Class A stock in MAG.
The fair value of $4.0 million at March 31, 2015 compares to a cost of $2.8 million, with the difference being
attributable to accrued dividends on the Class A stock and is adjusted for foreign exchange fluctuations.
Additionally, Clairvest had advanced working capital loans totaling $0.9 million to a Canadian subsidiary of MAG
["MAG Canada"] which is included in loans receivable. Subsequent to year end, these loans have been repaid in full.
The Meadowlands
At March 31, 2015 and 2014, Clairvest held US$5.4 million in secured convertible debentures in the Meadowlands which
accrue interest at a rate of 15% per annum, 10% of which is payable quarterly in cash and 5% accrued quarterly. Clairvest
also held warrants which entitle it to invest in equity securities of the Meadowlands subject to certain conditions.
The fair value of $7.9 million at March 31, 2015 compares to a fair value of $6.3 million at March 31, 2014 and a
cost of $5.6 million. The increase in fair value was due to accrued but unpaid interest on the debentures. The fair value is
adjusted for foreign exchange fluctuations.
Rivers Casino
At March 31, 2015 and 2014, Clairvest owned 9,021,917 units in Rivers Casino representing a 5.0% ownership on a fully
diluted basis.
During fiscal 2015, Clairvest earned $4.5 million in quarterly distributions and $0.5 million in quarterly fees from
Rivers Casino. As a result of Clairvest’s investment in Rivers Casino requiring certain acquisition entities in the United States,
Clairvest, through its acquisition entities, incurred U.S. income tax obligations totaling $1.5 million during fiscal 2015.
The fair value of $25.4 million at March 31, 2015 compares to a fair value of $21.8 million at March 31, 2014 and a cost of
$7.5 million. The fair value is adjusted for foreign exchange fluctuations.
Winters Bros. of CT
At March 31, 2015 and 2014, Clairvest owned 76,284.8 Class C units in Winters Bros. of CT, representing a 13.4% ownership
interest on a fully diluted basis.
The fair value of $9.7 million at March 31, 2015 compares to a fair value of $8.4 million at March 31, 2014 and a
cost of $8.1 million. The fair value is adjusted for foreign exchange fluctuations.
INVESTMENTS MADE THROUGH CEP V CO‐INVEST ALONGSIDE CEP V
Winters Bros. of LI
During fiscal 2015, Clairvest and MIP V invested $7.2 million and $2.4 million respectively for 1,398,507 Class C units in
Winters Bros. of LI, representing a 14.0% ownership interest on a fully diluted basis. Clairvest is entitled to the realizable
value of the $2.4 million invested by MIP V as described in note 5[i] to the consolidated financial statements.
The fair value of $9.7 million at March 31, 2015 compares to a cost of $7.2 million. The fair value is adjusted for
foreign exchange fluctuations.
33
MANAGEMENT’S DISCUSSION AND ANALYSIS
OTHER INVESTMENTS
Wellington Fund III / IV
At March 31, 2014, Clairvest, as a limited partner, had funded $13.8 million of its $25.1 million commitment in Wellington
Fund IV.
During fiscal 2015, Clairvest funded an additional $0.5 million to Wellington Fund IV bringing total amount funded
to $14.3 million. Clairvest also purchased a $0.1 million commitment from a limited partner of Wellington Fund IV for $0.1
million increasing its commitment in Wellington Fund IV to $25.2 million.
At March 31, 2015, Clairvest, as a limited partner, had funded $14.4 million of its $25.2 million commitment to
Wellington Fund IV. Clairvest is also entitled to participate in the profits received by the General Partner of Wellington Fund
III/IV. At March 31, 2015, Clairvest has received income distributions totaling $3.3 million from Wellington Fund IV and its
General Partner, bringing the net cash investment to $11.1 million. In addition, Clairvest received distributions from
Wellington Fund III totaling $9.3 million to March 31, 2015, and is entitled to future profits of up to $0.5 million based on
the value of the remaining assets of Wellington Fund III at March 31, 2015.
The fair value of $18.1 million at March 31, 2015 reflects management's estimated realizable value of Clairvest's
entitlement as a limited partner and a general partner of Wellington Fund III and IV.
Subsequent to year end, an additional $0.4 million was funded to Wellington Fund IV.
LIABILITIES
Total liabilities at March 31, 2015 of $59.3 million included $6.9 million in accrued management and director compensation,
$24.5 million in share‐based compensation, $12.3 million in derivative instruments liability and $8.3 million in deferred tax
liability.
34
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 consolidated
financial statements are prepared in accordance with International Financial Reporting Standards. 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, 2015. Based on that evaluation, Management concluded
that the Company’s internal control over financing reporting was effective for the year ended March 31, 2015.
The Board of Directors carries out its responsibility for the consolidated financial statements in this
annual report principally through its Audit Committee. The Audit Committee, which comprised three non‐
management Directors during the year ended March 31, 2015, 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
35
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS OF CLAIRVEST GROUP INC.
We have audited the accompanying consolidated financial statements of Clairvest Group Inc., which comprise
the consolidated statements of financial position as at March 31, 2015 and 2014, and April 1, 2013, and the
consolidated statements of comprehensive income, changes in equity and cash flows for the years ended March
31, 2015 and 2014, and a summary of significant accounting policies and other explanatory information.
MANAGEMENT'S RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS
Management is responsible for the preparation and fair presentation of these consolidated financial statements
in accordance with International Financial Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
AUDITORS' RESPONSIBILITY
Our responsibility 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
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
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
or error. In making those risk assessments, 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
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to
provide a basis for our audit opinion.
OPINION
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position
of Clairvest Group Inc. as at March 31, 2015 and 2014, and April 1, 2013, and its financial performance and its
cash flows for the years ended March 31, 2015 and 2014 in accordance with International Financial Reporting
Standards.
Toronto, Canada,
June 24, 2015
36
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at March 31
$000's
ASSETS
2015
2014
[Note 3]
As at
April 1, 2013
[Note 3]
Cash and cash equivalents [notes 4, 14, 17 and 18]
$ 98,644
$ 51,797
$ 112,969
Temporary investments [notes 4, 17 and 18]
Accounts receivable and other assets [notes 5[s], 8[g] and
17]
Loans receivable [notes 5, 8 and 17]
Income taxes recoverable
Restricted temporary investments [notes 8[c] and 17]
Carried interest receivable [notes 5[a], 5[b], 5[d]
and 5[e]]
Corporate investments [notes 8, 15[b] and 17]
Fixed assets [notes 5[v] and 9]
58,511
62,995
59,708
15,055
11,520
12,197
11,451
120
—
38,256
14,151
6,937
4,681
—
5,425
53,738
56,370
36,724
291,421
2,267
244,029
3,558
210,235
3,974
$ 531,207
$ 475,462
$ 460,064
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Accounts payable and accrued liabilities [note 5[v]]
$ 1,820
$ 2,278
$ 2,697
Loans payable
Income taxes payable
Derivative instruments [note 15]
Accrued compensation expense [notes 13 and 16[h]]
Share‐based compensation [note 13]
Management participation [note 5]
Deferred tax liability [note 11]
Contingencies, commitments and guarantees [note 16]
Shareholders' equity
Share capital [note 12]
Retained earnings
See accompanying notes
On behalf of the Board:
—
69
4,341
6,935
24,528
37,756
8,064
237
39
1,575
5,395
18,326
38,325
9,827
41,258
1,941
190
3,983
14,657
25,539
5,860
$ 83,513
$ 76,002
$ 96,125
$ 79,314
$ 79,314
$ 79,101
368,380
447,694
320,146
284,838
399,460
363,939
$ 531,207
$ 475,462
$ 460,064
MICHAEL BREGMAN
Director
JOSEPH J. HEFFERNAN
Director
37
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended March 31
$000's [except per share information]
REVENUE
Net investment gains [notes 6 and 8]
Distributions and interest income [notes 5, 8 and 16[h]]
Net carried interest income [note 7]
Management fees [notes 5[e] and 5[h]]
Advisory and other fees [note 5[u]]
Realized gain on temporary investments
EXPENSES
Employee compensation and benefits [notes 13 and 16[h]]
Share‐based compensation expenses [note 13]
Administration and other expense
Finance and foreign exchange expense [note 15]
Management participation [note 5]
Income before income taxes
Income tax expense [note 11]
Net income and comprehensive income for the year
2015
2014
[Note 3]
$ 37,471
$ 38,927
33,516
31,361
648
13,049
20,248
621
1,331
1,232
—
2,250
104,327
76,327
14,822
8,586
8,566
5,742
3,922
4,221
1,366
843
20,359
13,087
49,035
32,479
55,292
3,287
43,848
5,041
$ 52,005
$ 38,807
Basic net income and comprehensive income per share [note 12]
$ 3.43
$ 2.56
Fully diluted net income and comprehensive income per share [note 12]
$ 3.43
$ 2.56
See accompanying notes
38
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the years ended March 31
$000's
As at April 1, 2014
Changes in equity
Share capital
Retained earnings
Total equity
$ 79,314
$ 320,146
$ 399,460
Net income and comprehensive income for the year
Dividends declared [$0.2492 per share]
—
79,314
—
52,005
372,151
[3,771]
52,005
451,465
[3,771]
As at March 31, 2015
$ 79,314
$ 368,380
$ 447,694
As at April 1, 2013
Changes in equity
Net income and comprehensive income for the year
Dividends declared [$0.2312 per share]
Issue of shares on exercise of stock options [note 12]
As at March 31, 2014 [note 3]
See accompanying notes
$ 79,101
$ 284,838
$ 363,939
—
79,101
—
213
38,807
323,645
[3,499]
—
38,807
402,746
[3,499]
213
$ 79,314
$ 320,146
$ 399,460
39
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended March 31
$000's
OPERATING ACTIVITIES
Net income and comprehensive income for the year
Add [deduct] items not involving a current cash outlay
Amortization and impairment of fixed assets
Share‐based compensation expense
Deferred income tax expense [recovered]
Net investment gains
Unrealized carried interest income and management participation
Non‐cash items relating to foreign exchange forward contracts
Non‐cash items relating to corporate investments
Adjustments for:
Net proceeds on sale [cost on acquisition] of temporary investments
Loans advanced [notes 5, 8[m] and 8[o]]
Receipt of loans advanced [notes 5 and 8[o]
Loans received [note 5]
Repayment of loans received [note 5]
Cost on settlement of realized foreign exchange forward contracts
Decrease in restricted temporary investments
Acquisition of corporate investments
Proceeds on sale of corporate investments
Return of capital from corporate investments
Net change in non‐cash working capital balances related to operations [note 14]
Cash Provided by [used in] operating activities
INVESTING ACTIVITIES
Purchase of fixed assets
Cash used in investing activities
FINANCING ACTIVITIES
Cash dividends paid
Issuance of share capital [note 12]
Cash used in financing activities
NET INCREASE [DECREASE] IN CASH AND CASH EQUIVALENTS DURING THE YEAR
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF YEAR [NOTE 14]
SUPPLEMENTAL CASH FLOW INFORMATION
Interest and distributions received
Income taxes paid
Interest paid, on gross basis
See accompanying notes
2015
2014
[Note 3]
$ 52,005
$ 38,807
1,372
6,202
[1,763]
[37,471]
2,063
3,742
[1,053]
25,097
532
3,811
3,967
[38,927]
[6,861]
1,549
[537]
2,341
4,484
[84,273]
111,078
19,945
[20,182]
[976]
—
[19,066]
144
10,054
21,208
4,394
50,699
[3,287]
[129,659]
105,554
5,796
[46,817]
[82]
5,425
[3,534]
884
8,239
[57,481]
[2,488]
[57,628]
[81]
[81]
[116]
[116]
[3,771]
—
[3,771]
[3,499]
71
[3,428]
46,847
51,797
98,644
[61,172]
112,969
51,797
$ 29,116
$ 5,360
$ 1,259
$ 8,834
$ 4,611
$ 1,406
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [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"], Clairvest Equity Partners IV‐A Limited Partnership ["CEP IV‐
A"], Clairvest Equity Partners V Limited Partnership ["CEP V"] and Clairvest Equity Partners V‐A Limited Partnership ["CEP V‐
A"] [together, the "CEP Funds"]. Clairvest contributes financing and strategic expertise to support the growth and
development of its indirect investee companies in order to create realizable value for all shareholders. Clairvest is
incorporated under the laws of the Province of Ontario.
The Company's head office is located at 22 St. Clair Avenue East, Suite 1700, Toronto, Ontario, Canada, M4T 2S3.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and adoption of IFRS
In 2010, the Handbook of the Chartered Professional Accountants of Canada ["CPA Canada Handbook"] was revised to
incorporate International Financial Reporting Standards ["IFRS"], and required publicly accountable enterprises to apply
such standards for financial years beginning on or after January 1, 2011. Subsequently, the Canadian Accounting Standards
Board ["AcSB"] approved a three‐year deferral from IFRS adoption which allowed Canadian companies that applied
Accounting Guideline 18 ["AcG‐18"] to continue to use existing Canadian Generally Accepted Accounting Principles
["Canadian GAAP"] until fiscal years beginning on or after January 1, 2014. Accordingly, Clairvest adopted IFRS for fiscal year
beginning April 1, 2014.
The consolidated financial statements of Clairvest are prepared in accordance with IFRS applicable to the
preparation of financial statements, including International Accounting Standard 1, "Presentation of Financial Statements"
["IAS 1"] and IFRS 1, "First‐time Adoption of IFRS" ["IFRS 1"]. The Company has consistently applied the same accounting
policies used to prepare its opening IFRS consolidated statement of financial position as at April 1, 2013 throughout all
periods presented in these consolidated financial statements, as if these policies had always been in effect.
These audited annual consolidated financial statements and related notes of Clairvest for the years ended March
31, 2015 and 2014 ["consolidated financial statements"] were authorized for issuance by the Board of Directors on June 24,
2015.
The consolidated financial statements have been presented on a historical cost basis, except for certain financial
instruments that have been measured at fair value. The consolidated financial statements have been prepared on a going
concern basis and are presented in Canadian dollars, which is the functional currency of the Company. All values are
rounded to the nearest thousand dollars [$000's], except where otherwise indicated.
Basis of consolidation
These consolidated financial statements have been prepared in accordance with IFRS 10, "Consolidated Financial
Statements" ["IFRS 10"], as issued by the International Accounting Standards Board ["IASB"] and include the accounts of the
Company and its consolidated subsidiaries. As discussed under critical accounting estimates and judgments, the Company
has determined it meets the definition of an investment entity.
[I] Consolidated subsidiaries
In accordance with IFRS 10, subsidiaries are those entities that provide investment‐related services and that the Company
controls by having the power to govern the financial and operating policies of the entity. Such entities would include those
which earn priority distributions or management fees and carried interest from the CEP Funds. All intercompany amounts
and transactions amongst these consolidated entities have been eliminated upon consolidation. The existence and effect of
potential voting rights that are currently exercisable and shareholder agreements are considered when assessing whether
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is obtained by the
Corporation and are subsequently deconsolidated from the consolidated financial statements on the date that control
ceases.
The following entities, which are significant in nature, provide investment‐related services on behalf of the
Company.
Clairvest GP Manageco Inc.
Clairvest GP [GPLP] Inc.
CEP MIP GP Corporation
Clairvest USA Limited
Clairvest General Partner Limited Partnership
Clairvest General Partner III Limited Partnership
Clairvest General Partner IV Limited Partnership
Clairvest General Partner V Limited Partnership
PGO Aviation LP
[II] Interests in unconsolidated subsidiaries ["acquisition entities"]
In accordance with IFRS 10, interests in subsidiaries other than those that provide investment‐related services are
accounted for at fair value through profit or loss rather than consolidating them in accordance with the amendments for
investment entities under IFRS 10. Investment entities under IFRS 10 are defined as those that "obtains funds from one or
more investors for the purpose of providing them with investment management services, commits to its investors that its
business purpose is to invest funds solely for returns from capital appreciation, investment income, or both, and measures
and evaluates the performance of substantially all of its investments on a fair value basis."
The following entities, which are significant in nature, are controlled by Clairvest either directly or indirectly and are
used as acquisition entities of the Company ["controlled acquisition entities"].Accordingly, they are accounted for at fair
value through profit or loss. These entities' principal place of business is in Canada.
2141788 Ontario Corporation ["2141788 Ontario"]
CEP III Co‐Investment Limited Partnership ["CEP III Co‐Invest"]
MIP III Limited Partnership ["MIP III"]
CEP IV Co‐Investment Limited Partnership ["CEP IV Co‐Invest"]
MIP IV Limited Partnership ["MIP IV"]
CEP V Co‐Investment Limited Partnership ["CEP V Co‐Invest"]
MIP V Limited Partnership ["MIP V"]
The Company may also use intermediate subsidiaries whose sole purpose is to hold investments for the Company and
therefore not included in the listing above.
[III] Interests in the CEP Funds
Clairvest manages and invests alongside the CEP Funds, which meet the definition of structured entities under IFRS.
Clairvest provides loans to and earns priority distributions or management fees and carried interest from the CEP Funds,
which are further described in note 5. The Company concluded that its ownership interest in the CEP Funds do not meet the
definition of control under IFRS. Accordingly, the financial positions and operating results of the CEP Funds are not included
in Clairvest's consolidated financial statements.
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
Summary of significant accounting policies
The Company has consistently applied the following accounting policies throughout all periods presented in these
consolidated financial statements, as if these policies had always been in effect.
[a] Classification and recognition of financial instruments
In accordance with IAS 39, "Financial Instruments: recognition and measurement", financial assets and financial liabilities
are classified at initial recognition into the following categories:
Financial assets and liabilities at fair value through profit or loss ["FVTPL"]
This category is further divided into the following:
Financial instruments classified as Held For Trading: Financial assets and liabilities are classified as Held For Trading
if they are acquired for the purpose of selling and/or repurchasing in the near term, and are acquired principally for the
purpose of generating a profit from short‐term fluctuations in price. Derivative instruments are classified as Held For
Trading. The Company does not apply hedge accounting to its derivative instruments.
Financial instruments designated as FVTPL through inception: Cash equivalents, temporary investments, and
corporate investments are designated as fair value through profit or loss upon initial recognition. These financial assets
are designated upon initial recognition on the basis that they are part of a group of financial assets that are managed
and have their performance evaluated on a fair value basis, in accordance with risk management and investment
strategies of the Company.
Loans and receivables
Loans and receivables are non‐derivative financial assets with fixed or determinable payments that are not quoted in an
active market. The Company includes in this category receivable balances relating to indirect investee companies and
the CEP Funds as well as other short‐term receivables.
Other financial liabilities
This category includes all financial liabilities, other than those classified as fair value through profit or loss. The Company
includes in this category amounts relating to accounts payable and loans payable.
[b] Cash and cash equivalents
Cash and cash equivalents comprisecash at bank and in hand and short‐term deposits with an original maturity of three
months or less.
[c] 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 closing 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 volatilityand 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 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
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
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.
[d] 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 using exchange
rates in effect at the consolidated statements of financial position dates. Non‐monetary assets and liabilities that are
measured at historical cost are translated into Canadian dollars using the exchange rate at the date of transaction. Non‐
monetary assets and liabilities that are carried at fair value are translated into Canadian dollars using exchange rates at
the date the fair value was determined. Exchange gains and losses are included in income in the period in which they
occur. Foreign currency transaction gains and losses on financial instruments classified as FVTPL are included in the
statement of comprehensive income as part of net investments gains.
[e] Derivative instruments
The Company and its controlled acquisition entities periodically enters into foreign exchange forward contracts to hedge
its exposure to exchange rate fluctuations on its foreign currency denominated investments and loans. These foreign
exchange forward contracts and, where applicable, their underlying investments and loans, are valued at exchange rates
in effect at the consolidated statements of financial position dates.
Foreign exchange forward contracts entered into by the Company are included on the consolidated statements of
financial position 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 statement of financial position dates. Any unrealized gains or losses are included in finance and foreign
exchange expense in the consolidated statements of comprehensive income.
Foreign exchange forward contracts entered into by the Company's controlled acquisition entities are included in
the fair value determination of these acquisition entities.
[f] 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 included in net investment gains in the
consolidated statements of comprehensive 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. Carried interest from the CEP funds are recognized on an accrual
basis when estimated fair values of the underlying investments can be measured reliably.
[g] Income taxes
Current income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are
enacted or substantively enacted, at the reporting date in the countries where the Company operates and generates
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
taxable income. Management periodically evaluates positions taken in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred tax
The Company records deferred income tax expense or recovery using the asset and liability method. Under this method,
deferred income taxes reflect the expected deferred 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. Deferred
income tax assets and liabilities are determined for each temporary difference based on the income tax rates that are
expected to be in effect when the asset or liability is settled. Deferred income tax assets and liabilities are only
recognized to the extent that, in the opinion of management, the most probable outcome is that the deferred income
tax asset or liability will be realized.
[h] Stock‐based compensation plan
The Company's stock option plan allows for a cash settlement of stock options. As the economics to choose cash or
shares as settlement is the same for all holders, compensation expense is recognized and recorded as a liability based on
the fair value of the outstanding stock options at the consolidated statements of financial position dates and the
proportion of their vesting periods expected to elapse. Fair value is measured by use of an appropriate option pricing
model. In valuing the Company's stock option plan, no consideration is taken of any vesting conditions, other than
conditions linked to the price of the shares of the Company. 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 share‐based compensation expense.
[i] 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 granted 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 share‐based compensation
expense and recorded as a libility based on the number of DSUs outstanding at the consolidated statements of financial
position dates multiplied by the market value of a Clairvest common share on the TSX at the consolidated statements of
financial position dates.
Certain directors were also granted Appreciation Deferred Share Units ["ADSUs"] Upon redemption of the ADSUs,
the Company pays to the participant a lump sum cash payment equal to the number of ADSUs 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
ADSUs only following termination of board service. Under the Company's DSU plan, the fair value of the ADSUs is
charged to share‐based compensation expense and recorded as a libility based on the number of ADSUs outstanding at
the consolidated statement of financial position dates multiplied by the difference between the market value of a
Clairvest common share on the TSX at the consolidated statement of financial position dates and the market value of a
Clairvest common share on the TSX on the grant date.
[j] 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
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
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 share‐based
compensation expense and recorded as a liability over the BVAR vesting period based on the book value per share at
the consolidated statement of financial position date of the prior quarter.
[k] Fixed assets
Fixed assets are accounted for at cost less accumulated amortization. Leasehold improvements are amortized on a
straight line basis over the lease term including reasonably assured renewal options. All other capital assets are
amortized on a straight‐line basis at the following rates per year:
Aircraft
Computer equipment
Computer software
Furniture, fixtures and equipment
Leasehold improvements
The Company assesses, at each reporting date, whether there is an indication that a fixed asset may be impaired. If
any indication exists, the Company estimates the fixed asset's recoverable amount. The recoverable amount is the
higher of its fair value less costs of disposal and its value in use. When the carrying amount exceeds its recoverable
amount, the fixed asset is considered impaired and is written down to its recoverable amount.
10%
30%
50%
20%
Term of lease
[l] Net income and comprehensive income per share
Basic net income and comprehensive income per share is determined by dividing net income and comprehensive
income attributable to common shareholders by the weighted average number of common shares outstanding during
the year. Fully diluted net income and comprehensive income per share are 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.
[m] Critical accounting estimates, assumptions and judgements
The preparation of consolidated financial statements in conformity with IFRS required management to make estimates,
assumptions and judgements that affect the reported amounts. Estimates and judgments are continually evaluated and
are based on historical experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances. The Company makes estimates and assumptions concerning the future. The
resulting accounting estimates could materially differ from the related actual results. The following estimates,
assumptions and judgments have a significant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next fiscal year:
Determination of investment entity
Judgment is required when making the determination that the Company meets the definition of an investment entity
under IFRS. In accordance with IFRS 10, an investment entity is an entity that: "obtains funds from one or more investors
for the purpose of providing them with investment management services, commits to its investors that its business
purpose is to invest funds solely for returns from capital appreciation, investment income, or both, and measures and
evaluates the performance of substantially all of its investments on a fair value basis." In addition, IFRS 10 clarifies that
an investment entity may earn fee income from the provision of investment‐related services to external parties. The
Company has historically co‐invested alongside third party capital in the CEP Funds that it manages. In determining its
status as an investment entity, the Company has determined that fair value is the primary measurement attribute used
to monitor and evaluate its investments.
Fair value of financial instruments
Certain financial instruments are recorded in the Company’s consolidated statements of financial position at values that
are representative of or approximate fair value. The fair value of a financial instrument that is traded in active markets
at each reporting date is determined by reference to its quoted market price or dealer price quotations. The fair values
46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
of certain other financial instruments are determined using valuation techniques. By their nature, these valuation
techniques require the use of estimates and assumptions. Changes in the underlying estimates and assumptions could
materially impact the determination of the fair value of a financial instrument. Imprecision in determining fair value
using valuation techniques may affect net investment gains reported in a particular period.
The Company assesses, at each reporting date, whether there is any objective evidence to revise the fair values of its
financial instruments. The assessment of the fair value of a financial instrument requires significant judgment, where
management evaluates, among other factors, the financial health and business outlook of their investees. Fair value
information is presented in note 18.
Recognition of carried interest and corresponding expenses
The determination of the Company's unrealized carried interest receivable recorded on the consolidated statements of
financial position is based on the fair values of the financial instruments held by the CEP Funds. As discussed previously,
fair values of certain financial instruments are determined using valuation techniques and by their nature, the use of
estimnates and assumptions. Changes in the underlying estimates and assumptions could materially impact the
determination of the fair value of these financial instruments. Imprecision in determining fair value using valuation
techniques may affect the calculation of unrealized carried interest receivable and the resulting accrued liabilities for
future payouts relating to these unrealized carried interest at the statement of financial position date.
Income taxes
The determination of the Company's income and other tax liabilities requires interpretation of complex laws and
regulations often involving multiple jurisdictions. Judgment is required in determining whether deferred income tax
assets should be recognized on the consolidated statements of financial position. Deferred income tax assets are
recognized to the extent that the Company believes it is probable that the assets can be recovered. Furthermore,
deferred income tax balances are recorded using enacted or substantively enacted future income tax rates. Changes in
enacted income tax rates are not within the control of management. However, any such changes in income tax rates
may result in actual income tax amounts that may differ significantly from estimates recorded in deferred tax balances.
3. TRANSITION TO IFRS
The Company has applied the provisions of IFRS 1 in these consolidated financial statements. IFRS 1 provides the
framework for the first‐time adoption of IFRS and specifies that, in general, an entity shall apply the principles under IFRS
retrospectively. However, IFRS 1 also provides for certain voluntary and mandatory exceptions from full retrospective
application. The only voluntary exemption adopted by the Company upon transition was the ability to designate a financial
asset or financial liability at fair value through profit or loss upon transition to IFRS. All financial assets designated at FVTPL
upon transition were previously carried at fair value under Canadian GAAP as required by AcG‐18.
The effect of the Corporation's transition from Canadian GAAP to IFRS is set out in the following reconciliations and
the footnotes that accompany such reconciliations.
[a] Consolidated financial statements
Under Canadian GAAP, the Company consolidated its various acquisition entities that exist for investing purposes. All
intercompany accounts and transactions were eliminated accordingly.
Under IFRS, the Company is required to fair value its acquisition entities which had previously been consolidated
under AcG‐18 as described in the preceding paragraph. As a result of this change, assets and liabilities which are held by
these acquisition entities and which were previously presented as separate statement of financial position items are
now included in the determination of fair value of the Company’s corporate investments. Accounts and transactions
between the current consolidated group of entities and these acquisition entities are no longer eliminated upon
consolidation. The Company is required to consolidate limited partnerships that provide investment related services
including those which the Company is not the sole partner. For those assets and liabilities which are consolidated from
such partnerships, a liability which represents interests owned by outside parties is included as liabilities on the
consolidated statements of financial position.
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
[b] Share‐based payments
Under Canadian GAAP, share‐based compensation expense for the Company's stock option plan, was recognized and
recorded as a liability based on the intrinsic value of the outstanding stock options at the consolidated statements of
financial position dates and the proportion of their vesting periods that have elapsed.
In accordance with IFRS 2 "Share‐based Payment", these expenses must be recognized and recorded in accordance with
the prescribed graded vesting method which results in front‐loading of expenses during the vesting period, as well as to
measure the liability incurred at fair value by applying an appropriate option pricing model.
[c] Unrealized carried interest and corresponding management bonuses
Under Canadian GAAP, unrealized carried interest from the CEP Funds payable to Clairvest as described in note 5 was
not recognized as the realization events for these carried interest have not yet occurred. The unrealized carried interest
was instead disclosed in the notes to the consolidated financial statements and not accrued for.
In accordance with IAS 18 "Revenue", the Company has chosen to recognize the unrealized carried interest from
the CEP Funds since the amounts can be measured reliably based on the fair values of the CEP Funds' investments and
receipt is probable.
Under the Company's Incentive Bonus Program [the "Bonus Program"], a bonus of 10% of after‐tax cash income,
including realized carried interest from the CEP Funds, and realizations on certain of Clairvest's corporate investments
would be paid to management annually as applicable. Under Canadian GAAP, the bonus was accrued to the extent that
cash income and investment realizations have occurred and the bonus has become payable. Additional bonuses
resulting from the unrealized carried interest described above and from unrealized corporate investments calculated at
their current fair values were disclosed in the notes to the consolidated financial statements instead of being accrued for
as the realization events for these payments had not yet occurred.
In accordance with IAS 19 "Employee Benefits", the Company is required to accrue for future payouts under the
Bonus Program even where the realization event for such payout has not yet occurred, including those which are only
payable upon the receipt of certain proceeds which have not yet been received.
[d] Unrealized carried interest and management participation
Under Canadian GAAP, the Company applied AcG‐18 and accordingly disregarded the assets, liabilities, revenues and
expenses related to entitlements of partners of a limited partnership that are external to the consolidated group of the
Company but where the partnership is required to be consolidated by the Company.
Under IFRS, the Company is required to consolidate these limited partnerships as described in note 2[I].
Accordingly, the Company has chosen to recognize that portion of the unrealized carried interest from the CEP Funds
which are not payable to Clairvest and in accordance with IAS 32 "Financial Instruments: Presentation", recognized a
liability ["management participation"] on the entitlements of the limited partners which are external to the Company.
The following tables reconcile [i] the consolidated statements of financial position as at March 31, 2014 and April
1, 2013; [ii] the consolidated statement of comprehensive income for the year ended March 31, 2014; and [iii] the
consolidated statement of cash flow for the year ended March 31, 2014, as previously prepared under Canadian GAAP
to the corresponding consolidated financial statements prepared in accordance with IFRS.
48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
Reconciliation of Canadian GAAP Consolidated Statement of Financial Position as at April 1, 2013 to IFRS
Canadian
GAAP
Ref [a]
Ref [b]
Ref [c]
Ref [d]
IFRS
IFRS Translation Adjustments
ASSETS
Cash and cash equivalents
$ 114,805
$ [1,836]
$ —
$ —
$ —
$ 112,969
Temporary investments
Accounts receivable and other
assets
Loans receivable
59,708
—
9,609
2,588
5,365
8,786
Income taxes recoverable
5,195
[514]
Restricted Temporary investments
5,425
—
Carried interest receivable
—
—
Corporate investments
176,390
26,668
Fixed assets
2,439
1,535
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
59,708
12,197
14,151
4,681
5,425
18,362
18,362
36,724
—
7,177
210,235
—
—
3,974
$ 378,936
$ 37,227
$ —
$ 18,362
$ 25,539
$ 460,064
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued
liabilities
Loans payable
Income taxes payable
Derivative instruments
$ 1,248
$ 1,449
$ —
$ —
$ —
$ 2,697
—
41,258
1,993
3,115
[52]
[2,925]
—
—
—
—
—
—
—
2,046
—
—
—
—
—
41,258
1,941
190
3,983
14,657
25,539
Accrued compensation expense
1,937
—
Share‐based compensation
14,481
—
176
—
Management participation
—
—
—
—
25,539
Deferred tax liability
6,474
[2,503]
—
1,889
—
5,860
29,248
37,227
176
3,935
25,539
96,125
Shareholders' equity
Share capital
Retained earnings
79,101
270,587
349,688
—
—
—
—
[176]
[176]
—
14,427
14,427
—
—
—
79,101
284,838
363,939
$ 378,936
$ 37,227
$ —
$ 18,362 $ 25,539
$ 460,064
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
Reconciliation of Canadian GAAP Consolidated Statement of Financial Position as at March 31, 2014 to IFRS
Canadian
GAAP
Ref [a]
Ref [b]
Ref [c]
Ref [d]
IFRS
IFRS Translation Adjustments
ASSETS
Cash and cash equivalents
$ 52,791
$ [994]
$ —
$ —
$ —
$ 51,797
Temporary investments
Accounts receivable and other
assets
Loans receivable
62,995
—
12,413
[893]
33,503
4,753
Income taxes recoverable
6,937
—
Carried interest receivable
—
—
Corporate investments
241,066
[7,177]
Fixed assets
2,069
1,489
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
62,995
11,520
38,256
6,937
28,185
28,185
56,370
—
10,140
244,029
—
—
3,558
$ 411,774
$ [2,822]
$ —
$ 28,185 $ 38,325
$ 475,462
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued
liabilities
Loans payable
Income taxes payable
Derivative instruments
$ 789
$ 1,489
$ —
$ —
$ —
$ 2,278
—
237
1,015
1,873
[976]
[298]
—
—
—
—
—
—
—
2,746
Accrued compensation expense
2,649
—
Share‐based compensation
18,205
—
121
—
—
—
—
—
—
237
39
1,575
5,395
18,326
Management participation
—
—
—
—
38,325
38,325
Deferred tax liability
10,095
[3,274]
—
3,006
—
9,827
34,626
[2,822]
121
5,752
38,325
76,002
Shareholders' equity
Share capital
Retained earnings
79,314
297,834
377,148
—
—
—
—
[121]
[121]
—
22,433
22,433
—
—
—
79,314
320,146
399,460
$ 411,774
$ [2,822]
$ —
$ 28,185 $ 38,325
$ 475,462
50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
Reconciliation of Canadian GAAP Consolidated Statement of Comprehensive Income for the year ended March 31, 2014
Canadian
GAAP
Ref [a]
Ref [b]
Ref [c]
Ref [d]
IFRS
IFRS Translation Adjustments
REVENUE
Net investment gains
$ 27,556
$ 8,408
$ —
$ —
$ 2,963
$ 38,927
Distributions and interest income
20,965
[7,916]
Net carried interest income
Dividend income
Management fees
Advisory and other fees
Realized gain on temporary
investments
EXPENSES
Employee compensation and
benefits
300
1,619
621
—
[1,619]
—
1,719
[487]
2,250
—
—
—
—
—
—
—
—
—
13,049
9,824
10,124
20,248
—
—
—
—
—
—
—
—
—
621
1,232
2,250
55,030
[1,614]
—
9,824
13,087
76,327
[7,886]
—
—
—
[700]
[8,586]
Share‐based compensation
[5,797]
—
Administration and other expense
Finance and foreign exchange
expense
Management participation
[4,931]
[759]
—
710
[84]
—
Income before income taxes
Income tax expense
Net income and comprehensive
income for the year
[19,373]
626
35,657
[4,911]
[988]
988
55
—
—
—
—
—
—
—
—
[5,742]
[4,221]
[843]
—
55
55
—
—
[13,087]
[13,087]
[700]
[13,087]
[32,479]
9,124
[1,118]
—
—
43,848
[5,041]
$ 30,746
$ —
$ 55
$ 8,006
$ —
$ 38,807
Basic net income per share
$ 2.03
Fully diluted net income per share
$ 2.03
$ 2.56
$ 2.56
51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
Reconciliation of Canadian GAAP Consolidated Statement of Cash Flows for the year ended March 31, 2014
OPERATING ACTIVITIES
Net income for the year
Add [deduct] items not involving a current
cash outlay:
Amortization of fixed assets
Share‐based compensation expense
Deferred income tax expense
Net investment gains
Unrealized carried interest income net of
management participation
Non‐cash items relating to foreign exchange
forward contracts
Non‐cash items relating to corporate
investments
Adjustments for:
Net cost of acquisition of temporary
investments
Loans advanced
Receipt of loans advanced
Loans received
Repayment of loans received
Cost of realization of foreign exchange
forward contracts
Decrease in restricted temporary investments
Acquisition of corporate investments
Proceeds on sale of corporate investments
Return of capital from corporate investments
Net change in non‐cash working capital
balances
Cash used in operating activities
INVESTING ACTIVITIES
Purchase of fixed assets
Cash used in investing activities
FINANCING ACTIVITIES
Cash dividends paid
Issuance of share capital
Canadian
GAAP
Ref [a]
Ref [b]
Ref [c]
Ref [d]
IFRS
IFRS Translation Adjustments
$ 30,746
$ —
$ 55
$8,006
$ —
$ 38,807
439
3,866
3,621
[27,556]
—
93
—
[771]
[8,408]
—
9,431
[7,882]
[11,453]
10,916
—
[55]
—
—
—
—
—
9,094
[6,052]
—
—
—
1,117
—
[9,824]
—
—
—
[2,963]
2,963
532
3,811
3,967
[38,927]
[6,861]
—
—
1,549
—
[701]
—
[537]
—
2,341
—
—
—
—
[3,287]
[3,287]
[107,048]
78,910
—
—
[10,673]
5,425
[26,551]
884
—
[62,340]
[5,271]
[58,517]
[22,611]
26,644
5,796
[46,817]
10,591
—
23,017
—
8,239
4,859
2,082
889
[69]
[69]
[47]
[47]
[3,499]
71
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
701
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
[129,659]
105,554
5,796
[46,817]
[82]
5,425
[3,534]
884
8,239
[57,481]
[2,488]
[57,628]
[116]
[116]
[3,499]
71
Cash used in financing activities
[3,428]
—
—
—
—
[3,428]
Net decrease in cash and cash equivalents
Cash and cash equivalents, beginning of year
[62,014]
114,805
842
[1,836]
Cash and cash equivalents, end of year
$ 52,791
$ [994]
—
—
$ —
—
—
$ —
—
—
[61,172]
112,969
$ —
$ 51,797
52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
4. CASH EQUIVALENTS AND TEMPORARY INVESTMENTS
Cash equivalents consist of deposits in investment and money market savings accounts which have maturities of less than
90 days from the date of acquisition. The yield ranges between 0.2% and 1.1% per annum [March 2014 – between 1.2% and
1.4%; April 2013 – between 1.2% and 1.4%] with a weighted average rate of pre‐tax return of 1.0% per annum [March 2014
– 1.3%; April 2013 – 1.2%].
Temporary investments consist of guaranteed investment certificates and corporate bonds and loans which 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 8.4% per annum [March 2014 – between 1.5% and 9.2%; April 2013 – between 1.7% and 9.2%]
with a weighted average rate of pre‐tax return of 4.5% per annum [March 2014 – 3.0%; April 2013 – 3.2%]. The composition
of Clairvest's temporary investments at March 31 was as follows:
March 31, 2015
Due after 1 year
March 31, 2014
April 1, 2013
Total
Total
Total
Due in 1 year
or less
Guaranteed investment
certificates
Corporate bonds and loans
$ 25,663
$ 12,625
$ 38,288
$ 50,453
$ 44,335
––
20,223 [1]
20,223
12,542[1]
15,373[1]
$ 25,663
$ 59,708
[1] In addition to the investment Clairvest made in Centaur Gaming as described in note 8[h], Clairvest also made a treasury investment in Centaur Gaming
during fiscal 2013 in the form of US$6.0 million first lien secured loans and US$6.0 million second lien secured loans. During fiscal 2015, the first lien
loans were repaid in full and Clairvest purchased an additional US$4.0 million in second lien loans. Also during fiscal 2015, Clairvest purchased US$7.5
million in Light Tower Rentals corporate bonds for its treasury holdings. At March 31, 2015, Clairvest's treasury holdings included US$7.5 million in Light
Tower Rentals corporate bonds and US$10.0 million in Centaur Gaming second lien loans and the fair market values were US$5.9 million [C$7.4 million]
and US$10.1 million [C$12.8 million] [March 2014 – US$6.0 million [C$6.7 million]; April 2013 − US$6.0 million [C$6.1 million]] based on the respective
last bid prices at March 31, 2015.
$ 32,848
$ 58,511
$ 62,995
5. RELATED PARTY DISCLOSURES
Transactions with CEP Funds and acquisition entities
Investments in acquisition entities and investment‐related transactions with acquisition entities are further described in
note 8.
[a] The general partner of CEP ["CEP GP"], an entity which is controlled by Clairvest, is entitled to participate in distributions
made by CEP equal to 20% of all net gains ["carried interest"] of CEP as governed by its limited partnership agreement.
10% of the carried interest is allocated to Clairvest and the remaining 10% is allocated to principals and employees of
Clairvest via a limited partnership ["Participation Partnership"], the general partner of which is Clairvest and the limited
partners are principals and employees of Clairvest. The limited partners of Participation Partnership have purchased, at
fair market value, units of the Participation Partnership. From time to time, additional units in Participation Partnership
may be purchased by the limited partners of Participation Partnership. At March 31, 2015, CEP had declared and paid
distributions to CEP GP totaling $23.3 million [March 2014 − $22.8 million; April 2013 − $22.2 million], 50% of which or
$11.6 million [March 2014 − $11.4 million; April 2013 − $11.1 million] was ul(cid:415)mately paid to Clairvest and the other 50%
or $11.6 million [March 2014 − $11.4 million; April 2013 − $11.1 million] was ul(cid:415)mately paid to the limited partners of
Participation Partnership. During fiscal 2015, $0.1 million [2014 − $0.2 million] was ul(cid:415)mately paid to key management.
At March 31, 2015, if CEP were to sell all of its corporate investments at their current fair values, CEP GP would
receive up to $1.8 million [March 2014 − $1.4 million; April 2013 − $2.0 million] in carried interest from CEP. As
described in notes 2[f] and 3, Clairvest has recorded the $1.8 million [March 2014 − $1.4 million; April 2013 − $2.0
million] as carried interest receivable on the consolidated statements of financial position, with the 50% entitlement
that will be ultimately paid to the limited partners of Participation Partnership, or $0.9 million [March 2014 − $0.7
million; April 2013 − $1.0 million] recorded as a management par(cid:415)cipa(cid:415)on liability on the consolidated statements of
financial position.
53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
[b] As 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% per annum 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
investments of CEP III. During fiscal 2015, CEP III declared to Clairvest priority distributions of $1.4 million [2014 – $1.6
million]. As per the Limited Partnership Agreement, fees of $0.2 million [2014 – $0.3 million] from corporate
investments of CEP III were netted against the priority distributions.
The general partners of CEP III ["CEP III GP"] are entitled to a 20% carried interest in respect of CEP III as governed
by its limited partnership agreement. 10% of the carried interest is allocated to Clairvest and the remaining 10% is
allocated to MIP III, the general partner of which is Clairvest and the limited partners of which are principals and
employees of Clairvest. The limited partners of MIP III have purchased, at fair market value, units of the MIP III. From
time to time, additional units in MIP III may be purchased by the limited partners of MIP III. At March 31, 2015, CEP III
had declared and paid distributions to CEP III GP totaling $33.3 million [March 2014 – nil; April 2013 – nil], 50% of which,
or $16.6 million [March 2014 – nil; April 2013 – nil], was ultimately paid to Clairvest and the other 50% or $16.6 million
[March 2014 – nil; April 2013 – nil] was ultimately paid to the limited partners of MIP III. During fiscal 2015, $8.9 million
[2014 − nil] was ultimately paid to key management.
At March 31, 2015, if CEP III were to sell all of its corporate investments at their current fair values, CEP III GP
would receive up to $21.9 million [March 2014 − $33.8 million; April 2013 − $23.2 million] in carried interest from CEP III.
As described in notes 2[f] and 3, Clairvest has recorded the $21.9 million [March 2014 − $33.8 million; April 2013 − $23.2
million] as carried interest receivable on the consolidated statements of financial position, with the 50% entitlement
that will be ultimately paid to the limited partners of MIP III, or $11.0 million [March 2014 − $16.9 million; April 2013 −
$11.6 million] recorded as a management participation liability on the consolidated statements of financial position.
[c] As described in note 16[b], Clairvest is required to co‐invest alongside CEP III in all investments undertaken by CEP III.
CEP III Co‐Invest was established in fiscal 2007 as the investment vehicle for this purpose. CEP III Co‐Invest has three
limited partners, Clairvest, 2141788 Ontario and MIP III. MIP III 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. At March 31, 2015, CEP III Co‐Invest had declared and
paid distributions totaling $4.1 million [March 2014 – nil; April 2013 – nil] to MIP III. During fiscal 2015, $2.1 million
[2014 − nil] was ultimately paid to key management.
Clairvest, as the general partner of MIP III, is entitled to participate in distributions equal to the realizable value on
the $1.1 million invested by MIP III in CEP III Co‐Invest plus the first $0.2 million in distributions received by the MIP III as
described above, and any other distributions to MIP III are the entitlements of the limited partners of MIP III. At March
31, 2015, $2.0 million [March 2014 – $0.6 million; April 2013 − $0.3 million] has been received by Clairvest.
At March 31, 2015, if CEP III Co‐Invest were to sell its corporate investments at their current fair values, the limited
partners of MIP III, via the general partner of CEP III Co‐Invest, would receive up to $4.7 million [March 2014 – $5.5
million; April 2013 − $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 management participation liability on the consolidated statements of financial
position.
[d] As general partner of CEP IV, Clairvest is entitled to a priority distribution from CEP IV. Effective January 14, 2011 and to
the date upon which consideration based on committed capital is payable in respect of CEP V [the "CEP IV Investment
Termination Date"], the priority distribution is calculated monthly as 0.1667% per annum committed capital, and
thereafter, 0.1667% per annum 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. As at March 31,
2015, the CEP IV Investment Termination Date has not been determined. During fiscal 2015, CEP IV declared to Clairvest
priority distributions of $5.4 million [2014 – $5.4 million]. As per the Limited Partnership Agreement, fees of $0.5 million
[2014 – $0.5 million] from corporate investments of CEP IV were netted against the priority distributions.
The general partners of CEP IV ["CEP IV GP"] are entitled to a 20% carried interest in respect of CEP IV as governed
by its limited partnership agreement. 10% of the carried interest is allocated to Clairvest and the remaining 10% is
54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
allocated to MIP IV, the general partner of which is Clairvest and the limited partners of which are principals and
employees of Clairvest. The limited partners of MIP IV have purchased, at fair market value, units of the MIP IV. From
time to time, additional units in MIP IV may be purchased by the limited partners of MIP IV. No carried interest has
been declared and paid by CEP IV to CEP IV GP as at March 31, 2015.
At March 31, 2015, if CEP IV were to sell all of its corporate investments at their current fair values, CEP IV GP
would receive up to $24.6 million [March 2014 ‐ $17.8 million; April 2013 ‐ $9.8 million] in carried interest from CEP IV.
As described in notes 2[f] and 3, Clairvest has recorded the $24.6 million [March 2014 − $17.8 million; April 2013 − $9.8
million] as carried interest receivable on the consolidated statements of financial position, with the 50% entitlement
that will be ultimately paid to the limited partners of MIP IV, or $12.3 million [March 2014 − $8.9 million; April 2013 −
$4.9 million] recorded as a management participation liability on the consolidated statements of financial position.
[e] As manager of CEP IV‐A, Clairvest is entitled to a management fee from CEP IV‐A. Effective January 14, 2011 and to the
date upon which consideration based on committed capital is payable in respect of CEP V‐A [the "CEP IV‐A Investment
Termination Date"], the management fee is calculated monthly as 0.1667% per annum 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. As at March 31, 2015, the CEP IV Investment Termination Date has not been
determined. During fiscal 2015, Clairvest earned management fees of $0.6 million [2014 – $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 [2014 – $0.3 million] was netted against the management fees.
The general partner of CEP IV‐A ["CEP IV‐A GP"], an entity which is controlled by Clairvest, is entitled to a 20%
carried interest in respect of CEP IV‐A as governed by its limited partnership agreement. 10% of the carried interest is
allocated to Clairvest and the remaining 10% is allocated to MIP IV. No carried interest has been declared and paid by
CEP IV‐A to CEP IV‐A GP as at March 31, 2015.
At March 31, 2015, if CEP IV‐A were to sell all of its corporate investments at their current fair values, CEP IV‐A GP
would receive up to $5.4 million [March 2014 − $3.3 million; April 2013 − $1.6 million] in carried interest from CEP IV‐A.
As described in notes 2[f] and 3, Clairvest has recorded the $5.4 million [March 2014 ‐ $3.3 million; April 2013 − $1.6
million] as carried interest receivable on the consolidated statements of financial position, with the 50% entitlement
that will be ultimately paid to the limited partners of MIP IV, or $2.7 million [March 2014 − $1.7 million; April 2013 −
$0.8 million] recorded as a management participation liability on the consolidated statements of financial position.
[f] As described in note 16[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‐Invest was established in fiscal 2010 as the investment vehicle for this
purpose. CEP IV Co‐Invest has two limited partners, Clairvest and MIP IV. MIP IV 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, as general partner of MIP IV, is entitled to participate in distributions equal to the realizable value on the
$1.6 million invested by MIP IV in CEP IV Co‐Invest plus the first $0.4 million received by MIP IV as described above, and
any other distributions to MIP IV are the entitlements of the limited partners of MIP IV. No amounts have been
received by Clairvest at March 31, 2015.
At March 31, 2015, if CEP IV Co‐Invest were to sell all of its corporate investments at their current fair values, MIP
IV would receive up to $6.2 million [March 2014 − $4.7 million; April 2013 − $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 management participation
liability on the statements of financial position. To date, CEP IV Co‐Invest has not made any carried interest payments
to MIP IV.
[g] As general partner of CEP V, Clairvest is entitled to a priority distribution from CEP V. The priority distribution
calculated as follows: [i] from March 2, 2015 to the CEP IV Investment Termination Date, 0.1667% per annum of capital
allocated to specifically identifiable investments net of any write‐downs of capital invested; [ii] from the CEP IV
Investment Termination Date to the fifth anniversary of the CEP IV Investment Termination Date, 0.1667% per annum
55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
of committed capital; and [iii] thereafter, 0.1667% per annum of invested capital net of write‐downs of capital then
invested. As at March 31, 2015, the CEP IV Investment Termination Date has not been determined. During fiscal 2015,
CEP V declared to Clairvest priority distributions of $30 thousand [2014 – nil].
The general partners of CEP V ["CEP V GP"] are entitled to a 20% carried interest in respect of CEP V as governed by
its limited partnership agreement. 10% of the carried interest is allocated to Clairvest and the remaining 10% is
allocated to MIP V, the general partner of which is Clairvest and the limited partners of which are principals and
employees of Clairvest. The limited partners of MIP V have purchased, at fair market value, units of the MIP V. From
time to time, additional units in MIP V may be purchased by the limited partners of MIP V. No carried interest has been
declared and paid by CEP V to CEP V GP as at March 31, 2015.
[h] As manager of CEP V‐A, Clairvest is entitled to a management fee from CEP V‐A. The management fee calculated as
follows: [i] from March 2, 2015 to the CEP IV‐A Investment Termination Date, 0.1667% per annum of capital allocated
to specifically identifiable investments net of any write‐downs of capital invested; [ii] from the CEP IV‐A Investment
Termination Date to the fifth anniversary of the CEP IV‐A Investment Termination Date, 0.1667% per annum of
committed capital; and [iii] thereafter, 0.1667% per annum of invested capital net of write‐downs of capital then
invested. As at March 31, 2015, the CEP V‐A Investment Termination Date has not been determined. During fiscal 2015,
Clairvest earned management fees of $6 thousand [2014 – nil] as compensation for its services in the administration of
the portfolio of CEP V‐A.
The general partner of CEP V‐A ["CEP V‐A GP"], an entity which is controlled by Clairvest, are entitled to a 20%
carried interest in respect of CEP V‐A as governed by its limited partnership agreement. 10% of the carried interest is
allocated to Clairvest and the remaining 10% is allocated to MIP V. No carried interest has been declared and paid by
CEP V‐A to CEP V‐A GP as at March 31, 2015.
[i] As described in note 16[d], Clairvest is required to co‐invest alongside CEP V and CEP V‐A in all investments undertaken
by CEP V and CEP V‐A. CEP V Co‐Invest was established in fiscal 2015 as an investment vehicle for this purpose. CEP V
Co‐Invest has three limited partners, Clairvest, 2141788 Ontario and MIP V. MIP V has invested $2.4 million in CEP V
Co‐Invest and is entitled to an 8.25% carried interest in respect of CEP V Co‐Invest.
Clairvest, as the general partner of MIP V, is entitled to participate in distributions equal to the realizable value on
the $2.4 million invested by MIP V in CEP V Co‐Invest plus the first $1.4 million received by MIP V as described above,
and any other distributions to MIP V are the entitlements of the limited partners of MIP V. No amounts have been
received by Clairvest at March 31, 2015.
[j] At March 31, 2014, the Company had advanced to CEP III $15.6 million in loans bearing interest at the prime rate in
accordance with CEP III's Limited Partnership Agreement. During fiscal 2015, additional loans totaling $2.5 million
[2014 – $19.2 million] were made by the Company to CEP III. Also during fiscal 2015, $15.6 million [2014 – $3.6 million]
of these loans were repaid and the remaining $2.5 million were transferred to an acquisition entity of Clairvest. Interest
of $0.1 million [2014 – $0.1 million] was earned from loans to CEP III during fiscal 2015.
[k] At March 31, 2014, CEP III Co‐Invest had advanced $0.2 million in non‐interest bearing loans to Clairvest. During fiscal
2015, the Clairvest received additional loans of $17.5 million from CEP III Co‐Invest. All loans advanced by CEP III Co‐
Invest were repaid in full by Clairvest during fiscal 2015.
[l] At March 31, 2014, the Company had advanced to CEP IV $8.7 million in loans bearing interest at the Reference Rate in
accordance with CEP IV’s Limited Partnership Agreement. During fiscal 2015, additional loans totaling $24.5 million
[2014 – $63.1 million] were made by the Company to CEP IV. Also during fiscal 2015, $25.8 million [2014 – $58.9
million] of these loans were repaid and a further $4.0 million [2014 − nil]were transferred to an acquisition entity of
Clairvest such that $3.4 million [2014 − $8.7 million] remained outstanding at March 31, 2015. Interest of $0.7 million
[2014 – $0.3 million] was earned from loans to CEP IV during fiscal 2015.
[m] At March 31, 2014, the Company had advanced to CEP IV‐A $0.8 million in loans bearing interest at the Reference Rate
in accordance with CEP IV‐A's Limited Partnership Agreement. During fiscal 2015, additional loans totaling $3.8 million
[2014 – $8.8 million] were made by the Company to CEP IV‐A. Also during fiscal 2015, $4.0 million [2014 – $8.7 million]
56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
of these loans were repaid such that $0.6 million [2014 ‐ $0.8 million] remained outstanding at March 31, 2015.
Interest of $0.1 million [2014 – $14 thousand] was earned from loans to CEP IV‐A during fiscal 2015.
[n] At March 31, 2014, the Company had advanced to CEP IV Co‐Invest $3.7 million in non‐bearing interest loans. During
fiscal 2015, additional loans totaling $19.8 million [2014 – $21.0 million] were made by the Company to CEP IV Co‐
Invest. Also during fiscal 2015, $18.8 million [2014 – $17.3 million] of these loans were repaid such that $4.7 million
[2014 − $3.7 million] remained outstanding at March 31, 2015. Subsequent to year end, an additional $0.5 million of
these loans were repaid.
[o] During fiscal 2015, the Company had advanced to CEP V $18.9 million in loans bearing interest at the Reference Rate in
accordance with CEP V's Limited Partnership Agreement. These loans were repaid in full during fiscal 2015. Interest of
$0.1 million was earned from loans to CEP V during fiscal 2015.
[p] During fiscal 2015, the Company had advanced to CEP V‐A $3.6 million in loans bearing interest at the Reference Rate
in accordance with CEP V‐A's Limited Partnership Agreement. These loans were repaid in full during fiscal 2015.
Interest of $12 thousand was earned from loans to CEP V during fiscal 2015
[q] During fiscal 2015, MIP V advanced $2.4 million in non‐interest bearing loans to Clairvest which were repaid in full
during fiscal 2015.
[r] At March 31, 2014, the Company had advanced to 2141788 Ontario $1.0 million in non‐bearing interest loans. The
loans were repaid in full during fiscal 2015.
Other related‐party transactions
[s] Included in accounts receivable and other assets at March 31, 2015 are share purchase loans made to certain officers
of the Company totaling $2.2 million [March 2014 − $1.4 million; April 2013 − $1.1 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 $3.2 million [March 2014 – $2.1 million; April 2013 − $1.4 million].
None of these loans were made to key management [March 2014 ‐ $0.2 million; April 2013 − $0.3 million]. Also
included in accounts receivable and other assets at March 31, 2015 are other loans made to certain officers of a
company affiliated with Clairvest totaling $0.5 million [March 2014 − $0.6 million; April 2013 − $0.6 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 $54 thousand [2014 – $35 thousand] was earned on these loans during the year. Also included in
accounts receivable and other assets were receivables as follows:
Clairvest's direct and indirect investee companies
CEP
CEP III
CEP IV
CEP IV‐A
CEP V
CEP V‐A
Other accounts receivables and prepaid expenses
Share purchase loans and loans to officers of affiliated
company
March 31, 2015
March 31, 2014
April 1, 2013
$ 2,867
3
1,036
6,205
264
1,065
189
11,629
647
$ 2,003
8
2,575
3,459
493
―
―
8,538
777
$ 1,122
38
1,607
3,242
528
―
―
6,537
3,970
2,779
2,205
1,690
$ 15,055
$ 11,520
$ 12,197
57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
Additionally, acquisition entities of the Company which were not consolidated by the Company as described in note 8
held receivables from Clairvest's indirect investee companies totaling $1.2 million [March 2014 – $1.0 million, April
2013 ‐ $0.1 million].
[t] During fiscal 2015, the Company had advanced to an acquisition entity of a co‐investor of Discovery Air Inc. $2.0 million
in non‐interest bearing loans which were repaid in full during fiscal 2015.
[u] During fiscal 2015, Clairvest earned $2.3 million [2014 – $2.3 million] in distributions and interest income and $1.3
million [2014 – $1.2 million] in advisory and other fees from its indirect investee companies. Additionally, acquisition
entities of the Company which were not consolidated by the Company as described in note 8 earned $8.5 million [2014
– $8.1 million] in distributions and interest income, $1.0 million [2014 – $1.6 million] in dividend income and $0.5
million [2014 – $0.5 million] in advisory and other fees from its investee companies.
[v] Clairvest, through PGO Aviation LP, has a 50% ownership in an aircraft where the other 50% ownership is held by a
related party of Clairvest. Clairvest received 100% of the incidental rental income of the aircraft and is responsible for
100% of the operating expenses. In accordance with IFRS, Clairvest has recognized 100% of the net book value of the
aircraft and a liability for the 50% ownership the Company does not own.
6. NET INVESTMENT GAINS
Net investment gains for the years ended March 31, 2015 and 2014 comprised the following:
Net realized losses during the year [note 8[b]]
Previously recognized net unrealized losses [note 8[b]]
Net changes in unrealized gains during the year
2015
2014
$ [2,096]
$ [5,111]
2,115
37,452
5,086
38,952
$ 37,471
$ 38,927
7. NET CARRIED INTEREST INCOME
Net carried interest income for the years ended March 31, 2015 and 2014 comprised the following:
Realized carried interest income [notes 5[a], 5[b] and 5[c]]
$ 33,991
$ 600
2015
2014
Net changes in unrealized carried interest [notes 5[a], 5[b], 5[d],
and 5[e]]
[2,630]
19,648
$ 31,361
$ 20,248
8. CORPORATE INVESTMENTS
In accordance with IFRS 10, the fair value of the Company’s corporate investments include the fair value of the net assets of
its acquisition entities which are controlled by the Company. Accordingly, Clairvest's direct corporate investments comprise
these acquisition entities which invest directly or indirectly in various investee companies.
2141788 Ontario, a limited partner of CEP III Co‐Invest and CEP V Co‐Invest, is a wholly‐owned acquisition entity of
Clairvest. Clairvest's relationship with CEP III Co‐Invest and MIP III, CEP IV Co‐Invest and MIP IV, and CEP V Co‐Invest and
MIP V are described in notes 5[c], 5[f] and 5[i] to the annual consolidated financial statements. During the year ended
March 31, 2015, Clairvest made total investments of $13.4 million [2014 – $3.5 million] in CEP IV Co‐Invest and $3.6 million
[2014 – nil] in CEP V Co‐Invest. 2141788 and MIP V also made a $3.6 million [2014 – nil] and $2.4 million [2014 – nil]
investment in CEP V Co‐Invest respectively during fiscal 2015.
During fiscal 2015, CEP III Co‐Invest received total net cash proceeds of $79.6 million as a result of the realization
events involving Kubra Data Transfer Ltd. ["Kubra"] and Light Tower Rentals Inc. ["Light Tower Rentals"] as described in
notes 8[e] and 8[f]. CEP III Co‐Invest returned $10.1 million of capital to Clairvest and declared distributions totaling $16.8
58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
million to Clairvest. CEP III Co‐Invest also returned $16.7 million and $0.4 million and declared distributions totaling $27.7
million and $0.7 million to 2141788 Ontario and MIP III, respectively. CEP III Co‐Invest also declared and paid $4.1 million to
the general partner, $0.2 million of which was then declared and paid to the general partner of MIP III and $3.9 million of
which was then declared and paid to the limited partners MIP III as described in note 5 [c].
Also during fiscal 2015, MIP III declared and paid distributions totaling $1.4 million to Clairvest as described in note
5[c]. The following discloses Clairvest’s direct investments and those made in acquisition entities which are controlled by
Clairvest but which are not part of the consolidated group, and the holdings of the underlying investee companies held by
these acquisition entities ["indirect investee companies"]:
59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
As at March 31, 2015
Clairvest
Group
Inc.
2141788
Ontario
CEP III
Co‐
Invest
CEP IV
Co‐
Invest
MIP III
CEP V
Co‐
Invest
MIP IV
MIP V
Total
Investments alongside CEP
Grey Eagle Casino
2,709
−
−
−
−
Investments alongside CEP III
Casino New Brunswick
Chilean Gaming Holdings
Light Tower Rentals Inc.
["Light Tower Rentals"]
Lyophilization Services of New
England Inc. ["LSNE"]
Investments alongside CEP IV
Centaur Gaming
Cieslok Media Inc. ["Cieslok"]
County Waste of Virginia, LLC
["County Waste"]
CRS Contractors Rental Supply
Limited Partnership ["CRS"]
Davenport Land Investments
Discovery Air Inc.
["Discovery Air"]
Linen King, LLC ["Linen King"]
Momentum Aviation Group
["MAG"]
New Meadowlands Racetrack,
LLC [" the Meadowlands"]
Rivers Casino
Winters Bros. Waste Systems
of CT, LLC ["Winters Bros. of
CT"]
Investments alongside CEP V
Winters Bros. Waste Systems
of Long Island Holdings, LLC
["Winters Bros. of LI"]
Wellington Financial Fund III/IV
["Wellington Fund III/IV"]
Other Investments
Total [excluding net assets
[liabilities] from acquisition
entities]
Net assets [liabilities] from
acquisition entities
Total
−
−
−
−
−
−
975
143
159
329
67
640
16
77
154
491
−
−
−
−
49,380
7,268
8,051
16,655
3,398
32,396
793
3,903
7,788
24,871
9,475
187
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
2,709
8,324
34,703
11,629
9,380
50,355
7,411
8,210
16,984
3,465
33,036
809
3,980
7,942
25,362
9,662
5,111
21,309
3,089
12,878
7,141
4,315
5,760
3,481
124
516
173
139
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
3,633
18,069
−
−
−
−
3,658
2,422
9,713
−
−
−
18,069
20,778
1,616
42,954
−
23,763
−
952
−
163,978
−
3,238
−
3,658
2,422
−
261,743
1,616
22,394
42,954
23,763
952
163,978
3,238
3,658
2,422
263,359
−
20,572
12,472
500
[5,264]
[104]
[71]
[47]
28,062
22,394
63,526
36,239
1,452
158,714
3,134
3,587
2,375
291,421
60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
As at March 31, 2014
Investments alongside CEP
Grey Eagle Casino
N‐Brook Mortgage LP
["N‐Brook"]
Investments alongside CEP III
Casino New Brunswick
Chilean Gaming Holdings
Kubra
Light Tower Rentals
LSNE
Investments alongside CEP IV
Centaur Gaming
Cieslok
County Waste
CRS
Discovery Air
Linen King
MAG
The Meadowlands
Rivers Casino
Winters Bros. of CT
Wellington Fund III/IV
Other Investments
Total [excluding net assets
[liabilities] from acquisition
entities]
Net assets [liabilities] from
acquisition entities
Total
Clairvest
Group Inc.
2141788
Ontario
CEP III Co‐
Invest
MIP III
CEP IV Co‐
Invest
MIP IV
Total
2,130
125
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
15,542
17,797
562
−
−
2,708
18,079
14,091
22,308
5,031
−
−
1,633
10,905
8,499
13,455
3,035
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
66
437
340
539
121
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
38,870
3,922
6,927
12,213
27,421
690
2,817
6,166
21,278
8,237
−
−
−
−
−
−
−
−
925
93
165
291
653
16
67
147
507
196
−
2,130
125
4,407
29,421
22,930
36,302
8,187
39,795
4,015
7,092
12,504
28,074
706
2,884
6,313
21,785
8,433
15,542
62,217
−
37,527
−
1,503
−
128,541
−
3,060
−
250,645
562
18,359
62,217
37,527
1,503
128,541
3,060
251,207
−
[2,645]
[1,596]
[64]
[2,806]
[67]
[7,178]
18,359
59,572
35,931
1,439
125,735
2,993
244,029
61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
As at April 1, 2013
Investments alongside CEP
Grey Eagle Casino
Landauer Metropolitan Inc
N‐Brook
Investments alongside CEP III
Casino New Brunswick
Chilean Gaming Holdings
Kubra
Light Tower Rentals
LSNE
Investments alongside CEP IV
Centaur Gaming
CRS
Discovery Air
Linen King
MAG
Rivers Casino
Wellington Fund III/IV
Other Investments
Total [excluding net assets from
acquisition entities]
Net assets from acquisition
entities
Total
Clairvest
Group Inc.
2141788
Ontario
CEP III Co‐
Invest
MIP III
CEP IV Co‐
Invest
MIP IV
Total
2,431
25
713
−
−
−
−
−
−
−
−
−
−
−
14,850
18,019
812
−
−
−
1,504
24,264
7,791
15,104
4,654
−
−
−
−
−
−
−
−
−
−
908
14,636
4,699
9,111
2,807
−
−
−
−
−
−
−
53,317
−
32,161
−
18,831
53,317
32,161
−
−
−
36
586
188
365
112
−
−
−
−
−
−
−
1,287
−
1,287
−
−
−
−
−
−
−
−
17,990
10,313
24,895
769
1,857
20,233
−
76,057
−
−
−
−
−
−
−
−
−
453
260
626
19
47
509
−
2,431
25
713
2,448
39,486
12,678
24,580
7,573
18,443
10,573
25,521
788
1,904
20,742
14,850
1,914
−
182,755
812
76,057
1,914
183,567
−
3,993
2,409
97
19,674
495
26,668
18,831
57,310
34,570
1,384
95,731
2,409
210,235
The following table details the assets and liabilities included in the determination of the fair value of the net assets
[liabilities] of acquisition entities excluding the indirect investee companies held by these acquisition entities.
March 31, 2015
March 31, 2014
April 1, 2013
Assets
Cash
Accounts receivable and other assets
Loans receivable
Liabilities
Accounts payable and accrued liabilities
Loans payable
Derivative Instruments
Deferred tax liability
Net assets [liabilities]
30,905
1,515
15,217
47,637
6,697
4,684
7,998
196
19,575
28,062
994
967
7,065
9,026
1,049
11,580
299
3,276
16,204
[7,178]
1,837
244
41,258
43,339
2,459
8,785
2,924
2,503
16,671
26,668
62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
Excluding the net assets from acquisition entities summarized in the table above, the difference between the cost and the
fair value of the Company's indirect investee companies, are summarized below.
March 31, 2015
March 31, 2014
April 1, 2013
Fair value
Cost
Difference
Fair value
Cost
Difference
Fair value
Cost
Difference
Investments alongside CEP
Grey Eagle Casino
$ 2,709
$ 1
$ 2,708 $ 2,130 $ 1 $ 2,129 $ 2,431 $ 1
$ 2,430
Landauer Metropolitan Inc.
N‐Brook Mortgage LP
Investments alongside CEP III
—
—
—
—
—
—
—
125
—
—
2,240
[2,115]
25
713
5,111
3,124
[5,086]
[2,411]
Casino New Brunswick
8,324
9,798
[1,474]
4,407
9,798
[5,391]
2,448
9,798
[7,350]
Chilean Gaming Holdings
34,703
28,754
5,949
29,421
28,754
667
39,486
28,725
Kubra
Light Tower Rentals
LSNE
Investments alongside CEP IV
—
11,629
9,380
—
2,403
7,451
—
22,930
9,226
36,302
1,929
8,187
2,150
8,178
7,451
20,780
12,678
28,124
24,580
736
7,573
2,150
8,178
7,451
10,761
10,528
16,402
122
Centaur Gaming
50,355
14,644
35,711
39,795
14,644
25,151
18,443
14,644
3,799
Cieslok
County Waste
CRS
7,411
8,210
4,015
6,690
3,396
1,520
4,015
7,092
4,015
6,706
—
386
—
—
—
—
16,984
10,573
6,411
12,504
10,573
1,931
10,573
10,573
Davenport Land Investments
3,465
3,059
406
—
—
—
—
—
Discovery Air
33,036
29,606
3,430
28,074
22,045
6,029
25,521
22,045
Linen King
MAG
The Meadowlands
809
2,525
[1,716]
706
2,525
[1,819]
3,980
7,942
2,787
5,580
1,193
2,362
2,884
6,313
788
1,904
—
2,525
1,915
—
—
—
—
—
3,476
[1,737]
[11]
—
Rivers Casino
25,362
7,508
17,854
21,785
Winters Bros. of CT
9,662
8,053
1,609
8,433
Investments alongside CEP V
2,447
5,580
7,508
8,053
437
733
380
14,277
20,742
7,413
13,329
—
—
—
—
—
—
Winters Bros. of LI
9,713
7,215
2,498
—
—
—
Wellington Fund III/IV
18,069
14,375
3,694
15,542
13,802
1,740
14,850
12,138
2,712
Other investments
1,616
1,686
[70]
562
738
[176]
812
911
[99]
261,743
165,037
96,706
250,645
156,470
94,175
182,755
135,791
46,964
$ 263,359
$166,723
$ 92,636 $ 251,207
$157,208
$ 93,999 $ 183,567
$136,702
$ 46,865
The cost and fair value of indirect investee companies do not reflect foreign exchange gains or losses on the foreign
exchange forward contracts entered into as economic hedges against these investments [note 15]. For those investments
which are hedged by acquisition entities, the fair value of these foreign exchange forward contracts were included in the
net assets [liabilities] of these acquisition entities. Details of each investment are described below.
63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
[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, 2015, March 31, 2014 and April 1, 2013, Clairvest held 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 2015, Clairvest earned $0.8 million [2014 – $0.3 million] in profit distributions from Grey Eagle Casino,
bringing total profit distributions earned to March 31, 2015 to $1.5 million [2014 – $0.7 million].
[b] 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, 2014, Clairvest had a net $2.2 million [April 2013 − $3.1 million] investment in N‐Brook. During fiscal
2015, Clairvest received cash distributions totaling $0.1 million from N‐Brook and realized the investment. Clairvest
recorded a realized gain of $19 thousand during fiscal 2015. Over the life of this investment, Clairvest realized a $2.1
million loss, all of which except for the $19 thousand gain as described, had been previously recorded as unrealized
losses.
[c] Casino New Brunswick
Casino New Brunswick is a gaming entertainment complex located in Moncton, New Brunswick. At March 31, 2015,
March 31, 2014 and April 1, 2013, CEP III Co‐Invest had invested $9.8 million in Casino New Brunswick in the form of
debentures with a stated interest at a rate of 6% per annum and units of a limited partnership which operates Casino
New Brunswick, entitling CEP III Co‐Invest to 22.5% of the earnings of the casino until December 31, 2030. Interest had
been waived between March 1, 2011 and December 31, 2012 and resumed effective January 1, 2013, with 45% of the
interest payable in cash and the remaining 55% payable in‐kind.
At April 1, 2013, Clairvest had pledged a $5.4 million temporary investment to a Schedule 1 Canadian chartered
bank which has provided debt financing to Casino New Brunswick. During fiscal 2014, the pledge was no longer required
and the restriction on the $5.4 million temporary investment was released.
During fiscal 2015, CEP III Co‐Invest recorded $0.3 million [2014 – $0.4 million] in net interest income, which
represents the portion payable in cash.
Subsequent to year end, CEP III Co‐Invest entered into an agreement to realize its 22.5% ownership interest in
Casino New Brunswick. CEP III Co‐Invest is expected to receive gross proceeds of approximately $14 million. The
proposed transaction is subject to the consent of the New Brunswick Lotteries and Gaming Corporation and requires
regulatory approvals.
[d] Chilean Gaming Holdings
Chilean Gaming Holdings is a limited partnership which has a 50.0% ownership interest in Casino Marina 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. At March 31, 2015, March 31, 2014 and April 1, 2013, CEP III Co‐Invest owned 30,446,299 limited
partnership units of Chilean Gaming Holdings, representing a 36.8% equity interest.
During fiscal 2015, CEP III Co‐Invest earned dividends totaling $1.0 million [2014 – $1.6 million] through its
investment in Chilean Gaming Holdings, bringing dividends earned to March 31, 2015 to $9.0 million [2014 – $8.0
million].
[e] Kubra
Kubra is a business process outsourcing company focused on print and electronic distribution of bills and fulfillment of
related payments for high volume clients.
At March 31, 2014 and April 1 2013, CEP III Co‐Invest owned 3,250,000 Class A voting common shares of Kubra,
representing an 11.5% interest on a fully diluted basis.
64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
During fiscal 2015, CEP III Co‐Invest sold its investment in Kubra and received proceeds of US$35.7 million [C$39.0
million], compared to a fair value of $22.9 million at March 31, 2014. Over the life of the investment, CEP III Co‐Invest
received total cash proceeds of $42.0 million against an investment cost of $3.2 million.
[f] 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, 2014 and April 1, 2013, CEP III Co‐Invest owned 8,428,387 common shares and 5,841,250 Series A
convertible preferred shares in Light Tower Rentals, representing a 12.5% [2013 – 12.6%] ownership interest on a fully
diluted basis. Each preferred share was convertible into one common share and the conversion was at CEP III Co‐Invest's
discretion.
During fiscal 2015, Light Tower Rentals, completed a series of transactions to recapitalize its balance sheet. In July
2014, Light Tower Rentals completed a refinancing which included a US$330 million bond offering and a subsequent
redemption of common shares to repatriate funds back to its owners. As part of this transaction, CEP III Co‐Invest
converted the 5,841,250 preferred shares it held to 5,841,250 common shares of Light Tower Rentals on a one‐to‐one
basis such that it held 14,269,637 common shares immediately after the conversion, 7,284,322 of which were redeemed
subsequent to the conversion for gross proceeds of US$25.1 million [C$26.9 million]. Subsequently in August 2014, Light
Tower Rentals finalized its recapitalization by adding a group of institutional equity investors. As part of this transaction,
CEP III Co‐Invest purchased 157,003 additional common shares of Light Tower Rentals for US$0.3 million [C$0.3 million]
prior to a second redemption of common shares from Light Tower Rentals. Subsequent to the purchase, Light Tower
Rentals redeemed 3,156,714 common shares from CEP III Co‐Invest for gross proceeds of US$12.8 million [C$13.8
million]. At March 31, 2015, CEP III Co‐Invest owned 3,985,604 common shares of LTR representing a 6.7% ownership
interest on a fully diluted basis.
[g] 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, 2015, March 31, 2014 and April 1,
2013, CEP III Co‐Invest 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 with a stated interest rate of 10% per annum. The Series A preferred shares are entitled to
dividends only in the event that CEP III Co‐Invest does not convert the preferred shares into common shares. Each Series
A preferred share is convertible into one common share and the conversion is at CEP III Co‐Invest's discretion.
At March 31, 2014, Clairvest had advanced short‐term working capital loans totaling US$0.2 million [C$0.2 million]
to LSNE. During fiscal 2015, additional loans totaling $0.6 million [2014 – $0.2 million] were made by Clairvest to LSNE
such that $0.8 million [2014 – $0.2 million] were outstanding at March 31, 2015. The loans bear interest at 10.0% per
annum and the interest earned has been fully provided for. These loans given their short‐term nature have been
included in accounts receivable. $0.5 million of these loans have been repaid susequent to year end.
[h] Centaur Gaming
Centaur Gaming is the owner and operator of Hoosier Park Racing & Casino in Anderson, Indiana, and Indiana Grand
Casino and Indiana Downs Racetrack in Shelbyville, Indiana.
At March 31, 2015, March 31, 2014 and April 1, 2013, CEP IV Co‐Invest 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 4, Clairvest also held US$10.0 million in second lien loans for its treasury holdings at March 31,
2015.
[i] Cieslok
Cieslok is a Canadian outdoor advertising firm which operates large format digital and static billboards throughout major
cities in Canada.
65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
During fiscal 2014, CEP IV Co‐Invest invested $4.0 million to acquire 4,014,989 common shares of Cieslok. At March 31,
2015 and 2014, CEP IV Co‐Invest’s ownership in Cieslok was 24.0%.
[j] County Waste
County Waste is a regional solid waste collection, recycling and disposal company based in West Point, Virginia.
During fiscal 2014, CEP IV Co‐Invest invested US$4.5 million [C$4.6 million] to acquire 4,539.62 Class B units of
County Waste representing a 12.5% ownership interest on a fully diluted basis. Subsequently, CEP IV Co‐Invest invested
an additional US$1.9 million [C$2.1 million] in the form of convertible debentures with a stated interest rate of 10% per
annum payable in‐kind and compounded on an annual basis. Each $1,000 in accrued value of the convertible debentures
was convertible into 1 Class B unit of County Waste.
During fiscal 2015, CEP IV Co‐Invest acquired an additional 1,942.66 Class B units of County Waste to support the
growth of its operations. The acquisition was funded by a US$0.3 million follow‐on investment in cash and US$1.7
million through a partial conversion of principal and $0.2 million of accrued interest from the convertible debentures
CEP IV Co‐Invest held in County Waste. The remaining US$0.2 million in convertible debentures were repaid by County
Waste in cash. At March 31, 2015, CEP IV Co‐Invest held 6,482.28 Class B units of County Waste at a cost of $6.7 million.
[k] CRS
CRS is a provider of equipment rental services and related merchandise across Ontario, Canada.
At March 31, 2014 and April 1, 2013, CEP IV Co‐Invest owned 10,572,805 limited partnership units of CRS,
representing a 13.4% ownership interest. CEP IV Co‐Invest has the right to receive proceeds equal to an additional 1.7%
economic interest in CRS until CEP IV Co‐Invest has received three times its invested capital.
During fiscal 2015, CEP IV Co‐Invest exercised its right to purchase units of CRS from a departing unitholder of CRS
at a pre‐determined price. CEP IV Co‐Invest, via an acquisition entity, purchased 199,900 Class B units of CRS at $0.2
million which was funded by a return of capital from CRS. At March 31, 2015, CEP IV Co‐Invest held 199,990 Class B units
and 10,572,805 Class C units of CRS, representing a 13.7% ownership interest and the right to receive proceeds equal to
an additional 2.2% economic interest until it has received three times its invested capital.
Also during fiscal 2015, CEP IV Co‐Invest earned distributions totaling $0.4 million [2014 – $0.5 million] from CRS,
bringing distributions earned to March 31, 2015 to $0.9 million [2014 – $0.5 million].
[l] Davenport Land Investments
Davenport Land Developments comprises two entities holding real estate surrounding a casino development in
Davenport, Iowa ["Davenport North" and "Davenport South"].
During fiscal 2015, CEP IV Co‐Invest invested US$1.4 million [C$1.6 million] for an 18.7% ownership in Davenport
North and US$1.3 million [C$1.5 million] for a 23.0% ownership interest in Davenport South. Subsequently, Davenport
South sold certain of its real estate holdings for proceeds of US$0.6 million [C$0.6 million] which had been distributed to
CEP IV Co‐Invest. Additionally at March 31, 2015, CEP IV Co‐Invest had advanced a US$0.6 million non‐interest bearing
loan to a partner to help fund its 50% ownership in Davenport North.
Subsequent to year end, Davenport South sold another portion of its real estate holdings for proceeds of US$0.8
million [C$0.9 million] which were distributed to CEP IV Co‐Invest.
[m] Discovery Air
Discovery Air is a specialty aviation services company operating across Canada and in select locations internationally.
At March 31, 2014 and April 1, 2013, CEP IV Co‐Invest had invested $22.0 million in secured convertible
debentures ["Debentures"] of Discovery Air. The Debentures, which have a 5.5‐year term from issuance on September
23, 2011 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. Also at March 31, 2014 and April 1, 2013,
Clairvest held 53,997 common shares of Discovery Air.
During fiscal 2015, CEP IV Co‐Invest invested an additional $7.4 million for 19,337,975 common shares of Discovery
Air. Clairvest also invested $0.1 million for 417,943 common shares of Discovery Air. At March 31, 2015 Clairvest and
CEP IV Co‐Invest collectively held 19,809,915 common shares representing a 24.2% ownership interest on a fully
66
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
diluted basis, in addition to a gross accrued value of $28.5 million in the Debentures which are convertible into
2,775,218 common shares of Discovery Air at a conversion price of $10.51 [March 2014 – $9.55; April 2013 – $8.68] per
share. At March 31, 2015, the closing quoted market price of a Discovery Air common share was $0.23 [March 2014 –
$1.01; April 2013 – $2.38] per share.
During fiscal 2015, CEP IV Co‐Invest earned $2.8 million [2014 – $2.6 million] in interest from its investments in
Discovery Air, $0.7 million of which has been provided for [2014 – nil]. Also during fiscal 2015, CEP IV Co‐Invest
received $1.6 million [2014 – nil] of interest on the Debentures. Net interest earned is reflected in the fair value of
Clairvest's investments in CEP IV Co‐Invest.
Clairvest also advanced $1.7 million to Discovery Air in the form of a promissory note during fiscal 2015 and an
additional $5.4 million in promissry notes subsequent to year end. These promissory notes bear interest at 8.0% per
annum compounded daily and are repayable on or before July 9, 2015. Interest of $1 thousand was earned from the
promissory note to Discovery Air during fiscal 2015.
Subsequent to year end, Clairvest and CEP IV Co‐Invest purchased for an additional 1,455,500 common shares of
Discovery Air at a cost of $0.4 million, increasing Clairvest and CEP IV Co‐Invest's ownership interest in Discovery Air to
25.9% on a fully diluted basis. Also subsequent to year end, the maturity date of the Debentures was extended to
September 30, 2017.
[n] Linen King
Linen King is an Oklahoma‐based textile rental company that provides commercial laundry services to the healthcare
and hospitality industries.
At March 31, 2015, March 31, 2014 and April 1, 2013, CEP IV Co‐Invest owned 2,529,209 Class A units of Linen
King, representing a 21.7% ownership interest.
[o] MAG
MAG is a U.S.‐based specialty aviation and intelligence, surveillance and reconnaissance service provider. At April 1,
2013, CEP IV‐ Co‐Invest owned 18,737 Class A stock of MAG. The Class A stock have a stated dividend rate of 10% per
annum and each Class A stock is convertible into 1.0114 common stock of MAG.
During fiscal 2015, CEP IV Co‐Invest invested an additional US$0.3 million [C$0.3 million] [2014 – US$0.5 million
[C$0.5 million]] to acquire 2,677 Class A stock [2014 – 5,085] in MAG to support the growth of its operations. At March
31, 2015, CEP IV Co‐Invest owned 26,499 [2014 – 23,822] Class A stock of MAG, representing a 9.6% [2014 – 9.4%]
ownership interest on a fully diluted basis.
During fiscal 2014, MAG incorporated a Canadian subsidiary ["MAG Canada"] which provides aircraft logistics for
goods and crews to both government and commercial customers. Clairvest provides working capital loans to MAG
Canada in support of its operations. The loans bear interest at 10.0% per annum compounded daily. At March 31, 2015,
$0.9 million [2014 − $3.3 million] of these working capital loans were outstanding and have been included in loans
receivable. Interest of $50 thousand [2014 – $0.1 million] was earned from loans to MAG Canada during fiscal 2015.
Subsequent to year end, these loans have been repaid in full.
[p] The Meadowlands
The Meadowlands operates a standardbred horse racing track located in East Rutherford, New Jersey.
During fiscal 2014, Clairvest fully funded its US$5.4 million [C$5.6 million] commitment to invest in the
Meadowlands. The investment was made in the form of secured debentures which accrue interest at a rate of 15% per
annum, 10% of which is payable quarterly in cash and 5% is accrued quarterly.
During fiscal 2015, Clairvest earned $0.6 million [2014 – $0.3 million] in cash interest and $0.3 million [2014 – $0.1
million] in accrued interest on its investment in the Meadowlands secured debentures. $0.4 million [March 31, 2014 –
$32 thousand] of the cash interest was received during the year and the remaining $0.2 million of the cash interest was
received subsequent to year end.
67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
Clairvest also holds warrants which entitle it to invest in equity securities of the Meadowlands subject to certain
conditions. The accrued interest on the secured convertible debentures is forfeited in the event Clairvest exercises the
warrants.
[q] Rivers Casino
Rivers Casino is a gaming entertainment complex located in Des Plaines, Illinois.
At April 1, 2013, CEP IV Co‐Invest owned 8,926,338 units of Rivers Casino and 5,000 units of a minority investor [the
"Minority Investor"] as required by the Illinois legislature, which in aggregate represents a 5.0% ownership on a fully
diluted basis. During fiscal 2014, the equity interest in the Minority Investor was redeemed in exchange for direct
ownership in Rivers Casino such that CEP IV Co‐Invest continues to hold a 5.0% ownership interest in Rivers Casino on a
fully diluted basis.
CEP IV Co‐Invest earns quarterly distributions and fees as an investor in Rivers Casino.
During fiscal 2015, CEP IV Co‐Invest earned $4.5 million [2014 – $4.4 million] in quarterly distributions and $0.5
million [2014 – $0.5 million] in quarterly fees from Rivers Casino.
As a result of CEP IV Co‐Invest's investment in Rivers Casino requiring certain acquisition entities in the United
States, CEP IV Co‐Invest, through its acquisition entities, incurred U.S. income tax obligations totaling $1.5 million [2014 ‐
$1.7 million] during fiscal 2015.
The quarterly distributions, fees and U.S. taxes paid by the U.S. acquisition entity is reflected in the fair value of
Clairvest's investments in CEP IV Co‐Invest.
At March 31, 2015 and 2014, CEP IV Co‐Invest owned 9,021,917 units of Rivers Casino, representing a 5.0%
ownership on a fully diluted basis.
[r] Winters Bros. of CT
Winters Bros. of CT is a regional solid waste collection, recycling and disposal company based in Danbury, Connecticut.
During fiscal 2014, CEP IV Co‐Invest invested US$7.6 million [C$8.1 million] to acquire 76,284.8 Class C units of
Winters Bros. of CT. At March 31, 2015 and 2014, CEP IV Co‐Invest's ownership interest in Winters Bros. of CT was
13.4%.
[s] Winters Bros. of LI
Winters Bros. of LI is a regional solid waste collection, recycling and disposal company based in Long Island, New York.
During fiscal 2015, CEP V Co‐Invest invested US$7.7 million [C$9.6 million] to acquire 1,398,507 Class C units of
Winters Bros. of LI. At March 31, 2015, CEP V Co‐Invest’s ownership interest in Winters Bros. of LI was 14.0%.
[t] Wellington Fund III/ IV
Wellington Fund IV, a successor fund of Wellington Financial Fund III ["Wellington Fund III"], provides 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 $25.1 million representing a 12.6% interest in
Wellington Fund IV at March 31, 2014 and April 1, 2013. Clairvest continues to own an interest in the residual of
Wellington Fund III and is also entitled to participate in the profits received by the General Partner of Wellington Fund III
and Wellington Fund IV.
During fiscal 2015, Clairvest funded an additional $0.5 million [2014 – $1.7 million] to Wellington Fund IV, bringing
total amount funded to $14.3 million [2014 – $13.8 million] against the $25.1 million commitment. Subsequently,
Clairvest purchased a $0.1 million commitment from a former limited partner of Wellington Fund IV increasing its
commitment in Wellington Fund IV to $25.2 million. At March 31, 2015, $14.4 million of Clairvest's $25.2 million
commitment had been funded representing a 12.6% ownership in Wellington Fund IV.
Subsequent to year end, Wellington Fund IV called additional capital and Clairvest funded $0.4 million to
Wellington Fund IV, bringing total amount funded to $14.8 million against the $25.2 million commitment.
68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
9. FIXED ASSETS
The composition of Clairvest's fixed assets was as follows:
At April 1, 2013
Cost
Aircraft
IT equipment[1]
Furniture, fixtures
and Equipment
Leasehold
improvements
$ 3,510
$ 643
$ 371
$ 2,478
Accumulated amortization
[439]
[571]
[352]
[1,666]
Total
$ 7,002
[3,028]
Net book amount
3,071
72
19
812
3,974
Year ended March 31, 2014
Opening net book amount
3,071
72
19
812
3,974
Additions
94
22
—
—
Amortization charge
[186]
[33]
[8]
[305]
116
[532]
Closing net book amount
2,979
61
11
507
3,558
At March 31, 2014
Cost
3,603
665
371
2,478
7,117
Accumulated amortization
[624]
[604]
[360]
[1,971]
[3,559]
Net book amount
2,979
61
11
507
3,558
Year ended March 31, 2015
Opening net book amount
2,979
61
11
507
3,558
Additions
—
59
20
2
Amortization charges
Impairment charges
[224]
[800]
Closing net book amount
1,955
[34]
—
86
[8]
—
[306]
—
81
[572]
[800]
23
203
2,267
At March 31, 2015
Cost
3,603
724
391
2,480
7,198
Accumulated amortization
Impairment charges
[848]
[800]
[638]
—
[368]
—
[2,277]
—
[4,131]
[800]
$ 1,955
Net book amount
[1] Comprised computer equipment and computer software.
$ 86
$ 23
$ 203
$ 2,267
10. 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, 2015, March 31, 2014 and April 1, 2013 is $75.0 million. No amounts were drawn during fiscal 2015 and
2014. Included in accounts receivable and other assets at March 31, 2015 is a capitalized closing fee on this facility totaling
$24 thousand [March 2014 – $0.3 million; April 2013 – $0.6 million] which will be fully amortized in April 2015.
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, 2015 was 2.85% [March 2014 – 3.00%; April 2013 – 3.00%]. The amount
available under the credit facility at March 31, 2015 was $20.0 million [March 2014 ‐ $20.0 million; April 2013 ‐ $20.0 million],
which is based on debt covenants within the banking arrangement. No amounts were drawn during fiscal 2015 and 2014.
69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
11. INCOME TAXES
Income tax expense for the years ended March 31, 2015 and 2014 consist of the following:
Current income tax expense
Deferred income tax expense [recovery]
2015
$ 5,050
[1,763]
$ 3,287
2014
$ 1,074
3,967
$ 5,041
A reconciliation of the income tax expense based on the Federal and Ontario statutory rate and the effective rate is as follows:
Income before income taxes
Statutory Federal and Ontario income tax rate
Statutory Federal and Ontario income taxes
Non‐taxable portion of net investment gains and
distributions
Non‐taxable portion of gain on temporary
investments
Non‐taxable portion of carried interest net of
management participation
Non‐taxable portion of foreign exchange gains
Non‐deductible portion of other expenses
Foreign income tax rate differences
Tax recoveries regarding prior year
Other
2015
2014
%
$
%
$
55,292
14,652
26.50
26.50
43,848
11,620
[8,336]
[15.08]
[3,629]
26.50
26.50
[8.27]
—
—
[298]
[0.68]
[2,000]
[883]
964
[514]
[193]
[403]
3,287
[3.62]
[1.60]
1.74
[0.93]
[0.35]
[0.73]
5.93
[1,300]
[1,242]
411
[294]
[889]
662
5,041
[2.96]
[2.83]
0.94
[0.67]
[2.03]
1.51
11.51
Deferred tax liabilities relate to temporary differences on corporate and temporary investments, derivative instruments,
accounts payable and accrued liabilities, income, and unrealized carried interest income as follows:
Temporary differences on corporate and temporary investments
Temporary differences on derivative instruments
Temporary differences on accounts payable and accrued liabilities
Temporary differences on income
Temporary differences on unrealized carried interest income
Other
March 31, 2015 March 31, 2014
April 1, 2013
$ 7,400
[1,291]
[4,046]
677
3,560
1,764
$ 8,064
$ 7,533
[209]
[3,564]
231
3,735
2,101
$ 9,827
$ 4,597
[25]
[2,681]
36
2,433
1,500
$ 5,860
All deferred income tax expenses [recoveries] were recognized in net income during fiscal 2015 and 2014.
70
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
12. 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
March 31, 2015
Marc 31, 2014
Common shares, beginning of year
Issued on exercise of stock options
[note 13]
Shares
Amount
Shares
Amount
15,134,095
$ 79,314
15,124,095
$ 79,101
─
─
10,000
213
Common shares, end of year
15,134,095
$ 79,314
15,134,095
$ 79,314
During fiscal 2015, the Company filed a normal course issuer bid enabling it to make market purchases of up to 756,705
[2014 – 756,705] of its common shares in the 12‐month period commencing March 5, 2015 [2014 – March 6, 2014]. During
fiscal 2015 and 2014, 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, 2015, March 31, 2014 and April 1, 2013. An additional 934,200 common and 2,230,954 non‐voting shares have
been purchased for cancellation outside of the normal course issuer bid.
15,134,095 [March 2014 − 15,134,095; April 2013 − 15,124,095] common shares were outstanding at March 31,
2015.
The weighted average number of common shares outstanding during fiscal 2015 was 15,134,095 [2014 −
15,131,677].
The basic and fully diluted net income per share computations for 2015 and 2014 are as follows:
Net income and
comprehensive
income
['000s]
Weighted
average
number of
shares[1]
2015
Per share
amount
Net income and
comprehensive
income
['000s]
Weighted
average
number of
shares[1]
2014
Per share
amount
Basic and fully diluted
$ 52,005 15,134,095
$ 3.43
$ 38,807 15,131,677
$ 2.56
[1] The determination of the weighted average number of shares on a fully diluted basis excludes 322,092 [2014 – 296,559] shares related to stock
options that were anti‐dilutive for the year ended March 31, 2015.
13. SHARE‐BASED COMPENSATION AND OTHER COMPENSATION PLANS
Under the Company's stock option plan, 1,113,856 [March 2014 – 1,123,856; April 2013 – 1,173,856] common shares of the
Company have been made available for issuance to eligible participants. At March 31, 2015, 555,000 [March 2014 –
565,000; April 2013 – 615,000] options were outstanding under the plan, and an additional 558,856 [March 2014 – 558,856;
April 2013 – 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
which is 10 years after the grant date.
71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
During fiscal 2015, 10,000 [2014 – 50,000] options were exercised, all of which [2014 – 40,000], were exercised under the
cash settlement plan and had no impact on share capital. No options [2014 – 10,000] were exercised for shares during fiscal
2015. No options were granted during fiscal 2015 and 2014.
A summary of the status of the Company's stock option plan as at March 31, 2015, March 31 2014 and April 1,
2013 and changes during the years ended March 31, 2015 and 2014 are presented below:
Options outstanding, April 1, 2013
Options exercised
Options outstanding, March 31, 2014
Options exercised
Options outstanding, March 31, 2015
Options exercisable, March 31, 2015
[1] Adjusted for special dividends where applicable
Number of options
Weighted average exercise
price per share[1]
615,000
[50,000]
565,000
[10,000]
555,000
555,000
$ 10.30
6.94
10.60
8.84
$ 10.63
$ 10.63
The following table summarizes information about stock options outstanding and exercisable at March 31, 2015:
Range of exercise prices
$8.00 to $8.99
$9.00 to $9.99
$12.00 to $12.99
Options outstanding
Weighted average
remaining
contractual life [yrs]
0.2
1.2
2.5
Number
outstanding
200,000
120,000
235,000
555,000
Options exercisable
Weighted average
exercise price[1]
Number
exercisable
Weighted average
exercise price{1]
$ 8.84
200,000
$ 8.84
9.55
12.58
120,000
235,000
555,000
9.55
12.58
[1] Adjusted for special dividends where applicable
Clairvest recognizes stock‐based compensation expense based upon the fair value of the outstanding stock options at
March 31, 2015, March 31, 2014 and April 1, 2013 using Black‐Scholes option pricing model with the following assumptions:
72
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
At March 31, 2015
Grant
# options granted
# of options vested
Price
Black‐Scholes assumptions used
Expected volatility
Expected forfeiture rate[1]
Expected dividend yield
Risk‐free interest rate
Expected life [years]
June 23, 2005
June 21, 2006
June 27, 2007
June 30, 2009
200,000
120,000
200,000
35,000
200,000
120,000
200,000
35,000
8.84
9.40
12.49
12.14
10%
0%
0.00%
1.00%
0.2
10%
0%
0.29%
0.86%
1.2
10%
0%
0.32%
0.89%
2.2
10%
0%
0.34%
1.10%
4.2
Value using Black‐Scholes ['000s][2]
$ 3,837
$ 2,232
$ 3,113
$ 560
At March 31, 2014
Grant
# options granted
# of options vested
Price
Black‐Scholes assumptions used
Expected volatility
Expected forfeiture rate[1]
Expected dividend yield
Risk‐free interest rate
Expected life [years]
June 23, 2005
June 21, 2006
June 27, 2007
June 30, 2009
210,000
120,000
200,000
35,000
210,000
120,000
200,000
33,600
8.99
9.55
12.64
12.29
10%
0%
0.34%
1.28%
1.2
10%
0%
0.38%
1.42%
2.2
10%
0%
0.39%
1.65%
3.2
10%
0%
0.42%
2.12%
5.2
Value using Black‐Scholes ['000s][2]
$ 3,140
$ 1,734
$ 2,325
$ 416
At April 1, 2013
Grant
June 23, 2003
June 23, 2005
June 21, 2006
June 27, 2007
June 30, 2009
120,000
120,000
9.68
210,000
210,000
9.12
50,000
50,000
7.07
# options granted
# of options vested
Price
Black‐Scholes assumptions used
Expected volatility
Expected forfeiture rate[1]
Expected dividend yield
Risk‐free interest rate
Expected life [years]
Value using Black‐Scholes ['000s][2]
[1] Assumed a 0% forfeiture rate as a result of a cash settlement feature in Clairvest’s stock option plan and historical forfeiture rates of individuals
200,000
200,000
12.77
35,000
30,450
12.42
10%
0%
0.45%
1.57%
4.2
10%
0%
0.48%
1.80%
6.2
10%
0%
0.45%
1.45%
3.2
10%
0%
0%
1.28%
0.2
10%
0%
0.43%
1.34%
2.2
$ 1,728 $ 283
$ 697
$ 2,505
$ 1,374
included in the stock option plan.
[2] Share prices at March 31, 2015, March 31, 2014 and April 1, 2013 were $27.81, $23.90 and $20.98 respectively [TSX: CVG]
73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
At March 31, 2015, all options granted have fully vested [March 2014 – 558,000; April 2013 – 610,450]. At March 31, 2015,
$9.7 million [March 2014 – $7.6 million; April 2013 – $6.6 million] has been accrued under the Company's stock option plan
and included in share‐based compensation liability. For the quarter ended March 31, 2015, Clairvest recognized a share‐
based compensation expense of $2.3 million [2014 – $1.7 million].
As at March 31, 2015, a total of 229,103 [March 2014 – 226,135; April 2013 – 232,215] DSUs were held by
directors of the Company, the accrual in respect of which was $6.5 million [March 2014 – $5.5 million; April 2013 ‐ $5.0
million] and has been included in share‐based compensation liability. During fiscal 2015, 13,577 [2014 – 24,820] DSUs were
exercised and 16,545 [2014 – 18,740] DSUs were granted. For the year ended March 31, 2015, Clairvest recognized an
expense of $1.4 million [2014 – $1.2 million] with respect to DSUs.
As at March 31, 2015, 105,000 [March 2014 – 105,000; April 2013 – 120,000] ADSUs were held by directors of the
Company, the accrual in respect of which is $1.6 million [March 2014 – $1.2 million; April 2013 ‐ $1.0 million] and has been
included in share‐based compensation liability. During fiscal 2015, no [2014 – 15,000] ADSUs were exercised. For the year
ended March 31, 2015, Clairvest recognized an expense of $0.4 million [2014 – $0.3 million] with respect to ADSUs.
As at March 31, 2015, a total of 1,105,692 [March 2014 – 1,149,536; April 2013 ‐ 1,238,680] BVARs were held by
employees of Clairvest, the accrual in respect of which was $6.6 million [March 2014 – $4.0 million; April 2013 ‐ $2.1
million] and has been included in share based compensation expense liability, and a further $6.2 million [March 2014 ‐ $4.7
million; April 2013 ‐ $3.8 million] not accrued as those BVARs have not vested. During fiscal 2015, 189,994 [2014 – 126,575]
BVARs were exercised and 42,401 [2014 – 88,553] BVARs were forfeited. Also during fiscal 2015, 188,551 [2014 – 125,984]
BVARs were granted. For the year ended March 31, 2015, Clairvest recognized an expense of $4.9 million [2014 – $2.9
million] with respect to BVARs.
Compensation paid and payable to key management
Key management at Clairvest are the Co‐Chief Executive Officers ["Co‐CEOs"] and its directors. The Co‐CEOs are entitled to
annual discretionary cash bonuses of up to 175% of their individual's annual salary based on individual performance. There
is also an annual objective cash bonus which is based on Clairvest's Incentive Bonus Program as described in note 16[h], a
stock option plan and a book value appreciation rights plan. Compensation paid for the years ended March 31 to the Co‐
CEOs is as follows:
Paid:
Salaries
Annual incentive plans[1]
Stock options
2015
2014
$ 652
3,293
─
$ 652
1,050
790
$ 3,945
$ 2,492
[1] Includes quarterly payments from annual incentive plan of up to 21.875% of their respective annual base salary and for the year ended March 31,
2015 included a one‐time bonus as a result of the closing of CEP V.
Compensation payable at the statement of financial position dates are as follows:
Payable:
Annual incentive plans
Stock options
Book value appreciation rights
March 31, 2015
March 31, 2014
April 1, 2013
$ 2,243
9,036
$ 1,889
6,902
489
109
$ 1,341
6,000
─
$ 11,768
$ 8,900
$ 7,341
Compensation paid and payable to the directors of Clairvest comprises those made under the DSU and ADSU plans
previously discussed.
74
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
14. CONSOLIDATED STATEMENTS OF CASH FLOWS
The net change in non‐cash working capital balances related to operations is detailed as follows:
Accounts receivable and other assets
Income taxes recoverable
Accounts payable and accrued liabilities
Income taxes payable
Accrued compensation expense
2014
2013
$ [3,535]
$ 677
6,817
[458]
30
1,540
[2,256]
[419]
[1,902]
1,412
$ 4,394
$ [2,488]
Cash and cash equivalents comprised the following:
Cash
Cash equivalents
March 31, 2015
March 31, 2014
April 1, 2013
$ 8,743
$ 1,637
$ 1,266
89,901
50,160
111,703
$ 98,644
$ 51,797
$ 112,969
15. DERIVATIVE INSTRUMENTS
The Company and its acquisition entities entered into foreign exchange forward contracts as economic hedges against the
fair value of its foreign‐denominated investments and loans unless a specific exemption is approved by the Board of
Directors. During fiscal 2015, the Company realized a $1.0 million loss [2014 – $0.1 million] on expired foreign exchange
forward contracts, which has been recorded in finance and foreign exchange expense in the consolidated statements of
income.
As at March 31, 2015, the Company had entered into foreign exchange forward contracts as economic hedges
against its foreign‐denominated investments and loans as follows:
Foreign exchange forward contracts to sell US$28.9 million [March 2014 – US$118.8 million; April 2013 – sell
US$60.0 million and buy US$4.2 million] at an average rate of Canadian $1.1175 per U.S. dollar [March 2014 – $1.0969;
April 2013 – US$1.0126 million] through to August 2015. The fair value of the forward contracts at March 31, 2015 is a loss
of $4.3 million [March 2014 – $1.6 million; April 2013 – $0.2 million].
Additionally, acquisition entities of Clairvest had entered into foreign exchange forward contracts as economic
hedges against its foreign‐denominated investments as follows:
Foreign exchange forward contracts to sell US$99.9 million [March 2014 – US$40.2 million; April 2013 – US$31.6
million] and buy US$0.6 million [March 2014 – nil; April 2013 – nil] at an average rate of Canadian $1.2010 per U.S. dollar
[March 2014 – $1.1074; April 2013 – $0.9838] through to January 2016. The fair value of the forward contracts at March 31,
2015 is a loss of $6.8 million [March 2014 – $16 thousand; April 2013 – loss of $1.0 million].
Foreign exchange forward contracts to sell 14.7 billion Chilean Pesos ["CLP"] [March 2014 – 14.7 billion; April 2013
– 14.7 billion] at an average rate of Canadian $0.001909 per CLP [March 2014 – $0.001976; April 2014 ‐ $0.002022] through
to January 2016. The fair value of these contracts at March 31, 2015 is a loss of $1.1 million [March 2014 – loss of $0.3
million; April 2013 – loss of $1.9 million].
The fair value of the foreign exchange forward contracts entered into by these acquisition entities has been
included in the fair value of Clairvest’s investment in these acquisition entities on the consolidated statements of financial
position.
Included in cash and cash equivalents on the consolidated statements of financial position at March 31, 2015, was $4.9
million [March 2014 – nil; April 2013 – nil] Clairvest had funded to the counterparty as a collateral for its foreign exchange
forward contracts and those of its acquisition entities.
75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
16. 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 [March 2014 – $3.5 million; April 2013 − $3.5 million] of which remains
unfunded at March 31, 2015. 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] CEP III Co‐Invest has committed to co‐invest alongside CEP III in all investments undertaken by CEP III. CEP III Co‐Invest's
co‐investment commitment is $75.0 million, $15.2 million [March 2014 – $15.2 million; April 2013 − $15.2 million] of
which remains unfunded at March 31, 2015. In accordance with the co‐investment agreement, the proportion of the
commitment amongst Clairvest, 2141788 Ontario and MIP III is at their own discretion. CEP III Co‐Invest 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] CEP IV Co‐Invest has committed to co‐invest alongside CEP IV and CEP IV‐A in all investments undertaken by CEP IV and
CEP IV‐A. CEP IV Co‐Invest's co‐investment commitment is $125.0 million, $36.8 million [March 2014 – $46.6 million;
April 2013 − $73.1 million] of which remains unfunded at March 31, 2015. In accordance with the co‐investment
agreement, the proportion of the commitment between Clairvest and MIP IV is at their own discretion. CEP IV Co‐Invest
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] CEP V Co‐Invest has committed to co‐invest alongside CEP V and CEP V‐A in all investments undertaken by CEP V and
CEP V‐A. CEP V Co‐Invest's co‐investment commitment is $180.0 million, $169.9 million [March 2014 – $180.0 million] of
which remains unfunded at March 31, 2015. In accordance with the co‐investment agreement, the proportion of the
commitment between Clairvest, 2141788 Ontario and MIP V is at their own discretion. CEP V Co‐Invest may only sell all
or a portion of a corporate investment that is a joint investment with CEP V and CEP V‐A if it concurrently sells a
proportionate number of securities of that corporate investment held by CEP V and CEP V‐A.
[e] Clairvest has also committed $25.2 million to Wellington Fund IV [March 2014 – $25.1 million; April 2013 − $25.1
million], $10.8 million [March 2014 – $11.3 million; April 2013 − $13.0 million] of which remains unfunded at March 31,
2015.
[f] At March 31, 2015, Clairvest has received profit distributions totaling $4.6 million [March 2014 – $4.1 million; April 2013
‐ $3.3 million] through its ownership interest in the General Partners of Wellington Fund III and Wellington Fund IV.
Subject to clawback provisions, Clairvest may be required to repay up to $1.1 million [March 2014 – $0.8 million; April
2013 – $0.4 million] of these distributions in the event the limited partners of Wellington Fund IV do not meet their
return threshold as specified in the respective Limited Partnership Agreements. At March 31, 2015, March 31, 2014 and
April 1, 2013, there were no accruals made with respect to the clawback.
[g] Clairvest had 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. The guarantee was reduced to US$10.0 million during fiscal
2015.
[h] Under Clairvest's Bonus 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 [the "Realized Amount"]. At March 31,
2015, the Realized Amount under the Bonus Program was $1.4 million [March 2014 − $0.4 million; April 2013 ‐ $0.6
million] and has been accrued under accrued compensation expense liability.
In accordance with IFRS, Clairvest is also required to record a liability equal to a bonus of 10% of the after‐tax cash
income and realizations which are applicable but which have yet to be realized. Accordingly, Clairvest also recorded a
$2.8 million [March 2014 − $2.7 million; April 2013 − $2.0 million] accrued compensa(cid:415)on expense liability that would
only be payable to management when the corresponding realization events have occurred.
The Bonus Program does not apply to the income generated from investments made by Clairvest through CEP III
Co‐Invest, CEP IV Co‐Invest and CEP V Co‐Invest.
76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
[i] Clairvest has guaranteed to fund any cash flow or debt service shortfalls of Casino New Brunswick for a specified period
of time. The amount of the guarantee is allocated, at Clairvest’s discretion, 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 CEP III Co‐Invest. Any amounts paid under the guarantee will result in additional debentures being granted
to CEP III Co‐Invest and CEP III, allocated on the same basis as the participation between CEP III Co‐Invest and CEP III in
the guarantee funding. As at March 31, 2015, no amounts subject to this guarantee have been funded.
[j] 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 of Casino Sol Calama for a specified period of time. Casino Sol
Calama's operator has indemnified this acquisition entity with respect to this guarantee. As at March 31, 2015, no
amounts subject to this guarantee have been funded or are owing.
[k] As part of the holding structure of Chilean Gaming Holdings, an acquisition entity of CEP III Co‐Invest had loans totaling
$40.7 million at March 31, 2015 [March 2014 − $42.0 million; April 2013 ‐ $44.6 million] from an unrelated financial
institution, while another acquisition entity of CEP III Co‐Invest held term deposits totaling $40.7 million at March 31,
2015 [March 2014 − $42.0 million; April 2013 ‐ $44.6 million] with the same financial institution as security for these
loans. CEP III Co‐Invest's ownership of both acquisition entities was 36.8% at March 31, 2015.
[l] At March 31, 2015, the Company’s had future minimum annual lease payments under non‐cancellable operating leases
for the use of office space of $0.3 million due within one year and $1.7 million due after one year but not more than five
years.
[m] 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.
17. 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, 2015 and 2014, 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, 2015, March 31, 2014 and April 1,
2013, net of any allowances for losses, were as follows:
77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
Financial Assets
Cash and cash equivalents
Temporary investments
Accounts receivable[1]
Loans receivable[2]
Restricted temporary investments
Corporate investments[3]
Financial Liabilities
Accounts payable
Derivative instruments
March 31, 2015
March 31, 2014
April 1, 2013
$ 98,644
$ 51,797
$ 112,969
58,511
14,408
6,732
−
263,359
62,995
10,743
33,474
−
251,207
59,708
8,227
5,365
5,425
183,567
$ 441,654
$ 410,216
$ 375,261
$ 315
$ 130
$ 133
4,341
1,575
190
$ 4,646
$ 1,705
$ 323
[1]
[2]
[3]
Excludes prepaid expenses and receivables from acquisition entities
Excludes loans receivable from acquisition entities
Excludes net assets [liabilities] from acquisition entities
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 indirect 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 its indirect investee companies regularly.
The Company is also subject to credit risk on its accounts receivable and loans receivables, a significant portion of
which is with its investee companies and the CEP Funds. The Company manages this risk through its oversight
responsibilities with existing investee companies by reviewing financial condition of its indirect 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 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. The credit ratings, based on the Dominion Bond Rating Services rating
scale, with the exception of corporate bonds and loans which are based on Standard and Poor's rating scale, for the
Company's cash, cash equivalents and temporary investments were as follows:
78
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
Cash
Money market savings accounts
R1‐High
Guaranteed investment certificates and investment savings
accounts, including restricted temporary investments
March 31, 2015
March 31, 2014
April 1, 2013
$ 8,743
$ 1,637
$ 1,265
41,262
7,849
93,463
AA
AA‐
A+
A
BBB+[1]
Not rated[1]
Corporate bonds and loans
BB‐[2]
B[2]
CCC+[2]
Total cash, cash equivalents, temporary investments and restricted
76,603
−
2,534
7,588
101
101
−
20,223
−
79,555
7,850
5,359
−
−
−
5,854
−
6,688
59,764
2,704
5,561
3,032
−
−
6,117
−
6,196
$ 178,102
temporary investments
[1] Principal protected by the Canada Deposit Insurance Corporation.
[2] Pertains to Clairvest's treasury investments in Light Tower Rentals and Centaur Gaming as described in note 4.
$ 157,155
$ 114,792
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% per annum, the potential effect would be an increase or decrease of
$1.4 million [2014 – $0.8 million] to distributions and interest income on a pre‐tax basis for the year ended March 31, 2015.
The Company's corporate investment portfolio is diversified across 18 indirect investee companies in 9 industries
and 3 countries as at March 31, 2015. Concentration risk by industry and by country is as follows:
79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
March 31, 2015
March 31, 2014
April 1, 2013
Canada
United
States
Chile
Total
Canada
United
States
Chile
Total
Canada
United
States
Chile
Total
$ —
$ —
$ —
$ —
$ — $22,930
$ — $22,930
$ —
$12,678
$ — $12,678
Business
services
Contract
manufacturing
—
9,380
Defense services
16,518
3,980
Equipment rental
16,984
11,629
Financial services
18,069
—
Health and medical
related
Outdoor
advertising
—
7,411
Specialty aviation
16,518
—
—
—
Textile rental
service
Waste
management
Other
Total
—
809
—
27,585
1,616
3,465
—
—
—
—
9,380
—
8,187
20,498
14,037
2,884
28,613
12,504
36,302
18,069
15,667
—
—
—
—
—
8,187
—
7,573
—
7,573
16,921
12,761
1,904
48,806
10,573
24,580
15,667
15,563
—
14,665
35,153
15,563
—
—
—
—
—
—
—
—
—
—
7,411
4,015
16,518
14,037
809
27,585
—
—
—
—
—
706
15,525
5,081
562
—
—
—
—
—
—
—
—
4,015
—
—
14,037
12,760
706
15,525
—
—
562
812
25
—
—
788
—
—
—
—
—
—
—
—
25
—
12,760
788
—
812
Gaming
11,003
83,659
34,703
129,395
6,537
67,893
29,421
103,851
4,879
39,185
39,486
83,550
$88,149 $140,507
$34,703 $263,359
$67,359
$154,427
$29,421
$251,207
$57,348
$86,733
$39,486
$183,567
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. The Company has also advanced loans to indirect investee
companies which are denominated in foreign currency. In order to limit its exposure to changes in the value of foreign
denominated currencies relative to the Canadian dollar, Clairvest and its acquisition entities hedge 100% of the fair value of
its foreign investments unless a specific exemption is approved by the Board of Directors.
A number of indirect 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. Accounts
payable, loans payable, and derivative instruments have maturities of less than one year. Management participation
liability, share‐based compensation liability, and amounts accrued under the Bonus Program are only due upon cash
realization or completion of the respective vesting period. Total unfunded commitments to co‐invest alongside the CEP
Funds, as described are $225.4 million as at March 31, 2015 [March 2014 − $245.3 million; April 2013 − $91.8 million]. The
timing of any amounts to be funded under these commitements is dependent upon the timing of investment acquisitions,
which are made at the sole discretion of the Company.
The Company manages liquidity risk by maintaining a conservative liquidity position that exceeds all liabilities
payable on demand. The Company invests its cash, cash equivalents and temporary investments [together, "treasury
funds"] in liquid assets such that they are available to cover any potential funding commitments and guarantees. In
addition, the Company maintains various credit facilities.
80
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
At March 31, 2015, Clairvest had treasury funds of $157.2 million [March 2014 – $114.8 million; April 2013 − $172.7 million]
and access to $95.0 million [March 2014 ‐ $95.0 million; April 1, 2013 − $95.0 million] through its credit facili(cid:415)es to support
its current and anticipated corporate investments.
18. FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, cash equivalents, temporary investments, corporate investments, and derivative instruments are carried at fair value
in accordance with the Company's accounting policy as described in note 2[a] to the consolidated financial statements. All
other financial instruments, including receivables and payables, are short‐term in nature.
[a] Fair value hierarchy
The Company classifies financial instruments measured at fair value through profit or loss according to the following
hierarchy, based on the lowest level of significant input used in measuring fair value.
Level
Level 1
Fair value input description
Financial instruments
Quoted prices [unadjusted] from active markets Quoted equity instruments
Quoted corporate bonds
Level 2
Inputs other than quoted prices included in
Level 1 that are observable either directly [i.e.
as prices] or indirectly [i.e. derived from prices]
Level 3
Inputs that are not based on observable market
data
Money market and
accounts
Quoted equity
actively
traded
positions]
investment
savings
instruments which are not
[i.e. significant ownership
Guaranteed investment certificates
Quoted corporate bonds or loans which are not
actively traded
Unquoted equity instruments or partnership
units
Corporate bonds, debentures or
traded
loans not
81
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
The following table presents the financial instruments measured at fair value classified by the fair value hierarchy:
March 31, 2015
Fair value measurements using
Level 1
Level 2
Level 3
Assets/liabilities at
fair value
Financial assets
Cash equivalents
Investment savings accounts
$ 48,639
$ —
$ —
$ 48,639
Money market savings accounts
41,262
89,901
Temporary investments
Guaranteed investment certificates
—
—
—
38,288
20,223
58,511
—
—
—
—
—
41,262
89,901
38,288
20,223
58,511
109
291,312
291,421
—
—
—
$ 89,901
$ 58,620
$ 291,312
$ 439,833
Corporate bonds and loans
Corporate investments
Financial liabilities
Derivative instruments
$ —
$ 4,341
$ —
$ 4,341
$ —
$ 4,341
$ —
$ 4,341
82
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
March 31, 2014
Fair value measurements using
Level 1
Level 2
Level 3
Assets / liabilities at
fair value
Financial assets
Cash equivalents
Investment savings accounts
$ 42,311
$ —
$ —
$ 42,311
Money market savings accounts
7,849
50,160
—
—
—
—
—
—
—
7,849
50,160
50,453
12,542
62,995
50,453
12,542
62,995
—
—
55
$ 50,215
$ 62,995
$ 243,974
$ 357,184
—
243,974
244,029
Temporary investments
Guaranteed investment certificates
—
Corporate bonds and loans
Corporate investments
Financial liabilities
Derivative instruments
$ —
$ 1,575
$ —
$ 1,575
$ —
$ 1,575
$ —
$ 1,575
83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
April 1, 2013
Fair value measurements using
Level 1
Level 2
Level 3
Assets / liabilities at
fair value
Financial assets
Cash equivalents
Investment savings accounts
$ 18,240
$ —
$ —
$ 18,240
Money market savings accounts
Temporary investments
Guaranteed investment certificates
Corporate bonds and loans
Restricted temporary investments
Corporate investments
Financial liabilities
93,463
111,703
—
3,061
3,061
—
126
—
—
44,335
12,312
56,647
5,425
—
—
—
—
—
—
93,463
111,703
44,335
15,373
59,708
5,425
—
210,109
210,235
$ 114,890
$ 62,072
$ 210,109
$ 387,071
Derivative instruments
$ —
$ 190
$ —
$ 190
$ —
$ 190
$ —
$ 190
For financial instruments that are recognized at fair value on a recurring basis, the Company determines whether
transfers have occurred between levels in the hierarchy by re‐assessing categorization [based on the lowest level input
that is significant to the fair value measurement as a whole] at the end of each reporting period. Transfers between
levels of fair value hierarchy are deemed to have occurred at the date of event.
During the year ended March 31, 2015, the Company transferred its direct investment in Discovery Air common
shares from level 1 to level 2 as a result of the market for the shares becoming inactive following the significant
purchases made by Clairvest together with its co‐investors as discussed in note 8[m]. There were no other transfers
between the various levels of the fair value hierarchy for the years ended March 31, 2015 and 2014.
84
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
[b] Level 3: Reconciliation between opening and closing balances
The following table presents the changes in fair value measurements for instruments included in Level 3 of the fair value
hierarchy set out in IFRS 13:
Total realized /
unrealized gains
and foreign
exchange
revaluations
included in
earnings
Fair value April 1,
2014
Purchases of
assets / issuances
of liabilities
Sales of assets /
settlements of
liabilities
Fair value March
31, 2015
Unrealized gains
and foreign
exchange
revaluations
included in
earnings for assets
and liabilities for
the year ended
March 31, 2015
for positions still
held
243,974
38,604
18,932
[10,198]
291,312
38,585
243,974
38,604
18,932
[10,198]
291,312
38,585
Total realized /
unrealized gains
and foreign
exchange
revaluations
included in
earnings
Fair value April 1,
2013
Purchases of
assets / issuances
of liabilities
Sales of assets /
settlements of
liabilities
Fair value March
31, 2014
Unrealized gains
and foreign
exchange
revaluations
included in
earnings for assets
and liabilities for
the year ended
March 31, 2014 for
positions still held
210,109
39,454
3,534
[9,123]
243,974
39,479
210,109
39,454
3,534
[9,123]
243,974
39,479
Financial assets
Corporate
investments
Financial assets
Corporate
investments
[c] Level 3: Fair value measurement based on reasonably possible alternative assumptions
While Clairvest considers its fair value measurements to be appropriate, the use of reasonably possible alternative
assumptions could result in different fair values. For a given measurement date, it is possible that other market
participants could measure a same financial instrument at a different fair value, with the valuation techniques and
inputs used by these market participants still meeting the definition of fair value. The fact that different fair value
measurements exist reflects the judgment, estimates and assumptions applied as well as the uncertainty involved in
determining the fair value of these financial instruments.
Included in corporate investments are indirect investee companies [refer to note 8] for which the fair values have been
estimated based on assumptions that are not be supported by observable inputs. The following tables present
quantitative information on the primary valuation techniques and unobservable inputs based on the form of
investment:
85
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
March 31, 2015
Unquoted equity instruments [including
warrants] or partnership units
Corporate bonds, debentures or loans not
traded
March 31, 2014
Unquoted equity instruments [including
warrants] or partnership units
Corporate bonds, debentures or loans not
traded
April 1, 2013
Unquoted equity instruments [including
warrants] or partnership units
Corporate bonds, debentures or loans not
traded
Valuation techniques
Public company
comparables
Recent transactions
Significant
unobservable input
EBITDA multiples
Range
4.2x to 9.5x
n/a
n/a
Discounted cash flows
Discount rates
6.0% to 15.0%
Valuation techniques
Public company
comparables
Recent transactions
Significant
unobservable input
EBITDA multiples
Range
4.4x to 8.9x
n/a
n/a
Discounted cash flows
Discount rates
6.0% to 15.0%
Valuation techniques
Public company
comparables
Recent transactions
Discounted cash flows
Significant
unobservable input
Range
EBITDA multiples
3.4x to 7.1x
n/a
Discount rates
n/a
6.0% to 10.0%
The most significant unobservable input for fair value measurement is the multiple of earnings before interest, taxes,
depreciation and amortization ["EBITDA"] used for each individual indirect investee company. 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 directly or indirectly 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. Twelve indirect investee companies are valued using the earnings multiple approach. If the
Company had used an earnings multiple for each investee company that was higher or lower by 0.5 times, the potential
effect would be an increase of $23.9 million or decrease of $27.4 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,
2015 [March 2014 – increase of $22.4 million or decrease of $21.8 million; April 2013 – increase of $19.3 million or
decrease of $19.4 million]. Earnings multiples used are based on public company valuations as well as private market
multiples for comparable companies.
Clairvest may also use information about recent transactions carried out in the market for valuations of private
equity investments when this value is the most representative indication of fair value. The fair value of corporate bonds,
debentures or loans is primarily determined using discounted cash flow technique which uses observable and
unobservable inputs such as discount rates that take into account the risk associated with the investment as well as
future cash flows. For those investments valued based on recent transactions or discounted cash flows, Clairvest has
86
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014 [tabular dollar amounts in thousands, except per share information]
determined that there are no alternative assumptions that would change the fair value significantly at March 31, 2015,
March 31, 2014 and April 1, 2013.
19. CAPITAL DISCLOSURES
Clairvest considers the capital it manages to be shareholders' equity. Clairvest also manages the third‐party capital
committed or invested in the CEP Funds and co‐investments made by other investors.
Clairvest's objectives in managing capital are to:
Preserve a financially strong company with substantial liquidity 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 offsetting a portion of its operating costs and by earning a
carried interest.
At March 31, 2015, March 31, 2014 and April 1, 2013, Clairvest had no external capital requirements, other than as
disclosed in note 16.
20. FUTURE CHANGES IN ACCOUNTING POLICIES
IFRS 9 Financial Instruments
In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments which reflects all phases of the financial
instruments project and replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of
IFRS 9. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting.
IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early application permitted. Retrospective
application is required, but comparative information is not compulsory. Early application of previous versions of IFRS 9
[2009, 2010 and 2013] is permitted if the date of initial application is before February 1, 2015. The Company is currently
assessing the impact of IFRS 9 and plans to adopt the new standard on the required effective date.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 was issued in May 2014 and establishes a new five‐step model that will apply to revenue arising from contracts with
customers. Under IFRS 15 revenue is recognized at an amount that reflects the consideration to which an entity expects to
be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured
approach to measuring and recognizing revenue. The new revenue standard is applicable to all entities and will supersede
all current revenue recognition requirements under IFRS. Either a full or modified retrospective application is required for
annual periods beginning on or after January 1, 2017 with early adoption permitted. The Company is currently assessing the
impact of IFRS 15 and plans to adopt the new standard on the required effective date.
87
SHAREHOLDER INFORMATION
As at, and for the year ended, March 31, 2015
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, and on the SEDAR website, www.sedar.com.
VALUATION MEASURES
Clairvest’s focus is on building the longterm value of its investments. Accordingly, the results are reflected in the value of
our investments. The fair value method, however, is not without its 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
Stock symbol
Common Shares[3]
Toronto Stock Exchange
CVG
15,134,095
9,857,822
5,276,273
$ 431,321,708
$ 150,373,781
[1] As at June 2, 2015. [2] Excludes holders of 10% or more of the outstanding common shares. [3] During the year, Clairvest filed a new Normal Course Issuer Bid.
BOOK VALUE PER SHARE[1] AT MARCH 31
[1] Book value per share presented under Part V “Pre‐changeover accounting standards” of the Handbook for Chartered Professional Accountants Canada
[“Canadian GAAP”] for all periods up to March 31, 2014.
88
SHAREHOLDER INFORMATION
As at, and for the year ended, March 31, 2015
SHARE PRICE VS BOOK VALUE PER SHARE[1]
[1] Book value per share presented under Part V “Pre‐changeover accounting standards” of the Handbook for Chartered Professional Accountants Canada
[“Canadian GAAP”] for all periods up to March 31, 2014.
SHARE TRADING VOLUME FISCAL 2015
Common shares
Year to March 31, 2015
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year to March 31, 2014
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
24.24
25.24
26.99
28.23
22.95
22.74
23.11
23.95
22.34
22.96
24.75
26.99
20.98
20.83
21.70
23.01
23.20
25.05
26.99
27.81
21.02
22.35
23.01
23.90
289,800
108,200
31,600
23,600
46,700
77,700
64,400
94,300
89
TRANSFER AGENT AND REGISTRAR
Investors are encouraged to contact
CST Trust Companyfor information
regarding their security holdings.
Information can be obtained at:
P.O. Box 4202, Station A
Toronto, Ontario, M5W 0E4
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 12, 2015
St. Andrews Club & Conference Centre,
150 King Street West, 27th Floor
Toronto, Ontario Canada
All Shareholders are encouraged to attend.