Clairvest Group Inc.
Annual Report 2017

Plain-text annual report

ANNUAL REPORT 2017 TABLE OF CONTENTS Co-Chief Executive Officers' Message Management's Discussion and Analysis 2 4 Management's Report 38 Independent Auditors' Report 39 Consolidated Financial Statements 40 Notes to Consolidated Financial Statements 44 Shareholder Information 80 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$1.7 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 CLAIRVEST DELIVERS SOLID RETURNS IN FISCAL 2017 FELLOW SHAREHOLDERS, Fiscal 2017 was another active year for Clairvest. We completed two meaningful liquidity events and another shortly after the fiscal year-end generating $270 million in proceeds for our shareholders and the Clairvest Equity Partners fund investors. These transactions included the recapitalization of Rivers Casino in December 2016, the sale of Cieslok Media in January 2017 and the sale of LSNE in April 2017. We are pleased to see that the sale of Cieslok Media was recognized by our peers, and for the fifth time over the last ten years, we were named the CVCA Private Equity Deal of the Year award winner, having generated a return of 8.4x invested capital and an internal rate of return ("IRR") of 92% on this investment. This sale and the recapitalization of Rivers Casino brought the gross returns on the realized investments of Clairvest Equity Partners IV to an impressive 5.4x invested capital. While we delivered strong results during fiscal 2017, we are challenged with the latest investment which we made shortly after year-end. That investment, Head Infotech, operates a skill-based online gaming platform in India. In June 2017, a material adverse regulatory development occurred which impacted operations. As at the writing of this letter, the impact to Clairvest’s book value is uncertain and potentially material. We are deeply engaged along with our partners to deal with this situation. For the 12 months ended March 31, 2017, Clairvest’s book value per share grew to $36.21, or by 14% including dividends paid. Over the last 20 years, our book value has grown at a compounded annual growth rate of 10.5%, after tax, despite an average cash balance of 35%. In contrast, the S&P500 has delivered 7.8%, pre-tax, reflecting solid out-performance by Clairvest on an absolute and, particularly, on a risk-adjusted basis. In terms of our industry, the themes of the past several years continue; fierce competition, rising valuation multiples and more capital being allocated to the PE asset class. Private equity is cyclical and we have been here before leading up to the financial crisis in 2009 when pricing was unreasonably high, and we responded with investment sales, and very careful, judicious underwriting of new investments. When the inevitable correction occurred, and many were consumed with troubles, we had few challenges and a full cheque book which permitted us to invest in attractive opportunities such as Rivers Casino and Centaur Gaming, both of which are already home runs. The successful sale of Cieslok Media, the meaningful recapitalization of Rivers Casino and the sale of LSNE are examples of our focus on monetizing the value built in the portfolio in the current sellers’ market. We know from experience that it is during times like this that our discipline and proven investment strategy will serve us well. Our track record speaks to our strategy best; the 30 realized deals originated by the current management team have turned $593 million of equity investments into over $1.8 billion and generated a pooled IRR of 24%. Our plan is to continue to execute and continually improve upon the same strategy that has worked in the past. 2 CO-CHIEF EXECUTIVE OFFICERS’ MESSAGE As always, we express our gratitude to Clairvest’s shareholders and fund partners for their support, to our investee company management for their entrepreneurship, to the Clairvest team for their hard work and to our board members for their advice and counsel. Together, they provide the means to continue building shareholder value in Clairvest Group. Respectfully, B. Jeffrey Parr Co-Chief Executive Officer Ken Rotman Co-Chief Executive Officer June 22, 2017 3 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 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, 2017 ["consolidated financial statements"]. The following MD&A is the responsibility of Management and is as at June 22, 2017. 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 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 carefully selected companies that have the potential to generate superior returns. Clairvest also manages third party capital through the CEP Funds and provides loans to and earns priority distributions or management fees and carried interest from the CEP Funds, which meet the definition of structured entities under International Financial Reporting Standards ["IFRS"]. The Company concluded that its ownership interests 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. The Company’s consolidated financial statements include those subsidiaries which provide investment-related services and that the Company controls by having the power to govern the financial and operating policies of these entities. Such entities would include those which earn priority distributions or management fees and carried interest from the CEP Funds. 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 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 IFRS as described in the Critical Accounting Estimates section of the MD&A, include the following: 2141788 Ontario Corporation ["2141788 Ontario"] 2486303 Ontario Inc. ["2486303 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"] 4 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 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. 2486303 Ontario is a wholly-owned acquisition entity of Clairvest which purchased 100% of the limited partnership interest of Clairvest Equity Partners Limited Partnership ["CEP"] and 50% interest of Clairvest General Partner Limited Partnership in December 2015. CEP was an investment fund held by third party investors prior to being purchased by 2486303 Ontario. 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. As at March 31, 2017, Clairvest, through these acquisition entities, had 16 core investments in 8 different industries and 3 countries. Two were joint investments with CEP III, nine were joint investments with CEP IV and CEP IV-A [together, the "CEP IV Fund"], and three were joint investments with CEP V and CEP V-A [together, the "CEP V Fund"]. Clairvest also held investments in the Grey Eagle Casino and Wellington Financial. The table below summarizes Clairvest’s direct and indirect investee companies ["investee companies"] as at March 31, 2017: 5 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 SUMMARY OF CLAIRVEST'S INVESTEE COMPANIES AS AT MARCH 31, 2017 Investee Company Industry Segment Geographic Segment Ownership Percentage[17] Cost of Investment [millions] Net Cash Investment [millions][18] Fair Value of Investment [millions][19] Description of Business INVESTMENTS MADE BY CEP III CO-INVEST ALONGSIDE CEP III Chilean Gaming Holdings[1] Gaming Chile 36.8% $ 28.8 $ 17.2 $ 48.8 Lyophilization Services of New England Inc. ["LSNE"][2] Contract Manufacturing United States 11.2% $ 6.6 $ 6.1 $ 27.2 interest An investment vehicle which holds an equity various gaming in entertainment complexes in Chile. CEP III ownership: 37.7% A Manchester, New Hampshire based contract manufacturing organization focused on providing lyophilization services to biotech, pharmaceutical and medical device manufacturers. CEP III ownership: 33.5% INVESTMENTS MADE BY CEP IV CO-INVEST ALONGSIDE CEP IV/CEP IV-A Centaur Gaming[3] Gaming United States Debt interest with stapled warrants $ 34.7 $ 31.8 $ 111.2 County Waste of Virginia, LLC ["County Waste"][4] CRS Contractors Rental Supply Limited Partnership ["CRS"][5] Davenport Land Investments[6] Waste Management United States 12.5% $ 7.5 $ 7.5 $ 18.0 Equipment Rental Canada 13.5% $ 10.6 $ 8.7 $ 28.8 $ 2.2 $ 1.7 $ 3.0 Other United States 18.7% [Davenport North] & 13.4% [Davenport South] Discovery Air Inc. ["Discovery Air"][7] Specialty Aviation Canada 27.3% and debt interest $ 36.9 $ 32.8 $ 21.0 Momentum Aerospace Group ["MAG"][8] Specialty Aviation United States 10.3% and debt interest $ 5.1 $ 5.1 $ 11.6 on focused The owner and operator of the Hoosier Park Racing & Casino in Anderson, Indiana and the Indiana Grand Casino and Indiana Downs ["Indiana Grand Racetrack Casino"] in Shelbyville, Indiana. CEP IV and CEP IV-A ownerships: debt interests with stapled warrants A private regional solid waste collection company headquartered in Albany, New York. CEP IV and CEP IV-A ownerships: 29.5% and 4.7% respectively An Ontario based equipment rental provider commercial, industrial and infrastructure sectors. CEP IV and CEP IV-A ownerships: 31.8% and 5.1% respectively Comprised of two entities ["Davenport North" and "Davenport South"] holding real casino development in Davenport, Iowa. CEP IV and CEP IV-A ownerships: 44.1% and 7.0% of Davenport North and 31.6% and 5.0% of Davenport South respectively A specialty aviation services business delivering airborne services globally and commercial aviation services primarily in Northern Canada. CEP IV and CEP IV-A ownerships: 35.9% and 5.7% of Discovery Air respectively and debt interest A U.S.-based speciality aviation and and intelligence, reconnaissance service provider. CEP IV and CEP IV-A ownerships: 24.3% and 3.9% respectively surrounding surveillance training estate a [1] [2] [3] [4] [5] [6] [7] [8] Clairvest held 30,446,299 units of Chilean Gaming Holdings which holds a 50% interest in Casino Marina del Sol and a 73.8% interest in each of Casino Osorno and Casino sol Calama. Clairvest held 6,406,000 Series A 10% cumulative convertible preferred shares and 331,506 Series B 10% cumulative preferred shares. Clairvest invested $34.7 million in Centaur Gaming by way of US$17.4 million in unsecured term loans with stapled warrants which, subject to regulatory approval, were convertible upon exercise into 12.7% of Class A and Class B units of Centaur Gaming. Clairvest held 6,942.64 Class B units in County Waste and 174.3 units in Spare Lots, LLC ["Spare Lots"], a company affiliated with County Waste. Clairvest held 241,896 Class B and 10,572,805 Class C limited partnership units in CRS. Clairvest has the right to receive proceeds equal to an additional 2.2% economic interest in CRS until Clairvest has received proceeds equal to three times its invested capital. Clairvest held 1,408.81 units in Davenport North, 1,298.21 units in Davenport South and a US$0.6 million loan to a partner of Davenport Land Investments. Clairvest held 22,384,024 common shares, $22.0 million in convertible debentures with a stated interest rate of 10% per annum and $6.6 million in secured loans advanced to DA Defence, a wholly-owned subsidiary of Discovery Air with a stated interest rate of 12% per annum. Clairvest also advanced $2.3 million in promissory notes with a stated rate of 8% per annum which was included in its loans receivable. Clairvest held 33,736 Class A stock in MAG and advanced $1.1 million in the form of promissory notes from Discovery Air Fire Services, which had been acquired by MAG during fiscal 2017, with a stated interest rate of 10% per annum. 6 Winters Bros. Waste Systems of CT, LLC ["Winters Bros. of CT"][11] Accel Entertainment Inc. ["Accel Entertainment"][12] Digital Media Solutions, LLC ["Digital Media Solutions"][13] Winters Bros. Waste Systems of Long Island Holdings, LLC ["Winters Bros. of LI"][14] STANDALONE INVESTMENTS Grey Eagle Casino[15] Operates North America’s premier standardbred horse racing track located in East Rutherford, New Jersey. CEP IV and CEP IV-A ownerships: debt interests and equity investment rights A gaming entertainment complex located in Des Plains, Illinois. CEP IV and CEP IV-A ownerships: 11.8% and 1.9% respectively A solid waste collection, recycling and disposal company based in Danbury, Connecticut. CEP IV and CEP IV-A ownerships: 31.6% and 5.0% respectively regional lead generation engine A operator in Illinois. CEP V and CEP V-A ownerships: 15.4% and 2.9% respectively A digital media company which operates as a for companies in a variety of different industries. CEP V and CEP V-A ownerships: 27.3% and 5.2% respectively A solid waste regional management company based in Long Island, New York. CEP V and CEP V-A ownerships: 27.5% and 5.2% respectively private A charitable casino on Tsuu T'ina First Nation reserve lands, located southwest of the city of Calgary, Alberta. Provides debt capital and operating lines to venture capital backed technology, biotechnology, and industrial product companies in Canada and the United States. communications MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 Investee Company Industry Segment Geographic Segment Ownership Percentage[17] Cost of Investment [millions] Net Cash Investment [millions][18] Fair Value of Investment [millions][19] Description of Business INVESTMENTS MADE BY CEP IV CO-INVEST ALONGSIDE CEP IV/CEP IV-A Gaming New Meadowlands Racetrack LLC [the "Meadowlands"][9] United States Debt interest and equity investment rights $ 6.4 $ 5.3 $ 9.6 Rivers Casino [10] Gaming United States United States 5.0% $ 9.1 $ [34.1] $ 14.3 13.4% $ 8.1 $ 8.1 $ 11.2 Waste Management Gaming United States 7.9% $ 16.0 INVESTMENTS MADE BY CEP V CO-INVEST ALONGSIDE CEP V/CEP V-A terminal licensed video gaming $ 20.6 $ 16.0 Marketing Services United States 13.9% $ 8.3 $ 7.5 $ 8.2 Waste Management United States 14.0% $ 10.6 $ 10.6 $ 11.2 Gaming Canada Equity participation $ 11.0 $ [0.1] $ 12.6 Wellington Financial[16] Financial Services Canada 10.1% $ 15.6 $ [15.6] $ 22.1 OTHER TOTAL $ 1.0 $ 218.5 $ 1.0 $ 109.7 $ 1.0 $ 380.4 [9] [10] [11] [12] [13] [14] Clairvest invested US$5.4 million [C$5.6 million] in the Meadowlands in the form of secured convertible debentures with a stated interest rate of 15% per annum and an additional US$0.7 million [C$0.9 million] in the form of preferred debt with a stated interest rate of 3% per annum. Clairvest also held warrants which entitle it to invest in equity securities subject to certain conditions. Clairvest held 9,021,917 units in Rivers Casino. Clairvest held 76,284.8 Class C units of Winters Bros. of CT. Clairvest held 283,478 Class D preferred shares of Accel Entertainment. Clairvest held 6,150,000 Class B units of Digital Media Solutions. Clairvest held 1,487,773 Class C units in Winters Bros. of LI. And 256,037 units in WBLI II, LLC, an affiliate to Winters Bros. of LI which is owned proportionately by the same unitholders as Winters Bros. of LI. [15] During fiscal 2016, Clairvest increased its equity participation interest in the Grey Eagle Casino, through the purchase of CEP by 2486303 Ontario, to between 11.25% to 38.25% of the earnings of Grey Eagle Casino until December 2022. Cost and fair value excludes $1.2 million which represent Clairvest’s direct entitlement through the general partner of CEP ("CEP GP"). Clairvest has a $30.3 million limited partner commitment to Wellington Financial Fund V, $15.6 million of which had been funded as at March 31, 2017. Clairvest also held a limited partner interest in Wellington Financial Fund III and Wellington Financial Fund IV and an interest in the general partner of the various Wellington Funds. [16] [17] Ownership percentage calculated on a fully diluted basis as at March 31, 2017. [18] Net cash investment [proceeds] comprised cost net of dividends, interest and other distributions received but excludes advisory and other fees received, f oreign 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. [19] 7 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 OVERVIEW OF FISCAL 2017 An overview of the significant events during fiscal 2017 and those which occurred subsequent to year-end follows: Overall and Corporate • Clairvest's book value increased by $64.7 million, or $4.30 per share, to $550.2 million or $36.21 per share. The increase was primarily due to net income and comprehensive income ["net income"] of $4.61 per share, net of $0.3191 per share in dividends paid. During fiscal 2017, 20,000 common shares were purchased and cancelled under the Normal Course Issuer Bid, reducing the number of common shares outstanding to 15,194,095. For the year ended March 31, 2017, Clairvest recorded $131.5 million in total revenue, comprised $72.9 million in net investment gains, $20.3 million in distributions and interest income, $35.6 million in net carried interest income from the CEP Funds and $2.7 million in other income. Total revenue for the prior fiscal year was $75.9 million. • • Net income for the year ended March 31, 2017 was $70.1 million compared to $40.0 million in the prior fiscal year. • In December 2016, Clairvest closed on a new 5-year $100 million committed revolving credit facility with several Schedule 1 Canadian chartered banks. The new credit facility replaced $95 million in prior credit facilities. Further details are on page 10 of the MD&A. Clairvest filed a new normal course issuer bid enabling it to make market purchases of up to 760,627 of its common shares in the 12-month period commencing March 7, 2017. No purchases have been made under this bid to June 22, 2017. As at June 22, 2017, Clairvest had repurchased a total of 6,615,049 common and non-voting shares for $68.9 million over the last thirteen years. Clairvest paid an annual ordinary dividend of $0.10 per share and a special dividend of $0.2191 per share. The dividends were paid on July 22, 2016 to common shareholders of record as of July 6, 2016. The dividends were eligible dividends for Canadian income tax purposes. • • Clairvest/CEP III Co-Invest and CEP III • In September 2016, CEP III Co-Invest and CEP III realized on Light Tower Rentals, Inc. ["LTR"], an oilfield equipment rental company based in the U.S. The carrying value of LTR had been nil since December 2015. Over the 8-year investment horizon, LTR generated 4.7 times invested capital, or a 29.8% internal rate of return ["IRR"] for Clairvest and CEP III on a currency neutral basis. Further details are on page 13 of the MD&A. CEP III Co-Invest and CEP III announced the sale of LSNE in March 2017 which was completed in April 2017. CEP III Co- Invest realized proceeds of US$19.9 million [C$27.1 million] at closing and are entitled to additional proceeds in fiscal 2018 of up to US$0.3 million subject to certain conditions. Over the 9-year investment horizon, LSNE generated 2.9 times invested capital, or a 13.3% IRR for Clairvest and CEP III on a currency neutral basis. In Canadian dollar terms, net of foreign exchange hedges, CEP III Co-Invest received net proceeds of $26.2 million against an investment of $7.5 million, or 3.5 times invested capital. As at March 31, 2017, LSNE is carried at the estimated sale proceeds substantially all of which have since been received. Subsequent to the sale of LSNE, CEP III has returned 2.25 times invested capital to its third-party investors, after consideration of general partner priority distributions, carried interest and expenses. CEP III continues to hold one investment as at June 22, 2017. Based on the fair value at March 31, 2017, CEP III is expected to generate approximately 2.5 times invested capital or an IRR of over 18% for its third-party investors after all expenses and carried interest over the life of the fund. Clairvest/CEP IV Co-Invest and the CEP IV Fund • In December 2016, Rivers Casino completed its second financing since it began operations in July 2011. As a result of the financing, CEP IV Co-Invest and the CEP IV Fund received distributions totalling US$42.7 million [C$57.5 million], CEP IV Co-Invest’s portion was US$11.0 million [C$14.8 million]. To March 31, 2017, CEP IV Co-Invest and the CEP IV Fund had received distributions, interest and fees totaling 4.8 times invested capital from Rivers Casino. In January 2017, CEP IV Co-Invest and the CEP IV Fund realized on Cieslok Media Inc. ["Cieslok Media"], an outdoor advertising company operating large format digital and static billboards across major cities in Canada. CEP IV Co-Invest’s • • • 8 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 portion of the proceeds was $33.3 million versus a cost of $4.0 million. Over the 3-year investment horizon, Cieslok Media generated 8.4 times invested capital, or a 92% IRR for Clairvest and the CEP IV Fund. • During fiscal 2017, CEP IV Co-Invest invested an additional $20 million in Centaur Gaming in the form of US$3.8 million in term loans with stapled warrants. As at March 31, 2017, the investments in Centaur held by CEP IV Co-Invest were convertible upon exercise into 12.7% of Class A and B units in Centaur Gaming, and with a carrying value of $111.2 million at March 31, 2017 represented 20.2% of the book value of Clairvest. • Also during fiscal 2017, CEP IV Co-Invest, the CEP IV Fund and other co-investors in Discovery Air [collectively the "Discovery Air Investor Group"] invested an additional net $20.8 million to Discovery Air, CEP IV Co-Invest’s portion of which was $4.6 million. As at March 31, 2017, CEP IV Co-Invest’s investment in Discovery Air had a carrying value of $21.0 million, compared to $30.7 million in the prior year. Subsequent to year-end, the Discovery Air Investor Group made additional investments in Discovery Air totaling $12.5 million, $4.4 million of which was funded by CEP IV Co-Invest. Further details are on page 14 of the MD&A. In February 2017, MAG acquired Discovery Air Fire Services, Inc. ["DAFS"] from Discovery Air. Further details are on page 15 of the MD&A. • • As at March 31, 2017 and June 22, 2017, the CEP IV Fund had realized or partially realized 3 of its 11 investments, and had returned 55% of capital invested by third-party investors. • Clairvest/CEP V Co-Invest and the CEP V Fund • During fiscal 2017 and pursuant to a post-closing purchase price adjustment, CEP V Co-Invest and the CEP V Fund invested an additional US$7.9 million in Accel Entertainment. CEP V Co-Invest’s portion of the investment in Accel Entertainment was US$2.4 million. Subsequent to year-end, CEP V Co-Invest, the CEP V Fund and other co-investors invested US$73.7 million [C$99.2 million] in Head InfoTech India Pvt. Ltd. ["Head Infotech"], which operates an online skill-based gaming platform in India providing online experience of Rummy. CEP V Co-Invest invested US$41.6 million [C$56.0 million] in Head InfoTech, which comprised US$17.0 million [C$22.9 million] in the form of compulsory convertible debentures which bear interest at a rate of 16.0% per annum, and US$24.6 million [C$33.1 million] for a 33.6% equity interest in Head InfoTech. A foreign exchange hedging strategy has not been implemented against this investment. Subsequent to the investment, a material adverse regulatory development occurred with respect to this investment. The impact to the fair value of this investment is currently uncertain and potentially material. • As at June 22, 2017, the CEP V Fund had made 4 investments, or approximately 34% of its committed capital. OUTLOOK Clairvest's current management team has made 43 platform investments and has realized or partially realized on 30 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. As a long-term investor, Clairvest is focused on building value in its investee companies by contributing strategic expertise, advising on operational improvment and helping its investee companies capitalize on new opportunities that arise. As at March 31, 2017, Clairvest and its controlled acquisition entities had $714.4 million of capital available for future acquisitions through its cash, cash equivalents and temporary investments ["treasury funds"], credit facilities and uncalled capital in the CEP Funds. 9 June 22, 2017 Number of Investments Total 8 Currently Held 1 9 4 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 The table below summarizes the status of the CEP Funds as at June 22, 2017: Status of Clairvest Equity Partnerships [$millions, except year of fund and number of investments] Year of Fund Third Party Capital Clairvest Commitment Total Capital Percentage Drawn Clairvest Equity Partners III ["CEP III"] 2006 225 75 300 79.8% Clairvest Equity Partners IV ["CEP IV"] 2010 342 Clairvest Equity Partners V ["CEP V"] 2015 420 125 180 467 81.3% 11 600 34.0% 4 FINANCIAL CONDITION AND BOOK VALUE The following table summarizes the Company’s financial position and book value as at March 31, 2017 and 2016: Financial Position As at, [$000's, except number of shares and per share amounts] March 31, 2017 March 31, 2016 Cash, cash equivalents and temporary investments ["treasury funds"] $ 122,169 $ 87,043 Carried interest receivable from the CEP Funds Corporate investments, at fair value Total assets Management participation Total liabilities Book value Book value per share Dividends per share paid during the fiscal year ended Number of common shares outstanding 98,322 410,102 671,951 67,050 121,747 550,204 36.21 0.3191 64,009 353,801 570,191 43,977 84,670 485,521 31.91 0.2958 15,194,095 15,214,095 As at March 31, 2017, Clairvest had total assets of $672.0 million, an increase of $101.8 million during fiscal 2017. The increase was primarily due to net gains on realizations and a net increase in the fair value of Clairvest’s investee companies. As at March 31, 2017, the Company’s treasury funds of $122.2 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-. 2141788 Ontario also held $43.9 million in cash, investment savings accounts and guarantee investment certificates with consistent ratings to the above. Clairvest also had access to $5.0 million in cash held in various other acquisition entities which were controlled by Clairvest. During the year ended March 31, 2017, Clairvest closed on a new 5-year, $100.0 million, committed revolving credit facility with several Schedule 1 Canadian chartered banks. The credit facility, which has an initial expiry of December 2021 and is eligible for a one-year extension on each anniversary of the closing date, bears interest at the bank prime rate, which was 2.7% per annum as at March 31, 2017, plus 1.25% per annum on drawn amounts and a standby fee of 0.70% per annum on undrawn amounts. The amount available under the credit facility as at March 31, 2017 was $100.0 million, which is based on debt covenants and certain restrictions within the banking arrangement. No amounts had been drawn on the facility during the year and as at March 31, 2017. The new credit facility replaced a $75 million committed credit facility and a $20 million credit facility which were extinguished in December 2016. No amounts were drawn on those facilities during the year. 10 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 As at March 31, 2017, Clairvest had corporate investments with a carrying value of $410.1 million, an increase of $56.3 million during fiscal 2017, $380.4 million of which represented the fair value of Clairvest’s investee companies and the remaining $29.7 million of which represented other net assets [liabilities] held by Clairvest’s acquisition entities. Excluding net assets [liabilities] held by Clairvest’s acquisition entities, the aggregate carrying value of Clairvest’s investee companies increased by $55.7 million during fiscal 2017, which primarily comprised the following: - Net changes in unrealized gains on its investee companies of $35.3 million; - - - - - Follow-on investments net of return of capital totaling $30.6 million in existing investee companies; Foreign exchange revaluations of investee companies totaling $7.0 million; partially offset by The sale of Cieslok Media which had a carrying value of $10.6 million as at March 31, 2016; Provisions for interest on debenture investments totaling $5.6 million; and Interest payments on debenture investments totaling $1.7 million. Clairvest has implemented a hedging strategy because it has, directly and indirectly, several investments outside of Canada. In order to limit its exposure to changes in the value of these investments denominated in foreign currencies relative to the Canadian dollar, Clairvest and its acquisition entities consider and if determined appropriate, enters into hedging positions against these foreign denominated currencies as approved by the Board of Directors. For the year ended March 31, 2017, the foreign exchange adjustments made in Clairvest’s valuation of its investee companies is primarily offset by the foreign exchange adjustments made in the forward exchange forward contracts used to support its foreign exchange hedging strategy, except for its foreign exchange exposure in the Chilean Pesos ["CLP"] which is unhedged. Forward exchange forward contracts are described in the Derivative Financial Instruments section of the MD&A. 11 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 The table below details the cost and fair value of Clairvest’s investee companies as at March 31, 2017 and 2016: March 31, 2017 March 31, 2016 Fair value Cost Difference Fair value Cost Difference CEP III CO-INVEST INVESTMENTS Chilean Gaming Holdings[1] $ 48,835 $ 28,754 $ 20,081 $ 43,674 $ 28,754 $ 14,920 Light Tower Rentals — — — — LSNE 27,248 6,619 20,629 16,017 CEP IV CO-INVEST INVESTMENTS Centaur Gaming Cieslok Media County Waste CRS Davenport Land Investments Discovery Air MAG The Meadowlands Rivers Casino Winters Bros. of CT CEP V CO-INVEST INVESTMENTS Accel Entertainment Digital Media Solutions Winters Bros. of LI Grey Eagle Casino[2] Wellington Financial 111,170 34,657 76,513 — 17,999 28,758 3,009 21,037 11,557 9,563 14,307 11,160 20,639 8,179 11,190 12,613 22,101 — 7,533 10,573 2,196 — 10,466 18,185 813 36,860 [15,823] 5,068 6,444 9,058 8,053 15,978 8,254 10,636 11,017 15,640 6,489 3,119 5,249 3,107 4,661 [75] 554 1,596 6,461 68,672 10,640 11,981 22,009 2,858 30,685 5,600 8,551 26,202 9,907 12,646 7,987 10,927 14,076 20,852 2,403 7,077 [2,403] 8,940 14,644 54,028 4,015 7,308 10,573 2,196 32,243 3,838 5,580 9,058 8,053 12,910 8,254 10,636 11,017 14,631 6,625 4,673 11,436 662 [1,558] 1,762 2,971 17,144 1,854 [264] [267] 291 3,059 6,221 379,365 217,340 162,025 323,284 193,190 130,094 Other investments 1,039 1,127 [88] 1,415 1,486 [71] $ 380,404 $ 218,467 $ 161,937 $ 324,699 $ 194,676 $ 130,023 [1] [2] Comprised CEP III Co-Invest’s investment in Casino Marina del Sol, Casino Osorno and Casino Sol Calama. Fair value included the portion owned directly by Clairvest and the portion owned indirectly through 2486303 Ontario. Fair value excluded the amount of $1.0 million which represented Clairvest’s 50% entitlement of the carried interest of CEP as described in the Transactions with Related Parties section of the MD&A. The cost and fair value of these investee companies 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. Details of each investee company held as at March 31, 2017 and 2016 follows: INVESTMENTS MADE BY CEP III CO-INVEST ALONGSIDE CEP III Chilean Gaming Holdings As at March 31, 2017 and 2016, CEP III Co-Invest held 30,446,299 limited partnership units in Chilean Gaming Holdings, representing a 36.8% ownership interest on a fully diluted basis. During fiscal 2017, CEP III Co-Invest earned dividends totaling $3.7 million through its interest in Chilean Gaming Holdings, bringing total dividends earned to March 31, 2017 to $13.2 million. 12 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 Also during fiscal 2017, management determined that the fair value of Chilean Gaming Holdings should be adjusted upward by $3.7 million. The fair value of $48.8 million as at March 31, 2017 compares to a fair value of $43.7 million at March 31, 2016 and a cost of $28.8 million. The fair value is adjusted for foreign exchange fluctuations. Light Tower Rentals As at March 31, 2016, CEP III Co-Invest held 3,985,604 common shares in Light Tower Rentals, representing a 6.7% ownership interest on a fully diluted basis. During fiscal 2017, CEP III Co-Invest realized on its investment in Light Tower Rentals which had a carrying value of nil since December 2015. Over the life of this investment, CEP III Co-Invest received total proceeds of US$37.9 million [C$40.7 million] against its original investment of US$8.1 million [C$8.2 million] in Light Tower Rentals. In addition, Clairvest and CEP III Co-Invest had incurred total costs of $4.6 million on the foreign exchange hedging strategy for the investment in Light Tower Rentals. LSNE As at March 31, 2016, CEP III Co-Invest held 6,406,000 Series A 10% cumulative preferred shares and 1,250,000 Series B 10% cumulative preferred shares in LSNE. The Series A 10% cumulative preferred shares were convertible into a 11.2% ownership interest on a fully diluted basis and dividends would be forfeited on conversion. The Series B preferred shares were not convertible. During fiscal 2017, LSNE redeemed 918,494 Series B preferred shares held by CEP III Co-Invest at their fair market value of US$0.6 million [C$0.8 million]. Subsequent to year-end, the remaining 331,506 Series B preferred shares were redeemed at their fair market value of US$0.2 million [C$0.3 million]. Also subsequent to year-end, CEP III Co-Invest realized its investment in LSNE and sold the Series A 10% cumulative preferred shares for US$19.9 million [C$27.1 million] in cash proceeds at closing and is entitled to additional proceeds of US$0.3 million subject to the conditions of the purchase and sale agreement. As at March 31, 2017, LSNE was carried at a value which approximated the sale proceeds received subsequent to year-end. As at June 22, 2017, CEP III Co-Invest had received total proceeds of US$21.6 million [C$29.0 million] against its original investment of US$7.5 million [C$7.5 million] in LSNE. Clairvest and CEP Co-Invest III had also incurred total costs of $2.8 million on the foreign exchange hedging strategy for the investment in LSNE. INVESTMENTS MADE BY CEP IV CO-INVEST ALONGSIDE CEP IV Centaur Gaming As at March 31, 2016, CEP IV Co-Invest held US$13.6 million in term loans with stapled warrants which were convertible upon exercise to 9.9% of Class A and B units in Centaur Gaming. During fiscal 2017, CEP IV Co-Invest invested an additional $20.0 million in Centaur Gaming in the form of US$3.8 million in term loans with stapled warrants which were convertible upon exercise to 2.8% of Class A and Class B units of Centaur Gaming. As at March 31, 2017, CEP IV Co-Invest held US$17.4 million in term loans with stapled warrants which were convertible upon exercise to 12.7% of Class A and Class B units of Centaur Gaming. Also during fiscal 2017, management determined that the fair value of Centaur Gaming should be adjusted upward by $19.3 million. The fair value of $111.2 million as at March 31, 2017 compares to a fair value of $68.7 million at March 31, 2016 and a cost of $34.7 million. The increase in fair value was due to continuing growth in operating performance and reduced debt levels. The fair value is adjusted for foreign exchange fluctuations. Cieslok Media As at March 31, 2016, CEP IV Co-Invest held 4,014,989 common shares in Cieslok Media, representing a 23.5% ownership interest on a fully diluted basis. During fiscal 2017, CEP IV Co-Invest completed the sale of Cieslok Media and received cash proceeds of $33.3 million 13 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 against its original investment of $4.0 million. During fiscal 2017, CEP IV Co-Invest realized a net gain of $22.7 million on the sale of Cieslok Media. County Waste As at March 31, 2017 and 2016, CEP IV Co-Invest held 6,942.64 Class B units in County Waste, representing a 12.5% ownership interest on a fully diluted basis. During fiscal 2017, CEP IV Co-Invest invested US$0.2 million [C$0.2 million] for 174.3 units in Spare Lots, LLC ["Spare Lots"], a company affiliated with County Waste and which is owned proportionately by the unitholders of County Waste. Also during fiscal 2017, management determined that the fair value of County Waste should be adjusted upward by $5.4 million. The fair value of $18.0 million as at March 31, 2017 compares to a fair value of $12.0 million at March 31, 2016 and a cost of $7.5 million. The increase in fair value was due to growth in operating performance. The fair value is adjusted for foreign exchange fluctuations. CRS As at March 31, 2016, CEP IV Co-Invest held 226,902 Class B units and 10,572,805 Class C units in CRS. During fiscal 2017, CEP IV Co-Invest exercised its right to purchase Class B limited partnership units in CRS from a departing unitholder of CRS at a pre-determined price. CEP IV Co-Invest purchased 14,994 Class B units in CRS for $21 thousand which was funded by a return of capital from CRS. As at March 31, 2017, CEP IV Co-Invest held 241,896 Class B units and 10,572,805 Class C units in CRS, representing a 13.5% ownership interest and the right to receive sale proceeds equal to an additional 2.2% economic interest until CEP IV Co-Invest has received three times its invested capital. Also during fiscal 2017, management determined that the fair value of CRS should be adjusted upward by $6.7 million. The fair value of $28.8 million as at March 31, 2017 compares to a fair value of $22.0 million at March 31, 2016 and a cost of $10.6 million. The increase in fair value was due to continuing growth in operating performance. Also during fiscal 2017, CEP IV Co-Invest earned $0.6 million in distributions from CRS. As a result of CRS’ flow- through status for tax purposes, Clairvest incurred income tax obligations totaling $0.6 million as a result of its investment in CRS. Davenport Land Investments As at March 31, 2017 and 2016, CEP IV Co-Invest had invested $1.6 million in Davenport North and $0.9 million in Davenport South. CEP IV Co-Invest had also advanced a US$0.6 million promissory note to a partner to help fund its 50% ownership in Davenport North. Effective October 1, 2016, the promissory note bears interest at a rate of 10% per annum. The fair value of $3.0 million as at March 31, 2017 compares to a fair value of $2.9 million at March 31, 2016 and a cost of $2.2 million. The fair value is adjusted for foreign exchange fluctuations. Discovery Air As at March 31, 2016, CEP IV Co-Invest had invested $22.0 million in secured convertible debentures ["Debentures"] of Discovery Air. The Debentures, which had a maturity date of March 22, 2017 and were extended to May 5, 2018 during fiscal 2017, accrue interest at a rate of 10% per annum and interest is paid in-kind and compounded on an annual basis. At March 31, 2016, the gross accrued value of the Debentures was $32.1 million, which included $10.1 million in accrued interest. During fiscal 2017, $3.2 million in interest was accrued on the Debentures and $1.7 million in interest payment was made by Discovery Air in conjunction with the sale transaction of Discovery Air Fire Services ["DAFS"] to MAG as described below. As at March 31, 2017, the gross accrued value of the Debentures was $33.6 million. As at March 31, 2017, the carrying value of the Debentures was $14.2 million, which excluded all interest accrued on the Debentures and an additional $7.8 million write- down of the Debentures associated with the challenges experienced in the divisions providing commercial aviation services in Northern Canada. As at March 31, 2017, the Debentures were convertible into 2,637,703 common shares of Discovery Air at a conversion price of $12.73 per share. As at March 31, 2017, the closing quoted market price of a Discovery Air common 14 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 share was $0.20 per share. June 22, 2017 As at March 31, 2016, CEP IV Co-Invest held 20,758,800 common shares of Discovery Air and Clairvest held 506,615 common shares of Discovery Air, which collectively represented a 25.9% ownership interest on a fully diluted basis. During fiscal 2017, CEP IV Co-Invest invested an additional $0.2 million to acquire 1,118,609 common shares of Discovery Air. As at March 31, 2017, Clairvest and CEP IV Co-Invest collectively held 22,384,024 common shares representing a 27.3% ownership interest on a fully diluted basis. As at March 31, 2017 and 2016, the carrying value of the Discovery Air common shares was nil. CEP IV Co-Invest had also committed to fund under a definitive agreement with amongst the Discovery Air Investor Group to purchase all outstanding common shares of Discovery Air at a cash consideration of $0.20 per share. The transaction was completed subsequent to year-end for total cash consideration of $1.5 million, $0.4 million of which was funded by CEP IV Co-Invest. As at March 31, 2016, Clairvest had advanced to Discovery Air $2.3 million in the form of a promissory note bearing interest at 8.0% per annum and was repayable May 15, 2016. During fiscal 2017, the maturity date was extended to September 15, 2017. Interest of $0.2 million was earned from this promissory note from Discovery Air during fiscal 2017. As at March 31, 2017, the promissory note was included in loans receivable at the accrued value. As at March 31, 2016, CEP IV Co-Invest had committed to advance up to $3.8 million to Discovery Air in the form of a secured revolving credit facility with interest at 12% per annum on drawn amounts, $2.2 million of this facility had been drawn. During fiscal 2017, an additional $0.9 million was advanced under this facility. In December 2016, the secured revolving credit facility was extinguished at the maturity date and the $3.1 million was repaid in full. Interest of $0.2 million was earned from the secured revolving credit facility during fiscal 2017. Also during fiscal 2017, the Discovery Air Investor Group provided a $25.0 million secured revolving credit facility to ["Revolver"] to Discovery Air Defence Services Inc. [“DA Defence”] a subsidiary of Discovery Air, $20.0 million of which was drawn at closing and was outstanding as at March 31, 2017. All drawn amounts bear interest at a rate of 12% per annum which compounds quarterly and the Revolver matures on December 15, 2017. The Revolver provides the Discovery Air Investor Group the option to convert the outstanding balance of the Revolver into common shares of DA Defence based on an agreed market value of DA Defence. As at March 31, 2017, CEP IV Co-Invest’s portion of the drawn amounts under the Revolver was $6.6 million. Interest of $0.2 million was earned by CEP IV Co-Invest from the Revolver during fiscal 2017. As at March 31, 2017, the accrued value of the loans made under the Revolver by CEP IV Co-Invest was $6.9 million. Subsequent to year-end, the Revolver was fully drawn, with CEP IV Co-Invest advancing an additional $1.4 million under the Revolver. Also subsequent to year-end, the Discovery Air Investor Group provided an additional $13.0 million secured revolving credit facility ["New Revolver"] to DA Defence which is in addition to the $25.0 million Revolver described above but on the same economic terms. As at June 22, 2017, $6.0 million of the New Revolver had been funded, $2.2 million of which was funded by CEP IV Co-Invest. CEP IV Co-Invest is committed to fund any shortfall of the other investors of the Discovery Air Investor Group. The New Revolver provides the Discovery Air Investor Group the option to convert the outstanding balance of the New Revolver into common shares of DA Defence on the same economic terms as the Revolver. Concurrent with the New Revolver, Discovery Air and DA Defence granted the Discovery Air Investor Group an option to exchange $18.4 million of the Debentures into $14.7 million of common shares in DA Defence, with the valuation of DA Defence being the same as that used for the conversion of the Revolver and the New Revolver. MAG As at March 31, 2017 and 2016, CEP IV Co-Invest held 33,736 Class A stock in MAG, representing a 10.3% ownership interest on a fully-diluted basis. 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 at CEP IV Co-Invest’s discretion and dividends are forfeited on conversion. During fiscal 2017, MAG acquired DAFS from Discovery Air. In support of this transaction, CEP IV Co-Invest advanced $1.1 million to DAFS in the form of promissory notes bearing interest at 10.0% per annum with a maturity date of January 31, 2021. Interest of $21 thousand was earned from these promissory notes from DAFS during fiscal 2017. Also during fiscal 2017, management determined that the fair value of MAG should be adjusted upward by $4.6 15 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 million. The fair value of $11.6 million as at March 31, 2017 compares to a cost of $5.1 million, with the increase being attributable to growth in operating performance. The fair value is adjusted for foreign exchange fluctuations. Additionally, Clairvest had advanced working capital loans to a Canadian subsidiary of MAG ["MAG Canada"], the outstanding balance as at March 31, 2017 was $2.9 million which had been included in loans receivable. $1.0 million of the loans had been repaid subsequent to year-end. The Meadowlands As at March 31, 2017 and 2016, CEP IV Co-Invest had funded US$5.4 million [C$5.6 million] to the Meadowlands in the form of secured convertible debentures which accrue interest at a rate of 15% per annum, 10% of which was payable quarterly in cash and 5% payable in-kind. Commencing January 1, 2016, CEP IV Co-Invest agreed to the entire 15% interest be payable in- kind. CEP IV Co-Invest also held warrants which entitle it to invest in equity securities of the Meadowlands subject to certain conditions. The 5% interest on the secured convertible debentures is forfeited in the event CEP IV Co-Invest exercises the warrants. As at March 31, 2016, the gross accrued value of the secured debentures was US$6.6 million [C$8.6 million], which included US$1.2 million [C$1.5 million] in accrued interest. During fiscal 2017, US$1.0 million [C$1.3 million] in interest was accrued on the Debentures and no interest payments were made by the Meadowlands. As at March 31, 2017, the gross accrued value of the secured debentures was US$7.6 million [C$10.1 million]. As at March 31, 2017, the carrying value of the secured debentures was US$6.5 million [C$8.7 million], which excluded US$1.1 million [C$1.4 million] in accrued interest on the secured debentures. Also during fiscal 2017, CEP IV Co-Invest invested an additional US$0.7 million [$0.9 million] in the form of preferred debt, which is junior to the secured debentures. The preferred debt has a stated interest rate of 3% per annum and interest is payable-in-kind. The fair value of $9.6 million as at March 31, 2017 compares to a cost of $6.4 million. The fair value is adjusted for foreign exchange fluctuations. Rivers Casino As at March 31, 2017 and 2016, CEP IV Co-Invest held 9,021,917 units in Rivers Casino representing a 5.0% ownership interest on a fully diluted basis. During fiscal 2017, Rivers Casino completed a financing and made a distribution to its owners. CEP IV Co-Invest received $14.8 million from this distribution. CEP IV Co-Invest also earned quarterly distributions of $3.9 million and quarterly fees of $0.6 million as an investor in Rivers Casino. As a result of CEP IV Co-Invest's investment in Rivers Casino requiring certain acquisition entities in the United States, $1.2 million in U.S. income tax obligations were incurred during fiscal 2017. Also during fiscal 2017, management determined that the fair value of Rivers Casino should be adjusted downward by $12.4 million. The fair value of $14.3 million as at March 31, 2017 compares to a fair value of $26.2 million at March 31, 2016 and a cost of $9.1 million. The decrease in fair value was due to the distributions received during fiscal 2017. The fair value is adjusted for foreign exchange fluctuations. Winters Bros. of CT As at March 31, 2017 and 2016, CEP IV Co-Invest held 76,284.8 Class C units in Winters Bros. of CT, representing a 13.4% ownership interest on a fully diluted basis. During fiscal 2017, management determined that the fair value of Winters Bros. of CT should be adjusted upward by $1.0 million. The fair value of $11.2 million as at March 31, 2017 compares to a fair value of $9.9 million at March 31, 2016 and a cost of $8.1 million. The increase in fair value was due to growth in operating performance. The fair value is adjusted for foreign exchange fluctuations. 16 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 INVESTMENTS MADE BY CEP V CO-INVEST ALONGSIDE CEP V Accel Entertainment As at March 31, 2017 and 2016, CEP V Co-Invest held 283,478 Class D preferred shares in Accel Entertainment, representing a 7.9% ownership interest on a fully diluted basis. The Class D preferred shares are entitled to certain preference over all other equity of Accel Entertainment. During fiscal 2017, CEP V Co-Invest invested an additional US$2.4 million in Accel Entertainment pursuant to a post- closing purchase price adjustment. Also during fiscal 2017, management determined that the fair value of Accel Entertainment should be adjusted upward by $4.6 million. The fair value of $20.6 million as at March 31, 2017 compares to a cost of $16.0 million. The fair value is adjusted for foreign exchange fluctuations. Digital Media Solutions As at March 31, 2017 and 2016, CEP V Co-Invest held 6,150,000 Class B units in Digital Media Solutions, representing a 13.9% ownership interest on a fully diluted basis. The Class B units are entitled to certain preference over all other equity units in Digital Media Solutions. During fiscal 2017, CEP V Co-Invest received distributions totaling $0.8 million from Digital Media Solutions. The fair value of $8.2 million as at March 31, 2017 compares to a fair value of $8.0 million as at March 31, 2016 and a cost of $8.3 million. The fair value is adjusted for foreign exchange fluctuations. Winters Bros. of LI As at March 31, 2017 and 2016, CEP V Co-Invest held 1,487,773 Class C units in Winters Bros. of LI and 256,037 units of WBLI II, an affiliated company of Winters Bros. of LI which is owned proportionately by the same unitholders of Winters Bros. of LI, representing a 14.0% ownership interest on a fully diluted basis in the respective entities. The fair value of $11.2 million as at March 31, 2017 compares to a fair value of $11.0 million as at March 31, 2016 and a cost of $10.6 million. The fair value is adjusted for foreign exchange fluctuations. OTHER INVESTMENTS Grey Eagle Casino As at March 31, 2017 and 2016, 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 until December 18, 2022. Additionally, CEP is entitled to between 8.5% and 28.7% of the earnings of the Grey Eagle Casino until December 18, 2022. During fiscal 2016, 2486303 Ontario invested $11.0 million for 100% of CEP’s limited partner interest and 50% of CEP’s general partner interest which in aggregate represents a 90% interest in CEP. Clairvest holds a 10% interest in CEP through its carried interest entitlement in CEP. During fiscal 2017, Clairvest earned $0.7 million and CEP earned $2.2 million in equity distributions from Grey Eagle Casino. The aggregate fair value of $12.6 million as at March 31, 2017 compares to a fair value of $14.1 million as at March 31, 2016 and a cost of $11.0 million. Wellington Financial As at March 31, 2016, Clairvest had funded $14.6 million of its $30.3 million limited partner commitment in WF Fund V Limited Partnership ["Wellington Fund V"], representing a 10.1% ownership interest in Wellington Fund V. During fiscal 2017, Clairvest funded an additional $1.0 million to Wellington Fund V bringing total amount funded to $15.6 million. Clairvest also has an interest in the general partner of various Wellington Financial funds and retained residual limited partner interest in WF Fund III Limited Partnership ["Wellington Fund III"] and WF Fund IV Limited Partnership ["Wellington Fund IV"]. 17 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 During fiscal 2017, Clairvest received distributions totaling $4.6 million from Wellington Financial. As at March 31, 2017, Clairvest had received distributions from Wellington Financial totaling $31.2 million. The fair value of $22.1 million as at March 31, 2017 compares to a cost of $15.6 million and reflects management's estimated realizable value of Clairvest's entitlement as a limited partner of various Wellington Financial funds and general partner interest in Wellington Financial. LIABILITIES As at March 31, 2017, Clairvest had $121.7 million in total liabilities, which included $8.3 million in accrued management and director compensation, $21.7 million in share-based compensation, $67.1 million in management participation and $20.7 million in deferred tax liability. $92.8 million of these liabilities were payable only upon the cash realization of certain investments of Clairvest or the CEP Funds. FINANCIAL RESULTS 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. Net income for the year ended March 31, 2017 was $70.1 million compared with net income of $40.0 million for the year ended March 31, 2016. The following table summarizes the composition of net income for the years ended March 31: Financial Results Year ended March 31, [$000's, except per share amounts] Net investment gains 2017 2016 Investee companies inclusive of foreign exchange hedging activities $ 60,455 $ 32,674 - - Acquisition entities including distributions, interest, dividends and fees received from investee companies and net of taxes payable by these acquisition entities Distributions, interest income, dividends and fees - - - - CEP Funds Investee companies Treasury funds[1] Acquisition entities and other Net carried interest income – realized and unrealized changes Total expenses Income before income taxes Income taxes Net income and comprehensive income Net income and comprehensive income per share Net income and comprehensive income per share - fully diluted [1] Includes realized gains/losses and market value changes to Clairvest’s treasury funds 12,491 5,405 72,946 38,079 12,282 7,260 764 2,601 22,907 35,617 51,870 79,600 9,474 70,126 4.61 4.61 9,955 6,548 517 4,563 21,583 16,255 32,690 43,227 3,261 39,966 2.63 2.63 The Company fair values its acquisition entities which hold Clairvest’s investee companies as well as other assets and liabilities. Distributions, interest, dividends and fees earned from and realized gains and net changes in unrealized gains on 18 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 the investee companies held by acquisition entities, including foreign exchange fluctuations and the hedging activities related to managing the foreign currency exposure of these investments, and income taxes incurred by these acquisition entities, are reflected in net investment gains until the proceeds are distributed out of these acquisition entities, at which point the Company would record a distribution or a dividend from acquisition entities and reverse the net investment gains or losses which had previously been recorded. During fiscal 2017, CEP III Co-Invest realized its investment in Light Tower Rentals which had a fair value of nil since December 2015. During fiscal 2017, CEP III Co-Invest made distributions totaling $3.1 million to its unitholders, $1.2 million of which were to Clairvest and the remaining $1.9 million were to acquisition entities of Clairvest. During fiscal 2016, CEP III Co-Invest completed the sale of Casino New Brunswick and distributed substantially all of the proceeds to its unitholders, $3.7 million of which was received by Clairvest and $5.1 million of which was received by acquisition entities of Clairvest. During fiscal 2017, CEP IV Co-Invest received $33.3 million in cash proceeds as a result of the sale of Cieslok Media and received $14.8 million in distributions from the financing of Rivers Casino. During fiscal 2017, CEP IV Co-Invest made capital distributions totaling $38.1 million to its unitholders, $37.5 million of which were to Clairvest and the remaining $0.6 million were to acquisition entities of Clairvest. 19 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 The following tables summarize the net investment gains or losses of investee companies for the years ended March 31, 2017 and 2016. These net investment gains are inclusive of the foreign exchange hedging activities related to these investments: Net investment gains [losses] on investee companies Year ended March 31, 2017 [$000's] Accel Entertainment Centaur Gaming Cieslok Media[1] Chilean Gaming Holdings County Waste CRS Davenport Land Investments Digital Media Solutions Discovery Air Grey Eagle Casino Light Tower Rentals[1] LSNE MAG The Meadowlands Rivers Casino[2] Wellington Financial Winters Bros. of CT Winters Bros. of LI Foreign Exchange gains (losses) inclusive of foreign exchange hedging activities Total Net realized gains (losses) Net unrealized gains (losses) $ — $ 4,560 $ [30] $ 4,530 — 19,275 22,707 — — — — — — — — 31 — — — — — — — 3,719 5,385 6,749 — — [8,097] [1,424] — 11,670 4,570 — [12,375] 223 1,015 — 1,251 — 1,540 42 — [21] [16] — — — [73] 7 [89] [147] — [9] [8] 20,526 22,707 5,259 5,427 6,749 [21] [16] [8,097] [1,424] — 11,628 4,577 [89] [12,522] 223 1,006 [8] Net investment gains on investee companies $ 22,738 $ 35,270 $ 2,447 $ 60,455 [1] [2] Cieslok Media and Light Tower Rentals were realized during fiscal 2017. During fiscal 2017, Rivers Casino completed a financing and distributed $14.8 million to CEP IV Co-Invest which resulted in a decrease to the fair value of the investment. 20 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 Year ended March 31, 2016 [$000's] Accel Entertainment Casino New Brunswick[1] Centaur Gaming Cieslok Media Chilean Gaming Holdings County Waste CRS Davenport Land Investments Digital Media Solutions Discovery Air Grey Eagle Casino Light Tower Rentals Linen King[1] LSNE MAG The Meadowlands Rivers Casino Wellington Financial Winters Bros. of CT Winters Bros. of LI June 22, 2017 Foreign exchange gains (losses) inclusive of foreign exchange hedging activities Total Net realized gains (losses) Net unrealized gains (losses) $ — $ — $ [6] $ [6] 1,474 — — — — — — — — — — [74] — — — — — — — — 17,251 3,228 10,433 3,069 5,025 223 — [4,993] 378 — 121 — [1,124] 124 — [22] [4] — — 1,474 17,372 3,228 9,309 3,193 5,025 201 [4] [4,993] 378 [11,531] [1,070] [12,601] — 6,277 483 — 165 2,528 — — [1] 798 18 1 [152] — 25 30 [75] 7,075 501 1 13 2,528 25 30 Net investment gains on investee companies $ 1,400 $ 32,536 $ [1,262] $ 32,674 [1] Casino New Brunswick and Linen King were realized during fiscal 2016. The Company and its acquisition entities also receive distributions, interest, dividends or fees from various investee companies. The following table summarizes these income earned by the Company and its acquisition entities for the years ended March 31: 21 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 Distributions, Interest, Dividends, and Fees from Investee Companies June 22, 2017 Year ended March 31, [$000's] Distributions and interest income 2017 Earned through acquisition entities Earned directly by Clairvest Earned directly by Clairvest Total 2016 Earned through acquisition entities Total Casino New Brunswick $ — $ — $ — $ — $ 4,587 $ 4,587 Centaur Gaming CRS Davenport Land Investments Digital Media Solutions Discovery Air Grey Eagle Casino LSNE MAG The Meadowlands Rivers Casino Wellington Financial — — — — 183 729 — 245 — — 4,773 5,930 121 622 82 819 395 121 622 82 819 578 2,187 2,916 — 21 866 18,691 — 23,804 — 266 866 18,691 4,773 29,734 — — — — 253 849 74 69 — — 3,375 4,620 59 465 378 — — 59 465 378 — 253 1,108 1,957 122 — 1,203 4,896 — 196 69 1,203 4,896 3,375 12,818 17,438 Dividend income Chilean Gaming Holdings — 3,701 3,701 — 501 501 Advisory and other fees Distributions, interest, dividends and fees from investee companies 1,330 619 1,949 1,928 628 2,556 $ 7,260 $ 28,124 $ 35,384 $ 6,548 $ 13,947 $ 20,495 The Company and its acquisition entities also receive distributions, fees and interest from the CEP Funds as described in the Transaction with Related Parties section of the MD&A. The following table summarizes the distributions, fees and interest earned from the CEP Funds for the years ended March 31: Distributions, Fees and Interest from the CEP Funds Year ended March 31, [$000's] Priority distributions Management fees Interest on loans advanced Distributions, fees and interest from the CEP Funds 2017 Earned through acquisition entities Earned directly by Clairvest Earned directly by Clairvest Total 2016 Earned through acquisition entities Total $ 10,860 $ — $ 10,860 $ 7,760 $ — $ 7,760 1,311 111 — 74 1,311 185 835 1,360 — 902 835 2,262 $ 12,282 $ 74 $ 12,356 $ 9,955 $ 902 $ 10,857 22 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 Also included in distributions and interest income for the year ended March 31, 2017 was income on treasury funds of $0.8 million which included a net realized loss of $0.7 million on the US$7.5 million Light Tower Rentals corporate bonds purchased under Clairvest’s treasury portfolio. During fiscal 2016, income on treasury funds of $0.5 million included net unrealized losses of $1.8 million on these bonds. Acquisition entities of Clairvest earned interest from its treasury funds totaling $0.5 million during fiscal 2017 compared to $0.4 million during fiscal 2016. The Company also earns carried interest income from the CEP Funds, as described in the Transaction with Related Parties section of the MD&A. The following table summarizes net carried interest income earned by the Company for the years ended March 31: Net carried interest income Year ended March 31, [$000's] Realized carried interest from CEP Realized carried interest from the CEP Funds Net change in unrealized carried interest from the CEP Funds Net carried interest income[1] 2017 2016 $ 474 $ 439 830 34,313 5,395 10,421 $ 35,617 $ 16,255 [1] Includes carried interest which are ultimately paid to non-Clairvest participants if and when they are payable, which are recorded as management participation as described below Total expenses for the year were $53.4 million, compared with $32.7 million for the year ended March 31, 2016. The following table summarizes expenses incurred by the Company for the years ended March 31: Total Expenses, excluding Income Taxes Year ended March 31, [$000's] Employee compensation and benefits Share-based compensation expenses Administration and other expenses Domain and due diligence expenses[1] Professional fees Office and other expenses Finance and foreign exchange expense Interest and bank charges Foreign exchange gain Management participation Total expenses, excluding income taxes 2017 2016 $ 11,342 $ 10,025 10,992 730 770 3,388 4,888 828 [14] 814 23,834 6,264 120 699 3,389 4,208 871 [432] 439 11,754 $ 51,870 $ 32,690 [1] Domain and due diligence expenses with respect to investments made alongside CEP V and CEP V-A are allocated to CEP V Co-Invest. These expenses are therefore included in the fair value determination of Clairvest’s acquisition entities. Included in share-based compensation expenses for the year ended March 31, 2017 was $0.9 million for the Non-Voting Option Plan as described in the Equity and Share Information section of the MD&A, $7.8 million for book value appreciation rights ["BVARs"] and $2.7 million for Deferred Share Units ["DSUs"] and Appreciation Deferred Share Units ["ADSUs"], 23 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 compared to $0.8 million for the legacy stock option plan, $5.5 million for BVARs and $0.4 million for DSUs and ADSUs for the year ended March 31, 2016. Refer to notes 2[h], 2[i], 2[j] and 12 to the consolidated financial statements for details of these compensation plans. Management participation is further described in the Transaction with Related Parties section of the MD&A. SUMMARY OF QUARTERLY RESULTS [$000's except per share information] March 31, 2017 December 31, 2016 September 30, 2016 June 30, 2016 March 31, 2016 December 31, 2015 September 30, 2015 June 30, 2015 Gross Revenue $ 33,443 52,368 20,354 25,305 28,156 18,956 8,072 20,733 Net Income $ 17,268 30,764 10,520 11,574 17,265 11,930 2,882 7,889 Net Income Per Common Share* $ 1.14 Net Income Per Common Share Fully Diluted* $ 1.14 2.02 0.69 0.76 1.14 0.78 0.19 0.52 2.02 0.69 0.76 1.14 0.78 0.19 0.52 * 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 investments 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 2017 was $17.3 million compared with a net income of $17.3 million for the fourth quarter of fiscal 2016. Gross revenue for the fourth quarter of fiscal 2017 was $33.4 million compared with $28.2 million for the fourth quarter of fiscal 2016. Expenses before income tax for the fourth quarter of fiscal 2017 were $14.5 million compared to $9.6 million for the fourth quarter of fiscal 2016. The Company incurred $1.6 million in tax expense during the fourth quarter of fiscal 2017, compared to $1.3 million in tax expense for the same quarter last year. Gross revenue for the fourth quarter of fiscal 2017 comprised $17.2 million in net investment gains, $5.8 million in distributions, interest, dividends and fees, and $10.4 million in net carried interest income. This compares with net investment gains in $14.5 million, $5.4 million in distributions, interest, dividends and fees and $8.2 million in net carried interest income for the fourth quarter of fiscal 2016. The net investment gains of $17.2 million for the fourth quarter of fiscal 2017 resulted from $18.5 million in net unrealized gains from Clairvest’s investee companies inclusive of foreign exchange hedging activities and $1.3 million in net unrealized losses from Clairvest’s acquisition entities. This compared with $15.0 million in net unrealized gains from Clairvest’s investee companies and $0.5 million in net unrealized losses from Clairvest’s acquisition entities for the fourth quarter of fiscal 2016. Distributions from acquisition entities are typically declared annually during the fourth quarter of each fiscal year resulting in net unrealized losses from these acquisition entities. Distributions, interest, dividends and fees for the quarter included income on treasury funds of $0.3 million, general partner distributions and interest earned from the CEP Funds of $3.1 million, distributions and interest earned from investee companies of $2.1 million and $0.3 million from acquisition entities. This compared with $0.7 million in income on treasury 24 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 funds, $3.0 million earned from the CEP Funds, $0.9 million earned from investee companies and $0.8 million in distributions from Clairvest’s acquisition entities for the same quarter last year. Net carried interest income of $10.4 million for the fourth quarter of fiscal 2017 comprised $0.1 million in realized carried interest from CEP and $10.3 million in unrealized carried interest payable by the CEP Funds. Net carried interest income of $8.2 million for the fourth quarter of fiscal 2016 comprised entirely of unrealized 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. Expenses for the fourth quarter of fiscal 2017 included $6.8 million of management and director compensation expenses, $6.4 million of management participation, $1.1 million in administrative and other expenses, and $0.2 million in finance and foreign exchange expenses. This compares with $3.8 million of management and director compensation expenses, $5.4 million of management participation, $0.6 million in administrative and other expenses, and $0.1 million in finance and foreign exchange expenses recoveries for the fourth quarter of fiscal 2016. Management participation is further described in the Transaction with Related Parties section of the MD&A. EQUITY AND SHARE INFORMATION As at March 31, 2017 and June 22, 2017, Clairvest had 15,194,095 common shares issued and outstanding. During fiscal 2017, Clairvest purchased and cancelled 20,000 common shares under a previous normal course issuer bid. No purchases had been made on the current normal course issuer bid to June 22, 2017. As at June 22, 2017, Clairvest had repurchased a total of 6,615,049 common and non-voting shares for total consideration of $68.9 million over the last thirteen years. During fiscal 2017, the Board of Directors of the Company authorized the creation of Non-Voting Series 2 Shares ["Non-Voting Shares"] which have a two times preference over the common shares. The Non-Voting Shares were authorized as part of the new stock option program as described below. No Non-Voting Shares had been issued as at March 31, 2017 and June 22, 2017. Also during fiscal 2017, Company adopted a new stock option plan [the "Non-Voting Option Plan"]. Options granted under the Non-Voting Option Plan are exercisable for Non-Voting Shares. Subsequent to the adoption of the Non-Voting Option Plan, Clairvest granted 203,353 options under this plan. The Non-Voting Option Plan has a cash settlement feature. Options granted under this plan vest at a rate of one-fifth of the grant at the end of each year over a five-year period. As at March 31, 2017 and June 22, 2017, all 203,353 options were outstanding and none had vested. In addition, during fiscal 2017 the Board of Directors of the Company approved an Employee Deferred Share Units ["EDSU"] Plan. The EDSU Plan provides, among other things, that participants may elect annually to receive all or a portion of their annual bonus amounts that would otherwise be payable in cash in the form of EDSUs. EDSUs may be redeemed for cash or for common shares of the Company in accordance with the terms of the plan. Subsequently, the EDSU Plan received shareholders’ approval by ordinary resolution during fiscal 2017. Clairvest is required to reserve one common share for each EDSU issued under the EDSU Plan. The maximum number of Clairvest common shares reserved for the EDSU Plan is 200,000 which represented approximately 1.3% of the outstanding number of common shares as at March 31, 2017 and June 22, 2017. As at March 31, 2017 and June 22, 2017, 18,445 EDSUs had been issued based on the terms and conditions of the EDSU Plan, and none of which had been redeemed. Clairvest paid an ordinary dividend of $0.10 per share on the common shares in each of fiscal 2017, fiscal 2016 and fiscal 2015. During fiscal 2017, and 2016 and 2015, Clairvest also paid a special dividend of $0.2191 and, $0.1958 and $0.1492 per share respectively. Subsequent to year-end, Clairvest declared an annual ordinary dividend of $0.10 per share, and a special dividend of $0.2621 per share. The dividends will be payable to common shareholders of record as of July 6, 2017. The dividend will be paid on July 24, 2017. Both dividends are eligible dividends for Canadian income tax purposes. 25 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 CRITICAL ACCOUNTING ESTIMATES For a discussion of all significant accounting policies, refer to note 2 to the consolidated financial statements. 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 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 records 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 income 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, 26 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 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. TRANSACTIONS WITH RELATED PARTIES The general partner of CEP ["CEP GP"], an entity which is controlled by Clairvest, is entitled to participate in distributions equal to 20% of all net gains [a "20% carried interest"] of CEP as governed by its Limited Partnership Agreement. Effective December 21, 2015, 10% of the carried interest is allocated to Clairvest and the other 10% is allocated to 2486303 Ontario, which purchased the 10% carried interest from principals and employees of Clairvest during fiscal 2016 for $1.2 million. During fiscal 2017, CEP GP earned $0.5 million in carried interest from CEP, 50% of which was ultimately paid to Clairvest, and the other 50% was ultimately paid to 2486303 Ontario. As at March 31, 2017, CEP had declared and paid distributions to CEP GP totaling $24.2 million, 50% of which or $12.1 million was ultimately paid to Clairvest, $11.8 million of which was ultimately paid to the principals and employees of Clairvest and $0.3 million was ultimately paid to 2486303 Ontario. As at March 31, 2017, if CEP were to sell all of its corporate investments at their current fair values, CEP GP would receive up to $2.1 million in carried interest from CEP. In accordance with IFRS, Clairvest has recorded the $2.1 million as carried interest receivable on the consolidated statements of financial position, with a $1.0 million payable owed to 2486303 Ontario. 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 2017, CEP III declared to Clairvest priority distributions of $0.9 million. As per the Limited Partnership Agreement, fees of $0.1 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 MIP III. From time to time, additional units in MIP III may be purchased by the limited partners of MIP III. During fiscal 2017, CEP III GPs earned $0.8 million in carried interest from CEP III, 50% of which was ultimately paid to Clairvest, and the other 50% was ultimately paid to the limited partners of MIP III which reduced the management participation liability. As at March 31, 2017, CEP III had declared and paid distributions to the CEP III GPs totaling $39.5 million, 50% of which was ultimately paid to Clairvest and the other 50% was ultimately paid to the limited partners of MIP III. As at March 31, 2017, if CEP III were to sell all of its corporate investments at their current fair values, CEP III GPs would receive up to $25.2 million in carried interest from CEP III. In accordance with IFRS, Clairvest had recorded the $25.2 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 $12.6 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 had invested $1.1 million in CEP III Co-Invest and in addition 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. Clairvest is entitled to the first $0.2 million in carried interest received by MIP III, and the remaining carried interest represents the entitlements of the limited partners of MIP III. During fiscal 2017, CEP III Co-Invest paid $0.3 million to MIP III with respect to this carried interest entitlement. As at March 31, 2017, CEP III Co-Invest had declared and paid distributions totaling $5.1 million with respect to this carried interest entitlement, $0.2 million of which was received by Clairvest and $4.9 million was received by the limited partners of 27 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 MIP III. As at March 31, 2017, 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 $5.9 million in carried interest from CEP III Co-Invest based on the terms described above, the amount of which had been recorded as a management participation liability on the consolidated statements of financial position. Clairvest, as the general partner of MIP III, is also entitled to participate in distributions equal to the realizable value on the $1.1 million invested by MIP III in CEP III Co-Invest. As at March 31, 2017, $1.9 million had been received by Clairvest. As general partner of CEP IV, Clairvest is entitled to a priority distribution from CEP IV. Effective January 14, 2016, 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 63.2% of any fees earned by Clairvest from corporate investments of CEP IV. During fiscal 2017, CEP IV declared to Clairvest priority distributions of $3.0 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 MIP IV. From time to time, additional units in MIP IV may be purchased by the limited partners of MIP IV. No carried interest had been declared and paid by CEP IV to CEP IV GPs as at March 31, 2017. As at March 31, 2017, if CEP IV were to sell all of its corporate investments at their current fair values, CEP IV GPs would receive up to $59.5 million in carried interest from CEP IV. In accordance with IFRS, Clairvest had recorded the $59.5 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 $29.8 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, 2016, the management fee is calculated monthly as 0.1667% of invested capital net of write-downs of capital then invested. The management fee is reduced to the extent of 10.1% of fees earned by Clairvest from corporate investments of CEP IV-A and other amounts as provided in the Limited Partnership Agreement. During fiscal 2017, Clairvest earned management fees of $0.4 million as compensation for its services in the administration of the portfolio of CEP IV-A. As per the Limited Partnership Agreement, fees of $0.1 million from corporate investments of CEP IV-A were 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 had been declared and paid by CEP IV-A to CEP IV-A GP as at March 31, 2017. As at March 31, 2017, 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 $11.5 million in carried interest from CEP IV-A. In accordance with IFRS, Clairvest has recorded the $11.5 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 $5.7 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 partners, Clairvest and MIP IV. MIP IV has invested $1.6 million in CEP IV Co-Invest and in addition 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 is entitled to the first $0.4 million in carried interest received by MIP IV, and the remaining carried interest represents the entitlements of the limited partners of MIP IV. As at March 31, 2017, if CEP IV Co-Invest were to sell all of its corporate investments at their current fair values, MIP IV would receive up to $13.0 million in carried interest from CEP IV Co-Invest based on the terms described above, the amount 28 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 of which had been recorded as a management participation liability on the statements of financial position. To date, CEP IV Co-Invest had not made any carried interest payments to MIP IV. Clairvest, as general partner of MIP IV, is also entitled to participate in distributions equal to the realizable value on the $1.6 million invested by MIP IV in CEP IV Co-Invest. As at March 31, 2017, $0.6 million had been received by Clairvest. As general partner of CEP V, Clairvest is entitled to a priority distribution from CEP V. From January 14, 2016 to January 13, 2021, the priority distribution is calculated monthly as 0.1667% of committed capital; and thereafter, 0.1667% of invested capital net of write-downs of capital then invested. The priority distribution is reduced to the extent of 58.8% of any fees earned by Clairvest from corporate investments of CEP V. During fiscal 2017, CEP V declared to Clairvest priority distributions of $6.9 million. As per the Limited Partnership Agreement, fees of $0.1 million from corporate investments of CEP V were netted against the priority distributions. 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 MIP V. From time to time, additional units in MIP V may be purchased by the limited partners of MIP V. No carried interest had been declared and paid by CEP V to CEP V GPs as at March 31, 2017. As manager of CEP V-A, Clairvest is entitled to a management fee from CEP V-A. From January 14, 2016 to January 13, 2021, 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 11.2% of fees earned by Clairvest from corporate investments of CEP V-A and other amounts as provided in the limited partnership agreement. During fiscal 2017, Clairvest earned management fees of $0.9 million as compensation for its services in the administration of the portfolio of CEP V-A. As per the limited partnership agreement, fees of $0.3 million from corporate investments of CEP V-A were netted against the management fees. The general partner of CEP V-A ["CEP V-A GP"], an entity which is controlled by Clairvest, is 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 had been declared and paid by CEP V-A to CEP V- A GP as at March 31, 2017. 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 in addition is entitled to an 8.25% carried interest in respect of CEP V Co-Invest via the general partner of CEP V Co-Invest, an entity controlled by Clairvest. Clairvest is entitled to the first $1.4 million in carried interest received by MIP V, and the remaining carried interest represents the entitlements of the limited partners of MIP V. To date, CEP V Co-Invest had not made any carried interest payments to MIP V. Clairvest, as the general partner of MIP V, is also entitled to participate in distributions equal to the realizable value on the $2.4 million invested by MIP V in CEP V Co-Invest. No amounts had been received by Clairvest as at March 31, 2017. 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, stock option plans and the BVAR plan. Annual salaries and compensation under these plans paid to the Co-CEOs during fiscal 2017 was $2.0 million. As at March 31, 2017, the total amounts payable to the Co-CEOs under the aforementioned plans were $6.3 million. Compensation paid to the directors of Clairvest under the DSU plan, the ADSU plan and the BVAR plan during fiscal 2017 was $2.8 million. As at March 31, 2017, the total amounts payable to the directors of Clairvest under the DSU, ADSU and Non- Voting Option plans was $10.3 million. As at March 31, 2017, Clairvest had share purchase loans receivable from certain officers of Clairvest [the "Officers"] totaling $3.0 million. The loans are interest bearing, have full recourse to the individual and are collateralized by the common 29 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 shares of Clairvest owned by the Officers with a market value of $4.8 million. None of these loans were made to key management. As at March 31, 2017, Clairvest also had loans receivable from certain officers of a company affiliated with Clairvest totaling $0.4 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 $67 thousand was earned on these loans during fiscal 2017. During fiscal 2017, the Company had advanced to CEP III $0.1 million in loans bearing interest at the prime rate in accordance with CEP III’s limited partnership agreement. Interest of $1 thousand was earned from loans to CEP III during fiscal 2017. Subsequent to year-end, the loans were repaid in full. During fiscal 2017, the Company had advanced to CEP III Co-Invest $25 thousand in non-bearing interest loans. Subsequent to year-end, the loans were repaid in full. As at March 31, 2016, the Company had advanced to CEP IV $5.0 million in loans bearing interest at the Reference Rate in accordance with CEP IV’s limited partnership agreement. During fiscal 2017, additional loans totaling $3.4 million were made by the Company to CEP IV. The loans were repaid in full during fiscal 2017. Interest of $0.1 million was earned from loans to CEP IV during fiscal 2017. During fiscal 2017, the Company had advanced to CEP IV-A $0.1 million in loans bearing interest at the Reference Rate in accordance with CEP IV-A’s limited partnership agreement. The loans were repaid in full during fiscal 2017. As at March 31, 2016, the Company had advanced to CEP IV Co-Invest $10.8 million in non-bearing interest loans. During fiscal 2017, additional loans totaling $36.5 million were made by the Company to CEP IV Co-Invest. The loans were repaid in full during fiscal 2017. During fiscal 2017, the Company had advanced to CEP V $6.5 million in loans bearing interest at the Reference Rate in accordance with CEP V’s limited partnership agreement. The loans were repaid in full during fiscal 2017. Interest of $12 thousand was earned from loans to CEP V during fiscal 2017. During fiscal 2017, the Company had advanced to CEP V-A $1.1 million in loans bearing interest at the Reference Rate in accordance with CEP V-A’s limited partnership agreement. The loans were repaid in full during fiscal 2017. Interest of $2 thousand was earned from loans to CEP V-A during fiscal 2017. As at March 31, 2016, the Company had advanced to CEP V Co-Invest $0.5 million in non-bearing interest loans. During fiscal 2017, additional loans totaling $3.7 million were made by the Company to CEP V Co-Invest. Also during fiscal 2017, $3.9 million of these loans were repaid such that $0.3 million remained outstanding as at March 31, 2017. As at March 31, 2016, the Company had advanced to 2486303 Ontario $10.9 million in loans bearing interest at 10% per annum. During fiscal 2017, $1.0 million of these loans were repaid such that $9.9 million remained outstanding as at March 31, 2017. Interest of $1.0 million was earned from loans to 2486303 Ontario during fiscal 2017. During fiscal 2017, Clairvest earned $5.9 million in distributions and interest income and $1.3 million in advisory and other fees from its investee companies. Additionally, acquisition entities of Clairvest which were not consolidated in accordance with IFRS earned $23.8 million in distributions and interest income, $3.7 million in dividend income and $0.6 million in advisory and other fees from its investee companies. As at March 31, 2017, Clairvest had accounts receivable from its investee companies totaling $1.6 million, from CEP III totaling $0.2 million, from CEP IV totaling $0.3 million, from CEP IV-A totaling $44 thousand, from CEP V totaling $11.4 million and from CEP V-A totaling $2.2 million. Additionally, acquisition entities of Clairvest which were not consolidated in accordance with IFRS held receivables from CEP III totaling $7 thousand, from CEP IV totaling $12 thousand, from CEP V totaling $27 thousand and Clairvest’s investee companies totaling $1.8 million. 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. The related party has the right to sell its portion of the ownership of the aircraft to Clairvest at the fair market value determined at the time of sale. Accordingly, Clairvest has recognized 100% of the net book value of the aircraft and a liability for the 50% ownership the Company does not own. 30 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 OFF-STATEMENT OF FINACIAL POSITION ARRANGEMENTS 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 as at March 31, 2017. 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, $21.2 million of which remains unfunded as at March 31, 2017. 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, $142.2 million of which remains unfunded as at March 31, 2017. 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 committed $25.2 million to Wellington Fund IV, all of which was unfunded at March 31, 2017. As specified in the Limited Partnership Agreement, upon the closing of Wellington Fund V, Wellington Fund IV may no longer invest in new investments. Clairvest has also committed $30.3 million to Wellington Fund V, $14.6 million of which remained unfunded as at March 31, 2017. As at March 31, 2017, Clairvest has earned profit distribution totaling $0.9 million through its ownership interest in the General Partners of Wellington Fund V. Clairvest has guaranteed to return up to amounts received in the event the limited partners of Wellington Fund V do not meet their return threshold as specified in its Limited Partnership Agreement. As at March 31, 2017 and 2016, there were no accruals made with respect to the clawback. Clairvest had guaranteed up to US$10.0 million of CEP III's obligations to a schedule 1 Canadian chartered bank under CEP III's foreign exchange forward contracts with the bank. Subsequent to year-end, the guarantee was extinguished. Under Clairvest's 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"]. As at March 31, 2017, the Realized Amount under the Bonus Program was $0.2 million and had 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 $5.0 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. In conjunction with the sale of Casino New Brunswick, Clairvest had agreed to a net guarantee of $13.5 million to fund any valid claims made by the purchaser under the indemnity provisions of the sale for a specified period of time. Any funding pursuant to the guarantee will be allocated 25% to CEP III Co-Invest and 75% to CEP III. As at March 31, 2017, no amounts with respect to this guarantee had been funded. Subsequent to year-end, the net guarantee was reduced to $2.2 million. As part of the holding structure of Chilean Gaming Holdings, acquisition entities of CEP III Co-Invest had loans totaling $41.9 million as at March 31, 2017 from an unrelated financial institution, while another acquisition entity of CEP III Co-Invest 31 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 held term deposits totaling $41.9 million as at March 31, 2017 with the same financial institution as security for these loans. CEP III Co-Invest’s ownership of both acquisition entities was 36.8% as at March 31, 2017. Clairvest had agreed to guarantee up to $10 million to support Discovery Air’s credit facility with its bank. The guarantee is callable by the lender under certain circumstances and should it be called, Clairvest will assume the lender’s security position that supports the loans provided by the lender. Clairvest intends to allocate any amounts called under this guarantee to CEP IV Co-Invest, CEP IV and CEP IV-A on a pro-rata basis in accordance with their respective capital commitments in the CEP IV fund pool. During fiscal 2017, in conjunction with the DAFS sale transaction as previously described, Discovery Air repaid $5.0 million of its credit facility which reduced the guarantee provided by Clairvest. As at March 31, 2017, the total contingent exposure under this guarantee was $2.4 million. Any additional guarantee is subject to Clairvest’s consent in its sole discretion. The Discovery Air Investor Group had entered into a definitive agreement to purchase all outstanding common shares of Discovery Air at a cash consideration of $0.20 per share. The transaction was completed subsequent to year-end for total cash consideration of $1.5 million, $0.4 million of which was funded by CEP IV Co-Invest. As at March 31, 2017, the Company had future minimum annual lease payments under non-cancellable operating leases for the use of office space of $0.5 million due within one year, $1.9 million due after one year but not more than five years and $2.2 million due after 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 risk factors. These factors, categorized as market risk, investing process risk and other risks, are described below. Additional risks not currently known to us or that we currently believe to be immaterial may also have a material adverse effect on future business of the Company. Market risk Fair Value risk Fair value risk includes exposure to fluctuations in the fair market value of the Company’s investments. Included in corporate investments are 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. At March 31, 2017, 10 investee companies were 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 have been an increase of $29.6 million or a decrease of $29.3 million to the carrying value of corporate investments and net investment gains, on a pre-tax basis, for the year ended March 31, 2017. Earnings multiples used are based on public company valuations as well as private market multiples for comparable companies. 32 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 Clairvest may also use information about recent transactions carried out in the market for valuations of private equity investments. When fair value is determined based on recent transaction information, this value is the most representative indication of fair value for a period of up to twelve months. The fair value of corporate bonds, debentures or loans is primarily determined using discounted cash flow technique. This technique 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 and discounted cash flows, Clairvest has determined that there are no reasonable alternative assumptions that would change the fair value materially as at March 31, 2017. The Company's corporate investment portfolio was diversified across 16 investee companies in 8 industries and 3 countries as at March 31, 2017. The Company has considered current economic events and indicators in the valuation of its investee companies. Interest rate risk Fluctuations in interest rates affect the Company's income derived from its treasury funds. For financial instruments which yield a floating interest rate, the income received is directly impacted by the prevailing interest rate. The fair value of financial instruments which yield a fixed interest rate would change when there is a change in the prevailing market interest rate. The Company manages interest rate risk on its treasury funds 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 have been an increase or decrease of $1.2 million to distributions and interest income on a pre-tax basis for the year ended March 31, 2017. Certain of the Company's corporate investments are also held in the form of debentures and loans. Significant fluctuations in market interest rates can have a significant impact on the carrying value of these investments. Currency risk 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 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 entered into hedging positions against these foreign denominated currencies as approved by the Board of Directors. In June 2016, the Company adopted a new foreign exchange policy to not hedge the Chilean Pesos ["CLP"] as approved by the Board of Directors. As a result, at March 31, 2017, the Company had foreign exchange exposure to the CLP totaling $48.8 million. A number of investee companies are subject to foreign exchange risk. A significant change in foreign exchange rates can have a significant impact on the profitability of these entities and in turn the Company's carrying 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. Commodity price risk Certain of Clairvest’s investee companies are subject to price fluctuations in commodities. For example, the price of oil had a material adverse effect on Light Tower Rentals, an investment which Clairvest realized during fiscal 2017. In addition, Discovery Air had been negatively impacted by the general downturn in the oil and gas and mining sectors. Clairvest understands the risk of investing in cyclical industries which are largely tied to commodity prices and takes such risk into account in making these investments. The Company manages this risk through oversight responsibilities with existing investee companies and by reviewing the financial condition of investee companies regularly. 33 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 Investing process risk June 22, 2017 Competition risk Clairvest and the CEP Funds compete for acquisition of investments with many other investors, some of which may have greater depth of investment experience in particular industries or segment or greater financial resources. There may be intense competition for investments in which Clairvest intends to invest, and such competition may result in less favorable investment terms than would otherwise be the case. There can, therefore, be no assurance that the investments ultimately acquired by Clairvest will meet all the investment objectives of Clairvest, or that Clairvest will be able to invest all of the capital it has committed to invest alongside the CEP Funds. The Company manages this risk through a disciplined approach to investing its capital and that of the CEP Funds, and has strict investment policies where investments above a certain threshold require the approval of the Board of Directors. Uncompleted and unspecified investment risk The due diligence of each specific investment opportunity that Clairvest looks at and the negotiation, drafting and execution of the relevant agreements require substantial management time and attention and may incur substantial third-party costs. In the event that Clairvest elects not to complete a specific investment, the costs incurred up to that point for the proposed transaction are often not recoverable by Clairvest and the CEP Funds. Furthermore, in the event that Clairvest reaches an agreement relating to a specific investment, it may fail to complete such an investment for any number of reasons, including those beyond Clairvest’s control. Any such occurrence could similarly result in a financial loss to Clairvest and the CEP Funds due to the inability to recoup any of the related costs incurred to complete a transaction. A shareholder must rely upon the ability of Clairvest’s management in making investment decisions consistent with its investment objectives and policies. Shareholders will not have the opportunity to evaluate personally the relevant economic, financial and other information which is utilized by Clairvest in its selection of investments. Minority investment risk Clairvest and the CEP Funds may make minority equity investments in entities in which they do not legally control all aspects of the business or affairs of such entities. As at March 31, 2017, 15 of the 16 investments made by Clairvest were minority equity investments. In all investments, Clairvest monitors the performance of each investment, maintains an ongoing dialogue with each investee’s management team and seeks board representation and negative controls as conditions of each investment. Gaming investment risk As at March 31, 2017, Clairvest’s exposure to the gaming industry represented 39.7% of its net book value. These investments are subject to the risks of any other investment but have heightened exposure to political and regulatory risk whereby a change in the political or regulatory regime governing the gaming industry in a particular jurisdiction where Clairvest’s gaming assets are located could have an impact on the ultimate returns of that investment. In addition, many of these investments involve the construction of a gaming facility whereby not only is Clairvest underwriting the risk of completing the facility on budget, but it is also relying on forecasted gaming revenue, versus historical results, which is only a best estimate. While a project is in construction and for a specified period thereafter, the owners of a newly constructed gaming facility may have to guarantee some or all of the bank facility or agree to fund any operating shortfall. The Company manages this risk through oversight responsibilities with existing investee companies and by reviewing the financial condition of investee companies regularly. Historically, Clairvest has been able to manage all of these risks but past performance of Clairvest provides no assurance of future success. 34 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 Risks upon sale of investments In connection with the disposition of an investee company, Clairvest and the CEP Funds may be required to make representations about the business and financial affairs of the business. Clairvest and the CEP Funds may also be required to indemnify the purchasers of such investee companies to the extent that any such representation turns out to be incorrect, inaccurate or misleading. Investment structure and taxation risks Clairvest structures its investments in a manner that is intended to achieve its investment objectives. There can be no assurance that the structure of any investment will be as tax efficient as designed or that any particular tax result will be achieved, due to unanticipated tax law changes or unforeseen circumstances during the planning phase of the tax structuring. Furthermore, Clairvest’s returns in respect of its investments may be reduced by withholding or other taxes imposed by jurisdictions in which Clairvest’s investee companies are organized. Other risks 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, 2017, 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 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 investee companies regularly. The Company is also subject to credit risk on its accounts receivable and loans receivable, a significant portion of which are with its investee companies and its CEP Funds. The Company manages this risk through its oversight responsibilities with existing investee companies by reviewing their financial conditions 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 counterparty credit risk on derivative instruments by only contracting with counterparties which are Schedule 1 Canadian chartered banks. The Company manages credit risk on its treasury funds by conducting activities in accordance with the fixed income securities policy which 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. 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 periods. Total unfunded commitments to co-invest alongside the CEP Funds, as described were $178.5 million as at March 31, 2017. 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. In addition to its commitments to co-invest alongside the CEP Funds, as at March 31, 2017, the Company had unfunded commitments of $25.2 million and $14.6 million to Wellington Fund IV and Wellington Fund V respectively. 35 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 The Company manages liquidity risk by maintaining a conservative liquidity position that exceeds all liabilities payable on demand. The Company invests treasury funds in liquid assets such that they are available to cover any potential funding commitments and guarantees. In addition, the Company maintains a $100.0 million credit facility which was undrawn at March 31, 2017. As at March 31, 2017, Clairvest had treasury funds of $122.2 million and access to $100.0 million in credit to support its obligations and current and anticipated corporate investments. Clairvest also had access to $48.9 million in treasury funds held by its acquisition entities and $443.4 million in uncalled committed third-party capital through the CEP Funds at March 31, 2017 to invest along with Clairvest’s capital. Conflicts of interest risk Clairvest’s primary business is that of a private equity investor investing its own capital but it also manages third-party capital through the CEP Funds. In accordance with the various fund agreements for the CEP Funds, Clairvest is required to invest alongside the CEP Funds unless the relevant CEP Fund investor committee approves such an investment to be invested by Clairvest without the CEP Funds’ participation. Accordingly, Clairvest shareholders may not realize the full benefit of Clairvest investment opportunities as such opportunities are required to be shared with the CEP Funds. Risk of CEP Fund Limited Partners’ failure to meet capital calls The general partner of the CEP Funds is responsible to manage the affairs of the CEP Funds, which includes calling capital for investments made by the CEP Funds. If a limited partner of the CEP Funds fails to make the required capital contribution when due, Clairvest could be required to increase its investment under certain conditions. The general partner of the CEP Funds manages this risk through designing the terms of the CEP Funds appropriately and due diligence of potential limited partners of the CEP Funds prior to admitting them to the partnership. Minority shareholder risks As at March 31, 2017, Clairvest’s Board of Directors and employees owned over 90% of Clairvest’s common shares and Kenneth B. Rotman owned or controlled over 50% of such shares. Accordingly, Mr. Rotman and other insider shareholders have the ability to exercise substantial influence with respect to Clairvest’s affairs and can usually dictate the outcome of shareholder votes and may have the ability to prevent certain fundamental transactions. Accordingly, Clairvest shares may be less liquid and trade at a relative discount compared to circumstances where such large shareholders did not have the ability to significantly influence or determine matters affecting Clairvest. DERIVATIVE FINANCIAL 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 specific exemption is approved by the Board of Directors. During fiscal 2017, the Company received $0.5 million on the settlement of realized foreign exchange forward contracts. As at March 31, 2017, Clairvest had entered into foreign exchange forward contracts to sell US$1.5 million at an average rate of Canadian $1.3450 per U.S. dollar through to May 2017. The fair value of the forward contracts as at March 31, 2017 was a gain of $24 thousand. Additionally, acquisition entities of Clairvest had entered into foreign exchange forward contracts to sell US$165.2 million at an average rate of Canadian $1.3145 per U.S. dollar through to February 2018. The fair value of the contracts held by these acquisition entities as at March 31, 2017 was a loss of $2.3 million which had been included in the fair value of Clairvest’s investments in these acquisition entities. 36 MANAGEMENT’S DISCUSSION AND ANALYSIS As at, and for the year ended, March 31, 2017 June 22, 2017 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, 2017 and concluded that the disclosure controls and procedures were effective in ensuring that information required to be disclosed by the Company in its corporate filings is recorded, processed, summarized and reported within the required time period for the year then ended. National Instrument 52-109 also requires certification from the Chief Executive Officers and Chief Financial Officer to certify their responsibilities for establishing and maintaining internal controls with regards to the reliability of financial reporting and the preparation of financial statements in accordance with IFRS. Management has evaluated Clairvest's design and operational effectiveness of internal controls over financial reporting for the year ended March 31, 2017. Management has concluded that the design of internal controls over financial reporting were effective and operated as designed as of March 31, 2017 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, 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. 37 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, 2017. Based on that evaluation, management concluded that the Company’s internal control over financing reporting was effective for the year ended March 31, 2017. 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, 2017, 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 38 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, 2017 and 2016, and the consolidated statements of comprehensive income, changes in shareholders' equity and cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information. MANAGEMENT'S RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS Management 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 audits 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, 2017 and 2016, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards. Toronto, Canada June 22, 2017 39 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As at March 31 $000s ASSETS Cash and cash equivalents [notes 3, 13 and 16] Temporary investments [notes 3 and 16] Accounts receivable and other assets [notes 9[m] and 16] Loans receivable [notes 6, 9[l] and 16] Derivative instruments [note 14] Income taxes recoverable Carried interest receivable [note 9[j]] Corporate investments [notes 6 and 16] Fixed assets [notes 7 and 9[o]] LIABILITIES AND SHAREHOLDERS’ EQUITY Liabilities 2017 2016 $ 106,205 $ 65,250 15,964 21,551 15,654 24 2,029 98,322 410,102 2,100 21,793 27,446 30,563 581 4,888 64,009 353,801 1,860 $ 671,951 $ 570,191 Accounts payable and accrued liabilities [note 9[o]] $ 3,914 $ 2,501 Income taxes payable Accrued compensation expense [notes 12 and 15[h]] Share-based compensation [note 12] Management participation [note 9] Deferred income tax liability [note 10] Contingencies, commitments and guarantees [note 15] Shareholders' equity Share capital [note 11] Retained earnings See accompanying notes On behalf of the Board: 96 8,312 21,705 67,050 20,670 110 6,860 17,083 43,977 14,139 $ 121,747 $ 84,670 $ 81,554 $ 81,662 468,650 550,204 403,859 485,521 $ 671,951 $ 570,191 MICHAEL BREGMAN Director JOSEPH J. HEFFERNAN Director 40 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the years ended March 31 $000s [except per share information] REVENUE Net investment gains [notes 4 and 6] Distributions and interest income [notes 6 and 9] Net carried interest income [note 5] Management fees [notes 9[e] and 9[h]] Advisory and other fees [note 9[n]] EXPENSES Employee compensation and benefits [notes 12 and 15[h]] Share-based compensation expenses [note 12] Administration and other expenses Finance and foreign exchange expenses [note 8] Management participation [note 9] Income before income taxes Income tax expense [note 10] 2017 2016 $ 72,946 $ 38,079 20,266 35,617 1,311 1,330 131,470 11,342 10,992 4,888 814 23,834 51,870 79,600 9,474 18,820 16,255 835 1,928 75,917 10,025 6,264 4,208 439 11,754 32,690 43,227 3,261 Net income and comprehensive income for the year Basic and fully diluted net income and comprehensive income per share [note 11] $ 70,126 $ 39,966 $ 4.61 $ 2.63 See accompanying notes 41 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY For the years ended March 31 $000s Share capital Retained earnings Total shareholders’ equity $ 81,662 $ 403,859 $ 485,521 As at April 1, 2016 Changes in shareholders' equity Net income and comprehensive income for the year Dividends declared [$0.3191 per share] 70,126 [4,855] [480] 70,126 [4,855] [588] Purchase and cancellation of shares [note 11] [108] As at March 31, 2017 $ 81,554 $ 468,650 $ 550,204 As at April 1, 2015 Changes in shareholders' equity Net income and comprehensive income for the year Dividends declared [$0.2958 per share] Issuance of shares on exercise of stock options [note 12] As at March 31, 2016 See accompanying notes $ 79,314 $ 368,380 $ 447,694 39,966 [4,487] 39,966 [4,487] 2,348 2,348 $ 81,662 $ 403,859 $ 485,521 42 CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended March 31 $000s 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 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 of temporary investments Loans advanced [notes 6[i], 6[j] and 9] Receipt of loans advanced [notes 6[i], 6[j] and 9] Loans received Repayment of loans received Proceeds [cost] on settlement of realized foreign exchange forward contracts [note 14] Investments made in investee companies or acquisition entities Proceeds on sale of investee companies Return of capital from acquisition entities Settlement of share-based compensation liability Net change in non-cash working capital balances related to operations [note 13] Cash provided by [used in] operating activities INVESTING ACTIVITIES Purchase of fixed assets, net of disposals Cash used in investing activities FINANCING ACTIVITIES Cancellation of common shares Cash dividends paid Issuance of share capital [note 11] Cash used in financing activities 2017 2016 $ 70,126 $ 39,966 428 11,986 6,531 [72,946] [11,240] 100 268 5,253 5,829 [58,549] 73,458 — — 457 [21,110] — 37,487 [7,364] 30,208 11,605 47,066 [668] [668] [588] [4,855] — [5,443] 658 4,608 6,075 [38,079] [4,050] [104] 1,819 10,893 36,718 [236,038] 216,926 146 [146] [4,818] [40,887] 13 14,754 [12,053] [25,385] [16,512] [31,004] [251] [251] — [4,487] 2,348 [2,139] 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 13] 40,955 65,250 $ 106,205 [33,394] 98,644 $ 65,250 SUPPLEMENTAL CASH FLOW INFORMATION Interest received Distributions received Income taxes paid Interest paid See accompanying notes $ 3,244 $ 59,013 $ 3,386 $ 568 $ 2,564 $ 11,761 $ 1,941 $ 752 43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [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 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 ["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 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 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 preparation The consolidated financial statements of Clairvest are prepared in accordance with International Financial Reporting Standards ["IFRS"] as issued by the International Accounting Standards Board ["IASB"]. These audited annual consolidated financial statements and related notes of Clairvest for the years ended March 31, 2017 and 2016 ["consolidated financial statements"] were authorized for issuance by the Board of Directors on June 22, 2017. 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 [$000s], except where otherwise indicated. Basis of consolidation The consolidated financial statements have been prepared in accordance with IFRS 10, Consolidated Financial Statements ["IFRS 10"], as issued by the 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. 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 the Company controls an entity. Subsidiaries are fully consolidated from the date on which control is obtained by the Company and are subsequently deconsolidated from the consolidated financial statements on the date that control ceases. The following entities, which are significant in nature, do not meet the definition of an investment entity and 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 44 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] Clairvest General Partner V Limited Partnership PGO Aviation Limited Partnership Interests in unconsolidated subsidiaries ["acquisition entities"] In accordance with the amendments for investment entities under 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 through consolidation. As discussed under critical accounting estimates and judgments, management exercised judgement when determining whether subsidiaries are investment entities. 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 that are accounted for at fair value rather than consolidated. These entities' principal place of business is in Canada. 2141788 Ontario Corporation ["2141788 Ontario"] 2486303 Ontario Inc. ["2486303 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 list above. 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 9. The Company concluded that its ownership interests in the CEP Funds do not meet the definition of control under IFRS. Accordingly, the financial positions and operating results of the CEP Funds and other funds it manages for certain co-investors are not included in Clairvest's consolidated financial statements. [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. Financial instruments designated as FVTPL through inception: Cash equivalents, temporary investments, derivative instruments, and corporate investments are designated as FVTPL 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. The Company does not apply hedge accounting to its derivative instruments. 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 direct and indirect investee companies ["investee companies"] and the CEP Funds as well as other short-term receivables. 45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] Other financial liabilities This category includes all financial liabilities, other than those classified as FVTPL. The Company includes in this category amounts relating to accounts payable, accrued liabilities and loans payable. [b] Cash and cash equivalents Cash and cash equivalents comprise cash 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 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 from the quoted market price due to a variety of factors such as premiums paid for large blocks or discounts due to illiquidity. Estimated costs of disposition are not included in the fair value determination. In the absence of an active market, the fair values are determined by management using the appropriate valuation methodologies after considering the history and nature of the business, operating results and financial conditions, the general economic, industry and market conditions, capital market and transaction market conditions, contractual rights relating to the investment, public market comparables, private company transactions multiples and, where applicable, other pertinent considerations. The process of valuing investments for which no active market exists is inevitably based on inherent uncertainties and the resulting values may differ from values that would have been used had an active market existed. The amounts at which Clairvest's privately held investments could be disposed of may differ from the fair value assigned and the differences could be material. Estimated costs of disposition are not included in the fair value determination. In determining the fair value of public company warrants, the underlying security of which is traded on a recognized securities exchange, if there are sufficient and reliable observable market inputs, including exercise price and term of the warrants, market interest rate, and current market price, expected dividends and volatility of the underlying security, a valuation technique is used. If market inputs are insufficient or unreliable, the warrants are valued at intrinsic value, which is equal to the higher of the closing bid price of the underlying security, less the exercise price of the warrant, or nil. For private company warrants, the underlying security of which is not traded on a recognized securities exchange, the fair value is determined consistently with other investments which do not have an active market as described above. [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 consolidated statements of comprehensive income as part of net investments gains. 46 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] [e] Derivative instruments The Company and its acquisition entities enter into foreign exchange forward contracts to hedge their exposure to exchange rate fluctuations on their foreign currency denominated investments and loans. These foreign exchange forward contracts and 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 in 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 statements 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 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 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 and its acquisition entities operate and generate 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 income 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 are only recognized to the extent that, in the opinion of management, the most probable outcome is that the deferred income tax asset will be realized. [h] Stock-based compensation plans The Company's stock option plans allow 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 over the applicable vesting period and a corresponding liability is recorded based on the fair value of the outstanding stock options at the consolidated statements of financial position dates. Fair value is measured by use of an appropriate option-pricing model. 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 plans Directors of the Company may elect annually to receive all or a portion of their compensation in deferred share units ["DSUs"] based on the market value of a Clairvest common share on the date directors fees are payable. 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 redemption date. A participant may redeem his or her 47 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] DSUs only following termination of board service. Under the Company's DSU plan, a change to the fair value of the DSUs is charged to share-based compensation expense and recorded as a liability. 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 redemption date and the market value of a Clairvest common share on the grant date. A participant may redeem his or her ADSUs only following termination of board service. Under the Company's ADSU plan, a change to the fair value of the ADSUs is charged to share-based compensation expense and recorded as a liability. Certain employees of the Company may elect annually to receive all or a portion of their annual bonuses in employee deferred share units ["EDSU"]. The number of EDSUs granted to a participant is determined by dividing the amount of the elected bonuses to be received by way of EDSUs by the five-day volume-weighted average closing price of the Clairvest common shares. EDSUs may be redeemed for cash or for common shares of the Company. A participant may redeem his or her EDSUs only following termination of employment. Under the Company's EDSU plan, a change to the fair value of the EDSUs is charged to share-based compensation expense and recorded as a liability. [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 redeem his or her BVARs at the earlier of [i] five years from the grant date or [ii] cessation of employment with the Company. Fair value of the BVARs is calculated based on the latest book value per share published at the time the value is being determined. As the Company's BVAR plan is a cash-settled plan, a change to the fair value of the BVARs is charged to share- based compensation expense and recorded as a liability. [k] Entitlements of partners of a limited partnership The Company consolidates acquisition entities which include various limited partnerships as described in note 2[I] and the entitlements of partners of these limited partnerships that are external to the consolidated group of the Company are recorded as a liability and an expense of the Company. Accordingly, that portion of the carried interest from the CEP Funds which are ultimately paid to the limited partners of MIP III, MIP IV and MIP V which are external to the consolidated group are recorded as a management participation liability and a management participation expense on the consolidated financial statements. [l] 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 fixed 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 10% 30% 50% 20% Term of lease 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. 48 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] [m] Net income and comprehensive income per share Basic net income and comprehensive income per share ["net income"] are 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 are based on the weighted average number of common shares and dilutive common share equivalents outstanding during the year. [n] Critical accounting estimates, assumptions and judgments The preparation of consolidated financial statements in conformity with IFRS requires management to make estimates, assumptions and judgments 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 or its various subsidiaries meet 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 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 17. 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 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 the unrealized carried interest at the consolidated statements of financial position dates. 49 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] 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. 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. As at March 31, 2017, the yield ranged between 0.8% and 0.9% per annum [2016 – between 0.8% and 0.9%] with a weighted average rate of pre-tax return of 0.9% per annum [2016 – 0.9%]. As at March 31, 2017, temporary investments comprised guaranteed investment certificates which have maturities greater than 90 days from the date of acquisition and through to March 2018. The yield on these investments ranged between 1.4% and 1.7% per annum [2016 – between 1.6% and 7.8%], with a weighted average rate of pre-tax return of 1.5% per annum [2016 – 3.6%]. The composition of Clairvest's temporary investments as at March 31 was as follows: March 31, 2017 Due after 1 year March 31, 2016 Total Total Due in 1 year or less Guaranteed investment certificates $ 15,964 $ − $ 15,964 $ 16,336 Corporate bonds and loans − − − 5,457 $ 15,964 $ − $ 15,964 $ 21,793 4. NET INVESTMENT GAINS Net investment gains for the years ended March 31, 2017 and 2016 comprised the following: Net realized gains Net changes in unrealized gains during the year 2017 2016 $ − $ 13 72,946 38,066 $ 72,946 $ 38,079 5. NET CARRIED INTEREST INCOME Net carried interest income for the years ended March 31, 2017 and 2016 comprised the following: Realized carried interest income [note 9] $ 1,304 $ 5,834 Net changes in unrealized carried interest [notes 9[j]] 34,313 10,421 2017 2016 $ 35,617 $ 16,255 6. CORPORATE INVESTMENTS In accordance with IFRS 10, the fair value of the Company’s corporate investments includes the fair value of the net assets of its acquisition entities that are controlled by the Company. Accordingly, Clairvest's direct corporate investments comprise these acquisition entities, which invest directly or indirectly in various investee companies and other investee companies where Clairvest made an investment directly. 50 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] The following table details the fair value of Clairvest’s direct investments and acquisition entities, which are controlled by Clairvest but which are not part of the consolidated group: Investee companies March 31, 2017 Acquisition entity net assets [liabilities] Total Investee companies March 31, 2016 Acquisition entity net assets [liabilities] Total Held directly by Clairvest Group Inc. $ 26,549 Held through the following acquisition entities: $ — $ — $ 26,549 $ 26,071 $ 26,071 2486303 Ontario 2141788 Ontario CEP III Co-Invest MIP III CEP IV Co-Invest MIP IV CEP V Co-Invest MIP V Total 9,204 56,448 28,235 1,131 225,147 3,413 27,701 2,576 [9,866] 23,741 14,598 585 1,893 29 [1,173] [109] [662] 80,189 42,833 1,716 10,272 40,223 22,152 886 [10,424] 27,060 16,486 660 [152] 67,283 38,638 1,546 227,040 193,458 [2,917] 190,541 3,442 26,528 2,467 3,649 25,607 2,381 [55] [1,563] [145] 3,594 24,044 2,236 $ 380,404 $ 29,698 $ 410,102 $ 324,699 $ 29,102 $ 353,801 2141788 Ontario, a limited partner of CEP III Co-Invest and CEP V Co-Invest, is a wholly owned acquisition entity of Clairvest. 2486303 Ontario is a wholly owned acquisition entity of Clairvest which is the sole limited partner of Clairvest Equity Partners Limited Partnership ["CEP"] and a 50% partner of Clairvest General Partner Limited Partnership. CEP was an investment fund held by third party investors prior to being purchased by 2486303 Ontario in December 2015. 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 9[c], 9[f] and 9[i], respectively. During the year ended March 31, 2017, Clairvest made additional investments totaling $20.1 million in CEP IV Co- Invest. During fiscal 2017, CEP IV Co-Invest received total cash proceeds of $33.3 million as a result of the realization events involving Cieslok Media Ltd. as described in note 6[e] and US$11.0 million [C$14.8 million] in distributions from Rivers Casino subsequent to the completion of a financing as described in note 6[l]. Subsequently, CEP IV Co‐Invest repaid $12.0 million in loans from Clairvest and returned a total of $37.5 million of capital to Clairvest and $0.6 million of capital to MIP IV as described in note 9[f]. Also during fiscal 2017, CEP III Co-Invest declared distributions totaling $1.2 million to Clairvest, $1.9 million to 2141788 Ontario and $46 thousand to MIP III, respectively. CEP III Co-Invest also declared and paid $0.3 million to the general partner, all of which was then declared and paid to the limited partners of MIP III as described in note 9[c]. Also during fiscal 2017, MIP III declared and paid distributions totaling $46 thousand to Clairvest as described in note 9[c] and MIP IV declared and paid distributions totaling $0.6 million to Clairvest as described in note 9[f]. 51 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] The following table details the assets and liabilities included in the determination of the fair value of the net assets of acquisition entities excluding the investee companies held by these acquisition entities: Assets Cash Temporary investments Accounts receivable and other assets Loans receivable Income taxes recoverable Derivative instruments Deferred income tax asset Liabilities March 31, 2017 March 31, 2016 $ 41,430 $ 34,901 7,464 1,890 423 1,030 83 — 10,501 2,426 3,095 2,184 6,165 92 $ 52,320 $ 59,364 Accounts payable and accrued liabilities $ 2,135 $ 3,736 Loans payable Income taxes payable Derivative instruments Deferred income tax liability Net assets 10,283 753 2,371 7,080 22,223 37 — 4,266 $ 22,622 $ 30,262 $ 29,698 $ 29,102 52 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [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 investee companies, are summarized below. March 31, 2017 March 31, 2016 Fair value Cost Difference Fair value Cost Difference Investments made by CEP III Co-Invest alongside CEP III Chilean Gaming Holdings[1] $ 48,835 $ 28,754 $ 20,081 $ 43,674 $ 28,754 $ 14,920 Light Tower Rentals Inc. — — — — Lyophilization Services of New England Inc. Investments made by CEP IV Co-Invest alongside CEP IV Centaur Gaming Cieslok Media Inc. County Waste of Virginia, LLC CRS Contractors Rental Supply Limited Partnership Davenport Land Investments[2] Discovery Air Inc. Momentum Aerospace Group New Meadowlands Racetrack, LLC Rivers Casino Winters Bros. Waste Systems of CT, LLC Investments made by CEP V Co-Invest alongside CEP V Accel Entertainment Inc. Digital Media Solutions, LLC Winters Bros. Waste Systems of Long Island Holdings, LLC Grey Eagle Casino[3] Wellington Financial[4] 27,248 6,619 20,629 16,017 111,170 34,657 76,513 — 17,999 28,758 3,009 21,037 11,557 9,563 14,307 11,160 20,639 8,179 11,190 12,613 22,101 — 7,533 10,573 2,196 36,860 5,068 6,444 9,058 8,053 15,978 8,254 10,636 11,017 15,640 — 10,466 18,185 813 [15,823] 6,489 3,119 5,249 3,107 4,661 [75] 554 1,596 6,461 68,672 10,640 11,981 22,009 2,858 30,685 5,600 8,551 26,202 9,907 12,646 7,987 10,927 14,076 20,852 2,403 7,077 [2,403] 8,940 14,644 54,028 4,015 7,308 10,573 2,196 32,243 3,838 5,580 9,058 8,053 12,910 8,254 10,636 11,017 14,631 6,625 4,673 11,436 662 [1,558] 1,762 2,971 17,144 1,854 [264] [267] 291 3,059 6,221 Other investments 1,039 1,127 [88] 1,415 1,486 [71] 379,365 217,340 162,025 323,284 193,190 130,094 $ 380,404 $ 218,467 $ 161,937 $ 324,699 $ 194,676 $ 130,023 [1] [2] [3] [4] Comprised CEP III Co-Invest’s investment in Casino Marina del Sol, Casino Osorno and Casino Sol Calama. Comprised two entities which hold real estate surrounding a casino in Davenport, Iowa ["Davenport North" and "Davenport South"]. Fair value included the portion owned directly by Clairvest and the portion owned indirectly through 2486303 Ontario. Fair value as at March 31, 2017 excluded the amount of $1.0 million [2016 − $1.2 million] which represented Clairvest’s 50% entitlement of the carried interest of CEP as described in note 9[a]. Comprised interest in WF Fund III Limited Partnership ["Wellington Fund III"], WF Fund IV Limited Partnership ["Wellington Fund IV"] and WF Fund V Limited Partnership ["Wellington Fund V"] and their respective general partners. The fair value of each investee company reflected valuation methodologies as described in note 17, except for notes 6[c], 6[h], 6[i], 6[k], 6[q] and 6[r] as described below. The cost and fair value of 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 14]. For those investments which are hedged by acquisition entities, the fair value of these foreign exchange forward contracts was included in the net assets [liabilities] of these acquisition entities. Details of each investee company are described below. 53 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] [a] Chilean Gaming Holdings Chilean Gaming Holdings is a limited partnership which had a 50% ownership interest in Casino Marina del Sol in Concepcion, Chile, and a 73.8% ownership interest in each of Casino Osorno in Osorno, Chile, and Casino Sol Calama in Calama, Chile. As at March 31, 2017 and 2016, CEP III Co-Invest held 30,446,299 limited partnership units of Chilean Gaming Holdings, representing a 36.8% equity interest. During fiscal 2017, CEP III Co-Invest earned dividends totaling $3.7 million [2016 – $0.5 million] through its investment in Chilean Gaming Holdings, bringing dividends earned to March 31, 2017 to $13.2 million [2016 – $9.5 million]. [b] Light Tower Rentals Inc. Light Tower Rentals Inc. ["Light Tower Rentals"] is an oilfield equipment rental company operating in major oil and gas drilling basins in the United States. As at March 31, 2016, CEP III Co-Invest held 3,985,604 common shares of Light Tower Rentals representing a 6.7% ownership interest on a fully diluted basis. During fiscal 2017, CEP III Co-Invest realized on its investment in Light Tower Rentals which had a carrying value of nil since December 2015. Over the life of this investment, CEP III Co-Invest received total proceeds of US$37.9 million [C$40.7 million] against its original investment of US$8.1 million [C$8.2 million] in Light Tower Rentals. Clairvest and CEP III Co-Invest had also incurred total costs of $4.6 million on the foreign exchange hedging strategy for the investment in Light Tower Rentals. [c] Lyophilization Services of New England Inc. Lyophilization Services of New England Inc. ["LSNE"] is a Manchester, New Hampshire-based contract manufacturing organization focused on providing lyophilization services to biotech, pharmaceutical and medical device manufacturers. As at March 31, 2016, CEP III Co-Invest held 6,406,000 Series A 10% cumulative preferred shares which were convertible into a 11.2% ownership interest on a fully diluted basis and 1,250,000 Series B 10% cumulative preferred shares which were not convertible. Each Series A preferred share was convertible into one common share at CEP III Co-Invest's discretion and dividends would be forfeited on conversion. During fiscal 2017, LSNE redeemed 918,494 Series B preferred shares held by CEP III Co-Invest at their fair market value of US$0.6 million [C$0.8 million]. As at March 31, 2017, CEP III Co-Invest held 6,406,000 Series A 10% cumulative preferred shares and 331,506 Series B 10% cumulative preferred shares of LSNE. Subsequent to year-end, the remaining 331,506 Series B preferred shares were redeemed for additional proceeds of US$0.2 million [C$0.3 million]. Also subsequent to year-end, CEP III Co-Invest realized its investment in LSNE and received US$19.9 million [C$27.1 million] in cash proceeds at closing and is entitled to additional proceeds of US$0.3 million subject to the conditions of the purchase and sale agreement. As at March 31, 2017, LSNE was carried at a value which approximated the sale proceeds and which had been substantially received subsequent to year-end. Over the life of this investment, CEP III Co-Invest received total proceeds of US$21.6 million [C$29.0 million] against its original investment of US$7.5 million [C$7.5 million] in LSNE. Clairvest and CEP III Co-Invest had also incurred total costs of $2.8 million on the foreign exchange hedging strategy for the investment in LSNE. [d] 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. As at March 31, 2016, CEP IV Co-Invest held US$13.6 million in term loans with stapled warrants which were convertible upon exercise to 9.9% of Class A and Class B units of Centaur Gaming. During fiscal 2017, CEP IV Co-Invest invested an additional $20.0 million in Centaur Gaming in the form of US$3.8 million in term loans with stapled warrants which are convertible upon exercise to 2.8% of Class A and Class B units of Centaur Gaming. As at March 31, 2017, CEP IV Co-Invest held US$17.4 million in term loans with stapled warrants which were convertible upon exercise to 12.7% of Class A and Class B units of Centaur Gaming. 54 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] [e] Cieslok Media Inc. Cieslok Media Inc. ["Cieslok Media"] was a Canadian outdoor advertising firm which operates large format digital and static billboards throughout major cities in Canada. As at March 31, 2016, CEP IV Co-Invest held 4,014,989 common shares of Cieslok Media representing a 23.5% ownership on a fully diluted basis. During fiscal 2017, CEP IV Co-Invest completed the sale of Cieslok Media and received cash proceeds of $33.3 million against a carrying value of $10.6 million as at March 31, 2016 and its original investment of $4.0 million. Subsequently, CEP IV Co-Invest distributed the net proceeds to its unitholders in accordance with its Limited Partnership Agreement. [f] County Waste of Virginia, LLC County Waste of Virginia, LLC ["County Waste"] is a private regional solid waste collection company headquartered in Albany, New York. As at March 31, 2016, CEP IV Co-Invest held 6,942.64 Class B units of County Waste representing a 12.5% ownership interest on a fully diluted basis at a cost of $7.3 million. During fiscal 2017, CEP IV Co-Invest invested an additional US$0.2 million [C$0.2 million] for 174.3 units in Spare Lots, LLC ["Spare Lots"], a company affiliated with County Waste. As at March 31, 2017, CEP IV Co-Invest held 6,942.64 Class B units in County Waste and 174.3 units in Spare Lots, which collectively represented a 12.5% ownership interest on a fully diluted basis. [g] CRS Contractors Rental Supply Limited Partnership CRS Contractors Rental Supply Limited Partnership ["CRS"] is a provider of equipment rental services and related merchandise across Ontario, Canada. As at March 31, 2016, CEP IV Co-Invest held 226,902 Class B units and 10,572,805 Class C units of CRS, representing a 13.6% 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. During fiscal 2017, CEP IV Co-Invest exercised its right to purchase Class B units of CRS from a departing unitholder of CRS at a pre-determined price. CEP IV Co-Invest, via an acquisition entity, purchased 14,994 Class B units of CRS at $21 thousand, which was funded by a return of capital from CRS. As at March 31, 2017, CEP IV Co-Invest held 241,896 Class B units and 10,572,805 Class C units of CRS, representing a 13.5% 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 2017, CEP IV Co-Invest earned distributions totaling $0.6 million [2016 – $0.5 million] from CRS, bringing distributions earned to March 31, 2017 to $2.0 million [2016 – $1.4 million]. [h] Davenport Land Investments Davenport Land Developments comprises two entities holding real estate surrounding a casino development in Davenport, Iowa ["Davenport North" and "Davenport South"]. As at March 31, 2017 and 2016, CEP IV Co-Invest had invested US$1.4 million [C$1.6 million] for an 18.7% ownership in Davenport North and US$0.8 million [C$0.9 million] for a 13.4% ownership interest in Davenport South. Additionally, CEP IV Co-Invest had advanced a US$0.6 million promissory note to a partner to help fund its 50% ownership in Davenport North, which effective October 1, 2016, bears interest at a rate of 10% per annum. [i] Discovery Air Inc. Discovery Air Inc. ["Discovery Air"] is a specialty aviation services company operating across Canada and in select locations internationally. As at March 31, 2016, CEP IV Co-Invest had invested $22.0 million in secured convertible debentures ["Debentures"]. The Debentures, which had a maturity date of March 22, 2017 and were extended to May 5, 2018 during fiscal 2017, accrue interest at a rate of 10% per annum and interest is paid in-kind and compounded on an annual basis. At March 31, 2016, the gross accrued value of the Debentures was $32.1 million, which included $10.1 million in accrued interest. During fiscal 2017, $3.2 million [2016 – $2.9 million] in interest was accrued on the Debentures and $1.7 million [2016 – nil] in interest payment was made by Discovery Air in conjunction with the sale transaction of Discovery Air Fire Services ["DAFS"] to Momentum Aerospace Group ["MAG"] as described in note 6[j]. As at March 31, 2017, the gross accrued value of the 55 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] Debentures was $33.6 million. As at March 31, 2017, the carrying value of the Debentures was $14.2 million [2016 – $28.5 million], which excluded $11.5 million [2016 – $3.6 million] in accrued interest on the Debentures and an additional $7.8 million [2016 – nil] write-down of the Debentures associated with the challenges experienced in the divisions providing commercial aviation services in Northern Canada. As at March 31, 2017, the Debentures were convertible into 2,637,703 [2016 – 2,775,824] common shares of Discovery Air at a conversion price of $12.73 [2016 – $11.56] per share. As at March 31, 2017, the closing quoted market price of a Discovery Air common share was $0.20 [2016 – $0.21] per share. As at March 31, 2016, CEP IV Co-Invest held 20,758,800 common shares of Discovery Air and Clairvest held 506,615 common shares of Discovery Air, which collectively represented a 25.9% ownership interest on a fully diluted basis. During fiscal 2017, CEP IV Co-Invest invested an additional $0.2 million to acquire 1,118,609 common shares of Discovery Air. As at March 31, 2017, Clairvest and CEP IV Co-Invest collectively held 22,384,024 common shares representing a 27.3% ownership interest on a fully diluted basis. As at March 31, 2017 and 2016, the carrying value of the Discovery Air common shares was nil. CEP IV Co-Invest had also committed to fund under a definitive agreement with a group of investors [the “Discovery Air Investor Group”] to purchase all outstanding common shares of Discovery Air at a cash consideration of $0.20 per share. The transaction was completed subsequent to year-end for total cash consideration of $1.5 million, $0.4 million of which was funded by CEP IV Co-Invest. As at March 31, 2016, Clairvest had advanced to Discovery Air $2.3 million in the form of a promissory note bearing interest at 8.0% per annum and was repayable May 15, 2016. During fiscal 2017, the maturity date was extended to September 15, 2017. Interest of $0.2 million [2016 – $0.2 million] was earned from this promissory note from Discovery Air during fiscal 2017. As at March 31, 2017 and 2016, the promissory note was included in loans receivable at the accrued value. As at March 31, 2016, CEP IV Co-Invest had committed to advance up to $3.8 million to Discovery Air in the form of a secured revolving credit facility with interest at 12% per annum on drawn amounts, $2.2 million of this facility had been drawn. During fiscal 2017, an additional $0.9 million was advanced under this facility and $3.1 million was repaid. In December 2016, the secured revolving credit facility was extinguished at the maturity date. Interest of $0.2 million [2016 – nil] was earned from the secured revolving credit facility during fiscal 2017. Also during fiscal 2017, CEP IV Co-Invest and other investors of Discovery Air [the "Discovery Air Investor Group"] provided a $25.0 million secured revolving credit facility ["Revolver"] to Discovery Air Defence Services Inc. ["DA Defence"] a subsidiary of Discovery Air, $20.0 million of which was drawn at closing and was outstanding as at March 31, 2017. All drawn amounts bear interest at a rate of 12% per annum which compounds quarterly and the Revolver matures on December 15, 2017 subject to acceleration in the event of certain refinancing transactions. The Revolver provides the Discovery Air Investor Group the option to convert the outstanding balance of the Revolver into common shares of DA Defence based on an agreed market value of DA Defence. As at March 31, 2017, CEP IV Co-Invest’s portion of the drawn amounts under the Revolver was $6.6 million. Interest of $0.2 million was earned from the Revolver to DA Defence during fiscal 2017. As at March 31, 2017, the loans made by CEP IV Co-Invest under the Revolver were carried at the accrued value of $6.9 million. Subsequent to year-end, the Revolver was fully drawn, with CEP IV Co-Invest advancing an additional $1.4 million under the Revolver. [j] Momentum Aerospace Group MAG is a U.S.-based specialty aviation and intelligence, surveillance and reconnaissance service provider. As at March 31, 2017 and 2016, CEP IV Co-Invest held 33,736 Class A stock of MAG, representing a 10.3% ownership interest on a fully diluted basis. The Class A stock has a stated dividend rate of 10% per annum and each Class A stock is convertible into 1.0114 common stock of MAG at CEP IV Co-Invest’s discretion and dividends are forfeited on conversion. During fiscal 2017, MAG acquired DAFS from Discovery Air. In support of this transaction, CEP IV Co-Invest advanced $1.1 million to DAFS in the form of promissory notes bearing interest at 10.0% per annum with a maturity date of January 31, 2021. Interest of $21 thousand was earned from these promissory notes to DAFS during fiscal 2017. As at March 31, 2016, Clairvest had provided $1.0 million in loans to MAG Canada, a Canadian subsidiary of MAG, in support of its operations. During fiscal 2017, Clairvest advanced an additional $7.0 million [2016 − $6.9 million] to MAG 56 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] Canada, and $5.1 million [2016 − $6.8 million] of these loans were repaid such that $2.9 million [2016 − $1.0 million] remained outstanding as at March 31, 2017 and had been included in loans receivable at the accrued value. Interest of $0.2 million [2016 – $69 thousand] was earned from loans to MAG Canada during fiscal 2017. An additional $1.0 million of the loans were repaid subsequent to year-end. [k] New Meadowlands Racetrack, LLC New Meadowlands Racetrack, LLC [the "Meadowlands"] operates a standardbred horseracing track located in East Rutherford, New Jersey. As at March 31, 2017 and 2016, CEP IV Co-Invest had funded US$5.4 million [C$5.6 million] to the Meadowlands in the form of secured convertible debentures, which accrue interest at a rate of 15% per annum, 10% of which was payable quarterly in cash and 5% was payable-in kind. Commencing January 1, 2016, CEP IV Co-Invest agreed to the entire 15% interest be payable in-kind. CEP IV Co-Invest also holds warrants which entitle it to invest in equity securities of the Meadowlands subject to certain conditions. The 5% interest on the secured convertible debentures is forfeited in the event Clairvest exercises the warrants. As at March 31, 2016, the gross accrued value of the secured debentures was US$6.6 million [C$8.6 million], which included US$1.2 million [C$1.5 million] in accrued interest. During fiscal 2017, US$1.0 million [C$1.3 million] [2016 – US$0.9 million; C$1.2million] in interest was accrued on the Debentures and no interest payments [2016 – US$0.6 million; C$0.8 million] were made by the Meadowlands. As at March 31, 2017, the gross accrued value of the secured debentures was US$7.6 million [C$10.1 million]. As at March 31, 2017, the carrying value of the secured debentures was US$6.5 million [C$8.7 million] [2016 – US$6.6 million; C$8.6 million], which excluded US$1.1 million [C$1.4 million] [2016 – nil] in accrued interest on the secured debentures. Also during fiscal 2017, CEP IV Co-Invest invested an additional US$0.7 million [C$0.9 million] in the form of preferred debt, which is junior to the secured debentures. The preferred debt has a stated interest rate of 3% per annum and interest is payable-in-kind. [l] Rivers Casino Rivers Casino is a gaming entertainment complex located in Des Plaines, Illinois. As at March 31, 2017 and 2016, CEP IV Co-Invest held 9,021,917 units of Rivers Casino, representing a 5.0% ownership on a fully diluted basis. During fiscal 2017, Rivers Casino completed a financing and made a distribution to its owners. CEP IV Co-Invest received distributions from Rivers Casino of US$11.0 million [C$14.8 million]. CEP IV Co-Invest also earned quarterly distributions and fees as an investor in Rivers Casino. During fiscal 2017, CEP IV Co-Invest earned $3.9 million [2016 – $4.9 million] in quarterly distributions and $0.6 million [2016 – $0.6 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, $1.2 million [2016 – $1.8 million] in U.S. income tax obligations were incurred during fiscal 2017. [m] Winters Bros. Waste Systems of CT, LLC Winters Bros. Waste Systems of CT, LLC ["Winters Bros. of CT"] is a regional solid waste collection, recycling and disposal company based in Danbury, Connecticut. As at March 31, 2017 and 2016, CEP IV Co-Invest held 76,284.8 Class C units of Winters Bros. of CT, representing 13.4% ownership interest on a fully diluted basis. [n] Accel Entertainment Inc. Accel Entertainment Inc. ["Accel Entertainment"] is a licensed video gaming terminal operator in Illinois. During fiscal 2016, CEP V Co-Invest invested US$9.7 million [C$12.9 million] to acquire 283,478 Class D preferred shares of Accel Entertainment, representing a 7.9% ownership interest in Accel Entertainment on a fully diluted basis. The Class D preferred shares are entitled to certain preference over all other equity of Accel Entertainment. During fiscal 2017, CEP V Co-Invest invested an additional US$2.4 million [C$3.1 million] in Accel Entertainment pursuant to a post-closing purchase price adjustment. 57 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] [o] Digital Media Solutions, LLC Digital Media Solutions, LLC ["Digital Media Solutions"] operates as a lead generation engine for companies in a variety of different industries. As at March 31, 2017 and 2016, CEP V Co-Invest held 6,150,000 Class B units of Digital Media Solutions, representing a 13.9% ownership interest on a fully diluted basis. The Class B units are entitled to certain preference over all other equity units in Digital Media Solutions. During fiscal 2017, CEP V Co-Invest earned distributions totaling $0.8 million [2016 – nil] from Digital Media Solutions, bringing distributions earned to March 31, 2017 to $0.8 million [2016 – nil]. [p] Winters Bros. Waste Systems of Long Island Holdings, LLC Winters Bros. Waste Systems of Long Island Holdings, LLC ["Winters Bros. of LI"] is a regional solid waste collection, recycling and disposal company based in Long Island, New York. WBLI II, LLC ["WBLI II"], an affiliated company of Winters Bros. of LI which is owned proportionately by the same unitholders of Winters Bros. of LI. During fiscal 2016, CEP V Co-Invest invested an additional US$0.5 million [C$0.7 million] to acquire 89,266 Class C units of Winters Bros. of LI. Also during fiscal 2016, CEP V Co-Invest invested US$0.3 million [C$0.3 million] for 256,037 units of WBLI II. As at March 31, 2017 and 2016, CEP V Co-Invest held 1,487,773 Class C units of Winters Bros. of LI and 256,037 units of WBLI II, representing a 14.0% ownership on a fully diluted basis in the respective entities. [q] 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. As at March 31, 2017 and 2016, 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. Additionally, CEP is entitled to between 8.5% and 28.7% of the earnings of the Grey Eagle Casino until December 18, 2022. As described previously in note 6, 2486303 Ontario owns a 90% interest in CEP, and Clairvest owns a 10% interest in CEP through its carried interest entitlement. During fiscal 2017, Clairvest earned $0.7 million [2016 – $0.9 million] and CEP earned $2.2 million [2016 – $1.1 million] in equity distributions from Grey Eagle Casino. [r] Wellington Financial Wellington Financial, through various Wellington Funds, 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 $25.2 million representing a 12.6% interest in Wellington Fund IV and another $30.3 million representing a 10.1% interest in Wellington Fund V as at March 31, 2017 and 2016. 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, Wellington Fund IV and Wellington Fund V. During fiscal 2017, Clairvest funded an additional $1.0 million [2016 – $14.6 million] to Wellington Fund V, bringing total amount funded to $15.6 million [2016 – $14.6 million] against the $30.3 million commitment as at March 31, 2017. During fiscal 2017, Clairvest received distributions totaling $4.6 million [2016 – $3.3 million] from Wellington Financial, bringing total distributions received from current and prior Wellington Funds to $31.2 million [2016 – $26.6 million]. 58 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] 7. FIXED ASSETS The composition of Clairvest's fixed assets was as follows: Aircraft IT equipment [1] Furniture, fixtures and equipment Leasehold improvements Total At cost Balance as at April 1, 2016 $ 3,603 $ 801 $ 460 $ 2,585 $ 7,449 Additions Disposals — — — [18] — — 686 — 686 [18] Balance as at March 31, 2017 $ 3,603 $ 783 $ 460 $ 3,271 $ 8,117 Accumulated amortization Balance as at April 1, 2016 $ 2,004 $ 749 $ 377 $ 2,459 $ 5,589 Amortization expense 355 24 21 28 428 Balance as at March 31, 2017 $ 2,359 $ 773 $ 398 $ 2,487 $ 6,017 Carrying amount as at March 31, 2017 $ 1,244 $ 10 $ 62 $ 784 $ 2,100 At cost Balance as at April 1, 2015 $ 3,603 $ 724 $ 391 $ 2,480 $ 7,198 Additions — 77 69 105 251 Balance as at March 31, 2016 $ 3,603 $ 801 $ 460 $ 2,585 $ 7,449 Accumulated amortization Balance as at April 1, 2015 $ 1,648 $ 638 $ 368 $ 2,277 $ 4,931 Amortization expense 356 111 9 182 658 Balance as at March 31, 2016 $ 2,004 $ 749 $ 377 $ 2,459 $ 5,589 Carrying amount as at March 31, 2016 $ 1,599 $ 52 $ 83 $ 126 $ 1,860 [1] Comprised computer equipment and computer software. 8. CREDIT FACILITIES As at March 31, 2016, Clairvest had a $75.0 million committed credit facility with a maturity date of April 30, 2020. The credit facility bore interest at 11% per annum on drawn amounts and at 1% per annum on undrawn amounts. The Company also had a $20.0 million credit facility available, which was subject to annual renewals and bore interest at the prime rate plus 0.5% per annum. The prime rate as at March 31, 2017 and 2016 was 2.70% per annum. No amounts were drawn under both credit facilities during fiscal 2017 and 2016 and both credit facilities were extinguished and replaced by a new credit facility in December 2016. During fiscal 2017, Clairvest closed on a new 5-year, $100.0 million committed revolving credit facility with several Schedule 1 Canadian chartered banks. The credit facility, which has an initial expiry of December 2021 and is eligible for a one- year extension on each anniversary of the closing date, bears interest at the prime rate plus 1.25% per annum on drawn 59 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] amounts and a standby fee of 0.70% per annum on undrawn amounts. The amount available under the credit facility as at March 31, 2017 was $100.0 million. No amounts had been drawn on the facility during the fiscal 2017 and as at March 31, 2017. 9. RELATED PARTY DISCLOSURES Investments in acquisition entities and investment-related transactions with acquisition entities are further described in note 6. [a] The general partner of CEP ["CEP GP"], an entity which is controlled by Clairvest, is entitled to participate in distributions equal to 20% of all net gains [a "20% carried interest"] of CEP as governed by its Limited Partnership Agreement. Effective December 21, 2015, 10% of the carried interest is allocated to Clairvest and the other 10% is allocated to 2486303 Ontario, which purchased the 10% carried interest from principals and employees of Clairvest during fiscal 2016 for $1.2 million. During fiscal 2017, CEP GP earned $0.5 million [2016 − $0.4 million] in carried interest from CEP, 50% of which was ultimately paid to Clairvest, and the other 50% was ultimately paid to 2486303 Ontario. As at March 31, 2017, CEP had declared and paid distributions to CEP GP totaling $24.2 million [2016 – $23.6 million], $12.1 million [2016 – $11.8 million] of which was ultimately paid to Clairvest, $11.8 million [2016 – $11.8 million] of which was ultimately paid to the principals and employees of Clairvest and $0.3 million [2016 – nil] was ultimately paid to 2486303 Ontario. [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% 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 2017, CEP III declared to Clairvest priority distributions of $0.9 million [2016 – $1.2 million]. As per the Limited Partnership Agreement, fees of $0.1 million [2016 – $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 MIP III. From time to time, additional units in MIP III may be purchased by the limited partners of MIP III. During fiscal 2017, CEP III GPs earned $0.8 million [2016 – $5.4 million] in carried interest from CEP III, 50% of which, or $0.4 million [2016 – $2.7 million], was ultimately paid to Clairvest, and the other 50% or $0.4 million [2016 – $2.7 million] was ultimately paid to the limited partners of MIP III, which reduced the management participation liability. As at March 31, 2017, CEP III had declared and paid distributions to the CEP III GPs totaling $39.5 million [2016 – $38.7 million], 50% of which was ultimately paid to Clairvest and the other 50% was ultimately paid to the limited partners of MIP III. During fiscal 2017, $0.2 million [2016 − $1.1 million] of the carried interest paid by CEP III was ultimately paid to key management. [c] As described in note 15[a], 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 in addition 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. Clairvest is entitled to the first $0.2 million in carried interest received by MIP III, and the remaining carried interest is the entitlement of the limited partners of MIP III. During fiscal 2017, CEP III Co-Invest paid $0.3 million [2016 – $0.7 million] to MIP III with respect to this carried interest entitlement. As at March 31, 2017, CEP III Co-Invest had declared and paid distributions totaling $5.1 million [2016 – $4.8 million] with respect to this carried interest entitlement, $0.2 million [2016 – $0.2 million] of which was received by Clairvest and $4.9 million [2016 – $4.6 million] was received by the limited partners of MIP III. During fiscal 2017, $0.1 million [2016 − $0.3 million] of the carried interest paid by CEP III Co-Invest was ultimately paid to key management. 60 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] 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. As at March 31, 2017, $1.9 million [2016 – $1.9 million] has been received by Clairvest. [d] As general partner of CEP IV, Clairvest is entitled to a priority distribution from CEP IV. Up to January 13, 2016, the priority distribution was calculated monthly as 0.1667% of committed capital and thereafter 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 63.2% of any fees earned by Clairvest from corporate investments of CEP IV. During fiscal 2017, CEP IV declared to Clairvest priority distributions of $3.0 million [2016 – $4.8 million]. As per the Limited Partnership Agreement, fees of $0.5 million [2016 – $0.6 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 MIP IV. From time to time, additional units in MIP IV may be purchased by the limited partners of MIP IV. No carried interest had been declared and paid by CEP IV to CEP IV GPs as at March 31, 2017 and 2016. [e] As manager of CEP IV-A, Clairvest is entitled to a management fee from CEP IV-A. Up to January 13, 2016, the management fee was calculated monthly as 0.1667% of committed capital and thereafter is calculated monthly as 0.1667% of invested capital net of write-downs of capital then invested. The management fee is reduced to the extent of 10.1% of fees earned by Clairvest from corporate investments of CEP IV-A and other amounts as provided in the Limited Partnership Agreement. During fiscal 2017, Clairvest earned management fees of $0.4 million [2016 – $0.6 million] as compensation for its services in the administration of the portfolio of CEP IV-A. As per the Limited Partnership Agreement, fees of $0.1 million [2016 – $0.3 million] from corporate investments of CEP IV-A were 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 had been declared and paid by CEP IV-A to CEP IV-A GP as at March 31, 2017 and 2016. [f] As described in note 15[b], 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 in addition 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 is entitled to the first $0.4 million in carried interest received by MIP IV, and the remaining carried interest is the entitlement of the limited partners of MIP IV. No carried interest had been declared and paid by CEP IV Co-Invest as at March 31, 2017 and 2016. Clairvest, as general partner of MIP IV, is also entitled to participate in distributions equal to the realizable value on the $1.6 million invested by MIP IV in CEP IV Co-Invest. As at March 31, 2017, $0.6 million [2016 – nil] had been received by Clairvest. [g] As general partner of CEP V, Clairvest is entitled to a priority distribution from CEP V. The priority distribution is calculated monthly as follows: [i] from March 2, 2015 to January 13, 2016, 0.1667% of capital allocated to specifically identifiable investments net of any write-downs of capital invested, [ii] from January 14, 2016 to January 13, 2021, 0.1667% of committed capital, and [iii] thereafter, 0.1667% of invested capital net of write-downs of capital then invested. The priority distribution is reduced to the extent of 58.8% of any fees earned by Clairvest from corporate investments of CEP V. During fiscal 2017, CEP V declared to Clairvest priority distributions of $6.9 million [2016 – $1.8 million]. As per the Limited Partnership Agreement, fees of $0.1 million [2016 – $27 thousand] from corporate investments of CEP V were netted against the priority distributions. 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 61 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] 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 MIP V. From time to time, additional units in MIP V may be purchased by the limited partners of MIP V. No carried interest had been declared and paid by CEP V to CEP V GPs as at March 31, 2017 and 2016. [h] As manager of CEP V-A, Clairvest is entitled to a management fee from CEP V-A. The management fee is calculated monthly as follows: [i] from March 2, 2015 to January 13, 2016, 0.1667% of capital allocated to specifically identifiable investments net of any write-downs of capital invested, [ii] from January 14, 2016 to January 13, 2021, 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 11.2% of fees earned by Clairvest from corporate investments of CEP V-A and other amounts as provided in the Limited Partnership Agreement. During fiscal 2017, Clairvest earned management fees of $0.9 million [2016 – $0.3 million] as compensation for its services in the administration of the portfolio of CEP V-A. As per the Limited Partnership Agreement, fees of $0.3 million [2016 – $0.1 million] from corporate investments of CEP V-A were netted against the management fees. The general partner of CEP V-A ["CEP V-A GP"], an entity which is controlled by Clairvest, is 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 had been declared and paid by CEP V-A to CEP V-A GP as at March 31, 2017 and 2016. [i] As described in note 15[c], 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 in addition is entitled to an 8.25% carried interest in respect of CEP V Co-Invest via the general partner of CEP V Co-Invest, an entity controlled by Clairvest. Clairvest is entitled to the first $1.4 million in carried interest received by MIP V, and the remaining carried interest is the entitlement of the limited partners of MIP V. No carried interest had been declared and paid by CEP V Co-Invest as at March 31, 2017 and 2016. Clairvest, as the general partner of MIP V, is also entitled to participate in distributions equal to the realizable value on the $2.4 million invested by MIP V in CEP V Co-Invest. No amounts had been received by Clairvest as at March 31, 2017 and 2016. [j] The entitlement of carried interest from the CEP Funds as described in notes 9[b], 9[d], 9[e], 9[g] and 9[h] follow a distribution allocation which is governed by the Limited Partnership Agreement of the respective CEP Funds, and which requires the limited partners of the respective CEP Funds to first receive back the aggregate amount of their capital contribution and a specified preferred rate of return prior to a payment of carried interest to the General Partner. As at March 31, 2017, if CEP and the CEP Funds were to sell all of their corporate investments at their current fair values and distribute all proceeds in accordance with the respective limited partnership agreements, the respective general partners would receive the following in carried interest from CEP and the CEP Funds. As described in note 2[f], Clairvest has recorded these as carried interest receivable on the consolidated statements of financial position. CEP[1] CEP III CEP IV CEP IV-A CEP V CEP V-A March 31, 2017 March 31, 2016 $ 2,093 $ 2,377 25,249 59,527 11,453 ― ― 17,938 36,212 7,482 ― ― $ 98,322 $ 64,009 [1] A corresponding $1.0 million [2016 ― $1.2 million] in payable to 2486303 Ontario had been recorded to reflect the carried interest entitled by 2486303 Ontario as at March 31, 2017. Also see note 6[q]. 62 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] [k] If the CEP Funds were to sell all of their corporate investments, CEP III Co-Invest, CEP IV Co-Invest and CEP V Co-Invest [the "CEP Co-Invest Partnerships"] would be required to sell all of their corporate investments at their current fair values and as such, MIP III, MIP IV and MIP V would receive carried interest based on the terms previously described. The following details the carried interest entitlements from the CEP Funds and the CEP Co-invest Partnerships that will be ultimately paid to non-Clairvest participants, which were recorded as a management participation liability on the consolidated statements of financial position. CEP III CEP IV CEP IV-A CEP V CEP V-A CEP III Co-Invest[1] CEP IV Co-Invest[1] CEP V Co-Invest[1] March 31, 2017 March 31, 2016 $ 12,625 $ 8,969 29,763 5,727 ― ― 48,115 5,945 12,990 ― 18,106 3,741 ― ― 30,816 4,467 8,694 ― [1] Represents the entitlements of the limited partners of MIP III, MIP IV and MIP V, respectively, as described in notes 9[c], 9[f] and 9[i]. $ 67,050 $ 43,977 [l] Changes in loans receivable for the years ended March 31, 2017 and 2016 were as follows: CEP III[1] CEP IV[2] CEP IV-A[2] CEP V[2] CEP V-A[2] CEP III Co-Invest[3] CEP IV Co-Invest[3] CEP V Co-Invest[3] 2486303 Ontario[4] Clairvest investee companies[5] Other April 1, 2016 Loans advanced Loans repaid March 31, 2017 $ ― $ 140 $ ― $ 140 5,008 ― ― ― ― 10,780 542 10,901 27,231 3,307 25 3,403 86 6,480 1,142 25 36,497 3,736 ― 51,509 7,040 ― [8,411] [86] [6,480] [1,142] ― [47,277] [3,952] [969] [68,317] [5,141] ― ― ― ― ― 25 ― 326 9,932 10,423 5,206 25 $ 30,563 $ 58,549 $ [73,458] $ 15,654 63 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] CEP III[1] CEP IV[2] CEP IV-A[2] CEP V[2] CEP V-A[2] CEP III Co-Invest[3] CEP IV Co-Invest[3] CEP V Co-Invest[3] MIP III[3] 2486303 Ontario[4] Clairvest investee companies[5] Other April 1, 2015 Loans advanced Loans repaid March 31, 2016 $ ― $ 9,388 $ [9,388] $ ― 3,428 567 ― ― ― 4,684 ― 35 ― 8,714 2,622 115 45,655 6,049 67,719 17,485 3,756 20,183 39,152 ― 11,016 220,403 14,309 1,326 [44,075] [6,616] [67,719] [17,485] [3,756] [14,087] [38,610] [35] [115] [201,886] [13,624] [1,416] 5,008 ― ― ― ― 10,780 542 ― 10,901 27,231 3,307 25 $ 11,451 $ 236,038 $ [216,926] $ 30,563 [1] Loans advanced to CEP III bear interest at the prime rate in accordance with CEP III’s Limited Partnership Agreement. Interest of $1 thousand [2016 – $1 thousand] was earned from loans advanced to CEP III during fiscal 2017. Subsequent to year-end, these loans were repaid. [2] Loans advanced to CEP IV, CEP IV-A, CEP V and CEP V-A bear interest at the Reference Rate in accordance with the respective Limited Partnership Agreements. Interest of $0.1 million [2016 – $1.3 million] was earned from loans advanced to these partnerships during fiscal 2017. [3] Loans advanced to these acquisition entities are non-interest bearing loans. [4] Loans advanced to 2486303 Ontario bear interest at 10.0% per annum. Interest of $1.0 million [2016 – $0.3 million] was earned from these loans during fiscal 2017. [5] Comprised loans advanced to Discovery Air and a Canadian subsidiary of MAG. See notes 6[i] and 6[j]. [m] Accounts receivable and other assets comprised the following: Clairvest's investee companies CEP III CEP IV CEP IV-A CEP V CEP V-A Other accounts receivable and prepaid expenses Share purchase loans and loans to officers of affiliated company March 31, 2017 March 31, 2016 $ 1,612 $ 1,644 166 305 44 11,388 2,155 15,670 2,168 3,713 432 12,942 109 4,984 988 21,099 3,159 3,188 $ 21,551 $ 27,446 Included in accounts receivable and other assets as at March 31, 2017 were share purchase loans made to certain officers of the Company totaling $3.0 million [2016 − $2.3 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 $4.8 million [2016 – $2.9 million] as at March 31, 2017. None of these loans were made to key management. Also included in accounts receivable and other assets as at March 31, 2017 were other loans made to certain officers of a company affiliated with Clairvest totaling $0.4 million [2016 − $0.9 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 $67 thousand [2016 – $62 thousand] was earned on these loans during the year. Additionally, acquisition entities of the Company which were not consolidated by the Company as described in note 6 held receivables from CEP III totaling $7 thousand [2016 – $1 thousand], from CEP IV totaling $12 thousand 64 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] [2016 – $0.5 million], from CEP IV-A totaling $2 thousand [2016 – nil], from CEP V totaling $27 thousand [2016 – $0.1 million] and from Clairvest's investee companies totaling $1.8 million [2016 – $1.7 million]. [n] During fiscal 2017, Clairvest earned $5.9 million [2016 – $4.6 million] in distributions and interest income and $1.3 million [2016 – $1.9 million] in advisory and other fees from its investee companies. Additionally, acquisition entities of the Company which were not consolidated by the Company as described in note 6 earned $23.8 million [2016 – $12.8 million] in distributions and interest income, $3.7 million [2016 – $0.5 million] in dividend income and $0.6 million [2016 – $0.6 million] in advisory and other fees from its investee companies. [o] 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. The related party has the right to sell its portion of the ownership of the aircraft to Clairvest at the fair market value determined at the time of sale. Accordingly, Clairvest has recognized 100% of the net book value of the aircraft and a liability for the 50% ownership the Company does not own. 10. INCOME TAXES Income tax expense for the years ended March 31, 2017 and 2016 comprised the following: Current income tax expense [recovery] Deferred income tax expense 2017 2016 $ 2,943 $ [2,814] 6,531 6,075 $ 9,474 $ 3,261 A reconciliation of the income tax expense for the years ended March 31, 2017 and 2016 based on the Federal and Ontario statutory rate and the effective rate follows: 2017 2016 Income before income taxes Statutory Federal and Ontario income tax rate Statutory Federal and Ontario income taxes $ 79,600 21,094 % $ % 26.50 26.50 43,227 11,455 [5,128] 26.50 26.50 [11.86] Non-taxable portion of net investment gains and distributions [12,120] [15.23] Non-taxable portion of carried interest net of management participation Non-deductible portion of foreign exchange cost Non-deductible portion of other expenses Foreign income tax rate differences Tax recoveries regarding prior year Other [1,596] [2.01] [1,285] [2.97] ― 891 451 ― 1.12 0.57 [612] [0.77] 1,366 1.72 9,474 11.90 128 22 [276] [778] [877] 3,261 0.29 0.05 [0.64] [1.80] [2.03] 7.54 In addition to the income tax expense recorded by Clairvest, acquisition entities of Clairvest recorded $5.4 million [2016 – $3.2 million] in income tax expense during fiscal 2017, which had been included in the fair value determination of these acquisition entities. Deferred income tax liabilities relate to temporary differences on corporate and temporary investments, derivative instruments, accounts payable and accrued liabilities, income, and unrealized carried interest income. The composition was as follows: 65 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] Temporary differences on corporate and temporary investments Temporary differences on derivative instruments Temporary differences on accrued compensation and share-based compensation Temporary differences on income Temporary differences on unrealized carried interest net of management participation Other March 31, 2017 March 31, 2016 $ 18,065 $ 13,699 3 [5,204] 1,412 4,144 2,250 77 [4,565] 1,534 2,654 740 $ 20,670 $ 14,139 All deferred income tax expenses [recoveries] were recognized in net income during fiscal 2017 and 2016. 11. 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 (series 1) 1,000,000 non-voting shares (series 2) Issued and outstanding March 31, 2017 March 31, 2016 Common shares, beginning of year Issued on exercise of stock options [note 12] Purchased and cancelled under normal course issuer bid Shares Amount Shares Amount 15,214,095 $ 81,662 15,134,095 $ 79,314 — [20,000] — [108] 80,000 — 2,348 — Common shares, end of year 15,194,095 $ 81,554 15,214,095 $ 81,662 During fiscal 2017, the Company filed a normal course issuer bid enabling it to make market purchases of up to 760,627 [2016 – 760,704] of its common shares in the 12-month period ending March 6, 2018. During fiscal 2017, the Company made no purchases under the current normal course issuer bid and purchased and cancelled 20,000 common shares under a previous normal course issuer bid for an aggregate cost of $0.6 million. In total, 3,449,895 [2016 – 3,429,895] common shares at a cost of $35.9 million [2016 – $35.3 million] had been purchased under current and all previous normal course issuer bids as at March 31, 2017. An additional 934,200 common and 2,230,954 non-voting shares had been purchased for cancellation outside of the normal course issuer bid for an aggregate cost of $33.0 million. Common shares of 15,194,095 [2016 − 15,214,095] were outstanding as at March 31, 2017. The weighted average number of common shares outstanding during fiscal 2017 was 15,202,669 [2016 − 15,179,547]. 66 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] The basic and fully diluted net income per share computations for 2017 and 2016 were as follows: Net income and comprehensive income [000s] Weighted average number of shares 2017 Per share amount Net income and comprehensive income [000s] Weighted average number of shares 2016 Per share amount Basic and fully diluted $ 70,126 15,202,669 $ 4.61 $ 39,966 15,179,547 $ 2.63 During fiscal 2017, the Board of Directors of the Company authorized the creation of Non-Voting Series 2 Shares ["Series 2 Shares"] which have a two times preference over the common shares. The Series 2 Shares were authorized as part of the new stock option program as described in note 12. No Series 2 Shares had been issued as at March 31, 2017. 12. SHARE-BASED COMPENSATION The Company has a stock option plan [the "Legacy Option Plan"] in place which had 555,000 options outstanding as at March 31, 2015. During fiscal 2016, 555,000 options were exercised, 80,000 of which were exercised for shares, increasing share capital by $2.3 million. The remaining 475,000 options were exercised under the cash settlement plan and had no impact on share capital. As at March 31, 2017 and 2016, no options were outstanding under the plan, and an additional 558,856 are available for future grants. As at March 31, 2017 and 2016, 558,856 [2016 – 558,856] common shares of the Company have been made available for issuance to eligible participants. A summary of the status of the Company's Legacy Option Plan as at March 31, 2016 and changes during the year ended March 31, 2016 are presented below: Options outstanding, April 1, 2015 Options exercised Options outstanding, March 31, 2016 [1] Adjusted for special dividends where applicable. Number of options Weighted average exercise price per share[1] 555,000 [555,000] ─ $ 10.36 10.36 $ ─ During fiscal 2017, the Company adopted a new stock option plan [the "Non-Voting Option Plan"]. Options granted under the Non-Voting Option Plan are exercisable for Series 2 Shares as described in note 11. Subsequent to the adoption of the Non-Voting Option Plan, Clairvest granted 203,353 options under this plan. Option granted under this plan vest at a rate of one-fifth of the grant at the end of each year over a five-year period. As at March 31, 2017, all 203,353 options were outstanding and none had vested. Clairvest recognized stock-based compensation expense based upon the fair value of the outstanding stock options as at March 31, 2017 using the Black-Scholes option pricing model with the following assumptions: 67 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] As at March 31, 2017 Grant # of options granted # of options vested Price ($)[1] Black-Scholes assumptions used Expected volatility Expected forfeiture rate[2] Expected dividend yield Risk-free interest rate Expected life [years] Value using Black-Scholes [000s][3] March 31, 2017 203,353 — 57.00 10% 0% 1.00% 0.95% 4.25 $ 937 [1] [2] [3] Based on two times the five-day weighted average closing price of Clairvest common shares at date of grant and is adjusted for any special dividends paid by the Company. 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 included in the previous stock option plan. Share price for a Clairvest common share as at March 31, 2017 was $33.60 [TSX: CVG]. During fiscal 2017, the Board of Directors of the Company approved an Employee Deferred Shared Units ["EDSU"] Plan. The EDSU Plan provides, among other things, that participants may elect annually to receive all or a portion of their annual bonus amounts that would otherwise be payable in cash in the form of EDSUs. EDSUs may be redeemed for cash or for common shares of the Company in accordance with the terms of the plan. The EDSU Plan received shareholders’ approval by ordinary resolution during fiscal 2017. Clairvest is required to reserve one common share for each EDSU issued under the EDSU Plan. The maximum number of Clairvest common shares reserved for the EDSU Plan is 200,000, which represented approximately 1.3% of the outstanding number of common shares as at March 31, 2017. During fiscal 2017, 18,445 EDSUs were issued based on the terms and conditions of the EDSU Plan. Accordingly, an accrual of $0.6 million [2016 – nil] had been included in share- based compensation liability. During fiscal 2017, Clairvest recognized an expense of $0.1 million with respect to EDSUs. As at March 31, 2017, a total of 1,091,081 [2016 – 1,119,348] BVARs were outstanding, the accrual in respect of which was $10.0 million [2016 – $8.5 million] and had been included in share-based compensation liability, and an additional $5.9 million [2016 – $5.7 million] not accrued as those BVARs had not vested. During fiscal 2017, 283,861 [2016 – 241,664] BVARs were granted, 312,128 [2016 – 204,994] BVARs were exercised and none [2016 – 23,014] were forfeited. For the year ended March 31, 2017, Clairvest recognized an expense of $7.8 million [2016 – $5.5 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 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 15[h], the stock option plans, the BVAR Plan and the EDSU Plan. Aggregate compensation paid for the years ended March 31 to the Co- CEOs was as follows: Paid Salaries Annual incentive plans Stock options 2017 2016 $ 652 $ 652 1,377 ─ 1,649 9,903 $ 2,029 $ 12,204 68 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] Compensation payable to the Co-CEOs at the consolidated statements of financial position dates was as follows: Payable Annual incentive plans Stock options Book value appreciation rights March 31, 2017 March 31, 2016 $ 2,500 $ 2,261 99 3,668 ─ 1,100 $ 6,267 $ 3,361 As at March 31, 2017, 235,516 [2016 – 243,402] DSUs were held by directors of the Company, the accrual in respect of which was $8.2 million [2016 – $6.9 million] and had been included in share-based compensation liability. During fiscal 2017, 16,210 [2016 – 14,299] DSUs were granted and 24,096 DSUs [2016 – nil] were exercised for $0.7 million. For the year ended March 31, 2017, Clairvest recognized an expense of $2.0 million [2016 – $0.4 million] with respect to DSUs. As at March 31, 2017, 105,000 [2016 – 120,000] ADSUs were held by directors of the Company, the accrual in respect of which is $2.0 million [2016 – $1.6 million] and had been included in share-based compensation liability. During fiscal 2017, no ADSUs [2016 – 15,000] were granted and 15,000 ADSUs [2016 – nil] were exercised for $0.3 million. For the year ended March 31, 2017, Clairvest recognized an expense of $0.7 million [2016 – recovery of $2 thousand] with respect to ADSUs. During fiscal 2017, compensation paid to directors under the BVAR, DSU and ADSU plans were $2.8 million [2016 – nil]. In addition to the DSU and ADSU plans previously discussed, compensation payable to the directors of Clairvest included $0.1 million [2016 – nil] under the Non-Voting Option Plan. 13. CONSOLIDATED STATEMENTS OF CASH FLOWS The net change in non-cash working capital balances related to operations was as follows: Accounts receivable and other assets Income taxes recoverable Accounts payable and accrued liabilities Income taxes payable Accrued compensation expense Cash and cash equivalents as at March 31, 2017 and 2016 comprised the following: Cash Cash equivalents 2017 2016 $ 5,895 $ [12,391] 2,859 1,413 [14] 1,452 [4,768] 681 41 [75] $ 11,605 $ [16,512] March 31, 2017 March 31, 2016 $ 88,026 $ 2,704 18,179 62,546 $ 106,205 $ 65,250 14. DERIVATIVE INSTRUMENTS The Company and its acquisition entities enters 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 2017, the Company received $0.5 million [2016 – paid $4.8 million] on the settlement of realized foreign exchange forward contracts. As at March 31, 2017, the Company had entered into foreign exchange forward contracts as economic hedges against its foreign-denominated investments and loans as follows: 69 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] Foreign exchange forward contracts to sell US$1.5 million [2016 – US$7.6 million] at an average rate of Canadian $1.3450 per U.S. dollar [2016 – $1.3751] through to May 2017. The fair value of the forward contracts as at March 31, 2017 was a gain of $24 thousand [2016 – $0.6 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$165.2 million [2016 – US$133.1 million] at an average rate of Canadian $1.3145 per U.S. dollar [2016 – $1.3451] through to February 2018. The fair value of the forward contracts as at March 31, 2017 was a loss of $2.3 million [2016 – gain of $6.2 million]. The fair value of the foreign exchange forward contracts entered into by these acquisition entities had been included in the fair value of Clairvest’s investment in these acquisition entities on the consolidated statements of financial position. No collateral was funded to the counterparties for Clairvest’s foreign exchange forward contracts and those of its acquisition entities as at March 31, 2017 and 2016. 15. CONTINGENCIES, COMMITMENTS AND GUARANTEES [a] 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 [2016 – $15.2 million] of which remained unfunded as at March 31, 2017. 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. [b] 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, $21.2 million [2016 – $28.4 million] of which remained unfunded as at March 31, 2017. 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. [c] 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, $142.2 million [2016 – $146.7 million] of which remained unfunded as at March 31, 2017. 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. [d] Clairvest has committed $25.2 million to Wellington Fund IV [2016 – $25.2 million], all of which was unfunded at March 31, 2017. As specified in the Limited Partnership Agreement, upon the closing of Wellington Fund V, Wellington Fund IV may no longer invest in new investments. [e] Clairvest has also committed $30.3 million to Wellington Fund V, $14.6 million [2016 – $15.7 million] of which remained unfunded as at March 31, 2017. [f] As at March 31, 2017, Clairvest had earned profit distribution totaling $0.9 million [2016 – nil] through its ownership interest in the General Partners of Wellington Fund V. Clairvest has guaranteed to return up to amounts received in the event the limited partners of Wellington Fund V do not meet their return threshold as specified in the respective Limited Partnership Agreements. As at March 31, 2017 and 2016, there were no accruals made with respect to the clawback. [g] Clairvest had guaranteed up to US$10.0 million of CEP III's obligations to a schedule 1 Canadian chartered bank under CEP III's foreign exchange forward contracts with the bank. Subsequent to year-end, the guarantee was extinguished. [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"]. As at March 31, 70 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] 2017, the Realized Amount under the Bonus Program was $0.2 million [2016 − $0.6 million] and had 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 $5.0 million [2016 − $3.5 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. [i] In conjunction with the sale of Casino New Brunswick, Clairvest had agreed to a net guarantee of $13.5 million to fund any valid claims made by the purchaser under the indemnity provisions of the sale for a specified period of time. Any funding pursuant to the guarantee will be allocated 25% to CEP III Co-Invest and 75% to CEP III. As at March 31, 2017 and 2016, no amounts with respect to this guarantee have been funded. Subsequent to year-end, the net guarantee was reduced to $2.2 million. [j] As part of the holding structure of Chilean Gaming Holdings, acquisition entities of CEP III Co-Invest had loans totaling $41.9 million as at March 31, 2017 [2016 − $41.9 million] from an unrelated financial institution, while another acquisition entity of CEP III Co-Invest held term deposits totaling $41.9 million as at March 31, 2017 [2016 − $41.9 million] with the same financial institution as security for these loans. CEP III Co-Invest's ownership of both acquisition entities was 36.8% as at March 31, 2017 and 2016. [k] Clairvest had agreed to guarantee up to $10.0 million to support Discovery Air’s credit facility with its bank. The guarantee is callable by the lender under certain circumstances and should it be called, Clairvest will assume the lender’s security position that supports the loans provided by the lender. Clairvest intends to allocate any amounts called under this guarantee to CEP IV Co-Invest, CEP IV and CEP IV-A on a pro-rata basis in accordance with their respective capital commitments in CEP IV. During fiscal 2017, in conjunction with the DAFS sale transaction as previously described in note 6[i], Discovery Air repaid $5.0 million of its credit facility which reduced the guarantee provided by Clairvest. As at March 31, 2017, the total contingent exposure under this guarantee was $2.4 million [2016 − $7.4 million], $0.6 million [2016 − $2.0 million] of which would be assumed by CEP IV Co-Invest if called. Any additional guarantee is subject to Clairvest’s consent in its sole discretion. [l] The Discovery Air Investor Group had also entered into a definitive agreement to purchase all outstanding common shares of Discovery Air at a cash consideration of $0.20 per share. The transaction was completed subsequent to year-end for total cash consideration of $1.5 million, $0.4 million of which was funded by CEP IV Co-Invest. [m] As at March 31, 2017, the Company had future minimum annual lease payments under non-cancellable operating leases for the use of office space of $0.5 million due within one year [2016 − $0.4 million], $1.9 million due after one year but not more than five years [2016 − $1.3 million] and $2.2 million due after five years [2016 − nil]. [n] 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. 16. RISK MANAGEMENT The private equity investment business involves accepting risk for potential return, and is therefore affected by a number of risk factors. Fair value risk Fair value risk includes exposure to fluctuations in the fair market value of the Company’s investments as described in note 17. 71 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] The Company's corporate investment portfolio was diversified across 16 investee companies in 8 industries and 3 countries as at March 31, 2017. Concentration risk by industry and by country as at March 31, 2017 and 2016 was as follows: Contract manufacturing $ — $ 27,248 $ — $ 27,248 $ — $ 16,016 $ — $ 16,016 Canada United States Chile Total Canada United States Chile Total March 31, 2017 March 31, 2016 Defence services Equipment rental Financial services Gaming Marketing services Specialty aviation Other Total 10,519 28,758 22,101 11,557 — — — — — 22,076 28,758 22,101 15,343 22,009 20,852 5,601 — — — — — 20,944 22,009 20,852 12,613 155,679 48,835 217,127 14,076 116,070 43,674 173,820 — 8,179 10,518 — 1,038 3,009 — — — — 8,179 10,518 40,350 4,047 10,641 15,342 7,987 — — 32,815 1,415 2,858 — — — — 18,628 15,342 32,815 4,273 $ 85,547 $ 246,022 $ 48,835 $ 380,404 $ 99,678 $ 181,347 $ 43,674 $ 324,699 Waste management — 40,350 The Company has considered current economic events and indicators in the valuation of its investee companies. Interest rate risk Fluctuations in interest rates affect the Company's income derived from its cash, cash equivalents and temporary investments ["treasury funds"]. For financial instruments which yield a floating interest rate, the income received is directly impacted by the prevailing interest rate. The fair value of financial instruments which yield a fixed interest rate would change when there is a change in the prevailing market interest rate. The Company manages interest rate risk on its treasury funds 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 have been an increase or decrease of $1.2 million [2016 – $0.8 million] to distributions and interest income on a pre-tax basis for the year ended March 31, 2017. Certain of the Company's investments in the investee companies are also held in the form of debentures and loans. Significant fluctuations in market interest rates can have a significant impact on the carrying value of these investments as described in note 17. Currency risk 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 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 entered into hedging positions against these foreign denominated currencies as approved by the Board of Directors. In June 2016, the Board of Directors of the Company approved to remove the hedge on the Chilean Pesos ["CLP"]. As a result, at March 31, 2017, the Company had foreign exchange exposure to the CLP totaling $48.8 million. A number of investee companies are subject to foreign exchange risk. A significant change in foreign exchange rates can have a significant impact on the profitability of these entities and in turn the Company's carrying value of these investee companies. The Company manages this risk through oversight responsibilities with existing investee companies and by reviewing the financial condition of investee companies regularly. 72 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] 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, 2017 and 2016, there were no material income effects on changes of credit risk on financial assets. The carrying values of financial assets subject to credit exposure as at March 31, 2017 and 2016, net of any allowances for losses, were as follows: Financial assets Cash and cash equivalents Temporary investments Accounts receivable[1] Loans receivable[2] Derivative instruments Corporate investments[3] March 31, 2017 March 31, 2016 $ 106,205 $ 65,250 15,964 19,662 5,371 24 380,404 21,793 24,287 8,340 581 324,699 $ 527,630 $ 444,950 [1] Excludes prepaid expenses and receivables from acquisition entities. [2] Excludes loans receivable from acquisition entities. [3] 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 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 investee companies regularly. The Company is also subject to credit risk on its accounts receivable and loans receivable, a significant portion of which are with its investee companies and its CEP Funds. The Company manages this risk through its oversight responsibilities with existing investee companies by reviewing their financial conditions 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 counterparty credit risk on derivative instruments by only contracting with counterparties which are Schedule 1 Canadian chartered banks. As at March 31, 2017, the Company’s derivative instruments had a fair value of $24 thousand [2016 – $0.6 million]. Additionally, the Company’s acquisition entities held derivative instruments which had mark-to-market losses totaling $2.3 million [2016 – gains totaling $6.2 million]. The Company believes the counterparty risk with respect to its and its acquisition entities’ derivative instruments is nominal. The Company manages credit risk on its treasury funds by conducting activities in accordance with the fixed income securities policy which 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. 73 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] 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 & Poor's rating scale, were as follows: Cash Money market savings accounts R1-High Guaranteed investment certificates and investment savings accounts March 31, 2017 March 31, 2016 $ 88,026 $ 2,704 17,209 39,023 AA A+ A BBB+[1] BBB[1] BBB-[1] Not rated[1] Corporate bonds and loans B-[2] 16,126 — — — 202 101 505 — 36,683 2,570 202 101 101 101 101 5,457 Total cash, cash equivalents, temporary investments and restricted temporary investments [1] Principal protected by the Canada Deposit Insurance Corporation. [2] Pertains to Clairvest's treasury investments in Light Tower Rentals Inc. $ 122,169 $ 87,043 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 periods. Total unfunded commitments to co-invest alongside the CEP Funds, as described were $178.5 million [2016 – $190.3 million] as at March 31, 2017. 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. In addition to its commitments to co-invest alongside the CEP Funds, the Company has unfunded commitments of $25.2 million and $14.6 million to Wellington Fund IV and Wellington Fund V, respectively, as described in notes 15[d] and 15[e]. The Company manages liquidity risk by maintaining a conservative liquidity position that exceeds all liabilities payable on demand. The Company invests treasury funds in liquid assets such that they are available to cover any potential funding commitments and guarantees. In addition, the Company maintains a $100.0 million [2016 – $95.0 million] credit facility which was undrawn at March 31, 2017. As at March 31, 2017, Clairvest had treasury funds of $122.2 million [2016 – $87.0 million] and access to $100.0 million [2016 – $95.0 million] in credit to support its obligations and current and anticipated corporate investments. Clairvest also had access to $48.9 million [2016 – $45.4 million] in treasury funds held by its acquisition entities and $443.4 million [2016 – $465.7 million] in uncalled committed third-party capital through the CEP Funds at March 31, 2017 to invest along with Clairvest’s capital. 74 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] 17. 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[c] 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 FVTPL according to the following hierarchy, based on the lowest level of significant input used in measuring fair value. Level Level 1 Level 2 Fair value input description Financial instruments Quoted prices [unadjusted] from active markets Quoted equity instruments 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] Quoted corporate bonds Money market and investment savings accounts Quoted equity instruments which are not actively traded Guaranteed investment certificates Quoted corporate bonds or loans which are not actively traded Level 3 Inputs that are not based on observable market data Unquoted equity instruments or partnership units Corporate bonds, debentures or loans not traded The following table presents the financial instruments measured at fair value classified by the fair value hierarchy: March 31, 2017 Fair value measurements using Level 1 Level 2 Level 3 Assets/liabilities at fair value Financial assets Cash equivalents Money market savings accounts $ 17,209 $ — $ — $ 17,209 Investment savings accounts Temporary investments Guaranteed investment certificates Derivative instruments Corporate investments 970 18,179 — — — — — — 15,964 15,964 24 — — — — — — 970 18,179 15,964 15,964 24 410,102 410,102 $ 18,179 $ 15,988 $ 410,102 $ 444,269 75 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] March 31, 2016 Fair value measurements using Level 1 Level 2 Level 3 Assets/liabilities at fair value Financial assets Cash equivalents Money market savings accounts $ 39,023 $ — $ — $ 39,023 Investment savings accounts Temporary investments Guaranteed investment certificates Corporate bonds and loans Derivative instruments Corporate investments 23,523 62,546 — — — — — — — 16,336 5,457 21,793 581 — — — — — — 23,523 62,546 16,336 5,457 21,793 581 — 353,801 353,801 $ 62,546 $ 22,374 $ 353,801 $ 438,721 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, 2016, the Company transferred its investment in Discovery Air common shares from Level 2 to Level 3 as a result of the market for the shares becoming inactive following the additional purchases made by Clairvest together with its co-investors as discussed in note 6[i]. There were no other transfers between the various levels of the fair value hierarchy for the years ended March 31, 2017 and 2016. [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, 2016 Purchases of assets / issuances of liabilities Sales of assets / settlements of liabilities Fair value March 31, 2017 Unrealized gains and foreign exchange revaluations included in earnings for assets and liabilities for the year ended March 31, 2017 for positions still held Financial assets Corporate investments $ 353,801 $ 72,678 $ 21,110 $ [37,487] $ 410,102 $ 72,678 $ 353,801 $ 72,678 $ 21,110 $ [37,487] $ 410,102 $ 72,678 76 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] Total realized / unrealized gains and foreign exchange revaluations included in earnings Fair value April 1, 2015 Purchases of assets / issuances of liabilities Sales of assets / settlements of liabilities Fair value March 31, 2016 Unrealized gains and foreign exchange revaluations included in earnings for assets and liabilities for the year ended March 31, 2016 for positions still held $ 291,312 $ 36,366 $ 40,877 $ [14,754] $ 353,801 $ 36,353 $ 291,312 $ 36,366 $ 40,877 $ [14,754] $ 353,801 $ 36,353 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. On 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 investee companies [refer to note 6] for which the fair values have been estimated based on assumptions that are not supported by observable inputs. The following tables present quantitative information on the primary valuation techniques and unobservable inputs based on the form of investment: March 31, 2017 Valuation techniques Significant unobservable input Unquoted equity instruments [including warrants] or partnership units Public company comparables Recent transactions (a) EBITDA multiples (b) (a) n/a Range (c) 5.0x to 7.7x (b) n/a Corporate bonds, debentures or loans not traded or other finite set of cash flows Discounted cash flows Discount rates (c) 8.0% to 19.0% March 31, 2016 Valuation techniques Significant unobservable input Unquoted equity instruments [including warrants] or partnership units Public company comparables Recent transactions (d) EBITDA multiples (e) (d) n/a Range (f) 5.1x to 7.7x (e) n/a Corporate bonds, debentures or loans not traded or other finite set of cash flows Discounted cash flows Discount rates (f) 8.0% to 19.0% 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 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 77 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] 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. As at March 31, 2017, 10 investee companies were 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 $29.6 million or decrease of $29.3 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, 2017 [2016 – increase of $20.3 million or decrease of $20.0 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 fair value is determined based on recent transaction information; this value is the most representative indication of fair value for a period of up to twelve months. The fair value of corporate bonds, debentures or loans is primarily determined using a discounted cash flow technique. This technique uses observable and unobservable inputs such as discount rates that take into account the risk associated with the investment as well as further cash flows. For those investments valued based on recent transactions or discounted cash flows, Clairvest has determined that there are no reasonable alternative assumptions that would change the fair value materially as at March 31, 2017 and 2016. 18. CAPITAL DISCLOSURES Clairvest considers the capital it manages to be shareholders' equity. Clairvest also manages capital held in acquisition entities, 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 long-term value in its investee companies to generate superior returns; and Have appropriate levels of committed third-party capital available to invest alongside 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. As at March 31, 2017 and 2016, Clairvest had no external capital requirements, other than as disclosed in note 16. 19. 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. 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 78 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2017 and 2016 [tabular dollar amounts in thousands, except per share information] periods beginning on or after January 1, 2018 with early adoption permitted. The Company is currently assessing the impact of IFRS 15, which could be material on unrealized carried interest. The Company plans to adopt the new standard on the required effective date. 20. SUBSEQUENT EVENTS Subsequent to year-end, CEP V Co-Invest made an investment in Head InfoTech India Pvt. Ltd ["Head InfoTech"], which operates an online, skill-based gaming platform in India providing online experience of Rummy. CEP V Co-Invest invested US$41.6 million [C$56.0 million] in Head InfoTech, which comprised US$17.0 million [C$22.9 million] in the form of compulsory convertible debentures which bear interest at a rate of 16.0% per annum, and US$24.6 million [C$33.1 million] for a 33.6% equity interest in Head InfoTech. A foreign exchange hedging strategy has not been implemented against this investment. Subsequently, a material adverse regulatory development occurred with respect to this investment. The impact to the fair value of this investment is currently uncertain and potentially material. Also subsequent to year-end, CEP IV Co-Invest, and the Discovery Air Investor Group provided an additional $13.0 million secured revolving credit facility ["New Revolver"] to DA Defence which is in addition to the $25.0 million Revolver described in note 6[i] but on the same economic terms, $6.0 million of which was drawn at closing, $2.2 million of which was funded by CEP IV Co-Invest. CEP IV Co-Invest is committed to fund any shortfall of the other investors of the Discovery Air Investor Group. The New Revolver provides the Discovery Air Investor Group the option to convert the outstanding balance of the New Revolver into common shares of DA Defence on the same economic terms as the Revolver. Concurrent with the New Revolver, Discovery Air and DA Defence granted the Discovery Air Investor Group an option to exchange $18.4 million of the Debentures into $14.7 million of common shares in DA Defence, with the valuation of DA Defence being the same as that used for the conversion of the Revolver and the New Revolver. 21. COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS The comparative consolidated financial statements have been reclassified from statements previously presented to conform to the presentation of the fiscal 2017 consolidated financial statements. 79 SHAREHOLDER INFORMATION As at, and for the year ended, March 31, 2017 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 long-term value of its corporate investments. Accordingly, the results reflected the fair 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 actual realizations. Common Shares[3] 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 Toronto Stock Exchange CVG [1] [2] [3] As at June 5, 2017. Excludes holders of 10% or more of the outstanding common shares. During the year, Clairvest filed a new Normal Course Issuer Bid. BOOK VALUE PER SHARE[1] AT MARCH 31 15,194,095 9,656,380 5,537,715 $ 573,577,086 $ 209,048,741 $38 $36 $34 $32 $30 $28 $26 $24 $22 $20 $18 $16 $14 $12 $10 $8 $6 $4 $2 $- [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. 80 SHAREHOLDER INFORMATION As at, and for the year ended, March 31, 2017 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 2017 & 2016 Common shares Year to March 31, 2017 First Quarter Second Quarter Third Quarter Fourth Quarter Year to March 31, 2016 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 29.12 29.50 30.00 33.87 29.49 30.11 29.90 28.30 27.25 28.75 28.75 30.00 27.76 29.26 28.26 26.76 29.12 29.12 29.75 33.60 29.49 29.55 28.30 27.25 17,600 38,200 35,700 24,200 16,700 29,300 75,400 75,400 81 TRANSFER AGENT AND REGISTRAR Investors are encouraged to contact CST Trust Company for information regarding their security holdings. Information can be obtained at: P.O. Box 700, Station B Montreal, Québec H3B 3K3 Answerline: 1.800.387.0825 Web: www.canstockta.com Email: inquiries@canstockta.com CORPORATE INFORMATION CORPORATE OFFICE 22 St. Clair Avenue East, Suite 1700 Toronto, Ontario M4T 2S3 Tel: 416.925.9270 Fax: 416.925.5753 Web: www.clairvest.com AUDITORS Ernst & Young LLP THE ANNUAL MEETING OF SHAREHOLDERS August 14, 2017 St. Andrews Club & Conference Centre, 150 King Street West, 27th Floor Toronto, Ontario Canada All Shareholders are encouraged to attend. 

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