ANNUAL REPORT 2021
TABLE OF CONTENTS
Chief Executive Officer’s Message
Management's Discussion and Analysis
Management's Report
Independent Auditors' Report
Consolidated Financial Statements
Notes to Consolidated Financial Statements
Shareholder Information
Corporate Information
2
3
27
28
32
36
71
Back Cover
KNOWLEDGE BASED - PARTNER FOCUSED
CLAIRVEST IS ONE OF CANADA'S LEADING PROVIDERS OF
PRIVATE
TO MID-MARKET
FINANCING
COMPANIES AND CURRENTLY HAS OVER C$2.5 BILLION
OF EQUITY CAPITAL UNDER MANAGEMENT.
EQUITY
CLAIRVEST’S MISSION
PARTNER WITH
IS
ENTREPRENEURS TO HELP THEM BUILD STRATEGICALLY
SIGNIFICANT BUSINESSES.
TO
CLAIRVEST INVESTS ITS OWN CAPITAL, AND THAT OF
THIRD PARTIES THROUGH THE CLAIRVEST EQUITY
PARTNERS LIMITED PARTNERSHIPS,
IN OWNER-LED
BUSINESSES.
CHIEF EXECUTIVE OFFICER'S MESSAGE
DEAR FELLOW SHAREHOLDERS,
In many ways, fiscal 2021 was both a turbulent but active year. From a PE perspective, once the initial shock from the pandemic
was absorbed by the markets, we saw significant industry growth, unprecedented levels of dry powder globally, growing
valuations, and increasing leverage levels on buyout deals. Despite significant headwinds in the past year, stimulus from central
banks eased liquidity concerns and global markets rebounded quickly after the initial pullback.
For Clairvest, the year came out better than expected, driven by the collective efforts of our exceptional team, the ability to stay
agile, and our disciplined approach to investing. It was a challenging start, as predicted, but being invested in the right industries
served us well. Once the economy started re-opening south of the border, many of our portfolio companies exhibited strong
results, meeting or exceeding pre-COVID levels. Additionally, in July 2020, Digital Media Solutions (“DMS”) completed a business
combination with Leo Holdings Corp and began trading on the New York Stock Exchange (NYSE), increasing our total realized
return to date on the DMS investment to 3.5x invested capital with the potential to realize significant proceeds in the future from
our stock. We also capitalized on specific industry tailwinds and exited our investment in Right Time Heating and Air Conditioning
in December 2020, where Clairvest generated a 4.8x multiple of capital and an internal rate of return (“IRR”) of 112%. These two
liquidity events bolstered our track record of performance where on our 38 exited deals, we have turned $841 million of invested
equity into $3.3 billion, for a consolidated 3.9x multiple of capital and a pooled IRR of 24%. We were also pleased to see that the
sale of County Waste of Virginia was awarded the 2021 Canadian Venture Capital & Private Equity Association (“CVCA”) Global
Dealmaker Award, having generated a 3.6x multiple on invested capital (4.6x with an earnout potential) and 32% IRR. This is the
sixth time over the last 13 years that a Clairvest deal has received a CVCA award.
Despite the pandemic, Clairvest and its partners continued to exhibit positive momentum by navigating mandatory shutdowns
and travel restrictions. The team has been staying busy on the new deal front, deploying over $210M in Fund VI and completing
four new investments, both in domains familiar to us (IT services, waste management, renewable energy), as well as in a new
domain (co-packing). For the most part, these new investments were proprietary opportunities that emerged from relationships
cultivated by our team over several years. Over the past fiscal year, we have helped our partners raise over $240M in debt to
accelerate growth plans and executed 16 add-on acquisitions, with the most notable being NovaSource’s acquisition of First
Solar’s North American operations & maintenance (“O&M”) platform. This was a meaningful milestone towards our objective of
building the premier company in the Solar O&M space.
For the 12 months ended March 31, 2021, Clairvest’s book value per share grew to $56.96, or by 12.5% including dividends paid.
Over the last 15 years, our book value has grown at a compounded annual growth rate of 12.1% after tax, despite an average cash
balance of 45% during the period. By comparison, the S&P 500 has delivered 10.0% pre-tax, which illustrates Clairvest’s solid out-
performance on an absolute and risk-adjusted basis. With outstanding exits achieved over the last few years, Clairvest was
pleased to return some value to its shareholders in the form of a one-time special dividend of $5 per common share in November
2020, the same amount as was raised from our shareholders in our initial public offering many years ago.
Sadly, we lost our friend and long-time business partner, Joe Winters, CEO of Winter Bros. Waste Systems, in early January 2021
to Covid. Joe was a remarkable leader who cared about his employees and customers, and we are honored to have partnered with
him and the Winters family over the past 15 years. Clairvest has been working closely with the Winters family to transition the
business after this tragic loss.
Looking ahead to fiscal 2022, we are aware of the challenges but also see many great opportunities. Over the past 34 years, we
developed the reputation of being partners with strong ability and integrity, which will continue to be the driver of our success.
As always, I would like to express my gratitude towards Clairvest’s employees, fund partners, investee company management
teams, and our board members. Your commitment, unwavering support, and invaluable guidance provide the means to continue
building value and having a positive impact on those people and communities with whom we have the privilege to connect.
Respectfully,
Ken Rotman
Chief Executive Officer
2
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
June 22, 2021
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,
2021 ("consolidated financial statements").
The following MD&A is the responsibility of Management and is as at June 22, 2021. 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 management firm 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 symbol CVG.
Clairvest invests its own capital, and that of third parties, through various Clairvest Equity Partnerships (together,
the "CEP Funds") in carefully selected companies that have the potential to generate superior returns. These Partnerships
include the following:
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")
which together, are herein referred to as Clairvest Equity Partners III and IV.
Clairvest Equity Partners V Limited Partnership ("CEP V")
CEP V HI India Investment Limited Partnership ("CEP V India")
Clairvest Equity Partners V-A Limited Partnership ("CEP V-A")
Clairvest Equity Partners VI Limited Partnership ("CEP VI")
Clairvest Equity Partners VI-A Limited Partnership ("CEP VI-A")
Clairvest Equity Partners VI-B Limited Partnership ("CEP VI-B")
which together, are herein referred to as Clairvest Equity Partners V and VI.
The Company concluded that its ownership interests in the CEP Funds, which meet the definition of structured entities
under International Financial Reporting Standards ("IFRS"), 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 which the Company controls by having the power to govern the financial and operating policies of these
entities. 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
3
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
June 22, 2021
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")
MIP IV Limited Partnership ("MIP IV")
CEP V Co-Investment Limited Partnership ("CEP V Co-Invest")
Clairvest General Partner V Limited Partnership (“Clairvest GP V”)
MIP V Limited Partnership ("MIP V")
CEP VI Co-Investment Limited Partnership ("CEP VI Co-Invest")
MIP VI Limited Partnership ("MIP VI")
Clairvest Special Limited Partner VI Limited Partnership ("CEP SLP VI")
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 together with Clairvest, directly and
indirectly holds a 100% interest in Clairvest Equity Partners Limited Partnership ("CEP"), an investment fund held by
third-party investors until December 2015. Clairvest's relationship with CEP III Co-Invest and MIP III, CEP IV Co-Invest and
MIP IV, CEP V Co-invest, Clairvest GP V and MIP V, and CEP VI Co-Invest, MIP VI and CEP SLP VI are described in the
Transaction with Related Parties and Off-Statement of Financial Position Arrangements section of the MD&A.
As at March 31, 2021, Clairvest, through these acquisition entities, had 20 core investments in 10 different
industries, some of which are located or have operations outside of North America. One was a joint investment with CEP III,
three were joint investments with CEP IV and CEP IV-A (together, the "CEP IV Fund"), ten were joint investments with CEP V,
CEP V India and CEP V-A (together, the "CEP V Fund"), and four were joint investments with CEP VI, CEP VI-A and CEP VI-B
(together, the “CEP VI Fund”). Clairvest also held an investment in the Grey Eagle Casino and a residual interest in
Wellington Financial.
The table below summarizes Clairvest's direct and indirect investee companies ("investee companies") as at
March 31, 2021:
4
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
June 22, 2021
SUMMARY OF CLAIRVEST'S INVESTEE COMPANIES AS AT MARCH 31, 2021
Investee
Company
Industry
Segment
Clairvest
Ownership
Percentage(21)
CEP Fund
Ownership
Percentage(21)
Description of Business
Total
Ownership
Percentage(21)
INVESTMENTS DIRECTLY HELD
Grey Eagle Casino(1)
Gaming
Wellington
Financial
Financial
Services
Equity participation
N/A
A casino on Tsuu T'ina First Nation reserve lands, located southwest
of the city of Calgary, Alberta.
Wellington Financial was realized during fiscal 2018. Certain
entitlements on the residual warrants portfolio remain outstanding
as at March 31, 2021.
INVESTMENTS MADE BY CEP III CO-INVEST ALONGSIDE CEP III
Gaming
Chilean Gaming
Holdings(2)
36.8%
37.7%
INVESTMENTS MADE BY CEP IV CO-INVEST ALONGSIDE CEP IV/CEP IV-A
Centaur Gaming
Gaming
N/A
74.5% An investment vehicle which holds an equity interest in various
gaming entertainment complexes in Chile.
Investment was realized during fiscal 2019. Certain deferred
considerations on the sale remain outstanding as at March 31,
2021.
Davenport Land
Investments(3)
Northco / Top
Aces(4)
Other
21.9%
59.9%
81.8% An investment vehicle which holds real estate surrounding a casino
in Davenport, Iowa.
Specialty
Aviation &
Defence
Services
38.7% of
Northco
17.3% of Top
Aces
57.8% of
Northco
24.7% of Top
Aces
96.5% of
Northco
42.0% of Top
Aces
Northco is a specialty aviation services company operating across
Canada. Top Aces is a supplier of advanced adversary services in
Canada, United States, and Germany.
Momentum
Solutions(5)
Specialty
Aviation
4.4%
11.8%
16.2% Momentum Solutions is a Toronto based, inter-connected network
of logistical support companies offering innovative, custom and full-
scale solutions to clients globally.
New Meadowlands
Racetrack (the
"Meadowlands")(6)
Gaming
Debentures and equity investment rights
Operates North America’s premier standardbred horse racing track
located in East Rutherford, New Jersey.
(1)
(2)
(3)
(4)
(5)
(6)
Clairvest held an equity participation interest in the Grey Eagle Casino entitling to earnings between 11.25% to 38.25% of the earnings of Grey Eagle Casino until
December 2022, subject to certain extension rights.
Clairvest held 30,446,299 units of Chilean Gaming Holdings, a partnership which held a 50% interest in each of Casino Marina del Sol and Casino Chillan and a 73.8%
interest in each of Casino Osorno and Casino sol Calama.
Clairvest held 1,982.14 units of Davenport Land Investments.
Clairvest held $23.6 million in convertible debentures of Northco with a stated interest rate of 2% per annum, and 3,867 common shares of Northco. Clairvest also held
722.9719 common shares of Top Aces.
Clairvest held 4,477 common shares of Momentum Solutions.
Clairvest held US$5.4 million in secured convertible debentures of the Meadowlands with a stated interest rate of 15% per annum, US$0.7 million in preferred debt with
a stated interest rate of 3% per annum and US$0.4 million in a non-interest-bearing short-term loan. Clairvest also held warrants which entitle it to invest in equity
securities subject to certain conditions.
5
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
June 22, 2021
Investee
Company
Industry
Segment
Clairvest
Ownership
Percentage(21)
CEP Fund
Ownership
Percentage(21)
Description of Business
Total
Ownership
Percentage(21)
INVESTMENTS MADE BY CEP V CO-INVEST ALONGSIDE CEP V/CEP V India/CEP V-A
Gaming
5.5%
12.8%
18.3% A licensed video gaming terminal operator in the United States.
18.0%
41.9%
Listed on the NYSE under the symbol ACEL.
59.9% A global provider of software and hardware solutions that enable
the monitoring and control of power production and plant
operations for commercial, industrial, and utility-scale solar plants.
15.0%
35.0%
50.0% A multi-specialty dental practice with five offices across New Jersey.
Accel
Entertainment(7)
Also Energy(8)
ChildSmiles
Group(9)
Digital Media
Solutions(10)
Renewable
Energy
Dental
Services
Marketing
Services
DTG Recycle(11)
Waste
Management
14.6%
34.2%
10.4%
24.2%
34.6% A digital media company which operates as a lead generation
engine for companies in a variety of different industries. Listed on
the NYSE under the symbol DMS.
48.8% A waste hauling and
recycling company with operations
concentrated in the greater Seattle-Tacoma area of Washington
State.
Durante Rentals(12)
Equipment
Rental
20.8%
48.6%
69.4% A construction equipment rental provider
in the New York
Metropolitan area.
FSB Technology(13)
Gaming
25.1%
58.6%
83.7% A business-to-business sports and internet gaming technology
supplier based in London, United Kingdom.
Head Digital
Works(14)
Gaming
32.4%
42.4%
74.8% An internet-based technology and gaming company with ownership
interest in Ace2Three, FanFight, Cricket.com, and WittyGames.
Meriplex
Communications(15)
Information
Technology
Waste
Management
Winters Bros.
Waste
Systems of Long
Island ("Winters
Bros. of LI")(16)
17.7%
41.3%
59.0% A provider of managed IT services company based in Houston,
Texas.
14.0%
32.6%
46.6% A regional solid waste collection, recycling and disposal company
servicing customers in Long Island, New York.
INVESTMENTS MADE BY CEP VI CO-INVEST ALONGSIDE CEP VI/CEP VI-A/CEP V-B
Arrowhead
Environmental
Partners(17)
Brunswick
Bierworks(18)
F12.NET(19)
Waste
Management
11.3%
30.4%
41.7% A non-hazardous waste-by-rail operator in Northeastern United
States markets.
Co-Packing
22.2%
59.8%
82.0% A contract manufacturer of specialty beverages based in Ontario,
Canada.
Information
Technology
16.5%
44.3%
60.8% A provider of managed IT services for Canadian-based small and
medium-sized enterprises.
NovaSource Power
Services(20)
Renewable
Energy
23.0%
62.1%
85.1% A solar operations and maintenance company serving commercial,
residential and utility-scale solar plants globally.
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
Clairvest held 5,069,670 Class A-1 shares and 244,674 Class A-2 shares of Accel Entertainment.
Clairvest held 1,013,062 Class A preferred stock, 577,609 Class A common stock and 11,037 Class B preferred stock of Also Energy and a promissory note with a stated
interest rate of 10% per annum.
Clairvest held 11,836,135 Class B preferred units of ChildSmiles Group.
Clairvest held 6,058,016 Class A common shares and 276,653 warrants of Digital Media Solutions.
Clairvest held 8,657,622 Class A convertible preferred shares of DTG Recycle.
Clairvest held 217,121.20 LLC units of Durante Rentals.
Clairvest held 7,820,855 Class A common shares and 1,770,804 Class B convertible preferred shares of FSB Technology.
Clairvest held 39,412,175 common shares of Head Digital Works.
Clairvest held 5,250 common shares of Meriplex Communications.
Clairvest held 1,487,773 Class C units of Winters Bros. of LI., 256,037 units of WBLI II, LLC, and 1,398 units in WBLI III, LLC, affiliates to Winters Bros. of LI which are owned
proportionately by the same unitholders as Winters Bros. of LI.
(17)
Clairvest held 2,706 Class A preferred units of Arrowhead Environmental Partners.
(18)
Clairvest held 5,116,616 Class A shares of Brunswick Bierworks.
(19)
Clairvest held 283,144 Class A common shares of F12.NET.
(20)
Clairvest held 2,932.6159 common shares of NovaSource Power Services.
(21) Ownership percentage calculated on a fully diluted basis as at March 31, 2021.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
June 22, 2021
OVERVIEW OF FISCAL 2021
An overview of the significant events during fiscal 2021:
Overall and Corporate
•
Clairvest ended fiscal 2021 with a book value of $857.8 million, or $56.96 per share, representing a growth of 12.5%
during fiscal 2021. The growth comprised a book value increase of $20.4 million, or $1.41 per share, and dividends
paid totaling $84 million, or $5.5555 per share.
• Net income and comprehensive income ("net income") during fiscal 2021 was $6.96 per share. For the fiscal year
ended March 31, 2021, Clairvest recorded $177.7 million in total revenue and $104.8 million in net income, compared
to $129.3 million and $69.5 million, respectively, in the prior fiscal year.
• During fiscal 2021, 16,900 common shares were purchased and cancelled under the various normal course issuer bids
at an average price of $46.60 per share, reducing the number of common shares outstanding to 15,058,401. On March
1, 2021, Clairvest filed a new normal course issuer bid enabling it to make market purchases of up to 760,749 of its
common shares in the 12-month period commencing March 8, 2021. As at June 22, 2021, no shares have been
purchased under the current normal course issuer bid.
• During fiscal 2021, Clairvest paid an annual ordinary dividend of $0.10 per share and special dividends totalling $5.4555
per share. The ordinary dividend and a special dividend of $0.4555 per share were paid on July 24, 2020 to common
shareholders of record as of July 3, 2020. Another $5.00 per share special dividend was paid on November 23, 2020 to
common shareholders of record as at November 9, 2020. The dividends were eligible dividends for Canadian income
tax purposes.
Clairvest/CEP III Co-Invest and CEP III
• As at March 31, 2021 and June 22, 2021, CEP III had returned 2.3 times invested capital to its third-party investors,
after consideration of general partner priority distributions, carried interest and expenses (“on a net basis”). Clairvest,
through CEP III Co-Invest, and CEP III continues to hold one investment as at June 22, 2021. Based on the fair value as
at March 31, 2021, CEP III is expected to generate approximately 2.5 times invested capital or an IRR of 18% for its
third-party investors on a net basis.
Clairvest/CEP IV Co-Invest and the CEP IV Fund
•
•
Clairvest, through CEP IV Co-Invest, and the CEP IV Fund has exited 8 of its 11 investments, generating $1.51 billion of
total sale proceeds against $436 million of invested capital. As at March 31, 2021, the CEP IV Fund had returned over
2.8 times invested capital to its third-party investors on a net basis.
In April 2020, Top Aces completed an additional $60 million equity financing, where CEP IV Co-Invest and the CEP IV
Fund invested $10.4 million as part of this equity financing. CEP IV Co-Invest portion of the investment was $4.3 million.
• Remaining investments include Northco/Top Aces, New Meadowlands and the remaining interest in Davenport Land
Investments. Based on the fair values as at March 31, 2021, the CEP IV Fund is expected to generate approximately 3.1
times invested capital or an IRR of 25% for its third-party investors on a net basis.
Clairvest/CEP V Co-Invest and the CEP V Fund
•
Clairvest, through CEP V Co-Invest, and the CEP V Fund concluded their investment program towards the end of fiscal
2020 with 12 investments. As at March 31, 2021 and June 22, 2021, CEP V Co-Invest and the CEP V Fund have realized
two investments, returning 0.3 times invested capital to its third-party investors. Of the remaining 10 investments, two
have been registered and listed on public market stock exchanges.
In June 2020, CEP V Co-Invest and CEP V Fund made a US$12.0 million (C$16.2 million) follow-on investment to acquire
1,775 Class A common shares of Also Energy from a minority investor. Clairvest, through CEP V Co-Invest, invested
US$3.6 million (C$4.9 million), increasing its ownership interest to 18.0%.
In June 2020, Head Digital Works repaid in full the remaining INR₹657.9 million (C$13.7 million) compulsory convertible
debentures (“CCD”) to CEP V Co-Invest.
•
•
7
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
June 22, 2021
•
•
In July 2020, Digital Media Solutions (“DMS”), an investee company of CEP V Co-Invest and the CEP V Fund, completed
its transaction with Leo Holdings Corp., becoming a publicly traded company on the NYSE (NYSE: DMS). As part of the
transaction, CEP V Co-Invest received US$8.2 million in cash proceeds, 6,091,377 Class A common shares of DMS and
276,653 warrants (NYSE: DMS WS) which are convertible into Class A common shares at an exercise price of US$11.50
per warrant.
In December 2020, CEP V Co-invest and CEP V Fund realized on its investment in Right Time Heating and Air
Conditioning (“Right Time”) for a 4.8 times invested capital or an IRR of 112%. CEP V Co-Invest received total cash
proceeds of $30.3 million on the realization.
• During fiscal 2021, CEP V Co-Invest made follow-on investments totalling $3.9 million in FSB Technology in the form of
convertible preferred shares and common shares to support its continuing growth.
• Based on the fair values as at March 31, 2021, the CEP V Fund is tracking to 2.0 times invested capital or an IRR of
approximately 25% for its third-party investors on a net basis.
Clairvest/CEP VI Co-Invest and the CEP VI Fund
•
•
•
•
Clairvest, through CEP VI Co-Invest, and the CEP VI Fund’s investment period commenced in February 2020 following
the completion of the CEP V Fund investment period. As at March 31, 2021, the CEP VI Fund has completed four
investments, or approximately 20% of its investment program.
In May 2020, CEP VI Co-Invest and the CEP VI Fund acquired the solar operations and maintenance business of
SunPower Corporation. Upon closing the business was renamed as NovaSource Power Services (“NovaSource”). In
December 2020, NovaSource completed its acquisition of SunSystem Technology (“SST”). In March 2021, NovaSource
acquired the North American operations and maintenance business from First Solar, Inc. In aggregate, CEP VI Co-Invest
and the CEP VI Fund invested US$108 million into NovaSource, CEP VI Co-Invest’s portion of which was US$29.3 million
(C$34.3 million) representing a 23.0% ownership interest in NovaSource.
In June 2020, CEP VI Co-Invest and the CEP VI Fund invested US$10.0 million in Arrowhead Environmental Partners
(“AEP”), a non-hazardous waste-by-rail operator in the Northeastern United States. CEP VI Co-Invest invested US$2.7
million (C$3.7 million) in AEP in the form of 2,706 Class A preferred units representing a 11.3% ownership interest.
In November 2020, CEP VI Co-Invest and the CEP VI Fund invested $35.5 million in F12.NET, a provider of
comprehensive information technology services to small and medium enterprises across Canada. CEP VI Co-Invest
invested $9.6 million in F12.NET in the form of 283,144 Class A common shares representing a 16.5% ownership
interest.
• Also in November 2020, CEP VI Co-Invest and CEP VI Fund invested $18.9 million in Brunswick Bierworks, a Canadian
contract manufacturer of specialty beverages. CEP VI Co-Invest invested $5.1 million in Brunswick Bierworks in the
form of 5,116,616 Class A common shares representing a 22.2% ownership interest.
OUTLOOK
Clairvest is one of the leaders in the Canadian private equity industry. From inception, the Company has invested its own
capital in every investment. As at June 22, 2021, Clairvest's current management team has made 56 platform investments
and has realized or partially realized on 38 investments which have in aggregate created over $3 billion in equity value for
all stakeholders. Clairvest’s third party funds have performed in the top quartile during the last decade, and while past
performance is not an indication of the future, the Clairvest team have all invested significant amounts of their personal
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 improvement and helping its investee companies capitalize on new opportunities that arise.
Although there remains uncertainty on the longer-term impacts of the COVID-19 pandemic and the recovery
therefrom, the Company and its investee companies have taken and will continue to take actions to mitigate the effects of
COVID-19, keeping in mind the interests of the various stakeholders. These changes and any additional changes in
8
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
June 22, 2021
operations by Clairvest and its investee companies in response to COVID-19 could materially impact the financial results of
the Company. At this time, while vaccination efforts are ongoing globally, it is not possible to reliably estimate the length
and severity of COVID-19-related impacts on the financial results and operations of Clairvest and its investee companies.
As at March 31, 2021, Clairvest and its controlled acquisition entities had $1.3 billion of capital available for future
acquisitions through its cash, cash equivalents and temporary investments ("treasury funds"), credit facilities and uncalled
capital in the CEP Funds. As the Company’s investment mission is to partner with entrepreneurs to help build strategically
significant businesses, the Company and the CEP Funds intend to continue supporting their investee companies providing
them with the opportunity to realize on their investment thesis through this pandemic and beyond.
The table below summarizes the status of the CEP Funds as at June 22, 2021:
Status of Clairvest Equity Partnerships as at June 22, 2021
($millions, except year of fund and number of investments)
Clairvest Equity Partners III ("CEP III")
Year of
Fund
2006
Third-Party
Capital
Clairvest
Commitment Total Capital
C$225
C$75
C$300
Capital
Called
79.8%
Clairvest Equity Partners IV ("CEP IV")
2010
C$342
C$125
C$467
93.0%
Clairvest Equity Partners V ("CEP V")
2015
C$420
C$180
C$600
81.4%
Clairvest Equity Partners VI ("CEP VI")
2020
US$620
US$230
US$850
19.3%
FINANCIAL POSITION AND BOOK VALUE
Number of
Investments
Total
8
11
12
4
Currently
Held
1
3
10
4
The following table summarizes the Company's financial position and book value as at March 31, 2021 and 2020:
Financial Position
As at, ($000's, except number of shares and per share amounts)
Cash, cash equivalents and temporary investments ("treasury funds")
Carried interest from Clairvest Equity Partners III and IV
Corporate investments, including carried interest from Clairvest Equity Partners V and
VI, and net of corresponding management participation
Total assets
Management participation from Clairvest Equity Partners III and IV
Total liabilities
Book value
Book value per share
Dividends per share paid during the fiscal year ended
Number of common shares outstanding
March 31, 2021
March 31, 2020
279,373
34,318
428,856
44,409
534,667
985,025
25,996
127,218
857,807
56.96
5.5555
15,058,401
400,291
944,878
34,115
107,463
837,415
55.55
0.5144
15,075,301
ASSETS
As at March 31, 2021, Clairvest had total assets of $985.0 million, an increase of $40.1 million during fiscal 2021. The
increase was primarily due to net gain on investment realizations and a net increase in the fair value of Clairvest’s investee
companies, less the $84 million in dividends paid.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
June 22, 2021
As at March 31, 2021, the Company's treasury funds of $279.4 million were held in cash and money market savings
accounts rated not below R1-High, investment savings accounts and guaranteed investment certificates rated not below A-,
marketable securities, limited recourse capital notes and other fixed income securities as permitted by the Company's
treasury policy. 2141788 Ontario also held $63.6 million in cash, investment savings accounts and guarantee investment
certificates with consistent ratings to the Company’s treasury funds. Clairvest also had access to $2.4 million in cash held in
various other acquisition entities which are controlled by Clairvest.
Clairvest maintains a $100.0 million revolving credit facility which is participated in by several Schedule 1 Canadian
chartered banks. The credit facility, which has an expiry of December 2025 and is eligible for a one-year extension on each
anniversary date, bears interest at the bank prime rate 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, 2021 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, 2021.
As at March 31, 2021, Clairvest had loans receivable totalling $86.3 million, $60.3 million of which represented
bridge loans to the CEP VI Fund upon the closing of NovaSource’s acquisition in late March 2021. These loans were repaid in
full subsequent to year end.
As at March 31, 2021, Clairvest had corporate investments with a fair value of $534.7 million, an increase of
$134.4 million during fiscal 2021, $470.5 million of which represented the fair value of Clairvest's investee companies, $28.0
million of which represented carried interest from Clairvest Equity Partners V and VI net of management participation, and
the remaining $36.2 million of which represented other net assets held by Clairvest's acquisition entities.
Excluding the carried interest and management participation from Clairvest Equity Partners V and VI and the net
assets held by Clairvest's acquisition entities, the aggregate carrying value of Clairvest's investee companies increased by
$102.9 million during fiscal 2021, which primarily comprised the following:
- Net increase in unrealized gain on investee companies of $92.8 million;
-
-
-
-
-
-
-
Investments made in NovaSource totalling $34.3 million;
Follow-on investments in existing investee companies totalling $13.6 million;
An investment of $9.6 million in F12.NET;
An investment of $5.1 million in Brunswick Bierworks;
An investment of $3.7 million in Arrowhead Environmental Partners;
Accrued interest on debt investments and dividends totalling $0.6 million; partially offset by
Foreign exchange revaluation losses on invested companies totalling $22.8 million, $21.1 million of which
were offset by gains in Clairvest’s foreign exchange hedging strategy as described below;
Redemption of Head Digital Works CCD which had a carrying value of $13.7 million as at March 31, 2020;
-
- Distributions and partial realization proceeds from Digital Media Solutions totalling $10.8 million;
-
-
-
The sale of Right Time HVAC which had a fair value of $6.4 million as at March 31, 2020;
Proceeds received from the Wellington warrants portfolio totalling $2.3 million; and
Return of capital from other investee companies totalling $0.6 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, enter into currency positions
opposite these foreign denominated investments, thus creating hedges against fluctuation in the underlying currencies of
Clairvest’s investment. For the year ended March 31, 2021, the foreign exchange adjustments made in Clairvest's valuation
of its investee companies is primarily offset by the foreign exchange adjustments made in the foreign exchange forward
contracts used to support its foreign exchange hedging strategy, except for its foreign exchange exposure in its investment
in Chilean Gaming Holdings denominated in Chilean Pesos ("CLP") and its investment in Head Digital Works denominated in
10
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
June 22, 2021
Indian Rupees ("INR"), both of which are unhedged. Foreign exchange forward contracts are described in note 15 to the
consolidated financial statements.
The table below details the cost and fair value of Clairvest’s investee companies, aggregated by industry
concentration, as at March 31, 2021 and 2020:
($000's)
Co-packing
Dental services
Equipment rental
Financial services
Gaming
Information technology
Marketing services
Renewable energy
Residential services
Specialty aviation and defence services
Waste management
Other investments
March 31, 2021
March 31, 2020
Fair value
Cost
5,117
14,884
4,467
1,782
189,551
22,690
80,951
61,047
—
49,316
36,009
4,639
470,453
5,117
15,902
13,591
—
111,395
16,351
995
55,292
—
64,623
25,618
2,312
311,196
Difference
—
(1,018)
(9,124)
1,782
78,156
6,339
79,956
5,755
—
(15,307)
10,391
2,327
159,257
Fair value
Cost
Difference
—
16,636
7,102
3,009
186,484
8,602
7,471
18,523
6,375
81,016
27,117
5,257
367,592
—
15,902
13,591
—
120,688
6,732
995
16,185
6,375
60,304
21,951
2,346
265,069
—
734
(6,489)
3,009
65,796
1,870
6,476
2,338
—
20,712
5,166
2,911
102,523
Significant activities of each investee company during fiscal 2021 are further described in note 5 to the consolidated
financial statements.
LIABILITIES
As at March 31, 2021, Clairvest had $127.2 million in total liabilities, which included $10.5 million in accrued management
and director compensation, $65.2 million in share-based compensation, $26.0 million in management participation from
Clairvest Equity Partners III and IV and $16.9 million in current and deferred tax liability. $48.3 million of these liabilities
were and are 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 treasury funds and realized gains
and net change 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, 2021 was $104.8 million compared with net income of $69.5 million for
the year ended March 31, 2020. The following table summarizes the composition of net income for the years ended
March 31:
11
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
Financial Results
Year ended March 31, ($000's, except per share amounts)
Net investment gain (loss) (A)
- Investee companies inclusive of foreign exchange hedging activities
- Treasury funds
- Carried interest and management participation from
Clairvest Equity Partners V and VI
- Acquisition entities including distributions, interest,
dividends and fees received from investee companies and
net of taxes paid or payable by these acquisition entities
Distributions, interest income, dividends and fees (B)
- CEP Funds
- Investee companies
- Treasury funds
- Acquisition entities and other
Carried interest from Clairvest Equity Partners III and IV (C)
Total expenses (D)
Income before income taxes (A+B+C-D)
Income tax expense
Net income and comprehensive income
Net income and comprehensive income per share - basic and fully diluted
June 22, 2021
2021
2020
119,520
9,727
24,436
58,412
—
3,560
(3,155)
(40,396)
150,528
21,576
22,885
4,936
4,630
4,043
36,494
(9,299)
60,934
116,789
11,950
104,839
6.96
10,370
4,509
10,424
59,804
85,107
22,615
50,014
79,284
9,786
69,498
4.60
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 change in unrealized gains on
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 gain 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 gain
or loss which had previously been recorded.
The following tables summarize, by industry concentration, the net investment gain or loss of investee companies
for the years ended March 31, 2021 and 2020. The net investment gain or loss is inclusive of the impact on the foreign
exchange hedging activities related to these investments.
12
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
Net investment gain (loss), by industry concentration
Year ended March 31, 2021 ($000's)
Dental services
Equipment rental
Financial services
Gaming
Information Technology
Marketing services
Renewable energy
Residential services
Specialty aviation and defence services
Waste management
Other investments
Net investment gain (loss) on investee companies
(1) Inclusive of foreign exchange hedging activities
Year ended March 31, 2020 ($000's)
Dental services
Equipment rental
Financial services
Gaming
Information Technology
Marketing services
Renewable energy
Specialty aviation and defence services
Waste management
Other investments
Net investment gain (loss) on investee companies
(1) Inclusive of foreign exchange hedging activities
June 22, 2021
Net realized
gains (losses)
—
850
2,456
37
—
81
—
17,421
116
(4)
—
20,957
Net realized
gains (losses)
—
—
—
6,812
—
—
—
551
30,837
—
38,200
Net unrealized
gains (losses)
—
(1,965)
(1,226)
24,193
5,486
87,613
6,315
6,509
(36,020)
9,421
(39)
100,287
Net unrealized
gains (losses)
—
(6,974)
2,871
9,419
1,223
(2,987)
—
23,279
2,579
1,628
31,038
Foreign
exchange
gain (loss)(1)
68
65
—
(941)
(48)
(528)
(184)
—
—
(2)
(154)
(1,724)
Foreign
exchange
gain (loss)(1)
(26)
(564)
—
(9,639)
(41)
(12)
(106)
—
(412)
(26)
(10,826)
Total
68
(1,050)
1,230
23,289
5,438
87,166
6,131
23,930
(35,904)
9,415
(193)
119,520
Total
(26)
(7,538)
2,871
6,592
1,182
(2,999)
(106)
23,830
33,004
1,602
58,412
During fiscal 2021, the net impact of foreign exchange on the investee companies included a gain of $1.6 million (2020 –
loss of $5.9 million) on the Chilean Pesos denominated investment, a loss of $0.6 million (2020 – $3.2 million) on U.S. Dollar
denominated investments, a loss of $3.2 million (2020 – $1.5 million) on the Indian Rupee denominated investment, and a
gain of $0.4 million (2020 – loss of $0.2 million) on the British Pound denominated investment.
The Company and its acquisition entities also receive distributions, interest, dividends or fees from various
investee companies. The following table summarizes the income earned by the Company and its acquisition entities for the
years ended March 31:
13
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
June 22, 2021
Distributions, Interest, Dividends, and Fees from Investee Companies
Year ended March 31, ($000's)
Distributions and interest income
Dental services
Financial services
Gaming
Marketing Services
Renewable energy
Specialty aviation and defence services
Waste management
Other investments
Dividend Income
Financial services
Gaming
Advisory and Other Fees
Distributions, interest, dividends and
fees from investee companies
2021
Earned
through
acquisition
entities
Earned
directly by
Clairvest
—
2,320
163
—
—
—
—
—
2,483
—
—
—
2,453
776
—
1,269
—
625
47
—
92
2,809
—
6
6
—
2020
Earned
through
acquisition
entities
Earned
directly by
Clairvest
Total
776
2,320
1,432
—
625
47
—
92
5,292
—
6
6
—
2,108
30
—
—
—
—
—
2,138
898
—
898
2,453
1,473
Total
—
2,108
3,142
3,276
570
1,012
655
148
10,911
898
6,400
7,298
1,473
—
—
3,112
3,276
570
1,012
655
148
8,773
—
6,400
6,400
—
4,936
2,815
7,751
4,509
15,173
19,682
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
2021
Earned
through
acquisition
entities
—
—
46
Earned
directly by
Clairvest
9,602
12,065
1,218
Total
9,602
12,065
1,264
Earned
directly by
Clairvest
7,591
2,025
754
2020
Earned
through
acquisition
entities
—
—
14
Total
7,591
2,025
768
22,885
46
22,931
10,370
14
10,384
Carried interest from Clairvest Equity Partners III and IV during fiscal 2021 and 2020 was a loss of $9.3 million and an
income of $22.6 million, respectively. Carried interest from Clairvest Equity Partners V and VI during fiscal 2021 and 2020
was $73.9 million and $28.9 million, respectively. During fiscal 2021 and 2020, the Company received $0.8 million and $34.7
million in carried interest from Clairvest Equity Partners III and IV and none from Clairvest Equity Partners V and VI.
Included in distributions and interest income for the year ended March 31, 2021 and 2020 was interest earned
from treasury funds of $4.6 million and $10.1 million, respectively. Acquisition entities of Clairvest earned interest from its
14
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
June 22, 2021
treasury funds totalling $1.5 million and $1.5 million respectively during fiscal 2021 and 2020. Income from treasury funds
during fiscal 2021 were impacted due to a decrease in interest rates since March 2020.
Total expenses for the year were $60.9 million, compared with $50.0 million for the year ended March 31, 2020.
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
Finance and foreign exchange expenses
Management participation from Clairvest Equity Partners III and IV
Total expenses, excluding income taxes
2021
17,152
41,573
5,721
3,935
(7,447)
60,934
2020
22,056
4,161
5,338
489
17,970
50,014
Share-based compensation expense fluctuates as a result of changes in book value per share and the trading price of the
Company’s publicly traded common shares. The following table summarizes share-based compensation expenses incurred
by the Company for the year ended March 31:
Total Share-Based Compensations Expenses
Year ended March 31, ($000's)
Non-voting options expense (recovery)
Book value appreciation rights expense
Deferred share units and appreciation deferred share units expense (recovery)
Employee deferred shares units expense (recovery)
Total share-based compensation expense
2021
23,699
3,548
10,337
3,989
41,573
2020
(985)
7,411
(1,618)
(647)
4,161
Management participation is further described in note 7 to the consolidated financial statements.
The Company recorded $12.0 million in income tax expenses, and its acquisition entities recorded $4.7 million in
income tax expenses during fiscal 2021, compared with $9.8 million in income taxes expenses incurred by the Company and
$4.3 million in income tax expense recovered by the acquisition entity during the prior fiscal year. Income tax expense
incurred or recovered by the Company’s acquisition entities are reflected in net investment gain.
15
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
SUMMARY OF QUARTERLY RESULTS
June 22, 2021
($000's except per share information)
revenue
Net income (loss)
per common share*
fully diluted*
Gross
Net income (loss)
Net income (loss)
per common share
0.98
44,840
March 31, 2021
3.32
71,416
December 31, 2020
(1.61)
(16,480)
September 30, 2020
4.27
77,947
June 30, 2020
(1.65)
(38,036)
March 31, 2020
4.83
110,770
December 31, 2019
1.03
28,283
September 30, 2019
0.39
28,281
June 30, 2019
* 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
14,784
49,937
(24,234)
64,352
(24,937)
73,046
15,511
5,878
0.98
3.32
(1.61)
4.27
(1.65)
4.83
1.03
0.39
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 and management
participation which are revalued 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 changes in book value per share and
the trading price of the Company’s publicly traded common shares.
FOURTH QUARTER RESULTS
Net income for the fourth quarter of fiscal 2021 was $14.8 million compared with a net loss of $24.9 million for the fourth
quarter of fiscal 2020.
Revenue for the fourth quarter of fiscal 2021 comprised $38.9 million in net investment gain, $8.2 million in
distributions, interest, dividends and fees, and a $2.2 million reduction in net carried interest from Clairvest Equity Partners
III and IV. This compares with $98.9 million in net investment loss, $60.7 million in distributions, interest, dividends and fees
and $0.1 million in net carried interest for the fourth quarter of fiscal 2020.
The net investment gain of $38.9 million for the fourth quarter of fiscal 2021 resulted from $32.2 million in net
unrealized gain from Clairvest's investee companies inclusive of foreign exchange hedging activities, increase in net carried
interest of $5.5 million from Clairvest Equity Partners V and VI and $1.2 million in net unrealized gain from Clairvest's
acquisition entities. This compared with $36.7 million in net unrealized loss from Clairvest's investee companies, decrease
in net carried interest of $5.6 million from Clairvest Equity Partners V and VI and $56.6 million in net unrealized loss from
Clairvest's acquisition entities for the fourth quarter of fiscal 2020. During the fourth quarter of fiscal 2020, Clairvest
received distributions totalling $52.6 million from CEP IV Co-Invest primarily as a result of the realization of County Waste.
Accordingly, Clairvest’s fair value in CEP IV Co-Invest decreased in the fourth quarter of fiscal 2020.
Distributions, interest, dividends and fees for the fourth quarter of fiscal 2021 included income on treasury funds
of $1.0 million, general partner distributions and interest earned from the CEP Funds of $2.3 million, distributions and
interest earned from investee companies of $0.3 million and $0.7 million in distributions from acquisition entities. This
compared with income on treasury funds of $2.3 million, general partner distributions and interest earned from the CEP
Funds of $2.2 million, distributions and interest earned from investee companies of $0.7 million and $53.5 million in
distributions from acquisition entities for the same quarter last year.
Carried interest from Clairvest Equity Partners III and IV was a loss of $2.2 million for the fourth quarter of fiscal
2021 comprised entirely of a reduction in unrealized carried interest. Carried interest of $0.1 million for the fourth quarter
of fiscal 2020 comprised $32.0 million in realized carried interest and a corresponding reduction of $31.9 million in
unrealized carried interest, both resulting from the realization of County Waste of Virginia as described above. Carried
interest from Clairvest Equity Partners III and IV is further described in note 7 to the consolidated financial statements.
16
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
June 22, 2021
Expenses for the fourth quarter of fiscal 2021 included an expense of $25.7 million in management and director
compensation expenses, an expense recovery of $1.8 million in management participation from Clairvest Equity Partners III
and IV, an expense of $1.7 million in administrative and other expenses, an expense of $2.1 million in finance and foreign
exchange expenses and a $2.4 million income tax expense. This compares with an expense recovery of $8.6 million in
management and director compensation expenses, an expense recovery of $0.1 million in management participation from
Clairvest Equity Partners III and IV, an expense recovery of $1.1 million in administrative and other expenses, an expense
recovery of $0.3 million in finance and foreign exchange expenses, and an expense recovery of $3.0 million in income tax
expense for the fourth quarter of fiscal 2020. The share price of a Clairvest common share increased by $13.75 per share
during the fourth quarter of fiscal 2021, compared to a decrease of $9.30 per share during the fourth quarter of fiscal 2020.
Management participation is further described in note 7 to the consolidated financial statements.
EQUITY AND SHARE INFORMATION
As at March 31, 2021, Clairvest had 15,058,401 common shares issued and outstanding.
During fiscal 2021, Clairvest purchased and cancelled 16,900 common shares under the Company's normal course
issuer bids. No shares were purchased and cancelled subsequent to year end up to June 22, 2021. As at June 22, 2021,
Clairvest had 15,058,401 common shares issued and outstanding.
No Series 1 or Series 2 Shares had been issued as at March 31, 2021 and June 22, 2021.
Options granted under the stock option plan (the "Non-Voting Option Plan") are exercisable for Series 2 Shares,
which are non-voting and have a two times preference over the common shares. 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, 2020, 518,758 options were outstanding and 193,695 options had vested. During fiscal
2021, 77,650 new options were issued, 128,713 options had vested and 74,498 options were exercised for $4.3 million such
that 521,910 options were outstanding and 247,910 options had vested as at March 31, 2021.
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. 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, 2021 and June 22, 2021. As at March 31, 2021 and June 22, 2021, 156,486 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 2021, fiscal 2020 and
fiscal 2019. During fiscal 2021, and 2020 and 2019, Clairvest also paid a special dividend of $5.4555, $0.4144 and $0.3401
per share respectively.
Subsequent to year-end, Clairvest declared an annual ordinary dividend of $0.10 per share, and a special dividend
of $0.4696 per share. The dividends will be payable to common shareholders of record as of July 2, 2021. The dividend will
be paid on July 23, 2021. Both dividends are eligible dividends for Canadian income tax purposes.
CRITICAL ACCOUNTING ESTIMATES
For a discussion of all significant accounting policies, refer to note 2 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 is generally the bid price on the principal
exchange on which the investment is traded. 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,
17
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
June 22, 2021
relative trading volume and price volatility. Additionally, there are several other factors the Company considers in
determining the value at which to carry an investment quoted on an active market, including factors that may be unique to
Clairvest and its business model. These factors can and do sometimes include, inter alia, the amount of public float and the
depth of market liquidity for a particular stock, the size of our position and the amount of time it would take to dispose of
our position at acceptable prices, any applicable lock-up or other contractual restrictions, whether or not Clairvest is an
affiliate of the issuer of the securities, whether or not we have registration rights, the availability of safe harbor from
registration requirements for resales of our position, and whether or not the securities are restricted securities or control
securities. As a result of these factors, Clairvest’s internal valuation is likely to differ from that of other investors. Where
Clairvest’s internal valuation differs from the publicly traded price of a company’s shares, Clairvest’s internal valuation in no
way reflects a disagreement with the public price. 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 transaction 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.
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 gain.
Recognition of carried interest and corresponding expenses
The Company recognizes carried interest from Clairvest Equity Partners III and IV on its consolidated statements of financial
position which is based on the fair values of the financial instruments held by those funds. As discussed previously, fair
values of certain financial instruments are determined using valuation techniques which by their nature involve 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 carried interest receivable and the resulting accrued liabilities for future payouts
relating to these carried interest receivables at the statement of financial position date. In accordance with IFRS 15, the
Company would only recognize carried interest from Clairvest Equity Partners III and IV in the event a significant reversal
during a future period is highly improbable. The carried interest from Clairvest Equity Partners V and VI and the amounts
ultimately payable to the limited partners of the corresponding MIP Partnerships are accounted for at fair value through
profit or loss in accordance with IFRS 10 and included in Corporate Investments.
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,
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 probable that the deferred income tax asset will be realized. A change to an accounting
estimate with respect to deferred income taxes would impact deferred income tax liability and income tax expense.
Impact on COVID-19 on Significant Estimates
As at March 31, 2021, there remains uncertainty on the longer-term impacts of the COVID-19 pandemic and the recovery.
Accordingly, there exists a wide range of possible outcomes regarding the full scope of economic impact of COVID-19. As a
18
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
June 22, 2021
result, the fair value estimates of the Company’s corporate investments as at March 31, 2021 required significant judgment
given the uncertainty regarding the long-term impact of COVID-19 and the ultimate impact of COVID-19 on the Company’s
investee companies are unknown. If the pandemic’s duration, spread, or related advisories and restrictions are significantly
longer than the Company’s estimate, or the impact on the equity markets, credit markets, or the economy in general is
significantly worse than the Company’s estimate, the fair value of its corporate investments may be materially adversely
affected resulting in a material adverse impact to the Company’s financial results.
TRANSACTIONS WITH RELATED PARTIES
Clairvest is entitled to other various entitlements from its acquisition entities as described in note 10 to the condensed
consolidated financial statements.
As at March 31, 2021, Clairvest had accounts receivable from its investee companies totalling $2.5 million, from
CEP III totalling $45 thousand, from CEP IV totalling $61 thousand, from CEP IV-A totalling $78 thousand, from CEP V
totalling $0.1 million, from CEP V India totalling $2.3 million, from CEP V-A totalling $0.2 million, from CEP VI totalling $8.7
million, from CEP VI-A totalling $11.2 million and CEP VI-B totalling $7.1 million. Additionally, acquisition entities of Clairvest
which were not consolidated in accordance with IFRS held receivables from CEP III totalling $11 thousand and from CEP V-A
totalling $6 thousand.
In addition, the Company advances loans to its acquisition entities, the CEP Funds and short-term loans to investee
companies. During fiscal 2021, the Company advanced net loans of $66.2 million, such that $86.3 million in loans remained
outstanding as at March 31, 2021. $82.6 million of these loans have been repaid as at June 22, 2021. Further details are
described in note 10(e) to the consolidated financial statements.
As at March 31, 2021, Clairvest had advanced share purchase loans to certain employees of Clairvest totalling $2.8
million. The loans are interest bearing, have full recourse to the individual and are collateralized by the common shares of
Clairvest owned by the employees with a market value of $5.3 million. None of these loans were made to key management.
Interest of $49 thousand was earned on these loans during the year.
Key management at Clairvest includes the Chief Executive Officer ("CEO"), the Vice Chairman, the President and its
directors. The CEO and the President are entitled to annual discretionary cash bonuses of up to 175% of their individual
annual salary based on individual performance. The Vice Chairman is entitled to annual discretionary cash bonuses of up to
100% of annual salary based on individual performance. There is also an annual objective cash bonus which is based on
Clairvest's Incentive Bonus Program, the stock option plans, the BVAR Plan and the EDSU Plan. Total aggregate cash
compensation paid under these plans to the CEO, the Vice Chairman, and the President during fiscal 2021 were
$13.2 million. As at March 31, 2021, the total amounts payable to the CEO, the Vice Chairman, and the President under the
aforementioned plans was $15.8 million. During fiscal 2021, $2.6 million in compensation was paid to a director under the
DSU and the ADSU plan. As at March 31, 2021, the total amounts payable to the directors of Clairvest under the DSU, ADSU
and Non-Voting Option plans was $25.6 million.
During fiscal 2021, Clairvest earned $2.5 million in distributions and interest income and $2.5 million in advisory
and other fees from its investee companies. Additionally, acquisition entities of Clairvest which were not consolidated in
accordance with IFRS earned $2.8 million in distributions and interest income and $6 thousand in dividend income.
Clairvest and a related party of Clairvest, through a limited partnership, owns an aircraft that is available for use by
both parties. Clairvest and the related party each hold a 50% limited partnership interest. As Clairvest, through a wholly
owned subsidiary, is the general partner of the limited partnership, Clairvest has recognized 100% of the net book value of
the aircraft and a liability for the 50% ownership held by the related party. The cost of the aircraft had been included in
fixed assets and the liability in accounts payable and accrued liabilities.
19
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
June 22, 2021
OFF-STATEMENT OF FINANCIAL POSITION ARRANGEMENTS
Clairvest has committed a total of $55.5 million in various Wellington Financial funds, all of which was unfunded as at
March 31, 2021. As a result of the sale of Wellington Financial to CIBC in January 2018, these Wellington Financial funds are
in the process of being wound up and may no longer invest in new investments.
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,
2021, the Realized Amount under the Bonus Program was $0.5 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 $6.3 million accrued compensation expense liability which 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, CEP V Co-Invest and CEP VI Co-Invest.
In conjunction with the sale of Casino New Brunswick, Clairvest provided a guarantee 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. During fiscal 2021, the guarantee was
extinguished as the indemnity provision expired and no indemnity had been funded to its expiry.
Clairvest had guaranteed up to US$2.5 million to support a credit facility provided to SunSystem Technology, a
subsidiary of NovaSource, by its bank. Clairvest would assume the lender’s security position that supports the loans
provided by the lender should it be called and intended to allocate any amounts called under this guarantee to CEP VI Co‐
Invest, CEP VI, CEP VI-A and CEP VI‐B on a pro‐rata basis in accordance with their respective capital commitments in the CEP
VI Fund. The guarantee was extinguished during fiscal 2021 with no amount having been called, in conjunction with the
closing of the First Solar transaction described in note 5(d) to the consolidated financial statements.
As at March 31, 2021, the Company had an accrued liability resulting from future minimum annual lease payments
for the use of office space totalling $3.9 million, of which $0.6 million is due within one year, $2.5 million is due after one
year but not more than five years and $0.8 million is 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 inputs for fair value measurement
are earnings before interest, taxes, depreciation and amortization (“EBITDA”) and the earnings multiple which is applied to
the EBITDA in 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
20
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
June 22, 2021
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, including an estimate of the
potential impact of COVID-19. Earnings multiples used are based on public company valuations as well as private market
multiples for comparable companies. Earnings are based on the last twelve-month EBITDA and if necessary, adjusted for
any non-recurring items such as, restructuring expenses and annualized pro-forma adjustments from recently completed
acquisitions. Adjustments to EBITDA may also consider forecasted impacts arising from the current economic environment
or recent developments of the investee company. The potential effects to the carrying value of the Company’s investments
are further described in note 18 to the consolidated financial statements.
Clairvest may also use information with respect to recent transactions 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 12 months from the date of the investment. The fair value of corporate bonds, debentures or
loans is primarily determined using a discounted cash flow model, which uses observable and unobservable inputs such as
discount rates that take into account the risk associated with the investment as well as future cash flows. For those
investments valued based on recent transactions 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, 2021.
The Company's corporate investment portfolio was diversified across 20 investee companies in 10 industries and 5
countries as at March 31, 2021. 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.
The potential effect on the Company’s treasury funds from fluctuations in interest rates are further described in
note 17 to the consolidated financial statements.
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 material 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, India, Chile and the United Kingdom. The Company has also advanced loans to
investee companies and the CEP VI Fund 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,
subject to certain exceptions, entered into foreign exchange hedging positions against these foreign denominated
currencies. As at March 31, 2021, the Company’s foreign exchange exposure with respect to the Chiliean Peso and Indian
Rupee are unhedged. In addition, there is a timing difference between the balance sheet date and the investment valuation
date given the timing of which information is available to make this determination. This could result in a delay in the
implementation of the Company’s hedging strategy. Accordingly, a significant depreciation in value in these currencies
could result in a material impact to the performance of Clairvest’s investment portfolio and the carried interest the
Company could earn from the CEP Funds.
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
21
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
June 22, 2021
corporate investments, and could impact the carried interest the Company could earn from the CEP Funds. 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 Clairvest's investee companies are subject to price fluctuations in commodities. 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.
Investing process risk
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, 2021, 11 of the 20 investments made by Clairvest and the
CEP Funds 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, 2021, Clairvest's exposure to gaming investments represented 22.1% 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, including those internationally, could have an impact on the ultimate returns of that
22
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
June 22, 2021
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.
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, 2021, 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. With respect to the other fixed income securities under temporary
investments, the Company reviews the credit quality of the counterparties through underwriting information provided by
agents or brokers which are specialized in brokering these investments and in each case the Company’s investment in these
counterparties represents the most senior security in the counterparty’s capital structure. Management's application of
23
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
June 22, 2021
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 $332.3 million as at March 31, 2021. The timing of any amounts to be funded under these
commitments is dependent upon the timing of investment acquisitions, which are made at the sole discretion of the
Company.
The Company manages liquidity risk by maintaining a conservative liquidity position that exceeds all liabilities
payable on demand. The Company invests 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 as at March 31, 2021.
As at March 31, 2021, Clairvest had treasury funds, inclusive of those held at acquisition entities, of $345.3 million
and access to $100.0 million in credit to support its obligations and current and anticipated corporate investments. Clairvest
also had access to $0.8 billion in uncalled committed third-party capital through the CEP Funds as at March 31, 2021 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 their capital call obligations
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, 2021, Clairvest's Board of Directors and employees owned approximately 76% of Clairvest's common shares
and the CEO owned or controlled over 50% of the total common shares of the Company. Accordingly, the CEO 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.
24
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
June 22, 2021
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 in accordance with its foreign exchange hedging policy. Foreign
exchange hedging activities during fiscal 2021 are further described in note 15 to the consolidated financial statements.
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 at March 31, 2021 and concluded that the disclosure controls and procedures were effective in
ensuring that information required to be disclosed by Clairvest 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 CEO and the 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, 2021. Management has concluded
that the design of internal controls over financial reporting were effective and operated as designed as at March 31, 2021
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
25
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at, and for the year ended, March 31, 2021
June 22, 2021
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.
26
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 consolidated 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, 2021. Based on that evaluation, management concluded that the Company’s internal control over
financing reporting was effective for the year ended March 31, 2021.
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, 2021, 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
Vice Chairman
Daniel Cheng
Chief Financial Officer
27
INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF CLAIRVEST GROUP INC.
OPINION
We have audited the consolidated financial statements of Clairvest Group Inc. and its subsidiaries [the “Company”], which
comprise the consolidated statements of financial position as at March 31, 2021 and 2020, and the consolidated statements
of comprehensive income, consolidated statements of changes in shareholders’ equity and consolidated statements of cash
flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant
accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated
financial position of the Company as at March 31, 2021 and 2020, and its consolidated financial performance and its
consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards [“IFRSs”].
BASIS FOR OPINION
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements
section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to
our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the
consolidated financial statements of the current period. These matters were addressed in the context of the audit of the
consolidated financial statements as a whole, and in forming the auditor’s opinion thereon, and we do not provide a
separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is
provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated financial
statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of
procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial
statements. The results of our audit procedures, including the procedures performed to address the matters below, provide
the basis for our audit opinion on the accompanying consolidated financial statements.
28
INDEPENDENT AUDITOR’S REPORT
Key audit matter
How our audit addressed the key audit matter
Fair value measurement of financial assets based on unobservable inputs
The Company describes its critical accounting estimates,
assumptions and judgment in relation to the fair value
measurement of financial instruments in note 2 of the
consolidated financial statements. As disclosed in note 18
of the consolidated financial statements, the Company
has financial assets of $656 million recorded at fair value.
Of these, $396 million relates to investments where fair
value is based on unobservable inputs and are classified
as Level 3 financial instruments within the fair value
hierarchy.
Auditing the fair value of Level 3 financial assets requires
the application of significant auditor
judgment and
involvement of valuation specialists in assessing the
valuation techniques and unobservable inputs utilized by
the Company. Certain valuation inputs used to determine
fair value that may be unobservable include the multiple
of earnings before
interest, taxes, depreciation and
amortization [“EBITDA”] and the estimated adjusted
EBITDA. The use of different valuation techniques and
assumptions
significantly different
estimates of fair value.
could produce
Our audit procedures included, among others, evaluating
the Company’s valuation techniques and testing the
significant
inputs and assumptions utilized by the
Company, including related disclosures. We evaluated the
Company’s valuation techniques and assessed whether
these valuation techniques were reasonable based on the
characteristics of the investee company, such as the
operations, industry sector and market activity. We also
assessed whether
inputs and
assumptions identified by the Company are relevant and
if it provided a reasonable basis for the fair value
measurement.
the unobservable
The most significant and judgmental unobservable inputs
impacting the fair value measurement are the multiple of
EBITDA and the estimated adjusted EBITDA for the
relevant
investee company. Our audit procedures
included, among others:
reviewed
companies, we
for additional guideline companies
• Where the multiple of EBITDA is based on public
guideline
business
descriptions of guideline companies selected by
management and evaluated if they were reasonable
based on the business of the investee company.
Where applicable, we performed an independent
search
to
benchmark and incorporate trends in the broader
industry that impact the fair value measurement.
• Where the multiple of EBITDA is based on a multiple
at which the Company invested in the investee
company, or on follow-on investments or financings,
we re-calculated the multiple using the transaction
transaction
details and assessed whether
continued to be representative of fair value.
the
• We assessed the estimated adjusted EBITDA based on
recent financial information of the investee company,
financial
including
statements.
the most
audited
recent
• Our assessment of the multiple of EBITDA and
estimated adjusted EBITDA was also based on certain
qualitative factors, including the size and stage of the
investee company, nature of business of guideline
companies compared to the
investee company,
developments of the
investee company, current
economic environment and any relevant subsequent
events.
29
INDEPENDENT AUDITOR’S REPORT
OTHER INFORMATION
Management is responsible for the other information. The other information comprises:
•
•
Management’s Discussion and Analysis
The information, other than the consolidated financial statements and our auditor’s report thereon, in the Annual
Report
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form
of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work
we have performed, we conclude that there is a material misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE CONSOLIDATED FINANCIAL
STATEMENTS
Management is responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with IFRSs, 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.
In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment
and maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
30
INDEPENDENT AUDITOR’S REPORT
•
•
•
•
Obtain an understanding of internal control relevant to the audit 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
Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the
Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Gary Chin.
Toronto, Canada
June 22, 2021
31
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at March 31
$000s
ASSETS
Cash and cash equivalents (notes 3 and 14)
Temporary investments (note 3)
Accounts receivable and other assets (note 10(f))
Loans receivable (note 10(e))
Derivative instruments (note 15)
Income taxes recoverable
Deferred income tax asset (note 11)
Carried interest from Clairvest Equity Partners III and IV (note 7)
Corporate investments (note 5)
Fixed assets (note 8)
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities (notes 10(h) and 16(e))
Income taxes payable
Accrued compensation expense (notes 13 and 16(b))
Share-based compensation (note 13)
Management participation from Clairvest Equity Partners III and IV (note 7)
Deferred income tax liability (note 11)
Contingencies, commitments and guarantees (note 16)
Shareholders' equity
Share capital (note 12)
Retained earnings
See accompanying notes
On behalf of the Board:
MICHAEL BREGMAN
Director
JOHN KREDIET
Chairman
2021
2020
$
$
$
$
$
$
$
186,795
92,578
40,502
86,313
1,446
433
—
34,318
534,667
7,973
985,025
$
$
$
$
8,554
956
10,507
65,216
25,996
15,989
127,218
80,827
776,980
857,807
985,025
$
272,938
155,918
33,695
20,063
85
8,000
417
44,409
400,291
9,062
944,878
11,861
1,998
8,317
39,039
34,115
12,133
107,463
80,917
756,498
837,415
944,878
32
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended March 31
$000s (except per share information)
REVENUE
Net investment gain (notes 4 and 5)
Distributions and interest income (notes 5, 6 and 10)
Carried interest from Clairvest Equity Partners III and IV (note 7)
Dividend income (note 10(g))
Management fees (note 6)
Advisory and other fees (note 10(g))
EXPENSES
Employee compensation and benefits (notes 13 and 16(b))
Share-based compensation expenses (note 13)
Administration and other expenses
Finance and foreign exchange expenses
Management participation from Clairvest Equity Partners III and IV (note 7)
Income before income taxes
Income tax expense (note 11)
Net income and comprehensive income for the year
Basic and fully diluted net income and comprehensive income per share
(note 12)
See accompanying notes
2021
2020
$
150,528
20,561
(9,299)
1,415
12,065
2,453
177,723
17,152
41,573
5,721
3,935
(7,447)
60,934
116,789
11,950
104,839
$
21,576
80,397
22,615
1,212
2,025
1,473
129,298
22,056
4,161
5,338
489
17,970
50,014
79,284
9,786
69,498
6.96
$
4.60
$
$
$
33
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the years ended March 31
$000s
Share capital Retained earnings
shareholders’
Total
As at April 1, 2020
Changes in shareholders' equity
Net income and comprehensive income for the year
Dividends declared ($5.5555 per share)
Purchase and cancellation of shares (note 12)
As at March 31, 2021
As at April 1, 2019
Changes in shareholders' equity
Net income and comprehensive income for the year
Dividends declared ($0.5144 per share)
Purchase and cancellation of shares (note 12)
As at March 31, 2020
See accompanying notes
$
80,917
$
756,498
$
837,415
equity
104,839
(83,661)
(696)
(90)
80,827
$
776,980
$
104,839
(83,661)
(786)
857,807
81,245
$
697,447
$
778,692
$
$
69,498
(7,786)
(2,661)
69,498
(7,786)
(2,989)
(328)
$
80,917
$
756,498
$
837,415
34
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 of fixed assets
Share-based compensation
Deferred income tax expense
Net investment gain
Carried interest and management participation from Clairvest Equity Partners III and IV
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
Net loans advanced to acquisition entities or the CEP Funds (note 10(e))
Proceeds from (cost of) settlement of realized foreign exchange forward contracts
Investments made in investee companies or acquisition entities
Proceeds on sale of investee companies
Distribution or return of capital from investee companies or acquisition entities
Settlement of share-based compensation liability
Net change in non-cash working capital balances related to operations (note 14)
Cash used in operating activities
INVESTING ACTIVITIES
Sale (purchase) of fixed assets
Cash provided by (used in) investing activities
FINANCING ACTIVITIES
Cash dividends paid
Purchase and cancellation of shares (note 12)
Cash used in financing activities
Net decrease in cash during the year
Cash and cash equivalents, beginning of year (note 14)
Cash and cash equivalents, end of year
SUPPLEMENTAL CASH FLOW INFORMATION
Interest received
Distributions received (notes 5 and 10)
Income taxes paid
Interest paid
See accompanying notes
2021
2020
$
104,839
$
69,498
1,203
43,433
4,273
(150,528)
1,972
(3,819)
1,237
2,610
75,524
(66,250)
2,458
(35,761)
—
38,492
(17,256)
(2,793)
(1,399)
(1,582)
(114)
(114)
(83,661)
(786)
(84,447)
(86,143)
272,938
186,795
5,462
47,648
1,591
777
$
$
$
$
$
$
$
$
$
$
1,216
6,034
7,937
(21,576)
3,591
883
21,101
88,684
7,485
(10,336)
(968)
(57,524)
154
23,833
(7,260)
(44,616)
(49,709)
(5,641)
432
432
(7,786)
(2,989)
(10,775)
(15,984)
288,922
272,938
10,652
106,321
29,902
775
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
1. NATURE OF ACTIVITIES
Clairvest Group Inc. ("Clairvest" or the "Company") is a private equity management firm 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 the symbol CVG. The Company, which operates in only one business segment,
actively seeks to form mutually beneficial investments with entrepreneurial businesses. As at March 31, 2021, 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"), CEP V HI India Investment Limited Partnership ("CEP V India"), Clairvest
Equity Partners V-A Limited Partnership ("CEP V-A"), Clairvest Equity Partners VI Limited Partnership (“CEP VI”), Clairvest
Equity Partners VI-A Limited Partnership (“CEP VI-A”) and Clairvest Equity Partners VI-B Limited Partnership (“CEP VI-B”)
(together, the "CEP Funds"). CEP III, CEP IV and CEP IV-A are herein referred to as Clairvest Equity Partners III and IV. CEP V,
CEP V India, CEP V-A, CEP VI, CEP VI-A and CEP VI-B are herein referred to as Clairvest Equity Partners V and VI.
Clairvest contributes financing and strategic expertise to support the growth and development of its investee
companies in order to create realizable value for shareholders.
Clairvest is incorporated under the laws of the Province of Ontario. The Company's head office is located at 22 St.
Clair Avenue East, Suite 1700, Toronto, Ontario, Canada, M4T 2S3.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and adoption of new accounting standard
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").
The Company has consistently applied the same accounting policies throughout all periods presented in these
consolidated financial statements, as if these policies had always been in effect.
These consolidated financial statements and related notes of Clairvest for the years ended March 31, 2021 and
2020 ("consolidated financial statements") were authorized for issuance by the Board of Directors on June 22, 2021.
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 these entities. Such entities
would include those which earn priority distributions or management fees from the CEP Funds and carried interest from
Clairvest Equity Partners III and IV. 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.
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
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 GP III”)
Clairvest General Partner IV Limited Partnership (“Clairvest GP IV”)
Interests in unconsolidated subsidiaries ("acquisition entities")
In accordance with IFRS 10, interests in subsidiaries other than those that provide investment-related services are
accounted for at fair value through profit or loss (“FVTPL”) rather than consolidating them. As discussed under critical
accounting estimates and judgments, management exercised judgment when determining whether subsidiaries are
investment entities.
During fiscal 2020, the Company determined that Clairvest General Partner V Limited Partnership (“Clairvest GP
V”) met the definition of an investment entity, as defined in IFRS 10. This change in status resulted from an amendment
to the business purpose of Clairvest GP V for it to invest directly in CEP V Co-Investment Limited Partnership.
As a result of this change in status, the assets and liabilities of Clairvest GP V have been derecognized from the
Company’s consolidated statement of financial position and the Company’s investment in Clairvest GP V has been
recognized in corporate investments as at November 22, 2019, with an initial fair value of $0.1 million. There was no
material transition gain or loss on the change. Effective November 22, 2019, Clairvest GP V is considered an acquisition
entity of Clairvest and investments made by Clairvest GP V in CEP V Co-Investment Limited Partnership are measured at
FVTPL. The change in status of Clairvest GP V has been accounted for prospectively from November 22, 2019, in
accordance with IFRS 10.
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. The 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")
Clairvest GP V
MIP V Limited Partnership ("MIP V")
CEP VI Co-Investment Limited Partnership (“CEP VI Co-Invest”)
MIP VI Limited Partnership (“MIP VI”)
Clairvest SLP VI Limited Partnership (“Clairvest SLP VI”)
The Company may also use intermediate subsidiaries whose sole purpose is to hold investments for the Company and
therefore are 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 notes 6 and 7. The Company concluded that its ownership interests in the CEP Funds do
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
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 IFRS 9, Financial Instruments (“IFRS 9”), financial instruments classified as FVTPL would include cash
and cash equivalents, temporary investments, loans receivable, derivative instruments and corporate investments.
These financial instruments are classified at initial recognition at FVTPL 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. Accounts receivable and other assets would include balances relating to its acquisition entities,
indirect investee companies (“investee companies”) and the CEP Funds as well as other short‐term receivables. These
receivable balances are recognized at amortized cost in accordance with IFRS 9. Accounts payable and accrued liabilities
are considered to be payable in respect of goods or services received up to the statement of financial position date and
are recognised at amortised cost in accordance with IFRS 9.
(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, the fair
value of an investment quoted on an active market is generally the bid price on the principal exchange on which the
investment is traded. Investments that are escrowed or otherwise restricted as to sale or transfer are recorded at a
value which takes into account the escrow terms or other restrictions. In determining the fair value for such
investments, the Company considers the nature and length of the restriction, business risk of the investee company, its
stage of development, market potential, relative trading volume and price volatility 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 transaction 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.
(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 as at the consolidated statement 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
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
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 investment gain.
(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 as at the
consolidated statement 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 as at the
consolidated statement of financial position dates. Any unrealized gains or losses are included in finance and foreign
exchange expense in the consolidated statements of comprehensive income.
Foreign exchange forward contracts entered into by the Company's 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 gain (loss) 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 includes amounts receivable from Clairvest
Equity Partners III and IV. Each Clairvest Equity Partners III and IV Fund is separately reviewed as at the consolidated
statement of financial position date and an accrual for carried interest is made when the performance conditions are
achieved in accordance with IFRS 15, Revenue from Contracts with Customers (“IFRS 15”) based on the assumption that
the remaining underlying investments are realized at their estimated fair values. The fair value of the underlying
investments is determined consistently with the Company’s valuation methodology and is measured at the consolidated
statement of financial position date. Carried interest is accrued only in the event that it is highly probable that there will
not be a significant reversal in future financial periods.
(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, it is probable that the deferred income tax asset will be realized.
(h) Stock-based compensation plans
The Company's stock option plans allow for cash settlement of stock options. As the economics to choose cash or shares
as settlement are 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
statement of financial position dates. Fair value is measured by use of an appropriate option-pricing model. On the
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
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 closing price 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 closing price of a Clairvest common share on the redemption date. A participant may
redeem his or her DSUs only following termination of board service. Under the Company's DSU plan, a change 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 closing price of a Clairvest common share on the redemption date and the
closing price 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 ("EDSUs"). 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 subsidiaries which includes various limited partnerships 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 Clairvest Equity Partners III and IV which
are ultimately paid to the limited partners of the corresponding MIP partnerships which are external to the consolidated
group are recorded as a management participation liability and a management participation expense on the
consolidated financial statements. The amounts ultimately paid to the limited partners of the corresponding MIP
Partnerships resulting from carried interest from Clairvest Equity Partners V and VI are accounted for at FVTPL.
(l) Leases
Lease liabilities are measured at the present value of the remaining lease payments, discounted using the Company’s
incremental borrowing rate. Each lease payment is allocated between the repayment of the lease liability and finance
expenses. Finance expenses are charged to the consolidated statement of comprehensive income over the lease period
to produce a constant periodic rate of interest on the remaining balance of the lease liability for each period. The
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
associated right-of-use assets were measured at an amount equal to the lease liabilities, adjusted for previously
recognized lease accruals, in accordance with the transitional provisions of Leases (“IFRS 16”), and entirely comprised
real estate premises. The right-of-use assets are included within fixed assets in the consolidated statement of financial
position and amortized on a straight-line basis over the shorter of the asset’s useful life and the lease term. There was
no impact to retained earnings on April 1, 2019 resulting from the adoption of IFRS 16.
(m)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
Right-of-use asset
10%
30%
50%
20%
Term of lease
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 cost 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.
(n) Net income and comprehensive income per share
Basic net income and comprehensive income per share is determined by dividing net income and comprehensive
income attributable to common shareholders by the weighted average number of common shares outstanding during
the year. Fully diluted net income and comprehensive income per share are determined in accordance with the treasury
stock method and is based on the weighted average number of common shares and dilutive common share equivalents
outstanding during the year.
(o) Critical accounting estimates, assumptions and judgments
The preparation of the 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 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.
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
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 gain 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 carried interest is recorded on the consolidated statements of financial position is
based on the fair values of the financial instruments held by Clairvest Equity Partners III and IV. In accordance with IFRS
15, the calculated carried interest can only be recognized to the extent to which it is highly probable that there will not
be a significant reversal when the relevant uncertainty is resolved. This judgment is made on a fund-by-fund basis, based
on its specific circumstances, including consideration of: remaining duration of the fund, position in relation to the cash
hurdle, the number of assets remaining in the fund and the potential for clawback. The actual amounts of carried
interest received and paid will depend on the cash realizations of Clairvest Equity Partners III and IVs’ portfolio
investments and valuations may change significantly in future financial periods. 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 carried interest and the resulting accrued liabilities for future payouts relating to the carried interest as at
the consolidated statement of financial position dates.
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 deferred income tax asset will be realized.
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.
Impact on COVID-19 on significant estimates
As at March 31, 2021, there remains uncertainty on the longer-term impacts of the COVID-19 pandemic and the
recovery. Accordingly, there exists a wide range of possible outcomes regarding the full scope of the economic impact of
COVID-19. As a result, the carrying value estimates of the Company’s certain corporate investments as at March 31,
2021 required significant judgment given the uncertainty regarding the long-term impact of COVID-19 and the ultimate
impact of COVID-19 on the Company’s investee companies are unknown. If the duration of the pandemic, the related
advisories and restrictions are significantly longer than the Company’s estimate, the carrying value of its corporate
investments may be materially adversely affected, resulting in a material adverse impact to the Company’s consolidated
financial results.
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
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, 2021, the pre-tax weighted average yield was 0.7% (2020 – 0.8%) per
annum.
As at March 31, 2021, temporary investments comprised guaranteed investment certificates, marketable
securities, limited recourse capital notes and other fixed income securities as permitted by the Company's treasury policy
which in aggregate may not exceed 10% of book value and with no single issue greater than 1.5% of book value.
Guaranteed investment certificates have maturities greater than 90 days from the date of acquisition and through to
November 2023. The pre-tax weighted average yield was 3.2% (2020 – 2.6%) per annum. The composition of Clairvest's
temporary investments as at March 31 was as follows:
March 31, 2021
March 31, 2020
Guaranteed investment certificates
Corporate bonds
Marketable securities(1)
Limited recourse capital notes
Other fixed income securities
Due in 1 year
or less
$
$
37,089
—
—
—
11,195
48,284
$
Due after 1 year
$
7,159
—
31,564
4,173
1,398
44,294
Total
Total
44,248
—
31,564
4,173
12,593
92,578
$
$
127,403
3,012
17,964
—
7,539
155,918
$
$
(1)
253,610 common shares of Canadian Imperial Bank of Commerce (“CIBC”, TSX:CM)
Additionally, Clairvest’s acquisition entities held $45.7 million (2020 – $30.1 million) in cash and cash equivalents and $20.2
million (2020 – $26.4 million) in temporary investments as described in note 5.
4. NET INVESTMENT GAIN
Net investment gain for the year ended March 31, 2021 and 2020 comprised the following:
Net investment gain on investee companies (note 5)
Net investment gain on treasury funds
Net investment gain (loss) on the fair value revaluation of acquisition entities
Net change in unrealized gain on corporate investments (note 7)
Carried interest from Clairvest Equity Partners V and VI (note 7)
Management participation from Clairvest Equity Partners V and VI (note 7)
2021
119,520
9,727
(3,155)
126,092
73,890
(49,454)
150,528
$
$
$
$
2020
58,412
—
(40,396)
18,016
14,453
(10,893)
21,576
5. 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.
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (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:
March 31, 2021
Acquisition
entities net
assets
(liabilities)
Investee
companies
Total
Investee
companies
March 31, 2020
Acquisition
entities net
assets
(liabilities)
Total
Held directly by Clairvest Group Inc.
$
2,674
$
—
$
2,674
$
3,787
$
—
$
3,787
Held through the following acquisition
entities:
2141788 Ontario
2486303 Ontario
CEP III Co-Invest
MIP III
CEP IV Co-Invest
MIP IV
CEP V Co-Invest
Clairvest GP V
MIP V
CEP VI Co-Invest
Clairvest SLP VI
MIP VI
Total
64,670
2,629
14,814
593
70,301
1,065
234,485
19,107
5,095
37,849
5,475
11,696
55,591
(2,958)
460
(15)
1,897
(13)
(9,805)
44,127
(85)
(24,979)
3
(9)
120,261
(329)
15,274
578
72,198
1,052
224,680
63,234
5,010
12,870
5,478
11,687
51,197
2,186
13,843
554
107,392
1,627
166,954
12,056
3,737
2,839
—
1,420
38,684
(3,113)
4,531
(10)
(711)
(6)
(10,190)
7,190
(80)
(7,226)
—
3,630
89,881
(927)
18,374
544
106,681
1,621
156,764
19,246
3,657
(4,387)
—
5,050
$
470,453
$
64,214
$
534,667
$
367,592
$
32,699
$
400,291
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. Clairvest's relationship with CEP III Co-Invest
and MIP III, CEP IV Co-Invest and MIP IV, CEP V Co-Invest, Clairvest GP V and MIP V, and CEP VI Co-Invest, Clairvest SLP VI
and MIP VI are described in notes 10(a), 10(b), 10(c) and 10(d).
During the year ended March 31, 2021, Clairvest made an additional investment of $3.5 million in CEP V Co-Invest.
Clairvest GP V and 2141788 Ontario also made investments of $1.5 million and $0.8 million, respectively, in CEP V Co-Invest
during fiscal 2021. Also during the year ended March 31, 2021, CEP V Co-Invest received cash proceeds of $41.1 million
primarily as a result of the realization of Right Time Heating and Air Conditioning Canada (“Right Time HVAC”) and
distributions received from Digital Media Solutions. Accordingly, during fiscal 2021, CEP V Co-Invest declared capital
distributions totalling $44.8 million, $35.0 million of which were paid to Clairvest and the remaining $9.8 million were paid
to 2141788 Ontario, Clairvest GP V and MIP V.
Also during the year ended March 31, 2021, Clairvest made additional investments totalling US$17.8 million
(C$22.4 million) to CEP VI Co-Invest. Clairvest SLP VI and MIP VI also made investments totalling US$5.5 million (C$6.9
million) and US$2.6 million (C$3.2 million), respectively, to CEP VI Co-Invest during fiscal 2021.
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (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:
March 31, 2021
March 31, 2020
Assets
Cash and cash equivalents
Temporary investments
Accounts receivable and other assets
Derivative instruments
Income taxes recoverable
Carried interest from Clairvest Equity Partners V and VI
Loans receivable
Deferred income tax asset
Liabilities
Accounts payable and accrued liabilities
Derivative instruments
Income taxes payable
Management participation from Clairvest Equity Partners V and VI
Loans payable
Deferred income tax liability
Net assets
$
$
$
$
$
$
45,708
20,245
816
6,720
48
88,343
80
1,106
163,066
$
4,390
—
753
60,346
25,548
7,815
98,852
64,214
$
$
$
30,070
26,362
1,326
—
491
14,453
540
1,286
74,528
5,915
11,407
82
10,893
8,209
5,323
41,829
32,699
Excluding the net assets from acquisition entities summarized in the table above, the cost and the fair value of the
Company's investee companies, aggregated by industry concentration, are summarized below.
Co-packing
Dental services
Equipment rental
Financial services
Gaming
Information technology
Marketing services
Renewable energy
Residential services
Specialty aviation and defence services
Waste management
Other investments
March 31, 2021
March 31, 2020
Fair value
$
5,117 $
14,884
4,467
1,782
189,551
22,690
80,951
61,047
—
49,316
36,009
4,639
470,453 $
$
Cost
5,117 $
15,902
13,591
—
111,395
16,351
995
55,292
—
64,623
25,618
2,312
311,196 $
Difference
Fair value
— $
— $
(1,018)
(9,124)
1,782
78,156
6,339
79,956
5,755
—
(15,307)
10,391
2,327
159,257 $
16,636
7,102
3,009
186,484
8,602
7,471
18,523
6,375
81,016
27,117
5,257
367,592 $
Cost
— $
15,902
13,591
—
120,688
6,732
995
16,185
6,375
60,304
21,951
2,346
265,069 $
Difference
—
734
(6,489)
3,009
65,796
1,870
6,476
2,338
—
20,712
5,166
2,911
102,523
During fiscal 2021, the aggregate fair value of Clairvest’s investee companies increased by $102.9 million, comprised $92.8
million in net changes in unrealized gains in investee companies and $68.1 million in new and follow-on investments, net of
investment realizations, which had an aggregate fair value of $35.9 million, $22.8 million of losses in foreign exchange
revaluation excluding the impact from the foreign exchange hedging program and $0.7 million in interest accrual net of
repayments on debt investments.
The fair value of each investee company reflected valuation methodologies as described in note 18. The cost and
fair value of investee companies do not reflect foreign exchange gains or losses on the foreign exchange forward contracts
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
entered into as economic hedges against these investments (note 15). For those investments which are hedged by
acquisition entities, the fair value of these foreign exchange forward contracts was included in the net assets (liabilities) of
these acquisition entities. Details of each investee company are described below.
(a) Investments made by CEP III Co-Invest alongside CEP III
As at March 31, 2021 and 2020, CEP III Co-Invest had one investment remaining in Chilean Gaming Holdings, which has a
50% ownership interest in each of Casino Marina del Sol in Concepcion, Chile, and Casino Chillan in Chillán, 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, 2021 and 2020, CEP III Co-Invest held 30,446,299 limited partnership units of Chilean Gaming Holdings, representing a
36.8% equity interest.
(b) Investments made by CEP IV Co-Invest alongside CEP IV
As at March 31, 2021, CEP IV Co-Invest had three (2020 – three) investments remaining. Significant activities of CEP IV Co-
Invest portfolio companies were as follows:
Gaming
New Meadowlands Racetrack
New Meadowlands Racetrack (the "Meadowlands") operates a standardbred horse racing track located in East Rutherford,
New Jersey. As at March 31, 2021 and 2020, CEP IV Co-Invest had invested US$5.4 million (C$5.6 million) in the
Meadowlands in the form of secured convertible debentures. CEP IV Co-Invest also holds warrants which entitle it to invest
in equity securities of the Meadowlands subject to certain conditions. CEP IV Co-Invest also invested US$0.7 million (C$0.9
million) in the Meadowlands in the form of preferred debt, which is junior to the Meadowlands Debentures.
During fiscal 2021, the Company advanced a non-interest-bearing short-term loan of US$0.7 million (C$0.9
million), US$0.3 million (C$0.4 million) of which was repaid by the Meadowlands. The remaining portion was repaid
subsequent to year end.
Centaur Gaming
Centaur Gaming was the owner and operator of Hoosier Park Racing & Casino in Anderson, Indiana, and Indiana Grand
Casino and Indiana Downs Racetrack in Shelbyville, Indiana. During fiscal 2019, CEP IV Co-Invest realized its interest in
Centaur Gaming for aggregate proceeds of US$166.8 million (C$219.4 million) and is entitled to deferred consideration of
up to US$8.4 million. During fiscal 2021, CEP IV Co-Invest received US$2.5 million (C$3.4 million) of this deferred
consideration.
Specialty aviation and defence services
Northco / Top Aces
Northco is a specialty aviation services company operating across Canada and in selected locations internationally. As at
March 31, 2021 and 2020, CEP IV Co-Invest held $22.9 million in Northco debentures and 3,867 common shares of Northco
at a cost of $0.4 million which represented 38.7% ownership interest on a fully diluted basis. During fiscal 2021, the interest
rate on the Northco debentures were amended from 10% per annum to 2% per annum.
Top Aces is a supplier of advanced adversary services in Canada, United States, and Germany. As at March 31,
2020, CEP IV Co-Invest held 685.7824 common shares of Top Aces at a cost of $34.2 million, representing a 18.7%
ownership interest on a fully diluted basis. During fiscal 2021, Top Aces completed an equity financing of $60.0 million. In
connection with the transaction, CEP IV Co-Invest made a $4.3 million follow-on investment for 37.1895 common shares of
Top Aces in support of this equity financing. As at March 31, 2021, CEP IV Co-Invest held 722.9719 common shares of Top
Aces, representing a 17.3% ownership interest on a fully diluted basis.
46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
Momentum Solutions
Momentum Solutions is a Toronto-based, inter-connected network of logistical support companies offering innovative,
custom and full-scale solutions to clients globally. As at March 31, 2021 and 2020, CEP IV Co-Invest had a 4.4% ownership
interest of Momentum Solutions.
Other investments
As at March 31, 2020, CEP IV Co-Invest had an investment of $1.6 million in Davenport Land Developments which hold real
estate surrounding a casino development in Davenport, Iowa. Additionally, CEP IV Co-Invest had advanced US$0.6 million in
the form of a promissory note from a partner to help fund its 50% ownership in Davenport North.
During fiscal 2021, the investment in Davenport Land Investments was reorganized where CEP IV Co-Invest
exchanged the US$0.6 million (C$0.6 million) promissory note and US$0.4 million (C$0.5 million) in accrued interest for
additional equity interests in Davenport Land Investments, resulting in CEP IV Co-Invest holding a 21.9% ownership interest
in Davenport Land Investments, at a combined adjusted cost of $2.7 million.
(c) Investments made by CEP V Co-Invest alongside CEP V
As at March 31, 2021, CEP V Co-Invest had ten (2020 – eleven) investments. Significant activities of CEP V Co-Invest
portfolio companies were as follows:
Dental services
ChildSmiles Group is a multi-specialty dental practice with various offices across New Jersey providing families with
accessible oral health care. As at March 31, 2021 and 2020, CEP V Co-Invest held 11,836,135 Class B preferred units of
ChildSmiles Group at a cost of $15.9 million, representing a 15.0% ownership interest on a fully diluted basis. The Class B
preferred units are entitled to a liquidity preference over all other equity of ChildSmiles Group.
Equipment rental
Durante Rentals is a construction equipment rental provider in the New York Metropolitan area. As at March 31, 2021 and
2020, CEP V Co-Invest held 217,721.20 LLC units at a cost of $13.6 million, representing a 20.8% ownership interest on a
fully diluted basis.
Gaming
Accel Entertainment
Accel Entertainment is a licensed video gaming terminal operator in the United States. As at March 31, 2020, CEP V Co-
Invest held 4,994,907 Class A-1 shares, 244,674 Class A-2 shares and 299,052 private warrants of Accel Entertainment,
together representing a 6.4% ownership interest on a fully diluted basis. The Class A-1 shares are publicly listed on the NYSE
under symbol ACEL and have a cost basis of $16.0 million. The Class A-2 shares vest over a three-year period and the
conversion into Class A-1 shares is subject to certain criteria based on share price or earnings. The private warrants had a
strike price of US$11.50 per share and were converted into 74,763 Class A-1 shares during fiscal 2021, such that as at March
31, 2021, the Company held 5,069,670 Class A-1 shares and 244,674 Class A-2 shares. The Class A-1 Shares held by the
Company represent 6.4% of the total A-1 shares outstanding as at March 31, 2021.
FSB Technology
FSB Technology is a Business-to-Business sports and internet gaming technology supplier based in London, United Kingdom.
As at March 31, 2020, CEP V Co-Invest held 6,935,287 Class A common shares and 420,804 Class B convertible preferred
shares at a cost of $12.1 million, representing a 24.5% ownership interest on a fully diluted basis. The Class B convertible
preferred shares are entitled to a liquidity preference over the Class A common shares.
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
During fiscal 2021, CEP V Co-Invest made follow-on investments totalling GBP£2.2 million (C$3.9 million) for 885,568 Class A
common shares and 1,350,000 Class B convertible preferred shares such that as at March 31, 2021, CEP V Co-Invest held
7,820,855 Class A common shares and 1,770,804 Class B convertible preferred shares at a cost of $16.0 million,
representing a 25.1% ownership interest on a fully diluted basis.
Subsequent to year end, CEP V Co-Invest made an additional follow-on investment of GBP£0.9 million for 900,000
Class B convertible preferred shares, increasing its ownership interest in FSB Technology to 25.2% on a fully diluted basis.
Head Digital Works
Head Digital Works is an internet-based technology and gaming company which operates Ace2Three, FanFight, Cricket.com,
and WittyGames.
As at March 31, 2020, CEP V Co-Invest had investments totalling $46.8 million in Head Digital Works, comprising
INR₹657.9 million (C$13.7 million) in the form of compulsory convertible debentures (“CCD”), which were denominated in
INR and bore interest at a rate of 16.0% per annum; and INR₹1.6 billion (C$33.1 million) in 39,412,175 common shares,
representing a 32.4% ownership interest on a fully diluted basis.
During fiscal 2021, the CCD were repaid in full by Head Digital Works.
Information technology
Meriplex Communications is a provider of managed IT services company based in Houston, Texas. As at March 31, 2021 and
2020, CEP V Co-Invest held 5,250 common shares of Meriplex Communications, representing an 17.7% ownership interest
on a fully diluted basis at a cost of $6.7 million.
Marketing services
Digital Media Solutions operates as a lead generation engine for companies in a variety of different industries. As at March
31, 2020, CEP V Co-Invest held 6,150,000 Class B units of Digital Media Solutions, representing a 13.8% ownership interest
on a fully diluted basis.
During fiscal 2021, Digital Media Solutions completed a business combination with Leo Holdings Corp. The new
combined entity is publicly listed on the NYSE under the symbol DMS. At completion of the transaction, CEP V Co-Invest
received cash proceeds totalling US$8.2 million (C$10.8 million) and 6,091,377 Class A common shares of Digital Media
Solutions, representing 10.4% ownership interest on a fully diluted basis. Additionally, CEP V Co-Invest received 276,653
publicly traded warrants (NYSE: DMS/WS) which are convertible into Class A common shares at an exercise price of
US$11.50 per warrant.
Renewable energy
Also Energy is a global provider of software and hardware solutions that enable the monitoring and control of power
production and plant operations for commercial, industrial and utility-scale solar plants. As at March 31, 2020, CEP V Co-
Invest held 1,013,062 cumulative convertible preferred shares, 45,181 Class A common shares and 11,037 Class B preferred
shares for a combined cost of US$5.4 million (C$6.9 million), representing an ownership interest of 11.9% on a fully diluted
basis. In addition, CEP V Co-Invest has also advanced US$4.1 million (C$5.2 million) to Also Energy in the form of a
promissory note which accrues interest at 10% per annum. The promissory note had an initial maturity date of December
31, 2020 and was extended to June 30, 2021 during fiscal 2021.
During fiscal 2021, CEP V Co-invest made an additional follow-on investment of US$3.6 million (C$4.9 million) to
acquire 532,428 Class A common shares of Also Energy from a minority investor. As at March 31, 2021, CEP V Co-Invest held
1,013,062 cumulative convertible preferred shares, 577,609 Class A common shares and 11,037 Class B preferred shares
which together represent an 18.0% ownership interest in Also Energy on a fully diluted basis.
48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
Residential services
Right Time HVAC, an investment made during fiscal 2018, is a Canadian independent heating, ventilation and air-
conditioning contractor operating in Ontario and Manitoba and focused on the residential replacement market. As at
March 31, 2020, CEP V Co-Invest held 6,375,000 Class A preferred shares which were convertible into a 15.0% ownership
interest in Right Time HVAC on a fully diluted basis at a cost of $6.4 million.
During fiscal 2021, CEP V Co-Invest realized on its investment in Right Time HVAC for total cash proceeds of $30.3
million against a cost and carrying value of $6.4 million as at March 31, 2020.
Waste management
DTG Recycle
DTG Recycle is a waste hauling and recycling company with operations concentrated in the greater Seattle-Tacoma area of
Washington State. As at March 31, 2021 and 2020, CEP V Co-Invest held 8,657,622 Class A convertible preferred shares of
DTG Recycle, representing a 14.6% ownership interest on a fully diluted basis at a cost of $11.3 million.
Winters Bros. Waste Systems of Long Island
Winters Bros. Waste Systems of Long Island (“Winters Bros. of LI”) is a regional solid waste collection, recycling and disposal
company servicing customers in Long Island, New York. As at March 31, 2021 and 2020, CEP V Co-Invest held a 14.0%
ownership on a fully diluted basis in Winters Bros. of LI and its various affiliates.
(d) Investments made by CEP VI Co-Invest alongside CEP VI
As at March 31, 2021, CEP VI Co-Invest had four (2020 – one) investments. Significant activities of CEP VI Co-Invest portfolio
companies were as follows:
Co-packing
During fiscal 2021, CEP VI Co-Invest made a $5.1 million investment in Brunswick Bierworks, a contract manufacturer of
specialty beverages based in Ontario, Canada. The investment was made in the form of 5,116,616 Class A shares,
representing an ownership interest of 22.2% in Brunswick Bierworks on a fully diluted basis.
Information technology
During fiscal 2021, the Partnership made a $9.6 million investment in F12.NET, a provider of managed IT services for
Canadian-based small and medium-sized enterprises. The investment was made in the form of 283,144 Class A common
shares, representing an ownership interest of 16.5% in F12.NET on a fully diluted basis.
Renewable energy
SunSystem Technology (“SST”) is a solar operations and maintenance company serving both the commercial and residential
sector in the United States. As at March 31, 2020, CEP VI Co-Invest held 3,030.5882 Class A preferred stock for a 18.2%
ownership interest on a fully diluted basis at a cost of US$3.0 million (C$4.0 million).
During fiscal 2021, CEP VI Co-Invest made follow-on investments totalling US$0.3 million (C$0.4 million) to acquire
an additional 379.0941 Class A preferred stock from management of SST.
Also during fiscal 2021, CEP VI Co-Invest invested US$7.9 million (C$11.2 million) to acquire the solar operations
and maintenance business of SunPower Corporation. Upon closing, the business was renamed as NovaSource Power
Services (“NovaSource”). CEP VI Co-Invest’s investment was made in the form of 778.3166 common shares of NovaSource.
Following the investments described above, NovaSource acquired SST and as part of this transaction, the CEP VI
Co-Invest exchanged its interest in SST for an additional 334.5653 common shares of NovaSource.
Subsequently, NovaSource completed the acquisition of the Northern American operations and maintenance
business from First Solar Inc. In connection with the transaction, CEP VI Co-Invest made a follow-on investment of US$18.1
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
million (C$22.7 million) to acquire an additional 1,819.7340 common shares of NovaSource. As at March 31, 2021, CEP VI
Co-Invest held 2,932.6159 common shares, representing an ownership interest of 23.0% on a fully diluted basis with a
combined cost basis of $38.3 million.
Waste management
During fiscal 2021, CEP VI Co-Invest made a US$2.7 million (C$3.7 million) investment in Arrowhead Environmental
Partners, a non-hazardous waste-by-rail operator in Northeastern United States markets. The investment was made in the
form of 2,706 Class A preferred units, representing an ownership interest of 11.3% in Arrowhead Environmental Partners.
(e) Investments directly held
Financial services
As at March 31, 2021, the Company has a residual interest in Wellington Financial, which was realized during fiscal 2018
and currently comprise the residual warrants portfolio which is being liquidated over time.
During fiscal 2018, Clairvest received a full return of capital on its investment of $17.3 million in Wellington
Financial and 194,876 CIBC common shares as a result of CIBC acquiring the loan portfolio of Wellington Fund V and certain
assets of the general partner of Wellington Fund V.
During fiscal 2021, Clairvest received an additional 24,090 CIBC common shares from an earnout provision on the
prior sale of Wellington Financial.
During fiscal 2021, Clairvest received distributions totalling $2.3 million (2020 – $2.1 million) from Wellington
Financial. As at March 31, 2021, Clairvest had received distributions totalling $62.9 million (2020 – $60.6 million) from
Wellington Financial.
Gaming
As at March 31, 2021 and 2020, the Company has an investment in Grey Eagle Casino, which is located on the Tsuu T'ina
First Nation reserve lands, southwest of the City of Calgary, Alberta. As at March 31, 2021 and 2020, 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, 2486303 Ontario and Clairvest collectively hold a 100% interest in
CEP.
During fiscal 2021, Clairvest earned $0.2 million (2020 – $31 thousand) and CEP earned $0.5 million (2020 – $0.1
million) in equity distributions from Grey Eagle Casino.
The following tables summarize, by industry concentration, the net investment gain or loss on investee companies for the
years ended March 31, 2021 and 2020. The net investment gain or loss is inclusive of the impact on the foreign exchange
hedging activities related to these investments.
50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
Net investment gain (loss), by industry concentration
Year ended March 31, 2021
Dental services
Equipment rental
Financial services
Gaming
Information Technology
Marketing services
Renewable energy
Residential services
Specialty aviation and defence services
Waste management
Other investments
Net investment gain (loss) on investee companies
(1) Inclusive of foreign exchange hedging activities
Year ended March 31, 2020
Dental services
Equipment rental
Financial services
Gaming
Information technology
Marketing services
Renewable energy
Specialty aviation and defence services
Waste management
Other investments
Net investment gain (loss) on investee companies
(1) Inclusive of foreign exchange hedging activities
Net realized
gain (loss)
—
850
2,456
37
—
81
—
17,421
116
(4)
—
20,957
Net realized
gain (loss)
—
—
—
6,812
—
—
—
551
30,837
—
38,200
$
$
$
$
$
$
$
$
Net unrealized
gain (loss)
—
(1,965)
(1,226)
24,193
5,486
87,613
6,315
6,509
(36,020)
9,421
(39)
100,287
$
$
$
Foreign
exchange
gain (loss)(1)
68
65
—
(941)
(48)
(528)
(184)
—
—
(2)
(154)
(1,724) $
Net unrealized
gain (loss)
—
(6,974)
2,871
9,419
1,223
(2,987)
—
23,279
2,579
1,628
31,038
Foreign
exchange
gain (loss)(1)
$
(26) $
(564)
—
(9,639)
(41)
(12)
(106)
—
(412)
(26)
(10,826) $
$
Total
68
(1,050)
1,230
23,289
5,438
87,166
6,131
23,930
(35,904)
9,415
(193)
119,520
Total
(26)
(7,538)
2,871
6,592
1,182
(2,999)
(106)
23,830
33,004
1,602
58,412
The Company and its acquisition entities entered into foreign exchange forward contracts as economic hedges against the
fair value of its foreign currency-denominated investments and loans in accordance with its foreign exchange hedging policy
as approved by the Board of Directors. During fiscal 2021, the net impact of foreign exchange on the investee companies
included a gain of $1.6 million (2020 – loss of $5.9 million) on Chilean Pesos denominated investment, a loss of $0.6 million
(2020 – $3.2 million) on U.S. Dollar denominated investments, a loss of $3.2 million (2020 – $1.5 million) on Indian Rupee
denominated investment, and a gain of $0.4 million (2020 – loss of $0.2 million) on British Pound denominated investment.
6. GENERAL PARTNER PRIORITY DISTRIBUTIONS AND MANAGEMENT FEES
Clairvest derives revenue from its investment management services for the CEP Funds in the form of general partner
priority distributions or management fees. The priority distributions and management fees are charged as a percentage of
committed capital on the most recent CEP Fund and of invested capital less write-downs on the other CEP Funds. The
priority distributions and management fees received by Clairvest are reduced proportionately by fees earned by Clairvest
from corporate investments of the CEP Funds and other amounts as provided in the respective Limited Partnership
Agreements.
51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
During fiscal 2020, Clairvest completed the fundraising of Clairvest Equity Partners VI, a new private equity investment pool,
which comprised a US$230.0 million co-investment commitment from Clairvest through CEP VI Co-Invest (see note 10(d)),
and US$620.0 million of commitments from third-party investors through CEP VI, CEP VI-A and CEP VI-B. Clairvest Equity
Partners VI is the successor fund to Clairvest Equity Partners V. The General Partner of CEP V delivered a notice to CEP V
pursuant to its Limited Partnership Agreement, which terminated the Commitment Period of CEP V effective February 28,
2020. Accordingly, general partner priority distributions and management fees on Clairvest Equity Partners VI commenced
March 1, 2020.
For the year ended March 31, 2021 and 2020, general partner priority distributions and management fees from
the CEP Funds were as follows:
Priority distributions
CEP III
CEP IV
CEP V
CEP V India
CEP VI
Management fees
CEP IV-A
CEP V-A
CEP VI-A
CEP VI-B
$
$
$
$
2021
242
1,092
2,751
616
4,901
9,602
2021
142
704
6,859
4,360
12,065
$
$
$
$
2020
370
1,235
4,957
629
400
7,591
2020
195
914
560
356
2,025
7. CARRIED INTEREST AND MANAGEMENT PARTICIPATION
As governed by the respective CEP Fund Limited Partnership Agreements, certain Clairvest consolidated subsidiaries are
entitled to participate in distributions equal to 20% of all net gains (“carried interest”), which is subject to the respective
investors of each CEP Fund achieving a minimum net return on their investment. On Clairvest Equity Partners VI, the carried
interest increases from 20% to 25% once their investors achieve a net return of two times their aggregate capital
contributions.
Clairvest is entitled to 50% of the carried interest realized in each CEP Fund and Clairvest management is entitled
to the other 50% of the carried interest through their limited partnership interests in the various MIP partnerships. Clairvest
management is also entitled to an 8.25% carried interest from the various CEP Co-Invest partnerships as governed by their
respective Limited Partnership Agreements.
As described in note 2(k), Clairvest records the carried interest from Clairvest Equity Partners III and IV and records
an expense and a liability on that portion of the carried interest which is payable to Clairvest management. In accordance
with IFRS 10, the carried interest from Clairvest Equity Partners V and VI and the corresponding management participation
has been included in net investment gain as described in note 4.
Carried interest from Clairvest Equity Partners III and IV for fiscal 2021 and 2020 comprised the following:
52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
Realized carried interest
Net change in unrealized carried interest
$
$
2021
792
(10,091)
$
(9,299) $
2020
34,690
(12,075)
22,615
The following tables detail the carried interest received from Clairvest Equity Partners III and IV and management
participation paid for fiscal 2021 and 2020 and the corresponding receivable and payable balances as at the respective
balance sheet dates:
CEP
CEP III
CEP IV
CEP IV-A
CEP III
CEP IV
CEP IV-A
CEP III Co-Invest
CEP IV Co-Invest
Realized carried interest
Received during fiscal
2020
2021
92
700
—
—
792
$
$
24
960
28,950
4,756
34,690
Management participation
Paid during fiscal
2021
2020
350
—
—
322
—
672
$
$
480
14,475
2,378
470
5,128
22,931
$
$
$
$
Unrealized carried interest
As at March 31
2021
648
7,735
22,466
3,469
34,318
$
$
2020
515
7,971
30,927
4,996
44,409
Management Participation
Payable as at March 31
2021
3,868
11,233
1,734
3,117
6,044
25,996
$
$
2020
3,986
15,463
2,498
3,233
8,935
34,115
$
$
$
$
During fiscal 2021, no carried interest was received from Clairvest Equity Partners V and VI and no management
participation payments were made by Clairvest related to Clairvest Equity Partners V and VI. The following tables detail the
carried interest receivable from Clairvest Equity Partners V and VI and management participation payable balances, as at
the respective balance sheet dates, which have been included in corporate investments:
Unrealized Carried Interest
CEP V and CEP V India
CEP V-A
Management Participation
CEP V and CEP V India
CEP V-A
CEP V Co-Invest
Realized carried interest received
during the year ended March 31
Unrealized carried interest, as at
March 31
2021
2020
2021
2020
$
$
—
—
—
$
$
—
—
—
$
$
74,750
13,593
88,343
$
$
11,090
3,363
14,453
Management participation paid
during the year ended March 31
Unrealized carried interest, as at
March 31
2021
2020
2021
2020
$
$
—
—
—
—
$
$
—
—
—
—
$
$
37,375
6,796
16,175
60,346
$
$
5,546
1,681
3,666
10,893
53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
8. FIXED ASSETS
The composition of Clairvest's fixed assets was as follows:
At cost
Balance as at April 1, 2020
Additions
Balance as at March 31, 2021
Accumulated amortization
Balance as at April 1, 2020
Amortization expense
Balance as at March 31, 2021
Carrying amount as at March 31, 2021
At cost
Balance as at April 1, 2019
Additions
Impairment
Disposals
Balance as at March 31, 2020
$
$
$
$
$
$
$
Accumulated amortization
Balance as at April 1, 2019
$
3,367
$
Amortization expense
Disposals
594
(3,070)
Balance as at March 31, 2020
$
891
$
Aircrafts(1)
IT equipment
Furniture,
fixtures and
equipment
Leasehold
improvements
Right-of-use
asset(2)
Total
5,991
114
6,105
891
609
1,500
$
$
$
$
16
—
16
16
—
16
$
$
$
$
296
—
296
255
21
276
$
$
$
$
708
—
708
548
138
686
$
$
$
$
4,175
—
4,175
414
435
849
$
$
$
$
11,186
114
11,300
2,124
1,203
3,327
4,605
$
—
$
20
$
22
$
3,326
$
7,973
9,528
66
831
(4,434)
5,991
$
$
16
—
—
—
16
15
1
—
16
$
$
295
1
—
—
296
$
$
708
—
—
—
708
$
$
4,175
—
—
—
4,175
$
$
14,722
67
831
(4,434)
11,186
$
230
$
366
$
—
$
25
—
182
—
414
—
3,978
1,216
(3,070)
$
255
$
548
$
414
$
2,124
Carrying amount as at March 31, 2020
9,062
(1) A corresponding payable equal to 50% of the net book value of the aircrafts had been recorded to reflect the ownership interest of the related
5,100
3,761
160
41
—
$
$
$
$
$
$
parties.
(2) A corresponding accrued liability resulting from future minimum annual lease payments for the use of office space. $0.6 million is due within one
year, $2.5 million due after one year but no more than five years, and $0.8 million due after five years had been recorded. Refer to note 16(e) for
further details.
9. CREDIT FACILITIES
As at March 31, 2021 and 2020, Clairvest maintained a $100.0 million revolving credit facility which is participated in by
several Schedule 1 Canadian chartered banks. The credit facility, which has a current expiry of December 2025 (2020 –
December 2024) and is eligible for a one-year extension on each anniversary date, bears interest at the prime rate plus
1.25% per annum on drawn amounts and a standby fee of 0.70% per annum on undrawn amounts. The prime rate as at
March 31, 2021 was 2.45% (2020 – 2.45%) per annum. The amount available under the credit facility as at March 31, 2021
and 2020 was $100.0 million. No amounts had been drawn on the facility during fiscal 2021 and 2020 and as at March 31,
2021 and 2020.
54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
10. RELATED PARTY DISCLOSURES
Investments in acquisition entities and investment-related transactions with acquisition entities are further described in
note 5.
(a) CEP III Co-Invest, an investment vehicle established in fiscal 2007, has committed to co-invest alongside CEP III in all
investments undertaken by CEP III. 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 III Co-Invest’s co-investment commitment is $75.0 million, $15.2 million (2020 – $15.2 million) of which
remained unfunded as at March 31, 2021. CEP III Co-Invest is capitalized by three limited partners, Clairvest, 2141788
Ontario and MIP III. In accordance with the co-investment agreement, the proportion of the commitment amongst its
three limited partners is at their own discretion. As at March 31, 2021, MIP III had invested $1.1 million in CEP III Co-
Invest. 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. During fiscal 2021, MIP III distributed $53 thousand (2020 –
$78 thousand) to Clairvest. As at March 31, 2021, $2.5 million (2020 – $2.4 million) had been received by Clairvest.
(b) CEP IV Co-Invest, an investment vehicle established in fiscal 2010, 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 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 proportionately number of
securities of that corporate investment held by CEP IV and CEP IV-A.
CEP IV Co-Invest’s co-investment commitment is $125.0 million, $21.2 million (2020 – $21.2 million) of which
remained unfunded as at March 31, 2021. CEP IV Co-Invest is capitalized by two limited partners, Clairvest and MIP IV.
In accordance with the co-investment agreement, the proportion of the commitment amongst its two limited partners
is at their own discretion. As at March 31, 2021, MIP IV had invested $1.6 million in CEP IV Co-Invest. Clairvest, as the
general partner of MIP IV, is entitled to participate in distributions equal to the realizable value on the $1.6 million
invested by MIP IV in CEP IV Co-Invest. As at March 31, 2021, $6.2 million (2021 – $6.2 million) had been received by
Clairvest.
(c) CEP V Co-Invest, an investment vehicle established in fiscal 2015, has committed to co-invest alongside CEP V, CEP V
India and CEP V-A in all investments undertaken by CEP V, CEP V India CEP V-A. CEP V Co-Invest may only sell all or a
portion of a corporate investment that is a joint investment with CEP V, CEP V India and CEP V-A if it concurrently sells
a proportionately number of securities of that corporate investment held by CEP V, CEP V India and CEP V-A.
CEP V Co-Invest’s co-investment commitment is $180.0 million, $39.2 million (2020 – $45.0 million) of which
remained unfunded as at March 31, 2021. CEP V Co-Invest is capitalized by four limited partners, Clairvest, 2141788
Ontario, Clairvest GP V and MIP V. In accordance with the co-investment agreement, the proportion of the
commitment amongst its four limited partners is at their own discretion. Clairvest, as the general partner of Clairvest
GP V and MIP V, is entitled to participate in distributions equal to the realizable value on the amounts invested by
Clairvest GP V and MIP V in CEP V Co-Invest. As at March 31, 2021, Clairvest GP V and MIP V had invested $9.0 million
and 2.4 million, respectively, in CEP V Co-Invest. During fiscal 2021, CGP V and MIP V distributed $3.1 million (2020 –
nil) and $0.7 million (2020 – $0.1 million), respectively, to Clairvest. As at March 31, 2021, Clairvest had received
distributions totalling $3.1 million (2020 – nil) from Clairvest GP V and $0.8 million (2020 – $0.1 million) from MIP V.
(d) CEP VI Co-Invest, an investment vehicle established in fiscal 2020, has committed to co-invest alongside CEP VI, CEP VI-
A and CEP VI-B in all investments undertaken by CEP VI, CEP VI-A and CEP VI-B. CEP VI Co-Invest may only sell all or a
portion of a corporate investment that is a joint investment with CEP VI, CEP VI-A and CEP VI-B if it concurrently sells a
proportionately number of securities of that corporate investment held by CEP VI, CEP VI-A and CEP VI-B.
CEP VI Co-Invest’s co-investment commitment is US$230.0 million (C$289.2 million), US$204.1 million (C$256.7
million) of which remained unfunded as at March 31, 2021. CEP VI Co-Invest is capitalized by three limited partners,
Clairvest, Clairvest SLP VI and MIP VI. In accordance with the co-investment agreement, the proportion of the
commitment amongst its three limited partners is at their own discretion. As at March 31, 2021, Clairvest SLP VI and
55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
MIP VI had invested US$5.5 million (C$6.9 million) and US$2.6 million (C$3.2 million), respectively, in CEP VI Co-Invest.
Clairvest, as the general partner of Clairvest SLP VI and MIP VI, is entitled to participate in distributions equal to the
realizable value on the amounts invested by MIP VI in CEP VI Co-Invest. As at March 31, 2021, no distributions had been
received by Clairvest from Clairvest SLP VI and MIP VI.
(e) Changes in loans receivable for the years ended March 31, 2021 and 2020 were as follows:
CEP IV-A(2)
CEP V(1)
CEP VI(1), (2)
CEP VI-A(1), (2)
CEP VI-B(1), (2)
CEP V Co-Invest(3)
CEP VI Co-Invest(2), (3)
2486303 Ontario(4)
Other(2)
April 1, 2020
—
373
3,491
4,885
3,106
190
4,259
3,759
20,063
—
20,063
Net loan advanced
(repaid)
220
(373)
14,771
20,766
13,274
(190)
17,530
—
65,998
252
66,250
$
$
$
$
March 31, 2021
220
—
18,262
25,651
16,380
—
21,789
3,759
86,061
252
86,313
$
$
Net loan advanced
(repaid)
$
$
CEP V(1)
CEP V-A(1)
CEP VI(1)
CEP VI-A(1)
CEP VI-B(1)
CEP V Co-Invest(3)
CEP VI Co-Invest(3)
2486303 Ontario(4)
March 31, 2020
373
—
3,491
4,885
3,106
190
4,259
3,759
20,063
—
20,063
(1) Loans advanced to CEP IV, CEP IV-A, CEP V, CEP V India, CEP V-A, CEP VI, CEP VI-A and CEP VI-B bear interest at the reference rate in accordance
with the respective Limited Partnership Agreements. Interest of $1.2 million (2020 – $0.8 million) was earned from loans advanced to these
counterparties during fiscal 2021.
April 1, 2019
658
125
—
—
—
—
—
8,759
9,542
185
9,727
(285) $
(125)
3,491
4,885
3,106
190
4,259
(5,000)
10,521
(185)
10,336
(2) The loans were repaid in full subsequent to year end.
(3) Loans advanced to these acquisition entities are non-interest bearing.
(4) Loans advanced to 2486303 Ontario bear interest at 10.0% per annum. Interest of $0.4 million (2020 – $0.6 million) was earned from these
Other
$
$
$
loans during fiscal 2021.
56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
(f) Accounts receivable and other assets comprised the following:
Clairvest’s investee companies
CEP III
CEP IV
CEP IV-A
CEP V
CEP V India
CEP V-A
CEP VI
CEP VI-A
CEP VI-B
Other accounts receivable and prepaid expenses
Share purchase loans
March 31, 2021
March 31, 2020
$
$
2,507
45
61
78
129
2,287
217
8,651
11,222
7,127
32,324
5,357
2,821
40,502
$
$
2,948
275
37
27
3,680
1,563
4,574
3,509
4,832
3,073
24,518
6,494
2,683
33,695
Included in accounts receivable and other assets as at March 31, 2021 were share purchase loans made to certain
employees of the Company totalling $2.8 million (2020 − $2.7 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
employees with a market value of $5.3 million (2020 – $3.3 million) as at March 31, 2021. None of these loans were
made to key management. Interest of $49 thousand (2020 – $63 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 5 held receivables from CEP III totalling $11 thousand (2020 – nil) and from CEP V-A totalling $6 thousand (2020 –
$1.3 million).
(g) During fiscal 2021, Clairvest earned $2.5 million (2020 – $2.1 million) in distributions and interest income and
$2.5 million (2020 – $1.5 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 5 earned $2.8 million (2020
– $8.8 million) in distributions and interest income, and $6 thousand (2020 – $6.4 million) in dividend income. These
acquisition entities did not receive any advisory or other fees from its investee companies (2020 – nil).
(h) Clairvest and a related party of Clairvest, through a limited partnership, owns an aircraft that is available for use by
both parties. Clairvest and the related party each hold a 50% limited partnership interest. As Clairvest, through a wholly
owned subsidiary, is the general partner of the limited partnership, Clairvest had recognized 100% of the net book
value of the aircraft and a liability for the 50% ownership held by the related party. The cost of the aircraft had been
included in fixed assets and the liability in accounts payable and accrued liabilities.
11. INCOME TAXES
Income tax expense for the years ended March 31, 2021 and 2020 comprised the following:
Current income tax expense
Deferred income tax expense
$
$
2021
7,677
4,273
11,950
$
$
2020
1,849
7,937
9,786
57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
A reconciliation of the income tax expense for the years ended March 31, 2021 and 2020 based on the Federal and Ontario
statutory rate and the effective rate was as follows:
Income before income taxes
Statutory Federal and Ontario income tax rate
Statutory Federal and Ontario income taxes
Non-taxable portion of net investment gains and distributions
(27,668)
(23.69)
Non-taxable portion of carried interest net of management participation
Non-deductible portion of other expenses
Foreign income tax rate differences
Tax recoveries and loss carryforwards
Other
2,709
5,939
(40)
480
(419)
11,950
2.32
5.09
(0.03)
0.41
(0.36)
10.24
2021
2020
$
%
$
%
116,789
79,284
30,949
26.50
26.50
21,010
(7,482)
(2,255)
(600)
(154)
(792)
59
9,786
26.50
26.50
(9.44)
(2.84)
(0.76)
(0.19)
(1.00)
0.07
12.34
In addition to the income tax expense recorded by Clairvest, acquisition entities of Clairvest recorded an income tax expense of
$4.7 million (2020 – recovery of $4.3 million) during fiscal 2021, which had been included in the fair value determination of
these acquisition entities.
Net 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:
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, 2021 March 31, 2020
$
$
19,845
192
(11,545)
179
5,268
2,050
15,989
$
$
17,417
11
(8,931)
(1,427)
2,096
2,550
11,716
All deferred income tax expenses (recoveries) were recognized in net income during fiscal 2021 and 2020.
12. SHARE CAPITAL
Authorized
Unlimited number of preference shares issuable in series, with the designation, rights, privileges, restrictions and conditions
to be determined by the Board of Directors prior to the issue of the first shares of a series.
Unlimited number of common shares
10,000,000 non-voting shares (Series 1)
1,000,000 non-voting shares (Series 2)
58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
Issued and outstanding
March 31, 2021
March 31, 2020
Shares
Amount
Shares
Amount
Common shares, beginning of year
15,075,301
$
80,917
15,136,495
$
81,245
Purchased and cancelled under normal course issuer bid
(16,900)
(90)
(61,194)
(328)
Common shares, end of year
15,058,401
$
80,827
15,075,301
$
80,917
In March 2021, the Company filed a normal course issuer bid enabling it to make market purchases of up to 760,749
(2020 – 759,984) of its common shares in the 12-month period ending March 7, 2022. During fiscal 2021, the Company
purchased and cancelled 16,900 common shares under the previous normal course issuer bid for an aggregate cost of
$0.8 million.
Common shares of 15,058,401 (2020 − 15,075,301) were outstanding as at March 31, 2021. The weighted average
number of common shares outstanding during fiscal 2021 was 15,063,127 (2020 – 15,110,507).
The basic and fully diluted net income per share computations for 2021 and 2020 were as follows:
Net income and
comprehensive
income
(000s)
104,839
$
Weighted
average
number of
shares
15,063,127
2021
Per share
amount
6.96
Net income and
comprehensive
income
(000s)
69,498
$
Weighted
average
number of
shares
15,110,507
2020
Per share
amount
4.60
Basic and fully diluted
No Series 1 or Series 2 Shares had been issued as at March 31, 2021 and 2020.
13. SHARE-BASED COMPENSATION
The Company has a stock option plan (the "Legacy Option Plan") in place, which had no options outstanding as at March 31,
2021 and 2020. As at March 31, 2021 and 2020, 558,856 options under the Legacy Option Plan are available for future
grants and 558,856 common shares of the Company have been made available for issuance to eligible participants.
The Company has a stock option plan (the “Non-Voting Option Plan”) on the Series 2 Shares. Options granted
under the stock option plan are exercisable for Series 2 Shares, which are non-voting and have a two times preference over
the common shares. 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, 2020, 518,758 options were
outstanding, 193,695 options of which had vested. During fiscal 2021, Clairvest granted 77,650 (2020 – 106,667) options
under the Non-Voting Option Plan. Also during fiscal 2021, 128,723 options vested, and 74,498 options were exercised
under the cash settlement feature for $4.3 million. As at March 31, 2021, 521,910 (2020 – 518,758) options were
outstanding, 247,910 (2020 – 193,685) of which had vested.
Clairvest recognized share-based compensation expense based upon the fair value of the outstanding stock
options as at March 31, 2021 using the Black-Scholes option pricing model with the following assumptions:
59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
As at March 31, 2021
Year of grant
Number of options granted
Number of options exercised
Number of options forfeited
Number of options vested
Price ($)(1)
Black-Scholes assumptions used
Expected volatility
Expected forfeiture rate
Expected dividend yield
Risk-free interest rate
Expected life (years)
Value using Black-Scholes (000s)(2)
(1)
2020
2019
2018
2017
2016
78,400
—
750
—
79.69
10%
5%
0.15%
1.28%
4.25
106,667
—
1,963
21,327
85.04
10%
5%
0.15%
0.97%
3.25
49,487
—
—
19,792
81.60
10%
5%
0.15%
0.70%
2.25
168,829
50,396
—
71,056
59.48
10%
5%
0.15%
0.49%
1.25
203,353
26,018
7,662
135,735
44.06
10%
5%
0.00%
0.44%
0.25
$
1,340
$
3,135
$
1,887
$
7,349
$
13,566
Based on two times the five-day weighted average closing price of Clairvest common shares at date of grant and is adjusted for special dividends
paid by the Company.
Share price for a Clairvest common share as at March 31, 2021 was $64.75 (TSX: CVG).
(2)
During fiscal 2021, Clairvest recognized a share-based compensation expense of $23.7 million (2020 – recovery of $1.0
million) with respect to the Non-Voting Option Plan.
The Company has an EDSU plan which 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. 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, 2021. During fiscal 2021, 48,990 (2020 – 29,047) EDSUs were issued based on the terms
and conditions of the EDSU Plan. As at March 31, 2021, a total of 156,486 (2020 – 107,496) EDSUs were outstanding, the
accrual in respect of which was $10.1 million (2020 – $4.5 million) had been included in share-based compensation liability.
During fiscal 2021, Clairvest recognized an expense of $4.0 million (2020 – recovery of $0.6 million) with respect to EDSUs.
As at March 31, 2021, a total of 216,284 (2020 – 422,584) BVARs were outstanding, the accrual in respect of which
was $4.7 million (2020 – $11.5 million) and had been included in share-based compensation liability, and an additional
$3.0 million (2020 – $5.6 million) not accrued as those BVARs had not vested. During fiscal 2021, 35,364 (2020 – 4,082)
BVARs were granted and 241,664 (2020 – 177,446) BVARs were exercised. For the year ended March 31, 2021, Clairvest
recognized an expense of $3.5 million (2020 – $7.4 million) with respect to BVARs.
Compensation paid and payable to key management
In addition to the directors, key management at Clairvest are the Chief Executive Officer ("CEO"), the Vice Chairman and the
President. The CEO and the President are entitled to annual discretionary cash bonuses of up to 175% of their individual
annual salary based on individual performance. The Vice Chairman is entitled to annual discretionary cash bonuses of up to
100% of annual salary based on individual performance. There is also an annual objective cash bonus which is based on
Clairvest's Incentive Bonus Program as described in note 16(b), the stock option plans, the BVAR Plan and the EDSU Plan.
Aggregate compensation paid for the years ended March 31 to the CEO, the Vice Chairman, and the President was as
follows:
60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
2021
2020
Paid
Salaries
Annual incentive plans(1)
Stock options
Book value appreciation rights
912
4,422
—
2,923
8,257
(1) Included an aggregate bonus of $2.9 million paid upon the final closing of the fundraising of CEP VI ("CEP VI bonus") during fiscal 2020. The total CEP
VI bonus paid by the Company to management was $7.4 million.
912
1,780
4,314
6,205
13,211
$
$
$
$
Compensation payable to the CEO, the Vice Chairman and the President as at the consolidated statement of financial
position dates was as follows:
Payable
Annual incentive plans
Stock options
Book value appreciation rights
Employee deferred share units
March 31, 2021
March 31, 2020
$
$
3,125
5,390
4,657
2,675
15,847
$
$
2,464
2,621
7,957
1,204
14,246
During fiscal 2021, 40,656 DSUs were redeemed by a retired director of the Company for $2.0 million. As at March 31, 2021,
234,497 (2020 – 266,673) DSUs were held by directors of the Company, the accrual in respect of which was $16.9 million
(2020 – $12.0 million) and had been included in share-based compensation liability. During fiscal 2021, 8,480 (2020 – 9,100)
DSUs were granted. For the year ended March 31, 2021, Clairvest recognized an expense of $7.0 million (2020 – recovery of
$0.7 million) with respect to DSUs.
Also during fiscal 2021, 30,000 ADSUs were granted and 15,000 ADSUs were redeemed by directors of the
Company for $0.5 million. As at March 31, 2021, 135,000 (2020 – 120,000) ADSUs were held by directors of the Company,
the accrual in respect of which was $6.3 million (2020 – $3.1 million) and had been included in share-based compensation
liability. For the year ended March 31, 2021, Clairvest recognized an expense of $3.7 million (2020 – recovery of $0.5
million) with respect to ADSUs.
As described above, compensations totalling $2.6 million was paid to a retired director under the DSU or ADSU
plans during fiscal 2021. In addition to the DSU and ADSU plans previously discussed, compensation payable to the directors
of Clairvest included $2.4 million (2020 – $0.8 million) under the Non-Voting Option Plan.
14. 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
$
$
2021
(6,807) $
7,567
(3,307)
(1,042)
2,190
(1,399) $
2020
(13,826)
(8,000)
(2,866)
(20,333)
(4,684)
(49,709)
61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
Cash and cash equivalents as at March 31, 2021 and 2020 comprised the following:
Cash
Cash equivalents
March 31, 2021
March 31, 2020
$
$
159,178
27,617
186,795
$
$
246,621
26,317
272,938
15. DERIVATIVE INSTRUMENTS
The Company and its acquisition entities entered into foreign exchange forward contracts as economic hedges against the
fair value of its foreign currency-denominated investments and loans in accordance with its foreign exchange hedging
policy. During fiscal 2021, the Company received cash proceeds totalling $2.5 million (2020 – paid $1.0 million) on the
settlement of realized foreign exchange forward contracts.
As at March 31, 2021, the Company had unexpired foreign exchange forward contracts to sell US$81.1 million
(2020 – US$11.2 million) at an average rate of C$1.2765 per U.S. dollar (2020 – C$1.4141) through to May 2023. The fair
value of the forward contracts as at March 31, 2021 was a gain of $1.4 million (2020 – $0.1 million).
The fair value of foreign exchange forward contracts entered into by the Company’s acquisition entities to hedge
against foreign-denominated investee companies had been included in the fair value of Clairvest's investment in these
acquisition entities on the consolidated statements of financial position. The net impact of foreign exchange on the investee
companies are described in notes 5 and 17 under Currency Risk.
No collateral was funded to the counterparties for Clairvest's foreign exchange forward contracts and those of its
acquisition entities as at March 31, 2021 and 2020.
16. CONTINGENCIES, COMMITMENTS AND GUARANTEES
(a) Clairvest has committed a total of $55.5 million (2020 – $55.5 million) in the Wellington Funds, all of which was
unfunded as at March 31, 2021 and 2020. As a result of the sale of Wellington Financial to CIBC in January 2018, the
Wellington Funds are in the process of being wound up and may no longer invest in new investments.
(b) 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,
2021, the Realized Amount under the Bonus Program was $0.5 million (2020 − $2.3 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 recorded a
$6.3 million (2020 − $2.3 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, CEP V Co-Invest and CEP VI Co-Invest.
(c) In conjunction with the sale of Casino New Brunswick, Clairvest provided a guarantee 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. During fiscal 2021, the guarantee was
extinguished as the indemnity provision expired and no indemnity had been funded to its expiry.
(d) Clairvest had agreed to guarantee up to $2.5 million to support a credit facility provided to SunSystem Technology, a
subsidiary of NovaSource, by its bank. Clairvest would assume the lender’s security position that supports the loans
provided by the lender should it be called and intended to allocate any amounts called under this guarantee to CEP VI
Co-Invest, CEP VI, CEP VI-A and CEP VI‐B on a pro‐rata basis in accordance with their respective capital commitments in
CEP VI. During the quarter, the guarantee was extinguished, with no amount having been called, in conjunction with the
follow-on investment made in NovaSource as described in note 5.
(e) As at March 31, 2021, the Company had an accrued liability resulting from future minimum annual lease payments for
the use of office space. The detail of the lease liability recognized from April 1, 2019 is as follows:
62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
Lease liability, beginning of year
Payments applied during the year
Lease liability, end of year
(1) As at March 31, 2021, the incremental borrowing rate was prime plus 1.25% per annum (2020 - Prime plus 1.25%)
$
$
2021
3,761
(435)
3,326
$
$
2020
4,175
(414)
3,761
(f) In connection with its normal business operations, the Company is from time to time named as a defendant in actions
for damages and costs allegedly sustained by plaintiffs. While it is not possible to estimate the outcome of the various
proceedings at this time, the Company does not believe that it will incur any material loss in connection with such
actions.
17. RISK MANAGEMENT
The private equity investment business involves accepting risk for potential return, and is therefore affected by a number of
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 18.
The Company’s corporate investment portfolio was diversified across 20 investee companies in 10 industries as at
March 31, 2021. Concentration risk by industry and by country as at March 31, 2021 and 2020 was as follows:
March 31, 2021
March 31, 2020
Canada
United States
International(1)
Total
Canada
United States
International(1)
Total
$
5,117 $
— $
— $
5,117 $
— $
— $
— $
Co-packing
Dental services
Equipment rental
Financial services
Gaming
Information technology
Marketing services
Renewable energy
Residential services
Specialty aviation and
defence services
Waste management
Other investments
—
—
1,782
3,505
9,619
—
—
—
49,316
—
16
14,884
4,467
—
88,180
13,071
80,951
61,047
—
—
36,009
4,623
—
—
—
14,884
4,467
1,782
97,866
189,551
22,690
80,951
61,047
—
—
—
—
—
—
—
—
49,316
81,016
36,009
4,639
—
50
—
—
3,009
2,914
—
—
—
6,375
16,636
7,102
—
—
—
—
—
16,636
7,102
3,009
72,594
110,976
186,484
8,602
7,471
18,523
—
—
27,117
5,207
—
—
—
—
—
—
—
8,602
7,471
18,523
6,375
81,016
27,117
5,257
Total
$
69,355 $
303,232 $
97,866 $
470,453 $
93,364 $
163,252 $
110,976 $
367,592
(1) Includes investments in Chile, India and the UK
The Company has considered current economic events and indicators, including an estimate on the impact of COVID-19, 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
63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
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.
As at March 31, 2021, $185.8 million (2020 – $270.9 million) of the Company’s treasury funds are held in accounts
which pay interest commensurate with prime rate changes, and $44.2 million (2020 – $127.4 million) of the Company’s
treasury funds are in guaranteed investment certificates with an average remaining duration of 0.5 years (2020 – 0.6 years).
If interest rates were higher or lower by 0.25% per annum, and assuming the renewal rates of these guaranteed investment
certificates commensurate with prime rate changes, the potential effect would have been an increase or a decrease of $0.6
million (2020 – $1.0 million) per annum to distributions and interest income on a pre-tax basis.
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 as described in
note 18.
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, India, Chile and the United Kingdom. The Company may also advance 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, subject to certain
exceptions, entered into hedging positions against these foreign-denominated currencies. As at March 31, 2021, the
Company’s foreign exchange exposure with respect to the Chilean Peso and Indian Rupee are unhedged. In addition, there
is a timing difference between the balance sheet date and the investment valuation date given the timing of which
information is available to make this determination could result in a delay in the implementation of the Company’s hedging
strategy. Accordingly, significant depreciation in value in these currencies could result in a material impact to the
performance of Clairvest’s investment portfolio and potentially the carried interest it could earn from the CEP Funds.
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.
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, 2021 and 2020, 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, 2021 and 2020, net of any
allowances for losses, were as follows:
64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
March 31, 2021
Acquisition
entities
Clairvest
Total
Clairvest
March 31, 2020
Acquisition
entities
Total
Financial assets
Cash and cash equivalents
Temporary investments
Accounts receivable(1)
Loans receivable(2)
Derivative instruments
Corporate investments(3)
$
186,795
$
61,014
36,081
60,765
1,446
–
$
346,101
$
45,708
20,245
816
80
6,720
19,036
92,605
$
232,503
$
81,259
36,897
60,845
8,166
19,036
$
272,938
137,954
27,863
11,855
85
–
$
438,706
$
450,695
$
30,070
26,362
1,326
540
–
32,803
91,101
$
$
303,008
164,316
29,189
12,395
85
32,803
541,796
(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 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 the financial conditions of investee companies regularly, and
through its fiduciary duty as Manager of the CEP Funds and by maintaining sufficient uncalled capital for the CEP Funds to
settle obligations as they come due.
The Company manages counterparty credit risk on derivative instruments by only contracting with counterparties
which are Schedule 1 Canadian chartered banks. As at March 31, 2021, the Company and the Company’s acquisition entities
held derivative instruments which had a net mark-to-market gain of $8.2 million (2020 – loss of $11.4 million). The
Company believes the counterparty risk with respect to its and its acquisition entities' derivative instruments is minimal.
The Company manages credit risk on 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. With respect to the other fixed income securities under temporary
investments, the Company reviews the credit quality of the counterparties through underwriting information provided by
agents or brokers which are specialized in brokering these investments and in each case the Company’s investment in these
counterparties represents the most senior security in the counterparty’s capital structure. 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.
65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (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
R1-Low
March 31, 2021
March 31, 2020
Clairvest
$ 159,178
Acquisition
Clairvest
Total
entities
$ 37,200 $ 196,378 $ 270,984
Acquisition
entities
$ 29,769 $ 300,753
Total
—
—
—
—
—
—
389
235
279
—
668
235
Guaranteed investment certificates and investment savings accounts
AA+
AA
AA-
A
A-(1)
BBB-(1)
BB-(1)
Not rated(1)
Corporate bonds
A+
Limited recourse capital notes
BBB
BB+
Other fixed income securities
Not rated(2)
Total cash, cash equivalents and fixed income securities
3,050
66,689
870
—
301
302
—
653
—
2,052
2,121
—
16,437
—
—
60
—
—
404
3,050
83,126
870
—
361
302
—
1,057
—
122,093
—
5,909
311
210
105
105
—
—
—
—
3,012
2,052
2,121
—
—
—
16,195
—
—
—
102
—
306
—
—
—
—
138,288
—
5,909
311
312
105
411
3,012
—
—
12,593
$ 247,809
11,852
7,539
24,445
$ 65,953 $ 313,762 $ 410,892
9,781
17,320
$ 56,432 $ 467,324
(1) Principal protected by the Canada Deposit Insurance Corporation
(2) Comprised other fixed income securities as permitted by the Company’s treasury policy which in aggregate may not exceed 10% of book value and
with no single issue greater than 1.5% of book value
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 $332.3 million (2020 – $404.6 million) as at March 31, 2021. The timing of any amounts to be
funded under these commitments is dependent upon the timing of investment acquisitions, which are made at the sole
discretion of the Company.
The Company manages liquidity risk by maintaining a conservative liquidity position that exceeds all liabilities
payable on demand. The Company invests its 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 (2020 –
$100.0 million) credit facility which was undrawn as at March 31, 2021.
As at March 31, 2021, Clairvest had treasury funds, inclusive of those held at acquisition entities, of $345.3 million
(2020 – $485.3 million) and access to $100.0 million (2020 – $100.0 million) in credit to support its current and anticipated
corporate investments. Clairvest also had access to $0.8 billion (2020 – $1.0 billion) in uncalled committed third-party
capital through the CEP Funds as at March 31, 2021 to invest along with Clairvest's capital.
66
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
18. FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, cash equivalents, temporary investments, loans receivable, 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
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 equity instruments
Quoted corporate bonds
Money market and investment savings accounts
Quoted equity instruments which are not actively traded
(i.e. significant ownership positions)
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, 2021
Fair value measurements using
Level 1
Level 2
Level 3
Assets/liabilities
at fair value
Financial assets
Cash equivalents
Investment savings accounts
$
27,617
$
Temporary investments
Guaranteed investment certificates
Marketable securities
Limited recourse capital notes
Other fixed income securities
Derivative instruments
Corporate investments
27,617
—
31,564
—
—
31,564
$
—
—
44,248
—
4,173
—
48,421
$
—
—
—
—
—
12,593
12,593
27,617
27,617
44,248
31,564
4,173
12,593
92,578
—
1,446
—
1,446
151,704
—
382,963
$
210,885
$
49,867
$
395,556
$
534,667
656,308
67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
Financial assets
Cash equivalents
Money market savings accounts
Investment savings accounts
Temporary investments
Guaranteed investment certificates
Corporate bonds
Marketable securities
Other fixed income securities
Derivative instruments
Corporate investments
March 31, 2020
Fair value measurements using
Level 1
Level 2
Level 3
Assets/liabilities at
fair value
$
$
423
25,894
26,317
$
—
—
—
—
—
—
—
—
—
127,403
3,012
17,964
—
148,379
85
$
—
—
—
—
—
—
7,539
7,539
—
423
25,894
26,317
127,403
3,012
17,964
7,539
155,918
85
$
—
26,317
$
50,619
199,083
$
349,672
357,211
$
400,291
582,611
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 reassessing 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 fiscal 2021, the Company transferred the fair value pertaining to its investment in Accel Entertainment to
level 1 from level 2 of the fair value hierarchy upon the expiry of the hold period. Also fiscal 2021, the Company
transferred the fair value pertaining to its investment in Digital Media Solutions to level 1 from level 3 of the fair value
hierarchy upon completion of the business combination as described in note 5 and the subsequent expiry of the hold
period.
(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, Fair Value Measurement:
Fair value
April 1, 2020
Transfer to (from)
level 3
Amount
included in
earnings
Purchases of
assets / issuances
of liabilities
Sales of assets /
settlements of
liabilities
Fair value
March 31, 2021
Financial assets
Other fixed income securities
Corporate investments
$
$
7,539 $
349,672
357,211 $
— $
(33,023)
(33,023) $
88 $
69,045
69,133 $
12,505 $
35,761
48,266 $
(7,539) $
(38,492)
(46,031) $
12,593
382,963
395,556
68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
Financial assets
Other fixed income securities
Corporate investments
Fair value
April 1, 2019
Transfer to (from)
level 3
Amount
included in
earnings
Purchases of
assets / issuances
of liabilities
Sales of assets /
settlements of
liabilities
Fair value
March 31, 2020
$
$
31,169 $
346,600
377,769 $
— $
(50,619)
(50,619) $
(2) $
20,154
20,152 $
— $
57,524
57,524 $
(23,628) $
(23,987)
(47,615) $
7,539
349,672
357,211
(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 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 5) for which the fair values have been
estimated based on assumptions that are not supported by observable inputs. The following tables detail quantitative
information on the primary valuation techniques and unobservable inputs based on the form of investment:
March 31, 2021
Unquoted equity
warrants) or partnership units
instruments (including
Public
comparables
Valuation techniques
Significant
unobservable input
and
company
(a) EBITDA
Earnings
(c) 4.0x to 10.0x
Recent transactions
multiples
(b)
(a) n/a
(b) n/a
Debentures or loans not traded or other
finite set of cash flows
Discounted cash
flows
Discount rates
(c) 4.0% to 20.0%
March 31, 2020
Unquoted equity
warrants) or partnership units
instruments (including
Public
comparables
Valuation techniques
Significant
unobservable input
and
company
(d) EBITDA
Earnings
(f) 3.9x to 9.2x
Recent transactions
multiples
(e)
(d) n/a
(e) n/a
Corporate bonds, debentures or loans not
traded or other finite set of cash flows
Discounted cash flows
Discount rates
(f) 6.0% to 20.0%
The most significant unobservable input for fair value measurement is earnings before interest, taxes, depreciation and
amortization ("EBITDA") and the earnings multiple which is applied to the EBITDA in valuing 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, including an estimate of the potential impact of COVID-19. As
at March 31, 2021, 11 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 $12.6 million or a decrease of $10.2 million to the carrying value of corporate investments and net
investment gain, on a pre-tax basis, for the year ended March 31, 2021 (2020 – an increase of $18.0 million or a
69
Range
Range
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (tabular dollar amounts in thousands, except per share information)
decrease of $16.3 million). Earnings multiples used are based on public company valuations as well as private market
multiples for comparable companies. Earnings are based on the last twelve-month EBITDA and if necessary, adjusted for
any non-recurring items such as, restructuring expenses and annualized pro-forma adjustments from recently
completed acquisitions. Adjustments to EBITDA may also consider forecasted impacts arising from the current economic
environment or recent developments of the investee company.
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. 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 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, 2021 and 2020.
19. 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 investee companies;
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, 2021 and 2020, Clairvest had no external capital requirements, other than as disclosed in note 16.
70
SHAREHOLDER INFORMATION
As at, and for the year ended, March 31, 2021
(unaudited)
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.
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
(1)
(2)
(3)
As at June 18, 2021.
Excludes holders of 10% or more of the outstanding common shares.
During the year, Clairvest filed a new Normal Course Issuer Bid.
Common Shares(3)
Toronto Stock Exchange
CVG
15,058,401
9,558,180
5,500,221
990,842,786
361,914,542
$
$
BOOK VALUE PER SHARE AT MARCH 31
$59
$55
$51
$47
$43
$39
$35
$31
$27
$23
$19
$15
$11
$7
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21
71
SHAREHOLDER INFORMATION
As at, and for the year ended, March 31, 2021
(unaudited)
SHARE PRICE VS BOOK VALUE PER SHARE
$70.00
$65.00
$60.00
$55.00
$50.00
$45.00
$40.00
$35.00
$30.00
$25.00
7
1
-
r
a
M
7
1
-
n
u
J
7
1
-
p
e
S
7
1
-
c
e
D
8
1
-
r
a
M
8
1
-
n
u
J
8
1
-
p
e
S
8
1
-
c
e
D
9
1
-
r
a
M
9
1
-
n
u
J
9
1
-
p
e
S
9
1
-
c
e
D
0
2
-
r
a
M
0
2
-
n
u
J
0
2
-
p
e
S
0
2
-
c
e
D
1
2
-
r
a
M
Book Value
Share Price
SHARE TRADING VOLUME FISCAL 2021 and 2020
Common shares
Year to March 31, 2021
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year to March 31, 2020
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
SHAREHOLDER INQUIRIES
Stephanie Lo, Manager. Investor Relations & Marketing
tel:
fax:
email:
416.925.9270
416.925.5753
stephaniel@clairvest.com
High
Low
Close
Volume
43.40
46.27
51.00
67.30
50.83
51.78
54.00
55.00
37.74
41.46
43.54
52.00
46.82
48.36
49.61
40.00
43.40
45.35
51.00
64.75
50.83
50.51
52.30
43.00
59,131
37,189
60,811
28,555
43,249
128,657
44,107
90,675
72
TRANSFER AGENT AND REGISTRAR
Investors are encouraged to contact
AST Trust Company (Canada) for information
regarding their security holdings.
Information can be obtained at:
P.O. Box 700, Station B
Montréal, Québec H3B 3K3
Answerline: 1.800.387.0825
Web: www.astfinancial.com
Email: inquiries@astfinancial.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 11, 2021 by way of a live audio webcast.
The link to join the live audio meeting can be found at:
www.clairvest.com/shareholders/annual-meeting
All Shareholders are encouraged to attend.