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PICInvestmentGroupInc. 2012AnnualReport History of PIC . . . . . . . . . . . . . . . . . . . 1 Presidents Message . . . . . . . . . . . . 2 Caron Transport . . . . . . . . . . . . . . . . 4 ClearTech . . . . . . . . . . . . . . . . . . . . . . 6 Panther Industries . . . . . . . . . . . . . . 8 Kipp Zonen . . . . . . . . . . . . . . . . . . . 9 Hydor-Tech . . . . . . . . . . . . . . . . . . . . 10 Kreos Aviation . . . . . . . . . . . . . . . . . 11 G Mechanical . . . . . . . . . . . . . . . . . . 12 Round Table Management . . . . . . 13 Adventure Destinations . . . . . . . . 14 Minority Investments . . . . . . . . . . 15 Financial Report . . . . . . . . . . . . . . . 18 Charitable Contributions . . . . . . . 20 In 1976 Prairie Industrial Chemicals Ltd. opened its doors. It was a start-up chemical distribution company with one supplier and four available products. The founders grew the business by being open for business twenty-four hours per day and seven days per week all year round. They understood their customers needs often before the customer identified the need on their own. Just four years later the company had annual sales in excess of 5 million and established branch offices and warehouses across the prairie provinces. By its fifteenth year combined sales surpassed 26 million dollars annually and the company had diversified into chemical packaging chemical manufacturing transportation importexport and property management. With a view to future growth through delegation and acquisition it underwent a major reorganisation. Separate companies were formed each with its own core business. Ownership remained with Prairie Industrial Chemicals but the name changed to more accurately reflect a broader corporate mandate. Today PIC Investment Group Inc is a diversified holding company that uses venture capital investment and provides hands-on management in order to grow. Through a set of investments including joint ventures wholly- owned partially-owned Operating Companies loans bridge financing and minority investments we provide service and support to all of the companies we invest in. We look for every opportunity to find synergy facilitate acquisitions and finance internal growth within existing companies. Analysis of new opportunities compares the return on investment against our best alternative for creating lift during the period of time we hold the investment. We seek to maximise lift by predicting our partners needs and help keep their business safe from the unexpected. History of PIC 1 PIC INVESTMENT GROUP INC. The direct service PIC Investment Group provides to many of the Operating Companies is characterised by administrative finance and accounting services that an Operating Company would otherwise acquire from a third-party provider. In addition we look out to a twenty-year horizon and try to plan with the leadership of each company. By doing this we provide opportunities where a strategic fit might be or growth might exist. As a result the work our office produces hopefully goes unnoticed in the present but the benefits will be realised in the future. Inside PIC we added human resources that serve Operating Companies and therefore help ensure their success. We pushed strategic agendas in Operating Companies and we worked in businesses by helping wherever there was a gap. We added systems to enhance long-term efficiency and we shared mentorship resources between companies to reduce gaps due to inexperience. We invested in a program of building for the future by capitalising on the great work accomplished in the prior years. Our Governance method of providing oversight for Operating Companies helped provide each Operating Company with more intelligent analysis or opinion as well as it helped the Operating Companies communicate their long-term needs to a broader audience. With the additional intelligence about the future and the additional human support at PIC we began leveraging our resources to provide long-term security and clear the path for our Operating Companies to capture future opportunity. You will see in this report how various businesses increased their knowledge for future application planned carefully executed decisively and added capacity for future growth. At PIC Investment Group we did everything that we could to sponsor those activities and assist those activities. We took risks and made decisions and participated in activities that will not be of interest to you for years. We widened and deepened our foundation as an owner of the various entities contained in this report so that we could preserve or provide long-term stability. Greg Yuel Presidents Message 3 PIC INVESTMENT GROUP INC. 2012 was a planned correction year for both Caron Transportation Systems and Interload Services Ltd. and therefore the financial results will be less impressive then in 2011. We are hopeful that the significant wage adjustments implemented for drivers and mechanics and the addition of new positions in various departments and terminals will allow both organizations to grow and prosper in the coming years. We have completed construction on our head office expansion and I would like to thank all our head office employees for their patience during the long eight months of noise and dust. Hopefully you all agree that the final product was worth the pain and suffering. There are a number of opportunities and absolute musts in the pipeline for 2013. Adding to the maintenance facilities in Grande Prairie or making changes to operate 247 in our existing facility and constructing a dedicated trans-load facility in Saskatoon for one of our present customers are top priorities. We are also exploring the feasibility of a third terminal in the Edmonton area and are beginning the preliminary plans and discussions on how to proceed with replacing our current Edmonton facility. At this point managements focus is mainly on organic growth but there are a number of acquisitions being looked at both in western Canada and in the United States. We are cautiously optimistic that the changes we made will allow us to recruit more people in 2013 and therefore we should have another year of above average growth. This report would not be complete without announcing that our organization reached the milestone of more than 100 million dollars in sales in 2012. To put this in prospective for everyone but mostly for those team members that have been here since day one our first years sales when we purchased Caron Transport in 1990 were 3.5 million. I would like to take this opportunity to thank all of our dedicated employees supportive customers and reliable suppliers. It goes without saying that without the entire team working together the organization would not enjoy the success that it does. Bruno Muller 5 PIC INVESTMENT GROUP INC. Todays ClearTech is a mature well-entrenched company with over 35 years in the chemical distribution market. We define ourselves in the industry and remain differentiated because of our own blend of commitment agility and knowledge. We have built a solid foundation. Our goal now is to continue adding pieces to sustain our growth over the next several years and beyond. In 2012 we built forward by relocating our corporate headquarters to the newly renovated facility at 1500 Quebec Ave in Saskatoon. Our new offices provide room to grow but just as importantly they provide a more appropriate people friendly environment for our colleagues performing the administration and customer service duties required at our head office. The property is truly a showpiece and something to be proud of. We invite all of our friends customers suppliers and other partners to stop in for a visit as opportunity permits. Also in October 2012 we completed a strategic purchase of Advance Chemical Ltd. in Port Coquitlam. Advance was established in 1985 to manufacture sodium hypochlorite and to support the pool and cleaning industries in the lower mainland of British Columbia. The owners and the employees at Advance embody the same loyalty to customers commitment to service and strong integrity known throughout ClearTech. This combined with the obvious synergies between the two businesses makes me excited with respect to the potential we can create together. Advance is not a large company. Relative to ClearTech this is a small acquisition but in relation to our BC operations it essentially doubles our overall output. Advance is an investment and a commitment in one of the areas of the country that we are looking to grow. We are stronger because we have gained new people new markets and new opportunities in the process. Another strategy that has been in play for the past two years is a direct focus on ensuring we have the right people taking us forward in every aspect of our business. Without the right people we cannot execute our business at the level needed to excel. Execute well and our customers will drive our success. Execute poorly and we will be relegated to the status of commodity competing on price alone. We understand that excellent execution requires excellent people. Our future is in our own hands. Our services and strategies are not unique. We dont have any magic formulas. We simply know what we are and what it takes to keep our business a success. We are a value added customer friendly feet-on-the-street distributor of products. We are proud of the work our employee group is doing to support our direction and identity. We thank them for their continued unwavering focus on our customers and on our success. Randy Bracewell 7 PIC INVESTMENT GROUP INC. Panther Industry Inc. is still a new company that has undergone some very fantastic changes since 1978. The company had a difficult start in hard times. The color red was a favourite on the income statement for a few years. Many lessons had to be learned and most of them were the hard way. Were proud to say that the past 12 months reflect lessons and experiences learned by employees along the way. The business is getting more complex with a growing demand for people with unique talents and expertise. It is clear that the past 12 months success for Panther is what it is because of the people. Panthers growth has been 70 in the past two years despite some flat spots. Some growth has been prohibited because of Panthers inability to keep up to the demand. The one single factor for the problem is manpower and in our business manpower needs to be young and have good work ethics. This means that the people have to do their share and have to be dependable. Panthers answer to the tight labour market is automation. However the companies that are installing automated equipment are behind schedule. Panther started another project at Fort Saskatchewan in November 2011. Engineers were hired to design a rail site for a trans load system. Today Panther is still waiting for an engineered stamp on the rail design documents. This project was estimated to be done by Dec of 2012 but it is now believed that it will take some risk to have it done by September of 2013. Panther has a track design to unload 24 cars a day which is very exciting for Panther as a lack of rail capacity has restricted the companys growth. There were no surprises starting the 2011-2012 fiscal year. Budgets had been increased by 30 from the previous year. There were many visits to Calgary negotiating new business deals. This went on all winter and well into spring. As our talks went on things just got busier and busier. In the first half of the year sales were exceeding budget by 40. However April came about and spring break provided a reality check that brought sales to a snails pace. However by the end of our fiscal year our sales were back to budget numbers. Presently sales are down from what they were a year ago. It is not certain what the real problem is. It may be that the infrastructure is not in place to move the oil from where it is being produced to the market or it could be related to the pipeline rejection in the United States which are related issues. Panther has two pallet plants one in Davidson Saskatchewan and one in Edmonton Alberta. The pallet business also had a hard start back in the middle 1980s. It is a business that is considered important for Panthers own use. In addition to this Panther concentrates on larger companies looking for the same service that is required by Panther. Panther doesnt promise the lowest price but we do promise the best product on a demand basis. I look at the past year as a major success for Panther. Panthers growth for the year was 29 taking us to the best year by far. Looking forward that could double in the next few years. One thing for certain in this industry it may be a dream today but only tomorrow will make it reality. Jack Schneider 2012 ANNUAL REPORT 8 Proceed with caution were the words used in the outlook last year for the upcoming 2012 year. Proceeding with caution resulted in stabilizing the company and the grip on the markets. The strong growth of the previous years flattened to a level of approximately 5. Plans were developed for further expansion however the need for improving and stabilizing the organization was the first priority. The market has changed with growing competition and different demands from our industrial mainly solar energy related customers. Kipp and Zonen has invested in both staff and manufacturing equipment. The traditional solar countries France Spain and Italy slowed down due to various reasons such as economic crisis and change in government policies in funding the feed back tariffs. Other upcoming countries such as Turkey South Africa Central and South America could compensate for this slow down. The market in the US remained very strong and continued with a growth rate similar to previous years. The marketing and sales department expanded with three business managers to cover the various regions in the world better and closer. We have decided to upgrade our sales offices to regional support centers with calibration facilities. This will dramatically reduce the down time of a sensor due to the necessary calibration cycles. The next step is to build up regional inventory for supporting the local customers quicker. With this investment in staff and equipment we can expand and control our markets better and more efficiently. The Smart Interface introduction in 2011 for the Pyranometers was continued in 2012 with the introduction of the Smart Pyrheliometer. Eventually all major sensors will be equipped with a Smart Interface. The interface is not only successful in the industrial market for which it was originally designed but now also in the market of classic meteorology. The Royal Dutch Meteorological Institute KNMI has acquired the Smart Interface for the complete Dutch network of pryranometers. This will reduce the cost of data logging tremendously and the design of the network data transmission system is significantly simpler. In 2012 Kipp Zonen launched the new version of the Large Aperture Scintillometer LAS MKII. The instrument was completely redesigned meeting the latest technical requirements such as built in data logging facilities. Integrating the LAS in a complete station for evapotranspiration assessment has never been so easy. The sensor for measuring photosynthetically active radiation the PQS 1 has been proven the best sensor available on the market and is sold in large quantities. Kipp Zonen has made a real breakthrough in the agro meteorological market with this sensor. In 2013 Kipp Zonen is planning to invest in new RD projects multilingual web sites and specific markets such as China India Central and South America. At the moment of writing the economic outlook is diversified for the different areas of the world. Europe will be stable growth will come from the Americas and Asia. Ben Dieterink 9 PIC INVESTMENT GROUP INC. I am very pleased to report that in 2012 Hydor-Tech continued to grow with increased revenues and an improved bottom line performance. Our expanded facility in Edmonton Alberta is providing tremendous benefit to our production capabilities and efficiencies. These benefits will no doubt provide long term positive effects for our customers and our employees. One of the biggest challenges in business is to simultaneously fulfill the short-term obligations to our customers and employees while at the same time invest sufficient resources in undertakings that permit it to succeed in the future. Throughout this past year we have been firmly focused on building a stronger future for the company. At the beginning of the 2012 fiscal year our challenge was to not only keep pace with the growth we are experiencing but also to prepare the companys foundation for the future. With the help of everyone involved at Hydor-Tech we have gained a better understanding of our industry and our true capabilities. And it is from this that we are creating the right balance of short-term and long-term objectives. A major statement to our long term commitment was made earlier in 2012 and I am extremely proud to say that Hydor-Tech became a member of the Chemical Industry Association of Canada CIAC. By doing so will insure that we conduct ourselves and operate to the high standards of the globally renowned practices of Responsible Care. Being part of CIAC is a huge undertaking for any company involved in the chemical industry by dedicating everything we do to improving social responsibility the safety of our employees and the protection of our environment. Our network of Distributors grows stronger each year and it is their ability and experience that drive Hydor- Tech towards providing excellent service. Hydor-Tech has always been proud of our high level of service and for that I would like to take this opportunity to thank our hard working employees and their commitment to doing the right thing every day. I am looking forward to another exciting year helping our customers be successful which is the best way to measure our performance as a company. Ian Lewis 2012 ANNUAL REPORT 10 Preparing for the future would be the theme for both Kreos Aviation and Central Aircraft Maintenance in 2012. Kreos senior team developed a strategic plan for how they wanted to run the company for the next 5 years and a number of decisions were made based on this blueprint. A new King Air 350 was added to the fleet and the King Air 200 was sold. Other aircraft decisions were also made to better position Kreos in this competitive market. These moves have provided Kreos a unique offering and consistency to its customer base. Plans to add larger aircraft were put on hold as Kreos Operations Team focused on its core business aircraft management and executive charters. The fleet will also be expanding with additional jet opportunities that are either finalized or in mid-stream negotiation. Charter activity was very strong in the spring and early fall of 2012 but was unexpectedly slow in the summer. Part of this was aircraft availability for Kreos but also a slowdown with some of our regular customers. Business has increased again in the fall and looks strong for the rest of calendar year 2012 A number of different marketing strategies saw an increase in utilization at the FBO as well. Central Aircraft had its struggles in fiscal 2012 as business was down with a reduction in the number of aircraft under service but a number of changes have been implemented to ensure that its fortunes will rise in 2013 including a new home implementation of their quality management system and attacking alternative sources of revenue and profit. The other large undertaking in 2012again preparing Kreos for the futurewas change within a number of senior leadership positions. Wes Ramsay was hired to take over as Chief Operating Officer in mid-summer. The Kreos Team is excited to have a full time leader on board and Wes is implementing change leadership not just change management to Kreos. The Team at CAM also saw some major changes with a new Director of Maintenance in Harold Peters and a new Quality Manager and Floor Manager. All of these strategic moves will pay dividends as Kreos transitions to the next phase in its growth. Kreos also saw some important developments in Kreos Realty the real estate division. The Kreos hangars are now full. All of the remaining space is filled including an expansion at one hangar for a tenant and a renovation on a 3rd hangar which will be the new home of CAM. The next phase will be looking at future space needs and what solutions will best meet those needs. The Kreos Standard is to be safety driven to provide unmatched customer service and cost effective solutions to meet any clients unique aviation needs. With everyone on the Team working toward this goal and with flawless execution Kreos is on pace to jump to a new growth curve in 2013. Craig Bell 11 PIC INVESTMENT GROUP INC. 2012 was a year that began with much optimism. We finally had the infrastructure in place to put us on equal footing with the best competitors in the industry. We focused on execution. We worked closer with our project foremen to give them the tools to succeed on site. We focused on getting better information from the estimate to project progress meetings. The office improved the communication link to the field. Although our labor cost average remained a concern with the help of project foremen we could do a better job of recognizing the cause. Overall our performance improved consistently on every project. We continue to grow and evolve but our challenge remains the cost at which we do. Our decision to work for another subcontractor on a major project in Saskatoon led us to commit time and resources to a situation that ultimately failed. The experience left us bowed but not broken and we dug deep and managed through the process successfully. This experience will dedicate us to hone our strategic decision of having a better project mix working to solidify our process and playing to our strengths. We continue to chase profitability and are improving in the areas that will help us to achieve that goal. Looking at project statements we experienced tremendous improvement over past fiscal years and interestingly achieved a greater market share of the commercial industrial sector versus multi residential. From a revenue perspective commercial projects garnered almost 35 of the pie but accounted for over 50 of our contribution margin compared to the residential sector. We do see the progression to an increase in commercial projects as a natural one for G Mechanical and the project statements support that evolution. The economy continues to bear fruit and we see no slowdown with the project opportunities in the market place. We have done a tremendous job of leveraging positive experiences with General Contractors this year and are excited where those relationships will take G Mechanical in the New Year. TJ Smith 2012 ANNUAL REPORT 12 2012 was the year of opportunities for Round Table Management. This past year was a combination of acting for the now and preparing for the future. 2012 was the most active year in the history of Round Table Management we executed the largest amount of transactions for the most amount of money ever in the history of this company. Most of the transactions were associated with the future growth and needs of operating companies for the PIC Group which reinforces the prime mandate of the organization. The acquisitions were focused mostly in the Edmonton and Saskatoon areas with the largest volume in terms of deals and dollars happening in Edmonton. As well in 2012 construction began on our ambitious plans for an office building in downtown Saskatoon 220 Wall. We have run into a few weather and construction delays but this unique offering in the warehouse area of Saskatoon will be completed by the summer of 2013 and will be our largest development to date. RTM is a large company not in terms of employees but in terms of assets. The addition of people resources in 2012 has allowed us to clarify roles and responsibilities and to implement new processes and procedures to help RTM be more efficient and ultimately more profitable. However the Teams ability to capitalize on opportunities and deal with challenges is still the norm and this Team continues to excel. RTM increased revenue and profits in 2012 and we will be looking for a significant increase in both for 2013 as the new acquisitions start to show a return and the Wall Street and Quebec Ave properties become fully leased. The evolution of RTM continues with more transactions and our first true foray into third party development but our primary mandate remains to work with the Operating Companies within the PIC Group to ensure their current and future real estate needs are not only met but exceeded. Craig Bell 13 PIC INVESTMENT GROUP INC. The struggling US economy had little effect on Adventure Destinations as a whole this season but did effect Selwyn Lake Lodge numbers significantly. With strong marketing last season in Canada little focus was put into the US market which showed in the declining numbers. ADI hopes to expand the number of shows it attends in the US in the spring of 2013 but will have to be selective on which markets it focuses on. Selwyn Lake Lodge despite its 45 decrease in guests from the previous year did have a good year in terms of the percentage of guests that rebooked for 2013. With a solid start of 70 of the guests rebooked and many positive comments from guests Selwyns Manager Greg Sproat has a positive outlook for 2013. Continuing to market along with our other destinations Selwyn Lake Lodge will target those guests in the market looking for the special trip. Twin Falls Lodge showed a modest 10 increase in guest numbers over the previous year with revenues remaining about the same this mostly due to some reduced packages marketed to some groups early in the season. Improvements on equipment at Twin Falls continue to receive many positive comments such as two new boats and 4 motors and the replacement of all the boat seats. The addition of a 24 foot pontoon boat was enjoyed by guests and larger groups as well utilized for moving large amounts of freight and guests between Stanley Mission and the lodge. Thompsons Camps began the summer under the control of the management team of Simon and Wendy Parsons and showed an increase of 20 in revenues over the previous year. Increased revenues are partly due to increased rates for 2012 the mining crews that we are in support of remained relatively the same and guest numbers which were up slightly. Over 3200 guests stayed at TCLP between May and October while more than 500 guests enjoyed the experience of either a day fly out or a stay at one of our outpost camps. The addition of three new party barges and the upgrading of 8 new engines on the main lake were welcomed by guests this season. Thompsons Camps will continue to upgrade and renovate existing facilities as the demand for the higher end experience is evident and with the number of continued repeat guests Thompsons Camps should be able to continue to provide a great family or businesscorporate retreat at a great value in the coming years. The purchase of the general store in Missinipe The Churchill River Trading Post will give Thompsons Camps the opportunity to generate another stream of revenue as well as attract future full time employees in the community. Jim Yuel 2012 ANNUAL REPORT 14 The reason PIC Investment Group Inc. negotiates and participates in minority investments is to facilitate entrepreneurship and help existing businesses grow. PIC assesses risk and makes investment decisions based on the criteria listed on our website. Our intention is always to maximize our return either long-term or short-term by bringing some expertise to the business. The basic underlying motive is a belief that a strong and vibrant economy is constructed by growing one business at a time. Our focus this past year was on growth with three new investments being added to PICs minority investment portfolio. Two of the investments were a direct result of PICs involvement in the formation of the new Saskatchewan Capital Network SCN. SCN provides improved access to deal flow through its entrepreneur pitch networking sessions along with the opportunity to co-invest and gain from the expertise of other angel investors. ClubMynx Fitness Inc. Dawn Wotherspoon 103 23rd Street East Saskatoon SK S7K 0J1 In 2008 PIC entered into an Angel Investment partnership and loan with a young entrepreneur and former PIC group employee Dawn Wotherspoon. To date the results have been a testament to both the Angel Investment process and Dawns dedication to the business. The private group fitness facility has brought a unique element to the fitness industry in Saskatoon by offering fun non-intimidating exercise options designed to help participants stay motivated in their fitness programs. Defyrus Peter Blaney 150 William Street Kingston ON K7L 2C9 Participation with other minority investors under the management of Tancho Innovation Capital provided the opportunity for PIC to participate in technology commercialization. Defyrus is a private life sciences biodefence company that collaborates with domestic and international military R D partners to develop a range of therapeutics as medical countermeasures for civilians and military personnel. Minority Investment Portfolio 15 PIC INVESTMENT GROUP INC. Doepker Industries Ltd. Dave Doepker PO Box 10 Anaheim SK S0K 0G0 Doepker is a Canadian bulk trailer manufacturer with particular strength in the agriculture market. Our involvement helped Doepker through the economic crisis and intends to position the business to take advantage of growth opportunities going forward. Our participation has been active in the aspects of asset management and corporate finance. Through the Board we contribute business strategy and planning expertise. Eden Flowers Ltd. Tammy Kreutzwieser 134 1824 McOrmond Drive Saskatoon SK S7S 0A6 As a minority investor in Eden Flowers this past year PIC assisted Tammy Kreutzwieser in realizing her dream of becoming an entrepreneur. Eden Flowers is becoming known for its beautiful and unique approach to floral arrangements while reducing its environmental impact through recycling over 98 of its waste. MPT Mustard Products Technologies Inc. John Cross 101 111 Research Drive Saskatoon SK S7N 3R2 We have invested in a Board and Management with a proven track record in agriculture. MPTs innovative technology converts the unique properties of mustard seed into fertilizers that support soil health and formulated biopesticides that control soil borne pests and diseases. Phenomenome Discoveries Inc. John Hyshka 204 407 Downey Road Saskatoon SK S7N 4L8 A world-leading human health research company focusing on the discovery and development of novel disease screening treatment and health monitoring products to address diseases such as cancer multiple sclerosis and Alzheimers. Text2Car Inc. Vince Hardy 904 Central Avenue Saskatoon SK S7N 2G8 Text2Car offers innovative products to consumers and businesses that provide the ability to control monitor and track vehicle activity through a cell-phone or computer from any distance anywhere. PIC was made aware of this minority investment opportunity through our involvement with the new Saskatchewan Capital Network. Minority Investment Portfolio continued 2012 ANNUAL REPORT 16 TinyEYE Technologies Corporation Greg Sutton 127 116 Research Drive Saskatoon SK S7N 3R3 TinyEYE provides speech-language pathology services to school districts health regions and private individuals over the Internet using software web cameras and headsets. TinyEYE is a leading world provider of online speech therapy telepractice by individual professionals working independently all over the world. Therapy has been provided to clients throughout the world. TitanStar Properties Inc. Rick Turner 950 789 West Pender Street Vancouver BC V6C 1H2 The sole business of the Company is the ownership of real property interests consistent with a well-established investment policy. The Company seeks to create a portfolio of real estate assets in the United States with value to be maximized through the opportunistic acquisition of well-positioned undervalued or underperforming assets. Warman Home Centre Rick Casavant 601 South Railway Street West Warman SK S0K 4S1 Golden Opportunities Fund Inc. led a major transaction to complete the management buyout of Warman Home Center and all of its various subdivisions Warman Homes Warman Truss Warman Metals and Warman Cabinets located in Warman Saskatchewan. PIC partnered with Golden Opportunities and other leading Saskatchewan institutional investors including Lex Capital Partners LP and Hathersage Holdings Inc. with an investment in the syndicated purchase. 101178518 Saskatchewan Ltd. Aaron Wignes PO Box 1901 Saskatoon SK S7L 3S5 We entered into a partnership with a local general contractor whom we have known for approximately ten years. We provided an opportunity to our partner to build a bigger project than what he could accomplish on his own. In exchange PIC gained an opportunity to work with a partner in residential construction on a limited basis. 101178518101178518 17 PIC INVESTMENT GROUP INC. PIC is primarily an owner-operator of the companies that are featured in the preceding pages. Other opportunities outside of the companies in which PIC enjoys direct majority ownership include investments as a minority shareholder and the participation in other financing options such as syndicated loans bridge financing capital asset lending and inventory financing. Investments of this type can take place at any time throughout the year and although small and risky they can be rewarding. A wide variety of terms are possible depending on the needs of the recipient party and the level of risk and resources PIC must commit. Participation in this manner serves to keep PIC Investment Group connected to the markets in which these opportunities are revealed and allows PIC Investment Group to function as an operating company The cover of our annual report notes that we are building value. In order to give credit to our founders and to the people executing the strategies at our operating companies I would like to say that we are building value from value. In 2008 I commented that The nature of equity investing is that there will be losses. If structured properly only the invested capital is at risk. Conversely the successful ones have the possibility of returning invested money many times over. Many of our successful operating companies have returned the invested capital over-and-over-and-over. It is these returns that allow PIC to look for new opportunities to build value. 2012 was another year characterized by organic growth reinvestment in our core business units and strong operating results. 16.4 million in income before dividends represents an 18 increase over last year. The strength of our operating results is evidenced by the fact that we had record growth in assets yet our debt to equity ratio still improved. It was a busy year for financing and we benefitted from significant cooperation from the financial institutions that we view as business partners. Although we got a lot done in 2012 there are still some financing transactions in progress and completion of these transactions will allow us to further reinvest in 2013. I would like to congratulate Bruno Muller and his team at Caron Transportation for being the first PIC Group Company to reach one-hundred million in annual revenues. It is an honor to be involved with a company that is consistently establishing new financial milestones. This will be the fourth out of the last five years that I too have commented on significant financial milestones. 2012 has established many financial milestones but the one I will bring attention to is that PIC has exceeded one-hundred million in shareholders interest. 2013 will be another busy and exciting year. As you have read in the preceding pages our operating companies are not standing still. Since year end PIC has completed two equity transactions and another one is close. Post year end we received a significant return from our investment in Warman Home Centre. The quality and capabilities of the Groups leadership business partners and employees combined with the solidity of our financial foundation gives us the ability to move into the future with confidence. Hugh MacGowan Financial Report 2012 ANNUAL REPORT 18 Year ending September 30 2012 thousands 2012 2011 Current assets 57031 60834 Total assets 211997 187485 Current liabilities 42120 42703 Total liabilities 75538 69370 Minority interest 35726 32827 Shareholders interest 100733 85288 Sales 274826 245487 Profit before taxes and pref dividends 29573 28940 Income taxes 5227 6128 Net profit 16454 13925 Retained earnings beginning 77236 64090 Dividends 778 778 Retained earnings ending 92912 77236 Shares outstanding 23991 23991 Book value per share 3876 3232 Earnings per share 665 560 Net Profit 20082012 millions Sales 20082012 millions Cashflow FROM Operations 20082012 millions 19 PIC INVESTMENT GROUP INC. Our 2012 contributions were well over the Canadian and Provincial averages in-part due to the significant need in our communities. We continue to focus on five main categories disease research youth development municipal provincial economic development nature and community quality of life. Our participation within each category will fluctuate each year depending on what is required and our ability to affect the outcome. Our multi-year contributions towards the Ducks Unlimited Chappell Marsh project as well as the Meewasin River Landing project continued and both projects neared substantial completion this year. The PIC Group also committed to a multi-year sponsorship of the Remai Art Gallery. The Capital campaign required for the Childrens Hospital Foundations investment in that facility took place in earnest during 2011 and will continue for the next number of years. The PIC Group will continue its support of this project. In a world where the needs are so great we have difficulty in choosing who we could and should support. Many credible reputable organisations would benefit from our assistance therefore we must discern where our support for those in need is best allocated. Charitable Contributions Canada 2012 ANNUAL REPORT 20 21 PIC INVESTMENT GROUP INC. OPERATING COMPANIES Caron Transportation Systems 301 Streambank Avenue Sherwood Park AB T8H 1N1 ClearTech Industries Inc. 1500 Quebec Ave Saskatoon SK S7K 1V7 Panther Industries Inc. PO Box 698 Davidson SK S0G 1A0 Kipp Zonen B.V. Delftechpark 36 2628 XH Delft The Netherlands Hydor-Tech Limited 205 - 34334 Forrest Terrace Abbotsford BC V2S 1G7 Kreos Aviation Hangar 16 16 Wayne Hicks Lane Saskatoon SK S7L 6S2 Grasswood Mechanical Ltd. 229 Avenue I South Saskatoon SK S7M 1X8 Round Table Management Ltd. 255 Robin Crescent Saskatoon SK S7L 6M8 Adventure Destinations International Hangar 11 J.G. Diefenbaker Airport Saskatoon SK S7L 5X4 MINORITY INTERESTS ClubMynx Fitness Inc. 103 23rd Street East Saskatoon SK S7K 0J1 Defyrus 150 William Street Kingston ON K7L 2C9 Doepker Industries Ltd. PO Box 10 Anaheim SK S0K 0G0 Eden Flowers Ltd. 134 1824 McOrmond Drive Saskatoon SK S7S 0A6 MPT Mustard Products Technologies Inc. 101 111 Research Drive Saskatoon SK S7N 3R2 Phenomenome Discoveries Inc. 204 407 Downey Road Saskatoon SK S7N 4L8 Text2Car Inc. 904 Central Avenue Saskatoon SK S7N 2G8 TinyEYE Technologies Corporation 127 116 Research Drive Saskatoon SK S7N 3R3 TitanStar Properties Inc. 950 789 West Pender Street Vancouver BC V6C 1H2 Warman Home Centre 601 South Railway Street West Warman SK S0K 4S1 101178518 Saskatchewan Ltd. PO Box 1901 Saskatoon SK S7L 3S5 SOLICITOR Stevenson Hood Thornton Beaubier 500 - 123 2nd Avenue South Saskatoon SK S7K 7E6 AUDITOR Ernst Young LLP 1200 - 410 22nd Street East Saskatoon SK S7K 5T6 PRIMARY FINANCIAL SERVICES PROVIDER BMO 101 - 2nd Avenue Saskatoon SK S7K 3L4 255 Robin Crescent Saskatoon SK S7L 6M8 Tel 306 664-3955 www.picgroup.ca Printed in Canada Designed by Dark Horse Communications PIC Investment Group Inc.