Management Discussion & Analysis  A portion of the cash held at December 31, 2010 of $3.9 million was used to satisfy the dividend declared  in December 2011 (payable January 15, 2012).  The Corporation has a $30.1 million interest only senior debt facility with a two-member Canadian bank  syndicate, which was drawn to $6.5 million at December 31, 2011. Interest is paid monthly at the lenders’  prime rate plus three percent per annum (6.0% at December 31, 2011). During the current quarter, the  Corporation drew $44 million for the Quetico transaction and repaid $37.5 million out of the proceeds of  a public offering in December 2012. The Corporation has recorded a $14 million Deferred tax asset on its balance sheet to reflect the  accounting value of unused tax pools based on the Corporation’s internal projections. The Corporation’s interest in each of the Partners consist of a preferred partnership interest or ownership  of intellectual property with a return based on a formula linked to a top-line metric (sales or gross profit)  rather than a residual equity interest in the net earnings of such entities. The Corporation’s role with each  of the Partners is passive in all cases. The Corporation has no involvement in the day to day business of  each Private Company Partner and has no rights to participate in management decisions. The Corporation  does not have any significant influence over any of the Partners nor does it have the ability to exercise  control over such Partners. Instead, the Corporation has certain restrictive covenants in place designed to  protect the ongoing payment of the annual royalties and distributions payable to Alaris. In addition, the  Partners are required to obtain the consent of Alaris in certain circumstances prior to entering into a  material transaction. Such transactions generally include acquisitions & divestitures, major capital  expenditures and incurring additional indebtedness.  LifeMark  – Physiotherapy and rehabilitation services have not historically seen any significant year over year  swings as people will continue to get injured and require the services that LifeMark provides. However,  based on the terms of the amended Partnership agreement dated June 9, 2011, the LifeMark distribution  will now increase by 4% each period ending June 30. The distributions are now supported by LifeMark’s  parent company, Centric Health Corporation, a Canadian public company, who will report to Alaris  quarterly going forward. For the nine months ended September 30, 2011, Centric’s revenues are 172% and  EBITDA is 125% ahead of the prior year period results. The significant year over year improvement comes  from the impact of the LifeMark acquisition as the September numbers are the first full quarter since the  LifeMark acquisition.  LMS  – Volumes increased significantly in LMS’ September 2011 fiscal year and are expected to continue to  improve based on work on hand and recent project bidding activity. Based on audited financial statements  for the year ended September 30, 2011, total volumes are over 100% ahead of the prior year and total gross  profit dollars are 20% higher than the prior year. Total gross profit is the top-line performance metric on  which the annual distributions to the Corporation are reset. A portion of the annual distributions from  LMS were reset on January 1, 2012 and the remainder on April 1, 2012 based on the September 2011  results. LMS management expects continued improvement into its 2012 fiscal year.  End of the Roll  – End of the Roll completed its sixth fiscal year as an Alaris partner on April 30, 2011.  Same store sales results are the top-line performance metric on which the annual payments to the  Corporation are reset. Same store sales for End of the Roll decreased 13% for the year ended April 30,  2011 as the impact of the removal of the renovation tax credit by the Canadian government had more  impact on their business than originally thought. Based on unaudited financial statements for the eight  months ended December 31, 2011, revenues and EBITDA are marginally ahead of prior year results.  Alaris Royalty Corp. 2011 Annual Report   57  PRIVATE COMPANY PARTNER UPDATE 