Le Château Inc. Annual Information Form
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Annual Information Form Le Château Inc. For the fiscal year ended January 30, 2016 April 28, 2016
LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
Table of Contents
1. Incorporation and Corporate Structure .................................................................................. 3
1.1 Corporate History and Structure ................................................................................... 3
1.2 Inter-corporate Relationships ........................................................................................ 3
2. Business of the Company....................................................................................................... 4
2.1 General Business Development .................................................................................... 4
2.2 Description .................................................................................................................... 5
2.2.1 Profile ................................................................................................................ 5
2.2.2 The Retail Network ........................................................................................... 5
2.2.3 Manufacturing ................................................................................................... 9
2.2.4 Sources of Supply ........................................................................................... 11
2.2.5 Human and Material Resources ...................................................................... 11
2.2.6 Marketing Strategy.......................................................................................... 12
2.2.7 Intangible Rights ............................................................................................. 12
2.2.8 Competition..................................................................................................... 13
2.2.9 Seasonal Variations ......................................................................................... 13
2.3 Risk Factors ................................................................................................................ 13
3. Dividends ............................................................................................................................. 14
4. Description of Capital Structure .......................................................................................... 15
5. Market for Securities............................................................................................................ 17
6. Directors and Officers .......................................................................................................... 18
7. Transfer Agents and Registrars ............................................................................................ 20
8. Legal Proceedings ................................................................................................................ 20
9. Interest of Management and Others in Material Transactions ............................................. 21
10. Interest of Experts ................................................................................................................ 21
11. Audit Committee .................................................................................................................. 22
11.1 The Audit Committee’s Charter.................................................................................. 22
11.2 Composition of the Audit Committee ......................................................................... 22
11.3 Relevant Education and Experience ........................................................................... 22
11.4 External Auditor Service Fees .................................................................................... 23
11.4.1 Audit Fees ....................................................................................................... 23
11.4.2 Audit-Related Fees.......................................................................................... 24
11.4.3 Tax Fees .......................................................................................................... 24
11.4.4 All Other Fees ................................................................................................. 24
12. Additional Information ........................................................................................................ 24LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
The information in this Annual Information Form is as of January 30, 2016, unless stated
otherwise, and except for information incorporated by reference that has a different date.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This Annual Information Form may contain forward-looking statements relating to Le Château
Inc. (the “Company”) and/or the environment in which it operates that are based on the
Company's expectations, estimates and forecasts.
Forward-looking statements are presented in this Annual Information Form for the purpose of
assisting investors and others in understanding the Company’s objectives, strategies and business
outlook as well as its anticipated operating environment. Readers are cautioned, however, that
such information may not be appropriate for other purposes. Forward-looking statements made
in this Annual Information Form are based on a number of assumptions that the Company
believed were reasonable on the date of this Annual Information Form. If these assumptions turn
out to be inaccurate, actual results could be materially different from what the Company expects.
These statements are not guarantees of future performance and involve risks and uncertainties
that are difficult to predict and/or are beyond the Company’s control. A number of factors may
cause actual outcomes and results to differ materially from those expressed. These factors
include those set forth or incorporated by reference in this Annual Information Form and other
public filings of the Company. Therefore, readers should not place undue reliance on these
forward-looking statements. In addition, these forward-looking statements speak only as of the
date of this Annual Information Form and the Company disavows any intention or obligation to
update or revise any such statements as a result of any event, circumstance or otherwise except to
the extent required under applicable securities law.
Factors which could cause actual results or events to differ materially from current expectations
include, among other things: the ability of the Company to successfully implement its business
initiatives and whether such business initiatives will yield the expected benefits; competitive
conditions in the businesses in which the Company participates; changes in consumer spending;
general economic conditions and normal business uncertainty; seasonality and weather patterns;
changes in the Company’s relationship with its suppliers; lease renewals; information technology
security and loss of customer data; fluctuations in foreign currency exchange rates; interest rate
fluctuations; liquidity risk; and changes in laws, rules and regulations applicable to the
Company.
The risks described above are not the only ones that could affect the Company. The Company
operates in a competitive and rapidly changing environment. Additional risks not currently
known to the Company or that the Company currently deems to be immaterial may also have a
material adverse effect on the Company’s business, financial position or financial performance.
2LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
1. Incorporation and Corporate Structure
1.1 Corporate History and Structure
Château Stores Ltd. was incorporated under the Companies Act (Québec) on November 17,
1959. On June 9, 1969, an affiliated company, Le Château Design Ltd., was incorporated under
the Canada Corporations Act. On April 17, 1973, Le Château Design Ltd. changed its name by
supplementary letters patent to Château Stores of Canada Ltd., and at that time, Château Stores
of Canada Ltd. acquired all the outstanding shares of Château Stores Ltd. from Herschel H. Segal
and a minority shareholder. Over a period of time, the operations carried on by Château Stores
Ltd. were transferred to its parent company, Château Stores of Canada Ltd. Château Stores of
Canada Ltd. was continued under the Canada Business Corporations Act on January 27, 1977.
The Company completed its Initial Public Offering on December 3, 1983, issuing 922,300 Class
A subordinate voting shares.
On July 6, 2000, Château Stores of Canada Ltd. changed its name to Le Château Inc.
The head office and principal place of business of Le Château Inc. is located at 105 Marcel-
Laurin Boulevard, Saint-Laurent, Quebec, H4N 2M3, telephone (514) 738-7000.
1.2 Inter-corporate Relationships
Le Château Inc. owns 100% of the common shares of its U.S. subsidiary, Château Stores Inc.,
incorporated under the laws of the State of Delaware.
In this Annual Information Form, the “Company” and “Le Château” refer collectively to Le
Château Inc. and its subsidiary.
3LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
2. Business of the Company
2.1 General Business Development
The 2015-2016 and 2013-2014 fiscal years refer to the 52 week periods ended January 30, 2016
and January 25, 2014, respectively while the 2014-2015 fiscal year refers to the 53 week period
ended January 31, 2015.
Fiscal 2013-2014
Net loss in fiscal 2013-2014 amounted to $16.0 million or $(0.59) per share, compared to a
net loss of $8.7 million or $(0.34) per share for the previous fiscal year.
Sales remained flat at $274.8 million, while comparable store sales increased 0.6%.
Fiscal 2014-2015
Net loss in fiscal 2014-2015 amounted to $38.7 million or $(1.34) per share, compared to a
net loss of $16.0 million or $(0.59) per share for the previous fiscal year.
Sales decreased 9.0% to $250.2 million from $274.8 million, while comparable store sales
decreased 9.0%.
Fiscal 2015-2016
Net loss in fiscal 2015-2016 amounted to $35.8 million or $(1.19) per share, compared to a
net loss of $38.7 million or $(1.34) per share for the previous fiscal year.
Sales decreased 5.3% to $236.9 million from $250.2 million, while comparable store sales
decreased 1.9%.
4LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
2. Business of the Company [Cont’d]
2.2 Description
2.2.1 Profile
Le Château is a leading Canadian specialty retailer offering a broad array of contemporary
fashion apparel, accessories and footwear to style-conscious women and men. Our brand’s
success is built on quick identification of and response to fashion trends through our design,
product development and vertically integrated operations.
Le Château’s brand name clothing is largely designed and developed within its vertically
integrated operations. Le Château brand merchandise is sold exclusively through its 211 retail
locations located in Canada. In addition, 4 stores license the Le Château brand and concept in the
Middle East. Le Château’s web based marketing is further broadening the Company’s customer
base among internet shoppers in both Canada and the United States.
Le Château, committed to research, design and product development, manufactures
approximately 30% of the Company’s apparel in its own Canadian production facilities.
2.2.2 The Retail Network
The Company leases store locations both in shopping malls and in downtown areas where
pedestrian traffic is heavy. The following table summarizes the geographic distribution of Le
Château stores, as at January 30, 2016.
Province Stores Square Footage
Ontario 68 381,621
Québec 65 356,518
Alberta 27 163,539
British Columbia 22 125,259
Manitoba 8 39,998
Saskatchewan 7 29,957
Nova Scotia 5 25,251
New Brunswick 5 20,738
Newfoundland 3 15,314
Prince Edward Island 1 3,480
Total Le Château stores 211 1,161,675
5LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
2. Business of the Company [Cont’d]
Of the $236.9 million in total sales for the fiscal year ended January 30, 2016, stores situated in
Canada accounted for $235.8 million, or 99.6% of consolidated sales, while the store situated in
the United States accounted for $1.1 million or 0.4% of sales. Ontario accounted for 34% of total
sales, while Québec accounted for 26% of the Company’s sales.
Over the past few years, the retail landscape has evolved and consumer shopping habits have
changed significantly with e-commerce. In light of this evolution, the high concentration of
stores in large urban markets – a successful model in the pre-digital world – is no longer
required. Consequently, in light of these changes and situation, the Company's strategy is to
continue to recalibrate its retail network and close underperforming stores.
Lease expirations, excluding options to renew, are as follows: 39 leases are set to expire in fiscal
2016-2017, and the remainder expire in calendar years ranging from 2017 to 2025. In the normal
course of business, the Company is continually looking for promising locations to strengthen its
market penetration. Store performance is analyzed regularly. When a store does not meet
Company growth criteria, and when corrective measures are not effective, the store in question is
closed, usually when the lease for the location expires.
During the year ended January 30, 2016, the Company closed 11 stores considering its strategy
to continue to recalibrate its retail network and close underperforming stores. The distribution of
store openings and closings over the past three fiscal years has been as follows:
Fiscal Fiscal Fiscal
2015-2016 2014-2015 2013-2014
Canada
Openings 0 1 1
Closings – 10 –8 –7
Net Change – 10 –7 –6
Number of stores in Canada 211 221 228
U.S.
Openings 0 0 0
Closings –1 0 0
Net Change –1 0 0
Number of stores in the U.S. 0 1 1
Total number of stores 211 222 229
6LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
2. Business of the Company [Cont’d]
Breakdown of sales according to type of merchandise (as a percentage of total retail sales):
Fiscal Fiscal Fiscal
2015-2016 2014-2015 2013-2014
% % %
Ladies’ Clothing 58.6 57.2 56.8
Men’s Clothing 16.7 17.1 17.5
Footwear 12.7 12.0 11.3
Accessories 12.0 13.7 14.4
100.0 100.0 100.0
Le Château believes that its stores are a direct link to the customer. It is, therefore, vital that the
shop atmosphere reflects the dynamism, energy, and style that Le Château symbolizes.
Customers are not just buying clothes, but endorsing the Le Château brand image. The Company
endeavours to make each location look and feel more like a privately owned street boutique,
reflecting the uniqueness of both the market and its clothing. The store decor is a way of
enhancing the merchandise, creating confidence in the product and effectively connecting the
consumer with the brand. Shop personnel, an integral part of a store’s ambiance, further
strengthen the Le Château image, and, for this reason, the Company continues to prioritize and
nurture a more informed, empowered and ultimately more dynamic staff.
In October 2011, the Company introduced its first new concept store with a gradual rollout plan
to the top-tier markets and malls. New concept stores are designed to provide an elevated
experience consistent with the evolving brand through more sophisticated materials, furniture
and fixtures. As of January 30, 2016, the new concept has now been rolled out to 20 stores.
For the year ended January 30, 2016, the Company invested approximately $9.1 million in
capital expenditures, of which $5.6 million was for the renovation of 5 existing stores, with the
balance used primarily for investments in information technology and infrastructure. By
comparison, capital expenditures in the previous year were $8.5 million, of which $7.4 million
was for the opening of 1 new store and the renovation of 5 existing stores, with the balance used
primarily for investments in information technology and infrastructure.
7LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
2. Business of the Company [Cont’d]
The pace of the renovation program depends on the Company’s ongoing financial results.
Projected capital expenditures for fiscal 2016-2017 are approximately $7.5 to $8.0 million, of
which approximately $4.0 to $4.5 million is intended to be used for the renovation of 3 to 5
existing stores and $3.5 million for investments in information technology and infrastructure.
Management expects to be able to continue financing the Company’s activities and most of its
capital expenditures through cash flow from operations and/or long-term debt. If necessary, it
can draw upon its asset based credit facility of up to $80.0 million with Wells Fargo Capital
Finance Corporation Canada (previously GE Capital Canada), which came into effect on April
25, 2012 and was renewed on June 5, 2014 for a three-year term. The asset based credit facility
is collateralized by the Company’s cash, cash equivalents, marketable securities, credit card
balances in transit and inventories, as defined in the agreement. The facility consists of revolving
credit loans, which include both a swing line loan facility limited to $15.0 million and a letter of
credit facility limited to $15.0 million. Further details regarding the facility are set out in the
Company's Management's Discussion and Analysis for fiscal 2015-2016 which is available at the
Company’s profile on www.sedar.com.
On April 1, 2015, June 22, 2015 and January 15, 2016, the Company borrowed $5.0 million,
$15.0 million and $10.0 million, respectively, from a company that is directly controlled by a
director of the Company. Such financings are in the form of secured loans which bear a variable
rate of interest equal to the lesser of (i) the prime rate of the Royal Bank of Canada multiplied by
two and (ii) 7.5% and are repayable at maturity on January 31, 2020. Subject to the terms of its
revolving credit facility, the Company may prepay the loan, in whole or in part, at any time
without premium or penalty.
These funds provided the Company with additional capital and financing flexibility, with
proceeds being used primarily for working capital purposes, including the financing of
expenditures related to the Company’s store renovation program.
The loans are secured by all the Company’s assets and are subordinated in terms of ranking and
repayment to the Company’s $80.0 million revolving credit facility.
8LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
2. Business of the Company [Cont’d]
2.2.3 Manufacturing
DESIGN AND PRODUCT DEVELOPMENT
Fashion design has always been one of Le Château’s major strengths and management
recognizes the need to maintain and build upon this. In order to satisfy the specific needs of its
customers, the Company designs and develops entire collections of clothing, footwear and
accessories to be sold under its own “Le Château” label. The Company’s fashion, design and
manufacturing departments contain the essential “Research and Development” ingredients
needed for brand building. Le Château maintains its awareness of changing fashions through a
program of in-depth research of world-wide fashion trends. The Company’s in-house design
capability allows it to adapt these trends to the needs of its demographic market in a timely
manner. Thus, the Company is able to offer clothing, footwear and accessories that are at the
forefront of changing fashions. Le Château’s continual brand appeal is the result of close links
between designing, buying, manufacturing and selling – a quick response to market demands.
MANUFACTURING
Le Château’s vertically integrated approach makes it unique, as a major retailer in Canada that
not only designs and develops, but also manufactures its own brand name clothing. The
Company’s state-of-the-art production facilities, which include computer assisted design
(“CAD”)/computer assisted manufacturing (“CAM”) systems and five robotic cutting systems,
have long provided it with several key competitive advantages – short lead times and flexibility;
improved cost control; the ability to give its customers what they want, when they want it;
allowing the Company to remain connected to the market throughout changing times.
Le Château manufactures its exclusively designed apparel at its own 60,000 square foot leased
facilities or arranges for the manufacture of these products through other suppliers in Canada and
abroad. Goods manufactured by Le Château are cut in its facilities in Montreal and then sent out
to be assembled and sewn by independent contractors in the provinces of Québec and Ontario.
The goods are quality controlled throughout the manufacturing process and are sent to the
Company’s distribution facility for final quality inspection before being shipped to stores.
9LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
2. Business of the Company [Cont’d]
Le Château’s internal manufacturing process is comprised of the following steps:
design;
selecting and buying fabric and trimmings;
sample making;
pattern making, marking and grading;
fabric cutting; and
final quality control inspections.
As with many apparel manufacturers today, Le Château contracts its sewing needs out to various
third parties. The Montreal area is one of North America’s largest centres of apparel
manufacturing. Hence, Le Château’s access to Montreal’s large supply of manufacturing
capacity and skilled apparel workers allows the Company to manufacture locally in a cost-
effective manner. Of the approximately 30 subcontractors used by Le Château for garment
construction and stitching, none accounts for more than 15% of the Company’s production.
The Company’s manufacturing process makes use of state-of-the-art computerized equipment
for:
making patterns using CAD technology;
grading patterns using CAM technology;
optimizing the use of raw materials;
embroidering patterns on fabrics;
spreading fabric for cutting; and
robotic cutting of fabrics.
10LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
2. Business of the Company [Cont’d]
2.2.4 Sources of Supply
In addition to manufacturing goods in its own facility, Le Château also buys from other Canadian
manufacturers, imports goods directly, and buys from Canadian importers. By managing these
four elements according to market developments, the Company maximizes its operating
flexibility. The Company’s sources of supply include over 300 companies which are located in
Canada, the United States, Europe and the Far East. The Company has a diversified network of
supplier relationships, with its largest suppliers accounting for less than 10% of the Company’s
annual purchases.
The following table indicates the breakdown of Le Château’s clothing merchandise by source:
Fiscal Fiscal Fiscal
2015-2016 2014-2015 2013-2014
% % %
Manufacturing 28 29 35
Imports 70 70 64
Canadian suppliers 2 1 1
100 100 100
Le Château has traditionally preferred to manufacture its apparel in-house, because it gives the
Company the best combination of control, flexibility and speed to respond to market changes.
However, the Company adjusts the proportion of its apparel manufactured by other Canadian
companies when demand surges unexpectedly and/or the cost of doing so is favourable. In
general, Le Château prefers to manufacture domestically to take advantage of the ability to both
test products and come to market quickly thereafter.
2.2.5 Human and Material Resources
As at January 30, 2016, Le Château employed 2,418 employees, of whom 1,338 were full time
employees and 1,080 were part time employees.
The Company considers its employee relations to be highly satisfactory.
11LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
2. Business of the Company [Cont’d]
2.2.6 Marketing Strategy
Since 2012, in response to significant new competition, the Company embarked on a major
product repositioning and rebranding project. In conjunction with the project, the Company
initiated the store renovation program described above and, in August 2015, launched a
marketing campaign across Canada in collaboration with Sid Lee, which led to the "Le Chateau
of Montreal" brand refreshing. The campaign combined TV, billboards and social media, and
raised brand awareness. Consumers rediscovered the Company's brand and products, and the
Company believes this will have a sustainable impact. Le Château’s marketing strategy is based
on selecting the right merchandise and offering appropriate quantities at optimal prices in order
to maximize profitability. In order to accomplish this, Le Château conducts extensive market
testing of its merchandise on an ongoing basis. The Company also relies extensively on its point
of sale (“POS”) system, which collects sales information for each store and for each product by
size, colour and style. Management uses this information on a daily basis to decide on upcoming
orders, and depending on market conditions, whether to manufacture merchandise in-house,
import the goods or buy them on the domestic market.
Merchandise quality is also an important element of the Company’s marketing strategy. The
Company has quality controls in place to ensure that the price-to-quality ratio of its merchandise
is satisfactory to its customers.
Le Château has fully embraced the potential of the Internet, which has increasingly become a
complementary marketing channel for the Company. The Company’s on-line presence via its
web site and social media is allowing for increased sales through improved communication with
the public and existing customers.
Le Château’s fully networked management information systems provide integration of
merchandising, POS, manufacturing and financial systems. The Company’s vertically integrated
approach relies on these systems to achieve cost efficiencies and improve responsiveness to
changing market trends and a more demanding consumer. Le Château invests continually in
information technology, a key to maintaining its position as a leading provider of fashion.
2.2.7 Intangible Rights
The Company is the registered owner of approximately 32 active trademarks in Canada, 2 active
trademarks in the United States and 96 additional active trademarks elsewhere in the world.
The Company is also in the process of registering 9 trademarks in Canada, 1 trademark in the
United States and 12 additional trademarks elsewhere in the world. The Company considers that
some of its registered trademarks have significant value in the marketing of its merchandise.
12LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
2. Business of the Company [Cont’d]
2.2.8 Competition
In Le Château’s core business of avant-garde clothing, the Company competes with one-store
specialty boutiques as well as with retail specialty chains and fashion department stores, many of
which have strong online presence in addition to physical stores.
As compared with the one-store specialty boutiques, Le Château believes that it can offer
considerably more selection and better prices due to its in-house manufacturing facilities and its
larger resources to research emerging trends. Le Château also benefits from a strong brand name
and a well-researched store concept that enhances the look of its clothing and makes it easier for
customers to find the items they are looking for.
As compared with other retail chains, Le Château offers an exclusive selection of avant-garde
clothing and an excellent price-to-quality ratio.
Overall, management believes that Le Château has the assets required to retain its niche in the
Canadian retail clothing market. These include: appropriate systems and management expertise
to react quickly to market trends, a well defined and distinct retail concept, a strong brand name,
flexible manufacturing operations and a new store format that suits the tastes of today’s
consumers.
2.2.9 Seasonal Variations
The Company’s business is seasonal in nature. Retail sales are traditionally higher in the fourth
quarter due to the holiday season. In addition, fourth quarter earnings results are usually reduced
by post holiday sale promotions.
2.3 Risk Factors
A discussion of the risks and uncertainties to which Le Château is subject is presented under the
heading “Risks and Uncertainties” of the Company's most recent annual Management's
Discussion and Analysis and is incorporated by reference herein and may be found on Sedar at
www.sedar.com. See the heading “Caution regarding forward-looking statements” on page 2 of
this Annual Information Form for a discussion of risks associated with forward-looking
statements.
13LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
3. Dividends
The Company has not declared any cash dividends on the Class A and Class B shares for the 3
most recently completed fiscal years.
At the Board of Directors meeting held on December 9, 2011, the Company decided not to
declare a quarterly dividend in order to provide maximum operational flexibility and in the long-
term interest of shareholders. The Company’s asset based credit facility requires it to comply
with certain non-financial covenants, including restrictions with respect to the payment of
dividends.
The Class A shareholders are entitled to a non-cumulative preferential dividend of $0.0125 per
share, after which the Class B shareholders are entitled to a non-cumulative dividend of $0.0125
per share; any further dividends declared in a fiscal year must be declared and paid in equal
amounts per share on all the Class A and Class B Shares then outstanding without preference or
distinction.
14LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
4. Description of Capital Structure
The authorized share capital of the Company consists of an unlimited number of Class A
subordinate voting shares (“Class A Shares”), an unlimited number of Class B voting shares
(“Class B Shares”), an unlimited number of first preferred shares issuable in series (“First
Preferred Shares”), an unlimited number of second preferred shares issuable in series (“Second
Preferred Shares”) and an unlimited number of third preferred shares issuable in series (“Third
Preferred Shares”). As at April 28, 2016, there were 25,403,762 Class A Shares, 4,560,000 Class
B Shares and no First Preferred Shares, Second Preferred Shares or Third Preferred Shares
issued and outstanding.
Class A Shares. Each Class A Share entitles the holder thereof to one vote per share, except if the
Company proposes to sell, lease or exchange all or substantially all of its assets or to distribute
its assets for the purpose of winding up its affairs, in which case the Class A Shares shall entitle
the holder to 10 votes per share. Subject to the prior rights of the holders of the Preferred Shares,
the holders of Class A Shares shall be entitled, if and when declared by the directors, to a non-
cumulative preferential dividend in each fiscal year equal to $0.0125 per share. Subject to the
prior rights of the holders of the Preferred Shares, in the event of the liquidation, dissolution or
winding-up of the Company, the holders of the Class A Shares shall be entitled to receive, before
any distribution of any part of the assets of the Company among holders of any other shares, an
amount equal to all preferential dividends declared thereon and still unpaid. Each Class A Share
shall be converted into one Class B Share if at any time Herschel H. Segal or any corporation
controlled directly or indirectly by him ceases to be the beneficial owner, directly or indirectly,
and with full power to exercise in all circumstances the voting rights attached to such shares, of
shares of the Company having attached thereto more than 50% of the votes attached to all
outstanding shares of the Company. If there is an accepted or completed offer for more than 20%
of the Class B Shares or an accepted or completed offer to more than 14 holders thereof at a
price in excess of 115% of their market value (as defined in the Articles of the Corporation),
each Class A Share will be, at the option of the holder, converted into one Class B Share for the
purposes of accepting such offer, unless at the same time an offer is made to all holders of the
Class A Shares for a percentage of such shares at least equal to the percentage of Class B Shares
which are the subject of the offer and otherwise on terms and conditions not less favourable.
15LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
4. Description of capital structure [Cont’d]
Class B Shares. Each Class B Share entitles the holder thereof to 10 votes per share. After the
non-cumulative preferential dividend has been paid to the Class A Shares, the holders of Class B
Shares shall be entitled, if and when declared by directors, to a non-cumulative preferential
dividend in such fiscal year equal to $0.0125 per share. Any further dividends declared after the
non-cumulative preferential dividend has been paid to Class B Shares shall be paid in equal
amounts per share on all the Class A Shares and all the Class B Shares without preference or
distinction. In the event of the liquidation, dissolution or winding-up of the Company, after all
unpaid declared preferential dividends have been paid to the Class A Shares, the holders of Class
B Shares shall be entitled to receive, before any distribution of any part of the assets of the
Company among holders of any other shares, an amount equal to all preferential dividends
declared thereon and still unpaid. Thereafter, the Class A Shares and Class B Shares shall
participate equally, share for share, with respect to any further distribution of any of the assets of
the Company. The holders of the Class B Shares shall be entitled at any time and from time to
time to convert their Class B Shares into Class A Shares on the basis of one Class A Share for
each Class B Share converted. Except for the issue of Class B Shares upon the conversion of any
Class A Shares, no Class B Shares may be issued by the Company at any time without the prior
approval of the holders of the Class A Shares given at least a majority of the votes cast at a
meeting of the holders thereof.
In the event of any subdivision or consolidation of the Class A Shares or the Class B Shares, the
Shares of the other class will be similarly subdivided or consolidated and their attributes will
remain the same.
First, Second and Third Preferred Shares. The shares of each class of the Preferred Shares may
be issued from time to time in one or more series, the terms of each series including the number
of shares, the designation, rights, privileges, restrictions and conditions to be determined by the
Board of Directors of the Company by resolution. With respect to payment of dividends and
return of capital, the First Preferred Shares shall rank prior to the Second and Third Preferred
Shares, the Class A Shares and Class B Shares; the Second Preferred Shares shall rank prior to
the Third Preferred Shares, the Class A Shares and Class B Shares; and the Third Preferred
Shares shall rank prior to the Class A Shares and Class B Shares. There shall be no voting rights
attached to the Preferred Shares.
Changes in the provisions attached to each class of Preferred Shares as a class or to any series
thereof as a series, to the Class A Shares as a class or to the Class B Shares as a class require the
affirmative vote of two thirds of the votes cast at a meeting of the holders of the shares of the
class, classes or series affected.
16LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
5. Market for Securities
The Class A Shares of Le Château are listed on the Toronto Stock Exchange under the symbol
“CTU.A”.
The price ranges and volume of Class A Shares of Le Château traded on the Toronto Stock
Exchange on a monthly basis from February 2015 to and including January 30, 2016 was as
follows:
Month High Low Volume Traded
January 2016 ................ 0.27 0.17 62,527
December 2015 ............ 0.31 0.25 170,788
November 2015 ............ 0.48 0.27 116,898
October 2015 ................ 0.50 0.26 1,187,220
September 2015 ........... 0.58 0.43 16,276
August 2015 ................. 0.48 0.36 44,039
July 2015 ...................... 0.55 0.44 15,650
June 2015 ..................... 0.69 0.46 33,820
May 2015 ..................... 0.68 0.47 37,611
April 2015 .................... 0.77 0.51 71,003
March 2015 .................. 0.61 0.51 54,751
February 2015 .............. 0.70 0.61 50,548
17LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
6. Directors and Officers
The names, province and country of residence, position held with the Company and principal
occupations of the Board of Directors and executive officers of the Company as at April 28,
2016 appear in the following table.
Director
Name Principal Occupation Since
Jane Silverstone Segal (1) Chairman of the Board, Chairman of the Board and Chief 1983
(Québec, Canada) Chief Executive Officer and Director Executive Officer of the Company
Emilia Di Raddo (1) President and Director President of the Company 2000
(Québec, Canada)
Herschel H. Segal (1) Director President of 8780625 Canada Inc, 1969
(Québec, Canada) and 125387 Canada Inc., affiliated
holding companies
Norman Daitchman (2) (3) (4) Director Consultant 2011
(Québec, Canada)
David Martz (1) (2) (3) (4) Director President of 2986698 Canada Inc. 2002
(Québec, Canada) (personal holding company)
Michael Pesner (2) (3) (4) Lead Director President, Hermitage Canada 2012
(Québec, Canada) Finance Inc.
Franco Rocchi Senior Vice-President, Sales and Senior Vice-President, Sales and ___
(Québec, Canada) Operation Operation, of the Company
Johnny Del Ciancio Vice-President, Finance and Secretary Vice-President, Finance and ___
(Québec, Canada) Secretary of the Company
Catriona Belsham Vice-President, Design & Vice-President, Design & ___
(Québec, Canada) Merchandising, Ladies Merchandising, Ladies, of the
Company
Courtenay Fishman Vice-President, Creative Direction Vice-President, Creative Direction, ___
(Québec, Canada) of the Company
Wendy Stapleford Vice-President, Human Resources Vice-President, Human Resources, ___
(Ontario, Canada) of the Company
Richard Gill Vice-President, Information Vice-President, Information ___
(Québec, Canada) Technology Technology, of the Company
Paolo Volpe Vice-President, Marketing Vice-President, Marketing, of the ___
(Ontario, Canada) Company
Ronna Kaback Vice-President, Ladies Casualwear Vice-President, Ladies Casualwear, ___
(Québec, Canada) of the Company
Angie Park Vice-President, Dressy Dresses Vice-President, Dressy Dresses, of ___
(Québec, Canada) the Company
(1) Member of the Executive Committee of the Board.
(2) Member of the Corporate Governance Committee of the Board.
(3) Member of the Audit Committee of the Board.
(4) Member of Compensation Committee of the Board.
18LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
6. Directors and Officers [Cont’d]
Except as otherwise indicated below, each of the foregoing persons has held the principal
occupation set forth next to his or her name for the preceding five years. Catriona Belsham was,
prior to July, 2012, Design Director of the Company. Courtenay Fishman, was prior to July,
2012, Director, E-Commerce Creative Direction of the Company and, prior to March, 2010,
Design Director of the Company. Wendy Stapleford was, prior to July, 2012, Director of Human
Resources of the Company. Richard Gill was prior to September 2014, Director of Information
Technology of the Company. Paolo Volpe was prior to January 2015, Director of Marketing of
the Company. Ronna Kaback was prior to January 2015, Director of Ladies Casualwear of the
Company and prior to July 2012, Ladies Buyer of the Company. Angie Park was prior to January
2015, Design Director of the Company, prior to June 2011, Senior Designer of the Company and
prior to August 2010, Designer of the Company.
The term of each director in office expires at the close of the annual meeting of shareholders,
unless such director is re-elected at such meeting.
As a group, the directors and executive officers of the Company beneficially own, directly or
indirectly, or have control or direction over approximately 12,017,053 Class A Shares
representing approximately 47% of the total Class A Shares and 4,560,000 Class B Shares
representing 100% of the total Class B Shares. The information as to shares beneficially owned,
controlled or directed, not being within the knowledge of the Company, has been furnished by
the respective directors and executive officers individually.
To the knowledge of the directors and officers of the Company, except as indicated below, none
of the directors and executive officers:
a) is, as at the date of this Annual Information Form or has been, within the ten years before
the date of this Annual Information Form, a director or chief executive officer or chief
financial officer of any company, that, while that person was acting in that capacity:
(i) was the subject of a cease trade or similar order or an order that denied the
relevant company access to any exemption under securities legislation, for a
period of more than 30 consecutive days that was issued while the director or
executive officer of the Company was acting in the capacity as director, chief
executive officer or chief financial officer;
(ii) was subject to an event that resulted, after the director or executive officer ceased
to be a director or chief executive officer or chief financial officer, in the
company being the subject of a cease trade or similar order or an order that denied
the relevant company access to any exemption under securities legislation, for a
period of more than 30 consecutive days; or
19LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
6. Directors and Officers [Cont’d]
(iii) or within a year of that person ceasing to act in that capacity, became bankrupt,
made a proposal under any legislation relating to bankruptcy or insolvency or was
subject to or instituted any proceedings, arrangement or compromise with
creditors or had a receiver, receiver manager or trustee appointed to hold its
assets; or
b) has, within the ten years before the date of this Annual Information Form, become
bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or
become subject to or instituted any proceedings, arrangement or compromise with
creditors, or had a receiver, receiver manager or trustee appointed to hold its assets.
On May 25, 2011, Mr. Michael Pesner resigned from the board of directors of Prestige Telecom
Inc. In November 2011, Prestige Telecom Inc. filed a notice of intention to file a proposal to its
creditors under the Bankruptcy and Insolvency Act (Canada). On March 29, 2012, Prestige
Telecom Inc. received a final order from the Court approving the proposal, which had been
approved at the meeting of creditors which took place on March 6, 2012.
7. Transfer Agents and Registrars
Computershare Investor Services Inc. is the transfer agent and registrar for the Company’s Class
A Shares and Class B Shares. The registers of transfers of each class of securities are located at
its principal offices in Montreal and Toronto.
8. Legal Proceedings
The Company is not subject to any legal proceedings that management believes could have a
material impact on its business or financial condition.
The Company is not aware of any penalties or sanctions imposed against the Company by a court
relating to securities legislation or by a securities regulatory authority during the Company's
fiscal year ended January 30, 2016, or any other penalties or sanctions imposed by a court or
regulatory body against the Company that would likely be considered important to a reasonable
investor in making an investment decision, and the Company has not entered into any settlement
agreements with a court relating to securities legislation or with a securities regulatory authority
during the fiscal year ended January 30, 2016.
20LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
9. Interest of Management and Others in Material
Transactions
Except as disclosed in this Annual Information Form, to the Company’s knowledge, no director,
executive officer, person that beneficially owns, or controls or directs, directly or indirectly,
more than 10% of any class of its outstanding voting securities or any of their respective
associates or affiliates has any material interest, direct or indirect, in any transaction within the
three years prior to the date of this Annual Information Form or during the current financial year,
or any proposed transaction which has materially affected or will materially affect the Company.
10. Interest of Experts
Ernst & Young LLP have prepared the independent auditors’ report in respect of the Company’s
consolidated financial statements for the fiscal year ended January 30, 2016. Ernst & Young LLP
is independent of Le Château within the meaning of the Code of Ethics of the Ordre des
comptables professionnels agréés du Québec.
21LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
11. Audit Committee
11.1 The Audit Committee’s Charter
The Charter of the Audit Committee is attached to this Annual Information Form as Schedule A.
11.2 Composition of the Audit Committee
The Audit Committee is currently composed of Messrs. Norman Daitchman, David Martz and
Michael Pesner. Each of the members of the Audit Committee is (i) independent and (ii)
financially literate, within the meaning of National Instrument 52-110 – Audit Committees.
11.3 Relevant Education and Experience
Norman Daitchman FCPA, FCA, obtained a Bachelor of Commerce degree from McGill
University in 1968 and joined the accounting firm of Zittrer, Siblin, Stein, Levine where he was
appointed a Partner in May 1977. He was a Partner of that firm when it merged with Ernst &
Young in 1991. As an audit partner until his retirement at the end of June 2008, Mr. Daitchman
provided accounting, auditing and financial reporting consultation services, dealing with issues
relating to both private companies as well as clients with securities that are publicly traded in
Canada, including the complex issues that result from public reporting obligations. He
participated at the Canadian Institute of Chartered Accountants in the setting of accounting
standards as a member of the Accounting Standards Board and the Emerging Issues Committee.
He also served as a member of the Inspection Committee and the Disciplinary Committee of the
Ordre des comptables agréés du Québec. From April 2000 until February 2013, Mr. Daitchman
was a member of the Auditor General of Canada’s Independent Advisory Committee which
provides advice to the Auditor General on his/her audits of, and reporting issues related to, the
financial statements of the Government of Canada, Crown corporations and other public sector
entities. Mr. Daitchman obtained the title of Fellow of the Ordre des comptables agréés du
Québec in 1994. In March 2013, he was appointed to the Board of Directors of the Sir Mortimer
B. Davis Jewish General Hospital. Mr. Daitchman is a member of the audit committee of the Sir
Mortimer B. Davis Jewish General Hospital and chairs the audit committee of the Montreal
Jewish Community Foundation. In October 2013, Mr. Daitchman was appointed to the audit
committee of Federation CJA (Montreal). In May 2015, Mr. Daitchman was appointed to the
audit committee of United Israel Appeal of Canada Inc. and United Jewish Appeal of
Canada Inc.
22LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
11. Audit Committee [Cont’d]
David Martz holds a Bachelor of Science degree from McGill University as well as an MBA
from McMaster University with a major in finance. He was employed at Steinberg Inc. in
various financial and executive capacities from 1971 to 1983. From 1983 to 2002, he was an
executive with the Aldo Group, an international footwear and accessory retailer based in
Montreal, where he was Vice President and Corporate Secretary at the time of his departure. He
also served as a Director of the Retail Council of Canada from 1993 to 2002. Since then, Mr.
Martz has been the principal of Martz Management Inc. executing management consulting
assignments in both the corporate and “not for profit” sectors. He currently sits on several private
company advisory boards. In the not for profit sector, he is a Director of Federation CJA
(Montreal), as well as serving on its Budget and Finance Committee and Audit Committee. In
addition, he serves as a Director of the Montreal Jewish Community Foundation, as well as a
Director of Hope and Cope, a cancer care affiliate of the Jewish General Hospital.
Michael Pesner, CPA, CA, has been President of Hermitage Canada Finance Inc. since 2002, a
firm specializing in financial advisory services. He was previously a partner in financial advisory
services at KPMG LLP, in Montreal, specializing in corporate finance, mergers and acquisitions,
divestitures, restructuring and corporate recovery in Canada. Mr. Pesner holds a Bachelor of
Commerce degree in Finance and Administration from McGill University as well as a Bachelor
of Arts degree from Sir George Williams University. Mr. Pesner is also a Chartered Professional
Accountant, a Licensed Insolvency Trustee, and a Certified Insolvency and Restructuring
Professional. Mr. Pesner is a director of the following public companies: Richmont Mines Inc.
listed on NYSE MKT and the Toronto Stock Exchange, Quest Rare Minerals Ltd. listed on the
Toronto Stock Exchange, Alexandria Minerals Corporation, listed on the TSXV, and Wi2Wi
Inc., listed on the TSXV.
11.4 External Auditor Service Fees
The Company’s external auditor, Ernst & Young LLP, has billed the following fees in each of
the last two fiscal periods:
11.4.1 Audit Fees
The aggregate fees billed by the Company’s external auditor in each of the last two fiscal years
for audit services performed in connection with the annual audit and quarterly reviews of the
Company’s financial statements was $303,500 for fiscal 2015-2016 and $330,500 for fiscal
2014-2015.
23LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
11. Audit Committee [Cont’d]
11.4.2 Audit-Related Fees
The aggregate fees billed by the Company’s external auditor for audit-related advisory services
that are reasonably related to the performance of the annual audit and quarterly reviews of the
Company’s financial statements (and not included in the audit fees above) was $16,000 for fiscal
2015-2016 and $21,700 for fiscal 2014-2015. The audit related services for fiscal 2015-2016 and
2014-2015 related primarily to assistance with IT advisory services.
11.4.3 Tax Fees
The aggregate fees billed by the Company’s external auditor in each of the last two fiscal years
for Canadian and U.S. tax work not otherwise included in the audit fees and audit-related fees
above was $24,182 for fiscal 2015-2016 and $66,748 for fiscal 2014-2015. The tax fees relate to
the preparation of the Company’s tax returns as well as tax research and advisory services.
11.4.4 All Other Fees
The aggregate fees billed by the Company’s external auditor for services performed and not
otherwise included in the audit fees, audit-related fees and tax fees above was $30,500 for fiscal
2015-2016 and $30,875 for 2014-2015. These fees related to the translation of the annual
financial statements, the quarterly financial statements, and other regulatory documents.
12. Additional Information
Additional information relating to the Company may be found on Sedar at www.sedar.com.
Additional information, including directors’ and officers’ remuneration and indebtedness,
principal holders of the Company’s securities and securities authorized for issuance under equity
compensation plans, if applicable, is contained in the Company’s information circular for its
most recent annual meeting of securityholders that involved the election of directors.
Additional financial information is provided in the Company’s consolidated financial statements
and management discussion and analysis for its most recently completed financial year.
24LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
SCHEDULE A
LE CHÂTEAU INC.
AUDIT COMMITTEE CHARTER
1. THE COMMITTEE
1.1 The audit committee of the Board shall have the purpose, constitution and responsibilities
set forth herein.
1.2 Certain Definitions – In this Charter:
(a) “Board” means the board of directors of the Company;
(b) “Chair” means the chairperson of the Committee;
(c) “Charter” means this written charter of the Committee and any such charter for
the Committee which the Board resolves from time to time shall be the charter of
the Committee, as amended from time to time;
(d) “Committee” means the audit committee of the Board;
(e) “Company” means Le Château Inc.;
(f) “Director” means a member of the Board;
(g) “MD&A” means Management’s Discussion & Analysis as contemplated in NI
51-102; and
(h) “External Auditor” means the Company’s independent auditor.
1.3 Interpretation – The provisions of this Charter are subject to the provisions of the by-laws
of the Company and to the applicable provisions of applicable legislation.
2. PURPOSE
2.1 Purpose – The primary purpose of the Committee is to assist Board oversight of:
(a) the integrity of the Company’s financial statements;
(b) the Company’s compliance with legal and regulatory requirements;
(c) the External Auditor’s qualifications and independence; and
(d) the performance of the External Auditor.
A-1LE CHÂTEAU INC.
ANNUAL INFORMATION FORM
FOR THE FISCAL YEAR ENDED JANUARY 30, 2016
3. CONSTITUTION AND FUNCTIONING OF THE COMMITTEE
3.1 Number of Members – The Committee shall consist of not fewer than three members,
each of whom shall be a Director.
3.2 Appointment and Removal of Members of the Committee
(a) Board Appoints Members. The members of the Committee shall be appointed by
the Board, having considered the recommendation of the Nominating Committee
of the Board.
(b) Annual Appointments. The appointment of members of the Committee shall take
place annually at the first meeting of the Board after a meeting of the shareholders
at which Directors are elected, provided that if the appointment of members of the
Committee is not so made, the Directors who are then serving as members of the
Committee shall continue as members of the Committee until their successors are
appointed.
(c) Vacancies. The Board may appoint a member to fill a vacancy which occurs in
the Committee between annual elections of Directors.
(d) Removal of Member. Any member of the Committee may be removed from the
Committee by a resolution of the Board.
3.3 Independence of Members – Each member of the Committee shall be independent for the
purposes of all applicable regulatory requirements, unless an exemption from such independence
requirements is available and the Board is of the opinion that the use of such exemption is in the
best interests of the Company and its shareholders.
3.4 Financial Literacy
(a) Financial Literacy Requirement. Each member of the Committee shall be
financially literate or must become financially literate within a reasonable period
of time after his or her appointment to the Committee.
(b) Definition of Financial Literacy. “Financially literate” means the ability to read
and understand a set of financial statements that present a breadth and level of
complexity of accounting issues that are generally comparable to the breadth and
complexity of the issues that can reasonably be expected to be raised by the
Company’s financial statements.
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