STRATEGIC INVESTMENTS

Cash Converters International Limited

At September 30, 2013, we owned 136,848,000 shares, or approximately 33%, of Cash Converters International, a publicly traded company headquartered in Perth, Australia. Cash Converters International franchises and operates a worldwide network of approximately 700 specialty financial services and retail stores that provide pawn loans, short-term unsecured loans and other consumer finance products, and buy and sell second-hand goods, with significant store concentrations in Australia and the United Kingdom. Those shares include 12,430,000 shares that we acquired in November 2012 for approximately $11.0 million in cash as part of a share placement. Our total investment in Cash Converters International was acquired between November 2009 and November 2012 for approximately $68.8 million.

We account for our investment in Cash Converters International using the equity method. Since Cash Converters International’s fiscal year ends three months prior to ours, we report the income from this investment on a three-month lag. Cash Converters International files semi-annual financial reports for its fiscal periods ending December 31 and June 30. Due to the three-month lag, income reported for our fiscal years ended September 30, 2013, 2012 and 2011 represents our percentage interest in the results of Cash Converters' operations from July 1, 2012 to June 30, 2013, July 1, 2011 to June 30, 2012 and July 1, 2010 to June 30, 2011, respectively. In fiscal 2013, 2012 and 2011 we recorded dividends from Cash Converters of $5.1 million, $4.4 million and $4.1 million, respectfully. Cash Converters’ accumulated undistributed after-tax earnings included in our consolidated retained earnings were $17.3 million at September 30, 2013.

Conversion of Cash Converters International’s financial statements into U.S. GAAP resulted in no material differences from those reported by Cash Converters following IFRS.

In its functional currency of Australian dollars, Cash Converters International’s total assets increased 32% from June 30, 2012 to June 30, 2013 and its net income improved 12% for the fiscal year ended June 30, 2013. The following table presents summary financial information for Cash Converters International’s most recently reported results after translation to U.S. dollars (using the exchange rate as of June 30 of each year for balance sheet items and average exchange rates for the income statement items for the periods indicated):



	As of June 30,
	2013		2012
	(in thousands)
Current assets	$	163,606	$	137,646
Non-current assets	153,279		129,274
Total assets	$	316,885	$	266,920
Current liabilities	$	95,757	$	45,392
Non-current liabilities	451		31,928
Shareholders’ equity	220,677		189,600
Total liabilities and shareholders’ equity	$	316,885	$	266,920



	Year ended June 30,
	2013		2012		2011
	(in thousands)
Gross revenues	$	280,059	$	241,924	$	184,315
Gross profit	183,368		162,598		126,628
Profit for the year (net income)	33,754		30,366		27,385

At September 30, 2013, the recorded balance of our investment in Cash Converters International, accounted for on the equity method, was $87.6 million. Because Cash Converters International publicly reports its financial results only semi-annually as of June 30 and December 31, the latest Cash Converters International figures available are as of June 30, 2013, at which point our equity in net assets of Cash Converters International was $71.3 million. The difference between the recorded balance and our equity in Cash Converters International’s net assets represents the $18.6 million of equity method goodwill, plus the cumulative difference resulting from Cash Converters International’s earnings, dividend payments and translation gains and losses since the dates of investment.

Albemarle & Bond Holdings, PLC

At September 30, 2013, we owned 16,644,640 ordinary shares of Albemarle & Bond, representing almost 30% of its total outstanding shares. Our total cost for those shares was approximately $27.6 million. Albemarle & Bond is primarily engaged in pawnbroking, retail jewelry sales, check cashing and lending in the United Kingdom. We account for the investment using the equity method.

Albemarle & Bond’s fiscal year ends three months prior to ours; therefore, we report the income from this investment on a three-month lag. Albemarle & Bond files semi-annual financial reports for its fiscal periods ending December 31 and June 30. Due to the three-month lag, income reported for our fiscal years ended September 30, 2013, 2012 and 2011 represents our percentage interest in the results of Albemarle & Bond’s operations from July 1, 2012 to June 30, 2013, July 1, 2011 to June 30, 2012 and July 1, 2010 to June 30, 2011, respectively. Albemarle & Bond has not yet released its fiscal 2013 financial statements; therefore, income reported for our fiscal year ended September 30, 2013 is based on management's best estimate of Albemarle & Bond's fiscal 2013 results.

On April 19, 2013, Albemarle & Bond announced that it expected profits for their full fiscal year (ending June 30, 2013) to be materially below market expectations, citing reduction in gold buying profit and pressures on its pawn loan business due to the challenging gold environment and increased competition. In addition Albemarle & Bond's Board of Directors announced that their CEO would step down earlier than planned. In early October 2013, Albemarle & Bond announced that discussions to underwrite an equity funding had failed and they were in ongoing discussions with their banks to negotiate covenants. The market price of Albemarle & Bond’s stock declined as a result of this information. Due to these events, we evaluated the economic and strategic benefits of continuing to hold this investment. Based on the review as of October 18, 2013, we determined that the fair value of this investment was less than its carrying value as of September 30, 2013 and that this impairment was other than temporary. As a result, we recognized an other than temporary impairment of $42.5 million ($28.7 million, net of taxes). This amount is included in impairment of investments in our consolidated statements of operations.

In fiscal 2013, 2012 and 2011, we received dividends from Albemarle & Bond of $3.3 million, $3.3 million and $3.2 million, respectively. Albemarle & Bond’s accumulated undistributed after-tax earnings included in our consolidated retained earnings were $26.6 million at September 30, 2013.

Conversion of Albemarle & Bond’s financial statements into U.S. GAAP resulted in no material differences from those reported by Albemarle & Bond following IFRS.

The table below summarizes the recorded value and fair value of each of these strategic investments at the dates indicated. These fair values for Albemarle & Bond at September 30, 2012 and Cash Converters International at September 30, 2012 and 2013 are considered Level 1 estimates within the fair value hierarchy of FASB ASC 820-10-50, and were calculated as (a) the quoted stock price on each company’s principal market multiplied by (b) the number of shares we owned multiplied by (c) the applicable foreign currency exchange rate at the dates indicated. We included no control premium for owning a large percentage of outstanding shares.

The fair value for Albemarle & Bond at September 30, 2013 is considered a Level 2 estimate within the fair value hierarchy of FASB ASC 820-10-50. We calculated the fair value based on (a) the quoted average stock price of Albemarle & Bond over the 18 days after September 30, 2013 multiplied by (b) the number of shares we owned multiplied by (c) the applicable foreign currency exchange rate as of the dates indicated during the post September 30, 2013 measurement date. We believe this 18 day measurement date allowed the market to react and adjust to the information released by the company the first week of October 2013, as previously mentioned, and therefore resulted in a reasonable fair value as of September 30, 2013.



	As of September 30,
	2013		2012
	(in thousands of U.S. dollars)
Albemarle & Bond:
Recorded value	$	9,439	$	51,812
Fair value	9,439		65,109
Cash Converters International:
Recorded value	$	87,645	$	74,254
Fair value	165,663		100,705