TSX Symbol FC.UN
TORONTO, May 3 /CNW/ - Firm Capital Mortgage Investment Trust (the "Trust") (TSX FC.UN), released today its financial statements for the first quarter ended March 31, 2007.
Net earnings for the first quarter ended March 31, 2007 increased to $3,358,608 from $2,994,467 for the same period last year. Basic net earnings per unit based on the weighted average number of units outstanding during the first quarter totaled $0.27 versus $0.24 last year. Net earnings represented an annualized return on weighted average Unitholders' equity of 11.22% per annum. This return on Unitholders' equity equates to 704 basis points per annum over the average One Year Government of Canada Treasury Bill yield for the quarter and is well in excess of the Trust's target yield objective of 400 basis points per annum over the One Year Treasury Bill yield.
As at March 31, 2007, the Trust's mortgage portfolio decreased slightly to $200,049,897 as compared to $208,102,557 as at December 31, 2006. The portfolio continued to be heavily concentrated in first mortgages. As at December 31, 2006, the average portfolio face interest rate was 9.53%. Management continues to reduce risk by syndicating investments to ensure that the Trust is not significantly exposed to any single mortgage investment.
The Trust, through its Mortgage Banker, Firm Capital Corporation, is a non-bank lender providing residential and commercial short-term bridge and conventional real estate finance, including construction, mezzanine and equity investments. The Trust's investment objective is the preservation of Unitholders' equity, while providing Unitholders with a stable stream of monthly distributions from investments. The Trust achieves its investment objectives by pursuing a strategy of growth through investments in selected niche markets that are under-serviced by large lending institutions. Lending activities to date continue to develop a diversified mortgage portfolio, producing a stable return to Unitholders.
Additional information about the Trust, including the Management's Discussion and Analysis relating to the financial statements, will be available on the SEDAR website at www.sedar.com.
NOTICE UNDER NATIONAL INSTRUMENT 51-102
National Instrument 51-102: Continuous Disclosure Requirements requires that these interim financial statements be accompanied by this notice which indicates that these financial statements have not been reviewed by the auditors of Firm Capital Mortgage Investment Trust.
Unaudited Financial Statements of
FIRM CAPITAL MORTGAGE
INVESTMENT TRUST
For the Three Months Ended March 31, 2007
FIRM CAPITAL MORTGAGE INVESTMENT TRUST
Balance Sheets
March 31, 2007, with comparative figures for December 31, 2006 and
March 31, 2006
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Mar. 31, Dec. 31, Mar. 31,
2007 2006 2006
(Unaudited) (Audited) (Unaudited)
-------------------------------------------------------------------------
Assets
Amounts receivable and prepaid
expenses $ 1,937,498 $ 2,074,690 $ 1,679,452
Mortgages (note 5) 200,049,897 208,102,557 180,436,235
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$201,987,395 $210,177,247 $182,115,687
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Liabilities and Unitholders' Equity
Liabilities:
Bank indebtedness (note 6) $ 28,949,810 $ 40,101,684 $ 46,114,209
Accounts payable and accrued
liabilities 877,128 571,991 461,035
Unearned income 283,524 305,607 342,868
Unitholder distribution
payable 957,401 - 942,982
Loans payable (note 7) 27,123,315 25,983,173 15,001,100
Convertible debenture
(note 8) 23,590,417 23,537,211 -
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$ 81,781,595 $ 90,499,666 $ 62,862,194
Unitholders' equity (note 9): 120,205,800 119,677,581 119,253,493
Issued and outstanding:
12,597,384 units (2006 - 12,573,090)
Commitments (note 4)
Contingent liabilities (note 15)
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$201,987,395 $210,177,247 $182,115,687
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See accompanying notes to financial statements.
FIRM CAPITAL MORTGAGE INVESTMENT TRUST
Unaudited Statements of Earnings
Three Months ended March 31, 2007
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3 Month 3 Month
Period Period
March 31, March 31,
2007 2006
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Interest and fees earned, net of Trust
Manager interest allocation (note 13) $ 4,853,468 $ 3,807,350
Less interest expense (note 14) 1,326,359 662,094
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Net interest and fee income 3,527,109 3,145,256
Expenses:
General and administrative 168,501 150,789
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168,501 150,789
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Net earnings for the period $ 3,358,608 $ 2,994,467
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Net earnings per unit (note 10)
Basic $ 0.267 $ 0.238
Diluted $ 0.257 $ 0.238
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See accompanying notes to financial statements.
FIRM CAPITAL MORTGAGE INVESTMENT TRUST
Statement of Unitholders' Equity
Three Months ended March 31, 2007
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March 31, Dec. 31, March 31,
2007 2006 2006
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(Unaudited) (Audited) (Unaudited)
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Trust units (note 9)
Balance, beginning of period $119,297,099 $119,055,455 $119,055,455
Proceeds from issuance of units 41,378 241,644 32,175
Public offering costs - - -
Unit based compensation - - -
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Balance, end of period $119,338,477 $119,297,099 $119,087,630
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Equity component of convertible
debenture(note 8)
Balance, beginning of period - -
Equity component of convertible
debenture issued 380,482 380,482 -
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Balance, end of period 380,482 380,482 -
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Cumulative earnings
Balance, beginning of period $ 53,289,186 $ 41,099,121 $ 41,099,121
Net earnings 3,358,608 12,190,065 2,994,467
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Balance, end of period $ 56,647,794 $ 53,289,186 $ 44,093,588
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Cumulative distributions to
unitholders
Balance, beginning of period $ 53,289,186 $ 41,099,121 $ 41,099,121
Distributions to unitholders 2,871,767 12,190,065 2,828,604
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Balance, end of period $ 56,160,953 $ 53,289,186 $ 43,927,725
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Total unitholders equity $120,205,800 $119,677,581 $119,253,493
Units issued and outstanding 12,597,384 12,593,549 12,573,090
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See accompanying notes to financial statements.
FIRM CAPITAL MORTGAGE INVESTMENT TRUST
Unaudited Statement of Cash Flows
Three Months ended March 31, 2007
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3 Month 3 Month
Period Period
March 31, March 31,
2007 2006
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Cash provided by (used in):
Operating activities
Net earnings for the period $ 3,358,608 $ 2,994,467
Net changes in non-cash items
Increase in allowance for loan losses - -
Implicit interest rate in excess of
coupon rate - convertible debenture 53,207 -
Decrease (increase) in amounts receivable
and prepaid expenses 137,190 (78,764)
Increase (decrease) in accounts payable
and accrued liabilities 1,262,537 970,553
Increase (decrease) in unearned income (22,083) 26,401
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4,789,459 3,912,657
Financing activities:
Proceeds from issuance of units 41,378 32,175
Proceeds from convertible debenture - -
Increase (decrease) in bank indebtedness (11,151,872) 6,641,792
Increase (decrease) in loans payable 1,140,142 7,696,653
Public offering costs - -
Debenture offering costs - -
Distributions to unitholders (2,871,767) (2,828,604)
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(12,842,119) 11,542,016
Investing activities:
Funding of mortgages (32,864,826) (36,637,090)
Discharge of mortgages 40,917,486 21,182,417
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8,052,660 (15,454,673)
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Increase in cash, being cash, beginning
and end of period $ - $ -
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Supplemental cash flow information
Interest paid (note 14) $ 903,362 $ 587,729
See accompanying notes to financial statements.
FIRM CAPITAL MORTGAGE INVESTMENT TRUST
Notes to Financial Statements
Three Months ended March 31, 2007
1. Oganization of Trust:
Firm Capital Mortgage Investment Trust (the "Trust") is a closed-end
trust created for the benefit of the unitholders, pursuant to the
Declaration of Trust dated July 13, 1999, as amended and restated.
Pursuant to the Declaration of Trust, the Trust's mortgage banker is
Firm Capital Corporation and the trust manager is FC Treasury
Management Inc.
2. Basis of Presentation:
The unaudited interim period financial statements were prepared in
accordance with Canadian generally accepted accounting principles
("GAAP") and follow the same accounting policies and methods of
application with those used in the preparation of the audited
financial statements for the year ended December 31, 2006, except as
indicated in Note 3. Under Canadian GAAP, additional disclosure is
required in annual financial statements and accordingly the interim
financial statements should be read together with the audited
financial statements and the accompanying notes included in Firm
Capital Mortgage Investment Trust's 2006 Annual Report.
3. Summary of significant accounting policies:
The Trust's accounting policies and its standards of financial
disclosure are in accordance with Canadian generally accepted
accounting principles ("GAAP").
(a) Mortgages
Mortgages are stated at fair value. Fair value is the amount of
consideration that would be agreed upon in an arm's length
transaction between knowledgeable, willing parties who are under
no compulsion to act. An allowance for loan losses is recorded
against the portfolio where fair value is determined to be less
than the original value.
(b) Convertible debentures
The Trust's convertible debentures are classified into debt and
equity components. The equity component represents the estimated
value of the conversion rights of the holders.
(c) Revenue recognition
(i) Interest and fee income
Interest income is accounted for on the accrual basis, and
is recorded net of the Trust Manager interest spread
described in note 13. Commitment fees received are amortized
over the expected term of the mortgage.
(ii) Non-conventional mortgages:
Special profit participations earned by the Trust on non-
conventional mortgages are recognized only once the receipt
of such amounts is certain.
(d) Use of estimates:
The preparation of financial statements requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the year. Actual
results could differ from those estimates.
(e) Unit-based compensation:
The Trust has unit-based compensation plans (i.e. incentive
option plan) which are described in note 9. The Trust accounts
for its unit-based compensation using the fair value method,
under which compensation expense is measured at the grant date
and recognized over the vesting period.
(f) Basic and diluted net earnings per unit:
Basic net earnings per unit is computed by dividing net earnings
for the period by the weighted average number of units
outstanding during the reporting period. Diluted net earnings per
unit is computed similarly to basic net earnings per unit,
except that the weighted average number of shares outstanding is
increased to include additional shares from the assumed exercise
of incentive option units and the conversion of the convertible
debenture, if dilutive. The number of additional units is
calculated by assuming that outstanding incentive options were
exercised and that proceeds from such exercises were used to
acquire units at the average market price during the reporting
period. The additional units would also include those units
issuable upon the assumed conversion of the convertible
debenture, with an adjustment to net earnings for the period to
add back any interest paid to the debenture holders. These common
equivalent units are not included in the calculation of the
weighted average number of units outstanding for diluted earnings
per unit when the effect would be anti-dilutive.
4. Changes in accounting policy:
Effective January 1, 2007, the Trust adopted the new accounting
standards issued by the Canadian Institute of Chartered Accountants,
relating to financial instruments. In accordance with this new
standard, the Trust has classified its financial assets as one of the
following: (i) held-to-maturity, (ii) loans and receivables, (iii)
held for trading or (iv) available for sale. All financial
liabilities have been classified as: (i) held for trading or (ii)
other liabilities. The adoption of this standard has not resulted in
a material change in the carry value of any of the Trust's assets or
liabilities.
In accordance with this new standard, Deferred financing costs
relating to the issuance of convertible debentures are no longer
presented as a separate asset on the balance sheet and are now
included in the carrying value of the convertible debenture. This
change in accounting policy has not resulted in a material change in
the net carrying value of the convertible debenture and as such no
resulting entry has been made to Unitholders Equity.
The new standard requires the presentation of a Statement of
Comprehensive Income. The Trust does not have any material income
from this source and as such a Statement of Comprehensive Income has
not been included in these financial statements.
5. Mortgages:
The following is a breakdown of the mortgages as at March 31, 2007,
December 31, 2006 and March 31, 2006:
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March 31, 2007 Dec. 31, 2006
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Amount % Amount %
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Conventional first
mortgages $168,306,095 83.4 $170,806,640 81.4
Conventional non-first
mortgages 20,668,386 10.3 26,049,819 12.5
Non-conventional mortgages
& related investments 12,500,416 6.2 12,671,098 6.1
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$201,474,897 100.0 209,527,557 100.0
Allowance for loan losses 1,425,000 1,425,000
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$200,049,897 $208,102,557
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March 31, 2006
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Amount %
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Conventional first
mortgages $150,287,099 82.8
Conventional non-first
mortgages 17,747,437 9.8
Non-conventional mortgages
& related investments 13,516,699 7.4
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$181,551,235 100.0
Allowance for loan losses 1,115,000
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$180,436,235
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------------------------------------------------
The mortgages are secured by real property, bear interest at the
weighted average rate of 9.53% (2006 - 9.30%) and mature between 2007
and 2011. Included with mortgages is one loan not directly secured on
real property totalling $1,408,584 (2006 - $2,291,500).
The continuity of allowance for loan losses is as follows:
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Three Months Ended March 31:
2007 2006
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Balance, beginning of period 1,425,000 1,115,000
Increase during the period - -
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Balance - End of period 1,425,000 1,115,000
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The unadvanced funds under the existing mortgage portfolio (which are
commitments of the Trust) amounted to $43,142,219 as at March 31,
2007 (March 31, 2006 - $38,485,249 & December 31, 2006 -
$40,759,332).
Credit risk arises from the possibility that mortgagors may
experience financial difficulty and be unable to fulfill their
mortgage commitments. In accordance with the operating policies of
the Declaration of Trust, the Trust mitigates the risk of credit loss
by ensuring that its mix of mortgages is diversified between
conventional and non-conventional mortgages, and by limiting its
exposure to any one mortgagor.
Where appropriate, management makes specific provisions for loan
losses. Specific provisions are determined on an item by item basis
and reflect the estimated realizable amount of a mortgage.
Interest rate risk arises from a mismatch of terms on borrowings to
terms on the mortgage investments. The bank indebtedness bears
interest at a floating rate that fluctuates with bank prime. A
significant portion of the investment portfolio is short term in
nature and also bears interest that fluctuates with bank prime,
subject to an interest rate floor, thereby partially mitigating the
interest rate risk. Interest on loans payable is matched to specific
mortgage investments, thereby ensuring positive interest rate spread.
Principal repayments based on contractual maturity dates are as
follows:
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2007 $113,924,867
2008 71,433,311
2009 15,548,700
2010 424,011
2011 144,008
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$201,474,897
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Borrowers who have open loans have the option to repay principal at
anytime prior to the maturity date.
6. Bank indebtedness:
The Trust has entered into credit arrangements of which $28,949,810
(March 31, 2006 - $46,114,209 & December 31, 2006 - $40,101,684) has
been drawn. Interest on bank indebtedness is predominately charged at
rates that vary with bank prime and may have a component with a fixed
interest rate established based on a formula linked to Bankers
Acceptance rates. Bank indebtedness is secured by a general security
agreement. The credit agreement contains certain financial covenants
that must be maintained.
7. Loans Payable
First priority charges on specific mortgage investments have been
granted as security for the loans payable. The loans mature on dates
consistent with those of the underlying mortgages. The loans are on a
non-recourse basis and bear interest at rates ranging from 5.35% to
8.50% (2006 - 5.30% to 8.50%).
The loans are repayable at the earlier of the contractual expiry date
of the underlying mortgage investment and the date the underlying
mortgage is repaid. Repayments based on contractual maturity dates
are as follows:
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2007 $15,127,690
2008 5,436,833
2009 6,386,074
2010 172,718
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$27,123,315
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8. Convertible Debenture:
On April 24, 2006, the Trust completed a public offering of 25,000 6%
convertible unsecured subordinated debentures at a price of $1,000
per debenture for gross proceeds of $25,000,000. The debentures
mature on June 30, 2013 and interest is paid semi-annually on June 30
and December 31. The debentures are convertible at the option of the
holder at any time prior to the maturity date at a conversion price
of $11.75. The debentures may not be redeemed by the Trust prior to
June 30, 2009. On and after June 30, 2009, but prior to June 30,
2010, the debentures are redeemable at a price equal to the
principal, plus accrued interest, at the Trust's option on not more
than 60 days and not less than 30 days notice, provided that the
weighted average trading price of the units on the Toronto Stock
Exchange for the 20 consecutive trading days ending five trading days
preceding the date on which the notice of redemption is given is not
less than 125% of the conversion price. On and after June 30, 2010
and prior to the maturity date, the debentures are redeemable at a
price equal to the principal amount plus accrued interest, at the
Trust's option on not more than 60 days and not less than 30 days
prior notice. On redemption or at maturity, the Trust may, at its
option, elect to satisfy its obligation to pay all or a portion of
the principal amount of the debenture by issuing that number of units
of the Trust obtained by dividing the principal amount being repaid
by 95% of the weighted average trading price of the units for the 20
consecutive trading days ending on the fifth trading day preceding
the redemption or maturity date.
The convertible debentures were allocated into liability and equity
components on the date of issuance as follows:
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Liability $25,000,000
Equity 380,482
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Principal $24,619,518
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The accretion of the liability component of the convertible
debenture, which increases the liability component from the initial
allocation on the date of issuance, is included in interest expense.
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Liability, December 31, 2006 $23,537,211
Implicit interest rate in excess of
Coupon rate 53,206
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Liability, March 31, 2007 $23,590,417
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As discussed in Note 4 herein, in accordance with the new accounting
standard adopted by the Trust, Deferred financing costs relating to
the issuance of convertible debentures are no longer presented as a
separate asset on the balance sheet and are now netted against the
carrying value of the convertible debenture.
Notwithstanding the carry value of the convertible debenture, the
principal balance outstanding to the debenture holders is
$25,000,000.
9. Unitholders' equity:
The beneficial interests in the Trust are represented by a single
class of units which are unlimited in number. Each unit carries a
single vote at any meeting of unitholders and carries the right to
participate pro rata in any distributions.
(a) The following units are issued and outstanding:
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March 31, Dec. 31, March 31,
2007 2006 2006
Amount Amount Amount
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Balance, beginning of period 12,593,549 12,570,072 12,570,072
New units from public offering
during the year -
New units issued during the
year under Distribution
Reinvestment Plan 3,835 23,477 3,018
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Balance, end of period 12,597,384 12,593,549 12,573,090
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(b) Incentive option plan:
In November, 2005, 415,000 options were issued to trustees,
directors, officers and employees of the Trust Manager and Mortgage
Banker, with an exercise price of $9.90 per unit. The options are
exercisable any time up to November 17, 2010. The fair value of the
unit options used to compute compensation expense of $21,729 (which
was recorded in the fourth quarter of 2005) is the estimated fair
value of each option grant on the grant date. This was calculated for
the options granted during the 2005 using the Black-Scholes option
pricing model with the following assumptions: expected distribution
yield is 9.44%, expected volatility is 8.83%; risk free interest rate
is 3.96%; and expected option life in years is 5. The options vested
on the grant date.
(c) Distribution reinvestment plan and direct unit purchase plan:
The Trust has a distribution reinvestment plan and direct unit
purchase plan for its unitholders which allows participants to
reinvest their monthly cash distributions in additional trust units
at a unit price equivalent to the weighted average price of units for
the proceeding five day period.
10. Per unit amounts:
The following table reconciles the numerators and denominators of the
basic and diluted earnings per unit.
Basic earnings per unit calculation:
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Three months ended:
March 31, March 31,
2007 2006
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Numerator for basic earnings per unit:
Net earnings $ 3,358,608 $ 2,994,467
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Denominator for basic earnings per
unit:
Weighted average units 12,594,832 12,571,072
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Basic earnings per unit $ 0.267 $ 0.238
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Diluted earnings per unit calculation:
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Three months ended:
March 31, March 31,
2007 2006
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Numerator for diluted earnings per unit:
Net earnings $ 3,358,608 $ 2,994,467
Interest on convertible debentures 428,207 -
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Net earnings for diluted earnings per
unit $ 3,786,815 $ 2,994,467
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Denominator for diluted earnings per
unit:
Weighted average units 12,594,832 12,571,072
Net units that would be issued:
Assuming the proceeds from
incentive options are used to
repurchase units at the average
unit price 7,667 6,484
Assuming convertible debentures
are converted 2,127,660 -
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Diluted weighted average units 14,730,159 12,577,556
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Diluted earnings per unit $ 0.257 $ 0.238
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11. Distributions:
The Trust makes distributions to the unitholders on a monthly basis
on or about the 15th day of each month other than January and on
December 31 in each calendar year. The Declaration of Trust provides
that the Trust will distribute at least 100% of the net income of the
Trust determined in accordance with the Income Tax Act (Canada),
subject to certain adjustments, to Unitholders. The net income of the
Trust determined in accordance with the Income Tax Act (Canada), for
the three month period ended March 31, 2007 was $3,224,466.
For the quarter ended March 31, 2007, the Trust recorded
distributions of $2,871,767 (2006 - $2,828,604) to its unitholders.
Distributions were $0.228 (2006 - $0.225) per unit.
12. Income taxes:
The Trust is taxed as a mutual fund trust for income tax purposes.
Pursuant to the Declaration of Trust, the Trust is required to
distribute its income for income tax purposes each year to such an
extent that it will not be liable for income tax under Part 1 of the
Income Tax Act (Canada). Therefore, no provision for income taxes is
required on income earned by the Trust.
On March 27, 2007, the Department of Finance (Canada) ("Finance")
released a notice of ways and means motion containing draft
legislation relating to the taxation of publicly-traded trusts (such
as income trusts and real estate investment trusts) and partnerships
for Canadian federal income tax purposes (the "Proposals"). There can
be no assurance that the Proposals will be enacted in the form
proposed, if at all.
The Proposals create the concept of "specified investment flow-
through" entities, or "SIFTs", which would generally be subject to a
new tax on distributions. The Trust has considered the Proposals and
determined that, if enacted in their current form, the Trust would be
a SIFT.
Under the Proposals, SIFTs would be taxed on certain distributions of
income made to Unitholders. (Returns of capital are not subject to
this tax.) This tax is intended to replicate the entity-level tax
that the SIFT would pay if it were a corporation. In addition, the
Proposals generally provide that such distributions will be taxed in
the hands of Unitholders as though they were dividends received by
the Unitholders from a taxable Canadian corporation. Therefore,
individual Canadian resident Unitholders will be entitled to the
proposed enhanced dividend gross-up and tax credit mechanism.
The Proposals indicate that they will apply to an income trust the
units of which were publicly-traded before November, 2006, beginning
with the 2011 taxation year of the trust. As currently structured,
the Trust would be subject to the tax described in the Proposals.
Accordingly, commencing in 2011, the Proposals, may materially reduce
the distributable cash of the Trust.
In addition, Finance has indicated that there are circumstances,
including "undue expansion", under which an Existing Trust or
Partnership might become subject to this tax earlier than 2011. In
particular, Finance released guidelines on December 15, 2006 which
establish objective tests with respect to how much Existing Trusts
and Partnerships are permitted to grow without jeopardizing their
transitional relief. The Proposals provide that if these limits were
exceeded, the Trust would become subject to the tax described in the
Proposals, and the distributable cash of the Trust may be materially
reduced, before 2011.
We are considering the Proposals and the possible impact on the
Trust. The Proposals may limit the Trust's ability to undertake
financings and investments. Furthermore, the effect of the Proposals
on the marketability of the Trust's units, and the ability of the
Trust to finance future investments through the issuance of units or
other securities, are uncertain.
13. Related party transactions and balances:
Transactions with related parties are in the normal course of
business and are recorded at the exchange amount, which is the amount
of consideration established and agreed to by the related parties,
and represents fair market value.
The Trust Manager (a company controlled by some of the trustees),
pursuant to the Trust Management Agreement and Declaration of Trust,
receives an allocation of mortgage interest referred to as Trust
Manager spread interest, calculated as 0.75% per annum of the Trust's
daily outstanding performing mortgage investment balances. For the
quarter ended March 31, 2007 this amount was $367,331 (2006 -
$316,315), and was deducted from interest and fees earned.
The Mortgage Banker (a company controlled by a Trustee), pursuant to
the Mortgage Banking Agreement and Declaration of Trust, receives
certain fees from the borrowers as follows: loan servicing fees
equal to 0.10% per annum on the principal amount of each of the
Trust's mortgage investments; 75% of all the commitment and renewal
fees generated from the Trust's mortgage investments and 25% of all
the special profit income generated from the non-conventional
mortgage investments after the Trust has yielded a 10% per annum
return on its investments. Interest and fee income is net of the
loan servicing fees paid to the Mortgage Banker of approximately
$51,000 (2006 - $42,000). The Mortgage Banker also retains all
overnight float interest and incidental fees and charges payable by
borrowers on the Trust's mortgage investments. The Trust's share of
commitment and renewal fees recorded in income for the quarter ended
March 31, 2007 was $189,535 (2006 - $115,686) and applicable special
profit income for the quarter ended March 31, 2007 was $326,273 (2006
- $100,066).
The Trust Management Agreement and Mortgage Banking Agreement
contains provisions for the payment of termination fees to the Trust
Manager and Mortgage Banker in the event that the respective
agreements are either terminated or not renewed.
Several of the Trust's mortgages are shared with other investors of
the Mortgage Banker, which may include members of management of the
Mortgage Banker and/or Officers or Trustees of the Trust. The Trust
ranks equally with other members of the syndicate as to receipt of
principal and income.
Mortgages totalling $1,760,000 at March 31, 2007 (2006 - NIL) were
issued to borrowers controlled by certain Trustees of the Trust. Each
mortgage is dealt with in accordance with the Trust's existing
investment and operating policies and is personally guaranteed by the
related Trustee.
14. Interest
Three Months Ended:
March 31, March 31,
2007 2006
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Bank interest expense $ 478,609 $ 499,496
Loans payable interest expense 419,543 162,598
Debenture interest expense 428,207 -
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Interest Expense $ 1,326,359 $ 662,094
Implicit interest rate in excess of
coupon rate -
Convertible debentures (53,206) -
Change in accrued interest (369,791) (74,365)
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Cash interest paid $ 903,362 $ 587,729
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15. Contingent liabilities:
The Trust is involved in certain litigation arising out of the
ordinary course of investing in mortgages. Although such matters
cannot be predicted with certainty, management believes the claims
are without merit and does not consider the Trust's exposure to such
litigation to have an impact on these financial statements.
16. Comparative figures:
Certain 2006 comparative figures have been reclassified to conform
with the financial statement presentation adopted in 2007.