Clairvest Reports Fiscal 2005 Fourth Quarter And Year-End Results.TORONTO Toronto (tərŏn`tō), city (1998 est pop. 2,400,000), provincial capital, S Ont., Canada, on Lake Ontario. Toronto is the largest city in Canada and since the 1970s has been one of the fastest-changing cities in North America, experiencing -- Clairvest Group Inc. (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :CVG CVG Convergys Corp CVG Corporación Venezolana de Guayana CVG Clear Vertical Grain (woodworking) CVG Carrier Group CVG Corporacion Venezolana de Guyana CVG Comprehensive Video Group (South Hackensack, NJ, USA) ) - Highlights: - March 31, 2005 book value increased to $12.99 per share, versus $11.46 at March 31, 2004 - Clairvest declared dividend declared dividend A dividend authorized by a firm's board of directors. At the time a dividend is declared, the firm creates a liability for the dividend's payment. of $0.10 per share - Clairvest and CEP CEP congenital erythropoietic porphyria. CEP abbr. congenital erythropoietic porphyria closed $15.5 million investment in Integral Orthopedics orthopedics (ôrthəpē`dĭks), medical specialty concerned with deformities, injuries, and diseases of the bones, joints, ligaments, tendons, and muscles. Inc. - Subsequent to quarter-end, Gateway Casinos A list of casinos. Antigua and Barbuda
1 Card game played with a full deck by two to four players. Its origins are obscure though it probably traces back to the Italian game of Scopa. in Langley Lang·ley , Mount A peak, 4,227.9 m (14,026 ft) high, in the Sierra Nevada of southern California. lang·ley n. pl. , B.C. - Subsequent to quarter-end, Voxcom Income Fund completed initial public offering - Clairvest purchased 33,500 common shares during the quarter for $315,000 and 690,989 common shares subsequent to quarter end for $6.8 million under normal course issuer bids Clairvest Group Inc. (TSX:CVG) today reported its results for the fourth quarter and year ended March 31, 2005. (All figures are in Canadian dollars Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents unless otherwise stated). Clairvest's book value increased by $22.6 million during the year to $257.0 million, or to $12.99 per share, compared with $11.46 per share at March 31, 2004. The increase resulted from net income of $29.9 million, less the cost of shares purchased under Clairvest's normal course issuer bids and dividends paid. The net income was primarily generated by net realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. on investments, net unrealized gains Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. on investments and dividends received. Realized gains on investments resulted primarily from the sale of 1,865,226 Gateway Casinos Income Fund The Gateway Casinos Income Fund (TSX: GCI.un) is a gaming operator in western Canada. It operate seven casinos in Burnaby, Langley City, Kamloops, Kelowna, Penticton ,Vernon and Edmonton,.[1] It also provides management services to Gateway Casinos Inc. units for gross proceeds of $32.3 million and the release of the remaining $2.6 million that was being held in escrow escrow Instrument, such as a deed, money, or property, that constitutes evidence of obligations between two or more parties and is held by a third party. It is delivered by the third party only upon fulfillment of some condition. following the sale of Sparkling Spring Water in Fiscal 2003. "The increase in book value per share during fiscal 2005 demonstrates the commitment of Clairvest management to enhance shareholder value," said Jeff Parr, co-CEO of Clairvest. As previously announced, Clairvest and Clairvest Equity Partners Limited Partnership ("CEP") closed a $15.5 million investment in Integral Orthopedics Inc., which acquired the businesses of Obus The Obus was a French automobile manufactured from 1907 until 1908. A voiturette, it was produced by one A. Souriau of Montoire. Reference David Burgess Wise, The New Illustrated Encyclopedia of Automobiles. Forme forme (form) pl. formes [Fr.] form. forme fruste (froost) pl. formes frustes an atypical, especially a mild or incomplete, form, as of a disease. Ltd., a prominent provider of orthopedic orthopedic /or·tho·pe·dic/ (-pe´dik) pertaining to the correction of deformities of the musculoskeletal system; pertaining to orthopedics. back care products and Moller LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control , a leading developer of clinical treatment solutions for back and neck pain. Clairvest and CEP acquired a controlling interest controlling interest The ownership of a quantity of outstanding corporate stock sufficient to control the actions of the firm. Controlling interest often involves ownership of significantly less than 51% of a firm's outstanding stock because many owners fail in Integral Orthopedics Inc., with their investment being made based on pro rata [Latin, Proportionately.] A phrase that describes a division made according to a certain rate, percentage, or share. In a Bankruptcy case, when the debtor is insolvent, creditors generally agree to accept a pro rata share of what is owed to them. capital commitments to their investment pool, of 25% and 75% respectively. In May 2005, Gateway Casinos Inc. ("Gateway") opened the new Cascades casino in Langley, B.C. The new casino has been well received by the community and Gateway management are pleased with attendance. Should Cascades performance continue in line with early results, Clairvest will make appropriate adjustments to Gateway's fair value. Subsequent to quarter-end, Voxcom Income Fund completed its initial public offering ("IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. "). Voxcom Income Fund used the proceeds of the offering to acquire all of the common shares of Voxcom Incorporated and to repay a portion of Voxcom Incorporated's existing credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities . Clairvest reinvested its entire proceeds from the IPO into 1,645,015 units of Voxcom Income Fund, and as a result holds a 20.1% fully-diluted interest in Voxcom Income Fund. As of June June: see month. 22, 2005, the pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta fair value of Clairvest's interest in the Fund was $16.9 million versus a pre-tax fair value of Clairvest's investment in Voxcom Incorporated of $11.8 million at March 31, 2005. "Voxcom currently has more than 100,000 individual customers paying monthly service and maintenance fees," said Ken Rotman Rotman may refer to:
intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. revenue stream makes it a very predictable business and one that is ideally suited to being an income trust. We chose to retain our investment in Voxcom because we are optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about the prospects for further value creation." Clairvest declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. an annual dividend of $0.10 per share. The dividend will be payable to common shareholders and non-voting non-voting adj non-voting shares → azioni fpl senza diritto di voto shareholders of record as of July July: see month. 13, 2005. The dividend will be paid on July 27, 2005. Clairvest is a Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. merchant bank that invests its own capital, and that of third parties through Clairvest Equity Partners Limited Partnership ("CEP"), in companies that have the potential to generate superior returns. In addition to providing financing, Clairvest contributes strategic expertise and execution ability to support the growth and development of its investee partners. Clairvest realizes value through investment returns and the eventual disposition Act of disposing; transferring to the care or possession of another. The parting with, alienation of, or giving up of property. The final settlement of a matter and, with reference to decisions announced by a court, a judge's ruling is commonly referred to as disposition, regardless of of its investments. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. with respect to Clairvest Group Inc., its subsidiaries and their investments. These statements are based on current expectations and are subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Clairvest, its subsidiaries and their investments to be materially different from any future results, performance or achievements expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by such forward-looking statements. CLAIRVEST GROUP INC. June 23, 2005 MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE QUARTER ENDED MARCH 31, 2005 The following discussion and analysis should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. unaudited consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge and notes of Clairvest Group Inc. for the quarter ended March 31, 2005 and the attached press release. CRITICAL ACCOUNTING ESTIMATES The preparation of Clairvest's consolidated financial statements in conformity with Canadian generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets Contingent Asset An asset in which the possibility of ownership depends solely upon future events uncontrollable by the company. Notes: An example might be a settlement from a lawsuit. See also: Asset, Balance Sheet, Contingent Liability, Liability and liabilities at the date of the consolidated financial statements, and the reported amounts of income and expenses during the reporting period. On an on-going Adj. 1. on-going - currently happening; "an ongoing economic crisis" ongoing current - occurring in or belonging to the present time; "current events"; "the current topic"; "current negotiations"; "current psychoanalytic theories"; "the ship's current position" basis, management reviews its estimates and assumptions. Changes in facts and circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or may result in revised estimates Revised estimate The third estimate of GDP released about three months after the measurement period. , and actual results could differ from those estimates. The critical accounting estimates that have a material impact on Clairvest's consolidated financial statements are with respect to corporate investments and future tax liability. The process of determining the fair value of Clairvest's privately-held investments requires management to exercise judgment in making assumptions about the financial condition of the investment based on operational results, forecasts, financing and any other factors that may be relevant to the ongoing and realizable value of the investment, as well as an assessment of the market conditions based on comparable trading multiples of public companies and transaction multiples within the industry. Publicly-traded investments that are escrowed or otherwise restricted as to sale or transfer are recorded at amounts discounted from market value. The process for determining the discount for such investments requires management to exercise judgment while considering the nature and length of the restriction restriction - A bug or design error that limits a program's capabilities, and which is sufficiently egregious that nobody can quite work up enough nerve to describe it as a feature. , business risk of the investee company, its stage of development, market potential, relative trading volume Trading volume The number of shares transacted every day. As there is a seller for every buyer, one can think of the trading volume as half of the number of shares transacted. That is, if A sells 100 shares to B, the volume is 100 shares. and price volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the and any other factors that may be relevant to the ongoing and realizable value of the investment. A change to an accounting estimate with respect to Clairvest's privately-held investments or publicly-traded investments would impact corporate investments and unrealized gains/losses on investments. The process of determining future income tax assets and liabilities requires management to exercise judgment while considering the anticipated timing of disposal of corporate investments, and proceeds thereon there·on adv. 1. On or upon this, that, or it. 2. Archaic Following that immediately; thereupon. Adv. 1. thereon - on that; "text and commentary thereon" on it, on that , tax planning Tax planning Devising strategies throughout the year in order to minimize tax liability, for example, by choosing a tax filing status that is most beneficial to the taxpayer. strategies, changes in tax laws and rates, and loss carry-forwards. A change to an accounting estimate with respect to future income taxes would impact future tax liability and provision for income taxes. CHANGES IN ACCOUNTING POLICIES In the first quarter of fiscal 2005, Clairvest adopted the recommendations of The Canadian Institute of Chartered Accountants' Section 1100 Generally Accepted Accounting Principles, Accounting Guideline guideline Medtalk A series of recommendations by a body of experts in a particular discipline. See Cancer screening guidelines, Cardiac profile guidelines, Gatekeeper guidelines, Harvard guidelines, Transfusion guidelines. 18 Investment Companies and Accounting Guideline 13 Hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. Relationships. The impact on the consolidated financial statements resulting from the adoption of these recommendations is not material. In the fourth quarter of fiscal 2005, Clairvest prospectively adopted The Canadian Institute of Chartered Accountants' Accounting Guideline 15, Consolidation of Variable Interest Entities ("VIE"). The Guideline provides a framework for identifying a VIE and requires a primary beneficiary beneficiary Person or entity (e.g., a charity or estate) that receives a benefit from something (e.g., a trust, life-insurance policy, or contract). A primary beneficiary receives proceeds from a trust or insurance policy before any other. to consolidate Consolidate To combine the assets, liabilities, and other financial items of two or more entities into one. Notes: This term is generally used in the context of consolidated financial statements. a VIE. A primary beneficiary is the enterprise that absorbs a majority of the VIE's expected losses or receives a majority of the VIE's expected residual returns Residual Return Return independent of the benchmark. The residual return is the return relative to beta times the benchmark return. To be exact, an asset's residual return equals its excess return minus beta times the benchmark excess return. or both. The Guideline requires Clairvest to identify VIE's in which it has an interest, determine whether it is the primary beneficiary of such entities and if so, consolidate them. At March 31, 2005, the VIE in which Clairvest held an interest was Clairvest Equity Partners Limited Partnership ("CEP"). As of March 31, 2005, Clairvest was not considered the primary beneficiary of CEP. Clairvest has no exposure to loss as a result of its involvement in CEP in its capacity of general partner. Accordingly, Clairvest did not consolidate CEP. There is therefore no impact on the consolidated financial statement Consolidated financial statement A financial statement that shows all the assets, liabilities, and operating accounts of a parent company and its subsidiaries. resulting from the adoption of the Guideline. OPERATING RESULTS Net income for the fourth quarter of 2005 was $14.3 million compared with $9.2 million for the fourth quarter of 2004. Clairvest had realized gains on investments of $2.6 million for the quarter, compared with $8.3 million for the same quarter last year. The realized gains for the fourth quarter of fiscal 2005 resulted from the release of the remaining $2.6 million of funds that were held in escrow following the sale of Sparkling Spring Water in fiscal 2003. The realized gains for the fourth quarter of fiscal 2004 resulted from the sale of units of Gateway Casinos Income Fund, as well as the release of a portion of the funds that were held in escrow following the sale of Sparkling Spring Water. Clairvest reversed previously recognized unrealized gains of $27.9 million for the quarter, compared with $4.7 million for the same quarter last year. These previously recognized unrealized gains that were reversed in the fourth quarter of fiscal 2005 relate to unrealized gains that were recognized in fiscal 2005 and prior years with respect to Gateway Casinos Inc. that were reversed upon the receipt of a $28.1 million dividend from Gateway Casinos Inc. in the fourth quarter of fiscal 2005. The previously recognized unrealized gains of $4.7 million that were reversed in the fourth quarter of fiscal 2004 relate to unrealized gains that were recognized in fiscal 2004 and prior years on the units of Gateway Casinos Income Fund that were sold in the fourth quarter of fiscal 2004. Clairvest had unrealized gains on investments of $13.6 million for the fourth quarter of 2005, compared with $7.6 million for the fourth quarter of 2004. The net unrealized gains for the fourth quarter of 2005 resulted from: - a $9.4 million upward adjustment to the fair value of Clairvest's investment in Gateway Casinos Inc. This upward adjustment was determined by management to be appropriate in light of recent advances in the development and relocation RELOCATION, Scotch law, contracts. To let again to renew a lease, is called a relocation. 2. When a tenant holds over after the expiration of his lease, with the consent of his landlord, this will amount to a relocation. of several of Gateway Casinos' casinos; - a $0.1 million increase to the guarantee payable to CEP with respect to CEP's purchase of shares in Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Vendors from Clairvest in fiscal 2002. The guarantee payable is included as an offset against the fair value of Clairvest's investment in Consolidated Vendors; and - movements in quoted market prices, movements in foreign exchange and dividends that are accruing on cumulative shares. Interest income for the quarter was $1.6 million, compared with $1.5 million for the same quarter last year. Interest income for the fourth quarter of 2005 includes $0.5 million in distributions from Gateway Casinos Income Fund versus $0.7 million for the fourth quarter of 2004. Clairvest owned 1.5 million units in Gateway Casinos Income Fund at March 31, 2005, compared to 3.4 million units at March 31, 2004. Dividend income for the quarter was $28.1 million, compared with nil for the fourth quarter of 2004. Dividend income for the fourth quarter of 2005 represented tax-free tax-free adj. Not subject to taxation; tax-exempt. tax-free Adjective not needing to have tax paid on it: a tax-free lump sum Adj. 1. dividends from Gateway Casinos Inc. During the quarter Clairvest also repaid $28.1 million of loans from Gateway Casinos that were repayable re·pay v. re·paid , re·pay·ing, re·pays v.tr. 1. To pay back: repaid a debt. 2. on demand at any time after December December: see month. 31, 2004. Clairvest earned $0.6 million in management fees during the quarter for its services in the administration of CEP's portfolio and $0.4 million in advisory and other fees from its corporate investments. Administration and other expenses for the quarter were $3.1 million, compared with $2.8 million for the same quarter last year. Finance expense of $0.2 million for the quarter represents $0.3 million in interest on the loan payable to a subsidiary of Gateway Casinos Inc. net of a $0.1 million gain on foreign exchange forward contracts. Finance expense of $1.0 million for the fourth quarter of fiscal 2004 represents $0.8 million in interest on the loan payable to a subsidiary of Gateway Casinos Inc. and $0.2 million in costs on foreign exchange forward contracts.
SUMMARY OF QUARTERLY RESULTS
Net income
Net income (loss) per
Quarterly results (loss) per common share
($000's except per Gross Net income common fully
share information) income $ (loss) $ share $ diluted $
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March 31, 2005 18,947 14,345 0.73 0.69
December 31, 2004 11,920 8,995 0.45 0.43
September 30, 2004 8,229 4,458 0.22 0.21
June 30, 2004 6,222 2,092 0.10 0.10
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March 31, 2004 13,642 9,199 0.44 0.43
December 31, 2003 18,037 14,152 0.69 0.66
September 30, 2003 (16,021) (16,526) (0.80) (0.80)
June 30, 2003 9,671 6,002 0.29 0.27
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Significant variations arise in the quarterly results due to unrealized gains/losses on investments which result from Clairvest re-valuing its investments on a quarterly basis. The values at which publicly-traded investments are carried are subject to fluctuations in the public markets from quarter to quarter. The privately-held investments are re-valued when management adjusts its estimate of the fair value of the investment. FINANCIAL POSITION AND LIQUIDITY Clairvest has sufficient capital to support its current and anticipated new investments. In addition to cash, cash equivalents and temporary investments of $103.0 million at March 31, 2005, Clairvest has a $20 million credit facility with a Canadian Chartered Bank Chartered Bank A financial institution whose primary roles are to accept and safeguard monetary deposits from individuals and organizations, and to lend money out. The details vary from country to country, but usually a chartered bank in operation has obtained government permission . Loans totalling $5.6 million were made to Wellington Wellington, city (1996 pop. 157,647; urban agglomeration 334,051), capital of New Zealand, extreme S North Island, on Port Nicholson, an inlet of Cook Strait. Financial Fund II during the quarter. The loans bear interest at the prime rate, and are payable on demand. The loans, together with interest, were repaid subsequent to quarter-end. At March 31, 2005, Clairvest had loans totalling $28.8 million from Gateway Casinos Inc. entities comprised of: (a) $13.7 million 30-year, non-interest bearing loan that is repayable on demand. The loan is collateralized by the units held by Clairvest in the limited partnership that owns Gateway Casinos Inc. Clairvest repaid $1.4 million of this loan during the quarter, bringing the balance from $15.1 million at December 31, 2004 to $13.7 million at March 31, 2005. (b) $15.0 million 30-year loan bearing interest at 8.05% per annum Per annum Yearly. , that is collateralized by the units held by Clairvest in Gateway Casinos Income Fund. The loan must be repaid as the units in Gateway Casinos Income Fund are disposed dis·pose v. dis·posed, dis·pos·ing, dis·pos·es v.tr. 1. To place or set in a particular order; arrange. 2. of. (c) $89,000 of non-interest bearing loans that are repayable on demand at any time after December 31, 2005. $28.1 million of loans were outstanding at December 31, 2004 that were non-interest bearing and repayable on demand at any time after December 31, 2004. These loans were paid in full in the fourth quarter of fiscal 2005. A further $89,000 was loaned to Clairvest in the fourth quarter of fiscal 2005. Clairvest had a normal course issuer bid in place which enabled it to purchase up to 911,572 common shares during the 12-month period ending March 3, 2005. During the fourth quarter of fiscal 2005, Clairvest filed a new normal course issuer bid enabling it to purchase up to 877,472 common shares during the 12-month period ending March 3, 2006. During the quarter, Clairvest purchased and cancelled can·cel v. can·celed also can·celled, can·cel·ing also can·cel·ling, can·cels also can·cels v.tr. 1. To cross out with lines or other markings. See Synonyms at erase. 2. 25,000 common shares at a cost of $235,000. Also during the quarter, Clairvest purchased 8,500 common shares at a cost of $80,000 which were cancelled subsequent to quarter-end. In total 1,621,252 common shares at a cost of $12.7 million have been purchased under this and all previous normal course issuer bids as of March 31, 2005. Subsequent to quarter-end a further 690,989 common shares were purchased at a cost of $6.8 million. 16,849,949 common shares and 2,230,954 non-voting shares were outstanding at June 23, 2005. Clairvest's main asset is its corporate investments. All increases/decreases in the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of Clairvest's investments during the fourth quarter of fiscal 2005 are as a result of unrealized gains/losses on the investments, except as noted below. Consolidated Vendors Corporation During the quarter, Clairvest loaned $48,000 to Consolidated Vendors Corporation. During the quarter, Clairvest also increased its guarantee payable to CEP by $0.1 million. A total of $3.1 million would be owing to owing to prep. Because of; on account of: I couldn't attend, owing to illness. owing to prep → debido a, por causa de CEP under Clairvest's guarantee if CEP was disposed of at its current fair value. The $3.1 million has been included as an offset against the fair value of Clairvest's investment. Also during the quarter, Clairvest revalued the debt portion of its investment in Consolidated Vendors as a result of movements in the foreign exchange rate, resulting in a $1.2 million downward adjustment to the fair value. In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with hedge accounting Why is hedge accounting necessary? Many financial institutions and corporate businesses (entities) use derivative financial instruments to hedge their exposure to different risks (eg interest rate risk, foreign exchange risk, commodity risk, etc). , the debt portion of Clairvest's investment in Consolidated Vendors is marked to market at the consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. dates. The foreign exchange forward contracts entered into as a hedge against this portion of Clairvest's investment are also marked to market at the balance sheet date, resulting in an offsetting reduction in deferred gain on foreign exchange forward contracts of $0.9 million, and an increase in derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. market valuation of $22,000. The net result of these adjustments is a $0.2 million foreign exchange loss on the consolidated statement of income. Gateway Casinos Inc. The fair value of Clairvest's investment in Gateway Casinos decreased $18.4 million to $59.9 million at March 31, 2005. The decrease is comprised of a $27.8 million reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its of previously recognized unrealized gains, net of a $9.4 million unrealized gain on the investment. The reversal of previously recognized unrealized gains represents unrealized gains that were recognized in fiscal 2005 and prior years. Upon the receipt of a $28.1 million dividend from Gateway Casinos during fiscal 2005, these previously recognized unrealized gains were reversed. The $9.4 million upward adjustment to the fair value of the investment was determined by management to be appropriate in light of recent advances in the development and relocation of several of Gateway Casinos' casinos. N-Brook Mortgage LP During the quarter, Clairvest funded $0.3 million of its $5.0 million commitment to N-Brook Mortgage L.P., bringing the total funded amount to $1.2 million. Signature Security Group Holdings Pty. Limited During the quarter, Clairvest revalued the debt portion of its investments in Signature as a result of movements in the foreign exchange rate, resulting in a $1.8 million upward adjustment to the fair value. In accordance with hedge accounting, the debt portion of Clairvest's investment in Signature is marked to market at the balance sheet date. The foreign exchange forward contracts entered into as a hedge against this portion of Clairvest's investment are also marked to market at the balance sheet date, resulting in an offsetting reduction in deferred loss on foreign exchange forward contracts of $2.7 million, and an increase in derivative instruments market valuation of $0.1 million. The net result of these adjustments is a $0.9 million foreign exchange loss on the consolidated statement of income. Wellington Financial Fund II During the quarter, Clairvest funded $1.6 million of its $20.0 million commitment to Wellington Financial Fund II, bringing the total funded amount to $7.4 million. TRANSACTIONS WITH RELATED PARTIES Clairvest, as manager of CEP and parent company of the General Partner of CEP, has entered into various transactions with CEP. As manager of CEP, Clairvest is entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: to a management fee as compensation for its services in the administration of the portfolio of CEP. During the fourth quarter of fiscal 2005 CEP paid Clairvest net management fees of $0.6 million. At March 31, 2005, Clairvest had accounts payable to CEP totalling $13,000. The General Partner of CEP, a limited partnership, the general partner of which is a wholly-owned subsidiary of Clairvest, is entitled to participate in distributions made by CEP. The distribution to the General Partner will be determined based on the overall performance of CEP and no such distribution is permitted until CEP's limited partners have received all amounts contributed to CEP and a 6% compound annual return on that amount. The distributions received by the General Partner of CEP will be allocated 50% to each of its limited partners one of which is a wholly-owned subsidiary of Clairvest, and the other of which is another limited partnership (the "Participation Partnership"). The limited partners of the Participation Partnership are principals and employees of Clairvest (the "Investors"). The Investors purchased, at fair market value, units of the Participation Partnership during the first quarter of fiscal 2005. From time to time, additional units in the Participation Partnership may be purchased by the Investors. To date, CEP has not made any distributions to the General Partner. Clairvest has guaranteed up to $7.0 million of CEP's obligations to the Toronto-Dominion Bank The Toronto-Dominion Bank (TD) (TSX: TD NYSE: TD TYO: 8640 ) is a bank headquartered in Toronto, Ontario, Canada. It is one of Canada's Big Five banks, being the second largest bank in the country by assets and market capitalization. under CEP's foreign exchange forward contracts with the bank. During fiscal 2002, Clairvest sold certain shares of Consolidated Vendors to CEP, and guaranteed to compensate CEP for up to $5.7 million for certain deficiencies that CEP may incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. on these shares. Based on Clairvest's current fair value of its investment in Consolidated Vendors, Clairvest would owe CEP $3.1 million under this guarantee. The $3.1 million has been included as an offset against the fair value of Clairvest's investment in Consolidated Vendors. Clairvest has also entered into various transactions with its corporate investments. During the fourth quarter of fiscal 2005 Clairvest received $0.9 million in interest, $28.1 million in dividends, and $0.3 million in advisory and other fees from its corporate investments. During the fourth quarter of fiscal 2005 Clairvest paid $0.3 million in interest on a loan from a Gateway Casinos entity. At March 31, 2005, Clairvest had accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying from corporate investments totalling $0.7 million. At March 31, 2005, Clairvest also had a $2.7 million receivable from Sparkling Spring Water, representing the remaining funds that were held in escrow following the sale of the investment in fiscal 2003. The $2.7 million was received subsequent to quarter-end. No further amounts remain in escrow. At March 31, 2005, Clairvest had loans receivable from certain officers of the Company or officers of corporate investments (the "Officers") totalling $0.7 million. The loans are interest bearing, have full recourse Full recourse No matter what risk event occurs, the borrower or its guarantors guarantee to repay the debt. This is not a project financing unless the borrower's sole asset is the project. to the individual and are collateralized by the common shares of Clairvest purchased by the Officers with a market value of $1.1 million. At March 31, 2005 Clairvest also had loans receivable from certain officers of a company affiliated af·fil·i·ate v. af·fil·i·at·ed, af·fil·i·at·ing, af·fil·i·ates v.tr. 1. To adopt or accept as a member, subordinate associate, or branch: with Clairvest totalling $0.2 million. OFF-BALANCE SHEET ARRANGEMENTS Clairvest has committed to co-invest alongside CEP in all investments undertaken by CEP. Clairvest's total co-investment commitment is $54.7 million, of which $19.1 million has been funded to March 31, 2005. Clairvest may only sell all or a portion of a corporate investment that is a joint investment with CEP if it, as manager of CEP, concurrently con·cur·rent adj. 1. Happening at the same time as something else. See Synonyms at contemporary. 2. Operating or acting in conjunction with another. 3. Meeting or tending to meet at the same point; convergent. sells a proportionate pro·por·tion·ate adj. Being in due proportion; proportional. tr.v. pro·por·tion·at·ed, pro·por·tion·at·ing, pro·por·tion·ates To make proportionate. number of securities of that corporate investment held by CEP. Clairvest has committed $20.0 million to Wellington Financial Fund II, $7.4 million of which has been funded to March 31, 2005. Clairvest has committed $5.0 million to N-Brook Mortgage LP, subject to N-Brook management achieving certain targets. $1.2 million of Clairvest's commitment has been funded to March 31, 2005. Clairvest enters into foreign exchange forward contracts to manage the risks arising from fluctuations in exchange rates on its foreign investments. At March 31, 2005, Clairvest had entered into forward contracts to sell AUS AUS abbr. Army of the United States $31.3 million and US$12.3 million. The fair value of these contracts at March 31, 2005 is a loss of $300,000 on the Australian dollar Noun 1. Australian dollar - the basic unit of money in Australia and Nauru dollar - the basic monetary unit in many countries; equal to 100 cents contracts and a gain of $70,000 on the U.S. dollar contracts. $90,000 of the loss on the Australian dollar contracts relates to the debt portion of Clairvest's investment in Signature and has been recognized on the balance sheet as derivative instruments market valuation. The U.S. dollar contracts which have been entered into as a hedge against the debt portion of Clairvest's investment in Consolidated Vendors have a fair value of a loss of $22,000, which has been recognized on the consolidated balance sheet as derivative instruments market valuation. A wholly-owned subsidiary of Clairvest together with certain other unit holders (the "Unit Holders") hold 20% of the outstanding units of Gateway Casinos Income Fund. The Unit Holders have agreed that they will take all necessary steps to collectively maintain the 20% ownership interest amongst the Unit Holders and in connection with any additional issue of units of Gateway Casinos Income Fund to ensure that their collective ownership of Gateway Casinos Income Fund is maintained at 20% of the issued and outstanding units. During fiscal 2005, a wholly-owned subsidiary of Clairvest together with other shareholders of Gateway Casinos Inc. (the "Gateway Shareholders"), entered into an agreement with Gateway Casinos Inc.'s bank whereby the Gateway Shareholders agreed to fund cost overruns Noun 1. cost overrun - excess of cost over budget; "the cost overrun necessitated an additional allocation of funds in the budget" cost - the total spent for goods or services including money and time and labor on the development of Gateway Casinos Inc's casino facility in Langley, British Columbia Langley, British Columbia can mean the following:
Under Clairvest's Incentive Bonus Program, a bonus of 10% of after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. income, based on cash realizations on Clairvest's corporate investments, is paid to management as a bonus. Amounts are accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. under this plan with respect to cash realizations made during the year. If Clairvest were to sell its corporate investments at their current fair values, a bonus of $3.1 million would be owing to management under the Incentive Bonus Program. This amount has not been reflected in Clairvest's consolidated financial statements. A number of the matters discussed in this MD&A deal with potential future circumstances and developments and may constitute "forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. " statements. These forward-looking statements can generally be identified as such because of the context of the statements and often include words such as the Company "believes", "anticipates", "expects", "plans", "estimates" or words of a similar nature. The forward-looking statements are based on current expectations and are subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The impact of any one risk factor on a particular forward-looking statement is not determinable Liable to come to an end upon the happening of a certain contingency. Susceptible of being determined, found out, definitely decided upon, or settled. determinable adj. with certainty CERTAINTY, UNCERTAINTY, contracts. In matters of obligation, a thing is certain, when its essence, quality, and quantity, are described, distinctly set forth, Dig. 12, 1, 6. It is uncertain, when the description is not that of one individual object, but designates only the kind. Louis. as such factors are interdependent in·ter·de·pen·dent adj. Mutually dependent: "Today, the mission of one institution can be accomplished only by recognizing that it lives in an interdependent world with conflicts and overlapping interests" upon other factors, and management's course of action would depend upon its assessment of the future considering all information then available. All subsequent forward-looking statements, whether written or oral, attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the Company or persons acting on its behalf are expressly qualified in their entirety The whole, in contradistinction to a moiety or part only. When land is conveyed to Husband and Wife, they do not take by moieties, but both are seised of the entirety. by these cautionary statements. The Company assumes no obligation to update forward-looking statements should circumstances or management's estimates or opinions change.
CLAIRVEST GROUP INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31 March 31
$000's 2005 2004
---------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 1,828 $ 4,695
Temporary investments 101,203 88,913
Accounts receivable and other assets (Note 5a) 4,529 5,629
Loans receivable (Note 5b) 5,623 -
Deferred loss on foreign exchange forward
contracts - 2,801
Corporate investments (Note 2) 180,246 199,448
---------------------
$ 293,429 $ 301,486
---------------------
---------------------
LIABILITIES
Accounts payable $ 4,759 $ 3,456
Loans payable (Note 3) 28,788 61,224
Derivative instruments market valuation 112 -
Deferred gain on foreign exchange forward
contracts 558 -
Future tax liability 2,182 2,365
---------------------
36,399 67,045
---------------------
SHAREHOLDERS' EQUITY
Share capital (Note 4) 106,704 110,151
Shares purchased for cancellation (80) (407)
Stock-based compensation 138 57
Retained earnings 150,268 124,640
---------------------
257,030 234,441
---------------------
$ 293,429 $ 301,486
---------------------
---------------------
(see accompanying notes to interim consolidated financial statements)
CLAIRVEST GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME
For the Quarter Ended March 31
(unaudited)
Quarter ended Year ended
$000's (except per March 31 March 31
share information) 2005 2004 2005 2004
---------------------------------------------------------------------
---------------------------------------------------------------------
Net investment gains
Net realized gains on
investments $ 2,584 $ 8,342 $ 14,591 $ 8,786
Previously recognized net
unrealized gains (27,903) (4,700) (40,211) (4,700)
Net unrealized gains
on investments 13,594 7,569 32,248 6,943
----------------------------------------
(11,725) 11,211 6,628 11,029
----------------------------------------
Other income
Interest income (Note 5d) 1,606 1,521 6,676 8,758
Dividend income (Note 5d) 28,080 - 28,080 1,828
Management fees (Note 5c) 647 686 2,629 2,712
Advisory and other fees
(Note 5d) 339 224 1,305 1,002
----------------------------------------
30,672 2,431 38,690 14,300
----------------------------------------
Administration and
other expenses 3,055 2,752 9,402 6,919
Finance expense (Note 5d) 198 1,049 2,648 4,400
----------------------------------------
3,253 3,801 12,050 11,319
----------------------------------------
Income before income taxes 15,694 9,841 33,268 14,010
Income taxes 1,349 642 3,378 1,183
----------------------------------------
Net income $ 14,345 $ 9,199 $ 29,890 $ 12,827
----------------------------------------
Basic net income per share $ 0.73 $ 0.44 $ 1.50 $ 0.62
----------------------------------------
Fully diluted net income
per share $ 0.69 $ 0.43 $ 1.43 $ 0.59
----------------------------------------
----------------------------------------
(see accompanying notes to interim consolidated financial statements)
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the Quarter Ended March 31
(unaudited)
Quarter ended Year ended
March 31 March 31
$000's 2005 2004 2005 2004
---------------------------------------------------------------------
---------------------------------------------------------------------
Retained earnings,
beginning of period $ 136,030 $ 115,773 $ 124,640 $ 116,027
Net income 14,345 9,199 29,890 12,827
----------------------------------------
150,375 124,972 154,530 128,854
Dividends declared - - (2,007) (2,072)
Purchase and cancellation
of shares (Note 4) (107) (332) (2,255) (2,142)
----------------------------------------
Retained earnings,
end of period $ 150,268 $ 124,640 $ 150,268 $ 124,640
----------------------------------------
----------------------------------------
(see accompanying notes to interim consolidated financial statements)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Quarter Ended March 31
(unaudited)
Quarter ended Year ended
March 31 March 31
$000's 2005 2004 2005 2004
---------------------------------------------------------------------
---------------------------------------------------------------------
Cash flows from operating
activities
Net income $ 14,345 $ 9,199 $ 29,890 $ 12,827
Add (deduct) items not
involving a current
cash outlay
Amortization 19 23 84 84
Stock-based compensation 24 20 81 57
Future income taxes
(recovered) 504 547 (183) 1,457
Net realized gains
on investments (2,584) (8,342) (14,591) (8,786)
Previously recognized
net unrealized gains 27,903 4,700 40,211 4,700
Net unrealized gains
on investments (13,594) (7,569) (32,248) (6,943)
Non-cash income relating
to corporate investments 784 380 1,516 980
----------------------------------------
27,401 (1,042) 24,760 4,376
Net change in non-cash
working capital balances
related to operations 1,917 592 2,319 (10,798)
----------------------------------------
29,318 (450) 27,079 (6,422)
----------------------------------------
Cash flows from financing
activities
Cancellation of common shares (235) (941) (5,895) (6,734)
Shares purchased for
cancellation (80) (407) (80) (407)
Issuance of common shares - - 194 2,317
Loans payable 88 10,588 17,502 10,588
Repayment of loans payable (29,422) (11,361) (49,938) (15,746)
Dividends paid - - (2,007) (2,072)
----------------------------------------
(29,649) (2,121) (40,224) (12,054)
----------------------------------------
Cash flows from investing
activities
Net temporary investments (16,619) (34,664) (12,290) (9,980)
Acquisition of corporate
investments (1,766) (1,566) (11,523) (1,966)
Proceeds on corporate
investments 2,938 20,147 34,886 20,147
Loans receivable (5,623) - (5,623) -
Proceeds (costs) on
realization of foreign
exchange forward contracts 432 (2,405) 920 (3,253)
Return of capital from
corporate investments 12 (72) 3,908 3,042
----------------------------------------
(20,626) (18,560) 10,278 7,990
----------------------------------------
Net (decrease) in cash
and cash equivalents (20,957) (21,131) (2,867) (10,486)
Cash and cash equivalents,
beginning of period 22,785 25,826 4,695 15,181
----------------------------------------
Cash and cash equivalents,
end of period $ 1,828 $ 4,695 $ 1,828 $ 4,695
----------------------------------------
----------------------------------------
Supplemental cash flow
information
Income taxes paid $ 628 $ 297 $ 3,624 $ 9,232
Interest paid $ 297 $ 856 $ 2,029 $ 3,587
----------------------------------------
----------------------------------------
(see accompanying notes to interim consolidated financial statements)
CLAIRVEST GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005 (Tabular Dollar Amounts in Thousands)
(unaudited)
1. NATURE OF ACTIVITIES AND BASIS OF PRESENTATION The disclosures contained in these unaudited interim consolidated financial statements of Clairvest Group Inc. ("Clairvest" or the "Company") do not include all requirements of generally accepted accounting principles for annual financial statements. The unaudited interim consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements for the year ended March 31, 2004. In accordance with National Instrument 51-102 released by the Canadian Securities Administrators Canadian Securities Administrators(CSA) is a forum for the 13 securities regulators of Canada's provinces and territories to coordinate and harmonize regulation of the Canadian capital markets. , the Company discloses that its auditors AUDITORS, practice. Persons lawfully appointed to examine and digest accounts referred to them, take down the evidence in writing, which may be lawfully offered in relation to such accounts, and prepare materials on which a decree or judgment may be made; and to report the whole, together have not reviewed the unaudited interim consolidated financial statements for the quarter ended March 31, 2005. Clairvest's consolidated financial statements are prepared using the fair value method of accounting. Under fair value accounting, each of Clairvest's investments are re-valued quarterly. Realized and unrealized changes in Clairvest's investments, as well as the tax effects of these changes, are reflected in the income statement. The unaudited interim consolidated financial statements are based upon accounting principles consistent with those used and described in the annual audited consolidated financial statements, except as disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). herein. In the first quarter of fiscal 2005, Clairvest prospectively adopted the recommendations of The Canadian Institute of Chartered Accountants The Canadian Institute of Chartered Accountants (CICA) is the umbrella body for the Chartered Accountant profession in Canada and Bermuda. Membership of the CICA totals 70,000 Chartered Accountants and 8,500 students. Section 1100, Generally Accepted Accounting Principles ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "). The section establishes standards for financial reporting in accordance with GAAP by providing information regarding primary sources of GAAP in order of authority. The impact on the financial statements resulting from the adoption of the recommendations is not material. In the first quarter of fiscal 2005, Clairvest early-adopted, on a prospective basis, The Canadian Institute of Chartered Accountants Accounting Guideline 18, Investment Companies. The Guideline defines an investment company as a separate legal entity whose primary business activity is investments, and provides that an investment company should measure all of its investments at fair value and present them on this basis in its financial statements. The impact on the financial statements resulting from the adoption of the guideline is not material given that Clairvest measured its investments at fair value prior to the adoption of the guideline. In the first quarter of fiscal 2005, Clairvest prospectively adopted The Canadian Institute of Chartered Accountants Accounting Guideline 13, Hedging Relationships. The Guideline addresses the identification, designation DESIGNATION, wills. The expression used by a testator, instead of the name of the person or the thing he is desirous to name; for example, a legacy to. the eldest son of such a person, would be a designation of the legatee. Vide 1 Rop. Leg. ch. 2. 2. , documentation and effectiveness of hedging relationships for the purpose of applying hedge accounting. Clairvest's hedging program complies with the new requirements. Accordingly, the impact on the financial statements resulting from the adoption of the guideline is not material. In the fourth quarter of fiscal 2005, Clairvest prospectively adopted The Canadian Institute of Chartered Accountants' Accounting Guideline 15, Consolidation of Variable Interest Entities ("VIE"). The Guideline provides a framework for identifying a VIE and requires a primary beneficiary to consolidate a VIE. A primary beneficiary is the enterprise that absorbs a majority of the VIE's expected losses or receives a majority of the VIE's expected residual returns or both. The Guideline requires Clairvest to identify VIE's in which it has an interest, determine whether it is the primary beneficiary of such entities and if so, consolidate them. At March 31, 2005, the VIE in which Clairvest held an interest was CEP. As of March 31, 2005, Clairvest was not considered the primary beneficiary of CEP. Clairvest has no exposure to loss as a result of its involvement in CEP in its capacity of general partner. Accordingly, Clairvest did not consolidate CEP. There is therefore no impact on the consolidated financial statement resulting from the adoption of the Guideline.
2. CORPORATE INVESTMENTS
March 31, 2005 March 31, 2004
-----------------------------------------------------
-----------------------------------------------------
Fair Differ- Fair Differ-
Value Cost ence Value Cost ence
-----------------------------------------------------
-----------------------------------------------------
Investments in
publicly-traded
companies
Datamark Systems
Group Inc. $14,514 $14,421 $93 $10,148 $14,421 $(4,273)
Gateway Casinos
Income Fund 28,090 15,007 13,083 51,276 33,659 17,617
Voxcom
Incorporated - - - 11,624 12,775 (1,151)
-----------------------------------------------------
42,604 29,428 13,176 73,048 60,855 12,193
-----------------------------------------------------
Investments in
privately-held
companies
Allied Global
Holdings Inc. 4,323 3,000 1,323 3,931 3,000 931
Consolidated
Vendors
Corporation 239 7,035 (6,796) 1,674 6,030 (4,356)
Gateway Casinos
Inc. 59,921 24,000 35,921 70,368 24,000 46,368
Landauer
Metropolitan Inc. 4,234 3,636 598 3,645 3,306 339
N-Brook Mortgage
LP 1,169 1,150 19 - - -
NRI Industries
Inc. 10,080 17,613 (7,533) 10,080 17,613 (7,533)
Signature
Security Group
Holdings Pty.
Limited 30,230 28,421 1,809 28,421 28,421 -
Van-Rob Inc. 5,000 5,000 - 5,000 5,000 -
Voxcom
Incorporated 11,830 11,486 344 - - -
Wellington
Financial Fund I - - - 1,290 - 1,290
Wellington
Financial
Fund II 8,775 7,361 1,414 1,635 1,635 -
-----------------------------------------------------
135,801 108,702 27,099 126,044 89,005 37,039
-----------------------------------------------------
Other
investments 1,841 42 1,799 356 371 (15)
-----------------------------------------------------
$180,246 $138,172 $42,074 $199,448 $150,231 $49,217
-----------------------------------------------------
-----------------------------------------------------
In the fourth quarter of fiscal 2005, Clairvest loaned $48,000 to Consolidated Vendors Corporation. In the fourth quarter of fiscal 2005, Clairvest funded $0.3 million of its $5.0 million commitment to N-Brook Mortgage LP, bringing the total funded amount to $1.2 million. In the fourth quarter of fiscal 2005, Clairvest funded $1.6 million of its $20.0 million commitment to Wellington Financial Fund II, bringing the total funded amount to $7.4 million at March 31, 2005. In the fourth quarter of fiscal 2005, Wellington Fund The Wellington Fund was the first balanced mutual fund in the United States, and is one of the oldest surviving mutual funds. It was established in 1928 by Walter L. Morgan with $100,000 raised from relatives and business people in Morgan's home state of Pennsylvania. I was wound up. Upon the wind up, Clairvest received its prorata share of the warrants and other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. held by Wellington Fund I at the time. These investments are included as part of other investments. 3. LOANS PAYABLE Loans payable consist of the following: (a) $13.7 million 30-year loan from Gateway Casinos Inc. The loan is non-interest bearing, and repayable on demand. The loan is collateralized by the units held by Clairvest in the limited partnership that owns Gateway Casinos Inc. Clairvest repaid $1.4 million of this loan during the quarter. (b) $15.0 million 30-year loan from a subsidiary of Gateway Casinos Inc. The loan bears interest at 8.05% per annum, and is collateralized by the units held by Clairvest in Gateway Casinos Income Fund. The loan must be repaid as the units in Gateway Casinos Income Fund are disposed of. (c) Loans totalling $89,000 from the limited partnership that owns Gateway Casinos Inc. These loans are non-interest bearing and repayable on demand at any time after December 31, 2005. $28.1 million of loans were outstanding at December 31, 2004 that were non-interest bearing and repayable on demand at any time after December 31, 2004. These loans were paid in full during the fourth quarter of fiscal 2005. 4. SHARE CAPITAL During the fourth quarter of fiscal 2004 the Company filed a normal course issuer bid enabling it to make market purchases of up to 911,572 of its common shares in the 12-month period commencing March 4, 2004. During the fourth quarter of fiscal 2005 the Company filed a new normal course issuer bid enabling it to make purchases of up to 877,472 common shares in the 12-month period commencing March 4, 2005. During the fourth quarter of fiscal 2005, the Company purchased and cancelled under its normal course issuer bid 25,000 common shares at a cost of $235,000. During the fourth quarter of fiscal 2005, the Company also purchased 8,500 common shares at a cost of $80,000 which were cancelled subsequent to quarter-end. In total 1,621,252 common shares at a cost of $12.7 million had been purchased under this, and previous, normal course issuer bids as of March 31, 2005. 17,549,438 common shares and 2,230,954 non-voting shares were outstanding at March 31, 2005. 5. RELATED PARTY TRANSACTIONS (a) Included in accounts receivable and other assets are share purchase loans made to certain officers of the Company or officers of corporate investments totalling $658,000 (2004 - $1,062,000) and other loans made to certain officers of a company affiliated with Clairvest totalling $200,000 (2004 - $82,000). The share purchase loans bear interest fixed at either 4% or the prime rate on the date of drawdown Drawdown The peak to trough decline during a specific record period of an investment or fund. It is usually quoted as the percentage between the peak to the trough. Notes: less 1%, interest is paid annually, and the loans have full recourse and are collateralized by the common shares of the Company purchased by the officers with a market value of $1,110,000 (2004 - $1,321,000). The loans to officers of a company affiliated with Clairvest bear interest at the prime rate on the date of drawdown less 1%, and interest is paid annually. Loans are repayable upon departure of the officer. Also included in accounts receivable and other assets are receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed from Clairvest's corporate investments totalling $670,000 (2004 - $767,000), from Clairvest Equity Partners Limited Partnership ("CEP") totalling nil (2004 - $1,000) and from a corporate investment previously disposed of totalling $2,729,000 (2004 - $2,837,000). The $2,729,000 owing from a corporate investment previously disposed of was received subsequent to quarter-end. Clairvest had accounts payable to CEP totalling $13,000 (2004 - nil) at March 31, 2005. (b) Loans receivable consist of loans to Wellington Financial Fund II made during the quarter. These loans bear interest at the prime rate, and are repayable on demand. The loans, together with interest, were repaid subsequent to quarter-end. (c) Management fees are paid to Clairvest as compensation for its services in the administration of CEP's portfolio. (d) During the fourth quarter of fiscal 2005 Clairvest received $888,000 (2004 - $784,000) in interest, $28.1 million (2004 - nil) in dividends, and $339,000 (2004 - $224,000) in advisory and other fees from its corporate investments. Also during the fourth quarter of fiscal 2005 Clairvest paid $298,000 (2004 - $774,000) in interest to a Gateway Casinos Inc. entity. (e) During fiscal 2003, Clairvest entered into an agreement to guarantee up to $7.0 million of CEP's obligations to the Toronto-Dominion Bank under CEP's foreign exchange forward contracts with the bank. 6. STOCK-BASED COMPENSATION No options were granted, exercised or cancelled during the fourth quarter of 2005. At March 31, 2005, a total of 1,512,000 options were outstanding under Clairvest's stock option plan. During the fourth quarter of fiscal 2005, the Company recorded compensation expense of $24,000 with an offsetting credit to stock-based compensation in shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. for the stock options awarded to employees during fiscal 2004 and fiscal 2005. Had Clairvest recorded compensation expense for stock options granted prior to April 1, 2003 using the fair value method, net income would have decreased by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $4,100 (2004 - $17,000) for the fourth quarter of fiscal 2005. 7. CONSOLIDATED STATEMENTS OF CASH FLOWS
Net change in non-cash working capital balances related to operations
is detailed as follows:
2005 2004
---------------------------
Accounts receivable and other assets $ 1,317 $ (906)
Accounts payable 600 1,498
---------------------------
$ 1,917 $ 592
---------------------------
---------------------------
Cash and cash equivalents at March 31, 2005 and 2004 are comprised
of the following:
2005 2004
---------------------------
Cash $ 459 $ 1,221
Cash equivalents 1,369 3,474
---------------------------
$ 1,828 $ 4,695
---------------------------
---------------------------
8. FINANCIAL INSTRUMENTS As at March 31, 2005, the Company had entered into foreign exchange forward contracts as hedges against its foreign investments as follows: (i) Forward contracts to sell AUS$31.3 million (2004 - AUS$31.3 million) at a rate of Canadian $0.927 per Australian dollar through May 2005 (average rate of $0.9270; 2004 average rate of $0.9522). The fair value of these contracts at March 31, 2005 is a loss of $300,000 (2004 - loss of $1.4 million), $90,000 of this loss relates to the debt portion of Clairvest's investment in Signature and has been recognized on the balance sheet as derivative instruments market valuation; and (ii) Forward contracts to sell US$12.3 million (2004 - US$3.4 million) at rates of Canadian $1.1940 to $1.2315 per U.S. dollar through February February: see month. 2006 (average rate of $1.2227; 2004 average rate of $1.3404). The fair value of these contracts at March 31, 2005 is a gain of $70,000 (2004 - gain of $104,000). The contracts which have been entered into as a hedge against the debt portion of Clairvest's investment in Consolidated Vendors have a fair value of a loss of $22,000, which has been recognized on the consolidated balance sheet as derivative instruments market valuation. 9. CONTINGENCIES Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. , COMMITMENTS AND GUARANTEES (a) Clairvest has committed to co-invest alongside CEP in all investments undertaken by CEP. Clairvest's total co-investment commitment is $54.7 million, of which $19.1 million has been funded to March 31, 2005. Clairvest may only sell all or a portion of a corporate investment that is a joint investment with CEP if it, as manager of CEP, concurrently sells a proportionate number of securities of that corporate investment held by CEP. (b) Clairvest has committed $20.0 million to Wellington Financial Fund II, $7.4 million of which has been funded to March 31, 2005. Clairvest also owns 48.5% of the general partner of Wellington Financial Fund II. (c) Clairvest has committed $5.0 million to N-Brook Mortgage LP, subject to N-Brook management achieving certain targets. $1.2 million of Clairvest's commitment has been funded to March 31, 2005. (d) During fiscal 2002, Clairvest sold certain shares of Consolidated Vendors to CEP for $5.7 million. Clairvest has guaranteed to compensate CEP for any deficiency A shortage or insufficiency. The amount by which federal Income Tax due exceeds the amount reported by the taxpayer on his or her return; also, the amount owed by a taxpayer who has not filed a return. between (i) CEP's purchase price for these shares and (ii) the amount CEP receives from its investment in these shares, including proceeds of disposition and any other amounts and including proceeds of disposition or other amounts attributable to any other of CEP's holdings in Consolidated Vendors over and above the cost of these holdings. At March 31, 2005, $3.1 million of the guaranteed amount was reflected on the consolidated balance sheet, as a reduction in the fair value of Clairvest's investment in Consolidated Vendors. (e) During fiscal 2003, Clairvest entered into an agreement to guarantee up to $7.0 million of CEP's obligations to the Toronto-Dominion Bank under CEP's foreign exchange forward contracts with the bank. (f) Under Clairvest's Incentive Bonus Program, a bonus of 10% of after-tax cash realizations on Clairvest's corporate investments would be paid to management as a bonus. Amounts are accrued under this plan with respect to cash realizations made during the year. If Clairvest were to sell its corporate investments at their current fair values, a bonus of $3.1 million (2004 - $2.8 million) would be owing to management under the Incentive Bonus Program. (g) A wholly-owned subsidiary of Clairvest together with certain other unit holders (the "Unit Holders") hold 20% of the outstanding units of Gateway Casinos Income Fund. The Unit Holders have agreed that they will take all necessary steps to collectively maintain the 20% ownership amongst the Unit Holders and in connection with any additional issue of units of Gateway Casinos Income Fund to ensure that their collective ownership of the Fund is maintained at 20% of the issued and outstanding units. (h) During the third quarter of fiscal 2005, a wholly-owned subsidiary of Clairvest together with other shareholders of Gateway Casinos Inc. (the "Gateway Shareholders") entered into an agreement with Gateway's bank whereby the Gateway Shareholders agreed to fund cost overruns on the development of Gateway's casino facility in Langley, British Columbia. The development project is expected to be completed in June 2005. The amount of the cost overruns, if any, cannot be determined at this time and no amounts have been reflected in Clairvest's consolidated financial statements. 10. SUBSEQUENT EVENTS (a) On May 20, 2005, Voxcom Income Fund completed an initial public offering. Clairvest reinvested its entire investment in Voxcom Incorporated into 1,645,015 units of Voxcom Income Fund, and as a result holds a 20.1% interest in Voxcom Income Fund. The units initially traded at $10 per unit. Clairvest may not sell its units in Voxcom Income Fund for 180 days following closing. (b) Subsequent to quarter-end, Clairvest invested in Integral Orthopedics Inc., which acquired the businesses of Obus Forme Ltd. and Moller LLC. Clairvest made a $3.9 million investment in Integral Orthopedics Inc. 11. COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS The comparative consolidated financial statements have been reclassified from statements previously presented to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" the presentation of the March 31, 2005 consolidated financial statements. Clairvest Group Inc. (TSX:CVG) |
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