TSX Symbol FC.UN
TORONTO, July 16 /CNW/ - Firm Capital Mortgage Investment Trust (the
"Trust") (TSX FC.UN), released today its financial statements for the second
quarter ended June 30, 2008.
Net earnings for the second quarter ended June 30, 2008 increased to
$3,917,718 from $3,155,115 for the same period last year. Basic weighted
average earnings per unit for the second quarter amounted to $0.303 versus
$0.250 last year. Net earnings for the six month period ended June 30, 2008
increased to $7,492,005 from $6,513,723 for the same period last year. Basic
weighted average earnings per unit for the six month period ended June 30,
2008 increased to $0.586 versus $0.517 last year.
For the six month period ended June 30, 2008, net earnings exceeded
distributions by $1,502,708, representing $0.115 per unit, based on the number
of units outstanding at June 30, 2008. The Trust distributes the balance of
its net earnings, less distributions made up to November 30 of that year, to
Unitholders of record as at December 31. Net earnings for the six month period
ended June 30, 2008 represented an annualized return on average Unitholders'
equity of 12.61% per annum. This return on Unitholders' equity equates to 975
basis points per annum over the average One Year Government of Canada Treasury
Bill yield for the related period, 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 June 30, 2008, the Trust's mortgage portfolio, net of fair value
adjustment, stood at $244,645,057 as compared to $233,731,967 as at
December 31, 2007. The portfolio continued to be heavily concentrated in first
mortgages.
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.
Unaudited Financial Statements of
FIRM CAPITAL MORTGAGE INVESTMENT TRUST
For the Six Months Ended June 30, 2008
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.
FIRM CAPITAL MORTGAGE INVESTMENT TRUST
Balance Sheets
June 30, 2008, with comparative figures for December 31, 2007 and
June 30, 2007
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June 30, Dec. 31, June 30,
2008 2007 2007
(Unaudited) (Audited) (Unaudited)
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Assets
Amounts receivable and
prepaid expenses $ 2,217,213 $ 2,093,026 $ 1,973,143
Mortgage investments
(note 5) 244,645,057 233,731,967 204,952,996
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$246,862,270 $235,824,993 $206,926,139
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Liabilities and
Unitholders' Equity
Liabilities:
Bank indebtedness (note 6) $ 44,527,864 $ 52,593,158 $ 34,237,971
Accounts payable and
accrued liabilities 561,288 820,000 461,214
Unearned income 299,813 335,721 296,781
Unitholder distribution
payable 1,021,684 2,186,413 984,397
Loans payable (note 7) 50,463,679 36,002,060 26,608,102
Convertible debenture
(note 8) 23,862,382 23,753,430 23,644,266
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120,736,710 115,690,782 86,232,731
Unitholders' equity (note 9): 126,125,560 120,134,211 120,693,408
Issued and outstanding:
13,098,509 units
(2007 - 12,620,468)
Commitments (note 5)
Contingent liabilities
(note 15)
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$246,862,270 $235,824,993 $206,926,139
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See accompanying notes to financial statements.
FIRM CAPITAL MORTGAGE INVESTMENT TRUST
Unaudited Statement of Earnings
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3 Month Period 6 Month Period
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
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Interest and fees
earned, net of
Trust Manager
interest
allocation
(note 13) $ 5,778,363 $ 4,715,947 $ 11,257,026 $ 9,569,415
Less interest
expense (note 14) 1,468,119 1,264,080 3,176,404 2,590,439
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Net interest and
fee income 4,310,244 3,451,867 8,080,622 6,978,976
Expenses:
General and
administrative 192,526 201,752 388,617 370,253
Unrealized loss
in value of
mortgages
(note 5) 200,000 95,000 200,000 95,000
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392,526 296,952 588,617 465,253
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Net earnings for
the period $ 3,917,718 $ 3,155,115 $ 7,492,005 $ 6,513,723
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Net earnings per
unit (note 10)
Basic $ 0.303 $ 0.250 $ 0.586 $ 0.517
Diluted $ 0.288 $ 0.243 $ 0.559 $ 0.500
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See accompanying notes to financial statements.
FIRM CAPITAL MORTGAGE INVESTMENT TRUST
Statement of Unitholders' Equity
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June 30, Dec. 31, June 30,
2008 2007 2007
(Unaudited) (Audited) (Unaudited)
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Trust units (note 9):
Balance, beginning of period $119,753,729 $119,297,099 $119,297,099
Offering costs (rights offering) (164,037) - -
Proceeds from issuance of units 4,652,679 456,630 274,825
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Balance, end of period $124,242,371 $119,753,729 $119,571,924
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Equity component of convertible
debentures (note 8):
Balance, beginning of period $ 380,482 $ 380,482 $ 380,482
Equity component of convertible
debentures issued - - -
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Balance, end of period $ 380,482 $ 380,482 $ 380,482
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Cumulative earnings:
Balance, beginning of period $ 66,174,234 $ 53,289,186 $ 53,289,186
Net earnings for the period 7,492,005 12,885,048 6,513,723
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Balance, end of period $ 73,666,239 $ 66,174,234 $ 59,802,909
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Cumulative distributions to
unitholders:
Balance, beginning of period $ 66,174,234 $ 53,289,186 $ 53,289,186
Distributions to unitholders
(note 11) 5,989,297 12,885,048 5,772,720
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Balance, end of period $ 72,163,531 $ 66,174,234 $ 59,061,906
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Total unitholders' equity $126,125,560 $120,134,211 $120,693,409
Units issued and outstanding
(note 9) 13,098,509 12,638,227 12,620,468
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See accompanying notes to financial statements.
FIRM CAPITAL MORTGAGE INVESTMENT TRUST
Unaudited Statement of Cash Flows
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3 Month Period 6 Month Period
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
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Cash provided by
(used in):
Operating
activities
Net earnings
for the period $ 3,917,717 $ 3,155,115 $ 7,492,005 $ 6,513,723
Net changes in
non-cash items
Increase in
fair value
adjustment 200,000 95,000 200,000 95,000
Implicit
interest rate
in excess of
coupon rate -
convertible
debenture 54,568 53,849 108,952 107,055
Decrease
(increase)
in amounts
receivable
and prepaid
expenses 33,671 (35,645) (124,187) 101,547
Increase
(decrease)
in accounts
payable and
accrued
liabilities (405,472) (415,913) (258,712) (110,777)
Increase
(decrease)
in unearned
income 18,745 13,257 (35,908) (8,826)
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3,819,229 2,865,663 7,382,150 6,697,722
Financing activities:
Proceeds from
issuance of
units 4,539,940 233,447 4,652,679 274,825
Increase
(decrease)
in bank
indebtedness 1,204,809 5,288,161 (8,065,294) (5,863,713)
Increase
(decrease) in
loans payable 8,308,383 (515,213) 14,461,619 624,929
Increase
(decrease) in
distribution
payable 35,042 26,995 (1,164,729) 984,397
Debenture
offering costs (149,391) - (164,037) -
Distributions
to unitholders (3,030,013) (2,900,953) (5,989,297) (5,772,720)
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10,908,770 2,132,437 3,730,941 (9,752,282)
Investing
activities:
Funding of
mortgages (52,087,680) (39,570,227) (73,642,270) (72,435,052)
Discharge of
mortgages 37,359,681 34,572,127 62,529,179 75,489,612
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(14,727,999) (4,998,100) (11,113,091) 3,054,560
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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) $ 1,794,492 $ 1,564,812 $ 3,273,981 $ 2,426,012
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See accompanying notes to financial statements.
FIRM CAPITAL MORTGAGE INVESTMENT TRUST
Notes to Financial Statements
Three Months and Six Months ended June 30, 2008
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1. Organization 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, 2007. 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 2007 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) Mortgage investments:
Mortgage investments are stated at estimated fair value in
accordance with Canadian Institute of Chartered Accountants
Accounting Guideline 18. 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. The fair value of Mortgage investments
approximate their carry values due to the fact that the majority
of the mortgages are (i) are short-term in nature with terms of
12 months or less, (ii) repayable in full, at any time at the
option of the borrower prior to maturity without penalty, and
(iii) have minimum specified interest rates for mortgages with
floating rates linked to bank prime. When, in management's
opinion, collection of principal on a particular mortgage
investment is no longer reasonably assured, the fair value of the
mortgage investment is reduced to reflect the estimated net
realizable recovery from the collateral securing the mortgage
loan.
(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 year by the weighted average number of units outstanding
during the year. 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 debentures, 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 year.
