TSX Symbol FC.UN
TORONTO, Nov. 5 /CNW/ - Firm Capital Mortgage Investment Trust (the
"Trust") (TSX FC.UN), released today its financial statements for the third
quarter ended September 30, 2008.
Net earnings for the third quarter ended September 30, 2008 increased to
$3,484,045 from $3,221,939 for the same period last year. Basic weighted
average earnings per unit for the third quarter amounted to $0.261 versus
$0.255 last year. Net earnings for the nine month period ended September
30, 2008 increased to $10,976,050 from $9,735,662 for the same period last
year. Basic weighted average earnings per unit for the nine month period ended
September 30, 2008 increased to $0.846 versus $0.772 last year.
For the nine month period ended September 30, 2008, net earnings exceeded
distributions by $1,863,732, representing $0.135 per unit, based on the number
of units outstanding at September 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 nine month
period ended September 30, 2008 represented an annualized return on average
Unitholders' equity of 11.74% per annum. This return on Unitholders' equity
equates to 882 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.
For the nine month period ended September 30, 2008, net earnings exceeded
distributions by $1,863,732 representing $0.135 per unit (based on the number
of units outstanding at September 30, 2008).
As at September 30, 2008, the Trust's mortgage portfolio, net of fair
value adjustment, stood at $248,658,885 as compared to $233,731,967 as at
December 31, 2007. The portfolio continued to be heavily concentrated in first
mortgages.
The Trust has in place a Distribution Reinvestment Plan (DRIP) and Unit
Purchase Plan that is available to its Unitholders. The plans allow
participants to have their monthly cash distributions reinvested in additional
Trust units and grants participants the right to purchase additional units.
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 Nine Months Ended September 30, 2008
FIRM CAPITAL MORTGAGE INVESTMENT TRUST
Unaudited Balance Sheets
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Sept. 30, 2008 Dec. 31, 2007 Sept. 30, 2007
(Unaudited) (Audited) (Unaudited)
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Assets
Amounts receivable
and prepaid expenses $ 2,439,937 $ 2,093,026 $ 1,988,079
Mortgage investments
(note 5) 248,658,885 233,731,967 210,194,972
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$ 251,098,822 $ 235,824,993 $ 212,183,051
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Liabilities and Unitholders' Equity
Liabilities:
Bank indebtedness
(note 6) $ 42,732,217 $ 52,593,158 $ 29,540,984
Accounts payable
and accrued liabilities 1,025,235 820,000 1,057,172
Unearned income 323,640 335,721 326,633
Unitholder distribution
payable 1,078,913 2,186,413 985,260
Loans payable (note 7) 48,072,374 36,002,060 35,499,918
Convertible debenture
(note 8) 23,917,606 23,753,430 23,698,759
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117,149,985 115,690,782 91,108,726
Unitholders' equity
(note 9): 133,948,837 120,134,211 121,074,325
Issued and outstanding:
13,832,219 units
(2007 - 12,631,540)
Commitments (note 5)
Contingent liabilities (note 15)
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$ 251,098,822 $ 235,824,993 $ 212,183,051
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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 9 Month Period
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2008 2007 2008 2007
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Interest and fees
earned, net of
Trust Manager
interest allocation
(note 13) $ 5,414,603 $ 4,891,355 $16,671,629 $14,460,770
Less interest
expense (note 14) 1,602,547 1,455,468 4,778,951 4,045,907
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Net interest and
fee income 3,812,056 3,435,887 11,892,678 10,414,863
Expenses:
General and
administrative 178,011 213,948 566,628 584,201
Unrealized loss
in value of
mortgages
(note 5) 150,000 - 350,000 95,000
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328,011 213,948 916,628 679,201
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Net earnings for
the period $ 3,484,045 $ 3,221,939 $10,976,050 $ 9,735,662
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Net earnings per
unit (note 10)
Basic $ 0.261 $ 0.255 $ 0.846 $ 0.772
Diluted $ 0.253 $ 0.247 $ 0.811 $ 0.747
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See accompanying notes to financial statements.
FIRM CAPITAL MORTGAGE INVESTMENT TRUST
Unaudited Statement of Unitholders' Equity
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Sept. 30, 2008 Dec. 31, 2007 Sept. 30, 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
and private placement) (224,037) - -
Proceeds from issuance
of units 12,174,931 456,630 388,700
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Balance, end of period $ 131,704,623 $ 119,753,729 $ 119,685,799
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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 10,976,050 12,885,048 9,735,662
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Balance, end of period $ 77,150,284 $ 66,174,234 $ 63,024,848
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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) 9,112,318 12,885,048 8,727,618
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Balance, end of period $ 75,286,552 $ 66,174,234 $ 62,016,804
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Total unitholders'
equity $ 133,948,837 $ 120,134,211 $ 121,074,325
Units issued and
outstanding (note 9) 13,832,219 12,638,227 12,631,540
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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 9 Month Period
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2008 2007 2008 2007
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Cash provided by
(used in):
Operating activities
Net earnings for
the period $ 3,484,045 $ 3,221,939 $10,976,050 $ 9,735,662
Net changes in
non-cash items
Increase in fair
value adjustment 150,000 - 350,000 95,000
Implicit interest
rate in excess of
coupon rate -
convertible
debenture 55,224 54,493 164,176 161,548
Decrease
(increase)
in amounts
receivable and
prepaid
expenses (222,724) (14,936) (346,911) 86,611
Increase
(decrease)
in accounts
payable
and accrued
liabilities 463,947 595,958 205,235 485,181
Increase
(decrease)
in unearned
income 23,827 29,852 (12,081) 21,026
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3,954,319 3,887,306 11,336,469 10,585,028
Financing activities:
Proceeds from
issuance of units 7,522,253 113,876 12,174,932 388,701
Increase (decrease)
in bank
indebtedness (1,795,647) (4,696,987) (9,860,941) (10,560,700)
Increase (decrease)
in loans payable (2,391,305) 8,891,816 12,070,314 9,516,745
Increase (decrease)
in distribution
payable 57,229 863 (1,107,500) 985,260
Equity offering
costs (60,000) - (224,037) -
Distributions to
unitholders (3,123,021) (2,954,898) (9,112,318) (8,727,618)
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209,509 1,354,670 3,940,450 (8,397,612)
Investing activities:
Funding of
mortgages (39,326,209) (47,584,754) (112,968,479)(119,681,028)
Discharge of
mortgages 35,162,381 42,342,778 97,691,560 117,493,612
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(4,163,828) (5,241,976) (15,276,919) (2,187,416)
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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) $ 1,196,094 $ 867,646 $ 4,759,475 $ 3,378,449
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See accompanying notes to financial statements.
FIRM CAPITAL MORTGAGE INVESTMENT TRUST
Notes to Financial Statements
Three Months and Nine Months ended September 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) Special mortgage investments:
Special profit participations earned by the Trust on
special mortgage investments 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.
