Renasant Financial Partners Ltd.
TSX : REN

Renasant Financial Partners Ltd.

January 24, 2007 17:38 ET

Renasant Reports 3rd Quarter Fiscal 2007 Results and a Shareholders Meeting to Approve a Capital Distribution

MISSISSAUGA, ONTARIO--(CCNMatthews - Jan. 24, 2007) - Renasant Financial Partners Ltd. (TSX:REN) (the "Corporation") today reported results of operations for the third quarter ended December 31, 2006. The Corporation's financial performance reflects nominal profitability after paying the special dividend, but continued achievement of goals associated with reduced levels of assets and further settlements of litigation matters. In the third quarter, the Corporation reached settlements with the City of Windsor respecting their equipment leases and the Corporation's insurance provider respecting disputed coverage, all within anticipated financial parameters. The Corporation believes a capital distribution is currently appropriate given the status of remaining litigation matters and existing business objectives and is requesting a shareholder meeting to approve a distribution process.

Net income for the third quarter of Fiscal 2007 was $60,000 or $0.01 per share, down from the $1.6 million or $0.18 per share achieved in the corresponding period last year. All per share values are fully diluted. On a year-to-date basis, net income of $2.4 million or $0.28 per share was earned as compared with net income of $4.6 million or $0.52 per share earned in the first three quarters of Fiscal 2006. The reduction in net income was a direct result of the $62 million drop in investment assets associated with the payment of the special dividend in September 2006. No significant reduction in the expense base occurred to cushion the reduction in investment income.

Investment income was $1.0 million in the quarter and $5.1 million year-to-date compared with $0.9 million and $3.1 million in the corresponding periods last year due to higher disposal profits and a larger portfolio of marketable securities throughout the current year. Trading margin at $489,000 in the quarter was down from $652,000 in the same quarter last year on slightly higher volume due primarily to an increased allowance to address a collectability risk. Year-to-date margin of $2.1 million closely approximates that achieved in Fiscal 2007 on similar revenues. SG&A at $1.4 million in the quarter and $4.2 million year-to-date approximates the costs incurred last year as the Corporation continues to incur a high level of fixed costs associated with being a public company. Income from the discontinued leasing business was $0.1 million or $0.01 per share in the current quarter and $0.3 million or $0.04 per share year-to-date versus $1.3 million or $0.15 per share in the third quarter of last year and $3.6 million or $0.41 per share year-to-date Fiscal 2006 when the leasing business was the primary focus of the Corporation.

A proxy circular will be mailed to Renasant shareholders shortly for a meeting of Renasant shareholders to be held on March 13, 2007. The record date for the shareholders meeting is February 9, 2007. At that meeting, Renasant shareholders will be asked to approve a reduction of stated capital for the Corporation's common shares and a return of capital to a maximum aggregate amount of $47.0 million. Renasant's Board of Directors have approved a single distribution of $26.0 million in the aggregate to shareholders of record on March 22, 2007, subject to the approval by the shareholders of the capital reduction resolution.

The Corporation will continue to be focused on litigation management and reducing the discontinued assets while generating profits from the trading business and remaining investments within appropriate risk parameters.

Third Quarter Report Fiscal 2007

RENASANT FINANCIAL PARTNERS LTD.

OVERVIEW

Performance in the third quarter of Fiscal 2007 met expectations for constrained levels of profitability given the much lower asset base after the special dividend. Priorities continue to include a focus on litigation management, assessing the trading business and reducing the level of discontinued assets, all of which moved forward in the quarter.

INCOME

Net income for the third quarter of Fiscal 2007 was $60,000 or $0.01 per share, down from the $1.6 million or $0.18 per share achieved in the corresponding period last year. All per share values are fully diluted. On a year-to-date basis, net income of $2.4 million or $0.28 per share was earned as compared with net income of $4.6 million or $0.52 per share earned in the first three quarters of Fiscal 2006. The reduction in net income was a direct result of the $62 million drop in assets associated with the payment of the special dividend in September of 2006. No significant reduction in the expense base occurred to cushion the reduction in investment income.

Income from continuing operations was NIL in the quarter, down from the $0.3 million or $0.03 per share earned in the corresponding quarter last year. The prior year's value reflects a period when the focus remained on the leasing business. Income from the discontinued leasing business was $0.1 million or $0.01 per share in the current quarter versus $1.3 million or $0.15 per share in the third quarter of Fiscal 2006.

On a year-to-date basis, income from continuing operations was $2.1 million or $0.24 per share as compared with $1.0 million or $0.11 per share for the first three quarters in Fiscal 2006. On a year-to-date basis, income from the discontinued leasing business was $0.3 million or $0.04 per share in the current year versus $3.6 million or $0.41 per share in the corresponding period last year.

Income from continuing operations is comprised of the trading business and income from investments. It is not directly comparable to the prior period due primarily to two factors. Investment income in the prior year was relatively stable and represented funds surplus to the core leasing business. The current year's investment portfolio was volatile, being very high at the start of the year with the proceeds from the sale of the leasing business which was ultimately distributed to shareholders in September. Secondly, expenses for the prior year are allocations based on reasonable estimates of the split in the organization between lease and continuing operations. It may not necessarily approximate an organization formed to operate the continuing business on a stand alone basis.

Investment income was $1.0 million in the quarter compared with $.9 million in the corresponding quarter last year. On a year-to-date basis, investment income was $5.1 million as compared with $3.1 million in the corresponding period last year. The increase is primarily the result of a higher level of marketable securities which grew from $40.2 million in the third quarter of last year to approximately $100 million early in the current year prior to the recent liquidation. Current levels of marketable securities approximate $19 million although a higher percentage of the $22 million cash balance would be income earning in the current year. Disposition profits included in investment income were $1.3 million in the current year as compared with $0.4 million last year. At December 31, 2006, the fair market value of the remaining publicly traded securities represents approximately book value.

Gross margin in the equipment trading business was $489,000 in the current quarter and $2.1 million on a year-to-date basis. This compares with $652,000 and $2.0 million of trading margin earned in the corresponding periods in the prior year. Activity levels increased approximately 6% to $9.0 million this quarter and $25.9 million year-to-date. Gross margins in the current quarter were 5.5% as compared to approximately 7.8% in the corresponding quarter last year. On a year-to-date basis, however, trading margin was 8.0% essentially the same as that achieved in the corresponding period last year and equivalent to the historical long term margin rate. Margins in the trading business vary by customer and equipment type and as such tend to be quite variable and hard to predict. The current quarter's margin was negatively impacted by an allowance for collection concerns associated with one specific customer and represents the vast majority of the difference.

During the third quarter of Fiscal 2007, SG&A was approximately $1.4 million and on a year-to-date basis was approximately $4.2 million. These values are very similar to that allocated to continuing operations in the corresponding periods of last year. The Corporation incurs a significant level of fixed costs associated with being a public company (directors' fees, audit fees, insurance, etc.) which do not decline with activity levels. Further, the amortization of transitional service costs and executive stay bonuses in the current year offset the reduced level of infrastructure costs associated with lower activity levels. A substantial reduction in SG&A will occur in Q4 of this year as a significant portion of the executive costs have now been fully provided.

Income from the discontinued lease business in the current year represents profits earned from a small population of leases which the Corporation continues to own. The majority of these leases are not funded and generate market rates of return. The income contribution will decline with continued run-off and portfolio dispositions. The Corporation sold approximately $4.8 million of its lease portfolio in the quarter for net book value and retains a portfolio currently of less than $10 million. This compares with the leasing business in full operation in last year's equivalent period subject to certain expense allocations. The net income for both years incorporates an assumed tax provision of 37.5% based on an estimate of the geographic distribution of the leases. Some distortion in the tax provision on the income from continuing operations will result.

BALANCE SHEET

Cash and marketable securities at December 31, 2006 were approximately $41.6 million, an increase in the quarter of $3.1 million. The major cash inflow in the quarter was the disposal of discontinued lease assets offset to some extent by working capital changes.

A significant shift in the composition of cash and securities arose in the quarter as $8.6 million of bridge funds were redeemed and converted to cash. Surplus cash balances are currently being invested in short term investment grade instruments.

Fully diluted net book value per share at September 30, 2006 was $5.75. No issuer bid activity occurred in the quarter and on a year-to-date basis, 175,000 shares were repurchased for cancellation at an average price of $10.85. This occurred prior to the special dividend payment.

CONTINGENCIES

In December of 2006, the Corporation reached an agreement with its insurance carrier in respect of disputed coverage on certain of the litigation matters. Upon receipt of $3.25 million, the Corporation released the insurer of any future obligations. The amount effectively reimbursed the Corporation for costs and expenses incurred in defending the litigation matters and was within the expected financial parameters of the litigation reserve.

In October of 2006, the Corporation settled its remaining claims with the City of Windsor relating to approximately 50 equipment leases entered into between 1994 and 2001. A prior settlement with the City was reached in July 2005 regarding the regional landfill. Together, the settlements extinguish a $300 million litigation claim. The settlement requires the Corporation to pay $3.7 million to the City in cash, release a $0.5 million security deposit and modify several contracts to revise the purchase options to $1.00. The settlement was within the financial reserves established by the Corporation in prior years.

There have been no other changes in the status of litigation matters in the quarter. Detailed information on the litigation matters is provided in Note 13(a) to the 2006 Consolidated Financial Statements.

The Corporation has established a liability for litigation matters representing the estimated costs to the Corporation of settling all remaining litigation in a reasonable manner applying principles consistent with those established in earlier settlements. Special provisions of $45.0 million have historically been established to reflect current expectations. Current year settlements have been within the financial parameters of the reserves established. Should any settlement discussion prove unsuccessful, the Corporation intends to defend these actions on the basis that the lease documents entered into are clear and complete and create binding obligations. Should the Corporation be unsuccessful in its defense or settlement of one or more of these legal actions, there could be a materially adverse effect on the Corporation's financial position and future operations.

A detailed review of the federal and provincial income tax reassessments received by the Corporation is outlined in Note 13(c) to the 2006 Consolidated Financial Statements. There has been no significant change in the status of these reassessments. Detailed negotiations with CRA have yet to commence.

OUTLOOK

The Corporation believes a capital distribution is currently appropriate given the status of remaining litigation matters and existing business objectives and is requesting a shareholder meeting to approve a distribution process.

A proxy circular will be mailed to Renasant shareholders shortly for a meeting of Renasant shareholders to be held on March 13, 2007. The record date for the shareholders meeting is February 9, 2007. At that meeting, Renasant shareholders will be asked to approve a reduction of stated capital for the Corporation's common shares and a return of capital to a maximum aggregate amount of $47.0 million. Renasant's Board of Directors have approved a single distribution of $26.0 million in the aggregate to shareholders of record on March 22, 2007, subject to the approval by the shareholders of the capital reduction resolution.

In the near term, the Corporation will continue to be focused on resolving the remaining litigation matters, disposing of the balance of the assets of the discontinued business, managing and assessing the trading business in its current environment and optimizing investment opportunities for available cash within acceptable risk profiles.

NOTICE OF NO AUDITOR

REVIEW OF INTERIM FINANCIAL STATEMENTS

Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.

The accompanying unaudited interim financial statements of the company have been prepared by and are the responsibility of the company's management.

The company's independent auditor has not performed a review of these financial statements in accordance with the standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity's auditor.

President and Chief Executive Officer

Senior Vice President and Chief Financial Officer

January 24, 2007



RENASANT FINANCIAL PARTNERS LTD
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)

Dec 31, March 31,
2006 2006
(Unaudited) (Audited)
-------------------------

ASSETS

Cash $ 22,711 $ 13,037
Marketable securities (Note 2) 18,919 98,829
Equipment held for sale 3,127 2,425
Receivables 7,045 7,047
Long-term taxes recoverable 14,000 14,000
Capital Assets 160 168
Discontinued lease assets (Note 3) 9,746 40,076
-------------------------
$ 75,708 $ 175,582
-------------------------
-------------------------

LIABILITIES

Accounts payable and accrued charges $ 6,193 $ 18,163
Income tax payable 5,666 10,777
Future income tax liabilities 1,790 1,526
Discontinued lease liabilities (Note 3) 12,207 34,437
-------------------------
25,856 64,903
-------------------------

Contingencies and commitments (Note 6)

SHAREHOLDERS' EQUITY

Share Capital (Note 4) $ 47,048 $ 48,002
Foreign currency translation adjustment (Note 5) (1,499) (1,733)
Retained Earnings 4,303 64,410
-------------------------
49,852 110,679
-------------------------
$ 75,708 $ 175,582
-------------------------
-------------------------


RENASANT FINANCIAL PARTNERS LTD
CONSOLIDATED STATEMENTS
OF OPERATIONS AND RETAINED EARNINGS
(in thousands of dollars except per share data)

Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2006 2005 2006 2005
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------------------------------------------------

REVENUE

Equipment trading $ 8,979 $ 8,413 $ 25,855 $ 24,738

Investment 952 943 5,102 3,134
Finance - 225 - 671
------------------------------------------------------

9,931 9,581 30,957 28,543
------------------------------------------------------


EXPENSES

Equipment trading 8,490 7,761 23,785 22,735
Interest 0 (225) - 671
------------------------------------------------------
8,490 7,986 23,785 23,406
------------------------------------------------------

GROSS MARGIN 1,441 1,595 7,172 5,137

Selling, general and
administration 1,443 1,358 4,260 4,155
------------------------------------------------------

(LOSS) INCOME FROM
CONTINUING
OPERATIONS (2) 237 2,912 982

(Recovery of)
provision for
income taxes (8) (38) 832 (2)
------------------------------------------------------

NET INCOME FROM
CONTINUING
OPERATIONS 6 275 2,080 984

NET INCOME FROM
DISCONTINUED
LEASING BUSINESS 54 1,292 347 3,587
------------------------------------------------------

NET INCOME $ 60 $ 1,567 $ 2,427 $ 4,571

Retained earnings,
beginning
of period 4,243 66,008 64,410 64,855

Dividends - (884) (61,583) (2,655)
Premium on
cancellation of
shares - - (951) (80)
------------------------------------------------------

RETAINED EARNINGS,
END OF PERIOD $ 4,303 $ 66,691 $ 4,303 $ 66,691
------------------------------------------------------
------------------------------------------------------

EARNINGS PER COMMON
SHARE - BASIC AND
FULLY DILUTED
Continued operations $ - $ 0.03 $ 0.24 $ 0.11
Discontinued
operations $ 0.01 $ 0.15 $ 0.04 $ 0.41
------------------------------------------------------
$ 0.01 $ 0.18 $ 0.28 $ 0.52
------------------------------------------------------
------------------------------------------------------

SHARES OUTSTANDING
Basic 8,671,260 8,846,260 8,758,760 8,850,493
------------------------------------------------------
------------------------------------------------------
Fully diluted 8,671,260 8,846,260 8,758,760 8,850,493
------------------------------------------------------
------------------------------------------------------


RENASANT FINANCIAL PARTNERS LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)

Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2006 2005 2006 2005
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
-------------------------------------------------------
-------------------------------------------------------

NET INFLOW (OUTFLOW)
OF CASH RELATED TO THE
FOLLOWING
ACTIVITIES

OPERATING
Net income from
continuing
operations $ 6 $ 275 $ 2,080 $ 984
Items not
affecting
cash
Amortization of
other assets 13 326 37 962
Interest accrued
and other items
related to marketable
securites (20) 161 (1,101) 659
Future income tax
provision
(recovery) 445 (355) 678 (1,089)
Net (increase)
decrease in
equipment held for
sale, receivables,
accounts payable
and accrued charges (2,499) 5,350 (16,522) (15,353)
-------------------------------------------------------
(2,055) 5,757 (14,828) (13,837)
-------------------------------------------------------

FINANCING
Increase
(repayment)
of debt - 215 - (26,214)
Repurchase of
shares, net - 0 (1,904) (176)
Dividends paid - (885) (62,468) (2,657)
-------------------------------------------------------
0 (670) (64,372) (29,047)
-------------------------------------------------------

INVESTING
Repayment
(increase) in
structured finance
contracts - (215) - 31,887
Reduction
(increase) to
marketable
securities, net 9,406 (2,007) 81,011 863
Additions to other
assets, net (17) (66) (17) (186)
-------------------------------------------------------
9,389 (2,288) 80,994 32,564
-------------------------------------------------------

EFFECT OF EXCHANGE
RATES 198 991 75 423

-------------------------------------------------------
NET CASH INFLOW
(OUTFLOW) FROM
CONTINUING
OPERATIONS 7,532 3,790 1,869 (9,897)
-------------------------------------------------------

DISCONTINUED
LEASING
OPERATIONS
Operating cash
flows (423) 5,581 (15,530) 11,913
Addition
(reduction)
to debt 102 656 (6,712) (4,843)
Reduction to lease 5,263 3,549 30,047 3,250

-------------------------------------------------------
NET CASH INFLOW
FROM
DISCONTINUED
OPERATIONS 4,942 9,786 7,805 10,320
-------------------------------------------------------

NET CASH INFLOW 12,474 13,576 9,674 423

Cash, beginning of
period 10,237 9,053 13,037 22,206
-------------------------------------------------------
CASH, END OF PERIOD $ 22,711 $ 22,629 $ 22,711 $ 22,629
-------------------------------------------------------
-------------------------------------------------------
SUPPLEMENTAL CASH
FLOW DATA:

CONTINUING
OPERATIONS
Cash paid
(recovered)
during the
year for:
Interest $ - $ 310 $ - $ 998
Income taxes $ 174 $ (373) $ 3,461 $ 937

DISCONTINUED
OPERATIONS
Cash paid during
the year for:
Interest $ 199 $ 1,530 $ 300 $ 4,513


Notes to the Consolidated Financial Statements

December 31, 2006

(all dollar amounts are in thousands)

1. BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES

These financial statements should be read in conjunction with the Consolidated Financial Statements included in the Corporation's Annual Report for 2006 which provides information necessary or useful to understanding the Corporation's businesses and financial statement presentation. In particular, the Corporation's significant accounting policies and practices were presented in Note 2 to the Consolidated Financial Statements.

The quarterly financial statements are unaudited. Financial information in the Third Quarter Report reflects any adjustments that are, in the opinion of management, necessary to a fair presentation of the financial position of the Corporation and the results of its operations and cash flows for the interim periods, in accordance with generally accepted accounting principles ("GAAP") in Canada.

The results reported in these financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year.



2. MARKETABLE SECURITIES

Marketable securities are as follows:
---------------------------------------------------------------------------
Dec. 31, 2006 Mar. 31, 2006
---------------------------------------------------------------------------
Publicly-traded debt instruments $ - $ 69,460
Publicly-traded income trusts and
energy partnership units 1,817 15,172
Bridge loan fund 17,102 13,670
Other public instruments - 527
---------------------------------------------------------------------------
$ 18,919 $ 98,829
---------------------------------------------------------------------------
---------------------------------------------------------------------------


The purchase price discount or premium on debt instruments is amortized to income to generate a constant return on the investments to maturity. The quoted market value of the publicly traded portfolio approximates $1,725 (March 31, 2006 - $87,600). The fair value of the bridge loan fund instruments is assumed to approximate their carrying value as they generally involve variable rates that reprice frequently.

The Corporation maintains a margin account with the investment dealer secured by the publicly-traded marketable securities.

3. DISCONTINUED LEASING BUSINESS

On March 8, 2006, the Corporation completed the sale of its leasing business together with a substantial portion of its lease portfolio to ICON Capital Corporation ("ICON") an arms-length third party. The Corporation retained approximately $40.0 million in leases, along with corresponding debt and service obligations. The Corporation believes the remaining leases can be sold or liquidated in Fiscal 2007 for approximately book value and has designated all the leased assets and liabilities as discontinued.



The discontinued leasing business is comprised of the following:

---------------------------------------------------------------------------
Dec. 31, 2006 Mar. 31, 2006
---------------------------------------------------------------------------
Discontinued Lease Assets:

Leases $ 9,742 $ 40,030
Receivables 4 46
---------------------------------------------------------------------------
$ 9,746 $ 40,076
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Discontinued Lease Liabilities:

Debt $ 5,637 $ 12,350
Accounts payable 1,742 17,468
Future income tax liabilities 4,828 4,619
---------------------------------------------------------------------------
$ 12,207 $ 34,437
---------------------------------------------------------------------------
---------------------------------------------------------------------------


The majority of the reduction in the year reflects further sales to ICON of leases, net of related obligations.

The debt is non-recourse to the Corporation and is secured by the lease receivables, contracts and underlying equipment.

The Corporation continues to manage assets on behalf of investors. Certain of these relate to litigation customers and will cease once the litigation is settled. Total managed assets are:



---------------------------------------------------------------------------
Dec. 31, 2006 Mar. 31, 2006
---------------------------------------------------------------------------

Managed assets $ 4,034 $ 51,161

---------------------------------------------------------------------------
---------------------------------------------------------------------------


Also included in managed assets are leased assets owned by a company affiliated with an indirect shareholder of the Corporation. In addition, the Corporation has a loan outstanding from this company, secured by the leases, in the amount of $103 (March 31, 2006 - $483).

The following outlines the revenues, income before taxes and net income for the discontinued leasing business:



---------------------------------------------------------------------------
Nine Months Ended Nine Months Ended
Dec. 31, 2006 Dec. 31, 2005
---------------------------------------------------------------------------

Revenues $ 1,127 $ 50,721
Costs and expenses 572 44,981
---------------------------------------------------------------------------
Income from discontinued
leasing business 555 5,740
Provision for income taxes 208 2,153
---------------------------------------------------------------------------
Net income from discontinued
leasing business $ 347 $ 3,587
---------------------------------------------------------------------------
---------------------------------------------------------------------------



4. SHARE CAPITAL

Common Shares

Number of Shares Amount
---------------------------------------------------------------------------
Balance as at March 31, 2005 8,863,860 $ 48,098
---------------------------------------------------------------------------
Issued shares - -
Purchased for cancellation (17,600) (96)
---------------------------------------------------------------------------
Balance as at March 31, 2006 8,846,260 48,002
---------------------------------------------------------------------------
Issued shares - -
Purchased for cancellation (175,000) (954)
---------------------------------------------------------------------------
Balance as at December 31, 2006 8,671,260 $ 47,048
---------------------------------------------------------------------------
---------------------------------------------------------------------------


On September 15, 2006, the Corporation paid a special dividend to shareholders in the amount of $7.00 per share.

5. FOREIGN CURRENCY TRANSLATION ADJUSTMENT

An analysis of the foreign currency translation adjustment included as a component of shareholders' equity is as follows:



---------------------------------------------------------------------------

Balance as at March 31, 2005 $ (2,207)
---------------------------------------------------------------------------
Translation of net assets of self-sustaining foreign operations (2,544)
Foreign currency loss realized on reduction of net investment
in self-sustaining foreign operations 3,018
---------------------------------------------------------------------------
Balance as at March 31, 2006 (1,733)
---------------------------------------------------------------------------
Translation of net assets of self-sustaining foreign operations 234
Foreign currency loss realized on reduction of net investment
in self-sustaining foreign operations -
---------------------------------------------------------------------------
Balance as at December 31, 2006 $ (1,499)
---------------------------------------------------------------------------
---------------------------------------------------------------------------


6. CONTINGENCIES AND COMMITMENTS

Litigation

In December of 2006, the Corporation reached an agreement with its insurance carrier in respect of disputed coverage on certain of the litigation matters. Upon receipt of $3.25 million, the Corporation released the insurer of any future obligations. The amount effectively reimbursed the Corporation for costs and expenses incurred in defending the litigation matters and was within the expected financial parameters of the litigation reserve.

In October of 2006, the Corporation settled its remaining claims with the City of Windsor relating to approximately 50 equipment leases entered into between 1994 and 2001. A prior settlement with the City was reached in July 2005 regarding the regional landfill. Together, the settlements extinguish a $300 million litigation claim. The settlement requires the Corporation to convey $4.2 million to the City and modify several contracts to revise the purchase options to $1.00. The settlement was within the financial reserves established by the Corporation in its financial statements.

In August of 2006, a judicial decision was rendered to dismiss the claim by the City of Waterloo, involving several officers and employees of the Corporation who may ultimately claim over against the Corporation, in respect of the previously settled RIM Park financing. The City of Waterloo has subsequently appealed this decision.

In early June of 2006, the Corporation settled its litigation with the Municipality of Leamington together with several other townships comprising the Union Water Supply organization. Under the settlement, the Corporation paid a net contribution of $8.8 million which was within the financial parameters of the reserves established in prior years.

Also in June 2006, the Corporation attended a mediation in respect of the Nova Scotia litigation which was unsuccessful in resolving the outstanding issues.

There has been no other changes in the status of litigation matters. Detailed information is outlined in Note 13(a) to the 2006 Consolidated Financial Statements.

The Corporation has established a liability for litigation matters representing the estimated costs to the Corporation of settling all remaining litigation in a reasonable manner applying principles consistent with those established in earlier settlements. In 2003, a special provision of $25 million was established which was increased in Fiscal 2005 by $20 million to reflect revised expectations. Current year settlements were within the financial parameters of the reserves established. Should any settlement discussion prove unsuccessful, the Corporation intends to defend these actions on the basis that the lease documents entered into are clear and complete and create binding obligations. Should the Corporation be unsuccessful in its defense or settlement of one or more of these legal actions, there could be a materially adverse effect on the Corporation's financial position and future operations.

Income Tax Reassessment

A detailed review of the federal and provincial income tax reassessments received by the Corporation is outlined in Note 13(c) to the 2006 Consolidated Financial Statements. There has been no significant change in the status of these reassessments. Detailed negotiations with CRA have yet to commence.

7. SEGMENTED INFORMATION

The Corporation derives substantially all of its revenues from the sale and lease of technology equipment and related products. The Corporation operates in three significant geographic segments:



CANADA U.S.
9 MONTHS 9 MONTHS 9 MONTHS 9 MONTHS
ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
2006 2005 2006 2005
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

INCOME STATEMENT DATA

Equipment Trading
Revenues $ - $ - $ 19,096 $ 14,180
Expenses - 33 17,883 13,355
----------- ----------- ----------- -----------
Gross Margin - (33) 1,213 825
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------


Investment Revenue $ 5,102 $ 3,134 $ - $ -
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Structured Finance
Revenues $ - $ 671 $ - $ -
Expenses - 671 - -
----------- ----------- ----------- -----------
Gross Margin - - - -
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Total Gross Margin $ 5,102 $ 3,101 $ 1,213 $ 825
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------


BALANCE SHEET DATA DEC. 31, DEC. 31, DEC. 31, DEC. 31,
2006 2005 2006 2005
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Receivables $ 1,406 $ 6,587 $ 3,766 $ 3,862
----------- ----------- ----------- -----------
Equipment Held for Sale $ - $ 20 $ 1,891 $ 1,376
----------- ----------- ----------- -----------
Marketable securities $ 18,919 $ 40,209 $ - $ -
----------- ----------- ----------- -----------
Structured Finance
Contracts $ - $ 11,854 $ - $ -
----------- ----------- ----------- -----------



EUROPE TOTAL
9 MONTHS 9 MONTHS 9 MONTHS 9 MONTHS
ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
2006 2005 2006 2005
(Unaudited) (Unaudited) (Unaudited)(Unaudited)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

INCOME STATEMENT DATA

Equipment Trading
Revenues $ 6,759 $ 10,558 $ 25,855 $ 24,738
Expenses 5,902 9,347 23,785 22,735
----------- ----------- ----------- -----------
Gross Margin 857 1,211 2,070 2,003
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Investment Revenue $ - $ - $ 5,102 $ 3,134
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Structured Finance
Revenues $ - $ - $ - $ 671
Expenses - - - 671
----------- ----------- ----------- -----------
Gross Margin - - - -
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Total Gross Margin $ 857 $ 1,211 $ 7,172 $ 5,137
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------


BALANCE SHEET DATA DEC. 31, DEC. 31, DEC. 31, DEC. 31,
2006 2005 2006 2005
(Unaudited) (Unaudited) (Unaudited)(Unaudited)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Receivables $ 1,873 $ 1,804 $ 7,045 $ 12,253
----------- ----------- ----------- -----------
Equipment Held for Sale $ 1,236 $ 1,399 $ 3,127 $ 2,795
----------- ----------- ----------- -----------
Marketable securities $ - $ - $ 18,919 $ 40,209
----------- ----------- ----------- -----------
Structured Finance
Contracts $ - $ - $ - $ 11,854
----------- ----------- ----------- -----------


8. COMPARITIVES

Certain comparative figures have been reclassified to conform with current year's presentation.

Contact Information