Altus Group Income Fund
TSX : AIF.UN

Altus Group Income Fund

August 12, 2005 12:01 ET

Altus Group Income Fund Announces Results for First Reporting Period

TORONTO, ONTARIO --(CCNMatthews - Aug. 12, 2005) - Altus Group Income Fund ("the Fund") (TSX:AIF.UN) today announced financial and operating results (unaudited) for the period from May 19 to June 30, 2005.

Performance Highlights:

- Completed initial public offering (IPO), raising gross proceeds of $80.4 million

- Generated distributable cash of 18 cents per unit, higher than declared distributions of 14 cents

This is the first reporting period of the Fund since it commenced business operations on May 19th, and consequently, no comparative information is provided in the Fund's interim consolidated financial statements. This 43-day period may not be representative of a full quarter of operations. However, certain financial and operating results of the Fund and the Fund's predecessor companies for the six months ended June 30, 2005, are compared to the unaudited results of Altus Group, Helyar Group and Derbyshire Viceroy Consultants Limited (the Fund's predecessor companies).

"The Fund is pleased with our achievements and the support of our investors through the IPO and into our first few months as a public entity," said Gary Yeoman, President and CEO of Altus Group Income Fund. "Management is optimistic about opportunities to broaden and extend client relationships across the group, offer new services to existing clients, and attract new clients. Our size in terms of professional staff and breadth of services, along with geographic diversity, provide a significant advantage to meet the growing demand for real estate consulting services in Canada."

Results of Operations:

Revenue for the six months ended June 30, 2005 was up 7.8% to $31.6 million, compared to $29.3 million for the six months ended June 30, 2004. This increase in revenue over the prior year is attributable to organic growth at a rate consistent with prior years.

EBIDTA for the same 6-month period was $3.1 million, compared with $7 million in 2004. The decrease in earnings is attributable to non-recurring employee and shareholder bonuses, and incremental legal and accounting costs incurred prior to the IPO.

Revenue for the period May 19 to June 30, 2005 was $7.5 million.

Net earnings of the Fund for the period May 19 to June 30, 2005 were $0.9 million or 11 cents per Unit, after accounting for the non-controlling interest of the LP Class B exchangeable Partnership Units.

During the period May 19 to June 30, 2005, the Fund generated $2.0 million of distributable cash available to both the Fund's Units and the LP Class B exchangeable Partnership Units. The amount anticipated in the Fund's prospectus, prorated for the same period, is $1.6 million. On a per Unit basis, distributable cash was 18 cents for the period, compared with 14 cents anticipated in the Fund's prospectus.

On June 13, 2005, a distribution of 14 cents per Unit was declared to each Unitholder of record of the Fund at June 30, 2005, payable on July 15, 2005. Total cash requirement for the distributions was $1.1 million. There have been no distributions declared for the LP Class B exchangeable Partnership Units. Distributions on the LP Class B exchangeable Partnership Units are payable quarterly commencing October 15, 2005 for the quarter ended September 30, 2005.

During the 43-day period ended June 30, 2005, the Fund had cash flow from operating activities of $1.1 million. The 43-day period from May 19 to June 30, 2005 is shorter than the Fund's normal working capital cycle and is not representative of the Fund's cash flow over a normal cycle. The Fund commenced operations on May 19, 2005 with working capital of $8.1 million and now has $16.6 million in working capital. The increase in working capital is attributable to transactions related to the IPO in addition to operations. Included in current liabilities is $6.3 million of funds held in escrow to guarantee that the sellers had sufficient working capital to fund operations on an uninterrupted basis.

Capital expenditures during the period May 19 to June 30, 2005 were $0.1 million.

Working capital levels are stable and the Fund believes that it will continue to be able to finance distributions to Unitholders through cash generated from operations.

"The highlights of the quarter are consistent with our overall growth strategy, to broaden and extend client relationships across the country. For the remainder of 2005, we will focus on integrating the companies and practice areas to sell a more complete range of services to more clients. In addition, we will be sourcing potential strategic acquisitions, of both competitive and complementary businesses to build on the Altus Group's leadership position in Canadian real estate consulting," said Yeoman.

Altus Group Income Fund will hold an analyst conference call at 11:00 AM EDT on August 15, 2005, to discuss these financial results and current industry conditions. Please dial 1-877-888-3490 or 416-695-6622 to access the call. You will be required to identify yourself and your organization. A recording of this call will be made available beginning at 1:00 PM EDT. To access the recording, please call 1-888-509-0081 or 416-695-5275. The recording will also be available at www.thealtusgroup.com

Altus Group Income Fund is the leading independent multidisciplinary provider of real estate consulting and advisory services in Canada, provided by a staff of over 300 professionals. The Fund has a national network of offices in 13 cities and operates as Altus Helyar Research, Valuation and Advisory, Altus Helyar Cost Consulting and Altus Derbyshire Realty Tax. Altus' clients include banks, financial institutions, governments, pension funds, asset and fund managers, developers and landlords. The Fund's units trade on the Toronto Stock Exchange under the symbol AIF.un.

Non-GAAP Measures - Distributable Cash

Distributable cash does not have a standardized meaning prescribed by GAAP, but is a measure generally used by Canadian open-ended income funds as an indicator of financial performance. The Fund defines distributable cash as net earnings before interest, depreciation, amortization, income taxes, and after interest paid, capital expenditures, income taxes paid and contributions to any reserves that the Trustees of the Fund deem to be reasonable and necessary for the operation of the Fund.

The Fund's method of calculating distributable cash may differ from similar computations as reported by other similar entities and, accordingly, may not be comparable to distributable cash as reported by such entities. The Fund believes that its distributable cash is a useful supplemental measure that may assist investors in assessing the return on their investment in Units.

Forward-Looking Statements:

Certain statements in this release may constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Fund and its subsidiary entities, including LP, or the industry, to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. When used in this MD&A, such statements use words such as "may", "will", "expect", "believe", "plan" and other similar terminology. These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this MD&A. These forward-looking statements involve a number of risks and uncertainties, including those set out under the heading "Risk Factors" in the Fund's prospectus dated May 11, 2005. New risk factors may arise from time to time and it is not possible for management of the Fund to predict all of those risk factors or the extent to which any factor or combination of factors may cause actual results, performance or achievements of the Fund to be materially different from those contained in forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Although the forward-looking statements contained in this MD&A are based upon what management believes to be reasonable assumptions, the Fund cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this MD&A, and the Fund assumes no obligations to update or revise them to reflect new events or circumstances.



Selected Consolidated Financial Information

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2005 2005 2005 2004
Pre-IPO Stub Q2 YTD YTD
For the For the For the For the
Period period six six
in thousands from from months months
except for per January 1 May 19 ending ending
unit amounts to May 18 to June 30 June 30 June 30
---------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
---------------------------------------------------------------------
Revenues $24,028 $7,546 $31,574 $29,290
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Expenses
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Salaries,
general and
administrative (1) 23,103 5,330 28,432 22,270
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Earnings before
income taxes,
interest and
amortization (1) 925 2,216 3,143 7,020
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Amortization 475 1,247 1,721 269
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Interest 74 81 156 114
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Net earnings before
income taxes and
non-controlling
interest $376 $888 $1,265 $6,637
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Income taxes (2) - (340) - -
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Net earnings before
non-controlling
interest (2) - 1,228 - -
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Net earnings (2) - $860 - -
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Earnings per Fund Unit - $0.110 - -
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(1) Discretionary bonuses and incremental legal and accounting costs
incurred due to the IPO resulted in the increase in salaries,
general and administrative expenses.

(2) Income taxes and net earnings have not been presented on a
comparative basis due to the changes in the capital structure of
the predecessor entities and the Fund in connection with the IPO
on May 19, 2005.


Distributable Cash

---------------------------------------------------------------------
in thousands 2005 Stub Q2
except for per For the period from
unit amounts May 19 to June 30 Per Unit
---------------------------------------------------------------------
(unaudited)
---------------------------------------------------------------------
Earnings before income taxes,
interest and amortization $2,216
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Capital expenditures 100
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Interest 81
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Taxes paid 0
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Distributable cash (3) $2,035 $0.1771
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Pro-forma aggregate distributions,
all units (3) $1,571 $0.1368
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Actual payout ratio 77%
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Aggregate distributions declared,
Fund units only (4) $1,100 $0.1368
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(3) Distributable cash and distributable cash per Unit amounts are
calculated for the combined interest of the Fund's Units and the
Class B exchangeable partnership units of LP, which total
11,482,195.

(4) Distributions declared are calculated only for the Fund Units as
the first distribution of the Class B exchangeable partnership
units of LP is deferred until September 30, 2005, to be paid
quarterly thereafter until the first conversion date at which
specific defined criteria are met.


Altus Group Income Fund

Interim Consolidated Financial Statements
June 30, 2005
(Unaudited)
(Expressed in Thousands of Dollars)


Interim Consolidated Balance Sheet
As At June 30, 2005
(Unaudited)
(Expressed in Thousands of Dollars)

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Assets

Current

Cash and cash equivalents $ 11,762
Accounts receivable 12,296
Work-in-process 5,947
Prepaid expenses and sundry assets 389
Income taxes recoverable 316
Future income tax asset (note 10) 689
Deferred expenses 80
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31,479
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Capital Assets (note 4) 2,582
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Intangible Assets (note 5) 44,719
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Goodwill 73,478
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Future Income Tax Asset (note 10) 2,673
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$ 154,931
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Liabilities

Current

Accounts payable and accrued liabilities 4,032
Customer retainers 61
Income taxes payable 2,090
Working capital holdback 6,572
Future income tax liabilities (note 10) 1,063
Distribution payable to unitholders (note 13) 1,100
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14,918
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Future Income Tax Liabilities (note 10) 16,152
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Long-term Debt (note 6) 15,000
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Non-controlling Interest (note 12) 34,812
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Commitments (note 7)

Unitholders' Equity

Trust Units (note 11) 74,289

Deficit (240)
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74,049
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$ 154,931
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See accompanying notes


Interim Consolidated Statement of Deficit
For the Period of May 19, 2005 to June 30, 2005
(Unaudited)
(Expressed in Thousands of Dollars)

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Balance - Beginning of Period $ -

Net earnings 860
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860

Distribution declared to unitholders (note 13) 1,100
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Balance - End of Period $ (240)
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See accompanying notes


Interim Consolidated Statement of Earnings
For the Period of May 19, 2005 to June 30, 2005
(Unaudited)
(Expressed in Thousands of Dollars except for Trust Units
and Per Unit Amounts)

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Fees Revenue $ 7,546
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Expenses

Salaries, general and administrative 5,330
Amortization of capital assets 80
Amortization of intangible assets 1,167
Interest 81
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6,658
---------------------------------------------------------------------
Earnings Before Income Taxes and Non-controlling Interest 888

Future income taxes recovery (note 10) (340)
---------------------------------------------------------------------
Earnings Before Non-controlling Interest 1,228

Non-controlling interest (note 12) 368
---------------------------------------------------------------------
Net Earnings for the Period $ 860
---------------------------------------------------------------------
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Earnings per unit $ 0.11
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Weighted average number of Units (note 1) 7,787,674
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See accompanying notes


Interim Consolidated Statement of Cash Flows
For the Period of May 19, 2005 to June 30, 2005
(Unaudited)
(Expressed in Thousands of Dollars)

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Funds Provided (Used) -

Operating Activities

Net earnings $ 860
Non-controlling interest 368
Amortization of capital assets 80
Amortization of intangible assets 1,167
Amortization of financing charges 4
Future income taxes recovery (340)
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2,139
Net changes in operating elements of working capital (993)
---------------------------------------------------------------------
1,146
---------------------------------------------------------------------
Financing Activities

Issuance of trust Units on initial public offering 75,161
Expenses related to initial issuance of trust Units (6,090)
Repayment of bank indebtedness (2,718)
Proceeds from long-term debt 15,000
Repayment of other long-term liabilities (2,240)
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79,113
---------------------------------------------------------------------
Investing Activities

Acquisition of Altus Group, Helyar Group and
Derbyshire Viceroy Consultants Limited, net of cash
acquired of $632 (68,397)
Additions to capital assets (100)
---------------------------------------------------------------------
(68,497)
---------------------------------------------------------------------
Cash - End of Period $ 11,762
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Additional Cash Flows Information:

Interest paid $ 81
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See accompanying notes


Altus Group Income Fund
Notes to Interim Consolidated Financial Statements
June 30, 2005
(Unaudited)
(Expressed in Thousands of Dollars Except for Trust Units)


1. Formation of the Fund and Acquisition

Altus Group Income Fund (the "Fund") is an unincorporated, open-ended, limited purpose trust established under and governed by the laws of the Province of Ontario. The Fund was created to indirectly acquire and hold all of the outstanding Class A Partnership Units of Altus Group Limited Partnership ("Altus LP"), a partnership formed under the laws of Manitoba.

On May 19, 2005, the Fund, through an initial public offering (the "Offering") issued 7,500,000 Units for gross proceeds of $75,000. The cost of issuing the Units was $9,210 (less future income taxes of $3,327) resulting in net proceeds of $69,117, which was used to invest in Units and Notes of the Altus Operating Trust (the "Trust") and to invest in 100% of the outstanding shares of Altus General Partner Corporation ("GPCo").

On May 19, 2005, on the closing of the offering, the Fund through Altus LP acquired all of the outstanding shares of the Altus Group, Helyar Group and Derbyshire Viceroy Consultants Limited (collectively referred to as the "Sellers") through their respective operating and holding companies. Altus LP subsequently transferred the shares of the operating and holding companies together with remaining cash to Altus Group Limited ("Acquisitionco") in consideration for shares and interest bearing debt of Acquisitionco. Acquisitionco and the operating and holding companies then amalgamated and continued as Altus Group Limited ("Altus").

Consideration for the acquisition was comprised of cash of $69,117 and $32,822 of Class B "exchangeable" Units in the Fund's wholly-owned limited partnership, Altus LP, and a promissory note for $7,000.

The Fund granted an over-allotment option to the underwriters to purchase 537,825 additional Units on the same terms as the initial public offering. On June 8, 2005, the option was exercised in full and resulted in total gross proceeds of $5,378. The cost of issuing the additional Units was $323 (less future income taxes of $116), resulting in net proceeds of $5,171.

The Fund used the proceeds to subscribe for Units and Notes of the Trust, which in turn, subscribed for additional Class A "common" Units in Altus LP. Altus LP used the proceeds to repay a portion of the Altus Notes. An additional 162,175 Class B "exchangeable" Units were issued, for $10 each, to repay the balance of the Altus Notes.

The acquisition was accounted for by the purchase method with the results of Altus' operations from May 19, 2005 included in these interim consolidated financial statements and no comparative information is provided. These interim consolidated financial statements reflect the assets and liabilities of the Sellers at assigned fair values as follows:



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Net assets acquired before non-controlling interest:

Net working capital $ 8,100
Capital assets 2,562
Intangible assets 45,886
Future income taxes (17,638)
Goodwill 73,478
Other liabilities (2,343)
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$ 110,045
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Consideration:

Cash consideration $ 69,029
Working capital holdback 6,572
Class B "exchangeable" Units 34,444
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$ 110,045
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On the closing of the offering, a portion of the proceeds was withheld from the Sellers to ensure sufficient working capital was provided to the Fund. The working capital holdback will be settled upon realization of the working capital amounts acquired by the Fund.

The Fund anticipates that certain issuance costs may be incurred prior to its fiscal year end. To that extent, the purchase price equation would be affected with a related adjustment to goodwill.

2. Nature of Business

Altus Group Income Fund provides professional real estate consulting and advisory services. The Fund's business is conducted through three primary real estate-related practice areas: the research, valuation and advisory services practice, the cost consulting and development cost management practice and the realty tax management services practice, which comprise the largest independent real estate practice in Canada in each of these areas.

The cost consulting and development cost management practice provides services to the development and construction industries and financial institutions in Canada. The realty tax management services practice performs realty tax assessment reviews and appeals and assists with realty tax compliance filings. The research, valuation and advisory services practice performs real estate valuations, litigation support and real estate related services.

Altus operates nationally in 13 cities throughout Canada. Its clients consist of large real estate investment companies, financial institutions, pension funds, government and private ownership.

3. Summary of Significant Accounting Policies

These interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles and reflect the following significant accounting policies.

Principles of Consolidation

The interim consolidated financial statements include the accounts of Altus Group Income Fund, Altus Operating Trust, Altus Group General Partner Corporation, Altus Group Limited and Altus Group Limited Partnership.

All significant inter-company transactions and balances have been eliminated on consolidation.

The interim consolidated financial statements are for the period from May 19, 2005, the date of commencement of operations of the Fund, to June 30, 2005 inclusive and accordingly, no comparative information is provided.

Net Earnings per Unit

Net earnings per unit is calculated by dividing net earnings by the weighted average number of Units outstanding during the period. For the purposes of the weighted average number of Units outstanding, Units are determined to be outstanding from the date they are issued.

Revenue Recognition

Revenue is recognized when persuasive evidence of an arrangement exists, services are performed, the sale price to the customer is fixed or determinable, and collection of the resulting receivable is reasonably assured.

Services rendered but not yet billed are recorded as work-in-process at the lower of standard rates per hour in effect at the time the services were rendered and net realizable value.

Capital Assets

Capital assets are recorded at cost and are amortized over the remaining useful life of the assets on the declining balance method:



Furniture, fixtures and equipment 20%
Computer equipment 30%
Computer software 30%
Leasehold improvements 20%


Intangible Assets

Intangible assets are assets acquired that lack physical substance and that meet the specified criteria for recognition apart from goodwill. Intangible assets with a finite life are recorded at cost and are amortized over the period of expected future benefit on the straight-line method:



Databases 2 years
Custom software applications 2 years
Employment contracts and non-compete agreements 3 years
Customer backlog 2-3 years
Customer lists 5 years


Intangible assets, which have an indefinite life, are recorded at cost. On an annual basis, management reviews the carrying amount of intangible assets which have an indefinite life for possible impairment by evaluating discounted cash flows. Intangible assets are written down to their estimated fair value as determined by discounted cash flows when a permanent decline is identified.

Goodwill

Goodwill is not amortized and is subject to an annual impairment test. Goodwill impairment is evaluated between annual tests upon the occurrence of certain events or circumstances. Management anticipates that the impairment test will be completed in the third quarter. Goodwill impairment is assessed based on a comparison to the fair value of a reporting unit's net assets including goodwill. When the carrying amount of the reporting unit exceeds its fair value, the fair value of the reporting unit's goodwill is compared with its carrying amount to measure the amount of impairment loss, if any.

Long-lived Assets

Long-lived assets, which comprise capital assets and intangible assets with a finite life, are reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable. If the sum of the undiscounted future cash flows expected from use and residual value is less than the carrying amount, the long-lived asset is considered impaired. An impairment loss is measured as the amount by which the carrying value of the long-lived asset exceeds its fair value.

Derivative Financial Instruments

Interest rate swap contacts are designated as hedges of the cash flow relating to interest payments of the outstanding long-term debt or a portion thereof. The interest payments relating to swap contacts are recorded in net earnings over the life of the underlying transaction on an accrual basis as an adjustment to interest expense.

Income Taxes

Under the terms of the Income Tax Act (Canada), the Fund is not subject to income taxes to the extent that its taxable income in a year is paid or payable to a unitholder. Accordingly, no provision for current income taxes for the Fund is made. In addition, the Fund is not subject to the recommendations of CICA Section 3465 Income Taxes, as the Fund is contractually committed to distribute to its unitholders all or virtually all of its taxable income and taxable capital gains that would otherwise be taxable in the Fund. The Fund intends to continue to meet the requirements under the Income Tax Act (Canada) applicable to such trusts, and there is no indication that the Fund will fail to meet those requirements.

The Fund's operating subsidiary, Altus, is subject to CICA Section 3465 and to corporate income taxes as computed under the Income Tax Act (Canada).

Altus follows the liability method with respect to accounting for income taxes. Future tax assets and liabilities are determined based on differences between the carrying amount and the tax basis of assets and liabilities (temporary differences). Future income tax assets and liabilities are measured using the substantially enacted tax rates that will be in effect when these differences are expected to reverse. Future income tax assets, if any, are recognized only to the extent that, in the opinion of management, it is more likely than not that the assets will be realized.

Foreign Currency Translation

Accounts in foreign currency have been translated into Canadian dollars as follows:

Monetary items at exchange rates in effect at the balance sheet date;

Non-monetary items at exchange rates in effect on the dates of the
transactions;

Revenue and expenses at average exchange rates prevailing during the year;

Gains and losses arising from foreign currency translation are included in income.

Use of Estimates

The preparation of the interim consolidated financial statements requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities at the date of the interim consolidated financial statements and revenue and expenses recognized for the period reported. By their nature, these estimates are subject to measurement uncertainty and are reviewed periodically and adjustments, if necessary, are made in the period in which they are identified. Actual results may differ from these estimates.

Pension Plan

Altus maintains a defined Contribution Pension Plan for the employees in one of the practice areas. Pension expense during the 43 day period ended June 30, 2005 was $13.

4. Capital Assets



Accumulated Net Carrying
Cost Amortization Amount
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Furniture, fixtures and equipment $ 594 $ 14 $ 580
Computer equipment 1,109 38 1,071
Computer software 466 16 450
Leasehold improvements 493 12 481
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$ 2,662 $ 80 $ 2,582
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5. Intangible Assets


Accumulated Net Carrying
Cost Amortization Amount
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Finite Life Assets

Databases $ 2,735 $ 161 $ 2,574
Custom software applications 2,509 148 2,361
Employment contracts
and non-compete agreements 1,030 40 990
Customer backlog 3,992 188 3,804
Customer lists 26,705 630 26,075
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36,971 1,167 35,804
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Indefinite Life Assets

Brands 8,915 - 8,915
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$ 45,886 $ 1,167 $ 44,719
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6. Credit Facilities

The Altus Group Limited Partnership has Credit Facilities as follows:

(i) Revolving Facility: Senior secured revolving Credit Facility, in the principal amount of up to $4,000 and due on demand.

(ii) Term Facility: Senior secured Term Facility in an amount of $17,000. The Term Facility will mature May 19, 2008 with no scheduled repayments of principal required prior to maturity.

(iii) Treasury Facility: Senior secured demand facility in an amount of $1,500 and due on demand.

Loans under all facilities are repayable without any prepayment penalties and bear interest at a floating rate based on the Canadian dollar prime rate or the banker's acceptance rate plus, in each case, an applicable margin to those rates.

Amounts drawn under revolving credit and term debt facilities at June 30, 2005 are as follows:



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Revolving facility $ -
Term Facility, weighted effective
interest rate of 4.41% 15,000
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$ 15,000
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The Credit Facilities are secured by a general security agreement over all of the Partnership's assets. The Credit Facilities are also guaranteed by the Fund, the Trust, GPCo and Altus. Each of the Fund, the Trust, GPCo and Altus granted a security interest over all or certain of its assets as security for its guarantee.

At June 30, 2005, $10 million of the $15 million drawn on the Term Facility was subject to an interest rate swap to fix the interest rate at 5.01% over the term of the loan.

7. Commitments

Future minimum annual lease payments under operating leases for the Fund's premises and equipment for each of the years ended December 31:



2005 $ 1,440
2006 1,417
2007 1,378
2008 1,140
2009 1,001
Thereafter 795


8. Segmented Information

The operations of Altus consist of three reportable segments principally being the provision of research, valuation and advisory services, realty tax management services and cost consulting and development cost management. Discrete operating and financial information is available for these reportable segments and is used to determine operating performance for each segment and to allocate resources.

The research, valuation and advisory services segment performs real estate valuations, litigation support and real estate-related services.

The realty tax management services segment performs realty tax assessment reviews and appeals and assists with realty tax compliance filings.

The cost consulting and development cost management segment provides services to the development and construction industries and financial institutions in Canada.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies described in note 3. Revenue transactions between segments are valued at market rates. The value of inter-segment sales was not material for the period presented below.



Cost
Consulting
Research, and
Valuation Realty Tax Development
and Advisory Management Cost
Services Services Management Corporate Total
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Fees revenue $ 2,969 $ 2,565 $ 2,012 $ - $ 7,546
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Interest expense - - - 81 81
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Amortization
of capital
assets 44 16 19 1 80
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Assets 8,367 7,887 6,992 131,685 154,931
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Capital asset
additions 16 16 - 68 100
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Segment profit 765 1,115 588 (413) 2,055
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Other non-cash
items:
Amortization of
intangible assets - - - 1,167 1,167
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Earnings (loss)
before income taxes
and non-controlling
interest $ 765 $ 1,115 $ 588 $ (1,580) $ 888
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Effectively all of the revenues are from customers in Canada and
all capital assets are located in Canada.

9. Financial Instruments

Fair Value

Nominal Fair Contracts
Amount Value Expire
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Interest rate swaps $ 10,000 $ (166) 2008
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Fair value of the above-noted item was determined using discounted cash flows.

Accounts receivable, work-in-process, accounts payable and accrued liabilities, customer retainers, distribution payable to unitholders and working capital holdback, are all short term in nature and as such, their carrying values approximate fair values.

The fair value of long-term debt approximates its carrying value as this debt bears interest at rates comparable to current market rates.

Credit Risk

The company is exposed to credit risk with respect to collectability of its accounts receivable from its customers.

Interest Rate Risk

The company is exposed to interest rate risk in the event of fluctuations in the bank's prime rate or banker's acceptance rate as the interest rates on the Credit Facilities fluctuate with changes in the bank's prime rate or banker's acceptance rate.

Interest Rate Swap

The Fund has entered into an Interest Rate Swap Agreement to mitigate the risk associated with the fact that the Term Facility bears interest at floating rates. The notional amount of the Swap is equal to $10,000 of the outstanding principal balance on the Term Facility. The Fund is obligated to pay the Swap Counterparty an amount based upon a fixed interest rate of 3.51% per annum plus a fee of 1.5% and the Swap Counterparty is obligated to pay the Fund an amount equal to the Canadian Banker's Acceptance rate.

10. Income Taxes

Significant components of the income tax recovery are as follows:



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Earnings before income taxes and non-controlling interest $ 888
Interest expense deductible in Altus (1,583)
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(695)
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Combined Federal and Provincial statutory tax rates 36.12%
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Tax recovery using combined Federal and Provincial
statutory income tax rates (250)
Other (90)
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$ (340)
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Future income tax asset:

Current:

Issuance costs $ 689

Non-current:

Issuance costs 2,673
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$ 3,362
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Future income tax liabilities:

Current:

Work-in-process $ 1,063

Non-current:

Intangible assets 16,152
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$ 17,215
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11. Distribution Declared to Unitholders

The beneficial interests in the Trust are divided into interests of two classes, described and designated as "Trust Units" and "Special Voting Units". The aggregate number of Trust Units and Special Voting Units which is authorized is unlimited.

Trust Units

Each Trust Unit is transferable and represents an equal undivided beneficial interest in any distribution from the Trust and in any of the Trust Assets net of Trust Liabilities or in any other net assets of the Trust in the event of termination or winding-up of the Trust. All Trust Units outstanding from time to time shall be entitled to equal shares in any distributions by the Trust and, in the event of termination or winding-up of the Trust, in the Trust Assets. All Trust Units have equal rights and privileges. Each Trust Unit shall entitle the holder of record thereof to one vote at all meetings of Trust Unitholders.

Units are redeemable at any time at the option of the holder at amounts related to market prices. Cash redemptions are limited to a maximum of $50,000 in any particular month. This limitation may be waived at the discretion of the Trustees of the Fund.



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Issued on Initial Public Offering, 7,500,000 Units $ 75,000
Issued on Exercise of Over-allotment, 537,825 Units 5,378
Units' Issuance Costs, net of future income taxes (6,089)
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$ 74,289
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Special Voting Units

A Special Voting Unit shall not entitle the holder thereof to any interest or share in the Trust, in any distribution from the Trust or in the net Trust Assets in the event of a termination or winding-up of the Trust. Special Voting Units are issued only to holders of Altus LP Class B "exchangeable" Units and is evidenced only by the certificate or certificates representing such Altus LP Class B "exchangeable" Units. Accordingly, the number of special voting Units outstanding at any given time is equal to the number of Class B "exchangeable" Units outstanding at the time. On June 30, 2005, 3,444,370 special voting Units were outstanding. A Special Voting Unit may be transferred solely with the transfer of the LP Class B "exchangeable" unit with which it is associated. A holder of record of Special Voting Units shall be entitled to that number of whole votes (rounded down to the nearest whole vote) at all meetings of Trust Unitholders that is equal to the number of Trust Units into which the exchangeable Units to which such Special Voting Unit relates is, directly or indirectly, exchangeable (other than in respect of exchangeable Units that have been so exchanged and are held by the Trust or an affiliate thereof). Upon the exchange, conversion or cancellation of an exchangeable unit, the Special Voting Unit that is associated with such exchangeable unit will immediately be cancelled for no consideration without any further action of the Trustees, and the former holder of such Special Voting Unit will cease to have any rights with respect thereto.

12. Non-controlling Interest

Class B "Exchangeable" Limited Partnership Units

As part of the formation of the Fund, 3,282,195 Class B "exchangeable" Limited Partnership Units were issued by Altus LP as partial consideration for the acquisition of the Sellers. An additional 162,175 Class B "exchangeable" Units were issued as partial consideration to repay the Altus Notes as described in note 1. The Altus LP Class B "exchangeable" Units are classified as non-controlling interest in the consolidated financial statements of the Fund as they are not economically equivalent to Units of the Fund.

The non-controlling interest at June 30, 2005 is as follows:



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Issued on formation of the Fund, 3,282,195 Units $ 32,822
Issued to redeem Altus Notes, 162,175 Units 1,622
Share of net earnings 368
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$ 34,812
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13. Distribution to Unitholders

The initial distribution of the Fund was declared on June 13, 2005, for the period from May 19, 2005 to June 30, 2005. The distribution is in the amount of $1,100 and is payable on July 15, 2005. The Fund intends to make subsequent distributions on a monthly basis to Unitholders of record as of the last business day of each month with distributions being paid on the 15th day following the end of each month.

Contact Information

  • Altus Group Income Fund
    Gary Yeoman
    President and CEO
    (905) 953-9948
    or
    Altus Group Income Fund
    Dale Lawr
    CFO
    (416) 232-9999 x 344