Renasant Financial Partners Ltd.
TSX : REN

Renasant Financial Partners Ltd.

June 14, 2007 18:28 ET

Renasant Reports Fiscal 2007 Results

MISSISSAUGA, ONTARIO--(Marketwire - June 14, 2007) - Renasant Financial Partners Ltd. (TSX:REN) today reported financial statements for the year ended March 31, 2007.

Net income of $1.6 million or $0.19 per share was earned in the year. This compares with net income earned in Fiscal 2006 of $3.2 million or $0.36 per share. Both years were negatively impacted by a charge for foreign currency losses on the permanent reduction of capital required to finance the business in foreign jurisdictions resulting from the sale of the leasing business. The current year charge approximated $1.0 million a reduction from $3.0 million in Fiscal 2006.

As a follow-up to the sale of the leasing business in Fiscal 2006, the Corporation completed several sale transactions in the current year to liquidate the remaining portfolio. Income from Discontinued leasing was $0.2 million or $0.02 per share currently as compared to $3.7 million or $0.42 per share in the prior year. The prior year would have involved approximately 11 months when leasing was the primary business activity.

Income from Continuing Operations was $1.4 million or $0.17 per share in Fiscal 2007 as compared with a net loss of $0.5 million or $0.06 per share last year. In addition to the foreign currency losses, Income from Continuing Operations comprises the equipment trading activities and the Corporation's investment income less Selling, Administrative and General Expenses.

The Corporation's trading revenues grew by approximately 8% to $35.6 million in the year from $33.3 million in Fiscal 2006 but a bad debt loss of $0.9 million resulted in the equipment trading margin reducing to $2.2 million in the current year from $2.7 million in Fiscal 2006. Income on accumulated cash and investment balances increased to $6.1 million in the current year from $4.4 million last year reflecting primarily disposal gains of approximately $1.5 million as investments were liquidated in the current year to pay the special shareholders distributions. Expense reductions of approximately 7% were generated in the year as the SG&A reduced to $5.3 million in the current year from $5.7 million in Fiscal 2006 primarily the result of reduced manpower and activity levels.

During the year, Renasant was successful in resolving its two largest remaining litigation matters, liquidating its Discontinued Operations and implementing a strategic initiative to maximize the return of excess capital to its shareholders. In September of 2006, Renasant effectively returned the net sale proceeds of the leasing business to shareholders through the payment of a special dividend of $62 million or $7.00 per share. In March of 2007 a special capital reduction distribution of $26 million or approximately $3.00 per share was also paid. Issuer bid activity for the year involved the Corporation purchasing 175,000 of its outstanding common shares for cancellation at an aggregate cost of $1.9 million. Net book value per share at March 31, 2007 approximates $2.75 per share.

In Fiscal 2008, Renasant will continue to be focused on resolving its litigation and tax contestation matters while managing and assessing the equipment trading business in its current environment and generating investment income from its surplus cash balances. Effective April 1, 2007, Renasant under its management agreement with Morguard Investments Limited, relocated into new premises at the above address.




RENASANT FINANCIAL PARTNERS LTD.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2007 AND 2006 (in thousands of dollars)

2007 2006
-------------------------
ASSETS
Cash and cash equivalents $ 3,028 $ 13,037
Bridge loans receivable (Note 4) 15,858 13,670
Loans to officers (Note 3) 2,081 -
Marketable securities (Note 5) - 85,159
Equipment held for sale (Note 6) 2,535 2,425
Receivables (Note 6) 4,956 7,047
Income taxes recoverable (Note 11 and 13) 2,605 3,223
Capital assets (Note 7) 474 168
Discontinued lease assets (Note 3) - 40,076
-------------------------
$ 31,537 $ 164,805
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-------------------------

LIABILITIES
Accounts payable and accrued charges $ 6,093 $ 18,163
Future income tax liabilities (Note 11) 1,531 1,526
Discontinued lease liabilities (Note 3) - 34,437
-------------------------
7,624 54,126
-------------------------

Contingencies and commitments (Note 13)

SHAREHOLDERS' EQUITY
Share capital (Note 8) $ 21,078 $ 48,002
Foreign currency translation adjustment (Note 10) (675) (1,733)
Retained earnings 3,510 64,410
-------------------------
23,913 110,679
-------------------------
$ 31,537 $ 164,805
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RENASANT FINANCIAL PARTNERS LTD.
CONSOLIDATED STATEMENTS
OF OPERATIONS AND RETAINED EARNINGS
YEARS ENDED MARCH 31, 2007 AND 2006 (in thousands of dollars except per
share data)

2007 2006
--------------------
REVENUE

Equipment trading $ 35,581 $ 33,067
Investment 6,075 4,355
Finance - 818
--------------------
41,656 38,240
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EXPENSES

Equipment trading 33,328 30,390
Interest - 818
--------------------
33,328 31,208
--------------------

GROSS MARGIN 8,328 7,032

SELLING, GENERAL AND ADMINISTRATIVE 5,255 5,725

FOREIGN CURRENCY TRANSLATION EXPENSE (Note 10) 989 3,018
--------------------

INCOME (LOSS) FROM CONTINUING OPERATIONS 2,084 (1,711)

PROVISION FOR (RECOVERY OF) INCOME TAXES 607 (1,205)
--------------------

NET INCOME (LOSS) FROM CONTINUING OPERATIONS 1,477 (506)

NET INCOME FROM DISCONTINUED LEASING BUSINESS (Note 3) 157 3,681
--------------------
NET INCOME $ 1,634 $ 3,175

RETAINED EARNINGS, BEGINNING OF YEAR 64,410 64,855

DIVIDENDS (Note 8) (61,583) (3,540)

PREMIUM ON CANCELLATION OF SHARES (Note 8) (951) (80)
--------------------
RETAINED EARNINGS, END OF YEAR $ 3,510 $ 64,410
--------------------
--------------------

EARNINGS (LOSS) PER COMMON SHARE - BASIC AND DILUTED
Continued operations $ 0.17 $ (0.06)
Discontinued operations $ 0.02 $ 0.42
--------------------
$ 0.19 $ 0.36
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--------------------



RENASANT FINANCIAL PARTNERS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 2007 AND 2006 (in thousands of dollars)

2007 2006
------------------------
NET INFLOW (OUTFLOW) OF CASH RELATED
TO THE FOLLOWING ACTIVITIES:
OPERATING
Net income (loss) from continuing operations $ 1,477 $ (506)
Items not affecting cash
Amortization of other assets 50 1,186
Interest accrued and other items related
to marketable securites (1,316) (621)
Future income tax provision (recovery) 127 (18,218)
Net (increase) decrease in equipment held for
sale, receivables, accounts payable and
accrued charges (10,487) 642
------------------------
(10,149) (17,517)
------------------------

FINANCING
Repayment of debt - (29,953)
Reduction of capital (26,000) -
Repurchase of shares, net (1,875) (176)
Dividends paid (61,583) (3,540)
------------------------
(89,458) (33,669)
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INVESTING
Repayment in structured finance contracts - 43,740
Reduction of (increase to) marketable securities,
net 84,287 (56,477)
(Additions to) disposals of other assets, net (345) 226
------------------------
83,942 (12,511)
------------------------

EFFECT OF EXCHANGE RATES 99 (513)

------------------------
NET CASH OUTFLOW FROM CONTINUING OPERATIONS (15,566) (64,210)
------------------------

DISCONTINUED LEASING OPERATIONS
Operating cash flows (21,554) 12,653
Reduction of debt (12,350) (104,097)
Disposal of leases 39,461 146,485
------------------------
NET CASH INFLOW FROM DISCONTINUED OPERATIONS 5,557 55,041
------------------------

NET CASH OUTFLOW (10,009) (9,169)

Cash, beginning of year 13,037 22,206
------------------------

CASH, END OF YEAR $ 3,028 $ 13,037
------------------------
------------------------

SUPPLEMENTAL CASH FLOW DATA:

CONTINUING OPERATIONS
Cash paid during the year for:
Interest $ - $ 1,202
Income taxes $ 2,788 $ 2,354

DISCONTINUED OPERATIONS
Cash paid during the year for:
Interest $ 381 $ 5,535
Income taxes $ - $ -



RENASANT FINANCIAL PARTNERS LTD.
MARCH 31, 2007 AND 2006, (ALL DOLLAR AMOUNTS ARE IN THOUSANDS,
EXCEPT FOR STOCK OPTION EXERCISE PRICE DATA)


1. NATURE OF OPERATIONS

On March 8, 2006, the Corporation changed its name to Renasant Financial Partners Ltd. as a result of the sale of the leasing business. Prior to that, the Corporation operated the business under the name of CLEARLINK Capital Corporation, and for many years under the name of MFP Financial Services Ltd.

Renasant Financial Partners Ltd. (the "Corporation") is an independent financial services provider undertaking investments in both public and private enterprises. The Corporation is also engaged in the wholesale trading of computer assets.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles. The Corporation's significant accounting policies are summarized as follows:

a) Consolidation

The financial statements include the accounts of the Corporation and its wholly-owned operating subsidiaries: Renasant Financial Services Inc., MFP Technology Services Inc., both U.S. corporations, and MFP Technology Services (UK) Ltd.

b) Measurement uncertainty

The preparation of the consolidated financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and during the reported period. In particular, there is considerable management judgment involved in estimating the Corporation's liability arising from its potential exposure to certain income tax and litigation matters (Note 13).

c) Accounting for discontinued lease business

As discussed in Note 3 the Corporation discontinued its lease business in 2006. The accounting for leases that are recorded as discontinued activities arise from one of the following lease classifications: operating, finance or sales-type.

Leased assets:

Equipment on operating leases consists of the cost of the computer or other equipment on lease less the amount amortized to date.

Net investment in finance and sales-type leases represents the sum of the present value of the future minimum lease payments under the terms of the related lease contracts and the present value of the estimated residual at lease termination. Certain direct financing leases which meet the criteria for offsetting are accounted for on a basis whereby the investment in the lease and the related non-recourse obligation is netted in the consolidated balance sheet.

Revenue, costs and expenses

Operating leases:

Revenue associated with operating leases consists of the contractual lease payments and is recognized systematically over the term of the lease. Amortization of the equipment cost, down to the Corporation's estimated residual value, is recorded in a manner that produces a constant rate of return on the leased assets.

Finance leases:

Revenue consists of finance income earned on the sum of the present value of the future minimum lease payments and the present value of the residual. Finance income is recognized systematically over the related lease term in a manner that produces a constant rate of return on the lease receivable.

Sales-type leases:

Revenue consists of the present value of the future minimum lease payments and is recognized at lease inception. Related costs consist primarily of the equipment net book value at lease inception reduced by the present value of the residual. Subsequent to lease inception, revenue consists of finance income earned on the sum of the present value of the future minimum lease payments and the present value of the residual. Finance income is recognized systematically over the related lease term in a manner that produces a constant rate of return on the lease receivable.

Initial direct costs:

Commissions related to operating and finance leases are capitalized and amortized over a period which approximates the related lease terms. Initial direct costs related to sales-type leases are charged to income at lease inception.

Residuals:

Residuals are the estimated fair market values of the equipment at the termination of the lease. Residuals are recorded at lease inception and all lease contracts are then amortized to this estimated value over the lease term. Management utilizes third party publications and its own historical experience to determine the rate of amortization and the fair market value of the equipment at lease termination, taking into account the type of equipment, useful life, anticipated customer activity at lease termination and anticipated changes in technology. The Corporation's estimates are reviewed continuously to ensure recoverability. The Corporation provides a general reserve against the estimated residual value to reflect an estimate of impairment in the value of residuals that exists in the portfolio of leases at the balance sheet date but cannot be individually identified.

d) Bridge loans

The bridge loans represent funds advanced on relatively short-term, mezzanine loans. The loans are secured through charges on the underlying assets. Interest income is recognized on an accrual basis. Loans are classified as impaired when, in managements opinion there is no longer any reasonable assurance of the timely collection of principal or interest. When a loan is identified as impaired, the accrual of interest is discontinued. Loans are held at amortized cost less any allowance for impairment.

e) Equipment held for sale

Equipment held for sale is valued at the lower of cost and net realizable value. Cost is determined on a weighted average basis. The allowance for obsolescence is based on management estimates of loss giving consideration to inventory aging and market conditions.

f) Capital assets

Capital assets are recorded at cost less accumulated amortization. Amortization is recorded on a basis that reflects the estimated useful lives of the capital assets not to exceed 5 years.

g) Marketable securities

Marketable securities are purchased with the intent to hold them to maturity where applicable. The investments are recorded at cost with any purchase price discount or premium being amortized to income to generate a constant return on the investment. When there has been a loss in the value of a marketable securities investment that is other than a temporary decline, the investment is written down to recognize the loss.

h) Foreign exchange

Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange in effect at the balance sheet date. Revenue and expenses are translated at the weighted average rate for the year. Unrealized exchange gains and losses on foreign currency denominated monetary items designated as permanent hedges are translated and recognized on the same basis as the asset or liability which has been hedged.

The Corporation's subsidiaries in the United States and Europe are considered self-sustaining. Cumulative gains or losses arising from the translation of the assets and liabilities of these operations are recorded as a separate component of shareholders' equity.

i) Equipment trading

Equipment trading revenue is derived from the wholesale trading of computer equipment. Revenue is recognized where pervasive evidence of an arrangement exists and the revenues are considered fixed and determinable and collectibility is reasonably assured.

j) Intangible assets

Intangible assets are amortized over their expected useful lives and are included in capital assets.

k) Income (loss) per share

The Corporation uses the treasury stock method to calculate diluted income (loss) per share. This method assumes that proceeds which could be obtained upon exercise of in-the-money options would be used to purchase common shares at the average market price during the period.

l) Allowance for doubtful accounts

The allowance is determined based on management's identification and evaluation of problem accounts; estimated probable losses that exist on the remaining receivable balance; and other factors including the composition and quality of the receivables, and changes in economic conditions.

m) Stock-based compensation

The Corporation accounts for stock options using the fair value method. Under the fair value method, compensation expense for stock options is measured at fair value at the grant date using an option pricing model and recognized over the vesting period. No compensation is recorded for options issued prior to April 1, 2002.

n) Guarantees

The Corporation has adopted the requirements of CICA AcG-14 - "Disclosure of Guarantees", which requires additional disclosure about a guarantor's obligations under certain guarantees in the financial statements, without regard to whether the Corporation is likely to have to make any payments under these guarantees. AcG-14 defines a guarantee as a contract that contingently requires the guarantor to make payments to a guaranteed party based on: (a) changes in the underlying economic characteristics that are related to an asset, liability or equity security of the guaranteed party; (b) failure of another party to perform under an obligating agreement; or (c) failure of a third party to pay its indebtedness when due.

o) Variable interest entities

Effective April 1, 2005, the Corporation adopted the requirements of CICA AcG-15 - Variable Interest Entities, which requires the consolidation of all variable interest entities for which the Corporation is deemed to be the primary beneficiary. There was no impact to the Corporation of adopting this standard.

Future accounting changes

In 2005, the CICA issued three new accounting standards; Section 1530, Comprehensive Income, Section 3855, Financial Instruments - Recognition and Measurement and Section 3865, Hedges. These new standards became effective for the Corporation on April 1, 2007.

Section 1530 introduces Comprehensive income which is comprised of Net Income and Other Comprehensive Income and represents changes in Shareholders' equity during a period arising from transactions and other events with non-owner sources. Other comprehensive income (OCI) includes unrealized gains or losses in assets classified as available-for-sale, unrealized foreign currency translation amounts net of hedging arising from self-sustaining foreign operations, and changes in the effective portion of cash flow hedging instruments. The Corporation's consolidated financial statements will include a Consolidated Statement of Comprehensive Income while the cumulative amount, Accumulated Other Comprehensive Income (AOCI), will be presented as a new category of Shareholder's equity in the Consolidated Balance Sheets.

Section 3855 establishes standards for recognizing and measuring financial assets, financial liabilities and non-financial derivatives. It requires that financial assets and financial liabilities including derivatives be recognized on the balance sheet when the Corporation becomes party to the provisions of the financial instrument or non-financial derivative contract. All financial instruments should be measured at fair value on initial recognition except for certain related party transactions. Measurement in subsequent periods depends on whether the financial instrument has been classified as held-for-trading, available for-sale, loans and receivables or other liabilities. Other significant accounting implications arising on adoption of Section 3855 include the use of the effective interest method for the amortization of any transaction costs or fees, premiums or discounts earned or incurred for financial instruments measured at amortized cost.

Section 3865 specifies criteria under which hedge accounting can be applied.

The impact of adopting these standards is not expected to be material to the consolidated financial position or results of operations of the Corporation.

3. DISCONTINUED LEASING BUSINESS

On March 8, 2006, the Corporation completed the asset sale of its leasing business together with a substantial portion of its lease portfolio to ICON Capital Corporation ("ICON") an arms-length third party. During Fiscal 2007, the Corporation completed further sale transactions with ICON involving approximately $29 million of leases. Effective March 31, 2007, the Corporation liquidated the remaining contracts in its lease portfolio to a partnership owned by two officers of the Corporation. The transaction involved approximately $3.5 million of financing contracts and the assumption of certain related liabilities. This transaction was reflective of fair market value based on prevailing market conditions and resulted in the loss on sale of $286. The cash portion was initially financed by the Corporation and is shown as Loans from Officers in the balance sheet at March 31, 2007. The loan was repaid after year-end.



As at March 31, the discontinued leasing business comprised the following:

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2007 2006
--------------------------------------------------------------------------
Discontinued Lease Assets:

Leases $ - $ 40,030
Receivables - 46
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$ - $ 40,076
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Estimated residual values relating to the lease portfolio amounted to $NIL
(2006 - $59).

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2007 2006
--------------------------------------------------------------------------

Discontinued Lease Liabilities:

Debt $ - $ 12,350
Accounts payables - 17,468
Future income tax liabilities - 4,619
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$ - $ 34,437
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The following outlines the revenues, income before taxes and net income for
the discontinued leasing business:

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2007 2006
---------------------------------------------------------------------------
Revenues $ 1,297 $ 63,958
Income before tax 554 6,015
Gain on sales of discontinued leases:
Consideration - cash 9,789 56,758
- non-cash - 700
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9,789 57,458
- liabilities assumed 22,922 85,054
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32,711 142,512
Assets sold 32,997 141,912
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(Loss) gain on sale (286) 600
Costs and expenses 17 725
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Net loss on sale (303) (125)

Total income from discontinued leasing business 251 5,890

Income taxes 94 2,209
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Net income from discontinued leasing business $ 157 $ 3,681
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The non-cash consideration in 2006 includes a FMV determination of the 12 month transitional services arrangement provided free of charge by ICON and recorded as a prepaid in Receivables. Services include facilities, system utilization, contract billing and administration and certain payroll functions. The services contract expired March 31, 2007.

4. BRIDGE LOANS RECEIVABLE

The bridge loans receivable represent funds advanced on relatively short term, mezzanine loans. The loans are secured through charges on the underlying assets.

The fair value of these loans is assumed to approximate their carrying value as they generally involve variable rates that reprice frequently.

An amount of $3,845 (2006 - $NIL) has been classified as impaired (and interest of $24 has not been accrued.) No allowance for impairment been taken in respect of these loans as management anticipates full collection of principal and interest.

The Corporation is committed to invest a further $4.0 million (2006 - $8.8) in bridge lending depending on customer activity.



5. MARKETABLE SECURITIES

Marketable securities are as follows:

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2007 2006

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Publicly-traded debt instruments $ - $ 69,460
Publicly-traded income trusts and energy partnership units - 15,172
Other public securities - 527
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$ - $ 85,159
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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 portfolios approximates $NIL (2006 -$87,600).

6. EQUIPMENT TRADING BUSINESS

The equipment held for sale, receivables and approximately $2.3 million of accounts payable comprise the assets and liabilities of the computer trading business. While no immediate strategic plans exist for this business, it is conceivable that the net assets could be sold or liquidated as part of the ultimate wind-down of the Corporation. The values reflected in the financial statements represent reasonable approximations of their fair market value.



7. CAPITAL ASSETS
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2007 2006
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Cost $ 1,211 $ 1,080
Accumulated amortization (737) (912)
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$ 474 $ 168
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Amortization charges recorded in the statements of operations with respect
to capital assets amounted to $50 (2006 -$1,186). Current year additions
relate primarily to the costs of a new computer system.

8. SHARE CAPITAL

The Corporation is authorized to issue:

Common Shares

An unlimited number of common shares.

Preferred Shares

An unlimited number of Class A cumulative, redeemable, convertible and
voting preferred shares;
An unlimited number of Class B non-voting, preferred shares, issuable in
series; and
An unlimited number of Class C redeemable, retractable and non-voting
preferred shares.

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ISSUED COMMON SHARES
Number of Shares Amount
---------------------------------------------------------------------------
Balance as at March 31, 2005 8,863,860 $ 48,098

Issued - -

Purchased for cancellation (17,600) (96)
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Balance as at March 31, 2006 8,846,260 48,002

Issued 20,000 30

Purchased for cancellation (175,000) (954)

Reduction of capital (26,000)
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Balance as at March 31, 2007 8,691,260 $ 21,078
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a) Earnings per common share data

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2007 2006
---------------------------------------------------------------------------

Weighted average number of common shares 8,737,718 8,849,434

Diluted number of common shares 8,737,718 8,849,434

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b) Changes in the year

The Corporation issued 20,000 common shares in 2007 as a result of stock options being exercised.

The Corporation purchased 175,000 (2006 - 17,600) common shares for cancellation for cash consideration of $1,905 (2006 - $176) under the normal course issuer bid program. The resulting excess of purchase price over the stated capital of $951 (2006 - $80) has been deducted from retained earnings.

c) Distributions

During the current year, the Corporation declared a special dividend of approximately $62 million ($7.00 per common share) to the shareholders of record as of August 31, 2006 (dividend paid on September 15, 2006).

Pursuant to shareholder approval granting the Board of Directors authority to reduce the Corporation's stated capital, the Corporation returned $26 million (approximately $3.00 per share) to shareholders as a capital reduction with a record date of March 22, 2007, (paid on March 30, 2007).

9. STOCK OPTION PLAN

The Corporation operates a stock option plan, pursuant to which it can currently reserve up to 860,750 common shares for issuance to employees and directors of the Corporation, at the discretion of the Board of Directors. The option vesting period is set at the discretion of the Board of Directors at inception. Options are exercisable for a period not exceeding 7 years from the grant date.

Since inception of the plan, the Corporation has issued 784,500 options of which nil are outstanding as at March 31, 2007. A summary of the status of the Corporation's stock option plan as of March 31, 2007 and 2006 and changes during the years ending on those dates is presented below:



2007 2006
---------------------------------------------------------------------------

Weighted- Weighted-
average average
Exercise Exercise
Options Price Options Price
---------------------------------------------------------------------------
Outstanding, beginning of year 55,000 13.01 188,000 13.61

Granted - - - -

Exercised (20,000) 1.50 - -

Forfeited (35,000) 13.88 (133,000) 13.86
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Outstanding, end of year - - 55,000 13.01
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Options exercisable, end of year - - 55,000 -
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The price of the exercised options was adjusted to reflect the capital
distributions during the year.

10. FOREIGN CURRENCY TRANSLATION ADJUSTMENT

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

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2007 2006
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Balance, beginning of year $ (1,733) $ (2,207)
Translation of net assets of self-sustaining
foreign operations 69 (2,544)
Foreign currency loss realized on reduction
of net investment in self-sustaining foreign
operations 989 3,018
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Balance, end of year $ (675) $ (1,733)
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11. INCOME TAXES

The geographic source of (loss) income before income taxes is as follows:
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2007 2006
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Canada $ (803) $ (5,456)
Outside Canada 2,885 3,745
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$ 2,084 $ (1,711)
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The components of the income tax provision (recovery) charged to operations
are as follows:

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2007 2006
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Current $ 5,099 $ 17,013
Future (4,492) (18,218)
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$ 607 $ (1,205)
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Fiscal 2007 future income tax liabilities includes amounts related to the
Discontinued Business.

The following table reconciles tax expense calculated at statutory rates
with the actual income tax expense:

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2007 2006
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Income tax provision (recovery) at combined federal
and provincial statutory rates of 36.12%
(2006 - 36.12%) $ 753 $ (618)
Changes resulting from:
Lower foreign tax rates (152) (1,090)
Other items 6 503
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$ 607 $ (1,205)
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Significant components of the Corporation's future income tax liabilities
and assets are as follows:

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2007 2006
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Future income tax liabilities:
Difference in tax and accounting basis of assets $ 2,821 $ 3,696
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Future income tax assets:
Net operating losses available for carry forward 1,290 2,170

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Future income tax liabilities $ 1,531 $ 1,526
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The Corporation has recognized the benefit of approximately $1,613 (2006 - $4,908) of net-operating losses pertaining to the U.S. operations available to offset future taxable income. Non-capital losses of $1,613 will expire in 2008 and $1,613 in 2009.

12. 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.
2007 2006 2007 2006
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INCOME STATEMENT DATA

Equipment Trading
Revenues $ - $ - $ 25,868 $ 20,444
Expenses - 36 24,743 19,456
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Gross margin - (36) 1,126 988
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-----------------------------------------------

Investment Revenue $ 6,075 $ 4,355 $ - $ -
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-----------------------------------------------

Structured Finance
Revenues $ - $ 818 $ - $ -
Expenses - 818 - -
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Gross margin - - - -
-----------------------------------------------
-----------------------------------------------

Total Gross Margin $ 6,075 $ 4,319 $ 1,126 $ 988
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BALANCE SHEET DATA

Receivables $ 2,278 $ 1,378 $ 3,259 $ 4,641
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Equipment held for sale $ - $ - $ 1,398 $ 1,186
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Marketable securities $ - $ 85,159 $ - $ -
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Bridge loans receivable $ 15,858 $ 13,670 $ - $ -
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EUROPE TOTAL
2007 2006 2007 2006
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INCOME STATEMENT DATA

Equipment Trading
Revenues $ 9,713 $ 12,623 $ 35,581 $ 33,067
Expenses 8,585 10,898 33,328 30,390
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Gross margin 1,128 1,725 2,253 2,677
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-----------------------------------------------

Investment Revenue $ - $ - $ 6,075 $ 4,355
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-----------------------------------------------

Structured Finance
Revenues $ - $ - $ - $ 818
Expenses - - - 818
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Gross margin - - - -
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Total Gross Margin $ 1,128 $ 1,725 $ 8,328 $ 7,032
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BALANCE SHEET DATA
Receivables $ 1,500 $ 1,028 $ 7,037 $ 7,047
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Equipment held for sale $ 1,137 $ 1,239 $ 2,535 $ 2,425
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Marketable securities $ - $ - $ - $ 85,159
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Bridge loans receivable $ - $ - $ 15,858 $ 13,670
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13. CONTINGENCIES AND COMMITMENTS

a) Litigation matters

In June of 2006, the Corporation settled its litigation with the Municipality of Leamington and several other municipalities comprising the Union Water system. Under the settlement, the Corporation paid approximately $8.8 million to extinguish a claim for $75 million in damages.

In October of 2006, the Corporation settled its remaining claims with the City of Windsor. Following a settlement in 2005 respecting the regional landfill, this litigation involved approximately 50 equipment leases entered into between 1994 and 2001. Under the settlement, the Corporation paid approximately $4.2 million and agreed to modify those contracts still in existence to reflect a $1 purchase option.

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.

These settlements were within the financial reserves established by the Corporation in prior years.

No new litigation matters were commenced against the Corporation in the year. Ongoing litigation involves:

In July of 2004, the Corporation received a third party claim from the Province of Nova Scotia in relation to the lease financing of a $23 million emergency service system which commenced in 1999 and was directly assigned by the Corporation to a third party financial intermediary with the Province's explicit acknowledgement. The financial institution commenced an action against the Province when it short paid its rental obligation starting in 2004. The claim against the Corporation seeks rectification and/or damages of an unspecified value based on alleged misrepresentations of the contract's inherent lease rate. The Corporation believes the contracts represent valid and binding agreements that are complete on their face and reflect normal commercial terms with reasonable financing costs. A mediation in the first quarter of Fiscal 2007 proved unsuccessful.

In October of 2004, the Corporation received a third party claim from the former CFO of the City of Waterloo concerning the City's claim against him. Further, the City of Waterloo has also commenced litigation against several officers and employees of the Corporation who may ultimately claim over against the Corporation. As the Corporation has reached a settlement with the City in respect of these matters in early 2002, it has no understanding as to the rationale of these claims. The Corporation believes these actions to be without merit and will vigorously defend itself against this and similar claims. The issue was ruled upon in July of 2006 with the judge finding in favour of the Corporation indicating that the Municipality could not effectively seek additional compensation over the settlement already obtained. The municipality has decided to appeal the ruling. Given the status of this matter and potential indemnification rights, the Corporation does not believe any material financial exposure exists.

The Corporation 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 recorded which was increased in 2005 by $20 million to reflect current expectations. The current year's settlements were within the financial parameters of the reserves so established. Should any settlement discussion prove unsuccessful, the Corporation intends to defend these actions on the basis that the lease documents entered into were clear, complete and created binding obligation on the parties.

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, future operations and cash flows.

The Corporation continues to defend certain other litigation arising in the normal course of business. Management is of the opinion that any resulting settlements with respect to these other matters would not have a material effect on the financial position of the Corporation.

b) Income tax reassessments

In March 2000, the Corporation received federal income tax reassessments covering the fiscal years ended March 31, 1994 and 1995 which disallow capital cost allowance and certain other deductions claimed by the Corporation with respect to a particular lease transaction. Provincial reassessments for the fiscal years in question have also been received, mirroring the federal position. The Corporation disagrees with these reassessments and has filed Notices of Objection where applicable. Both management and tax counsel believe that the Corporation's technical position is supportable.

In April 2003, the Corporation received federal income tax reassessments covering the fiscal years 1996 and 1997 which disallow capital cost allowance and certain other deductions in respect of a second lease transaction based on similar facts and circumstances. Provincial reassessments mirroring the federal position have also been received. The Corporation disagrees with these reassessments and has filed Notices of Objection where applicable. Both management and tax counsel believe that the Corporation's technical position is similarly supportable in this transaction.

There are no other lease transactions of a similar nature to those that have been reassessed. Taxes and interest with respect to the March 2000 reassessment approximate $9 million and $13 million, respectively. Pursuant to legislative requirements, the Corporation has paid $13 million pending the outcome of the Corporation's objection.

With respect to the April 2003 reassessment, taxes and interest are estimated at $18 million and $9 million, respectively. The Corporation has paid $18 million pending the outcome of the Corporation's objection. No further payments are required until a final determination is made.

As a result of a GAAR decision finding in favour of another taxpayer in a similar case, the transaction structure has been accepted. The remaining issues now deal with the valuation of software and the treatment of the differential payment. Related capital tax matters must also be resolved. Valuation of similar type software has been made in other cases and should provide a precedent. The Corporation has just recently met with CRA to negotiate a settlement specific to the Corporation. Discussions are ongoing. Management is actively monitoring this situation to ensure that any potential interest exposure arising from these matters is adequately provided for in the accounts, however, the ultimate outcome could differ materially from the recorded amounts. To the extent that the final cost with respect to interest exceeds amounts currently provided for in the financial statements, the difference will be charged to income.

In light of the current status of this matter, a decision was made to net the taxes paid on account of this matter, historically presented as long-term taxes recoverable, with the estimated liability for interest exposure in the income tax payable account. This along with regular income tax activities has generated a net recoverable balance.

c) Lease commitments

The Corporation is committed to the following annual minimum payments under operating leases, for the rental of premises, and miscellaneous equipment, as follows:



2008 $ 264
2009 26
2010 -
-----------------------------
$ 290
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d) Management Agreement

In March of 2007, the Corporation signed a management services agreement pursuant to which a wholly owned subsidiary of Morguard Corporation will render management and consulting services to Renasant and its subsidiaries. The Chairman of the Board of Renasant, controls, through various subsidiaries, approximately 45% of the issued and outstanding common shares of Morguard Corporation. Accordingly, the Board of Directors of Renasant established a special committee of independent directors to consider and negotiate the terms of the Management Services Agreement.

Four employees of the Corporation were hired and a consulting agreement arranged with Mr. Wright, the Corporation's Chief Financial Officer to provide the necessary services under the agreement. Mr. Berrill will continue to fulfill the role of Chief Executive Officer on a part-time basis.

The term of the management services agreement beginning April 1, 2007 and continues for one-year. Beginning on October 1, 2007, Renasant may terminate the Management Services Agreement at any time upon sixty day's prior written notice to provider. Following the completion of the initial one-year term the Agreement may continue with the mutual agreement of the parties.

e) Guarantees

In the normal course of operations, the Corporation may execute agreements that provide for indemnification and guarantees to third parties in transactions such as sale of assets, sale of services, securitization agreements and funding agreements. Certain representations and warranties associated with the sale of the leasing business would constitute on indemnification. The maximum exposure to ICON is capped at $10 million. The Corporation has also agreed to indemnify its directors and certain of its officers and employees. The nature of many of the guarantee and indemnification undertakings precludes the possibility of making a reasonable estimate of the maximum potential amount the Corporation could be required to pay third parties as the agreements often do not specify a maximum amount and the amounts are dependent upon the outcome of future contingent events, the nature and likelihood of which cannot be determined at this time. Historically, the Corporation has not made any significant payments nor do they expect to make any significant payments under such indemnification agreements.

14. FINANCIAL INSTRUMENTS

The following methods and assumptions were utilized to estimate the fair values of the Corporation's financial instruments:

a) Financial instruments valued at carrying value

Loans, receivables, accounts payable and accrued charges, and the discontinued lease assets and liabilities are considered current financial instruments and the carrying values approximate their fair values.

The determination of fair value requires estimations utilizing present value techniques which can be significantly affected by interest rate assumptions. Furthermore, these fair value estimates are restricted to those assets and liabilities which have been categorized as financial instruments and do not reflect the comprehensive value of all of the Corporation's assets and liabilities. Due to the subjectivity of the estimation techniques and the nature of certain of the underlying contractual agreements, the fair values should not be interpreted as being realizable in an immediate settlement of the instruments.

15. RELATED PARTY TRANSACTIONS

During the course of the year the Corporation entered into transactions with related entities. These transactions are measured at the exchange amount. The Corporation participates in bridge loans (see Note 4) collectively with an entity under control of one of the shareholders of the Corporation. The Corporation also has entered into a management agreement with a related entity (see Note 13d)).

Amounts due from related parties as at March 31, 2007 are $2,081 (2006 - $NIL) - see Note 3.

16. COMPARATIVES

Certain comparative figures in particular, income taxes recoverable and income taxes payable, bridge loans and marketable securities have been reclassified to conform with current year's presentation.

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