Annual Report COVENTREE INCAnnual Report COVENTREE INC.
For the year ended
September 30, 2007
Coventree Investments has made strategic investments including Nereus Financial Inc. (“Nereus”) (currently a 100% shareholder), a securitization agent focused on the credit arbitrage market; Xceed Mortgage Corporation (“Xceed”) (currently a 9.6% shareholder), a leading nontraditional mortgage lender; and smaller interests in other growth-stage financial services businesses.
Other Income
The Company has made several strategic investments in financial services companies including an investment (currently 9.6% of the outstanding shares) in Xceed. Included in other income are dividends received and gains realized on the sale of these investments.
Other income for the year ended September 30, 2007 of $1.1 million is $5.2 million lower than for the year ended September 30, 2006. The decrease in fiscal 2007 is due to a gain of $0.3 million from the sale of 152,700 Xceed shares compared to a gain of $5.5 million for the sale of 600,000 Xceed shares in fiscal 2006.
Other income for the fourth quarter of fiscal 2007 of $0.8 million compared to $0.2 million in the same quarter of fiscal 2006. The increase this year compared to last year is primarily due to the gain from the sale of Xceed shares, discussed above, all occurring during the fourth quarter of fiscal 2007 as opposed to the sale of Xceed shares in the second quarter of fiscal 2006.
Other investments include an investment in Xceed of 2,662,649 (2006 – 2,815,349) shares with a fair value of $7.1 million (2006 – cost of $2.3 million). During fiscal 2007, the Company sold 152,700 Xceed shares (2006 – 600,000) for a realized gain of $0.3 million (2006 - $5.5 million), which is included as gain on sale of shares in investments in the consolidated statements of operations and retained earnings.
Some numbers to represent the value of XMC's shares locked into COF shares....
shares outstanding XMC 27,742,557
9.6% of OS 2,663,285
Book Value / share $3.42
Total Book Value of COF holdings $9,108,436
Market Value of shares $1.84
Total Market value of COF holdings $4,900,445
Total Under Valuation of XMC on COF books $4,207,991
OS of COF 16,630,182
Value of XMC held within COF shares at Market value $0.29
Value of XMC held within COF shares at Book value $0.55
So, in XMC not running up to 3.42/share or above it causes COF to report XMC's shares mark to market (M2M) at 0.29. On breakup if anything is left of COF equity then the COF bagholders will receive it. How is this material??? Don't know... Just thought I'd post... and well, after reviewing the COF financials... it appears COF only (as of those financails) only owned 9.6% of XMC or 2.66M shares.
Do your own DD and come to your own conclusions. I do own XMC and am hoping for the best regarding XMC. I do not own COF and only look into it in an attempt to understand the possibilities of those 2.66M shares.