MAVRIX FUND MANAGEMENT INC.
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    MAVRIX FUND MANAGEMENT INC. MAVRIX FUND MANAGEMENT INC. Document Transcript

    • MAVRIX FUND MANAGEMENT INC. SECOND QUARTER RESULTS June 30, 2007 Fund Management Inc.
    • Message from the Chairman Dear Fellow Shareholders, Mavrix is a fund management company. The firm provides investment advice and products to investment advisors and financial planners across Canada. What makes your company unique is its reputation for honesty, integrity and efficiency among those who choose to be its clients, and firms doing business with Mavrix - these include the largest financial institutions in Canada. Markets continued to be relatively strong during the second quarter of the year. Mutual Fund Industry Assets Under Management have grown 7% year-to-date, and Investment Funds Institute of Canada data showed that International Equity and International Balanced funds combined for 70% of total long term net sales in the month of June - a trend that has been ongoing since the beginning of the year. Mavrix Assets under Management (AUM) since December 31, 2006 has grown 7.2% in line with the industry, but since our business is strongly skewed towards domestic equities, most of our growth has occurred despite this trend. During the quarter, Mavrix AUM grew from $720 million at March 31, 2007 to $735.6 million at June 30th, or by 2.2%. Company revenues are correlated with AUM, and grew sequentially from $3.2 million in the 2nd quarter of 2007 to $3.3 million (up 3.1%) for the three months ended June 30, 2007. As discussed in previous quarterly releases, Mavrix has bolstered its marketing and sales efforts in order to accelerate the growth of various funds in our product lineup. For example, a campaign to increase client awareness of the Mavrix Global Fund was initiated during the 2nd quarter which we expect will bear fruit during the latter half of this year. As a result of these discretionary initiatives, Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) continues to be lower and the net loss for the quarter higher while we invest in the future of your firm. Operating costs have also been rising due to the growing financial burden of regulatory reform. At Mavrix we take pride in our strict compliance regimen, and since the inception of the firm we have adopted the philosophy that it is in the best interest of our shareholders and clients to anticipate regulatory reform and implement internal procedures in a timely fashion. EBITDA was negligible for the 2nd quarter, and the net loss was $(657,292) or $(0.08) cents per fully diluted share. You will recall that revenues were impacted by the decision at the end of 2006 to discontinue providing lower margin administrative services to third parties. This resulted in slightly lower revenues against the added expenses discussed during the first half of the year. However, successful launches of two new Specialty Funds, and the growing sales of a number of our smaller mutual funds continues to provide an offset to the forgone revenue, and should contribute materially to our bottom line in the future. Mavrix Mutual Funds The popularity of dividend and income funds peaked in early 2005. Although redemptions have now seemed to stabilize, growth in the Mavrix Dividend & Income Fund and the Mavrix Income Fund remain lackluster despite the fact that these funds continue to deliver substantially higher yields to investors than they can obtain in other instruments. As highlighted in previous quarterly reports, the growth in assets for a number of other funds, including Mavrix Small Companies Fund, Mavrix Global Enterprise Fund, Mavrix Global Fund and others has been more robust, but because they are growing from a lower base, the impact on AUM is only gradually becoming more significant. Our efforts to expand our distribution capability and market awareness, although costly in the short term, are having the desired effect of broadening our market penetration in terms of client/dealer, geography and product diversity. M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007 1
    • Message from the Chairman (continued) The net result of the above, is total net Mavrix Mutual Fund AUM at June 30, 2007 increased marginally to $552.3 million versus $551.8 million last quarter. Specialty Funds Specialty Fund AUM at the end of June 30th was $183.3 million, compared to $168.2 million at March 31, 2007, an increase of 9%. Two new specialty funds were launched during the first half of this year: Mavrix Explore Quebec 2007 - I Limited Partnership raised $21.1 million and the Mavrix Explore 2007 - I Limited Partnership raised in total $62.5 million. We expect to be able to launch one or more similar products this year, should market conditions warrant. As with mutual funds, we have initiated plans to broaden our product offering in the area of Specialty Funds as well. We hope to be in a position to offer good news on this front in the coming months. Thank you for investing with us. Malvin C. Spooner President, CEO & Chairman of the Board July 25, 2007 2 M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007
    • Management Discussion and Analysis (MD&A) Summary of Financial Highlights – The Six Months Ended June 30, 2007 Six months ended Six months ended Year ended Jun. 30, 2007 Jun. 30, 2006 Dec. 31, 2006 $ $ $ INCOME STATEMENT DATA Revenue Management fees 6,118,718 5,113,530 10,448,349 Fund accounting fees - 304,384 531,025 Redemption fees 342,325 523,660 823,688 Investment income 59,189 9,366 33,158 Total revenues 6,520,232 5,950,940 11,836,220 Expenses Selling, general, administrative & other 5,234,865 4,087,408 8,277,280 Fund accounting and systems 1,063,252 1,093,310 2,054,124 Expenses recovered from funds (1,761,692) (1,547,407) (3,200,829) Trailer fees 1,820,939 1,574,893 3,185,491 Amortization 1,146,914 1,063,647 2,201,109 Interest on long-term debt 230,302 224,556 451,765 Other income (42,497) (10,828) (50,110) Net loss (1,171,851) (534,639) (1,082,610) Basic and diluted loss per share (0.13) (0.07) (0.13) EBITDA* 162,868 742,736 1,520,154 EBITDA* per share 0.02 0.09 0.18 Dividends per share** - - - Total assets, end of period 14,150,664 12,861,872 13,680,023 Corporate debt, end of period 8,216,970 4,553,337 4,622,590 Shareholders' equity, end of period 4,111,700 7,018,648 7,391,023 Shares outstanding, end of period 8,527,853 7,974,595 8,714,228 ASSET MANAGEMENT DATA Mavrix Mutual Funds 552,346,134 474,089,508 493,163,106 Specialty Funds 183,289,584 161,050,610 193,223,889 Total assets under management (AUM) 735,635,718 635,140,118 686,386,995 * References to EBITDA are to earnings before interest, income taxes, depreciation and amortization. EBITDA is not a standardized earnings measure under GAAP. Management believes that in addition to net earnings, EBITDA is a useful supplemental measure as it provides investors with an indication of cash available for distribution, income taxes, working capital needs and capital expenditures. Investors should be cautioned, however, that EBITDA should not be construed as an alternative measure of liquidity and cash flows. The Company's method of calculating EBITDA may differ from other issuers and, accordingly, EBITDA may not be comparable to similarly titled measures used by other issuers. ** There have been no dividends declared in the history of MFMI. M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007 3
    • Summary of Financial Highlights – The Three Months Ended June 30, 2007 Three months ended Three months ended Year ended Jun. 30, 2007 Jun. 30, 2006 Dec. 31, 2006 $ $ $ INCOME STATEMENT DATA Revenue Management fees 3,137,477 2,540,162 10,448,349 Fund accounting fees - 150,736 531,025 Redemption fees 140,381 230,040 823,688 Investment income 29,400 5,458 33,158 Total revenues 3,307,258 2,926,396 11,836,220 Expenses Selling, general, administrative & other 2,746,875 2,183,686 8,277,280 Fund accounting and systems 501,438 624,841 2,054,124 Expenses recovered from funds (912,804) (794,459) (3,200,829) Trailer fees 960,865 813,233 3,185,491 Amortization 601,065 545,829 2,201,109 Interest on long-term debt 118,912 113,166 451,765 Other Income (51,801) (5,516) (50,110) Net loss (657,292) (554,384) (1,082,610) Basic and diluted loss per share (0.08) (0.07) (0.13) EBITDA* 10,884 99,095 1,520,154 EBITDA* per share 0.00 0.01 0.18 Dividends per share** - - - 4 M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007
    • Selected Quarterly Information – Years Ended December 31, ($millions except per share amounts) Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2005 2005 2006 2006 2006 2006 2007 2007 AUM 620.9 593.9 669.4 635.1 652.1 686.4 720.0 735.6 Revenue 2.6 2.5 3.0 2.9 2.8 3.1 3.2 3.3 EBITDA 0.4 0.2 0.6 0.1 0.4 0.3 0.2 0.0 Net Income (Loss) (0.2) (1.0) 0.02 (0.6) (0.2) (0.3) (0.5) (0.7) Net Income (Loss) Per Share (0.03) (0.13) 0.00 (0.07) (0.03) (0.04) (0.06) (0.08) Overview of Mavrix Fund Management Inc.'s Business The MD&A that follows should be read in conjunction with the unaudited financial statements for the six and three months ended June 30, 2007 including the notes attached thereto. Mavrix Fund Management Inc. (Mavrix) is an independent asset management company offering a wide range of asset management services, consisting primarily of: 1. The sponsorship and management of the Mavrix Mutual Funds. 2. Portfolio management services to funds outside of the Mavrix Mutual Funds (Specialty Funds which includes Mavrix Explore Fund FT Limited Partnerships and Mavrix Explorer Quebec FT Limited Partnerships). As at December 31, 2006, we discontinued the provision of administrative and consulting services to Third Party Funds. The decision was made to focus resources on the two remaining business activities, as they provide a better return. The key factor affecting the results of the Company is the level of Assets under Management (AUM) as Mavrix earns revenue as a percentage of AUM. The key factors affecting AUM are retained market appreciation and net asset inflows. Retained market appreciation is primarily the result of the investment performance of the underlying funds, which is largely driven by capital market returns. The following review and discussion has been prepared by management as of July 25, 2007. At June 30, 2007, total AUM was $735.6 million, as shown in the table below, represented by $552.3 million in Mavrix Mutual Funds and $183.3 million in Specialty Funds. During the quarter, AUM increased from $720 million as at March 31, 2007 to $735.6 million at June 30, 2007 or 2%. Mavrix Fund Management Inc.'s Assets Under Management (AUM) Jun. 30, 2007 Mar. 31, 2007 Dec. 31, 2006 Jun. 30, 2006 $ $ % Change $ % Change $ % Change Mavrix Mutual Funds 552,346,134 551,753,058 0% 493,163,106 12% 474,089,508 17% Specialty Funds 183,289,584 168,224,655 9% 193,223,889 (5%) 161,050,610 14% Total Assets Under Management (AUM) 735,635,718 719,977,713 2% 686,386,995 7% 635,140,118 16% M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007 5
    • Overview of Mavrix Fund Management Inc.'s Revenues and Expenses Revenues Mavrix's revenues are earned from the management services we provide as fund manager of the Mavrix Mutual Funds and Specialty Funds, and are reported as management fees. The key determinant of our management fee revenue is AUM, which is affected by both market returns and net sales of these funds. We charge a lower management fee on Class F units because our distribution and servicing costs are reduced. Our management fees range between 0.25% and 2.75% on the net asset value of AUM, depending on the fund and class of units. Mavrix also earns revenues from redemption fees. Investors in our funds pay redemption fees when funds are purchased on a deferred sales charge basis and the investment is redeemed within the applicable redemption period, either seven or three years, depending on which deferred sales charge option was selected (regular or low-load). Redemption fees are calculated as a percentage of the initial value of the funds sold, and have rates that start as high as 6.0% and decline to nil over the redemption period. We have earned investment income from investments in marketable securities. We invest in marketable securities to generate interest income and capital gains. Our third largest source of income in 2006 was generated from administrative services. These fees were earned on AUA, and varied by client according to the level of services provided. As at December 31, 2006, our AUA was nil, as we have decided to discontinue administrative services as a business activity in 2007. Expenses Our expenses are comprised primarily of selling, general, administration and other expenses (S,G,A&O), fund accounting and systems expenses, and trailer fees. Some of these expenses are offset by expenses recovered from funds. S,G,A&O expenses include costs related to portfolio management, sales, marketing, and general corporate overhead. The Mavrix Mutual Funds are responsible for payment of their operating expenses incurred by Mavrix including legal, audit, record keeping and unitholder communication costs, for example. Mavrix reports gross expenses on this line in the financial statements. The second category of expenses we incur on behalf of the funds is fund accounting and systems expenses. Fund accounting and systems costs are a significant expense for asset management companies and require consistent investment to maintain operating efficiency. Parts of these expenses are fixed in nature with a portion being a function of AUM and the number of unitholders of Mavrix funds. The recovery of the expenses paid by the funds is shown as "Expenses Recovered from Funds". To maintain competitive Management Expense Ratios for the Mavrix Mutual Funds, the amount of expenses recovered from some of the funds has been capped. Therefore, as the Mavrix Mutual Funds grow in size, a larger recovery will occur until such time as all recoverable expenses are borne by the funds. Trailer fees are paid to dealers in respect of services provided by dealers to clients who hold Mavrix Mutual Funds. These expenses are a direct function of AUM with no fixed cost element. Trailer fees vary by fund, and by sales charge option. Other expenses that we incur include amortization and interest on long-term debt. Amortization reflects both the amortization of deferred sales commissions and property and equipment. The portion of amortization expense for DSC commissions is highly correlated with growth in AUM. Mavrix has historically financed its capital requirements for DSC commissions with either debt or equity financing. Other Items References to EBITDA are to earnings before interest, income taxes, depreciation and amortization. EBITDA is not a standardized earnings measure under GAAP. Management believes that in addition to net earnings, EBITDA is a useful supplemental measure as it provides investors with an indication of cash available for distribution, income taxes, working capital needs and capital expenditures. Investors should be cautioned, however, that EBITDA should not be construed as an alternative measure of liquidity and cash flows. The Company's method of calculating EBITDA may differ from other issuers and, accordingly, EBITDA may not be comparable to similarly titled measures used by other issuers. 6 M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007
    • Six Months Ended June 30, 2007 Compared with Six Months Ended June 30, 2006 Market Review The S&P/TSX Composite Index return for the first six months of 2007 was 9.1%. The Dow Jones Industrial Average for the same period, adjusted for Canadian dollars, had a return of (1.0%). The S&P 500 Index declined by (2.6%). According to the Investment Fund Institute of Canada (IFIC), total industry assets were $660 billion at December 31, 2006. On July 4, 2007, IFIC released its June statistics. Net assets of the mutual fund industry at June 30, 2007 were $706.8 billion, up approximately 7% from December 31, 2006. Operating Review Our total AUM at June 30, 2007 was $735.6 million, up 7% from $686.4 million at December 31, 2006, and up 16% from $635.2 million at June 30, 2006. The increases are attributable to market appreciation and fund sales. At June 30, 2007, our AUM was comprised of $552.3 million of Mavrix Mutual Funds and $183.3 million of Specialty Funds, compared to $474.1 million and $161.1 million respectively at June 30, 2006. The $552.3 million for Mavrix Mutual Funds represents the total for our 19 core funds. Mavrix Mutual Funds had net sales of $43 million on gross sales of $188.4 million for the first six months of 2007. This compares to $29.2 million in net sales on $140.2 million of gross sales for Mavrix Mutual Funds for the same period in 2006. Second Quarter Developments On April 25, 2007, Mavrix announced the final closing of the Mavrix Explore 2007 - I FT Limited Partnership. Total units sold were 6,249,110 for total proceeds of $62,491,100. This represents the most successful initial public offering of a Mavrix resource flow-through limited partnership in Company history. In June 2007, Mavrix announced the issuance to VentureLink of a 10% subordinated debenture (the "Debenture") in the principal amount of $6 million together with 600,000 warrants to purchase common shares in the capital of the Corporation. The Corporation also announced the prepayment of outstanding indebtedness owing to VentureLink Financial Services Innovation Fund Inc. - Services I and VentureLink Financial Services Innovation Fund Inc. - Services II under two 8% subordinated convertible debentures in the aggregate principal amount of $2 million. On June 28 2007, Mavrix announced the filing of the final prospectus of the Mavrix TSX Venture Fund. The prospectus seeks to qualify the distribution of warranted units each consisting of one trust unit of the fund and one half of one fund unit purchase warrant at a price of $10.00 per warranted unit to achieve capital appreciation. Each whole purchase warrant entitles the holder to purchase one fund unit at a price of $10.25 on August 15, 2009. The maximum size of the offering is $50 million. The fund is seeking capital to invest mainly in the stocks that trade on the TSX Venture Exchange with emphasis on issuers in the TSX Venture 50tm. Revenues For the six months ended June 30, 2007, revenue totaled $6.5 million compared to $6.0 million for 2006. The year over year increase in revenues for the first six months was the result of the increase in AUM. Details are provided in the table below. Management fees for the first six months of 2007 increased by $1.0 million, or 20%, from the same period in 2006. This was due to the increase in the Mavrix Mutual Funds and specialty funds AUM of 16% from the prior year. In the fourth quarter of 2006 Mavrix ended the administrative service contracts with the two remaining third party funds. The departure from administrative services was undertaken to focus resources on our two remaining business activities. M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007 7
    • Revenues (continued) Redemption fees for the six months ended June 30, 2007 were $342 thousand compared to $524 thousand in the first six months of 2006. Redemption fees are driven by the level of gross redemptions, as well as by the time period that clients hold the funds prior to redemption. The longer a client holds the funds, the lower the redemption fee charge. Revenue ($000’s) Six months ended Six months ended % June 30, 2007 June 30, 2006 Change Management Fees $ 6,119 $ 5,114 20% Fund Accounting Fees - 304 (100%) Redemption Fees 342 524 (35%) Investment Income 59 9 532% Total Revenue $ 6,520 $ 5,951 10% Expenses S,G,A&O expenses before any expense recovery increased by $1.1 million compared to the first six months of 2006. Factors that have contributed to the increase in S,G,A&O expenses in the first six months of 2007 are increases in business development and compliance costs. Fund accounting and systems expenses were unchanged at $1.1 million. Expenses recovered from funds rose $215 thousand, or 14%, year over year for the six months ended June 30, 2007. The increase in expenses recovered resulted from the increase in AUM from the prior year. As the Mavrix Mutual Funds continue to grow in size, the amount of recoverable expenses absorbed by the company will decline. Trailer fees rose to $1.8 million in the six months ended June 30, 2007 compared to $1.6 million for the same six-month period in 2006. This represented an increase of 16% and is the result of growth in AUM. The increase is also attributable to the rollover of non-trailer fee specialty funds into the mutual funds of the corporation, which pay trailer fees. Expenses ($000’s) Six months ended Six months ended % June 30, 2007 June 30, 2006 Change S,G,A&O $ 5,235 $ 4,087 28% Fund Accounting and Systems 1,063 1,093 (3%) Expenses Recovered from Funds (1,762) (1,547) 14% Trailer Fees 1,821 1,575 16% $ 6,357 $ 5,208 22% EBITDA was $163 thousand for the six months ended June 30, 2007, compared to $743 thousand for the six months in 2006. This decline was the result of the increase in revenues not exceeding the increase in expenses. The following reconciles EBITDA to the net loss for the six-month period presented. ($000’s) Six months ended Six months ended % June 30, 2007 June 30, 2006 Change EBITDA $ 163 $ 743 (78%) Amortization (1,147) (1,064) 8% Interest on Long-term Debt (230) (225) 3% Other Income 42 11 292% Net Loss $ (1,172) $ (535) 119% 8 M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007
    • Expenses (continued) Amortization rose from $1.0 million in the first six months of 2006 to $1.1 million in the same period in 2007, or an 8% increase from year to year. The increase in the expense is the result of the increase in deferred sales commission (DSC) from a cost of $11.3 million at June 30, 2006 to $12.7 million at June 30, 2007. The largest element of amortization represents amortization of DSC. Mavrix reported net loss for the six months ended June 30, 2007 of $(1.2) million or $(0.13) per share, compared to a net loss for the six months ended June 30, 2006 of $(0.5) million or $(0.07) per share. Quarter Ended June 30, 2007 Compared with Quarter Ended June 30, 2006 Market Review S&P/TSX Composite Index return for the second quarter of 2007 was 6.3%. The Dow Jones Industrial Average return for the same period, as adjusted for Canadian dollars, was 0.4% and the S&P 500 Index return was (2.2%). According to IFIC, total industry assets were $690.1 billion at March 31, 2007 and 706.8 billion at June 30, 2007, for an increase of $16.7 billion, or 2.4%, during the second quarter of 2007. Operating Review Our total AUM at June 30, 2007 was $735.6 million, up 2% from $720.0 million at March 31, 2007. At June 30, 2007, our AUM was comprised of $552.3 million of Mavrix Mutual Funds and $183.3 million of Specialty Funds, compared to $551.8 million and $168.2 million respectively at March 31, 2007. Our Mavrix Mutual Funds have increased by 0.1% over the quarter while Specialty Funds have increased 9%. This variance is largely due to the launch of the Mavrix Explore 2007-I FT Limited Partnership for total proceeds of $62.5 million Mavrix Mutual Funds had net redemptions of $4 million on gross sales of $46.3 million for the second quarter of 2007. This compares to $2.8 million in net redemptions on $44.5 million of gross sales for Mavrix Mutual Funds for the same period in 2006. Second quarter 2007 saw higher redemption largely due to flow through investors exiting the Mavrix Multi Series Fund Ltd. - Explorer Series post-rollover, in anticipation of purchasing future flow through products. Revenues As a result of the 16% year over year increase in AUM, total second quarter revenue increased from $2.9 million in 2006 to $3.3 million in 2007. Details are provided in the table below. Management fees are positively impacted by increases in AUM. Management fees for the second quarter of 2007 increased $598 thousand, or 24%, from the same period in 2006, to $3.1 million. Redemption fees for the three months ended June 30, 2007 were $140 thousand compared to $230 thousand in the same period of 2006. Gross redemptions increased from $47 million in second quarter 2006 to $50 million in second quarter 2007. Revenue ($000’s) Three months ended Three months ended % June 30, 2007 June 30, 2006 Change Management Fees $ 3,138 $ 2,540 24% Fund Accounting Fees - 151 (100%) Redemption Fees 140 230 (39%) Investment Income 29 5 439% Total Revenue $ 3,307 $ 2,926 13% M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007 9
    • Expenses S,G,A&O expenses before any expense recovery for the second quarter of 2007 totalled $2.7 million compared to $2.2 million for the same period in 2006. This represents an increase of $563 thousand compared to the second quarter of 2006. An overall increase in compensation costs was the main reason for the change in S,G,A&O expenses. Compensation costs increased by $374 thousand, due to the expansion of our workforce from 47 employees at June 30, 2006 to 52 employees at June 30, 2007. Other factors that have contributed to the increase in S,G,A&O expenses in the second quarter of 2007 are increases in compliance and business development costs. During the three months ended June 30, 2007, fund accounting and systems expenses fell to $501 thousand from $625 thousand for the same three-month period of 2006. Expenses recovered from funds totalled $913 thousand in the second quarter of 2007, compared to $795 thousand in the same period in 2006. As Mavrix AUM increases, so do expense recoveries, and the portion of expenses absorbed by Mavrix declines. Trailer fees increased to $961 thousand in the three months ended June 30, 2007 compared to $813 thousand for the same three-month period in 2006, due to the rollover of non-trailer fee specialty funds into our mutual funds, which pay trailer fees. Expenses ($000’s) Three months ended Three months ended % June 30, 2007 June 30, 2006 Change S,G,A&O $ 2,747 $ 2,184 26% Fund Accounting and Systems 501 625 (20%) Expenses Recovered from Funds (913) (795) 15% Trailer Fees 961 813 18% $ 3,296 $ 2,827 17% EBITDA was $11 thousand for the three months ended June 30, 2007, compared to $99 thousand for the three months in 2006. The following reconciles EBITDA to the net loss for the three months presented. ($000’s) Three months ended Three months ended % June 30, 2007 June 30, 2006 Change EBITDA $ 11 $ 99 (89%) Amortization (601) (546) 10% Interest (119) (113) 5% Other Income 52 6 839% Net Loss $ (657) $ (554) 19% Total amortization for the three months ended June 30, 2007 was $601 thousand compared to $546 thousand for the same three-month period in 2006. This is due to the growth in assets in the Mavrix Mutual Funds resulting in a larger deferred sale charge amortization. On a three-month basis, interest expense increased from $113 thousand for the three months ended June 30, 2006, to $119 thousand for the same three months in 2007. The increase is attributable to the issue of the new subordinated debenture in June 2007. Mavrix recognized a $59 thousand gain on the sale of marketable securities in the three months ended June 30, 2007 (2006, $6 thousand). Mavrix reported a net loss for the three months ended June 30, 2007 of $(657) thousand or $(0.08) per share, compared to a net loss for the three months ended June 30, 2006 of $(554) thousand or $(0.07) per share. 10 M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007
    • Liquidity and Capital Resources Cash flow provided by operating activities (before the net change in non-cash balances related to operations) was $148 thousand for the six months ended June 30, 2007, compared to cash flow provided by operating activities in the same period in 2006 of $677 thousand. The net change in non-cash operating working capital for the six months ended June 30, 2007 was $458 thousand compared to $(220) thousand in the six months ended June 30, 2006. Cash flow used by operating activities (before the net change in non-cash balances related to operations) was $(3) thousand for the quarter ended June 30, 2007, compared to cash provided of $64 thousand in the same period in 2006. The net change in non-cash operating working capital for the quarter ended June 30, 2007 was $328 thousand compared to $261 thousand in the prior year. Current assets net of current liabilities were $4 million at June 30, 2007 up from $3.5 million at December 31, 2006. Consolidated cash and marketable securities amounted to $3.5 million as at December 31, 2006, and increased to $4.44 million as at June 30, 2007. In the second quarter of 2007, we extended $1.2 million in loans to employees to purchase units in the MFMI Employee Partnership. This has been deducted against capital stock. In the second quarter of 2007, we spent $2.7 million to prepay our 8% convertible debenture and during the same time period we received $5.8 million from a new 10% subordinated debenture. We invested the net proceeds in marketable securities. In the second quarter of 2007, we spent $717 thousand to repurchase our common stock for cancellation under our Normal Course Issuer Bid (NCIB), and we received $75 thousand from the exercise of options. Our consolidated cash and marketable securities at June 30, 2007 will be used to finance the payment of DSC commissions to advisors, to facilitate the development of new products, and to acquire additional assets if and when appropriate. Management believes that the availability of capital to fund trailer fees and deferred sales charge commissions is important to the future financial results of operations and that available capital will be sufficient to execute on the present business plan for the period to December 31, 2007. Risks and Uncertainties and Forward-Looking Statements A significant portion of Mavrix Mutual Funds AUM is attributable to a small number of the Mavrix Mutual Funds. If investors modified their portfolios by transferring their investments out of these funds where there is also a decline in sales, this would result in a materially adverse effect on the Company's results of operations and prospects. This may result if the Mavrix Mutual Funds were unable to achieve returns that are competitive with or superior to those achieved by other comparable investment products offered by its competitors or if its products otherwise fall out of favour with investors. The Company attributes its growth in AUM substantially to the Company's efforts to engage in sales and marketing initiatives targeted directly at third-party distribution channels and, in particular, investment advisors and financial planners who recognize the merits of the Company's differentiated products and the value of access to the Company's portfolio managers, rather than to the investing public generally. AUM growth relies largely on net asset inflows, which is affected materially by access to the third-party distribution channels. These channels are very competitive and access may be adversely affected by acquisitions of dealers by the Company's competitors who may limit or eliminate the Company's access to such distribution channels. The Company's focus is on the development of differentiated products that complement mainstream equity and fixed income products. Competitive pressures may impact the fees that the Company may charge for its services, as well as the expenses properly payable by the Mavrix Mutual Funds that are waived or "absorbed" by the Company. There can be no assurance that prevailing management fee rates will continue to be available in the future or that the Company will be able to reduce the portion of fund expenses absorbed by the Company. M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007 11
    • Risks and Uncertainties and Forward-Looking Statements (continued) The following section titled "Outlook" contains forward-looking statements, as may other portions of this document. These statements are based on the judgment of management on a basis deemed reasonable given the current circumstances. These judgments are subject to risks and uncertainties beyond the control of management such as general economic conditions, the state of capital markets, political events, regulatory changes and competitive developments. Investors should carefully consider these risks and uncertainties when evaluating the Company. Outlook At Mavrix, we expect that the asset management industry will continue to grow through 2007. We also plan to grow our business with solid performance in our existing products, by expanding our business with existing and new advisors, particularly focusing on gaining depth in the province of Quebec with the expansion of our presence there, and by gaining new mandates for Specialty Funds. Our belief has remained unchanged from the prior year - we believe that successful smaller fund companies are well suited to deliver products to more sophisticated advisors and that the mutual fund market will continue rewarding this approach. We believe that we will become stronger in our two remaining business activities in 2007 now that we have exited the activity of providing administrative services to third parties. We will be able to more effectively focus our existing resources on the growth and performance of the Mavrix Mutual Funds and Specialty Funds. Critical Accounting Estimates The following is a summary of Mavrix's critical accounting estimates. Mavrix's accounting policies are in accordance with GAAP and are described in the notes to the audited consolidated financial statements for the year-ended December 31, 2006. The accounting policies described below required estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses recorded in the financial statements. Because of their nature, estimates require judgment based on available information. Actual results or amounts could differ from estimates and the difference could have a material impact on the financial statements. Deferred Costs Selling commissions paid on mutual fund securities sold on a deferred load basis ("DSC") are recorded at cost and are amortized on a straight-line basis. DSC assets relating to the sales of mutual fund securities sold on a deferred low load basis are amortized over 3 years. DSC assets relating to the sales of mutual fund securities sold on a deferred regular load basis are amortized over 7 years. Deferred exchange costs represent expenses incurred by the Company on the issue of equity instruments in a Fund managed by the company. These costs are amortized on a straight-line basis over 3 years. The unamortized DSC and deferred exchange costs would be written down to fair value if carrying value exceeded expected future undiscounted cash flow. Customer Lists The customer list is recorded at cost and is amortized on a straight-line basis over a period of 7 years. Customer list is reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable. Management Contracts Management contracts are recorded at cost less accumulated amortization prior to 2003. Management contracts are no longer amortized as they were determined to have an indefinite life; however, they are subject to impairment tests on an annual basis or more frequently if events and circumstances indicate a potential impairment. 12 M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007
    • Changes in Accounting Policies There have been no changes to our existing accounting policies in the second quarter of 2007. There were two changes to our existing accounting policies in the first quarter of 2007 in the areas of accounting changes and financial instruments. Please refer to our first quarter MD&A for a detailed discussion of these policies. Changes in Internal Controls over Financial Reporting Pursuant to Multilateral Instrument 52-109, the Chief Executive Officer and Chief Financial Officer must certify that they are responsible for the design of internal controls over financial reporting (or caused them to be designed under their supervision). Internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian generally accepted accounting principles. During the six-month period ended June 30, 2007, there was no significant change to the systems of internal controls within our company. M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007 13
    • MAVRIX FUND MANAGEMENT INC. Consolidated balance sheets As at June 30, 2007 and December 31, 2006 (Unaudited) June 30, 2007 December 31, 2006 ASSETS Current Assets Cash $ 332,488 $ 142,484 Marketable securities (market value - 2006 - $3,418,130) 4,104,198 3,369,080 Accounts receivable (Note 3) 635,883 1,020,878 Prepaid expenses 748,238 665,741 5,820,807 5,198,183 Other Assets Property and equipment 252,091 290,694 Deferred costs 6,598,372 6,701,371 Intangible assets 1,479,394 1,489,775 8,329,857 8,481,840 $ 14,150,664 $ 13,680,023 LIABILITIES Current Liabilities Accounts payable and accrued liabilities $ 1,821,994 $ 1,666,410 Corporate Debt (Note 4) 8,216,970 4,622,590 10,038,964 6,289,000 SHAREHOLDERS' EQUITY Capital Stock (Note 5) 17,919,847 19,764,308 Equity Portion of Corporate Debt 235,481 235,481 Contributed Surplus (Note 5) 854,721 451,065 Deficit (14,898,349) (13,059,831) 4,111,700 7,391,023 $ 14,150,664 $ 13,680,023 The accompanying notes are an integral part of these consolidated financial statements. Signed on Behalf of the Board Malvin C. Spooner Raymond M. Steele Director Director 14 M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007
    • MAVRIX FUND MANAGEMENT INC. Consolidated statements of loss and deficit For the six months ended June 30, 2007 and 2006 (Unaudited) 2007 2006 Revenues Management fees $ 6,118,718 $ 5,113,530 Fund accounting fees - 304,384 Redemption fees 342,325 523,660 Investment income 59,189 9,366 6,520,232 5,950,940 Expenses Selling, general, administration and other 5,234,865 4,087,408 Fund accounting and systems 1,063,252 1,093,310 Expenses recovered from funds (1,761,692) (1,547,407) Trailer fees 1,820,939 1,574,893 6,357,364 5,208,204 Profit before the undernoted items 162,868 742,736 Amortization (1,146,914) (1,063,647) Interest on long-term debt (230,302) (224,556) Other income Gain on sale of marketable securities 59,100 11,969 Loss on disposal of property and equipment (16,603) (1,141) Net loss (1,171,851) (534,639) Deficit - beginning of period (13,059,831) (11,959,099) Loss on prepayment of debt (Note 4) (666,667) - Excess on repurchase of capital stock (Note 5) - 18,122 Deficit - end of period $ (14,898,349) $ (12,475,616) Weighted average number of shares - Basic and Diluted 8,744,396 7,940,087 Basic and diluted loss per share $ (0.13) $ (0.07) The accompanying notes are an integral part of these consolidated financial statements. M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007 15
    • MAVRIX FUND MANAGEMENT INC. Consolidated statements of loss and deficit For the three months ended June 30, 2007 and 2006 (Unaudited) 2007 2006 Revenues Management fees $ 3,137,477 $ 2,540,162 Fund accounting fees - 150,736 Redemption fees 140,381 230,040 Investment income 29,400 5,458 3,307,258 2,926,396 Expenses Selling, general, administration and other 2,746,875 2,183,686 Fund accounting and systems 501,438 624,841 Expenses recovered from funds (912,804) (794,459) Trailer fees 960,865 813,233 3,296,374 2,827,301 Profit before the undernoted items 10,884 99,095 Amortization (601,065) (545,829) Interest on long-term debt (118,912) (113,166) Other income Gain on sale of marketable securities 59,100 5,609 Loss on disposal of property and equipment (7,299) (93) Net loss (657,292) (554,384) Deficit - beginning of period (13,574,390) (11,921,232) Loss on prepayment of debt (Note 4) (666,667) - Deficit - end of period $ (14,898,349) $ (12,475,616) Weighted average number of shares - Basic and Diluted 8,722,057 7,964,485 Basic and diluted loss per share $ (0.08) $ (0.07) The accompanying notes are an integral part of these consolidated financial statements. 16 M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007
    • MAVRIX FUND MANAGEMENT INC. Consolidated statements of Comprehensive Loss and Accumulated Other Comprehensive Income For the six months ended June 30, 2007 (Unaudited) 2007 Net loss $ (1,171,851) Other comprehensive income - Comprehensive income $ (1,171,851) 2007 Accumulated other comprehensive income, beginning of period $ - Transitional adjustment (Note 2) 49,050 Reclassification for realized gains (49,050) Total other comprehensive income - Accumulated other comprehensive income, end of period $ - MAVRIX FUND MANAGEMENT INC. Consolidated statements of Comprehensive Loss and Accumulated Other Comprehensive Income For the three months ended June 30, 2007 (Unaudited) 2007 Net loss $ (657,292) Other comprehensive income: Reclassification for realized gains (7,050) Comprehensive loss $ (664,342) 2007 Accumulated other comprehensive income, beginning of period $ 56,100 Reclassification to earnings of gain on available-for-sale securities (56,100) Accumulated other comprehensive income, end of period $ - The accompanying notes are an integral part of these consolidated financial statements. M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007 17
    • MAVRIX FUND MANAGEMENT INC. Consolidated statements of cash flows For the six months ended June 30, 2007 and 2006 (Unaudited) 2007 2006 Cash from operations Net loss $ (1,171,851) $ (534,639) Items not affecting cash - Amortization 1,146,914 1,063,647 Gain on sale of marketable securities (59,100) (11,969) Loss on disposal of property and equipment 16,603 1,141 Accretion expense 23,548 23,548 Stock-based compensation expense 191,932 135,568 148,046 677,296 Net change in non-cash working capital - Accounts receivable 384,995 616,027 Prepaid expenses (82,497) (379,200) Accounts payable and accrued liabilities 155,584 (456,585) 606,128 457,538 Financing Activities Corporate debt repayment (2,666,667) - Corporate debt issuance, net of transaction costs 5,784,984 - Net share capital transactions (734,034) 20,000 2,384,283 20,000 Investing Activities Net disposition of marketable securities (676,016) 300,000 Employee partnership loans (1,179,000) - Purchase of property and equipment (30,756) (37,814) Additions to deferred costs (914,635) (1,125,824) (2,800,407) (863,638) Net change in cash during the period 190,004 (386,100) Cash - beginning of period 142,484 900,810 Cash - end of period $ 332,488 $ 514,710 Supplementary Information Cash paid for interest $ 200,960 $ 205,858 The accompanying notes are an integral part of these consolidated financial statements. 18 M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007
    • MAVRIX FUND MANAGEMENT INC. Consolidated statements of cash flows For the three months ended June 30, 2007 and 2006 (Unaudited) 2007 2006 Cash from operations Net loss $ (657,292) $ (554,384) Items not affecting cash - Amortization 601,065 545,829 Gain on sale of marketable securities (59,100) (5,609) Loss on disposal of property and equipment 7,299 93 Accretion expense 11,774 11,774 Stock-based compensation expense 92,789 66,302 (3,465) 64,005 Net change in non-cash working capital - Accounts receivable 501,789 645,378 Prepaid expenses (225,174) (426,197) Accounts payable and accrued liabilities 51,478 41,393 324,628 324,579 Financing Activities Corporate debt repayment (2,666,667) - Corporate debt issuance, net of transaction costs 5,784,984 - Net share capital transactions (642,446) 20,000 2,475,871 20,000 Investing Activities Net disposition of marketable securities (1,149,591) 100,000 Employee partnership loans (1,179,000) - Additions to deferred costs (431,143) (336,626) (2,759,734) (236,626) Net change in cash during the period 40,765 107,953 Cash - beginning of period 291,723 406,757 Cash - end of period $ 332,488 $ 514,710 Supplementary Information Cash paid for interest $ 161,387 $ 165,135 The accompanying notes are an integral part of these consolidated financial statements. M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007 19
    • MAVRIX FUND MANAGEMENT INC. Notes to Interim Unaudited Consolidated Financial Statements For the six months ended June 30, 2007 and 2006 1. Basis of Presentation The unaudited interim consolidated financial statements of Mavrix Fund Management Inc. ("Mavrix" or the "Company") have been prepared in accordance with Canadian generally accepted accounting principles, except that certain disclosures required for annual financial statements have not been included. Accordingly, the unaudited interim consolidated financial statements should be read in conjunction with the Company's most recent annual audited consolidated financial statements for the year ended December 31, 2006. The consolidated interim financial statements follow the same accounting policies and methods of application as the most recent annual consolidated financial statements. During the period the Company added the wholly owned subsidiary Mavrix Explore 2007 - I FT Management Limited. 2. Changes in Accounting Policies (a) Accounting Changes Effective January 1, 2007 the Company adopted revised CICA Handbook section 1506 - Accounting Changes. This section prescribes the criteria for changing accounting policies, together with the accounting treatment and disclosure of changes in accounting policies, changes in accounting estimates and corrections of errors. The revised section is effective for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2007. (b) Financial Instruments Effective January 1, 2007 the Company adopted CICA Handbook sections concerning financial instruments: section 3855 - Financial Instruments - Recognition and Measurement; section 3861 - Financial Instruments - Disclosure and Presentation; and section 1530 - Comprehensive Income. Implementation has been on a retroactive basis without the restatement of prior period financial statements. Sections 3855 and 3861 deal with the classification, recognition, measurement, presentation and disclosure of financial instruments and non-financial derivatives in the financial statements. These standards require that all financial instruments be classified as either available-for-sale, held for trading, held to maturity, loans and receivables or other liabilities. Section 1530 deals with the presentation of comprehensive income and its components, including net income and components of comprehensive income. Adoption of these recommendations had the following impact on the financial statements: Marketable securities have been classified as available-for-sale financial assets. As such, they are measured at fair value and changes in fair value are recognized in other comprehensive income. The transitional adjustment for the recognition of the financial assets at fair value on January 1, 2007 is $49,050 and is recorded in opening accumulated other comprehensive income. In April 2007 the asset that created the transitional adjustment and unrealized gain on available-for-sale securities was disposed of, resulting in both accumulated other comprehensive income and current year other comprehensive income being recognized in current period net income. Corporate debts have been classified as other liabilities and are measured at amortized cost, net of transaction costs, with amortization of interest and costs calculated on the effective interest rate method. Previously the Company used the straight-line method. There is no material impact on these financial statements as a result of this change in accounting policy. Cash is classified as available for sale, accounts receivable are classified as loans and receivables and accounts payable are classified as other liabilities. There is no change to these financial statements as a result of this classification. 20 M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007
    • MAVRIX FUND MANAGEMENT INC. Notes to Interim Unaudited Consolidated Financial Statements (continued) 3. Accounts Receivable Included in accounts receivable are amounts due from funds managed by the Company, deemed to be related parties, of $ 608,873 (2006, $ 975,917). These amounts are in the normal course of business, are non-interest bearing and are due on demand. 4. Corporate Debt June 30, 2007 December 31, 2006 $2.0 million - 8% convertible debenture due January 6, 2009 $ - $ 1,967,874 $3.05 million - 8% subordinated convertible debenture due June 30, 2010 2,712,283 2,654,716 $6.0 million - 10% subordinated debenture due July 2, 2011 5,504,688 - $ 8,216,971 $ 4,622,590 $2,000,000 - 8% Convertible Debenture In June 2007, the Company prepaid the $2,000,000 convertible debenture for a cash payment of $2,666,667. The cash payment was allocated to the carrying values of the debt and equity components resulting in a charge to amortization of $25,431 and a charge to deficit of $666,667. $6,000,000 - 10% Subordinated Debenture In June 2007, the Company obtained debenture financing in the form of a $6,000,000 subordinated debenture bearing interest at 10% per annum. The debt is repayable upon maturity on July 2, 2011 and is subordinated to all senior indebtedness. Transaction costs are amortized over the term of the debenture using the effective interest method. The lender also received warrants exercisable into 600,000 shares of the Company until July 2, 2011 at an exercise price of $2.20 per share. The estimated fair value of $280,296 for the warrants, which has been included in the deferred transaction costs is based on the following assumptions: Risk-free interest rate 4.54% Expected dividend yield 0% Expected share price volatility 27% Expected warrant life 4 years The components of the subordinated debenture are as follows: June 30, 2007 December 31, 2006 Face value of subordinated debenture $ 6,000,000 $ - Less deferred transaction costs (495,312) - Net subordinated debenture $ 5,504,688 $ - M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007 21
    • 5. Capital Stock (a) Issued and Outstanding – The following transactions occurred with respect to common shares during 2007 and 2006: Shares Amount Balance - December 31, 2005 7,910,270 $ 18,827,933 Stock options and warrants exercised 755,000 807,500 Shares issued under RSU plan - Note 6(b)(ii) 48,958 128,875 Balance - December 31, 2006 8,714,228 19,764,308 Stock options and warrants exercised 325,000 487,500 Shares issued under RSU plan 79,325 173,628 Shares repurchased under NCIB (590,700) (1,221,534) Contributed surplus from excess of average cost over repurchase price - (105,055) Employee partnership loans - (1,179,000) Balance - June 30, 2007 8,527,853 $ 17,919,847 (b) Stock-Based Compensation Plans B (i) Employee Stock Option Plan The number of common shares issuable under the plan is as follows: Six months ended Year ended June 30, 2007 December 31, 2006 Weighted Weighted Average Average Number Exercise Price Number Exercise Price ($) ($) Outstanding - beginning of period 387,500 1.84 410,000 1.63 Granted 30,000 1.60 195,000 1.59 Exercised (75,000) 1.50 (150,000) 1.00 Forfeited - - (67,500) 1.75 Outstanding - end of period 342,500 1.65 387,500 1.84 The fair values of the options granted in the first six months of 2007 were estimated to be $0.50 per option. The following assumptions were used to calculate the fair values of the options issued. Six months ended Year ended June 30, 2007 December 31, 2006 Risk-free interest rate 4.09% 3.99% to 4.34% Expected dividend yield 0% 0% Expected share price volatility 26% 20% to 26% Expected life of option 4 years 4 years During the six months ended June 30, 2007, 75,000 stock options were exercised (year ended December 31, 2006, 150,000) by employees of the Company for cash proceeds of $112,500 (2006, $150,000). Additionally, in the first six months of 2007, a total of 30,000 stock options were granted (year ended December 31, 2006, 195,000), with an exercise price of $1.60 (2006, $1.50 to $1.85). Management has estimated the fair value of the options issued in the six months ended June 30, 2007 using the Black-Scholes option-pricing model to be $15,019 (year ended December 31, 2006, $77,071). This amount is expensed over the vesting period. Compensation expense for options for the six months ended June 30, 2007 is $22,952 (year ended December 31, 2006, $24,770) with an offsetting credit to contributed surplus. No options were forfeited in the six months ended June 30, 2007 (year ended December 31, 2006, 67,500) with $Nil fair value (year ended December 31, 2006, $20,941). 22 M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007
    • MAVRIX FUND MANAGEMENT INC. Notes to Interim Unaudited Consolidated Financial Statements (continued) 5. Capital Stock (continued) (ii) Restricted Stock Unit Plan The number of common shares issuable under the RSU plan are as follows: Six months ended Year ended June 30, 2007 December 31, 2006 Outstanding - beginning of period 224,053 156,079 Granted 153,750 120,000 Vested (79,325) (48,958) Cancelled - (3,068) Outstanding - end of period 298,478 224,053 The fair value of the RSUs granted in the six months ended June 30, 2007 was $339,150 (year ended December 31, 2006, $198,375). Compensation expense related to RSUs for the six months ended June 30, 2007 was $168,980 (year ended December 31, 2006, $247,947). The unamortized value of RSUs granted to-date is $352,753 (year ended December 31, 2006, $182,058). (c) Warrants The Company has granted warrants to purchase common shares. The numbers of common shares issuable under these warrants are as follows: Six months ended Year ended June 30, 2007 December 31, 2006 Weighted Weighted Average Average Number Exercise Price Number Exercise Price ($) ($) Outstanding - beginning of period 400,000 2.25 1,200,000 1.54 Issued 600,000 2.20 - - Exercised (250,000) 1.50 (605,000) 1.09 Expired (150,000) 3.50 (195,000) 1.50 Outstanding - end of period 600,000 2.20 400,000 2.25 During the six months ended June 30, 2007, 250,000 warrants were exercised (year ended December 31, 2006, 605,000) for cash proceeds of $375,000 (2006, $657,500). Additionally, 600,000 warrants were issued during the six months ended June 30, 2007 (year ended December 31, 2006, Nil). In the first six months of 2007, 150,000 warrants expired (year ended December 31, 2006, 195,000). (d) Contributed Surplus The following table summarizes the changes in contributed surplus during the period. Six months ended Year ended June 30, 2007 December 31, 2006 Balance - beginning of period $ 451,065 $ 293,404 Options vested 22,952 33,689 Options forfeited - (8,919) Amortized value of RSUs granted 168,980 247,947 Shares issued under RSU plan (173,627) (133,178) Excess of average cost over repurchase of capital stock under NCIB 105,055 18,122 Warrants issued as a financing fee (Note 4) 280,296 - Balance - end of period $ 854,721 $ 451,065 M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007 23
    • 5. Capital Stock (continued) (e) Employee Partnership Loans In June 2007, the Company adopted a partnership loan plan for certain employees pursuant to which it extended offers to all employees to borrow in aggregate $1,179,000 to purchase common shares indirectly through MFMI Employee Partnership. Individual employees were given until June 27, 2007 to accept the terms of their partnership loans. As at June 30, 2007, an aggregate of $1,179,000 of offered loans were accepted by employees. The Company did not issue shares from treasury, as the shares were purchased by the partnership through the public markets. The Company will retain the loans on the balance sheet until they are repaid. The loans are due on June 15, 2017. The loans will be immediately repayable upon termination of employment of the participant with the Company. The loans are non-interest bearing and are secured by the units of the partnership, with a market value at June 30, 2007 of $1,230,000. 24 M A V R I X F U N D M A N A G E M E N T I N C . Second Quarter Results 2007
    • MAVRIX FUND MANAGEMENT INC. Fund Management Inc. 36 Lombard Street, Suite 400, Toronto, Ontario M5C 2X3 Telephone: 416-362-3077 Fax: 416-365-4080 Toll Free: 1-888-964-3533 Website: www.mavrixfunds.com Email: clientservices@mavrixfunds.com Vancouver Office: 701 West Georgia Street, Suite 1500 Vancouver, BC V7Y 1C6 Tel: (604) 684-8930 Fax: (604) 801-5911 Calgary Office: Regus Bankers Hall 888 3rd Street West, 10th Floor Calgary, AB T2P 5C5 Tel: (403) 444-6906 Fax: (403) 668-6001 Winnipeg Office: 179 McDermot Avenue, Unit 101 Winnipeg, MB R3B 0S1 Tel: (204) 947-9649 Fax: (204) 956-5705 Montreal Office: 1253 McGill College Avenue, Suite 690 Montreal, QC H3B 2Y5 Tel: (514) 227-0666 Fax: (514) 875-8188 Halifax Office: 1657 Barrington Street, Suite 310 Halifax, NS B3J 2A1 Tel: (902) 423-9987 Fax: (902) 423-6115