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FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of November , 2000
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FANTOM TECHNOLOGIES INC.
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(Translation of registrant's name into English)
1110 Hansler Road
Welland, Ontario, Canada L3B 5S1
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(Address of principal executive offices)
Indicate by check mark whether the registrant files or will
file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F X Form 40-F
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Indicate by check mark whether the registrant by furnishing
the information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the Securities
Exchange Act of 1934.
Yes No X
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If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b) : 82-___________
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FANTOM TECHNOLOGIES INC.
Date: November 17, 2000 by: /s/ Walter J. Palmer
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Walter J. Palmer
Secretary
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Item List
1. Annual Information Form dated November 15, 2000
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FANTOM TECHNOLOGIES INC.
2000
ANNUAL INFORMATION FORM
NOVEMBER 15, 2000
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TABLE OF CONTENTS
Page
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Documents Incorporated by Reference...................................3
INCORPORATION.........................................................3
GENERAL DEVELOPMENT OF THE BUSINESS...................................3
NARRATIVE DESCRIPTION OF THE BUSINESS.................................5
Products .....................................................5
Raw Materials and Suppliers...................................7
Dual-Cyclonic Technology......................................7
Employees.....................................................9
Customer Concentration....................................... 9
Sales Data...................................................10
Sales and Marketing..........................................10
Research and Development.....................................11
Counter-Top Microbiological Water Procesor...................12
"Wireless" Vacuum Cleaner....................................13
Power-Control Technology.....................................13
Universal Thermal Energy Cell................................13
Industry Overview............................................13
Business Strategies..........................................14
Property.....................................................15
Risk Factors and Cautionary Statements.......................15
SELECTED CONSOLIDATED FINANCIAL INFORMATION...........................17
MANAGEMENT'S DISCUSSION AND ANALYSIS.................................20
MARKET FOR SECURITIES................................................20
DIRECTORS AND OFFICERS...............................................21
Board of Directors..........................................22
Board Committees............................................23
ADDITIONAL INFORMATION...............................................24
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DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference in this 2000 Annual
Information Form of Fantom Technologies Inc.:
. Management's Discussion and Analysis found on pages 16 to 21 of the
2000 Annual Report of Fantom Technologies Inc.
. The Consolidated Financial Statements and Auditors' Report to the
Shareholders found on pages 22 to 31 of the 2000 Annual Report of
Fantom Technologies Inc.
All dollar amounts herein are expressed in Canadian dollars. On November
15, 2000, the exchange rate based on the noon buying rate in the City of New
York for cable transfers in Canadian dollars as certified for customs purposes
by the Federal Reserve Bank of New York was approximately Cdn.$0.64 per
U.S.$1.00.
INCORPORATION
Fantom Technologies Inc. (the "Company") was formed by articles of
amalgamation on May 12, 1986 under the Business Corporations Act (Ontario). The
articles of the Company were amended on May 1, 1997 to change the Company's name
from its former name of Iona Appliances Inc. The Company has three operating
subsidiaries: Fantom Technologies Direct, Inc., a wholly-owned subsidiary
incorporated under the Business Corporations Act (Ontario); and Fantom
Technologies U.S.A., Inc. and Fantom Technologies Intellectual Property, Inc.,
both wholly-owned subsidiaries incorporated under the General Corporation Law of
the State of Delaware. The Company's registered and principal executive office
is located at 1110 Hansler Road, Welland, Ontario, Canada L3B 5S1.
The Company's fiscal year ends on June 30 of each year.
GENERAL DEVELOPMENT OF THE BUSINESS
The Company was formed in 1986 as Iona Appliances Inc. and changed its name
to Fantom Technologies Inc. on May 1, 1997.
The Company, through predecessor companies, played an important role in
developing the lightweight stick-vacuum business in Canada, with its products
being merchandised by several leading Canadian retailers. A corded hand-held
vacuum was also marketed by the Company commencing in the mid-1980's.
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Starting in 1986, the Company committed itself to developing new floor-care
products based on patented, dual-cyclonic vacuuming technology, and to
developing its business in both the United States and Canadian markets. In 1988,
the Company introduced its first dual-cyclonic product, a carpet dry-cleaning
machine called CAPTURE(R). (CAPTURE(R) is a trademark of Milliken Research
Corporation.) In 1991, the Company introduced its second dual-cyclonic product,
an upright vacuum cleaner called the FANTOM(R) vacuum. This product gave the
Company its first entry into the mainstream, full-size, vacuum-cleaner market.
In January 1996, the Company commenced marketing a new upright model of the
FANTOM(R) vacuum called the FANTOM(R) FURY(R) vacuum. This is a smaller, lighter
version of the original FANTOM(R) vacuum and has a lower retail price point. In
March 1996, the Company began shipping a more powerful version of the original
FANTOM(R) vacuum. This product is called the FANTOM(R) THUNDER(R) vacuum. In the
Fall of 1997, the Company introduced a major line extension to the FANTOM(R)
vacuum line. This product is a dual-cyclonic canister vacuum and is called the
FANTOM(R) LIGHTNING(R) vacuum. In March 1999, the Company introduced a premium,
upright dual-cyclonic vacuum, the FANTOM(R) CYCLONE XT(R) product. This vacuum
commands the highest retail price among the line of FANTOM(R) uprights. The
Company's most recent dual-cyclonic entry - the FANTOM(R) FURY(R) Limited
Edition upright - was introduced in July 2000. It is an updated version of the
original FANTOM(R) FURY(R) product.
Currently, the Company's main products are its FANTOM(R) vacuums which the
Company sells in two ways: (a) to various types of retailers, including mass
merchants, catalogue and catalogue-showroom retailers, warehouse clubs,
department stores, hardware stores, television shopping networks and independent
vacuum dealers; and (b) to end-users through direct-response television and its
Internet website. The independent vacuum dealers also serve as product repair
centres. The Company uses a combination of its own sales personnel and
manufacturers' representatives to call on accounts. It also has a small group of
product trainers to instruct in-store sales personnel on the features and
benefits of its products. In addition, the Company maintains a special toll-free
call centre in its Welland, Ontario facility to handle inquiries that FANTOM(R)
owners and potential purchasers have about its products. The Company has been
focusing on maintaining distribution and sell-through of its FANTOM(R) vacuums
in retail outlets, and has been relying on the consumer awareness generated by
its direct-response television advertising, exposure on television shopping
networks, and trade promotions, to drive retail sales in these accounts.
With the introduction and promotion of its line of dual-cyclonic vacuums,
the Company created a new market segment - the cyclonic-bagless segment - within
the vacuum-cleaner category. Until the late 1990's, the Company's dual-cyclonic
vacuums essentially constituted the only cyclonic-bagless upright or canister
products available in retail stores in the United States and Canada. Commencing
in the late 1990's, competing cyclonic-bagless products were introduced and,
currently, virtually every major competitor is selling some form of
cyclonic-bagless product. This has resulted in increased "clutter" at retail,
greater perceived interchangeability of products, and pressure on the Company to
reduce prices in order to remain competitive.
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To facilitate long-term growth, the Company has been pursuing a
strategy of acquiring and developing new technologies, and developing new
products based on such technologies, within the vacuum-cleaner, household
water-treatment and other consumer-durable product categories. The Company has
also committed itself to developing revenue streams outside of the United States
and Canada by developing licensing and joint-venture opportunities.
NARRATIVE DESCRIPTION OF THE BUSINESS
Products
The Company's principal product line currently consists of its full-size,
upright and canister dual-cyclonic vacuum cleaners.
Stick Vacuums. The Company, through predecessor companies, played an
important role in developing the lightweight stick-vacuum business in Canada,
with its products being merchandised by several leading Canadian retailers.
These products were sold under the IONA(R), ELECTRIKBROOM(R) and SPEEDVAC(R)
trademarks. With the development of the Company's dual-cyclonic products,
coupled with increased competitive activity in the stick-vacuum segment, stick
vacuums became increasingly less significant to the Company's operations and the
product line was discontinued.
Dual-Cyclonic Products. Starting in 1986, the Company committed itself to
developing new cleaning products based on patented, dual-cyclonic vacuuming
technology. The Company believes that this technology is significant for two
reasons: (a) it eliminates the use of filter bags; and (b) it provides constant
peak cleaning power versus the declining cleaning power often experienced with
conventional vacuums using filter bags.
In 1988, the Company introduced its first dual-cyclonic product, a carpet
dry-cleaning machine called CAPTURE(R). The manufacturing of this product line
was discontinued in 1997 due to low sales.
In 1991, the Company introduced its second dual-cyclonic product, an
upright vacuum cleaner called the FANTOM(R) vacuum. This product gave the
Company its first entry into the mainstream, full-size, vacuum-cleaner market.
In January 1996, the Company commenced marketing a new upright model of the
FANTOM(R) vacuum called the FANTOM(R) FURY(R) vacuum. This is a smaller, lighter
version of the original FANTOM(R) vacuum and has a lower retail price point. In
March 1996, the Company began shipping a more powerful version of the original
FANTOM(R) vacuum. This product is called the FANTOM(R) THUNDER(R) vacuum.
Included among the current features of household models of the FANTOM(R)
FURY(R) and FANTOM(R) THUNDER(R) vacuums are the following: (a) a 12-amp rating;
(b) a handle which detaches and becomes a cleaning wand; (c) a 4:1 stretch,
steel reinforced hose; (d) a HEPA filter certified by its manufacturer; (e)
on-board attachments; (f) one or two headlights; (g) a quick release,
see-through bin designed for convenient emptying; (h) a height adjustment dial;
and (i) a two-year limited warranty.
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In the Fall of 1997, the Company introduced a major line extension to the
FANTOM(R) vacuum line in the United States and Canada. This product is a
dual-cyclonic canister vacuum and is called the FANTOM(R) LIGHTNING(R) vacuum.
Included among the standard features of the FANTOM(R) LIGHTNING(R) canister are
the following: (a) a unique STAIRHUGGER(R) feature which allows the machine to
sit firmly on steps while the user vacuums stairs; (b) a 12-amp rating; (c) a
6-foot, electrified hose and metal wand, which attaches to a powerhead that
features a rotating brush for cleaning carpets; the rotating brush can be turned
off for cleaning bare floors; (d) an electronic system in the powerhead that
turns the rotating brush off and prevents the drive belt from breaking, should
the rotating brush become jammed; (e) a HEPA filter certified by its
manufacturer; (f) a retractable power cord; (g) on-board attachments; (h) an
ergonomically designed handle at the end of the metal wand; (i) an easily
released, see-through bin designed for convenient emptying; (j) a height
adjustment dial; (k) 360(Degree) swiveling hose attachments; and (l) a two-year
limited warranty.
In March 1999, the Company introduced a premium, dual-cyclonic upright, the
FANTOM(R) CYCLONE XT(R) vacuum. This product, in addition to having the standard
features found on the FANTOM(R) FURY(R) and FANTOM(R) THUNDER(R) uprights,
incorporates two motors, one to rotate the brush and a second to create airflow,
thereby improving the vacuum's cleaning performance through specialization of
tasks. Importantly, the brush motor automatically shuts off when an object jams
the brush, thus saving the belt from breaking; it also shuts off when the vacuum
is in the upright position, thus saving wear and tear on the carpet as the user
cleans with the wand. It has an improved air path, a more ergonomically
positioned handle, a re-designed collection bin and a tool compartment at the
top of the vacuum.
The Company's most recent dual-cyclonic entry, the FANTOM(R) FURY(R)
Limited Edition vacuum, was introduced in July 2000. This product is an updated
version of the original FANTOM(R) FURY(R) vacuum and features new styling and a
new above-floor cleaning system that incorporates a telescopic wand.
Until the Fall of 1993, the main marketing effort behind the household
models of the Company's dual-cyclonic products was to sell them to retailers in
the United States and Canada, which retailers typically had trained floor-sales
personnel to demonstrate the products to consumers or catalogues in which to
present them. This effort was hampered by a marketplace which became
increasingly competitive and which forced several retailers to reduce their
trained floor sales personnel, a resource which the Company needed to
demonstrate effectively the features and benefits of its products. In response,
the Company developed a communications strategy for its FANTOM(R) vacuum aimed
at significantly building consumer awareness and expanding retail distribution.
This strategy utilized infomercials, a television format which lends itself to
demonstrating the features and benefits of the Company's products.
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In the Fall of 1993, the Company commenced airing a 30-minute
direct-response TV infomercial on U.S. television for its FANTOM(R) vacuum. No
similar media was purchased in Canada due to regulatory restrictions on the
airing of full-motion, long-form commercials. In February 1995, the Company
commenced airing short-form (60-second and 120-second) direct-response TV spots
in the U.S. to supplement its 30-minute infomercial. In February 1996, the
Company commenced airing in the U.S. a new 30-minute TV infomercial for its
FANTOM(R) FURY(R) vacuum and, in March 1996, new short-form (60-second and
120-second) TV spots for this product. In March 1996, the Company commenced
airing in Canada the TV infomercial and short-form TV spots for its FANTOM(R)
FURY(R) vacuum; this followed the easing of regulatory restrictions on the
airing of full-motion, long-form commercials in Canada. Additional long-form
(30-minute) and short-form (30-second, 60-second and 120-second) direct-response
TV commercials were developed and aired in subsequent years in the United States
and Canada for the various models of the Company's line of dual-cyclonic
vacuums. While direct-response television advertising has remained an important
component of the Company's promotional mix since the Fall of 1993, the Company
has recently reduced advertising expenditures as part of its tactical plan to
contend with lower margins and sales volumes resulting from heightened
competition.
Sales of dual-cyclonic products (including spare parts and accessories)
through all channels of distribution amounted to $207.6 million in fiscal 2000
compared with $242.0 million in fiscal 1999 and $176.0 million in fiscal 1998,
with over 87% of such sales being to customers in the United States in fiscal
2000 and over 90% in the previous two fiscal years. Direct-response television
sales in fiscal 2000 were $9.7 million compared to $12.2 million in fiscal 1999
and $16.4 million in fiscal 1998. See "Management's Discussion and Analysis".
Raw Materials and Suppliers
The Company currently conducts product assembly operations at its Welland,
Ontario facility and at a facility in West Columbia, South Carolina, which
commenced operations in June 1998. The Company relies on a number of different
vendors to satisfy its plastic injection-moulding needs. With the exception of
motors, the raw materials and components used by the Company in its
manufacturing operations are readily available from a number of Canadian, United
States and offshore suppliers. The Company is dependent on two suppliers for its
main suction motors. The Company does not have any formal agreement with either
of such suppliers regarding the Company's purchase of motors. The Company
believes it has an excellent relationship with both of such suppliers and has
not experienced any significant quality or supply problems during its
relationships with them. Nevertheless, the Company's inability to acquire the
type and number of motors needed to satisfy demand for its products could have a
material adverse effect on the Company's financial condition and results of
operations.
Dual-Cyclonic Technology
The Company's upright and canister vacuum cleaners are based on patented
dual-cyclonic technology which the Company licenses from Prototypes Limited and
Notetry Limited (collectively, the "Licensor") and is protected by several
patents in the United States and Canada, including (without limitation) United
States Patent Nos.: 4,593,429; 4,826,515; 4,853,008; 4,853,011; 5,078,761;
5,160,356; 5,558,697; 5,755,007; and D382,679; and Canadian Patent Nos.:
1,182,613; 1,241,158; 1,321,960; and 2,056,161. The dual-cyclonic technology
involves two cyclones, one inside the other, through which
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air whirls in sequence to separate dirt from the air stream instead of forcing
it through a traditional filter bag. Larger dirt particles are separated from
the air stream by being hurled to the edge of the outer cyclone and smaller dirt
particles are separated from the air stream by being hurled to the edge of the
inner cyclone.
The Company has entered into a series of technology-transfer agreements
with the Licensor pursuant to which the Company has the exclusive right (except
for the Amway Corporation ("Amway") license discussed below) to sell upright,
canister and back-pack vacuum-cleaning devices utilizing the dual-cyclonic
technology in the United States and Canada. The Company also has the
non-exclusive right to manufacture upright, canister and back-pack
vacuum-cleaning devices utilizing the dual-cyclonic technology in the United
States, Canada and other countries, not including Japan. The Company agreed in
1998 to the termination of its right to manufacture and sell upright dry-powder
carpet shampooers utilizing the dual-cyclonic technology.
The Company's right to continue using the dual-cyclonic technology is
subject to the continued performance of its obligations under the various
technology transfer agreements, which include an on-going obligation to pay
royalties based upon a fixed percentage of sales of products utilizing the
dual-cyclonic technology. The Company must pay a minimum annual royalty in order
to preserve the exclusive nature of its rights to use the dual-cyclonic
technology. Other than the Company's obligation to make royalty payments and
submit periodic reports to the Licensor substantiating the basis for such
royalty payments, the Company has no other material on-going obligations under
the technology transfer agreements. In the absence of the Company's bankruptcy
or a default by the Company in the performance of its obligations under the
technology transfer agreements, the licensing arrangements may not be terminated
by the Licensor and continue in effect until the last of the patents covered by
the agreements expires. The Company's obligations under the technology-transfer
agreements expire upon the expiration of the various agreements.
Many of the patents which the Company licenses have been in existence for
over ten years, during which time the Licensor and the Company have diligently
protected their rights in and to the dual-cyclonic technology. As part of a
comprehensive settlement with Amway in 1991 arising out of various legal
proceedings relating to the dual-cyclonic technology, Amway was granted the
perpetual right to manufacture and sell upright vacuum cleaners utilizing the
dual-cyclonic technology in the United States and Canada for household use only.
Amway has an on-going obligation to pay royalties on sales of dual-cyclonic
products based upon a fixed percentage of Amway's regularly listed selling price
to its distributors. Amway may market and sell dual-cyclonic products only
through Amway's private-party distributors and direct-mail catalogues, but by no
other means. Due to the significant limitations imposed on Amway's ability to
market and sell products utilizing the dual-cyclonic technology, the Company
does not believe that Amway's right to use the dual-cyclonic technology will
have a material adverse effect on the Company's financial condition and results
of operations. The Company believes that, to date, Amway's sales of
dual-cyclonic upright vacuum cleaners in each of the United States and Canada
have not constituted a significant percentage of the total upright vacuum
cleaners sold in either such country.
The loss of the Company's right to use and exploit the dual-cyclonic
technology for vacuum cleaning devices could have a material adverse effect on
the Company's financial condition and results of operations.
Because of market recognition achieved by the Company's cyclonic-bagless
technology, most of the Company's competitors have now introduced new products
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which compete with the Company's products and utilize a form of cyclonic action.
As a result of this competition, the Company is no longer able to distinguish
its products to consumers to the same extent it could prior to the introduction
of competing cyclonic-bagless products. This has had a material adverse effect
on the Company's sales and net income.
The patents which the Company licenses for use with its dual-cyclonic
products have been issued to the Licensor over a number of years. The first to
expire of the basic patents in the United States for the dual-cyclonic
technology does not expire until June 10, 2003, assuming that all necessary
renewal fees are paid and such patent is not invalidated by court action prior
to such time. As the patents expire, the ability of competitors to develop
products which are more functionally similar to the Company's dual-cyclonic
products will be enhanced. The Company is uncertain what effect the expiry of
the licensed patents will have on its future sales and net income.
Employees
The Company had approximately 441 employees as of June 30, 2000. Of these
employees, 72%, 17%, 10% and 1% were engaged in production, marketing/sales,
administration and engineering, respectively. As of June 30, 2000, approximately
53% of the employees in the Company's Welland, Ontario manufacturing facility
were unionized and were members of The United Steel Workers of America (the
"Union"). The Company has an agreement with the Union which expires March 31,
2003. The Company's relationship with the Union has been satisfactory and
uneventful, except for a week-long strike in December 1993. The strike occurred
after the Union had rejected the Company's first contract offer. Any significant
labour disruption could have a material adverse effect on the Company's ability
to manufacture products and accordingly could have a material adverse effect on
its financial position and resources and a long-term material adverse effect on
its sales.
Customer Concentration
Over the last few years, a small number of retailers have accounted for a
significant portion of the Company's total sales. In fiscal 2000, five customers
accounted for 48.6% of the Company's revenue. In fiscal 1999, the same five
customers accounted for 43.4% of the Company's revenue. One specific customer
accounted for 16% and 23% of sales in fiscal 2000 and fiscal 1999, respectively.
Sales Data
<TABLE>
<CAPTION>
Fiscal Year Ended June 30
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2000 1999 1998
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(in dollars)
<S> <C> <C> <C>
Total sales 207,646,115 242,045,457 177,585,454
Sales by method of distribution
Via direct-response television and the Internet 9,670,209 12,249,642 16,441,591
To retailers and distributors 197,975,906 229,795,815 161,143,863
Sales by territory
Canada Total 25,753,313 22,830,933 12,178,219
Dual-cyclonic and related products 25,760,718 22,707,089 10,550,894
All other (7,405) 123,844 1,627,325
United States Total 181,892,802 219,214,524 165,407,235
Dual-cyclonic and related products 181,892,802 219,214,524 165,407,235
</TABLE>
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<TABLE>
<CAPTION>
Sales of dual-cyclonic and related products
<S> <C> <C> <C>
Total 207,653,520 241,921,613 175,958,129
Fantom(R)vacuums 207,621,420 241,489,013 175,681,451
Via direct-response television and the Internet 9,670,209 12,249,642 16,441,591
To retailers and distributors 197,951,211 229,239,371 159,239,860
Capture(R)carpet shampooer and related products 32,100 432,600 276,678
</TABLE>
Sales and Marketing
The Company's main products are its FANTOM(R) vacuums which the Company
sells in two ways: (a) to various types of retailers, including mass merchants,
catalogue and catalogue-showroom retailers, warehouse clubs, department stores,
hardware stores, television shopping networks and independent vacuum dealers;
and (b) to end-users through direct-response television and its Internet
website. The independent vacuum dealers also serve as product repair centres.
The Company uses a combination of its own sales personnel and manufacturers'
representatives to call on accounts. It also has a small group of product
trainers to instruct in-store sales personnel on the features and benefits of
its products. In addition, the Company maintains a special toll-free call centre
in its Welland, Ontario facility to handle inquiries that FANTOM(R) owners and
potential purchasers have about its products. The Company has been focusing on
maintaining distribution and sell-through of its FANTOM(R) vacuums in retail
outlets, and has been relying on the consumer awareness generated by its
direct-response television advertising, exposure on television shopping
networks, and trade promotions, to drive retail sales in these accounts.
The Company's FANTOM(R)vacuums are currently listed in the United States by
prominent retailers including Ames Department Stores, Inc.; Best Buy Co. Inc.;
Consolidated Stores Corp.; Costco Wholesale Inc.; Fingerhut Companies Inc.; Fred
Meyer, Inc.; Home Shopping Network Inc.; JC Penney Company, Inc.; Kmart
Corporation; Kohl's Department Stores; Lowe's Companies, Inc.; Meijer, Inc.;
Service Merchandise Company, Inc.; Shopko Stores Inc.; Spiegel, Inc.; Target
Stores and Wal-Mart Stores, Inc. In Canada, the FANTOM(R) vacuums are listed by
The Bay; Canadian Tire Corporation, Limited; Costco Canada Inc.; Costco
Wholesale Corporation; Future Shop Ltd.; Home Hardware Stores Ltd.; The Shopping
Channel; Wal-Mart Canada, Inc. and Zellers Inc. The Company's products are also
sold by several hundred independent vacuum dealers across the United States and
Canada.
In addition to the above channels of distribution, during fiscal 2000 the
Company entered into transactions with a barter and media company. The
transactions principally consisted of the sale of refurbished vacuum cleaners
for a combination of cash and barter credits.
Research and Development
The Company has entered into arrangements with Omachron Technologies, Inc.
("Omachron") covering the acquisition and development of a number of
technologies for various household appliances and other consumer and commercial
products. The principal scientists of Omachron have been working together for
almost two decades on a wide range of civilian and non-civilian projects, many
of which have direct application to consumer products. The Company is combining
its expertise in product design, engineering, manufacturing and marketing with
Omachron's broad scientific knowledge for the purpose of developing innovative
new products with ground-breaking technologies. Eighty-six patent applications
have been filed for technologies the
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Company is either acquiring or exclusively licensing through its association
with Omachron. Of these, twenty-four have been allowed by the United States
patent office.
Pursuant to the agreements entered into during the last three years, the
Company has rights to certain proprietary technology on a worldwide basis and
will be evaluating opportunities for marketing products and licensing technology
and products internationally. The Company believes the technologies it is
developing and acquiring are significant and that this could lead to substantial
business growth. Due to the uncertainties associated with the development of the
various technologies and the marketing of products that would incorporate them,
the Company is unable to estimate with any reasonable degree of accuracy the
impact on results of operations.
Research and development spending in fiscal 2000 totaled $7.0 million, net
of research and development tax credits of $0.5 million. Of the total spending,
$2.7 million was capitalized, net of research and development tax credits of
$0.1 million, and was mainly for various technologies that were acquired,
industrial designs for a number of new products under development, and patent
applications for new technologies and products. Additions to deferred costs
totaled $2.1 million, net of research and development tax credits of $0.3
million, and consisted mainly of expenditures related to the Company's new
microbiological water processor and "wireless" floor-care product. Amounts
expensed were $2.2 million, net of $0.1 million of research and development tax
credits, and were mainly for research and development staff and materials.
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The Company intends to spend significant amounts on research and
development over at least the next three years, with expenditures expected to be
not less than $5 million per year. In addition, depending on the speed with
which new products are developed, it could spend as much as $20 million in any
given year for tooling, manufacturing equipment and pre-launch marketing
activities and materials. The Company has been financing the capital
expenditures and working capital requirements for these projects from its line
of credit with a Canadian chartered bank. The Company believes that its cash
flow from operations together with its borrowing arrangements with a Canadian
chartered bank will be sufficient to provide for its product development
programs in the floor-care and water-treatment fields. The Company is also
developing a new universal thermal energy cell and is uncertain as to what its
capital requirements will be to commercialize this technology and whether it
will be able to satisfy its financing requirements for commercialization from
its current line of credit.
Counter-Top Microbiological Water Processor
In early 2001, the Company plans to launch a counter-top, microbiological
water-treatment appliance, the CALYPSO(TM) Microbiological Water Processor, the
first of a line of water-treatment products planned for the Company. The kitchen
counter-top unit is designed to kill microorganisms such as Giardia, E. coli and
Cryptosporidium, all of which can seriously affect the health of people who have
weakened immune systems; to reduce heavy metals such as mercury and lead as well
as oils, fats, grease, pesticides, herbicides, chlorine and other trace
impurities; and to eliminate a wide range of volatile organic compounds like
benzene, atrazine, trihalomethanes and 2,4-D. The product leaves in fluoride as
well as minerals such as calcium, magnesium and potassium. It incorporates a
computer-controlled monitoring system to check various aspects of its operation
and to provide information to users regarding the status of the system.
The Microbiological Water Processor utilizes ozone to kill micro-organisms
as well as a custom-formulated carbon-block filter to remove many other
contaminants. The Company's technological developments enable relatively strong
concentrations of ozone to be produced in small, low-cost embodiments with small
energy inputs.
The Company plans to sell the water processor to many of the retailers that
purchase its existing floor-care products and to build consumer awareness and
demand at retail using direct-response television advertising, exposure on
television shopping networks, and public-relations programs.
In order to support certain performance claims the Company wishes to attach
to the CALYPSO(TM) product, such performance claims must be substantiated by
independent testing. In addition, in order sell the CALYPSO(TM) product in
certain states in the United States, the Company must receive certification for
the product from such states. Any delay in successfully completing independent
testing or in obtaining certification from those states that require such
certification will have an adverse effect on distribution and sales of the
product.
-12-
<PAGE>
The Company expects that it can develop international licensing and
joint-venture opportunities for the CALYPSO(TM) product and ozone technology
employed in such product. The Company recently signed a letter of intent with
Matsushita Seiko Co., Ltd of Japan to license Matsushita Seiko to manufacture
and market Fantom's CALYPSO(TM) Microbiological Water Processor in the Far East
and to utilize Fantom's ozone technology in humidifiers in the Far East. The
license is subject to further evaluation of the CALYPSO(TM) product and ozone
technology by Matsushita Seiko and completion of a definitive agreement.
"Wireless" Vacuum Cleaner
The Company plans to introduce a full-power "wireless" vacuum cleaner in
mid-calendar 2001. This product is designed to provide performance similar to
that of top-of-the-line corded vacuums, to operate for up to about an hour
before its energy system needs to be regenerated, and to be quiet during use.
The product is expected to compete in a retail price segment higher than that of
the Company's dual-cyclonic vacuums.
Power-Control Technology
The Company has developed power-control technology for use with its
"wireless" vacuum and other household appliances. The power-control technology
transfers energy in the form of a specially-tuned electronic signal, called a
"pulse-train", that is neither alternating nor direct current. It is designed to
reduce the power requirements of electromechanical systems as well as extend the
output and reduce the recharging time of batteries. The Company believes that,
over time, this might enable many cordless products to perform more equivalently
to traditional plug-ins. The Company has acquired exclusive rights to the
power-control technology for a range of consumer products and plans to
incorporate the technology into its own product lines and to offer licenses to
allow the technology to be used by other companies.
Universal Thermal Energy Cell
The Company is developing a universal thermal energy cell that it believes
employs several novel concepts that could enable it to operate efficiently as an
electrical generator or as a heat pump. Potential applications span a broad
spectrum of household products including small appliances such as vacuum
cleaners, lawn mowers and leaf blowers. Additional uses may include portable
power generators; portable light emitters; gas-fired furnaces; and air
conditioning, refrigeration, freezing and cryo-cooling systems.
Industry Overview
The electric floor-care industry is highly competitive and has several
product segments including canisters, uprights, stick vacuums, hand-held
vacuums, extractors and wet/dry vacuums. Products are sold in a variety of
retail outlets, on a door-to-door basis and through television shopping networks
and various direct-response formats.
-13-
<PAGE>
Industry shipments of full-size vacuums (canister, upright and stick
vacuums) within the United States in calendar 1999, as estimated by the Vacuum
Cleaner Manufacturers Association, were 18.0 million units compared with 16.3
million units for 1998 and 15.7 million units for 1997. Shipments of upright
vacuums in 1999 were 12.7 million units compared with 11.3 million units for
1998 and 10.8 million units for 1997. Shipments of canister vacuums in 1999 were
1.7 million units compared with 1.7 million units for 1998 and 1.6 million units
for 1997. The Canadian market for full-size vacuums is estimated by the Vacuum
Cleaner Manufacturers Association to be approximately 6% of the size of the U.S.
market.
The Company is aware of several major competitors in the United States and
Canada, including Bissell Inc.; Eureka Co.; Hoover Company; Matsushita Electric
Works, Ltd.; and Royal Appliance Mfg. Co. Of these major competitors, Eureka
Co., Hoover Company and Royal Appliance Mfg. Co. all have forms of
cyclonic-bagless vacuums that compete directly with the Company's line of
dual-cyclonic vacuums. These companies, as well as others, are expected to
introduce further new products that will compete with those of the Company. The
introduction of competitive cyclonic-bagless products had a significant negative
impact on sales of the Company's dual-cyclonic products during fiscal 2000. The
Company is uncertain as to the extent of the negative impact these and other new
products will have on its sales and net income in future periods.
Business Strategies
During the next 12 months the Company intends to focus on:
1) introducing enhancements to its existing product line including new models,
aesthetics and features;
2) introducing a new "wireless" floor-care product;
3) introducing the new CALYPSO(TM) Microbiological Water Processor;
4) building awareness and demand for its existing products and new products by
employing direct-response television advertising in long-form and
short-form formats, by gaining exposure on television shopping networks, by
securing trade promotions and by engaging in public-relations programs;
5) further developing its universal thermal energy cell so that its
performance characteristics can be assessed by third parties and its
commercial viability evaluated;
6) pursuing international licensing and joint-venture opportunities; and
7) continuing to develop other new products.
-14-
<PAGE>
Property
The Company's main manufacturing operations and administrative offices are
located at a facility which it owns in Welland, Ontario, Canada. The facility is
situated on approximately 53 acres of land, and is subject to a mortgage in
favour of a Canadian chartered bank. The Welland, Ontario facility was
constructed in 1973 and has approximately 79,000 square feet of factory space
and 12,000 square feet of office space. In June 1998, the Company commenced
manufacturing operations at a leased facility in West Columbia, South Carolina
which has approximately 35,000 square feet of factory space. The lease of the
West Columbia facility was renewed in September 2000 for five years.
All of the Company's appliances are currently made at its Welland, Ontario
or West Columbia, South Carolina facilities. The Company believes these two
current production facilities, as presently configured, are suitable for an
annual sales volume in excess of $325 million. Based upon annual capacity of
$325 million and the Company's total sales of $207 million for the fiscal year
ended June 30, 2000, the Company's production facilities were 64% utilized
during such period.
The Company leases a small sales office in Toronto, Ontario which houses
marketing and sales personnel. The present lease of the Toronto sales office
expires in 2004.
The Company also leases offices and laboratory space in Hampton, Ontario
which it utilizes for its research and development activities in conjunction
with Omachron.
Risk Factors and Cautionary Statements
This Annual Information Form contains statements which are forward-looking
statements under Section 21E of the United States Securities Exchange Act of
1934, as amended. In addition, the Company and persons acting on its behalf from
time to time make statements which contain such forward-looking statements. The
Company cautions that all such forward-looking statements are qualified by
important factors that could cause actual results to differ materially from
those in the forward-looking statements, including, among others, the following:
Dependence upon Suppliers
The Company's ability to manufacture products to meet customer demand is
dependent upon the timely availability from suppliers of components and raw
materials. In particular, the Company relies on only two suppliers of the main
suction motors used in the manufacturing of its products. While the Company
believes it has excellent relationships with both suppliers and has not
experienced any significant quality or supply problems during such
relationships, the Company does not have any formal agreement with either
supplier regarding the Company's purchase of motors. The Company's inability to
acquire the type and amount of motors needed to satisfy demand for its products
could have a material adverse effect on the Company's ability to manufacture
products and accordingly have a material adverse effect on its financial
condition and results of operations.
-15-
<PAGE>
Dependence on Patents
The Company's current products are based on patented dual-cyclonic
technology which the Company licenses from a third party and which is protected
by several registered patents in the United States and Canada. The Company's
right to continue to use the technology is dependent upon the Company meeting
certain obligations under the various agreements with the third party licensor.
The loss of the Company's right to use and exploit the dual-cyclonic technology
could have a material adverse effect on the Company's financial condition and
results of operations.
The Company's upcoming products, including the CALYPSO(TM) Microbiological
Water Processor and "wireless" vacuum, are protected by proprietary technologies
which the Company has acquired or exclusively licensed from a third party. The
Company's ability to capitalize on these proprietary technologies depends on the
extent to which patent protection can be obtained for them. In addition, the
continued right to use the technologies requires the Company to meet certain
obligations under its various agreements. The inability of the Company to obtain
patent protection or the loss of the Company's right to use and exploit the
various technologies could have a material adverse effect on the Company's
financial condition and results of operations.
Competition
The electric floor-care industry is highly competitive and the Company's
competitors have introduced a number of new cyclonic-bagless products that
compete directly with the Company's products. In the Company's fiscal 2000 year,
this heightened competition caused the Company to reduce prices for its products
and to experience a decline in sales. This had a significant negative impact on
the Company's results of operations. The Company's future success will depend in
large part upon its ability to assess the future market potential for products
in a rapidly changing environment in order that its products continue to be in
demand by consumers.
Customer Concentration
Over the last few years, a small number of retailers have accounted for a
significant portion of the Company's total sales. While the Company continues to
have good relationships with such customers, there is no guarantee that these
relationships will last or that it will be able to maintain listings for its
products with such customers. The loss of listings with key customers could have
a significant negative effect on the Company's sales and results of operations.
In addition, a significant number of retailers in the North American retail
industry have experienced financial difficulties during the last few years. In
light of these difficulties and the Company's concentration of customers, the
Company would be at risk if any major customer of the Company at any time became
unable to pay its accounts receivable to the Company, to the extent such
accounts receivable were not covered by insurance. Any such failure to pay could
have both an immediate effect on the Company's financial position and resources
and a long-term effect on its sales.
New Technologies and Products
The development of new products, in particular products based upon new
technologies which have not previously been incorporated into commercial
products, is time-consuming and risky. Taking an invention or innovative concept
from the theoretical stage through to a working model and then to a marketable
product capable of being manufactured at a commercially viable price is often
not possible and can regularly
-16-
<PAGE>
involve unanticipated costs and time delays. This process can be further
complicated by the need to obtain any required regulatory approvals.
The Company is highly dependent on a small number of scientists, and in
particular one chief scientist, to direct research activities for the
development of new technologies and product embodiments based on such
technologies. The loss of availability of the chief scientist could have a
material adverse effect on the Company's outlook and future results of
operations.
Impact of Exchange Rate Fluctuations
The Company publishes its financial statements in Canadian dollars, but is
a U.S. dollar generator. Therefore, the level of the Canadian dollar relative to
the U.S. dollar has a direct effect on its profitability. In order to protect
its earnings against adverse movement in the exchange rate between Canadian and
U.S. dollars, the Company has, since November 1995, entered into foreign
exchange contracts to reduce the exposure resulting from a strengthening in the
Canadian dollar relative to the U.S. dollar. Based on the Company's fiscal 2000
results, a rise in value of the Canadian dollar of one cent, without the
protection of hedging, would materially adversely affect net income by
approximately $0.4 million.
Banking Covenants
The Company is currently in the process of renegotiating its banking
arrangements and expects the new arrangements will provide appropriate levels of
financing on acceptable terms and conditions. The loss of banking support could
have an immediate adverse effect on the Company's financial position and
outlook.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following tables provide a summary of certain financial information for
fiscal years 1996 through 2000. The selected financial data set forth below as
of June 30, 2000, 1999, 1998, 1997 and 1996 have been derived from the Company's
audited consolidated financial statements which are prepared in accordance with
generally accepted accounting principles in Canada ("Canadian GAAP"). The
information presented below should be read in conjunction with the "Consolidated
Financial Statements" and related Notes thereto and "Management's Discussion and
Analysis" incorporated by reference in this Annual Information Form.
-17-
<PAGE>
Consolidated Statement of Operations Data (Canadian GAAP)
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
-----------------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Sales and Other Income $207,646,115 $242,045,457 $177,585,454 $150,213,517 $98,428,527
Cost of Goods Sold 135,507,033 155,492,659 113,661,329 96,246,860 66,586,407
------------- ------------- ------------ ------------ -----------
72,139,082 86,552,798 63,924,125 53,966,657 31,842,120
Selling, General and
Administrative Expenses 66,793,648 63,116,152 47,675,507 41,999,459 25,409,225
Research and Development 2,212,574 1,359,072 -- -- --
Finance Charges (152,140) (75,826) 48,527 464,595 718,045
-------------- ------------- ------------ ------------ -----------
68,854,082 64,399,398 47,724,034 42,464,054 26,127,270
Income Before Taxes 3,285,000 22,153,400 16,200,091 11,502,603 5,714,850
Income Taxes 1,230,000 7,971,000 5,882,564 4,142,000 504,200
Net Income $2,055,000 $14,182,400 $10,317,527 $7,360,603 $5,210,650
Net Income Per Share $0.23 $1.58 $1.18 $0.88 $0.72
Net Income Per Share -
Fully Diluted - $1.51 $1.11 $0.86 $0.69
</TABLE>
Consolidated Balance Sheet Data (Canadian GAAP)
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Assets $104,037,994 $98,796,105 $83,465,157 $60,760,190 $42,666,839
Long-term Debt -- -- $15,098 $238,273 $378,710
Shareholders' Equity $60,342,395 $59,066,197 $45,013,222 $34,420,695 $19,959,472
</TABLE>
-18-
<PAGE>
Quarterly Financial Data
<TABLE>
<CAPTION>
Fiscal Year Ended June 30, 2000
-------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Sales and Other Income $57,044,537 $60,920,152 $57,356,592 $32,324,834
Basic Earnings Per Share:
Net Income $3,405,530 $3,504,675 $1,632,552 $(6,487,757)
Shares 9,046,119 9,098,008 9,099,181 9,126,122
Basic Earnings Per Share $ 0.38 $ 0.39 $ 0.18 $ (0.71)
Fully Diluted Earnings Per Share:
Net Income - Adjusted $3,460,640 $3,559,176 $1,721,241 N/A
Shares - Fully Diluted 9,657,891 9,675,608 9,785,608 N/A
Fully Diluted Earnings Per Share $ 0.36 $ 0.37 $ 0.18 N/A
<CAPTION>
Fiscal Year Ended June 30, 1999
-------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter
------------ -------------- ------------- --------------
<S> <C> <C> <C> <C>
Sales and Other Income $55,114,160 $60,005,350 $65,628,821 $61,297,126
Basic Earnings Per Share:
Net Income $3,273,056 $3,595,123 $3,985,901 $3,328,320
Shares 8,972,809 9,003,108 9,008,802 9,017,751
Basic Earnings Per Share $ 0.36 $ 0.40 $ 0.44 $ 0.37
Fully Diluted Earnings Per Share:
Net Income - Adjusted $3,312,185 $3,642,367 $4,031,449 $3,369,824
Shares - Fully Diluted 9,423,760 9,538,108 9,535,608 9,535,608
Fully Diluted Earnings Per Share $ 0.35 $ 0.38 $ 0.42 $ 0.35
</TABLE>
The Company commenced paying quarterly dividends in the first quarter of
fiscal 1999 at the rate of $0.03 per share per quarter, and increased the amount
of such dividends to $0.05 per share per quarter in the first quarter of fiscal
2000. The declaration and payment of dividends are at the sole discretion of the
Board of Directors of the Company and depend upon the Company's results of
operations, financial condition, cash requirements and other factors deemed
relevant by the Board of Directors. The ability of the Company to pay dividends
is also subject to the Company fulfilling certain conditions with respect to its
line of credit with a Canadian chartered bank. As a result, there can be no
assurance that dividends will be declared, or as to the amount or timing of any
dividends that are declared.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Reference is made to the section entitled "Management's Discussion and
Analysis" found on pages 16 to 21 of the Company's 2000 Annual Report, which
section is incorporated herein by reference.
MARKET FOR SECURITIES
The Company's common shares (the "Common Shares") are listed and posted for
trading on The Toronto Stock Exchange (the "TSE") and the Nasdaq Stock Market
("Nasdaq"). The Common Shares commenced trading on the TSE on May 30, 1986, on
the Nasdaq Small Cap Market on November 20, 1995 and on the Nasdaq National
Market on March 18, 1996. The high and low sales prices for the Common Shares on
the TSE during each quarter of the 2000 and 1999 fiscal years were as follows:
High Low
---- ---
Fiscal year ended
June 30, 2000
-------------------------------
Fourth Quarter $15.50 $10.85
Third Quarter $21.50 $13.00
Second Quarter $20.25 $14.75
First Quarter $24.00 $16.95
Fiscal year ended
June 30, 1999
-------------------------------
Fourth Quarter $20.20 $14.80
Third Quarter $19.25 $13.90
Second Quarter $16.25 $11.00
First Quarter $17.00 $10.75
The volume of trading of the Common Shares on Nasdaq is, on average, a
small percentage of the value of trading on the TSE.
-20-
<PAGE>
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
Name and Municipality Officer Director
of Residence Principal Occupation Since(1)(2) Since(1)(2)
------------------------------- ------------------------------------------- ------------------ ------------------
<S> <C> <C> <C>
Arthur H. Crockett (3) Corporate Director -- 1984
Toronto, Ontario
Kenneth Kelman Director of the Company -- 1984
Toronto, Ontario
James D. Meekison Chairman, Trimin Capital Corp. -- 2000
Toronto, Ontario (public investment company)
Rikki Meggeson (3) Vice President, First Canada Financial 1999 1989
Toronto, Ontario Corporation Limited (private
investment company)
Chair of the Board of Directors
Allan D. Millman President and Chief Executive Officer 1984 1984
Toronto, Ontario
Walter J. Palmer(4) Partner, Fasken Martineau DuMoulin LLP 1996 1999
Toronto, Ontario (barristers and solicitors)
Alan Steinert Jr. Consultant -- 1990
Cambridge, Massachusetts
Joseph H. Wright (3) Managing Partner, Crosbie & Company -- 2000
Toronto, Ontario Inc. (specialty investment bank)
Stephen J. Doorey Vice President, Finance and Chief 1997 --
Mississauga, Ontario Financial Officer
Alan C. Hussey Senior Vice President and General 1995 --
Welland, Ontario Manager
Joseph A. Shillington Vice President, 1996 --
Welland, Ontario Information Technology
Paul F. Smith Vice President, Sales 1997 --
Oakville, Ontario
Norman V. Soler Vice President, Engineering 1984 --
Courtice, Ontario
Nick E. Varanakis Vice President, Sales 1989 --
Sandy, Utah, United States
Linda L. Watson Vice President, 1995 --
Mississauga, Ontario Marketing
Norman Wotherspoon Treasurer 1997 --
St. Catharines, Ontario
</TABLE>
Notes:
------
(1) All directors are elected and serve until the next annual meeting of
shareholders or until their successors are elected or appointed. All
executive officers of the Company serve at the pleasure of the Company's
Board of Directors.
-21-
<PAGE>
(2) Each director/officer has served as a director/officer of the Company and
its predecessor continuously since the year set out opposite his/her name.
(3) Member of the Audit Committee.
(4) Mr. Palmer is Secretary of the Company.
All of the directors have held the principal occupations identified above
(or another position with the same or associated firms or organizations) for the
past five years except Mr. Meekison, Mr. Steinert and Mr. Wright. Prior to July
1998, Mr. Meekison was the Chairman of Trimin Enterprises Inc., a public
investment company, and occupied such position since 1991. From July 1996 until
1997, Mr. Steinert was a Special Assistant to the Secretary of the Executive
Offices of Health and Human Services of the Commonwealth of Massachusetts. From
October 1995 to July 1996, Mr. Steinert was the Chief of Staff of Health and
Human Services of the Commonwealth of Massachusetts. Prior to October 1995, Mr.
Steinert was the Undersecretary of Environmental Affairs of the Commonwealth of
Massachusetts. Prior to October 1997, Mr. Wright was the President and Chief
Executive Officer of Swiss Bank Corporation (Canada), a Schedule II bank under
the Bank Act (Canada), and occupied such position since 1995.
All of the officers who are not also directors have held their positions or
other executive positions with the Company for the past five years with the
exception of Stephen Doorey and Paul Smith. Prior to July 1996, Mr. Doorey was
Vice President, Finance at Plasticap Inc. From July 1996 to April 1997, Mr.
Smith was Vice President, Sales of Regent-Sheffield (Canada), Ltd. and prior to
June 1996 he was National Sales Manager of Wiltshire Canada Inc.
As at November 15, 2000, all directors and senior officers of the Company
as a group beneficially owned, directly or indirectly, or exercised control or
direction over, approximately 10.53% of the Common Shares.
Board of Directors
The mandate of the Board of Directors (the "Board") is to oversee the
conduct of the Company's business and each year approve its strategic plan with
the objective of maximizing shareholder value in a manner which is consistent
with good corporate citizenship, including fair treatment of the Company's
employees, customers and suppliers.
The Board is responsible for reviewing overall business risks and the
Company's practices and policies for dealing with such risks. The Board approves
the Company's annual budget, supervises the Company's management and approves
major new product development programs and debt and equity financing.
-22-
<PAGE>
The Board also approves and revises, as appropriate, guidelines on
corporate governance issues, and oversees the Company's communications policy
which requires management to be available to shareholders to respond to
questions and concerns and to report to the Board in such regard.
The Chair of the Board is responsible for ensuring that the Board functions
properly and independently of management. The Chair submits to the Corporate
Governance Committee candidates for nomination to the Board, provides an
orientation and education program for each new director, and recommends to the
Board nominees to its Committees.
Board Committees
Audit Committee
The mandate of the Audit Committee is to review the Company's audited
annual financial statements and to report on such statements to the Board before
the statements are approved by the Board. To fulfil this responsibility, the
Committee meets with the Company's auditors to discuss the financial statements
and any concerns raised by the auditors with respect to financial presentation
or disclosure, and with respect to the Company's internal financial controls.
The Audit Committee assesses the principal risks which the Company faces
and, where appropriate, proposes to the Board the implementation of
risk-management systems. This Committee also overseas the integrity of the
Company's internal control and management-information systems. In addition, the
Audit Committee recommends to the Board the auditors to be appointed as the
Company's auditors at each annual meeting.
Compensation Committee
The Compensation Committee reviews the Company's overall compensation
philosophy, and corporate succession and development plans at the executive
officer level. This Committee has been mandated to review the annual performance
of the President and Chief Executive Officer and to make recommendations to the
Board with respect to his or her remuneration. The Compensation Committee also
reviews the adequacy and form of compensation of directors and oversees the
operation of the Company's pension plans.
Corporate Governance Committee
The Corporate Governance Committee is responsible for developing the
Company's approach to governance issues, including monitoring developments in
corporate governance theory and practice, reviewing the mandates of the Board's
Committees and recommending changes, and assisting in selecting the Chair of the
Board.
The Corporate Governance Committee also approves the engagement of outside
advisers, at the request of individual directors, to advise on matters in
relation to the Company. In addition, this Committee recommends nominees to the
Board, from those submitted by the Chair of the Board.
-23-
<PAGE>
ADDITIONAL INFORMATION
The Company will provide to any person, upon request to the Secretary of
the Company:
(a) when securities of the Company are in the course of a distribution
pursuant to a short-form prospectus or a preliminary short-form
prospectus which has been filed in respect of a distribution of its
securities,
(i) one copy of this Annual Information Form together with one copy
of any document or the pertinent pages of any document
incorporated by reference herein,
(ii) one copy of the consolidated financial statements of the Company
in respect of its fiscal year ended June 30, 2000 together with
the accompanying report of the auditors and one copy of any
interim financial statements subsequent to the consolidated
financial statements for the year ended June 30, 2000,
(iii) one copy of the information circular of the Company in respect
of the Annual Meeting of Shareholders of the Company held on
October 26, 2000, and
(iv) one copy of any other documents that are incorporated by
reference into such preliminary short-form prospectus or
short-form prospectus and are not required to be provided under
(i) to (iii) above; or
(b) at any other time, one copy of any document referred to in (i), (ii)
and (iii) of (a) above, provided the Company may require the payment
of a reasonable charge if the request is made by a person who is not a
security holder of the Company.
Additional information, including directors' and officers' remuneration and
indebtedness, principal holders of Common Shares, options to purchase Common
Shares and interests of insiders in material transactions, where applicable, is
contained in the Company's information circular for its Annual Meeting of
Shareholders held on October 26, 2000. Additional financial information is
provided in the Company's consolidated financial statements for the year ended
June 30, 2000.
-24-
