FORM 10-K/A*
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
* Amendment No. 1 to Form 10-K for the fiscal year ended December 31, 1996
(MARK ONE)
( X ) Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the year ended December 31, 1996.
( ) Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____________ to
------------.
Commission File Number: 000-24366
GORAN CAPITAL INC.
(Exact name of registrant as specified in its charter)
CANADA Not Applicable
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
181 University Avenue, Suite 1101 M5H 3M7
Toronto, Ontario Canada
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (416) 594-1155 (Canada)
(317) 259-6300 (U.S.A.)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Shares
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
The aggregate market value of the Issuer's Common Stock held by nonaffiliates,
as of March 25, 1997 was $128,101,996 (US).
The number of shares of Common Stock of the Registrant, without par value,
outstanding as of March 25, 1997 was 5,569,652.
Documents Incorporated By Reference:
Portions of the Annual Report to Shareholders and the Proxy Statement for the
1997 Annual Meeting of Shareholders are incorporated into Parts II and III. [ ]
<PAGE>
Exchange Rate Information
The accounts and financial statements of Goran Capital Inc. (the "Company") are
maintained in U.S. Dollars. In this Report all dollar amounts are expressed in
U.S. Dollars except where otherwise indicated.
The following table sets forth, for each period indicated, the average exchange
rates for U.S. Dollars expressed in Canadian Dollars on the last day of each
month during such period, the high and the low exchange rate during that period
and the exchange rate at the end of such period, based upon the noon buying rate
in New York City for cable transfers in foreign currencies, as certified for
customs purposes by the Federal Reserve Bank of New York (the "Noon Buying
Rate").
Foreign Exchange Rates
U.S. to Canadian Dollars
For The Years Ended December 31,
1996 1995 1994 1993 1992
Average .7339 .7287 .7322 .7733 .8342
Period End .7301 .7325 .7129 .7544 .7865
High .7472 .7465 .7642 .8046 .8757
Low .7270 .7099 .7097 .7439 .7761
Accounting Principles
The financial information contained in this document is stated in U.S. Dollars
and is expressed in accordance with Canadian Generally Accepted Accounting
Principles unless otherwise stated.
<PAGE>
GORAN CAPITAL INC.
ANNUAL REPORT ON FORM 10-K/A
December 31, 1996
PART I
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
SIGNATURES
<PAGE>
PART I
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the last quarter of fiscal year 1996 to a vote
of security holders of the Registrant, through the solicitation of proxies or
otherwise.
PART II
ITEM 6 - SELECTED FINANCIAL DATA
Selected Financial Data of the Company follows:
GORAN CAPITAL INC.
Selected Financial Data
As of the Year Ended December 31,
(In Thousands of U.S. Dollars)
1996 1995 1994 1993 1992
Gross Premium Revenue $307,634 $151,717 $126,978 $114,135 $128,440
Reported Net Earnings 31,296 7,171 3,940 1,397 4,413
US/Canada GAAP
Differences:
Discounting on
Outstanding Claims 62 (161) 88 49 143
Deferred Income Taxes (64) (344) 1,180 562 0
Revised Net Earnings 31,294 6,666 5,208 2,008 4,556
Earnings Per Share $ 5.47 $ 1.20 $ 0.96 $ 0.38 $ 0.94
EPS-Before
Unusual Item $ 5.47 $ 1.20 $ 0.96 $ 0.38 $ 0.94
EPS-Fully Diluted $ 2.48 $ 1.20 $ 0.96 $ 0.38 $ 0.94
Dividends Per Share $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Reported Total Assets 381,342 160,816 115,240 128,690 96,573
US/Canada GAAP
Differences:
Loans to Purchase
Shares (595) (563) (593) (741) (774)
Deferred Income
Taxes 1,357 1,466 1,742 548 0
Outstanding Claims
Ceded 0 0 0 0 0
Unearned Premiums
Ceded 0 0 0 0 0
Unrealized gain (loss)
on Investments 1,225 (221) (1,383) 0 0
Revised Total Assets 383,329 161,498 115,006 128,497 95,799
Long Term Bonds and
Debentures 0 9,237 10,787 12,936 14,633
Reported Shareholders'
Equity 47,258 12,622 5,067 1,088 (739)
US/Canada GAAP
Differences:
Deferred Income
Taxes 1,357 1,466 1,742 548 0
Discounting on
claims (1,261) (1,327) (1,134) (1,292) (1,396)
Loans to Purchase
Shares (595) (563) (593) (741) (774)
Unrealized Gain (Loss)
on Investments 1,225 (221) (1,383) 0 0
Revised Shareholders'
Equity 47,984 11,977 3,699 (397) (2,909)
Shares Outstanding 5,724,476 5,567,644 5,399,463 5,242,101 4,834,160
<PAGE>
Activity in the liability for unpaid losses and loss adjustment expenses is
summarized as follows: (In Thousands of U.S. Dollars)(1)
1996 1995 1994
-------- ------- -------
Balance at January 1 $ 59,421 $29,269 $54,143
Less reinsurance recoverables 37,798 12,542 36,891
-------- ------- -------
Net balance at January 1 21,623 16,727 17,252
-------- ------- -------
Reserves required in
connection with the
Superior Acquisition 44,423 0 0
-------- ------- -------
Incurred related to:
Current year 183,618 35,184 26,268
Prior years (1,509) 787 202
-------- ------- -------
Total Incurred 137,109 35,971 26,470
Paid related to:
Current year 102,713 21,057 16,647
Prior years 28,182 10,018 10,348
-------- ------- -------
Total paid 130,895 31,075 26,995
-------- ------- -------
Net balance at December 31 72,260 21,623 16,727
Plus reinsurance recoverables 29,459 37,798 12,542
-------- ------- -------
Balance at December 31 $101,719 $59,421 $29,269
======== ======= =======
The foregoing reconciliation shows that the (redundancies) deficiencies of
$(1,509), $787, and $202 in the December 31, 1996, 1995 and 1994 reserves,
respectively, emerged in the following year. These (redundancies) deficiencies
resulted from (lower) higher than anticipated losses resulting from a change in
settlement costs relating to those estimates.
The anticipated effect of inflation is implicitly considered when estimating
liabilities for losses and LAE. While anticipated price increases due to
inflation are considered in estimating the ultimate claim costs, the increase in
average severities of claims is caused by a number of factors that vary with the
individual type of policy written. Future average severities are projected based
on historical trends adjusted for implemented changes in underwriting standards,
policy provisions, and general economic trends. Those anticipated trends are
monitored based on actual development and are modified if necessary.
Liabilities for loss and loss adjustment expenses have been established when
sufficient information has been developed to indicate the involvement of a
specific insurance policy. In addition, a liability has been established to
cover additional exposure on both known and unasserted claims. These liabilities
are reviewed and updated continually.
(1) Such information relates only to Symons International Group, Inc. and
does not include any information with respect to any other insurance
subsidiaries of the Company.
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF 0PERATIONS
The discussion entitled "Management Discussion and Analysis of Financial
Condition and Results of Operations" and "Overview" in the 1996 Annual Report on
pages 5 through 13, and in the 1995 Annual Report on pages 4 through 11, both
included as Exhibit 13, is incorporated herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements included in the 1996 Annual Report and in
the 1995 Annual Report, both included as Exhibit 13, and listed in Item 14 of
this Report are incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item regarding Directors of the Company is
incorporated herein by reference to the Company's definitive management proxy
circular for its 1997 annual meeting of common stockholders included as Exhibit
99.1 (the "1997 Proxy Circular"). G. Gordon Symons, Chairman of the Board of the
Company, is the father of Alan G. Symons, the President and Chief Executive
Officer and a director of the Company, and Douglas H. Symons, the Vice President
and Chief Operating Officer and a director of the Company.
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference to the
Company's 1997 Proxy Circular.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by reference to the
Company's 1997 Proxy Circular and to the section captioned "Voting Securities
and Beneficial Owners" in the definitive proxy statement of Symons International
Group, Inc ("SIG") for the 1997 annual meeting of common stockholders of SIG
(the "1997 SIG Proxy Statement"), which section is included as Exhibit 99.2
hereof. The SIG Proxy Statement was originally included as Exhibit 99 of SIG's
Annual Report on Form 10-K for the year ended December 31, 1996.
<PAGE>
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by reference to the
sections captioned "Interest of Insiders in Material Transactions" and
"Indebtedness of Officers and Directors of the Corporation" in the Company's
1997 Proxy Circular, and to the sections captioned "Indebtedness of Management"
on pages 13 through 14 and "Certain Relationships/Related Transactions" on pages
15 through 16 of the 1997 SIG Proxy Statement. The latter two sections are
included as Exhibits 99.3 and 99.4, respectively, hereof.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The documents listed below are filed as a part of this Report except as
otherwise indicated:
1. Financial Statements. The following described consolidated financial
statements found on pages 14 through 33 of the 1996 Annual Report indicated
below are incorporated into Item 8 of this Report by reference.
Description of Financial Statement Item
Report of Independent Accountants
Consolidated Balance Sheets, December 31,
1996 and 1995
Consolidated Statements of Earnings, Years
Ended December 31, 1996 and 1995
Consolidated Statements of Retained Earnings
(Deficit), Years Ended December 31,
1996 and 1995
Consolidated Statements of Changes in Cash Resources,
Years Ended December 31, 1996 and 1995
Notes to Consolidated Financial Statements,
Years Ended December 31, 1996 and 1995
The following described consolidated financial statements found on pages 12
through 23 of the 1995 Annual Report indicated below are incorporated into Item
8 of this Report by reference.
Description of Financial Statement Item
Report of Independent Accountants
Consolidated Balance Sheets, December 31,
1995 and 1994
Consolidated Statements of Operations, Years
Ended December 31, 1995 and 1994
Consolidated Statements of Deficit,
Years Ended December 31, 1995 and 1994
Consolidated Statements of Changes in Cash Resources,
Years Ended December 31, 1995 and 1994
Notes to Consolidated Financial Statements,
Years Ended December 31, 1995 and 1994
<PAGE>
2. Financial Statement Schedules.
The following financial statement schedules are included herein.
Description of Financial Statement Item
Report of Independent Accountant On Differences
Between Canadian and United States Generally
Accepted Accounting Principles and
Supplementary Schedules
Differences Between Canadian And United States
Generally Accepted Accounting Principles
Exhibit 1 - Consolidated Statement of Changes
In Cash Resources
Exhibit 2 - Summary of Investments That Exceed
10% Of Shareholders' Equity
Exhibit 3 - Summary of Non Income Producing
Investments
Exhibit 4 - Amounts Due From Insurance Companies
In Excess of 10% of Shareholders' Equity
Exhibit 5 - Analysis Of Changes In Shareholders'
Equity
Schedule I - Summary Of Investments Other Than
Investments In Related Parties
Schedule II - Condensed Financial Information
Of Registrant
Schedule IV - Reinsurance
Schedule V - Valuation And Qualifying Accounts
Schedule VI - Supplemental Information Concerning
Property-Casualty Insurance Operations
Schedules other than those listed above have been omitted because the required
information is contained in the financial statements and notes thereto or
because such schedules are not required or applicable.
3. Exhibits. The Exhibits set forth on the Index to Exhibits are incorporated
herein by reference.
4. Reports on Form 8-K. Registrant filed no reports on Form 8-K during the
quarter ended December 31, 1996.
<PAGE>
GORAN CAPITAL INC.
Differences Between Canadian And United States General Accepted Accounting
Principles For The Years Ended December 31, 1996, 1995 and 1994
A reconciliation of financial statement amounts from Canadian Generally Accepted
Accounting Principles to U.S. Generally Accepted Accounting Principles is as
follows:
1996 1995 1994
Net Earnings In Accordance
With Canadian Generally
Accepted Accounting Principles $31,296 $7,171 $3,940
Add Effect Of Difference In
Accounting For:
Deferred Income Taxes
(See Note (e)) (64) (344) 1,180
Outstanding Claims
(See Note (f)) 62 (161) 88
Net Earnings In Accordance
With United States Generally
Accepted Accounting Principles $31,294 $6,666 $5,208
Applying United States Generally Accepted Accounting Principles, deferred income
tax assets would be increased by $1,357, $1,466 and $1,742, outstanding claims
would be increased by $1,261, $1,327 and $1,134 and cumulative translation
adjustment would be increased by $41, $36, and $14, as at December 31, 1996,
1995 and 1994, respectively. As a result of these adjustments, retained earnings
would be increased by $96, $139 and $608 as at December 31, 1996, 1995 and 1994,
respectively. The effect of the above noted differences on other individual
balance sheet items and on working capital is not significant.
B. Earnings Per Share
Earnings per share, as determined in accordance with United States Generally
Accepted Accounting Principles, are set out below. Primary earnings per share
are computed based on the weighted average number of common shares outstanding
during the year plus common share equivalents consisting of stock options and
warrants. Primary and fully diluted earnings per share are calculated using the
Treasury Stock method and assume conversion of securities when the result is
dilutive.
The following average number of shares were used for the compilation of primary
and fully diluted earnings per share:
1996 1995 1994
Primary $5,724,476 $5,567,644 $5,399,463
Fully Diluted 5,724,476 5,567,644 5,399,463
Earnings per share, as determined in accordance with U.S. Generally
Accepted Accounting Principles, are as follows:
1996 1995 1994
Primary Earnings Per Share $5.47 $1.20 $0.96
Fully Diluted Earnings Per Share 5.47 1.20 0.96
C. Statement Of Changes In Cash Resources
U.S. Generally Accepted Accounting Principles require that the components of the
changes in cash resources, in most cases, be reported on a gross basis.
Exhibit 1 is a Statement of Cash Resources that incorporates the necessary added
disclosure detail.
<PAGE>
D. Supplemental Cash Flow Information
Cash paid for interest and income taxes is summarized as follows:
1996 1995 1994
Cash Paid For Interest $4,005 $1,548 $1,773
Cash Paid For Income Taxes,
Net of Refunds 9,825 1,953 166
E. Income Taxes
The difference in accounting for deferred income taxes reflects the adoption for
U.S. Generally Accepted Accounting Principles, effective January 1, 1993, of
Statement of Financial Accounting Standards No. 109 ("SFAS" No. 109"),
"Accounting for Income Taxes". This standard requires an asset and liability
approach that takes into account changes in tax rates when valuing the deferred
tax amounts to be reported in the balance sheet.
Deferred tax assets recognized under Canadian Generally Accepted Accounting
Principles and Accounting Principles Board Opinion No. 11, which require
realization beyond a reasonable doubt in order to record the assets, amounted to
$NIL, $73 and $214 at December 31, 1996, 1995 and 1994, respectively, and
pertained to Canadian operations only.
The adoption of SFAS No. 109 results in additional deferred tax assets
recognized for deductible temporary differences and loss carry-forwards in the
amount of $3,531, $2,581 and $2,375 net of valuation allowances of $NIL, $69 and
$260 and deferred tax liabilities recognized for taxable temporary differences
in the amount of $2,174, $1,114 and $633 at December 31, 1996, 1995 and 1994,
respectively.
F. Outstanding Claims
The difference in accounting for outstanding claims reflects the application for
U.S. Generally Accepted Accounting Principles of SEC Staff Accounting Bulletin
No. 62, "Discounting By Property/Casualty Insurance Companies". This standard
does not allow discounting of unpaid claim liabilities by public companies,
except in specific circumstances that are not applicable to the Company.
G. Receivables From Sale Of Capital Stock
The SEC Staff Accounting Bulletins require that accounts or notes receivable
arising from transactions involving capital stock should be presented as
deductions from shareholders' equity and not as assets. Accordingly, in order to
comply with U.S. Generally Accepted Accounting Principles, shareholders' equity
would be reduced by $595, $563 and $593 at December 31, 1996, 1995 and 1994,
respectively, to reflect the loans due from certain shareholders which relate to
the purchase of common shares of the Company.
H. Concentration Of Investments
U.S. Generally Accepted Accounting Principles require that disclosure be made of
significant concentrations of investments and of investments that are non-income
producing. The Company considers investments whose value exceeds 10% of
shareholders' equity to be significant. The relevant disclosures are provided in
Exhibits 2 and 3, respectively.
I. Concentrations of Credit Risk
U.S. Generally Accepted Accounting Principles require disclosure of significant
concentrations of credit risk. The Company's credit risk is with respect to
amounts receivable from other insurance companies. The Company considers credit
risks in excess of 10% of shareholders' equity to be significant. The relevant
disclosure is provided in Exhibit 4.
J. Unrealized Loss On Investments
U.S. Generally Accepted Accounting Principles require that unrealized losses on
investment portfolios be included as a component in determining shareholders'
equity. In addition, SFAS No. 115 permits prospective recognition of unrealized
gains on investment portfolios for year-ends commencing after December 15, 1993.
As a result, shareholders' equity would be increased by $1,225 as at December
31, 1996 and reduced by $221 and $1,383 as at December 31, 1995 and 1994,
respectively.
<PAGE>
K. Changes In Shareholders' Equity
An analysis of the components of the change in shareholders' equity, determined
in accordance with Canadian Generally Accepted Accounting Principles, is
provided in Exhibit 5.
A reconciliation of shareholders' equity from Canadian Generally Accepted
Accounting Principles to U.S. Generally Accepted Accounting Principles
is as follows:
1996 1995 1994
Shareholders' Equity In Accordance
With Canadian Generally
Accepted Accounting Principles $47,258 $12,622 $ 5,067
Add (deduct) Effect Of Difference
In Accounting For:
Deferred Income Taxes (See
Note (a)) 1,357 1,466 1,742
Outstanding Claims (See
Note (a)) (1,261) (1,327) (1,134)
Receivables From Sale Of
Capital Stock (See Note (g)) (595) (563) (593)
Unrealized Gain (Loss) On
Investments (See Note (j)) 1,225 (221) (1,383)
Shareholders' Equity (Deficiency)
In Accordance With U.S.
Generally Accepted
Accounting Principles $47,984 $11,977 $ 3,699
<PAGE>
GORAN CAPITAL INC.
Consolidated Statement of Changes
In Cash Resources
For the Year Ended December 31,
(In Thousands of U.S. Dollars)
1996 1995 1994
Cash Provided By Operating
Activities:
Net income for the period $ 31,296 $7,171 $3,941
Items Not Affecting Cash
Resources:
Amortization 2,438 693 566
Minority Interest In Net
Income Of Consolidated
Subsidiary 2,801 (16) 16
Loss (gain) On Sale Of
Investments 637 198 (358)
Loss (gain) On Sale Of Capital
Assets (4) (7) (1)
Increase in Unearned Premiums 13,178 9,247 (7,037)
Increase (Decrease) In
Outstanding Losses (4,545) 29,289 (18,341)
Decrease (Increase) In Deferred
Policy Acquisition Costs 1,649 (3,058) (864)
Decrease In Deferred Income
Taxes 73 147 214
Decrease In Goodwill 0 0 0
Decrease (Increase) in
Reinsurance Recoverable on
outstanding claims 8,464 (25,930) 22,259
Decrease (Increase) in prepaid
reinsurance premiums (8,785) 916 (3,548)
Decrease (Increase) In Other
Assets (2,433) (470) 78
Items Not Involving Cash 13,473 11,009 7,058
Increase (Decrease) In Accounts
Payable 5,576 (2,291) 1,352
Decrease (Increase) In Accounts
Receivable (19,448) (6,252) (13,775)
Changes In Operating Working
Capital (13,872) (8,543) (12,423)
30,897 9,637 (1,424)
Financing Activities:
Issue Of Share Capital 599 303 34
Reduction Of Subordinated
Debenture (11,085) (1,462) (1,047)
Increase (Decrease) Of
Borrowed Funds 42,189 220 722
Increase (Decrease) in
Contributed Surplus 2,775 0 0
Increase (Decrease) in
Minority Interest 38,225 0 0
Investing Activities:
Net (Purchase) Sale Of
Marketable Securities (11,996) (4,147) 2,118
Acquisition of subsidiary (66,590) 0 0
Proceeds On Sale Of Capital
Assets 14 11 5
Net Purchase Of Capital Assets (2,473) (1,692) (634)
Other 563 155 (401)
Change In Cash Resources
During The Year 23,118 3,025 (627)
Cash Resources, Beginning Of Year 10,613 7,588 8,215
Cash Resources, End Of Year 33,731 10,613 7,588
Cash Resources Are Comprised Of:
Cash 4,679 4,171 (116)
Short-Term Investments 29,052 6,442 7,704
33,731 10,613 7,588
<PAGE>
GORAN CAPITAL INC.
CONSOLIDATED SUMMARY OF INVESTMENTS
THAT EXCEED 10% OF SHAREHOLDERS' EQUITY
For The Year Ended December 31, 1996
(In Thousands of U.S. Dollars)
Fixed Short-Term Total
Maturities Investments Investment
Federal Home
Loan Bank $ 9,770 $ $ 9,770
Federal
National
Mortgage
Association $14,885 $ $14,885
U.S.
Treasury
Notes $26,318 $ $26,318
U.S.
Treasury
Bills $ $10,292 $61,265
<PAGE>
GORAN CAPITAL INC.
Consoldiated Shareholders' Equity In Accordance
With United States GAAP
As At December 31, 1996
(In Thousands of U.S. Dollars)
Consolidated Shareholders' Equity
in Accordance with U.S. GAAP $47,983,000
Threshold (Rounded) 4,798,300
<PAGE>
GORAN CAPITAL INC.
Concentration of Credit Risk
Amounts Due From Other Insurance
Companies Paid and Unpaid Claims
As At December 31, 1996
(In Thousands of U.S. Dollars)
Company Name Amount
Centre Reinsurance (Bermuda) Limited $16,764
Federal Crop Insurance Corporation $21,800
Total $38,564
Notes: Accounts listed above are amounts greater than $4,798,000 (U.S.) which is
approximately 10% of Shareholders' Equity at December 31, 1996. Amounts are net
of trust accounts posted as collateral with original cedents, with respect to
certain retrocession agreements in which the Company is a retrocessionnaire.
<PAGE>
GORAN CAPITAL INC.
ANALYSIS OF CHANGES IN SHAREHOLDERS' EQUITY
As at December 31,
(In Thousands of U.S. Dollars)
1996 1995 1994
Capital Stock $16,875 $ 16,126 $ 16,091
Contributed Surplus 0 0 0
Deficit (3,895) (11,066) (15,007)
Cumulative Translation Adjustment (358) 7 (173)
Shareholders' Equity -
Opening Balance $12,622 $ 5,067 $ 911
Activity For The Year
Issue Of Share Capital 541 749 35
Contributed Surplus 2,775 0 0
Net Income For The Year 31,296 7,171 3,941
Translation Adjustment for The Year 24 (365) 180
Shareholders' Equity -
Ending Balance 47,258 12,622 5,067
Comprised Of:
Capital Stock 17,416 16,875 16,126
Contributed Surplus 2,775 0 0
Retained Earnings (Deficit) 27,401 (3,895) (11,066)
Cumulative Translation Adjustment (334) (358) 7
Shareholders' Equity -
Ending Balance 47,258 12,622 5,067
<PAGE>
GORAN CAPITAL INC. - CONSOLIDATED
SCHEDULE I - SUMMARY OF INVESTMENTS -
OTHER THAN INVESTMENTS IN RELATED PARTIES
As at December 31, 1996
(In Thousands of U.S. Dollars)
Estimated Amount On
Type of Investment Cost Market Value Balance Sheet
Fixed Maturities:
Bonds:
Government and Government
Agencies $ 57,804 $ 57,826 $ 57,804
States and Municipalities 3,587 3,651 3,587
Public Utilities 350 379 350
All Other Corporate Bonds 76,071 76,527 76,071
Total Fixed Maturities $137,812 $138,383 $137,812
Equity Securities:
Common Stocks $ 28,075 $ 28,729 $ 28,075
Preferred Stocks 0 0 0
Total Equity Securities $ 28,075 $ 28,729 $ 28,075
Mortgage Loans on Real Estate 2,430 2,430 2,430
Real Estate 4,548 4,548 4,548
Other Long-Term Investments 75 75 75
Short Term Investments 29,052 29,052 29,052
Total Investments $201,992 $203,217 $201,992
<PAGE>
GORAN CAPITAL INC. - CONSOLIDATED
SCHEDULE II - CONDENSED FINANCIAL INFORMATION
OF REGISTRANT (Parent Company)
Balance Sheet
As At December 31,
(In Thousands U.S. Dollars)
1995 1996
Assets
Cash $ 319 $ 812
Accounts Receivable 419 379
Capital and Other Assets 543 750
Investment In Subsidiaries 10,772 10,807
Total Assets $ 12,054 $ 12,748
Liabilities and Shareholders' Equity
Accounts Payable $ 9,758 $ 1,225
Other Payables 973 757
Subordinated Debenture 0 11,084
Total Liabilities 10,731 13,066
Shareholders' Equity
Common Shares 18,473 18,002
Deficit (17,150) (18,320)
Total Shareholders' Equity 1,323 (318)
Total Liabilities and Shareholders' Equity $12,054 $12,748
GORAN CAPITAL INC.
Statement of Earnings (Loss)
For The Years Ended December 31,
(In Thousands of U.S. Dollars)
1996 1995 1994
Revenues
Management Fees $ 352 $ 796 $ 901
Royalty Income 0 0 69
Dividend Income 3,500 0 0
Other Income 0 0 1,449
Net Investment Income 264 448 399
Total Revenues 4,116 1,244 2,818
Expenses
Debenture Interest Expense 868 998 1,089
Amortization 200 114 160
General, Administrative And
Acquisition Expenses 1,879 1,338 1,170
Total Expenses 2,946 2,450 2,419
Net Income (Loss) $ 1,170 $ (1,206) 399
Deficit, beginning of year (18,320) (17,114) (17,513)
Deficit, end of year (17,150) (18,320) (17,114)
<PAGE>
GORAN CAPITAL INC. - CONSOLIDATED
SCHEDULE II - CONDENSED FINANCIAL INFORMATION
OF REGISTRANT
For The Years Ended December 31, 1994, 1995
and 1996
(In Thousands of U.S. Dollars)
1994 1995 1996
Cash Flows From Operations:
Net Income (Loss) $ 1,170 $ (1,206) $ 399
Items Not Involving Cash:
Amortization 199 114 160
Gain on Sale of Capital Assets (4) (7) 0
Decrease (Increase) in Accounts
Receivable (40) 1,822 40
Decrease (Increase) in Other
Assets (3) (29) (2)
Increase (Decrease) in Accounts
Payable 8,533 1,227 (164)
Increase (Decrease) in Other
Payables 0 (141) (214)
Net Cash Provided (Used) by Operations 10,071 1,780 219
Cash Flows From Financing Activities:
Redemption of Share Capital by
Subsidiary 0 0 623
Proceeds on Sale of Capital
Assets 14 11 0
Issue of Common Shares 599 305 35
Net Cash Provided By Financing
Activities 613 316 658
Cash Flows From Investing Activities:
Purchase of Fixed Assets 0 (3) 0
Other, net (93) 3 0
Reduction of Debentures (11,084) (1,454) (1,076)
Net Cash Used by Investing Activities: (11,177) (1,454) (1,076)
Net Increase (Decrease) in Cash (493) 642 (199)
Cash at Beginning of Year 812 170 369
Cash At End of Year 319 812 170
Cash Resources are Comprised of:
Cash 187 109 (29)
Short-Term Investments 132 703 199
319 812 170
<PAGE>
GORAN CAPITAL INC. - CONSOLIDATED
SCHEDULE II - CONDENSED FINANCIAL
INFORMATION OF REGISTRANT
For The Years Ended December 31, 1994, 1995
and 1996
Basis of Presentation
The condensed financial information should be read in conjunction with the
consolidated financial statements of Goran Capital Inc. The condensed financial
information includes the accounts and activities of the Parent Company which
acts as the holding company for the insurance subsidiaries.
<PAGE>
GORAN CAPITAL INC. - CONSOLIDATED
SCHEDULE IV - REINSURANCE
For The Years Ended December 31,
(In Thousands of U.S. Dollars)
1996 1995 1994
Direct Amount $102,178 $122,088 $298,596
Assumed From Other
Companies $ 24,800 $ 29,629 $ 9,038
Ceded To Other
Companies $ 68,505 65,356 87,202
Net Amount $ 58,473 $ 86,361 $220,432
Percentage Of Amount
Assumed To Net 42.4% 34.3% 4.1%
<PAGE>
GORAN CAPITAL INC. - CONSOLIDATED
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS
For The Years Ended December 31,
(In Thousands of U.S. Dollars)
1994-Allowance 1995-Allowance 1996-Allowance
for Doubtful for Doubtful for Doubtful
Accounts Accounts Accounts
Additions:
Balance At Beginning
Of Period $1,179 $1,209 $ 927
Charged To Costs
And Expenses (1) (86) 2,523 5,034
Charged to Other
Accounts - - - - - - 0
Deductions From
Reserves (116) (2) 2,805 (2) 4,981 (2)
Balance At End
Of Period $1,209 $ 927 $1,480
(1) In 1993, the Company began to direct bill policyholders rather than agents
for premiums. Therefore, bad debt expenses in 1993 increased accordingly.
During late 1994 and into 1995, the Company experienced an increase in
premiums written. During 1995, the Company further evaluated the
collectibility of this business and incurred a bad debt expense of approxi-
mately $2.5 million. The Company continually monitors the adequacy of its
allowance for doubtful accounts and believes the balance of such allowance
at December 31, 1993, 1994 and 1995 was adequate.
(2) Uncollectible accounts written off, net of recoveries.
<PAGE>
GORAN CAPITAL INC. - CONSOLIDATED
SCHEDULE VI - SUPPLEMENTAL INFORMATION CONCERNING
PROPERTY - CASUALTY INSURANCE OPERATIONS
For The Years Ended December 31,
(In Thousands of U.S. Dollars)
1996 1995 1994
Deferred Policy
Acquisition Costs $ 12,800 $ 2,379 $ 1,479
Reserves for Losses and
Loss Adjustment Expenses 101,719 59,421 29,269
Unearned Premiums 87,825 17,497 14,416
Earned Premiums 191,759 49,641 32,126
Net Investment Income 6,738 1,173 1,241
Losses And Loss Adjustment
Expenses Incurred Related To:
Current Years 137,895 35,184 26,268
Prior Years (570) 787 202
Paid Losses And Loss
Adjustment Expenses 130,895 31,075 26,995
Amortization Of Deferred
Policy Acquisition Costs 27,657 7,150 4,852
Premiums Written 305,499 $124,634 $103,134
Note: All amounts in the above table are net of the effects of reinsurance and
related commission income, except for net investment income regarding which
reinsurance is not applicable, premiums written liabilities for losses and loss
adjustment expenses, and unearned premiums which are stated on a gross basis.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this amended report to
be signed on its behalf by the undersigned, thereto duly authorized.
GORAN CAPITAL INC.
April 29, 1997 By: /s/ Alan G. Symons
------------------------------------
Alan G. Symons,
President and Chief Executive Officer
<PAGE>
EXHIBIT INDEX
Reference to
Regulation S-K
Exhibit No. Document
1 Final Draft of the Underwriting Agreement dated November 4
1996 among Registrant, Symons International Group, Inc.,
Advest, Inc. and Mesirow Financial, Inc.
3.1 The Registrant's Articles of Incorporation are incorporated
by reference to Exhibit 1 of the Registrant's Form 20-F,
filed October 31, 1994.
3.2 Registrant's Restated Bylaw 1
4.1 Sample Share Certificate and Articles of Amalgamation
defining rights attaching to common shares are incorporated
by reference to Exhibit 2 of Registrant's Form 20-F filed
October 31, 1994.
10.1 The Stock Purchase Agreement among Registrant, Symons
International Group, Inc., Fortis, Inc. and Interfinancial,
Inc. dated January 31, 1996 is incorporated by reference to
Exhibit 10.1 of Symons International Group, Inc.'s
Registration Statement on Form S-1, Reg. No. 333-9129.
10.2(1) The Stock Purchase Agreement among GGS Management Holdings,
Inc., GS Capital Partners II, L.P., Registrant and Symons
International Group, Inc. dated January 31, 1996 is
incorporated by reference to Exhibit 10.2(1) of Symons
International Group, Inc.'s Registration Statement on Form
S-1, Reg. No. 333-9129.
10.2(2) The First Amendment to the Stock Purchase Agreement by and
among GGS Management Holdings, Inc., GS Capital Partners II,
L.P., Registrant and Symons International Group, Inc. dated
March 28, 1996 is incorporated by reference to Exhibit
10.2(2) of Symons International Group, Inc.'s Registration
Statement on Form S-1, Reg. No. 333-9129.
10.2(3) The Second Amendment to the Stock Purchase Agreement by and
among GGS Management Holdings, Inc., GS Capital Partners II,
L.P., Registrant and Symons International Group, Inc. dated
April 30, 1996 is incorporated by reference to Exhibit
10.2(3) of Symons International Group, Inc.'s Registration
Statement on Form S-1, Reg. No. 333-9129.
10.2(4) The Third Amendment to the Stock Purchase Agreement by and
among GGS Management Holdings, Inc., GS Capital Partners II,
L.P., Registrant, Symons International Group, Inc. and Pafco
General Insurance Company dated September 24, 1996 is
incorporated by reference to Exhibit 10.2(4) of Symons
International Group, Inc.'s Registration Statement on Form
S-1, Reg. No. 333-9129.
10.3(1) The Stockholders Agreement among GGS Management Holdings,
Inc., GS Capital Partners II, L.P., Symons International
Group, Inc. and Registrant dated April 30, 1996 is
incorporated by reference to Exhibit 10.3(1) of the Symons
International Group, Inc.'s Registration Statement on Form
S-1, Reg. No. 333-9129.
10.3(2) The Amended and Restated Stockholder Agreement among GGS
Management Holdings, Inc., GS Capital Partners II, L.P.,
Symons International Group, Inc. and Registrant dated
September 24, 1996 is incorporated by reference to Exhibit
10.3(2) of Symons International Group, Inc.'s Registration
Statement on Form S-1, Reg. No. 333-9129.
10.4 The Registration Rights Agreement among GGS Management
Holdings, Inc., GS Capital Partners II, L.P., Registrant and
Symons International Group, Inc. dated April 30, 1996 is
incorporated by reference to Exhibit 10.4 of Symons
International Group, Inc.'s Registration Statement on Form
S-1, Reg. No. 333-9129.
10.5 The Management Agreement among Superior Insurance Company,
Superior American Insurance Company, Superior Guaranty
Insurance Company and GGS Management, Inc. dated April 30,
1996 is incorporated by reference to Exhibit 10.5 of Symons
International Group, Inc.'s Registration Statement on Form
S-1, Reg. No. 333-9129.
<PAGE>
10.6 The Management Agreement between Pafco General Insurance
Company and Symons International Group, Inc. dated May 1,
1987, as assigned to GGS Management, Inc. effective April
30, 1996, is incorporated by reference to Exhibit 10.6 of
Symons International Group, Inc.'s Registration Statement on
Form S-1, Reg. No. 333-9129.
10.7 The Administration Agreement between IGF Insurance Company
and Symons International Group, Inc. dated February 26,
1990, as amended, is incorporated by reference to Exhibit
10.7 of the Symons International Group, Inc.'s Registration
Statement on Form S-1, Reg. No. 333-9129.
10.8 The Agreement between IGF Insurance Company and Symons
International Group, Inc. dated November 1, 1990 is
incorporated by reference to Exhibit 10.8 of Symons
International Group, Inc.'s Registration Statement on Form
S-1, Reg. No. 333-9129.
10.9(1) The Credit Agreement between GGS Management, Inc., various
Lenders and The Chase Manhattan Bank (National Association),
as Administrative Agent, dated April 30, 1996 is
incorporated by reference to Exhibit 10.11(1) of Symons
International Group, Inc.'s Registration Statement on Form
S-1, Reg. No. 333-9129.
10.9(2) The Pledge Agreement between GGS Management Holdings, Inc.
and Chase Manhattan Bank, N.A. dated April 30, 1996 is
incorporated by reference to Exhibit 10.11(2) of Symons
International Group, Inc.'s Registration Statement on Form
S-1, Reg. No. 333-9129.
10.9(3) The Pledge Agreement between GGS Management, Inc. and Chase
Manhattan Bank, N.A. dated April 30, 1996 is incorporated by
reference to Exhibit 10.11(3) of Symons International Group,
Inc.'s Registration Statement on Form S-1, Reg. No.
333-9129.
10.9(4) The First Amendment to the Credit Agreement between GGS
Management, Inc., various Lenders and Chase Manhattan Bank,
N.A., as Administrative Agent, dated September 26, 1996
10.9(5) The Second Amendment to the Credit Agreement between GGS
Management, Inc., various Lenders and Chase Manhattan Bank,
N.A., as Administrative Agent, dated December 31, 1996
10.9(6) The Third Amendment to the Credit Agreement between GGS
Management, Inc., various Lenders and Chase Manhattan Bank,
N.A., as Administrative Agent, dated March 26, 1997
10.10 The Registration Rights Agreement between Registrant and
Symons International Group, Inc. dated May 29, 1996 is
incorporated by reference to Exhibit 10.13 of Symons
International Group, Inc.'s Registration Statement on Form
S-1, Reg. No. 333-9129.
10.11(1) The License, Improvement and Support Agreement between
Tritech Financial Systems, Inc. and Symons International
Group, Inc. dated August 30, 1995 is incorporated by
reference to Exhibit 10.14(1) of Symons International Group,
Inc.'s Registration Statement on Form S-1, Reg. No.
333-9129.
10.11(2) The License of Computer Software between Tritech Financial
Systems, Inc. and Symons International Group, Inc. dated
August 30, 1995 is incorporated by reference to Exhibit
10.14(2) of Symons International Group, Inc.'s Registration
Statement on Form S-1, Reg. No. 333-9129.
10.12(1) The Agreement among Cliffstan Investments, Inc., Pafco
General Insurance Company and Gage North Holdings, Inc.
dated September 1, 1989 is incorporated by reference to
Exhibit 10.15(1) of Symons International Group, Inc.'s
Registration Statement on Form S-1, Reg. No. 333-9129.
10.12(2) The Purchase of Promissory Note and Assignment of Security
Agreement between Pafco General Insurance Company and
Granite Reinsurance Company, Ltd., dated September 30, 1992
is incorporated by reference to Exhibit 10.15(2) of Symons
International Group, Inc.'s Registration Statement on Form
S-1, Reg. No. 333-9129.
<PAGE>
10.12(3) The Guarantee of Alan G. Symons dated April 22, 1994 is
incorporated by reference to Exhibit 10.15(3) of Symons
International Group, Inc.'s Registration Statement on Form
S-1, Reg. No. 333-9129.
10.12(4) The Share Pledge Agreement between Symons International
Group, Ltd. and Pafco General Insurance Company dated April
22, 1994 is incorporated by reference to Exhibit 10.15(4) of
Symons International Group, Inc.'s Registration Statement on
Form S-1, Reg. No. 333-9129.
10.13(1) The Employment Agreement between GGS Management Holdings,
Inc. and Alan G. Symons dated January 31, 1996 is
incorporated by reference to Exhibit 10.16(1) of Symons
International Group, Inc.'s Registration Statement on Form
S-1, Reg. No. 333-9129.
10.13(2) The Employment Agreement between GGS Management Holdings,
Inc. and Douglas H. Symons dated January 31, 1996 is
incorporated by reference to Exhibit 10.16(2) of Symons
International Group, Inc.'s Registration Statement on Form
S-1, Reg. No. 333-9129.
10.14(1) The Employment Agreement between IGF Insurance Company and
Dennis G. Daggett effective February 1, 1996 is incorporated
by reference to Exhibit 10.17(1) of Symons International
Group, Inc.'s Registration Statement on Form S-1, Reg. No.
333-9129.
10.14(2) The Employment Agreement between IGF Insurance Company and
Thomas F. Gowdy effective February 1, 1996 is incorporated
by reference to Exhibit 10.17(2) of Symons International
Group, Inc.'s Registration Statement on Form S-1, Reg. No.
333-9129.
10.15 The Employment Agreement between Superior Insurance Company
and Roger C. Sullivan, Jr. dated May 9, 1996 is incorporated
by reference to Exhibit 10.18 of Symons International Group,
Inc.'s Registration Statement on Form S-1, Reg. No.
333-9129.
10.16 The Employment Agreement between Registrant and Gary P.
Hutchcraft effective June 30, 1996 is incorporated by
reference to Exhibit 10.19 of Symons International Group,
Inc.'s Registration Statement on Form S-1, Reg. No.
333-9129.
10.17 The Goran Capital Inc. Stock Option Plan is incorporated by
reference to Exhibit 10.20 of Symons International Group,
Inc.'s Registration Statement on Form S-1, Reg. No.
333-9129.
10.18 The GGS Management Holdings, Inc. 1996 Stock Option Plan is
incorporated by reference to Exhibit 10.21 of Symons
International Group, Inc.'s Registration Statement on Form
S-1, Reg. No. 333-9129.
10.19 The Symons International Group, Inc. 1996 Stock Option Plan
is incorporated by reference to Exhibit 10.22 of Symons
International Group, Inc.'s Registration Statement on Form
S-1, Reg. No. 333-9129.
10.20 The Symons International Group, Inc. Retirement Savings Plan
is incorporated by reference to Exhibit 10.24 of Symons
International Group, Inc.'s Registration Statement on Form
S-1, Reg. No. 333-9129.
10.21 The Insurance Service Agreement between Mutual Service
Casualty Company and IGF Insurance Company dated May 20,
1996 is incorporated by reference to Exhibit 10.25 of Symons
International Group, Inc.'s Registration Statement on Form
S-1, Reg. No. 333-9129.
10.22(1) The Automobile Third Party Liability and Physical Damage
Quota Share Reinsurance. Contract between Pafco General
Insurance Company and Superior Insurance Company is
incorporated by reference to Exhibit 10.27(1) of Symons
International Group, Inc.'s Registration Statement on Form
S-1, Reg. No. 333-9129.
<PAGE>
10.22(2) The Crop Hail Quota Share Reinsurance Contract and Crop
Insurance Service Agreement between Pafco General Insurance
Company and IGF Insurance Company is incorporated by
reference to Exhibit 10.27(2) of Symons International Group,
Inc.'s Registration Statement on Form S-1, Reg. No.
333-9129.
10.22(3) The Automobile Third Party Liability and Physical Damage
Quota Share Reinsurance Contract between IGF Insurance
Company and Pafco General Insurance Company is incorporated
by reference to Exhibit 10.27(3) of Symons International
Group, Inc.'s Registration Statement on Form S-1, Reg. No.
333-9129.
10.22(4) The Multiple Line Quota Share Reinsurance Contract between
IGF Insurance Company and Pafco General Insurance Company is
incorporated by reference to Exhibit 10.27(4) of Symons
International Group, Inc.'s Registration Statement on Form
S-1, Reg. No. 333-9129.
10.22(5) The Standard Revenue Agreement between Federal Crop
Insurance Corporation and IGF Insurance Company is
incorporated by reference to Exhibit 10.27(5) of Symons
International Group, Inc.'s Registration Statement on Form
S-1, Reg. No. 333-9129.
10.23 The Commitment Letter, effective October 24, 1996, between
Fifth Third Bank of Central Indiana and Symons International
Group, Inc. is incorporated by reference to Exhibit 10.28 of
Symons International Group, Inc.'s Registration Statement on
Form S-1, Reg. No. 333-9129.
10.24 The Reinsurance Agreement No. 1000-91 (Quota Share
Agreement) and Reinsurance agreement No. 1000-90 (Stop Loss
Reinsurance and Reserves Administration Agreement) are
incorporated by reference to Exhibit 3(c) of Registrant's
Form 20-F filed October 31, 1994.
10.25 The Form of Share Option Agreement is incorporated by
reference to Exhibit 10.05 of Registrant's Form 10-K for the
year ended December 31, 1994.
10.26 The Share Pledge Agreement between Symons International
Group, Ltd and Registrant is incorporated by reference to
Exhibit 10.06 of Registrant's Form 10-K for the year ended
December 31, 1994.
10.27 The MPCI Mulit-Year Stop Loss Reinsurance Agreement is
incorporated by reference to Exhibit 10.07 of Registrant's
Form 10-K for the year ended December 31, 1994.
10.28 The Automobile Liability and Physical Damage Quota Share
Reinsurance Agreement, as amended, is incorporated by
reference to Exhibit 10.08 of Registrant's Form 10-K for the
year ended December 31, 1994.
11 Statement re Computation of Per Share Earnings
13 Annual Report to Security Holders, 1996 and 1995
21 The Subsidiaries of the Registrant are incorporated by
reference to Footnote 1 of the Registrant's consolidated
financial statements contained in its 1996 Annual Report to
Security Holders filed hereunder as Exhibit 13.
99.1 Management Proxy Circular with respect to 1997 Annual
Meeting of Shareholders of Registrant
99.2 Section captioned "Voting Securities and Beneficial Owners"
in the definitive proxy statement of Symons International
Group, Inc. for the 1997 annual meeting of common
stockholders.
99.3 Section captioned "Indebtedness of Management" in the
definitive proxy statement of Symons International Group,
Inc. for the 1997 annual meeting of common stockholders.
99.4 Section captioned "Certain Relationships/Related
Transactions" in the definitive proxy statement of Symons
International Group, Inc. for the 1997 annual meeting of
common stockholders.
GORAN CAPITAL INC.
NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual and Special Meeting of the
Shareholders of Goran Capital Inc. (the "Corporation") will be held at 181
University Avenue, Suite 1101, Toronto, Ontario, on Wednesday, May 21, 1997, at
10:00 a.m., Toronto time, for the following purposes:
1. To receive the Annual Report and financial statements for the year ended
December 31, 1996, and the report of the auditor thereon;
2. To elect Directors;
3. To appoint an auditor and to authorize the Directors to fix the
auditor's remuneration;
4. To consider and, if deemed advisable, to confirm, subject to such
amendments, variations and additions as may be approved at the Meeting, new
Bylaw No. 1 enacted by the Directors which repealed and replaced the former
general Bylaw and which relates generally to the transaction of the business and
affairs of the Corporation.
5. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The accompanying management information circular provides additional
information relating to the matters to be dealt with at the Meeting and forms
part of this Notice.
Shareholders who are unable to attend the Meeting are requested to date,
sign and return the accompanying Form of Proxy in the envelope provided for that
purpose.
DATED at Toronto, this 27th day of March, 1997.
BY ORDER OF THE BOARD
/s/ ALAN G. SYMONS
CEO and President
March 27, 1997
<PAGE>
Dear Shareholder:
Re: Supplemental Mailing List
If you wish to have your name added to the supplemental mailing list of Goran
Capital Inc. so you may receive the Corporation's quarterly reports which
contain interim unaudited financial statements, please fill in your name and
address in the space provided below and return to Adams & Aihoshi Shareholder
Services Ltd., 461 Alden Road, Unit 33, Markham, Ontario, L3R 3L4, Telephone
(905) 940-9535.
NAME:
Please print
ADDRESS:
CITY:
PROVINCE: POSTAL CODE:
I hereby confirm that I am the owner of shares issued by the above-mentioned
Corporation.
SIGNATURE:
DATE:
<PAGE>
GORAN CAPITAL INC.
MANAGEMENT PROXY CIRCULAR
Solicitation of Proxies
This Management Proxy Circular is furnished in connection with the
solicitation of proxies by the management of Goran Capital Inc. (the
"Corporation") for use at the Annual and Special Meeting (the "Meeting") of
Shareholders of the Corporation to be held Wednesday, May 21, 1997, at 10:00
a.m., or at any and all adjournments thereof, for the purposes set forth in the
accompanying notice of the Meeting. It is expected that the solicitation will be
primarily by mail, but proxies may also be solicited personally, by telephone or
by telecopier, by directors, officers or regular employees of the Corporation.
The costs of such solicitation will be borne by the Corporation.
Revocation of Proxies
A shareholder who has given a proxy may revoke at any time to the extent it
has not been exercised. In addition to revocation in any other manner permitted
by law, a proxy may be revoked by instrument in writing executed by the
shareholder or his attorney authorized in writing, and deposited either at the
registered office of the Corporation at any time up to 5:00 p.m. (Toronto time)
on the last business day preceding the day of the Meeting, or any adjournment
thereof, at which the Proxy is to be used, or with the Chairman of the Meeting
prior to the beginning of the Meeting on the day of the Meeting, or any
adjournment thereof or in any other manner provided by law.
Voting of Shares Represented by Management Proxies
The persons named in the enclosed form of proxy will vote the shares in
respect of which they are appointed by proxy on any ballot that may be called
for in accordance with the instructions thereon. In the absences of such
specifications, such shares will be voted in favour of each of the matters
referred to herein.
The enclosed form of proxy confers discretionary authority upon the persons
named therein with respect to amendments to or variations of matters identified
in the Notice of meeting and with respect to other matters, if any, that may
properly come before the Meeting. At that date of this Circular, management of
the corporation knows of no such amendments, variations or other matters to come
before the Meeting. However, if any other matters that are not known to
management should properly come before the Meeting, the proxy will be voted on
such matters in accordance with the best judgment of the named proxy.
Voting Securities
The only voting securities of the Corporation currently outstanding and
entitled to be voted at the Meeting are 5,569,652 common shares, each of which
carries one vote.
In accordance with the provisions of the Canada Business Corporations Act,
the Corporation will prepare a list of the holders of common shares at the close
of business on the day immediately preceding the day on which Notice of the
Meeting is given. Each person named in such list is entitled to vote the shares
shown opposite his name on such list at the Meeting except to the extent that he
has transferred ownership of any of his shares after that date and the
transferee of those shares produces properly endorsed share certificates or
otherwise establishes that he owns the shares and demands not later than 10 days
before the Meeting that his name be included in the list before the Meeting, in
which case the transferee is entitled to vote his shares at the Meeting or any
adjournment thereof.
Principal Holders of Voting Securities
To the knowledge of the directors and officers of the Corporation, the
following are the only persons who beneficially own or exercise control or
direction over more than 10% of the outstanding common shares of the
Corporation:
Number of Common Shares
Beneficially Owned Percentage
Controlled or of Outstanding
Name Directed (1) Common Shares
Symons International
Group Ltd.(2) 1,646,413 29.6%
G. Gordon Symons 890,167 16.0%
Alan G. Symons 449,183 8.1%
(1) Reflect ownership as verified by the persons listed as of March 14, 1997.
(2) Mr. G. Gordon Symons is the controlling shareholder of Symons International
Group Ltd., a private company. Particulars of Matters to be Acted Upon
At the Meeting, shareholders will be asked to elect directors, to appoint
an auditor and to authorize the directors to fix the auditor's remuneration, to
confirm new Bylaw No. 1 for the Corporation and to deal with other matters which
may properly come before the Meeting.
Election of Directors
The Articles of the Corporation currently provide for a board consisting of
a minimum of three and a maximum of ten directors. The board currently consists
of seven Directors until otherwise determined by further resolution of the board
of directors of the Corporation.
Unless otherwise specified therein, proxies received in favour of
management nominees will be voted for the following proposed nominees (or for
substitute nominees in the event of contingencies not known at present) whose
term of office will continue until the next Annual Meeting of Shareholders or
until they are removed or their successors are elected or appointed in
accordance with the Canada Business Corporations Act and the bylaws of the
Corporation.
Number of Common
Shares of the
Name and Position in Year First Corporation
Principal the Became Beneficially
Occupation Corporation Director Owned (1)
G. Gordon Chairman of 1986 890,167
Symons the Board
Chairman of the
Board
Goran Capital
Inc.
Alan G. CEO, President 1986 449,183
Symons (2) and Secretary
CEO, President
and Secretary
Goran Capital
Inc.
Douglas H. COO and Vice 1989 197,483
Symons President
President, Symons
International
Group, Inc.,
Chief Operating
Officer, Goran
Capital Inc.
Ross Schofield Director 1992 3,800
President
Schofield
Insurance Brokers
David B. Shapira Director 1989 100,000
President
Medbers, Inc.
James G. Director 1995 2,000
Torrance,
Q.C. (2)
Partner Emeritus
Smith, Lyons
Barristers &
Solicitors
John K. Director 1995 -0-
McKeating (2)
Partner
Vision 2120, Inc.
(1) Information as to the shareholdings of each nominee has been provided by
the nominee.
(2) Member of the Audit Committee.
Each of the foregoing nominees has held the principal occupation indicated
above during the past five years except: (i) Alan G. Symons who prior to June 4,
1992, was the President of both Symons Capital Fund Ltd. and Symons
International Group Ltd.; and (ii) David B. Shapira who prior to 1995 was the
President of Morse Jewellers Inc.
Directors' and Officers' Remuneration
The aggregate remuneration paid by the Corporation and its subsidiaries to
its five highest paid employees or Officers, including the three inside
Directors, during the financial year ended December 31, 1996 was $1,643,492, all
in the form of salary, bonus and consulting fees.
In 1996, the Corporation's directors received (i) a flat annual fee of
$10,000 for each Director; and (ii) a $1,000 meeting fee for each board or
committee meeting attended.
Interest of Insiders in Material Transactions
Reference is made to the 1996 Annual Report, sent to each shareholder with
this Management Proxy Circular, and to Note 14, Related Party Transactions.
Indebtedness of Officers and Directors of the Corporation
The following directors and officers of the Corporation were indebted to the
Corporation in amounts exceeding $10,000 during the financial year ended
December 31, 1996, on account of loans to purchase common shares of the
Corporation and its affiliates certain of which were pursuant to the Employee
Share Purchase Plan (see below):
<PAGE>
Name and
Municipality of Date of Largest Blance Present
Residence Loan During Period Balance
G. Gordon Symons June 27, 1986 $148,000 $148,000
Bermuda June 30, 1986 $200,000 $200,000
May 31, 1988 $ 51,729 (US) $ 51,729 (US)
Alan G. Symons June 30, 1986 $ 40,172 $ 29,772
Indianapolis, February 25,
Indiana 1986 $ 27,309 (US) $ 27,309 (US)
Douglas H. Symons June 30, 1986 $ 15,000 $ 15,000
Indianapolis, February 25,
Indiana 1986 $ 2,219 (US) $ 2,219 (US)
The foregoing loans dated June 27, 1986 and June 30, 1986 made for the
purchase of common shares of the Corporation require that the shares acquired be
pledged for the benefit of the Corporation as security until these amounts are
fully paid. The other loans are each unsecured. The loans dated prior to 1988
are payable on demand and are interest free. The loans dated in 1988 are payable
on demand and bear interest at 90 day T-Bill rates.
Mr. G. Gordon Symons has an unsecured loan in the amount of $70,000 not
relating to the purchase of common shares of the Corporation. This loan was
taken out on January 2, 1988, is payable on demand and is interest free. In
November, 1990, the Corporation loaned Douglas H. Symons $39,377 (U.S.) for
acquisition of a residence. This loan bears interest at prime plus 1% and has
accrued an unpaid interest of $21,168. In February, 1997, Mr. G. Gordon Symons
repaid in full the U.S. mortgage note principal amount of $277,502 (U.S.)
supported by a residential collateral mortgage, originally taken out on October
3, 1988.
Executive Compensation
The Corporation had five Executive Officers during 1996. The aggregate cash
compensation paid by the Corporation and its subsidiaries to the Corporation's
Executive Officers including salaries, fees, commissions and bonuses, during
1996 was $1,643,492. The aggregate value of compensation, other than that
referred to above, paid to Executive Officers during 1996 does not exceed
$10,000 times the number of Executive Officers.
Table 1 sets forth certain compensation information, paid by the
Corporation and its subsidiaries, to the Corporation's Chief Executive Officer
and each of the Corporation's other Executive Officers during the Corporation's
three most recently completed fiscal years.
<PAGE>
TABLE 1: SUMMARY COMPENSATION TABLE
Annual Long-
Compensation Term Awards
Securities
Other Under Options
Salary Bonus Annual Granted (#) All Other
Name and US $ US $ Comp- Note C Compensa-
Principal Note A Note A ensa- tion US $
Position Year US $
Note B
G. Gordon 1996 $171,000(h) $393,945 NIL 51,524 $170,799(E)
Symons 1995 $175,000 70,000 NIL 18,946 25,272(D)
Chairman 1994 $150,000 $ 36,611 NIL 15,000 21,425(D)
Alan G. 1996 $242,786(f) $143,333(g) NIL 51,399 Note B
Symons 1995 $148,077 $ 42,893 NIL 18,945 Note B
1994 $142,361 $ 55,810 NIL 15,000 Note B
Douglas H. 1996 $195,973(I) $ 50,000 NIL $54,333 Note B
Symons 1995 $149,982 $100,000 NIL $ 9,473 Note B
1994 $150,041 $ 14,000 NIL $15,000 Note B
Gary P. 1996 $ 55,418(I) $28,000(I) NIL 0 Note B
Hutchcraft 1995 $ N/R N/R NIL N/R N/R
Vice President 1994 $ N/R N/R NIL N/R N/R
and Treasurer
David L. Bates 1996 $ 95,162(I) $97,076(I) NIL $ 3,165 Note B
Vice President 1995 $ 63,237 -0- NIL $ -0- Note B
and General 1994 N/R N/R NIL N/R N/R
Counsel
- -----------
N/R Not required.
Note A Salary and bonus are stated in U.S. dollars as the majority of
payments are actually made in U.S. dollars.
Note B Aggregate amounts not greater than the lesser of $50,000 and 10% of
the total of the annual salary and bonus.
Note C No stock appreciation rights (SAR's), restricted shares, or
restricted share units were granted during any of the past three completed
fiscal years.
Note D Imputed interest on interest-free stock purchase loan.
Note E Consulting fees paid to companies owned by Mr. G. Gordon Symons
including $52,411 paid to such companies by the Company's 67% owned subsidiary,
Symons International Group, Inc.
Note F Includes $142,786 paid by Symons International Group, Inc.
Note G Includes $133,333 paid by Symons International Group, Inc.
Note H Amount paid by a subsidiary of the Company.
Note I Amount paid by Symons International Group, Inc.
<PAGE>
Employee Share Option Plan
The Corporation has a Share Option Plan (the "Plan"). Under the Plan,
common shares equal to 10% of the number of common shares outstanding from time
to time have been reserved for issuance. The terms, conditions and limitations
of options granted under the Plan are determined by the board of directors of
the Corporation with respect to each option, within certain limitations. The
exercise price per share shall be the closing price on The Toronto Stock
Exchange on the date of grant of the option. The exercise price per share is
payable in full on the date of exercise. Options granted under the Plan are not
assignable.
During 1996, options to purchase a total of 213,986 common shares were
granted to Executive Officers and Directors pursuant to the Plan, excluding
options granted and subsequently canceled during the year.
Including the options referred to above, there are outstanding options to
purchase a total of 527,399 common shares as of December 31, 1996, at an average
price of $8.29.
TABLE 2: OPTION GRANTS DURING 1996
Market Value
% of Total of Securities
Securities Option Underlying
Under Granted To Exercise Options on the
Options Employees or Base Date of Grant Expiration
Name Granted (#) 1996 Price ($/Security) Date
($/Security)
G. Gordon 51,524 24.1% $16.50 $16.50 May 12, 2006
Symons
Alan G. 51,399 24.0% $16.50 $16.50 May 12, 2006
Symons
Douglas 54,333 25.6% $16.50 $16.50 May 12, 2006
H. Symons
David L. 3,165 1.5% $16.50 $16.50 May 12, 2006
Bates
Dennis G. 20,000 9.4% $16.50 $16.50 May 12, 2006
Daggett
Thomas F. 20,000 9.4% $16.50 $16.50 May 12, 2006
Gowdy
TABLE 3: AGGREGATED OPTION EXERCISES
DURING 1996 AND FINANCIAL YEAR-END OPTION VALUES
Value of
Unexercised Unexercised In-
Securities Options at The-Money Options
Acquired Aggregate FY-End (#) Exercisable/
On Value Exercisable/ Unexercisable
Name Exercise Realized Unexercisable
G. Gordon Symons 92,500 $1,513,250 273,470/0 $6,129,230/0
Alan G. Symons 49,383 $ 761,856 85,344/0 $ 982,775/0
Douglas H. Symons 33,333 $ 493,995 94,855/0 $1,524,787/0
Composition of the Compensation Committee
The following Goran Directors served as members of the Board's Compensation
Committee during 1996: J. Ross Schofield, Douglas H. Symons and James G.
Torrance. At its meeting on March 19, 1997, the Board reconfigured the
Compensation Committee to consist of Messrs. Schofield, Shapira and and Douglas
H. Symons. Mr. Douglas H. Symons was Chief Operating Officer and Vice President
of the Corporation throughout 1996. The role of the Compensation Committee is to
review the total compensation of the Corporation's Executive Officers in an
effort to ensure that the Corporation attracts and retains the talent
commensurate with its business objectives.
Report On Executive Compensation
The Corporation's Executive Compensation Policy (the "Policy") considers
an individual's experience, market conditions (including industry surveys),
individual performance and overall financial performance of the Corporation. The
Company's total compensation program for officers includes base salaries,
bonuses and the grant of stock options pursuant to the Company's stock option
plan. The Company's primary objective is to achieve above-average performance by
providing the opportunity to earn above-average total compensation (base salary,
bonus, and value derived from stock options) for above-average performance. Each
element of total compensation is designed to work in concert. The total program
is designed to attract, motivate, reward and retain the management talent
required to serve shareholder, customer and employee interests. The Company
believes that this program also motivates the Company's officers to acquire and
retain appropriate levels of stock ownership. It is the opinion of the
Compensation Committee that the total compensation earned by the Company's
officers during 1996 achieves these objectives and is fair and reasonable. At
its meeting on March 19, 1997, the Board of Directors of the Company voted to
retain an independent compensation consultant to review the Company's executive
compensation plan and to make recommendations concerning the compensation levels
and type necessary to achieve the Company's stated objectives.
Compensation is comprised of base salary, annual cash incentive (bonus)
opportunities, and long-term incentive opportunities in the form of stock
options. Individual performance is determined in relation to short and long-term
objectives that are established and maintained on an on-going basis. Performance
to these objectives is formally reviewed annually and base salary adjusted as a
result. Bonus rewards are provided upon the attainment of corporate financial
performance objectives as well as the individual's direct responsibilities and
their attainment of budget and other objectives.
The Policy also strives to establish long-term incentives to Executive
Officers by aligning their interests with those of the Corporation's
shareholders through award opportunities that can result in the ownership of the
Corporation's common stock.
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE
TOTAL RETURN OF GORAN CAPITAL INC.
WITH TSE 300
[Graph Omitted]
1991 1992 1993 1994 1995 1996
GNC $100 $886 $1,572 $2,443 $3,933 $9,108
TSE300 $100 $ 98 $ 134 $ 134 $ 155 $ 195
Performance Graph
The graph shown above compares the total cumulative shareholder return for
$100 invested in common shares of GNC on December 31, 1990, with the cumulative
total return of the TSE 300 Stock Index for the six most recently completed
financial years.
Appointment of Auditor
Unless otherwise instructed, the persons named in the enclosed Form of
Proxy intend to vote for the appointment of Schwartz, Levitsky, Feldman,
Chartered Accountants as auditor of the Corporation to hold office until the
next annual meeting of shareholders. Schwartz Levitsky Feldman was first
appointed
auditor of the Corporation in 1990.
The New Bylaw
At its meeting on March 19, 1997, the Board of Directors of the Corporation
approved and adopted a new Bylaw relating to the transaction of the business and
affairs of the Corporation. The action of the board in approving and adopting a
new Bylaw made it effective immediately. However, absent confirmation by the
Shareholders, the new Bylaw lapses on the earlier of March 19, 1998 or the date
of the Corporation's next shareholderm meeting. The following is a summary of
the principle provisions of the new Bylaws, a copy of which will be furnished
upon request.
Summary of Principal Bylaw Provisions
The Bylaws provide that, unless otherwise determined by Board resolution,
any contract or documents requiring execution by the Corporation may be signed
by any Director or Officer of the Corporation and that a document so executed
shall be binding upon the Corporation without further authorization or
formality. The Board has the further power to specifically delineate which of
its Directors or Officers may execute certain contracts or documents. Further,
if so authorized by a resolution of the Board, such signatures or the affixing
of the corporate seal may be done mechanically or electronically with the same
binding effect as if such were an original signature.
Except as otherwise determined by a resolution of the Board, all persons
authorized to sign contracts or documents on behalf of the Corporation may
execute and deliver instruments of proxy or otherwise vote securities owned by
the Corporation.
Subject to a contrary resolution of the Board, the Board may, without
shareholder authorization, borrow money on the credit of the Corporation, issue,
reissue, sell or pledge debt obligations of the Corporation, give a guaranty on
behalf of the Corporation to secure performance of an obligation and mortgage,
hypothecate, pledge or otherwise create a security interest in all or any
property of the Corporation, owned or subsequently acquired, to secure any
obligation of the Corporation.
An individual may be a member of the Board of Directors of the Corporation
as long as such individual is 18 years of age or greater, of sound mind, and is
not bankrupt. The number of Directors required to constitute a quorum for the
transaction of business at a meeting of the Board shall be 51% or more of the
Directors or the minimum number of Directors required by the Articles. A
Director shall serve a term of office from the date of election until the close
of the Annual Meeting of Shareholders next following his election or appointment
or until his successor is elected or appointed. The resignation of any Board
member becomes effective at the time a written resignation is sent to the
Corporation, or at the time specified in the resignation, whichever is later.
Directors may be removed by the Shareholders by a resolution at a special
meeting and a vacancy created by the removal of a Director may be filled at the
meeting of Shareholders at which the Director is removed.
Directors may attend meetings by telephone or other communication facilities.
The Chairman of the Board shall be Chairman of any meeting of Directors and
any questions arising at a meeting of Directors shall be decided by a majority
of the votes cast at such meeting. In the case of a tie, the Chairman of the
meeting shall be entitled to cast the deciding vote.
In lieu of a meeting, the Directors may act by a written resolution signed
by all Directors entitled to vote as if such resolution had been presented at a
meeting of the Directors.
The Board may appoint at least three (3) of its members, from time to time,
to act as the Audit Committee of the Board. A majority of the members of the
Audit Committee shall not be Officers or employees of the Corporation. The Audit
Committee shall review the annual financial statements of the Corporation and
report thereon to the Directors before such financial statements are approved by
the Directors.
The Board may, by resolution, appoint from among their number any one or
more other committees.
From time to time, the Directors may appoint a Chairman of the Board, a
President, one or more Vice Presidents (to which title may be added words
indicating seniority or function), a Secretary, a Treasurer, a Controller and
such other Officers as the Directors may by resolution determine. Any Officer so
appointed may be removed by the Directors at their pleasure without prejudice to
the rights of any such person.
In the event that a Director or Officer is party to a material contract or
proposed material contract with the Corporation or has a material interest in
any person who is a party to a material contract or proposed material contract
with the Corporation, such Director or Officer shall disclose in writing to the
Corporation the facts of same and, if a Director, shall not vote on any
resolution to approve such contract or transaction.
The Bylaws provide that every Director or Officer of the Corporation shall
be indemnified by the Corporation to the maximum extent provided by applicable
law.
Subject to the Articles of Incorporation, the Directors, by resolution, may
issue any or all of the unissued shares in the capital of the Corporation to
such persons and for such consideration as the Directors may determine by
resolution.
The Bylaws authorize, but do not require, the Board to declare dividends of
the Corporation and the Directors may, by resolution, fix in advance a date
preceding by not more than fifty (50) clear days, the date for the payment of
any dividend or the making of any distribution or for the issue of any warrant
or other evidence of right to acquire securities of the Corporation.
The Directors shall set the date and time for the Annual Meeting of
Shareholders and, by resolution, may call a special meeting of the Shareholders.
All meetings of Shareholders shall be held at the Corporation's offices or at
such other place within Canada as the Directors from time to time may determine.
Notice of such meeting of Shareholders shall be given to the Shareholders not
less than twenty-one (21), nor more than fifty (50) days before the date on
which such meeting is to be held.
The Secretary of the Corporation is directed to send a form of proxy and
Management Information Circular to each Shareholder concurrently with the notice
of a meeting of Shareholders. The quorum necessary for the transaction of
business at any shareholders' meeting shall be two (2) persons present and
entitled to vote not less than 51% of the Shares entitled to be voted at the
meeting. At each meeting of Shareholders, every question shall be decided by a
majority of the votes duly cast thereon (including those cast by proxy).
Any Shareholder entitled to vote at a meeting of Shareholders may submit to
the Corporation a notice of any proposal that such Shareholder wishes to raise
at the meeting and may discuss at the meeting any matter in respect of which he
would have been entitled under applicable law to submit a proposal. Where so
required by applicable law, the Management Information Circular prepared in
respect to the meeting shall sit out or be accompanied by such a proposal.
Directors' Approval
The contents of this information circular and the sending thereof have been
approved by the Board of Directors of the Corporation.
March 27, 1997
/s/ Alan G. Symons
President and CEO
<PAGE>
GORAN CAPITAL INC.
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
Symbols: TSE - GNC
NASDAQ - GNCNF
New Guidelines
In February, 1995, the Toronto Stock Exchange ("TSE") announced that all
companies with a year-end on or after June 30, 1995 would be required to
describe their practices of corporate governance with reference to TSE
Guidelines previously published. Goran conforms with the majority of these
Guidelines except as noted below:
"Corporate Governance" is the process and structure used to direct and
manage the business and affairs of the Corporation to achieve shareholders'
objectives. The shareholders of the Corporation elect the directors who, in
turn, are responsible for overseeing all aspects of the operation of the
Corporation, appointing management and ensuring that the business is managed
properly, taking into account the interests of the shareholders.
The Guidelines suggest that the chairman of the board of directors not be a
member of management and state that members of the board's nominating committee
should be exclusively non-management directors. In this respect, the Corporation
does not comply. The Corporation currently does not have a nominating or
corporate governance committee. Further, the knowledge and experience of G.
Gordon Symons, the founder of the Corporation and its current chairman, are very
important to the Corporation and the board. Further, it is believed that the
best interests of the Corporation's shareholders, the Corporation and the board
would not be properly served with either Mr. Symons relinquishing his management
function or the board appointing a different chairman.
The board of the Corporation is currently comprised of seven members, four
of whom are "unrelated" within the meaning of the guidelines and this majority
of unrelated directors allows the board the independence of management which is
a fundamental cornerstone of the TSE Guidelines.
Another guideline states that position descriptions should be developed for
the board and for the chief executive officer which delineate and define
management's responsibilities. The segregation of duties and responsibilities
between the board and its chief executive officer have been traditionally
understood but have not been formalized.
The Corporation has a significant shareholder and the percentage of shares
held by individuals or entities who are not directly or indirectly related to
the Corporation's significant shareholder is less than 50%. Yet, the Corporation
has a majority of its directors who are unrelated directors. The number of such
directors more than fairly reflects the investment in the Corporation by
shareholders other than the significant shareholder and those persons or
entities directly or indirectly related to the significant shareholder.
Therefore, the unrelated directors (and the board as a whole) are in a position
to fairly represent minority shareholders.
Mandate Of The Board
The responsibility of the Corporation's board of directors is to oversee
the conduct of the Corporation's business and to supervise management. The board
discharges its responsibilities either directly or through its committees. The
board met four times during 1996 and also acted through the medium of unanimous
written consent.
The board has three committees. All of these committees (except the
executive committee) have a majority of members who are unrelated directors.
During 1996, the audit committee was comprised of Alan G. Symons, David B.
Shapira, John K. McKeating and James G. Torrance. At its meeting on March 19,
1997, the Board selected Messrs. Torrance, McKeating and Alan G. Symons to serve
on the Board's Audit Committee. Its principal responsibilities are to review
annual audited financial statements prior to submission to the board for
approval, review the nature and scope of the annual audit, evaluate auditors'
performance, review fees and make recommendations as to the appointment of
auditors for the ensuing year and review the adequacy of internal accounting
control procedures and systems.
During 1996, the compensation committee was comprised Douglas H. Symons, J.
Ross Schofield and James G. Torrance. At its meeting on March 19, 1997, the
Board selected Messrs. Schofield, Shapira and Douglas H. Symons to serve on the
Board's compensation committee. Its role is to review the performance of the
chairman and chief executive officer as regards compensation, determine
compensation practices for the officers of the Corporation, periodically review
the Corporation's long-range plans and policies for recruiting, developing and
motivating personnel, and to make recommendations to the board concerning stock
option grants.
Decisions Requiring Prior Approval Of The Board
In general, the management of the Corporation is empowered to run the
business on a day-to-day basis. The board approves the annual business and
strategic plan and reviews performance against those plans on an interim basis
throughout the year. The board, of necessity, would approve any action leading
to a material change in the nature of the business of the Corporation, including
any acquisition or disposition of a significant operating unit. The board also
approves key borrowing and financing decisions. The board also appoints the
officers of the Corporation, determines directors' compensation and declares
dividends (if any).
Recruitment Of New Directors
Currently, if vacancies should occur on the board, the board seeks and
receives input from individual board members and reviews the qualifications of
prospective members while taking into consideration current board composition
and the Corporation's needs. It is anticipated that a nominating committee will
be formed by the board in the near future.
Measures For Receiving Shareholder Feedback
The board has requested management to make it aware, on an on-going basis,
of any significant shareholder concerns which are communicated to management.
The Board's Expectation Of Management
The board expects management to operate the Corporation in accordance with
prudent business practices and the direction of the board. The goal of
management, the Corporation and the board is to protect and enhance shareholder
value while managing the Corporation in a prudent manner as a fiduciary for the
Corporation's shareholders. Management is expected to provide regular financial
and operating reports to the board and to make the board aware of all important
issues and major business developments, especially those which have not been
anticipated. Consistent with its previously enunciated goal, management is
expected to seek out opportunities for business acquisitions and expansion and
to forward appropriate recommendations to the board for its action.
VOTING SECURITIES AND BENEFICIAL OWNERS
Only shareholders of record as of the close of business on March 21, 1997
will be entitled to vote at the Annual Meeting. On the Record Date, there were
10,450,000 shares of Common Stock outstanding, the only class of the Company's
stock which is currently outstanding.
The following table shows, as of March 14, 1997 the number and percentage
of shares of Common Stock held by each person known to the Company who owned
beneficially more than 5% of the issued and outstanding Common Stock of the
Company and Goran by the Company's Directors and Named Executive Officers:
Symons International Goran
Group, Inc. Capital Inc.
Name of Amount and Percent Amount and Percent
Beneficial Nature of of Class Nature of of Class
Owner Beneficial Beneficial
Owernship Ownership
G. Gordon
Symons1 385,000 3.4% 2,817,080 46.0%
Alan G.
Symons2 227,500 2.0% 541,557 8.9%
Douglas H.
Symons3 140,500 1.2% 299,368 4.9%
Robert C.
Whiting4 10,000 * 35,900 *
James G.
Torrance5 7,000 * 4,000 *
David R.
Doyle6 10,000 * - - - - - -
John K.
McKeating7 7,000 * 2,000 *
Jerome B.
Gordon8 - - - - - - 3,420 *
Goran Capital
Inc. 7,000,000 62.1% - - - - - -
FMR Corp./
Fidelity
Canadian
Growth
Company Fund - - - - - - 344,600 5.6%
Symons
International
Group Ltd.9 - - - - - - 1,646,413 26.9%
David L.
Bates10 15,000 * 4,866 *
Gary P.
Hutchcraft11 12,500 * 1,450 *
All Executive
Officers
and Directors
as a
Group (9
Persons) 814,500 7.2% 3,709,641 60.1%
*Less than 1% of class
1 With respect to Symons International Group, Inc., 10,000 shares are owned
directly and 375,000 are subject to option. With respect to the shares of
Goran Capital Inc., 890,167 shares are held by trusts of which Mr. Symons
is the beneficiary, 280,500 are subject to option and 1,646,413 of the
shares indicated are owned by Symons International Group Ltd., of which Mr.
Symons is the controlling shareholder.
2 With respect to Symons International Group, Inc., 27,500 shares are owned
directly and 200,000 shares are subject to option. With respect to the
shares of Goran Capital Inc., 449,183 are owned directly and 92,374 are
subject to option.
3 With respect to Symons International Group, Inc., 20,500 shares are owned
directly and 120,000 shares are subject to option. With respect to the
shares of Goran Capital Inc., 197,483 are owned directly and 101,885 are
subject to option.
4 Mr. Whiting owns 5,000 shares of Symons International Group, Inc. directly
and 5,000 shares are subject to option. With respect to Goran Capital Inc.,
all shares indicated are owned directly.
5 Mr. Torrance owns 2,000 shares of Symons International Group, Inc. directly
and 5,000 shares are subject to option. With respect to Goran Capital Inc.,
2,000 shares are owned directly and 2,000 shares are subject to option.
6 Mr. Doyle owns 5,000 shares of Symons International Group, Inc. directly
and 5,000 shares are subject to option. With respect to Goran Capital Inc.,
all shares indicated are owned directly.
7 Mr. McKeating owns 2,000 shares of Symons International Group, Inc.
directly and 5,000 shares are subject to option. With respect to Goran
Capital Inc., 2,000 shares are subject to option.
8 Mr. Gordon's shares of Goran Capital Inc. are owned directly.
9 Mr. G. Gordon Symons is the controlling shareholder of Symons International
Group Ltd., a private company.
10 Mr. Bates owns 5,000 shares of Symons International Group, Inc. directly
and 10,000 shares are subject to option. With respect to Goran Capital
Inc., 997 are held in Mr. Bates' 401(k) account pursuant to the Symons
International Group, Inc. Retirement Savings Plan and 3,869 shares are
subject to option.
11 Mr. Hutchcraft owns 2,500 shares of Symons International Group, Inc.
directly and 10,000 shares are subject to option. Mr. Hutchcraft also owns
450 shares of Goran Capital Inc. directly and 1,000 shares are subject to
option.
INDEBTEDNESS OF MANAGEMENT
The following Directors and Executive Officers of the Company were indebted
to the Company, or its parent or subsidiaries, in amounts exceeding $60,000
during 1996.
Date of Largest Loan Balance Present
Name Loan During 1996 Balance
G. Gordon
Symons June 27, 1986 $148,000 $148,000
June 30, 1986 $200,000 $200,000
May 31, 1988 $ 52,729 (US) $ 52,729 (US)
Alan G.
Symons June 30, 1986 $ 48,172 $ 29,772
February 25,1988 $ 27,309 (US) $ 27,309 (US)
Douglas H.
Symons June 30, 1986 $ 15,000 $ 15,000
February 25, 1988 $ 2,219 (US) $ 2,219 (US)
<PAGE>
The foregoing loans to Messrs. G. Gordon Symons, Alan G. Symons and Douglas
H. Symons are on account of loans to purchase common stock of Goran. Such loans
are collateralized by pledges of the common shares of Goran acquired and are
payable on demand and are interest-free. In addition, G. Gordon Symons has an
unsecured loan payable to Goran in the amount of $70,000 not relating to the
purchase of common shares of Goran. This loan was taken out on January 2, 1988
and is payable on demand and is interest-free. Douglas H. Symons has a demand
loan payable to the Company in the amount of $39,377 plus accrued interest of
$21,169 collateralized by a second mortgage on his personal residence. Interest
on this loan is prime plus 1%. In addition, the Company held a mortgage note of
G. Gordon Symons collateralized by a second mortgage on his personal residence.
This mortgage loan was originally incurred on October 3, 1988 and when paid off
in full during February of 1997, had a principal balance of $277,502.
David L. Bates received a $100,000 relocation loan to facilitate his move
to the Company's Indianapolis headquarters. This loan was repaid upon the
closing of the sale of his former residence in February, 1996.
Coincident with the closing of the Company's IPO, the Company retired an
outstanding debt owing to Goran and its affiliates in the approximate amount of
$7.5 Million. The Company incurred this debt in 1992 and, prior to its
retirement, carried an interest rate of 10%.
CERTAIN RELATIONSHIPS/RELATED TRANSACTIONS
Simultaneously with the acquisition of Superior Insurance Company, Goran,
the Company, GGS Management Holdings, Inc. ("GGSH") and certain investment funds
affiliated with Goldman Sachs & Co. ("GS Funds") entered into an agreement to
capitalize GGSH and cause GGSH to issue its capital stock to the Company and to
the GS Funds. This transaction gave the Company a 52% ownership interest in GGSH
and the GS Funds a 48% interest in GGSH. Pursuant to this transaction, the
Company contributed to GGSH all of the common stock of Pafco General Insurance
Company ("Pafco"), the Company's right to acquire Superior Insurance Company and
certain fixed assets with an approximately value of $350,000. The GS Funds
contributed $21.2 Million in cash.
Prior to the transfer of the stock of Pafco to GGSH, Pafco transferred all
of the outstanding capital stock of IGF Insurance Company ("IGF") to the Company
in order to improve the risk-based capital rating of Pafco and to permit GGSH to
focus exclusively on the nonstandard auotmobile insurance business. Pafco
accomplished this transfer by forming a wholly-owned subsidiary, IGF Holdings,
Inc., ("IGF Holdings") to which Pafco contributed all of the outstanding shares
of capital stock of IGF. The stock of IGF Holdings was then distributed to the
Company.
Prior to the transfer of the stock of IGF Holdings to the Company, Pafco
received a dividend from IGF Holdings in cash and a note from IGF having an
aggregate value of approximately $11 Million.
Jerome B. Gordon, a nominee to the Board of Directors of the Company,
received fees in the amount of $177,994 (including reimbursement of expenses)
for his consulting service to the Company during 1996 as well as 4,000 shares of
Goran stock worth approximately $80,000 at the time of receipt.
Two (2) of the Company's subsidiaries, IGF and Pafco, have entered into
reinsurance agreements with Granite Reinsurance Company Ltd., ("Granite Re"), an
affiliate of Goran.
Granite Re reinsures all Pafco insurance policies which were previously
issued through Symons International Group, Inc. - Florida, ("SIGF"), a former
subsidiary of the Company and now a subsidiary of Goran. This agreement is in
respect of business other than nonstandard automobile insurance. Granite Re
reinsures 100% of this SIGF business on a quota share basis.
Also, IGF reinsures a portion of its crop insurance with Granite Re and for
1996, Granite Re reinsured 15% of IGF's multi-peril crop insurance stop loss
protection ("MPCI") underwriting losses to the extent that aggregate losses of
its insureds nationwide exceed 100% of MPCI Retention up to 125% of MPCI
Retention and 95% of IGF's MPCI underwriting losses to the extent that aggregate
losses of its insureds nationwide exceed 125% of MPCI Retention up to 150% of
MPCI Retention. Further, for 1996, Granite Re had a 5% participation in 95% of
IGF's crop-hail losses in excess of an 80% pure loss ratio up to a 100% pure
loss ratio and a 10% participation in 95% of IGF crop-hail losses in excess of
100% pure loss ratio up to a 120% pure loss ratio.
<PAGE>
AUDITOR'S REPORT
To the Shareholders of Goran Capital Inc.
We have audited the consolidated balance sheets of Goran Capital Inc. as at
December 31, 1996 and 1995 and the consolidated statements of earnings, retained
earnings (deficit) and changes in cash resources for the years then ended. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at December 31, 1996
and 1995 and the results of its operations and the changes in its financial
position for the years then ended in accordance with generally accepted
accounting principles.
/s/ Schwartz Levitsky Feldman
Chartered Accountants
Toronto, Ontario
March 21, 1997
