ML20138P060

Genstar Annual Rept 1984

ML20138P060
Person / Time
Site:	07001113
Issue date:	12/31/1984
From:	GENSTAR CORP.
To:
Shared Package
ML20138P058	List: ML20138P056 ML20138P060
References
NUDOCS 8511060350
Download: ML20138P060 (63)

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'i FINANCIAL IIIGIII.lGI f15 For the years enJed Duember il

!!'S 1 1983 1982 I

t a _,

i n. !hons of CanaJun dollars) p Revenues mahons ef Joltars' Revenues 51,922.S

$1326 7 51.7N12 i

I j

0;vrating locome 253.1 252.0 21.5 1

2ao j

I Net income (Lms) 131.8 1030

(% 1.3)

{

i Dividends on Common Shares lo.S 21.9 27.7 i.n o funds Generated by Operating Activities 172.2 2(*l. 7 9.2 l^l'ce,\\4 Per Common Share:

sc Net income (lo3s) so j

Canadian Method

-Ila uc 5

3.50 5

2.53 5 (3..%)

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.6 r

77 %

7.

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rd

- Fully diluted 3.38 2.72 (1.b)

Im l

United States Method

- Prima ry 3.38 1 72 (1.%!

l l l

- Fully diluted 3.38 2"

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Dividends (current annual rate: 5100) 0.85 0 65 0 90 j

4s Ikk value 27.00 22.97 20.89

[

j o

j hk Prite-Toronto stock Exchange r

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{

lhgh 31.50 38.75 28.75 l'M l

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low 19.38 20.25 MM g,,

75 7 t>

77 Til 79 40 41 s2 al 44 I

Net Inanne timel Per Cwnmon share Total Debt.to-Equity Itatio 43:55 R 17 61:39 i

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i REPORT l

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during sllch a short pernwl li.is ale given Genst.it a more sliiiuld suengthen Genstar's real reflects the improved financul consistentiv stable source of estate and buildmg nuteruls strength of the company.

carnmgs. Eq uallv importa nt, busmesses and construction-CtllC nbklCrn!Zatloti alid cX-opCrat mnal arkl org.inlZ.it lotial telated operattorb will Cont mue fansl(?H of c Alsting oper.itions.

ItuptovCIUCnts at hulldiilg nla-(t) benc[lt heim the f.irge federal to enhance produenvitv and teruls and real esute operations road rchtuldmg and rep

.t prm cost ef fcCtivenew The corpora-liave enh.inced their ixitential grar:i iti the L'nited %:.ites Iri 1U111 spent $ Is niilllon on capit.il for growth under licaltliv tostto-addit:iin. the e s;.insisiti <if n

>r-Imp!ovcilient5 at its various Inic condit:ons, while offermg mg operanons w di pernnt prw businewes dur1Mg flic vea r, up gre.itCr priitectiori froni sCvere dtit t Min and distribut hin citi-tretil $ M million in lW I Of reversals in diffitult tunes.

clencies that should mtprove par tlCU!ar Illipor t.ince, Gensta r As a result of these Changes, margm% fWantul sCIvltes Will late in the year entered into negir clie conir.inv feels its hirig terrn als> uintinue ti,lx a sttisng.iral 1:ations with Ihrd Interrorated prospects lute unproved signifi-dependabic somce of mcome.

to acquire seven additional roof-cantiv It feels confident that and expanJed waste services Ing matiutJC!urliig phlnt% 'Ihat e\\isting o}Yrations are str.itegl-businCwes will make their hrst an}uls1 tion w.h CompletCd in CallV attuned to Currerit and f u veJr s pintribution to February and meludes rights to proiected regiotul economic con-ea r m n o-certain ihrd trade names This ditions and that It e.iti colnfort-I hese tatti>rs, biith ititernal will roughlv dWible lienstar\\ .lbly pursue new opiw>rtiinities and e < tertial. lead (;cintar ti> share of t f i riof trig inarkets fi>r expansiiin. Irlics e th.it its operating restilts and per m:t economics of scale Gcnstar is alm encouraged hv m IN will improve as the vear thJt should 'tenincantis reduce developments oteur rmg out side progresses production and dntribution the cornpany Ihe U s. crononiv co't s Girillnues to lv stronger th.in thiard of t hrectors the dn centure of busmewes economists have predicted, John it Hanulton. who had th H were providmg marginal ahhough cf forts to reduce the tren Chairman of Abbev Glen returns i,n aMts cmphn etb federal deficit rii.iy have some pro [Trtt Csir[ViratMin.It the time (;cnst.tr cb ocd its homt building d.imirnirig effect on the rate of it w.is acquired by Genst.ir. ()perath)ns in WCstern (laliad.i gri>wth in the futtire. While lit-retired from the contr.invi .ind Tctis 1ite in the s car.ind h tle immediate iniprovertictit is ikurd <>f Directors in 141 after now redircotirN !!* real C't.ite expetted in Albert.i arid lltitish cight years iif wrvice. Genst.ir is rcMiurces tim ard ubire prt)1tih Cillumhi.i, the reterit iricrease estremelv grateful for the role ing laiid and LonlmCrtlal devcl-in in) and gas exploration in Mr } l.itulltiin {l. lied dtiring the opment opperturunes The Western CanaJa is a pronnsmg assimdanon of Abbev Glen s conipany s nurine sJlVage and sien that econiimic recovery hobhngs fol!nwing that impor-shird< =.Lin e epcration in E ast-nuy be tinder w.iy in those im-tant acquninon and for hn w ne Urn Canada was.ilv> vilJ dur-twirtant markets. rescr'ing a t otirisel thriiiiglaint his tentire Ing the \\ car pattern of delline that lYgan in as a dlicLtur. [Iccted to the IkMrd

a 2 s peru nt mcrease m the los 1. Genstar also beheves the in May was Alan E Campncv dividcud rate In the ft)urth striing inandare given the newiv fiiiinding p.ittrier < >f the leg.il quartt r. Gen tar raised the electcJ federal government m hrm of Campncy a Murphy annual rate for conunon dni-C.mada signals puhhc support and I resident of Vanlev Agen-dends ti) $ ( t 4 ) PCT s}i.irC.

ti>r dchcit reduct Uif b, t})e cies bid Irl VandiuvCr-enciiuragentrnt of invcstnlent, OutbCk lessrestMonvccncigy[bbcies bmp!nMcs Gen't.ir tulo, o a wrufitantly a nd other devi lopments th.n I he thru tors w nh to wcicome different oc trant than it was u ill bas e p< nitive buieteisii car the list)sCA arid Ihrd einploy-at the begmnmg of the 1*lN n, muc t ticco throughout the ecs to the Gcustar f annly and to recession Jer a bnc: hi-tory of toman t hank all I wnn el the tom-its csolute n md relwd hu+ in IN tutt re't rates luve panviemplmces for their nc a phlb) 4 Thtc. plcaw

• te tile thlis f ar f enuined wtll bt b>W U dtribut hinN tilward linpf t A ed Gen'ur ( >pcranons ~ cuon on last wr s pcai Ictel in h ah ponha nvav and in t cf fctnve-pagn IJrld ?

(!!c [ ! 5 a rul l 'a n.it! l. I }it s rio* In Ih I I I he t(pr p;ratlorl\\ hilantJ Sho t ind bruntlal jvi~ltiim arc rmich st riiriar.i,.i re' tilt < >f /- I - __ M# b)w CT t t llophlVed i Mb f bM -~ l a ntl rt diH ed iipCr:ltIng J nd i A i r - E "' ' I I " ' "" ^ " f " ' ^ M " M " d """ hcad o penu ' l)lversiblath O Inti7 wa te Jnt! l hruncul u rviu s busmn n Mm h h.o n4 3

i Always opportunistic, the factor in those mar Lets. and to r i GENSI.AR company has made a number of aggressivelv manage us busi-1 OPERYFIONS key acquisitions that were criti-neues, divestmg or expanding 1 l cal to its evolution and growth: operations on the basis of their i Oln 1976, shortly after many retum on mvestment. When I The strategic direction Genstar of the present senior man-returns and market pmspects has taken m pursuing business agement team assumed their warrant, the company has made opportunities has changed positions, Genstar acquired substannal capital mvestments many times since its foundmg Abbey Glen property Corpora-in nulern, cmt-etfective plants j in 1951, but rarely have changes tion, at the time Canada's sixth and equipment to funher i been as significant as in recent largest real estate development impmvc pnx!ucuvity and com-i t years. company. Its holdings made irtinvc advantage. Examples Operating at first as a Cana-Genstar a maior factor in melude the S AU million spent dian holding company, the Western Canadian land devel-between 1977 and the end of { corporation originally nude opment markets, and the com. 1941 to modernize or build new ] investments in minerals explo-pany was also able to recoup the cement facihnes and approu-ration ventures and, later, in 579-mdlion purchase price mately 575 milhon mvested this establishing new industnal through salesof other Abbey past year and in early 19ss to companies in Canada. In 1965, Glen assets. upgrade its roof mg manufactur-l Genstar amalgamated three of Oln 1978. the purchase of mg operations and acquire. l its maior holdmgs and became 830 acres of land in San Diego, addmonal plants from thrd an operating company. manu-Cahfornia, for $111 million sig-Incor parated. facturing cement and other naled Genstar's intention to To tnat baste operating phi-products. Shortly afterward, it expand in a substantial way losophy, begmning m a maior 4 broadened its mterests in build-outside of Canada and into the way in 197N Genstar added a ing materials manufactunng larger and fast growing markets comnutment to funher diverstfy, i and divernfied intoland devel-of the U.S. sunbelt. both geographically and indus-1 opment and other construction. OThe company next estab-triallv. m order to broaden and i related businesses. hshed a maior presence in stabilize its earmngs base. spe-Since that time, Genstar's stra-building materials markets cificalig the company elected to l tegic plan has never been static, thmughout the Umted States expand us act vaies into us. J and success over the years has by acqumng The Flintkote markets and into the hnancial ] come from idenufymg economic Cmurany for 5117 milhon in and waste servaes industries. { trends and new business oppor. late 1979. As a consequence, (4) percent j tunitics early and adapting its CGenstar's gradual diverstf t-of the assets of consolidated plan accordingly cation into f mancial services, operations were m the Umted { In the late 19M)s and through-which had begun a decade states by the end of 198 t, com-out the 197o, changes were before, accclerated in 198I with pared to only 17 percent at the largely geographic in nature, the 5288-million purchase of beginning of 1978 Changes in first redirecting assets from Canada Permanent Mortgage the mix of Genstar's maior busi-j Eastern Canada to the resource-Corporation. nesses are equally sinking. 'I hey j nch provmees in the West and C!n 1981, the acquisition of are, however, not as readdy ^ then branching out into much about to percent of 3CA Services, apparent since most financial j larger markets in the Western Inc-, for approximately $2/d) service operations are accounted and Southern United States, in milhon further diversified the for in Genstar hnancial state-the 19hos however, the focus company and made Genstar a ments on an equity basis, not 4 l shifted more to industrial diver-maior supplier of waste services fully reflecting their relative j sification, secking out oppor-in the Umted States. si:c. tunities in entirely r:cw Historically; Gcnstar's basic for instance,if the corpora- { businesses, business phtimophy has been to tion reported assetmlits finan. j concentrate assets in regions etal service operanonwn the j expected to grow at above-sarne basts as those of other average rJtes, to operate on a elements of the cornpany, total large enough scale to he a inalor assets for Genstar as a whole at i f i 1 4 i i t t

i i t i i in the future't;enstar plans TlIE CllANGING NNIURE OF GENSTAR to mamt.nn its mterests in tmditom ht totap land and real estate develop-LJnd and ment and m building matert-Financial

• Industrial Buildt Real Estate als manufacturing. As demon-Services Services Materia
• tM elopment
• Total strated by buildmg materials ogrations in 1%, these are 4

51,2r41/ 39% 540'/12 % 51,202/3? % 5404/12 % 5 3,2'3/100% btisinewes that have the poten-tho $ 122';

• Sin s St :MW $6 ' 4 - 2 v.-

5 212il; httr% tial to reward Genstar with tncome,- 1984 5 121/3 W 5 4ci/I V% 5 103/W% $ ?4/22% 5 344/ItW N large gains in income during [ IW) 5 R4% 5Ms 5 1l M $2nls4r 5 h 10 % periods of CeononliC recovery or i {rosperttv, although they mtnt A wets-19s4. SiL264/M% 5401/4 % $ 1,023/10% 5"C % 51n 46o/lW% oc prudently managed to pre-I 1% $ U2m $14 W % suu va Wr 5 M20 lh% vent serious decimes under i

• The f o r nun..nd mwnr vi mdmu ul en un nHeo an (Mun.oed M1 wan omint*

recessionary conditions. nom M p r anons nquecd from sCA servi n inc. m se pr mtv t los t. " f e-t A The greatest growth in ftittire I <x&ae wrp u c cyvmo and auen 1:.wmc icnccts ramion bciore inte rnt anno M uwmet,nomanbr Womiwniut mtont ureme o deductra years, however, is expected to f nur r om.d kir.g bemos for that ty;v be m huMnesses that are leM f rrm tuuns u! en an h cun Ivc aaw u t-2 i a a in m < r.n am ui can e.# m h.n,ou u me and sn u non..oc of c5 clical or less sensitive to ax.mt i anh a.uctrr:t thauoe r th.n: the ae nf m.mu% tur m ana uhrr <tmoom retent expansion of waste wr-l I the end of IW1 would inetcase Ahhough the econonnes of the vices acu vities. for insta nce. re-I from the 52.7 bilhon reported Umted states and Canada are presents an mvestment in an m its fmancial statements to Imk ed by many factors, there industry that is largely immune f somethme in excess of 510 have been years w hen they are to external economic mfluences bilhon. There would be similar, ticarly out of step with one an. and that is ex pected to grow at i though leu dramatic, changes other. In 194, for instance, UA an average compmnd rate of in revenues and operatmg operanons accounted for nearly 20 percent annually over the i income totals two-thir A of the t ornpany's em e-nnt five ycart Usme hgnren alculated on that nues and operatmg income. Con. This means Genstar will i baus. the table abm c chmmtles v erselv. Canadian and otht r open continue to evolve and change ( ) the grow th of tmancial services ations outstdc the Umted States in the years ahead. l 1 over the past ine yean in exam-contnbuted approximately 90 The obiettive, as before, wdl i i inmg this rable,it becomes en rercent nt total operatmg mcome he to achieve an even more i { dent that hnanaal services has m IWI, esen though res enues ideal business mix, benefiting become Gt nstar s largest hne or geographically were about equally shareholders and employees i busmess divided. It n this tvpe of diveruty alike by sta bdizing earnings in j More impor tant, had earnmxs that sottens the etteet of negative difficult economic times and i f rom hnanual sers tces rem.nined t canonne (onditions when they providmg greater oppor t tini- [ static Jt IVsO~s level operatmg in-are not umformly felt throughout lies for growth in pe:tmls of come m 190 and IW i would North Amtrica. prosperity have been reduced by about one-Genstar has successfully quarter and one halt respettsuly effectu! such sweeping changes t 'I be importJM e oI C011stal s ci' irl its hl14 Deers throtigli a forts to dD erMtY XcoXrJpbitally decentralj2cd style of managC-also luomes clear from the table inent that enwurages on site on p.n'e 11 w hen one ettmmes entrepreneurial Int 1 ovation geographa sources of tornr.mv from those who direct individ-f income in 194 and 1%l, two ual operations. Those opera-t years of widely ddictmg eto-Oons, however, retitain stibiect I nomic conditions. to a untform wt of financial l controls estabhshed at the cor-jurate level. l l l l i b

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Financial services was again one of Genstar's most profitable businesses in 1984. Operating income was lower than a year ago, however, because of re-duced sales from the venture capital portfolio. J l Financial 5cmces *> Revenues After experiencing particularly Mortgage banking. In the mun-m w rapid growth m the years from U.s., the company ongmates or im in to 1982, fmancial services purchases mortgages and resells j II l equitvbaus.iforadditional has become one of Genstar's them to insntunonal investors. largest busmesses. Its size, how-It also services a large entfolio ever. is not fully reflected in the of these loans for chents. corupany's hnancial statements, Shipping container leasing. smce most hnancial services Genstar entered this busme s in w results are accounted for on the IW1 and had expanded its flect i of contamers to more than l detads, please see pages.t and S 89,aO twenty foot equivalent i o' ' ' " """ of this report.) umts by the end of 198 8. 4 Genstar is engaged in a di-Leveraged lea e brokerage. j Financial Semces "" verse range of fmancial service *, In the past five years, Genstar Operating income includmg: has arranged more than 51 bil-muu m a a w Retail and commercial lion m capital equipment fi-w banking. The mmpany acts as nancmg, hnding mvestors to [ a f mancial intermediary purchaw plants and eqmpment l throughout Canada, accepting for lease to the company's corpo-i m deposits servicing checkmg rate clients. accounts and origmatmg mort-Venture capital investment. I,I, arv aw(lo.trid other internledt-gages and other loans its loan This was Genstar's first hnan-

• '3 pirtful clal service hustnew, estabhshed ts amounted to alout in 19M In reccht years, it has e o uu u

$7 4 bilhon at the end of IWl. also been the most profitable. Trust services. A Genstar investments typically consist of subsahary is canada's fourth equity ho!Jmgs in recently largest trust wmpany, adimnis-formed or emergmg high. tech-tenng su bdhon in aswts for nology comparnes in the U S. pension funds corporations and i "H"" unhviduals. Its f ull range of - N '""" -- hduciar y services alsn includes C""A U$ "d"' k"I stid regtstration and trJnsfer, \\8 V H "'- l dividend disburseinents and.id-j nunistration of personal estates. p, u -.in-int i Real estate brokeragC serVicet % n my b G<nstar has a nationwide net-n nh i i work of more than luirealestate II""""' l sales s if f nes lin.ated in eight ]; "' i jg Canadian provmces ( en o r I lectronic cQulpfliellt reritaI. It rIN t !I II I Ihe si. ort terin rent.il of clee i m " ~ll e tronic tett and incasuttinent [" j' I d l eglllpinent is a gripwlllg blisincu

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i 1 / ~ The assets of these businesses, which consist of j Waste anO marine services, more t,han tripled in 1984, and operating income rose substantially ) when a major acquisition made Genstar the third l 1 largest waste services company in the United States. I I 7 I industrial 5crvices N ~ -~ I Revenues The acquisioon of a portion of Marine Services } q anai - niamaue SCA $crvices. luc., significantly Genstar operates a large fleet of j j expanded Genstar's waste collee-tugs and barges along *he Pacihc i non and disposal activines and. Coast of North America, trans-1 in terms of assets, nude indus-porting forest products and a trial services the fastest growing varietyof other cargoes.The j of Genstar's businesses m IW L flect also perforna shinlochng. ferrying, hghtcrage and salvage i m Waste services services. In addition, a smaller Censtar first became insolved ocean-gomg flect transp uts oggg,n,,,J f in the waste industry in IC 3 heavy hft, modular cargoes and when it began developmg sam-provides specialized support j tarv landhlis at quarnes that services on an internanonal i hed raw materials to os basis. I ] Industrial S< rvices C supk'hng materials divnmns. In Vancouver, the company l ope raunx incorne bui anai rns ea *' 1 he companv has since begun also operates a shipyard that ha.s l markenng a process for recover-extensive ship repair facilities mg methane gas from landfills and can construd vessels up to j burnmg it to drive a generator (4) feet in length and 150 feet w and produce electricity for sale m beam. to local utilitics Genstar also j operates urhan transfer stations, waste services Operations i i io i where wiid waste can be conve-DF 1""I [ f niently colleued either for trans-whd hte r U #"" '" 2' i "k% A u port to datant landfills or for R d"#"stanon s l fransfer M j recychng and resource recovery tane n, w peticaca in ihr in addinon, its rubber recy-Mahane un urosvnu t nergv I; NM" IrI Tw'r,'y chng plants converi scrap tires cc no aoon riann i I mio crumb rubber that is used kubhr suu hng riants 1 j ..a u o,,na a i %, for the construction and mainte-P' P" "" " h " 8 m ment min-c-o r r [Oi /nIn$",'c'"n'll/; nance of flexible pavement and $T,M"l[ [ en wa chennui, ne runnmg t racks iteclaimed rub-run ra and tmogenn da hne in in i omong her n also sold m other forms to %: vn e su oo m i i E.C,"1'llllc!I.N[C manufacturcrs of t res and other

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c The manufacturing of building materials was the company's most improved and most profitable bus-iness in 1984, largely because ofincreased demand in U.S. markets.Further gains are expected in 1985. 16' " Building Matenals Revenues Censtar manufactures a large Cement / Lame imahonwe aouuw number of building pnslucts in OPeranon' ^"""'IC'E, l""" "3 both the U.S. and Canada. For g,y""olumba - bin I Cement, Aggregatesand fmancial reporting purposes, C x these activities are divided into Mamtoba Wmo y the two broad areas discussed s,aatchewan - 227.sto below. An:ona 6*IuWU Cahforma 12 URO l.2a uto 'da J O $h Concrete pnslucts .g,,, ,'gpg zig The company is a leading manu-o -fA f,, c .s3,n,un, facturerof normal portland Axxtegetc/ concrete Product cement and various specialtV opersooni nuildmg Materuin 2:o cements in Western Canada and Typn of Plants Canada us. Total operaong income is a maior supplier in California. Agg re g.no-20 lo 30 aminons ni Mian' oregon, Wasnington and Headv-Mix concrete 22 11 36 Nevada. In the Western United Premt Concrete 3 States, it is also a large pnxluccr ej ) ) of hme pnxfucts. Concrete Rail Ties 1 I In addition, primarily in the nlx k rer:Asphaloc or I "ada and the mid-Atlantic region four Western proVmCes of Can-thtummous Concrete 6 7 II Cakium Car bonate t of the U.S., it pnxluces a variety g,'$"$d Man 5 Ik P f " ' ^ " d '"" ' P '"d " ' Q^g'{I wi 75 40 iii and also provides construction

• lntludes und, y avel and crushed stone-O g g service $

Gypsum WallboJrd/Roofmg The raw materials for these

operaoun, Annual Caracav-businewes are generally sup-t m oon walneard Roolmg plied by the company's own pits 3,3, n u,

ioyu tind qi arries-C shforma 5'0.0 0 Coloudo 22mu Wallboard and Roofing Georxu Wh ' " 17

• C Geristar pnxioces gypsum wall-Ilh""]n,

' st 2 g Inard in Western Lanada and Mmmwu IWM O throtighout the United States Nevada 41 's t i n and is one of the larger U.S. Mw kre 2'000 manufacturers of asphalt shin-Orex"n. D "' " gles, rolls and liquid coatings. M 'l,* "h "' uunni h'$$ The scope of its roofing lCd with opera-Alberta 17s uo tioris Was ricarly dotth nr m sh Colu mbu Ir@ O ( the rererit acquisition of eight ad-sa42'cbewan luuno I dittorial manufacturing plants. loul 1 91 W 4) 2.170M U The company now produces

• N " ' h " 5 0 8 "'" ' ' c l u d c ' ' P " ' '

{ about n an ions o# hquid mmniond- ) nW)fing pHK} tris !!nder lHit}i the n ino tons of rantboard end fili. flintkote and liird A Son trade R'm eon of f wim mat and mum l tons of granules WalDnJhl t apacity b U A MC\\ atated in thonunds of square lect (for 8 1 shif t 6 2M d o-per week opersoon61, i romhng 13 m tons and includes carat men [ atquurd f rom ibrd Inc in catly WR l D l

_____..__m._ l I. Y 9**' } ~ t]l.N$ar rt't cl a WWW ^ j f fs i v* .hMI prgg $$ ton s entras t)?r t 0ns rt'!c u n*4 ratluuy tws tlar lcltl h lW andal.leJwm;vnent> wrt ri auraans bna (sas s is it, low efpraast wm rae n strw tures. l 4 5 a m 3 k, M. y y It i WWh Mpy FW \\ WM w& i i (yyj:XI; prmeet and the expuanun of mnes for mduerul apphca-governmem housmg suhtdies nons Genstar.um ru cn cd a

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t}ut }ud sunmlatcd salCs W nJw Y bnnIhon Lontratt to l (3 W G ele l"M In the nnponant Alht na mnonue suppk g( oncrete i market Imwe cer. reduced attiv-

.nlu av nes to the.uudun i

i H ( )l M..I.l. b uv m N od and gas indusuv Lumal R.nlu av owr the next ( 1* cacant hou mg. apartments now proda-J mme tlun ? ; 1 othee buihhngs and commer-nnlhon of the' nes. Jouh!c the j f I"' cial C()inp}cxck.Ind new Oln-number (if aG\\ tit!1Cr Niit!}l i s !4 s a i w's j 'aruCIllin f emal!b a' a vC!v b)w Amerlfdn nunli.ltlltrCr. Ccnstar s c: ent, ai. Art Ja!c and IG C! ~I!1C 4tuat h al W.ls Illrther l he furtla r dcclme sit hinis vinJrcte pD >Iu lt <, t ratD;tB [h b cXJWer}51ted in lW I w}len high Ing ' tarts in Alberta, tinjpled ductd ? }ar.C m. r ase In t'jwr:l' unenlpblyrm nr rc411tCd in a % !Ih that pria trwei dis erst < tri Ing niu)n N Ilnd lO I G a reUMd number of mortgage fore-of roadhul!dmg tun b to f mam e f a'mpa ra n, s sm.l![ riv in rd t !4 !'alres h }l:ch furtlier depr ewed licht rail tr. instr. alsi h id a j nues. Incr acd deman ! for hung markets. detnmental ettu t on the Cana-j the e pn dum m +t Cmt-d Canadiin <ement opera-Jun can'truenon o;wunons j StJtt s Ic' 'I*ed !!a a Inarkt d ID !1% rCpirit d s<)mewhat b 4wer th it src< !alize in subdivisu ni j linph n cmlit in h h.! U;Inm: \\ a durnes and carriiiirs thari a servi::ng anJ m.uticipal(on-s l Jndph)h! ur inx 03 re than vcar ag<i. but they still made a se ria tn >n t Mr.ill resiilt s trisiti (if fsetting d'tII'lcs In ! cy Cana stihstantial aintrihtitD)n D) GCnsta r s t ( >llstr utt vill.It!!Vitles j d.In markcts UIC Im pri m inulme. Ira rcJ sCd CXptirts trtini in l'JnJd.1 % c! ? bCitCr than a ment m n wn al u reflcets the the Bntnh Columbu plant scar aga however a s the mm-absente (if b b.c aw4 1Jte d % 1tli nu>re than <>tfu t rediired pany airnpleted its withdraw.il i heavy conerucn4,n va d anJ demand m the domesuc mark ct, f rom m.nor bean tonstru< non the prMr yeaf 'sa!C (d [Jstern and b et}} UXJNrt and daimcsnC pn m t s and ( rillet tcd a pi)rn< >n Caria d u n inanu[att t1r in g (plr.1-shipments rinC in M.iriitob i. < >f it s claims fist e xt ra ser vices. tions hith of hint}l had nc w I1cW gairn. h< >w cver, f.iiled til Mir t Canadun operanons fiveh af fcettd C lt'u ngs In lh $. ni Itch dCClines clsCW}lCrC, t" pC' b cre 'a h (Cwiul in keeping h t)r k-In Canada. conurutnen acuv-cully in Albtru I hcre was ahi mg tapiul n-kr oght monol ity llU provcd in '. lam'oba, J ad Dimpt tinte pressqre nn prit cs through a ainunuing ph Nram I$ritb}} O)!utnhu n:arkets in u)me regDin l4)th f n un (>thcr e d inveriti>ry reductoms arid irn-rem.uned teamnab!v healthy Onadun pnducers and from prm ed mlletnon of ao ounts I becauxe of werk amiated with nu por t s recavahle. Al % m order to l Expo' a larG Internall )nal Enults at (Elnadian aD',r" redm e overhe.id cx;wnse, all s CXpt hit Din rsi he hcid in Alte anil aint rete priK!uct Inatiu-af,grega'C, t sincrete f ra dutt.ind 1 Vancouver next gar. There was f at tunng plant'. par.dlcled thme unso m non sen wcs opcunons 4 a small dechne in atuvity in of ccment operanons, and m Weveni('atuda wt te conmh-h hkatthcWan hetallW id (om-dc!!1.l'ld dt crCa cd fut nu r ! ppi dat(d WD}nn a smvIc thVbhin ph t hin id a laric hydD w lettr!C dih tv hal's (d [JC kap,cd nuh rl-Inc,irl% l'JW1 l als rf he. }h)WCvt r. lH1.luSC (d tile ln t},c { !nif cd \\t,ltc, ( lctisf ar's I expanded use of dry ban:, cd operanons e nmed vntly dif fer-cut nurket vinditD rrb M.lft ir l 16

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h-___,__,,4,. ,,,,_,,.u m -.c_ I i l 1 l C.mputernedJupata s s-a, , wr m-s f p rems fer Jehwries of re - ~ t ( f msg conae te(far leftlan f sepwissarrJstonarwinng \\ l s e r~---- u,t svn:rcispiems unprowdere 3 \\ p !a( l y ktmty. reJu.ed n 0>ts and ) e, san.edpront, at us ,pacn,,n w i I i a d [ i 1 e t j w- [ e i l s' 1 p n. feder.il and < tate read resurfac-rose.it UX linie nianuf acturing and siles will: er.elit further in me procams contnbuted to operanons during 1% 1 w hen im fmm the quung of two i st;0ng dCm.ind in a}} Munir dCnund fiir thCsc products nCw riants in its se.ircli for new [ tllarket', h tidJ unu ud! V Qu(! Increa sed in tlle Mllning, Lt.)((Cr. appllCatlolls b r Its pDhlthts. l % Cat}itr pa!!k'llar}\\ !!!t}ic ct?n 711ctD111 anJ Clectric utiini

t. ! s. i,perat u'ns a!~ ) 1+cga n ut e l

fw rth qua: ten len, thcnCd the mdm rics weathernelated kun p!vme ship badet for the hrst construm.n va% Low c r hutda ns m Arimna md toremlo-: [ .. uest ra es ala !cd m a larec Nei.dl ux tcased f a' and nuin-Capital ex pendttu rcs at [ side"!!al 0 "bt r ut-tenallce o nts..lltiWCVCI,keepini ( CD n t, agg rek.ltcs athl CtinC!de l InJrCav i j ti! 2CJr s ' !O I at j h ius n2 ti;*cra! ' < l ncr ynt a t a pj'It)x1" [D 45uCI t >pe r a t:('lis a n Min nlCd (!

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u.H!- IP t }' ' \\ Ca r l s J h b dC nl.ltcIV () s.lMIC }cVCl.b J \\C.H f i b Willh'n 15 lM E up f mm i l cuen!u!tb =,Cofl'-s Prn ~ 'f am Ut.uth is ruiw under w,n W ' nulhon a \\ car am tana ( inani po s !s h aC In Tcsjs'n C tin altri tut.c f tlel Int xCs t}ut dian!$peralSq14 }astVCar to Jt nur.!.nd ruenth r > rn-du Ja b m a produrnon costs am po red.uf J a mnal readv-nu t ntin. 'lcw !; p;t r!!:L ts are.lls) bh iCk and [f cCas! st ruJt u!C lZe,} [} 1: :! f tj ulp' m 'i c!!D i t o. nc StbTCd, including tmc IILinu f ac t u ring I lil!1tlCs '[IlcsC p ', cd ;'!: mi . J 4 !.llt pa vltig th.lt p}a nts. I!! ID)'t C l'es b.1 VC [ \\ t 11 l IUdt u!

• a:.!aL! urin g

J:.tl p.ld ;14 d In.itt.r la! s pl.lrlt s Ing t!P' n IL l [la nt in F.cMir,. ('a!!b TI;u..i! !!g of mad nulhon exran "n and na d rn-Etu.d1:1 1* as it%J;DHys rejlli.ind((41 t rilet h 'fl O dl-If at D dl 41f (!;U lt 'n;pallV N la r$' t i ' > 1m; <.rt ccitU n! tr.lsts. Nci. U dnpulcr!Jed dl; Li' t ('a i.I't (l u a r r Y l s utider WJ\\, unt ef fet e for rt ule at im ' w! t 16 ound pat, h t onto d wstem tontrib-and new portaHe blaCL top eXuedtd !!. Oct!dily plant \\ tital t() higher C 1rninMN fn un plant, wl}} }Wlp nicct incrCa Pd capauti I h" burnum of.dter-reads nu x conacte operanom road n surfaung necA ibit a C flu.} 4 I noWbcWg alb! 'a!cN ()f L al llilfl ca r he dlJte lh() dCVeli:pnient h al41(K - l t xphmd as a : ans of reduan. I" nef acd fnon contmume currcJ m le 1 tlut shou!d be of r I tnergy ur ts at the km Andre.n stn ncth m the automorne mmficant letcrm benefit to l facihty mdu'trv a numr cu'tomer for l rum nt operanonx 1 he in j li.es en LC'.ind 'a d u n.c' alv ) t h'. se p r< d uct s Ihcrehealso i t derJl l'Tade Ut unnussitin f rt un rcMD)\\ ed rt strictiotiN t41 the Inlpa n eniclit In carrline s [J( kart'd }U M1H rep lir Illattria!s a tjul itir al f.f add!!Mdla} ccincnt f i i fI

i l 1 I H 7th the aquisition efsmn I a.lJitionalroofine materials manufaaunneplantsfrom (. Ft \\ r f* '~ * ] . &'&T.., Bird inarydatedin early a' l 1985, Genstar nearly Joubled its capaaty to prrdu.e i ,~ rxfung produas. M .a l 1 i I h %W~.4RLM g, j + A..y.. mmesw - w eA I ternEnals in Gensur's prunary build'ngs and homes have been roofing sales almost tripled j U S. market artas and on supply-abwbed. and that is not hkelv despite soft CanaJian markets ing its U.S. ternunals w ith to occur before 1%. Also, much and continuing difficulties m cemem manufactured bv the of the construction work on the nufmg busmest BritSh Columbu plant. This Expo 4 has now been com-Fins sament of Censtars will reduce tonsporution costs pleted, and there is httle new bmiding mattnals busmess has l m Northwestern US. markets. actn itv in Priush Colun.bia to been the mmt responsive to un-I which haJ previous'v been sup-hll the vmJ. proved condinons m U s. home-P ed by the Ca[if0Inla plants The U S. tement operation, but ding markets, and lunising [ In earh 16. the commnston how ever. shculd contmue to ,t.ux though up only shghtly i also Ftsd restncucas on expene r te 'uong demand, m I-1. have nsen more than Gen sta : ecquinng new terr cn' highe vc!cres and improved M ptreent over the p nt two l and readv-mix plants in those pncing and the hme plants scars Genstar operanons also i same area In racipanon of will i.en; fit in m better pnxlue-mere ned their share of remodel-ths Ge: :ar m late le I cntered uon cifici a:cv and tl c introdue in-: and commercial markets m nto a paits nhtp apeement non of n-w pn ducts As a re, h, tw 1 in part because of the l wnh S A Ment :ne, CPA a incom; tmm luh of these bus mtaduconn of new shattwall I teth:M!ce CaI!Y adVanetd Euro-nes shou!d ab.o have roofmg sntem for use m wm-f growth. CliR imu.ly purchased another good m r, although mercu! onstr uc tion. l a 1; pen ent mterest m Gemurs then ahhty to n.atch 1% is T he companv's wallboa rd i CaiifoTniJ CemCut plJnt' and retord performance will depen',' volames m the U s. were 10 lids the < voin to intrease its in p Itt '1n favr>rable weather percent higher than the year l share to m percert. In the future. co n d.t mn s before. smpassmg the record Clm w dl share a3 technobygiul estat hshed m IQN. UN pl.mh devek>pment, with Gens tar a nd operated at.dout oo percent of i will contnbute to the cmts of WAl.Ll3(),\\l{l) ANI) capaity throghout the year, expandine this buonns as and Genstar's three Canadun g( g g ; ygy y g q 1 opportumucs arisc plants ccmrensated m part for The outlook m 1%5 is for sof t domesne markets by expon-improved earnmgs from cement, IM _ W ing larger volume,of wallboard i aggreg'ates and concrete pro. (nun ""O to the U S lucts, with U.S. (.cment opera- $Q g, Wallbnard p ohr margun i tions secountmg for most oi the t cnehted from reduced over-ncrease. In 1% 1, Genstar shipped record head and operaung costs as well l j Demand m Caaada is ex volumes of gypsum wallboard a' from improved sales volumes pected to remam relatively weak. from its plants in the U S., sell-and nemg. Distnbution ex-E Although the ex,unsion of ing it at much more favorable penws at wallboard operatmns i heavy oil aad tar sands pro;ccts pnces than in icccm years. As a were reduced by relymg les, on ? heuld provide a needed stunu-resuh. com bmed op :raung company owned supply centers lus to the Alberta economy.1 income from wallboard ar.d .md sclhng more wallto.n d matt uptum is not expectcJ enher ducetly to major <ontrac-l until CXistir)g inventories of tors or through ( xternal distribti-i Lion thannels T hree addiuonal I 18

1 1

l Genstar's sales and nmeme l

l trom gmum wilboarJIncar Idd readed rewrJImis m i I Im. und it opencJ a new \\ g glass-matplantin hasis i pberglass grousne Jemandpr hcip mat \\ badelarphalt r shmg!cs. i <4 -g j a F \\ .4 r 1 i ' app v centCrs wCrC ClthCd Ir1 (CrtJin 81rd tr,1dJ njnics, Ihc 11 :d ' clie ir t.iracit y. t!vc ! the 1I r t remain are agrecnknt a!sicalls for Bird t< > aimp.inc11a' n aNe t4, i. h, e 1" 1. t prUlurdV in the hieher gmw th market :mimg pn dut ts nunu-a !c' cWci ut uh. cle. pn >du arc.ls i l t ho l' ited St.ltt 1 (i" f.1Clu:cd hv (',CnstJr fl1D M eh ( U 1n f.K i[it' a ;-d till Inect It s I CC"crJ! 4 ICmN w h:t h dnve Birs! s, ttwork of dntnhunon . numt nt cd o dus m.ut r ul I generati >r4 aP d pri da ' c!cctric-tcntc? If;* cr na } } v u nsur alvi is nim ity with the htat uvd tiidrv Widi t hi 'c pl. int addit n >rn <>nc e f ti h a n.idir:g uiii:pa-l w allbs :J als) redu s!crcret t;cn,, r u;rit thuihin! its n: in the t: 4 with sranule

J prict s matati.a tt ring tal ac:tv ain!

nuir,ifa

• rine ap.ibilitt ~I bi s I

d ot s d url".4th vt r t t it r a '. "u'sY11}s and trt ICht du rc i-! n a ding nla t kcis IIU $ - typef f UcItRal Intedrall(in i i remair u! re:anvclv 'INe mg po de nonomics of cale en ur s - & pe: !aNe supriv of i cr b >Tr! tJ abilmprim'! at af hl tech e stcal advan e-r.iw mait ri;!s and tiirther i h 7 alt roi n :: plants n ents th.u should m: prove n du, es maufactunng i mt s. (;ct tar > m 1" ' W naca-cd cntu.d pnan r arcm The atqortto o w di also .l il T Tr w di IJ pn dt ut s h<i vet r Int '.u. cJ in the Br i d acq tiisi-a:h.w tr o m p:;tet<'vtrarc l wassn at n ~hort d 1.thm ta,n we re n orma grund plants of 1.un r nn L ..t b'wcr f reight l 1 capa<t' < wI ch has gn w . irk.u w and Ca'itorno and and drtrd utm, o rts in addn .a b.cau c < t txhn A rea! n' avhah s'ungic manuf tunng nor. n a dl per nat the usnsol-l pnc.ement m both : n tcru!s p! ants in Northt rn and (south-n!an, a nw eperanons and CQu'piner.E As J rJsid?, er 1 Cahti Inu, [oubun i. rcthE m gove!hJad O pen'cs compcut vc pr "um further Orceon. and wth Carohna and ; :pmvmg pndutuvin hv deprJ s<d prics.lfid th Ihc % dith (:aridiru pla: t alvi sliif ting t <:t.iin tvpm i f ; r< duc-plant s u f nt1HL. fd ti s 'att at a lus ir af;Ule am! filiciglJ s. HLi t (D'nfrt:n ah!d plaritstsenbire [t m nunilbcturing capabilitlCs O bl-cIfn!!vc f act}l tit' i 'Ihe n 6. 'n !u ars as a shingh s niad ht>rn.nphalt-(:apital e xpendittites t<> rrn xi-l wnolc has not ba n En,fnah!-in coated hhcrgle, mars luve cap erm:c Gen tar's n uhna.md !ccent \\ Cars and a siirc 4:ll:}a-tured an incrcJsing sharc (if wallh,ard plants in l'M ! j (H >n of J )mc ti p ai'. C c rna r)r T wifmg niarh ets in rccerit vCa:s amountt d D) f l S ' nnllhin, t tim-( Uunuf icturcra is DJt dt d If, ~I hcy i:f fer gr Tatt T flic !cststaiRt parol frii } \\ ' n:lllu tin a ycJr arf L l achicvc a rea cuan b dante than conscnnonal felt nut in UM Gt nstar beht vos ! ucnu nJ. shingles atu! ala, require le s < perating income fnim this wg-l between ca[at n \\ 't IlcaigntJing thb,(,cn 'ar has asphalt tii nianutatture. sigritt: ment td its hutiding nuf t rials made W\\ cral s:gluf tt.in t tantly reduCmg pnMlnition hu mc wdl umunne td i I t ha nge s m us n,ome or ranon cmt s The acquninon will actcl-unprove Although profits from I Late in the, car, the aimpany crate Gen,tarx umversion to wallboard nunutacturmy are acymred a ninhne p! ant m Hii-hhcrglaw shuMcs, whn h cxpet red to be somewhat lower Dith that is prt entiv being rerlo-ac counted f.>r 41;x rcent < >f Ilird s dun let vcari reoird level. vatul and w d! pernut th" clo-output last nar nur', ed unprou mt nt n annt n Ing of an M1r. It s, ef f D KMt Gen ur J!W (ompilthf con

• pated at mohng Up ranonN

( (!cnstar f.lcll!!V ne.lrh ln GlflV structMin of a McW fl!Crgl.lw w }R f c l! hND sbluld dUninbh I UM it then purchawd for nut manufacturmg pl.nu m steathly.n the n orumcanon of Jpptr)X1!ndte}y %I mil!1on [t Xat during the s 'i.f ind q ua r ter t hn htit tne ' j'!(Tic -Ws alul wven Jdilltpinal rtuding prod-of lWl With t}ut plant and i f fct tsid the Bird acijubitum uct pla rit, fr 'Tl Nird Ino lf-aft'tullyfeh. porated aluna with rights to N

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r i Lower revenues and income from real estate devel-opment operations in 1984 reflected a realignment of activities within this business. Genstar is now applying its resources primarily to the development ofland and income properties after withdrawing from homebuilding activities in most markets. Land /Real Estate W Development Genstar acquires and develops Acreage for Land Development

• IICId Revenues land for sale as lots or in larger i" P '

imillainsof d..Hani s2s parcels to builders of residential, owned u n d er iip Total conunercial and industrial II canada 11 oM Mw 10.780 23.s49 properties. Development gener-U.S. 7.627 4.852 1,490 13.969 y ally includes the installation of Total 19,5 m 5,658 12,270 37,518 roads, ScWers and utihues and,

• At December 31.19M; the total owned.

frequently, the e mstruction of opnoned or held m partnership at the 17s parks golf courses, lakes or other '",d;'3913*'My;c*,^] 'g'i,$'io,', 9 '8 amen,ities to enhance the value p.4n m i9n ana 6,3i7 in ive and utdity of the property. Pri-oy,u n y maryareasof activityinclude h",',,1,' p{"ggj P the provinces of Alberta, British 19u 19a3 ,o d $",(Real Estate l Columbia, Manitoba and Units Sq Ft. Units Sq. Ft. p Ontario in Canada and the states Operating income off,c, of Arizona, Califorma, Florida, Buildings 7 526.000 6 583.oto gosq vo iminions of Mura Texas and Washington in the Shopping U.S. centers 8 929,coli 5 627.n o In addition, the company has Total is 1,455,000 11 1.210.au I become increasingly involved in

• ^t necember 31; figures for 19m include one 310110 square-foot shoppmg center the acquisition, development held through a minonty iomt-venture and sale of commercial and mierest.

industnal revenue-producing g,;,g o,,io,3,j,,. properties. In Canada, shopping 1980 19u 1982 1983 1984 g centers and office buildings are-canada 1,7s7 1.68: 1,259 944 ass w = > a2 e" r for the most part, managed in a U.s. 2.827 1.729 1.190 1.061 70s portfolio ofincome properties as Total 4,5% 3,413 2.449 2.cn51,089 a source of cash flow and long- . Ai oecember ai; figures mciude sates term appreciation. In the United by both wholly owned operations and ' mtwenture pannenhips. States, most such properties are generally built, leased and then sold.The maiority of these com-mercial and industrial ventures are concentrated in Ontario, Alberta, British Columbia and Northern California. The company also continues to build homes in selected markets, although its home-building operations in Western Canada and in Texas were i closed during 1984 as a result of i unfavorable economic condi-i tions in those areas. 4 i i i 21

\\ n _nn v- -~ m - ~ spaialaelfaahtinpr lease ,x - - ts manufaaurers ef high- -M + "^ tes hnologyproducts conmb- .n N. usedts recerJ earningsfrom mw~ n. . '\\ gpg g_h( (gropert Jmispment income 5.., t. ,$, g pg Q_ '[ 9 c._ _ {%l.?b E 3 7 L ,.L,, b. nd s pk;f k-w i ) had been sold in San Diego. acres of land for commercial IAND AND Income from land develop-propernes. m acres for of fices l{[g[' [rWATI:' ment in Canada was also down and mdusuial parks, and ^ slightiv from a vear ago. The enough serviced lots for o,mn DINEI.OP.\\lEN.I. Alberta market, in particular. residential units. continued to be severelv de-In 1+ t the company contm-JN pressed, and sales declined m ved to devote more of us muu a ms' linush Columbia. There was a resources to the development of Pnenacs S RI $414 4 substanMal gam W ()ntarit), inUHue properties. and there opco nu inne 5 n tn 5mi however. and marked unprove-was a large mcrease m carnings Although revenues from ment m Manitoba where from these acuvines income 3 Gennar s real estate businesses Genstar sunificantly mereased from Canadian proiects was l declined by W million in lW t its share of available business well short of its level m 1% 1 following a 3ignificam reduc-Land development operations when a milhon+quare-foot { tion m homebuildmg acavines m both Canada and the U.S. shoppmg center had been sold. l total operatmg income was continued to carefully conuol but this was more than of fset bv i down only shchtly because of overhead costs during 1% 1. higher returns from develop-l good returns from land and There was also a 3) percent ments in the Uruted states. Income proper!v development. reduction m the mventory of In Canada. Censtar is mercas-1 The large3: contribution to serviced residential lots and a mgly concent ratm.; on ex pa nd-j carnmgs came from land devel-small dechne m total invest-mg its portfolio of mcome j opment proiects m the United ments in land. At year-end. properties and. at vear-end. it j States, where housing starts Gen-tar owned. had options on owned or held m pannership l continued to rise after pmting a or held in partnership r.il8 1.; milhon square feet of leasa-j very large increase the year acres of land plus 4,4 U serviced ble space, up 20 pacent f rom a before. Sales of land for cornmer-lots. i year ago. ) cial and mdustrial construction The first phase of develop-In the U.s, cannngs from the also held up well. While the ment at Genstar s 2,Mnacre sale of developed shoppmg cen-market for land softened in Mountain park Ranch project ters and industrial parks l Texas, demand was strong m m phoenix, Ancona, was com-reached record levels. In the san l Cahfornia. Ancona and florida. pleted in 1981, and sales com-Franci<o area. the company and there was mcreased acuvity menced late in the year. Censtar also entered imo partnerships 1 at the company's development also exercised a portion of its with two maior fmancial msti-in Washington State. Earnings, opuon on 4M acres in tunons to develop speciah cd 4 however, were somewhat lower Orlando. Flonda, a community facihties for lease to manufac-than in 198 3 when a particu-that has been growmg at rates turers in high technology in-larly valuable commercial tract well above average. Work on dustnes. a particularly pronus-that tract is expected to begin m ing market. At the end of IW t. 1985. When fully developed, it will include approximately 1;0 I I i l I, l 2

Sales oflandwmmenallate in 19M at the umpany's L600-as re Mnnum Park e-Ransh dewlopmentin ^ ,. m A ' ~

m

( Phxnix, Anuru

• .e y ow-w

~ ..V.-Q3, k,,_,7 ,e e4 (.. ' 'ig .y w,,-.,., y .-4 n . % ng / ph., N e~' r hk ~ ~ ~ - s m h, NN, s... (- 4 y US. operations were in the fust able for sale. compared to W at located. wen.uquired at com-pha ses of developmg over two the beginning of the year ht parativelv low cost. and will in1[ll(lil quare cet td prtipef!V id the reniaining in\\enttirv n vield gix *1 profit s imcc econiotiiC inCilldi-'.c c:cht i:nlu :::.il buiM-locitcJ in L:.ilth'rnia. o mJitions iniprieve. In thi-inas and a shoppmg < enter a In IM. Genstar believes meantune. the company wdl

" rease w t r t h<

there w di be relativelv little bc cru from strength in the waninca u mm - uare im unde: Jc'.cb ch.mee m cuber its t & or Mar aoba and Ontano markets i a scar l '.lIla 'I

real estate madets whcic us h

' h Igs Jrc sub-ifnt ilt. I t he sim af

[arii i t - f ml l. Int! deve (7 Man'lal }t , d[ ll4) be!'elit [nml ' 'i s i ' Si}.lI;,! 2,: ! nJnt a: cN jTeted !() appn1XI-de! ' Cla phiC IT nd s t ha t Ci'n-j'si,.ind[ht !! 0 til tavi T th. 's cs'ern anJ re, u.- , 43;c t}p, 1-t ,q r h !< ' d '" i 7er er b rir inct 4: h.>mebutid:ng s ot h n "s anielt" st ates in (Ss s qcran n sh 'u!d improve no. uluA Gen ta: Il x real estate n .i a L J!U }illlited tcs a 'c! a r e o u <.,' a t d. % :-t < d dl ' $ 1.11.h !!. f, < > i ' c i su' <( is.cg;;itti;tinircjs.injh,i; , ;,2 ; p t s .irc t-g {.cc t ct, ni 3 p-I t

• g3 tr,

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_ J ica s ha\\' ! 5. 4 r E[_, . n p a C C'..! Il' c '.1 t h e ci'st s ( d aP':Clpitu I t d ut tit lin in c.li n-in d' h Xas i s WC st i l' ' ! I w t. r e C ; d 1 :~ - in 01 sa } c. (d InC(T!ne j%) foi Js ".4. L:dla r m1! e it' a f b lid p r t s. as : cr pn nects w di bt at ihdn,'> t crcater ptrcentaac ath qu c i i

i da I'1 ).111 "

d airsta!d' !J/. In le and e d t!:e js p I l! h m. G n F, Vin .1 : ' : t ($ti t e_ A ps m i bam theallapani Cl!! he ti4ntentt 1: 1 ncrt :r1 cal esta:e by iristitti- ' ' i mt.i , a en J veb " ' or acqurma nonal and < a r mvotm Fom Nd.h x acnvP t, m p.op rn, through net of shouM aim add to demand in ( 'alifer t ven thi men bi, - In the ta' re-th;\\ta' addit:<m the unnpanvi in-in.4iftrat Ina lP a ! j ' r * !.l b'-;.t r.d ' y.r t t t} ( ht ral}. Ct Dintd inc(mle Liea <d In'. . Jment In Inn mh. h!gh'rcarn: I n [ U s 1. l'CI f - [ Dim J$!()f ( ta r's la nd. nd [nipCtyde\\CbTment and its mance (,f hi ! 11;}d!nd and ' ? 1} estJte b Cb fmCnf aCIlvl-Cuf tal[1!' Col L af hts:nchtiilding blnd dt. 2 f !" sntmmtlen-t h. thriuld T' nalti at dhiul the aClivlt:Cs w1I[ alb;w ftal estate tures also :mpfm ed. alt houch samc le'.el as m tw 1. Thn w dl operations to xhieve a more tht, again prix.!uced b e..es. lu )w en e. repre.cnt a better balanced. irid less t\\ clical fl(>w Gen' tar s 2rvin,ve:11ent in such ret ur:1 <,n a w.ts because < o; i:t c.nh a nd i>perating ino mic in prclects u'ntinues to decline, reduced IrivC'trntnts in this the fiiture and the aimpans n n<iw partic-b u si r ess. ipanrg m 12 acnvc ventures, Lnnger term. the outlook for down from 5 a year ago. the companys real estate opera-f {<)using Invent!; Ties at the tions n [Dmining. Genstarh end of 19e 1 consnted of F !andhoUings m Alberta are well homes enher completed or under construction and avad-2A

FLNANCIAL RINilM For the ten years ended December 31.198 8 (millions of Canadian dollars) Financial Summary 1984 1983 1982 1981 1980 Revenues $1,922.8 $ 1,826.7 $ 1,760.2 $2,145.9 $ 2,310.4 Operating income. 253.1 252.0 24.5 242.4 3R4 Income (loss) before income taxes 113.3 100.0 (184.7) 72.4 197.2 Net income (loss) 131.8 103.0 (S4.31 93.8 157.9 Per Common Share Net income (loss) Canadian method Basic 3.56 S 2.83 $ (3.36) $ 2.40 $ 4.92 Fully diluted.. 3.38 2.72 (3.36) 2.31 4.48 United States method Primary. 3.38 2.72 (3.36) 2.37 4.54 Fully diluted. 3.38 2.72 (3.36) 2.34 4.48 Dividends. 0.85 0.65 0.90 1.80 1.65 Book value 27.00 22.97 20.89 24.31 23.97 Performance Measurement Return on net assets (pre-tax) 10.8%*

• 12.4%

1. '. 96 9.9%

16.196 Return on common equity 13.1 % 12.3'6 (161P6) 9.8 96 19.496 Capitalization Ratios a Total debt to equity. 45:55 53:47 61:39 57:43 49:51 Long-term debt to equity 36:64 44:56 47:53 40:60 40:60 Capitalization Total assets. $2,714.2 $2,318.8 $2,660.3 $ 2,868.2 $2,467.5 Deferred income taxes (9.2) 24.5 82.1 167.8 181.3 Long-term debt...... 736.3 736.8 772.6 657.6 639.6 Redeemable preferred shares 220.8 120.0 120.0 120.0 120.0 Convertible redeemable preferred shares 205.1 104.9 106.9 111.1 113.5 i Common shares and contributed surplus. 312.9 304.3 296.8 291.7 285.1 Retained earnings. 465.8 383.1 316.8 448.0 429.4 Other Statistics (millions except employees) Working capital.... $ 181.6 $ 176.4 5 91.7 $ 136.7 $ 404.9 Net funds generated by operating activities 172.2 264.7 9.2 75.1 202.1 Capital exp~iditures 48.4 40.3 66.2 147.5 172.2 Common shares outstanding i Year-end 31.7 31.4 30.9 30.6 30.2 Average....... 31.5 31.2 30.7 30.5 28.5 Average number of employees 16,170 15,175 17,788 20,225 17,525

• Excluding the net assets and operations of The Fimtkote Company, which were acquired effective December 31.1979. " Excluding GsX.

1984 return on net assets was I1.7% i l 24 GENSTAR

Consolida ted liighlights Net income was $ 131.8 million ($3.56 per common share) in 19sa, compared to $103.0 milhon ($2.83 per common share) in 1983 and a loss of SSI.3 million ($3.36 per common sharel m 1982. Per share amounts 1979 1975 1977 196 1975 "f# based on average outstandmg common shares of al., nullion in 1984,31.2 million in 1983 and 30.7 S1,264.6 51,143.0 5 981.1 5 521.5 5 654.3 million in 1932. 255.3 204.S 170.3 143.0 106.4 Following are highlights of consohdated results: 190.1 154.9 120.8 103.4 84.6 126.5 87.9 6 57 7 4'.2 1984 compared to 1983 1981 revenues of $1.9 billUn we c 5% higher than 1983 as significant increascs 'n the Building Materi-als and Industrial Services categories were partially offset by lower revenues in Financial Services and 5 4.31 S 3.26 $ 2.66 5 2.40 $ 2.02 Land and Real Estate Development. While gross 4.06 3.00 2.44 2.16 1.51 profit margins remained unchanged in total from the prior year, margins excluding venture capital 4.26 3.24 2.61

2. 3' 2.01 improved by two percentage points because venture 1.Os 3.l'

'.4s 2.19 1.84 capital sales, which have a low cost basis, were 1.25 .81 'l .63 .60 considerably higher in 1983. Higher selling, general 19.29 15.56 13.'9 12 15 10.40 and administrative expenses and depreciation resulted in operating income only slightly above the l pnor year. However, a 512 million or W reduction in 17 0% 16.5% 15.6 % 13.1% 17 % fmancing costs combmed with a $15 million increase 22.2", 19.9% 19.1N 20.0% 19.5% in income tax recoveries resulted m a 27% increase m net income. The improved results were derived almost entirely 62:38 4951 62:3s 61:36 10:51 from the company's U.S. operations with a 15% . 3:47 32:68 5050 52: 4 39:61 increase in revenues and 17% increase in operating income, compared to the 9"u and 18"u reductions, respectively, experienced in weak Canadian markets. 52.101.4 51 492.7 51,219.2 51,232.s 5 701.6 The effect of improved U.S. results was further 15 N 115.3 91.5 75.5 52.4 augmented by conversion to Canadian dollars at '29.4 262.5 36 3.7 339.4 1013 average foreign exchange rates 5"a higher than in 120.0 120.0 19S3. 8.6 10.3 13 1 26.s 21 7 186.1 1 s0.2 109.2 14b.5 141.4 1983 compared to 1982 341.4 257.2 191.3 142.3 100.5 Revenues mereased overall by 4% as increases in the Land and Real Estate Development and Fmancial Services categones were partially offset by decreases in the Industrial Services and Buildmg Materials s 305.0 5 26N6 5 126.4 5 llR2 5 1011 and Services categories. All operanons in Western 309.3 (47.91 56.9 i-11 l) 43.9 Canada, parucularly m Alberta, continued to be 1061 52.5 107.1 8 9. ' 67.6 faced with depressed economic conditions. Gross profit margins improved i1 percentage points. 27.4 26.8 25.8 23.8 23.0 ~ and sellmg, general and admmistrative expenses 74 44 25.1 '35 "y 19[8U 10I:28 11.007 10$N95 10Il25 decrea These improvements reflected increased productivity. a 15% decrease in the average number of employees, and larger land and venture capital sales. Financing costs were reduced by 27%, of which 10"6 was the result of lower debt and 17% was the result i of lower interest rates. i l GENSTAR 25

Financial Review tcontmueJ! Operations CpMC's assets and habihues. Operating results of The following discussion of major factors affectmg trust and real estate brokerage activities were the operating income of each industrial category unchanged from 1983, both years reflectmg switive during the three years ended December 31,1984, contnbutions compared with a 52 million loss m should be read in conjunction with "Results by 1982 as a result of less active real estate markets. Industrial Category," included on pages 34 and 35 Mongar banking operations produced substantially of this report, and the " Financial Data by Geo-lower ca.aings than in 19s i when a 5; million graphic Area" on page 33. gain was generated by the sale of over 10% of the mortgage servicing putfolio. In 1981. an additional FinancialServices portfoho sale generated a gain of $4 million but Except for certain venture capital investments and was substantially offset by provnions for losses due property-casualty insurance, Genstar conducts its to increased foreclosure rates. Sales of venture capital financial service activities through Genstar Finan-investments generated operating income of 5 H cial Corporation (GFC), the results of which are million,588 million and $24 milhon in 1981,1981 accounted for on the equity method in the company's and 1982, respectively. The reduced returns in 1981 revenues. The financial position and results of reflect lower activity in initial public offerings of 1 operations of the financial services subsidianes such investments. Stock market acceptance of the included in GFC are summarized in Note 6 to the initial offermgs of the high technology concerns consolidated financial statements. typical of the companys venture capital portfolio Revenues in 1984 were $119 million, compared to was unusually high in 1983 and was not repeated in $159 million in 1983 and 599 million in 1982. 1984. Changing investor perceptions of the risks Operatmg income was $103 million in 1984, com-inherent in the technology and management of such pared to $14S million m 19S3 and SS5 million in compames make returns f rom this acuvity some-what difhcult to predict.

9g In the company's electronic equipment rental and Financial Services container leasing operations, contmued fleet growth Return on Net Aucts and higher average unlizanon produced increased (Pre-ta x) operating income despite generally flat per diem M'" '

rental and lease rates. u l13 Indmtrial Seren es Revenues m the mdustnal services category in-creased 18% in 1981 to $2P million, compared with $160 million m 19siand $189 milhon in 1982. i Operating income was $26 million in 1931, S11 million in 1983, and $14 milhon m 1982. 4 i m i The revenues and operating mcome growth in ihis 1 category largely reflects the acquisioon of approu-m.ucly 40k of the operauons of SCA Services. Inc. . 1 iSCA). The company's existmg waste services busi-1 , si eou ness reputed a slight reduction in earnings. The Operating income from financial intermedtary '"* P'* F 4 ".t r in Ware f SCA through a newly services increased significantly over 1983 due to funned subsidiary, GSX Corporation, late in the improvement in average net interest margins, a third quarter. The fonnation of GSX greatly increases t mnpann pn'sence n tb waue eco Significant reduction in loan loss provisions and a gain of $14 million from the sale and leaseback of industry, providing solid and chemical waste collec-Canada permanent Mortgage Corporation's (CpMC) ' 5"" ""d J *

• P"s"I Y *"' '" '"* *i" I ' *iJ #"' I" I

? I head office building in Toronto. However. this nd mdustrial customers in 17 states. Genstar is the l improved performance was offset by the negative Wird largen sua concern m the United Sta es. The effects of amortizing acquisition adjustments to equisition transaction and its effects on fmancial position are set out in Note 1 to the conmlidated financial statements. GSX contributed to income in i 26 GENSTAR

l l l l l the final four months of the year. although its impact Buildings Materials: on current year operating income was partially offset Cement, Axxrcgates and Concrete hoducts by amortization of acquisition adjustments. llevenues were $713 million m 1984, compared with Operating returns from marine activities have var- $682 million in 1983 and $770 milhon m 1982. The ied little in the past three years despite a 2n decline increase in 1984 was due primarily to increased in revenues since 1982. Marine services m total demand in U.S. markets. Canadian market volumes reported essentially unchanged earnings from 1983 continued below historic levels. The following tables demonstrate the volume improvements in the United l Industrial services States in 198 I which were partially offset by declin-Returnon Net Asscts ing volume in Canada: (Pre-tan) ament! 1984 198'1 19g-) Sales Volumes of Maior Products y Cement (tons) imilixinst Canada. 1.4 1.4 1.4 United States 0.7 0.5 0.6 'o Total. 2.1 1.9 2.0 Lime Products (tonsi United States 0.5 0.5 0.5 Aggregates r.ons) Canada M.3 7,9 7.1 o 1 Umted States 13.8 12.5 11.6 i Total. 22.1 20 4 18.7 M 81 x2 4 Ma

• Dark blue arra indudes Concrete B.ubic yards) all of Gs4 s year end rut Canada 0.8 0.9 1.1 Umted States 0.9 0.8 0.7 a ar r

t buti it. inm me Enludinit GsX, Total 1.7 1.7 1.8 i RoNA w wid have in urawd hy.ht thrito I ? 2% i Concrete lhcks istandard units) i although the mix of income changed. In the ship-Canada 10.6 12.4 14.3 yard operation. high volumes of repair work in 19&l i compensated ror lower levels of new ship construc-Operating income was $71 million in 1984. up 60"6 tion, resulting in operatmg profits that, while lower from tas million in 1983 and 39% from $51 million than in 1982, compared favorably to a loss in 1963. in 1982. The improvement in operating income is Returns from the tug and barge operations declined due to the effects of increased U.S. demand on both from prior year levels as a result of an early 1984 capacity utilization and prices: strike in the British Columbia forest products indus-I"84 1983 1982 try and lower levels of offshore oil exploration: Production capacity Utilization however, income was still ab(we that in 1932. Cement Canada 46 46% .ns Alm included m this category prior to 1981 is the tce. 6 'p j company's interest in a joint venture in chemical y and fertilizer manufacturing operations in Eastern United States 55 45 41 Canada. In 1983, the company recorded a $9 million Aggregates l loss resulting from operatmg losses and the write-off Canada 96 o0 gi j of its remaining investment in the venture.The United states 81 82 76 non-recurrence of these hisses contnbuted signifi-Concrete Products cantly to the category's improved 1981 results. Canada. 47 il 57 United States 103 96 83

• Represents fuH unlizatwn of one P ant in 194. a wmnd plant l

l has been shut down dunng the IW 1-IW 4 pe..at l. i l I \\ GENSTAR l 27 l

Financial Review icon rm ued ' lhiilding Matcrialv Building Materials: Willlmrd and Roofmg Pnslucts Cement. Aggregates Revenues increased 19"6 to $49 4 million in 14S4, and Concrete Products compared to $ 115 million in 19M and $ 141 milhon Return on Net Assets jn gggy I"S4 I"U I"N2 Sales Volumes of Maior pnxtucts r M Roofing (thousands of tons) 730 M9 65' l j Wallboard (billions of square feet) 1.6 1.1 1.2 is Operatmg income tnpled m 19S4 to $32 milhon com-pared with 511 m 1983 and a loss oi sat) nuthon in t } 1982, based on cost ef ficiencies and hgher plant utih-l ration. IW4 19C 1942 + pnxluction Capacity Utiliation Roofmg 02 % 52 % 1, Wallboard so 73 M 4 M 41 0 45 M Record U.S. volumes and substantially higher prices for the company's wa!! board products were the pri- } In the United States. significantly :ugher volumes mary factors in raising 14C operating mcome. and proht margins returned cement operations to Although mofing volumes also merea<.ed, pricing ] profitability for the first time in three years as the remained under heavy compenuve pressure and the i company's Reddmg, California, plant operated at full company recorded a loss on these operations. capacity and. thus, had lower costs per unit produced. i As in 198 3, the company's less efficient second U.S. ld j plant remained shut down and additional pnxluct ("jii/,"d $'["'I' required was imported from the company's British Ronhng Products Columbia plant and other sources. Importanon from Return on Nct Aswi, i the company's British Columbia facihty was made ( Pre-u s ' possible by the removal in 19M by the U.S. Federal i Trade Commission (FTC) of import prohibinons 'Y' i agreed to at the time of the acquisition of the U S. l cement operations. The FTC's action will enable the company to now coordinate cement pnxluction and ml { marketmg on the West Coast of Canada and the U.i l g j The company's U.S. concrete and aggregates divi-j sions, which are based primarily in and around the i state of Maryland, posted increases of over M m j operatmg income on a revenue gain of 14% Earn j ings impmved across all product lines assisted by cost efficiencies resulting from modernization of "w' several production facilities over the past two years. 'l new pnxlucts, and excellent weather conditions m 4 ) the last quarter that extended the construction season. The recovery in U.S. housing and remodehng By contrast. Canadian operations reported lower markets over the past two years coupled with the revenues and earnings than in 19M because of intnxluction of new commercial uses for wallboard } reduced volumes. Iow plant capacity utilization and improved volumes by more than Im over 100 and intensified competitive pressures, particularly in 3 rb over 19s2. The company's smaller Canadian Alberta where there was depressed economic activity operation also benefited from stronger U.S. condi-l in all construction markets. British Columbia tions by exporting larger volumes to the U.S. to i activity remained reasonably strong, boosted by con. compensate for weaker Canadian markets. Margins struction related to a maior exposition to be held were also improved by higher pnces and improved in 1986. Despite difficult eccmomic conditions, the pnxluction efficiencies resuhing from higher plant 4 company acquired ready-mix, concrete block and unlization which, on the average, was 13 and 22 precast structure manufacturing facilities enabling percentage points higher than 190 and 10S2, the company to replace some of its older, less respectively. efficient plants. 1 i i 28 GENSTAR I

Although volumes were 12% higher than in both Operating mcome was $64 milhon m 1984, compared 1983 and 1982, the company's roofing operations to $66 milhon m 1983 and a loss of $56 milhon in j continue to suffer from the intense price competition 1982. l that has marked the industry over the past three years. The company took several strategic steps dur-Land /Real Estate ing the year and in early 1985 to improve profitabil-Develeprnent ity in this division. In early 1985, the corporation Return on Net Assets acquired seven roofing plants from another company, (Pre-tad Bird Incorporated, which will double Genstar's

• • '""d 3"

capacity. During 1984, the company brought on line l a newly constructed fiberglass mat plant m Texas. This plant, coupled with glass mat capacity acquired ,'g from Bird Incorporated, will enable the company to meet its entire glass mat requirements internally. The company also acquired another firm's modern-m i:ed roofmg facility in llhnois which will permit the closure of an older, less efficient Genstar facility nearby. o The company believes these steps will enable it to achieve greater market share and better geographical g o, coverage fer its products together with lower unit

• " 62 " "

costs from the consolidation of operations in more 4 efficient facilities. The process of consolidation has Operating income in 1984 declined 5% from 1983 on already commenced and operating income reflects a a 12% reduction m revenues. Operating losses in this 59 million fourth quarter write-down of the carry-category in 1982 included 563 million in write-downs ing value of the company's less efficient facilities-of real estate assets. The fluctuations in revenues Lmd and Rcal Estate Developmen t and perating mcome reflect the sensitivity of these Revenues were $369 million m 1984, compared to perations to mterest rates and the large transaction $420 million in 1953 and $280 million in 1982. nature of the busmess. 1964 witnessed further implementation of the Sales Volumes 1944 19M 1%2 company's strategy of co#ntrating its real estate j Residential But!dmg Lots activities in land and income property development Canada 1.9S2 1.851 96 and reducing the scope of its operations in less United States t>X I 1.NN D6 profitable areas. In the last quarter, the company Total 2.w 3po 1.g announced the cessation of homebuilding opera-tions in Texas and Western Canada where large Land Acres losses were incurred due to de ressed demand, and h,'"'j'3,,tcs ,[jj ], ] ng results reflect $6 mi lion in shut-down o Total. l.9S4 2.631 1,091 In ongoing operations, the maior contributors to 1984 operating income were land and income l 1984 19 4 1932 property development in California. Property devel-opment operations in Northern California generated Income Properties ohyuund(of 4 til mdhmhh&bdpd d f0 developed properties and the formation of joint pp ng centers ventures with maior financial institutions for the Total I,455 1.210 1.nt2 development of industrial and office properties, in l Southern California land development operations, there was a greater number of land sales in 1984 than in the previous year, although operating income i GENSTAR 29

~_. ~ ..... _ _. - =. _, u - - + - -. ~. Financial Review iconnn ua was lower because 1983 included a maior commer-Total debt outstanding of s1057 billion at the end 1 cial parcel sale. In addition, sales commenced at a of 1981 was virtually unchanged from 19s rs total of maior project in Arizona. Losses from joint venture $1.056 billion and over 5 ;00 nulhon lower than projects continued. but at significantly reduced levels year-end 1982. Most of the reductions in total debt from 1983 and 1982. over the past two years have been m short-term in Canada, returns from land development were bormwings, which have declined by $272 million or In f m the 1982 level. lower than 1983, although revenues doubled in Winnipeg and Toronto markets helping to offset de-Although the company issued no new long-ter m pressed Alberta market c(mditions. Results from debt in Canadian or U.S. markets during 19s ! it Canadian income property operations were also utilized interest rate swaps to effectively establish lower, as 1983 included a maior commercial property fixed interest rates on approximately $66 nullion of i l sale in Ontario. long-term vartable rate debt. This effort brought the level of variable rate funding to less than one-half Financing of the total debt, compared to 54% and 62% at Total interest expense decreased SS,in 1984 to $ 110 December 31,19A3 and 1982. These reductions re-million, following a 27% decrease m 1983 to 5152 present a significant improvement in the company's million. There has been a one-third reduction of financial strength and pernut greater flexibility in interest expense over the past two years, all associ-financing the compa ny's operating and capital ated with floating rate short-term borrowings: expenditure requirements. This improvement was recognized during 19s i by an across-the-board 1%4 19M loc upgrade of the company's commercial paper, senior debt and preferred share credit ratmgs by the two Interest Expense cnnihonmt donus, ator Canadian cretht ratmg agencies. Short-term debt a9 M i17 I mg-term debt. 91 83 92 in the past two years, the comrany has made greater use of lease fmancing for maior h xed asset acquisi- $;p $ig $ygg tions. During 1981, the company continued a $63 inillion Canadian mobile equipment leasing pro-Borrowing rates. which had decimed in 1983. rose gram commenced in 1942 and estabbshed a 523 mil-slightly in 1984, but the company's effettive lxnrow-lion U.S. leasing program involvmg fixed and mobile mg rates were sull more than 22:% lower m 1941 '9"i "*"'.II""# 'h# U "f '".'leasma pmgram P b""'f5 '"'1* than in 1982. As in prior years, the interest rates paid or, tlw chuw rate on the U.S by the company were at or below tile prime rate wdl be bel % 1% for a period of up to 12 years. through the use or bankers, acceptances, LIBOR l (London Inter-Bank Offering Rate) and cost-of-funds borrowing instruments. In addition, mterest costs Liquidity declined because of the company's success m con. Excluding real estate advances. average short term j tinuing to reduce average debt levels, which have bormwings were 5101 milhon m 19s1. down 2n declined by almost 5100 nullion over the past two from $ 120 million m 1941. peak short term borrow-years. ings of $ 152 million in September 19sI were below the 19s I peak of 5480 milhon. Furthermore, the 198.1 i934 i9q 39g peak was unusually high because it included almost Average Borrowings (mdhnnaf dolled $200 million in connection with the compann Short-term borrowmgs 371 atry 7f2 acqtusitmn of approximately 10% of SCA. The cost j Iong-term debt , 3t> 7n >0 of acquiring SCA was substantially offset in the l $ 1,10' $ 1. 301 % 1,W fourth quarter by two preferred share issues m Can-ada which generated proceeds of 5195 million. P j ) 30 GENSTAR 1

= = _ I l l l The company has lines of credit comprised of com-The increase in accounts receivable turnover is due l mitted and demand facilities with all maior Cana-predominantly to the company's acquisition of part i dian banks. At December 31,1981, $538 million of of SCA in the fourth quarter of 1981. Without 1 Canadian bank lines were committed and $260 consolidation of SCA's operations, turnover would i i million were demand.The company also had a U.S. have been 57 days. 560 million committed line of credit with a consor-The maior fmancing activity in 19s I consisted of tium of European banks. two separate issues of preferred shares in Canada in the third and fourth quarters, which generated net Bank Lines of Credit proceedsof $195 million. In 1982, mJjor financing l tmilhons of dollars) activity had been the issue of $154 million in lo - l TotalCredit Available term debt. Activity in 1983 consisted primarily o ' MIc'[O"iIt][,j7 the $36-milhon paydown of such lurrowings. The partial acquisition of SCA accounts for the bulk 4 o of the funds acquired for investment in 1981.The j company acquired fixed assets of $122 million and intangible assets of $120 million in this transaction. e 4 The other maior investment activity consisted of f further equity investment of $46 million in the i j l 9 l company's unctmsolidated financial services subsidi-f l ary, Genstar financial Corporation (GEC). I eflecting j the less favorable climate for the company's opera-m tions in 1983 and 1982, investment activity in those years had resulted in net generation of funds, principally through repayment of advances made by insu.enn tneu,uum the company to GFC upon its organization in 1982. iua m GFC has matured over the past two years into an independent self-financing enterprise. It has success-l Although debt remained virtually unchanged from fully established a separate identity in Canadian the prior year, total assets increased by over two m credit markets, including investment grade ratings 1981. The increase was fmanced almost entirely by by Canadian rating agencies. equity issues and improved earnings. 3 i Funds gencrated by operations provided $ 155 mil' Capitalization lion in 1984, compared to $80 million in 1983 and a The principalcom mentsof thecompany'scapital $106 million outflow in 1982. Funds contributed by base are borrowed unds and shareholders' equity. 4 reductions m operating working capital were lower The ratio of total debt to equity at the end of 1984 4 than in 1982 and 198 L in those years, the company's was 15:55, maintaining the steady rate of improve-4 i retrenchmentof unprofitableoperations and empha-ment from 53:47 and 61:39 at December 31,1983 and { sis on cash flow rather than income generated reduc-1981 respectively The continuing improvement in tions of over $300 million in inventories and receiv-the ratio over the past three years, coupled with the ables. In 1981,impmved profitability and the expan-reduction in the amount of variable rate debt, sion in activity across most lines of business required reduces the company's vulnerability to floating i l investment in operating working capital at or above interest rates. year-end 19H levels. Nonetheless, the compa ny con-a i tinued to carefully momtor working capital levels-With almost identical year-end debt levels in 1983 The following are key turnover staustics: and 198 t, the improvement in the ratio resulted from improved earnings and the issue of $200 Im IN 19 9 million of preferred stock in the second half of the Currtnt Assets (dayo year. The first offering in September was for $100 l Account receivable tumover 66 si m million of Series D second preferred shares. These Inventories turnover 129 If IM shares are non-voting but convertible, at the holder,s option, into common shares and carry cumulative l dividends with a mmimum rateof 8% and a ma ximum rate of 14%. The second offering in l October, also for $100 million, was for Series E non-voting preferred shares bearing fixed rate l cumulative dividends of 9M%. In addition to i improving the debt-to-equity ratio, the current tax l i l GENSTAR 3g I __..-..._.,,--___-vm,.

i l l _ _ ___ _ l Financial Review l sconun ueJ1 position of the Canadian parent corporation makes of shareholders' equity and be considered as debt in this form of financing more tax-efficient than computing balance sheet ratios This appmach j further debt issues at this time In conjunction with ignores the respective rights of the holders of thesc l the two preferred issues, the company withdrew a shares and, in particular, holders of convertible " shelf" registration, filed in November 1983 with the shares. Using these guidehnes, Genstar's total i U.S. Securities and Exchange Commission, for the debt to-equity ranos would be %46 m 1981. 65:35 m potential issue of up to 3.0lR000 common shares. 1983, and 72:28 in 1982. Income Tax Considerations Debt and Equity for U.S. Individual Shareholders '"Q"d'*'"' Dividends are paid in Canadian and U.S dollars a r., and other currencies depending upon the residence of the shareholder. Dividends paid to United States tw resident shareholders in 1984 were subieet to a 1% I' I1 domesticcorporanonsisnotavailable. withholding tax. Generally, dividends received by United States citizens or residents are subicct to U.S. im income tax on the amount of the dividend, but cither a credit or a deductmn for Canadian tax withheld may be claimed. Ilecause Genstar is not a Umted States domestic corporation the partial exclu. sion of dividends received by mdividuals from y Share Capital c- " Genstar's voting share capaal consisn of 3M mil-1 lion common and preterence shares. At December The improvement m the debt-to-equity ratio, the 31,19% 1, m of the votmg shares were registered. containment of total borrowmgs in spite of a $2M and the balance were m bearer form, million mvestment in the expansion of the com-11elow is a summary of the shareholdmgs of the pany's waste services business, and the continued company which shows that the number of share-availabilityof credit lines wellin excess of the holders dechned shghtiv durmg 1+ 1 while ihe company's utih:ation, provides the company with number of shares held mcreased. Canadian share-adequate resources to meet anticipated capital and holders owned approximatelv i F of the votmg operatmg commitments. shares and represented '%f the company's regis-The Securities and Exchange Commission requires tered shareholders. Informanon regarding tradmg that capital stock with mandatory redemption volume and pnee information is meluded in Note 19 i provisions be reported separately from other elements to the consolidated fmancial statements. i Shareholdings 19s4 1m ? j Shareholders shareholdmgs Shareholders shareho!Jmgs i Numkr "e Shares Nu mber % shares $rm b nu inu:%n a Common & Votmg preferred i Canada 9,127 77 18.7 51 9.171 is ; 14 United States 2,591 22 7.8 22 2319 21 lo s 11 Bearer 4.1 12 I. 4 12 Other Countnes - 142 1 4.8 13 1% 1 a 11 I I,Mto 100 3in 100 12.114 bin R2 Im

• TM ownershm ot bearer shares a ur:known foint Ventures As descriled in Note 4 to the consohdated financial from 12% to M. These ventures had total assets of statement. the company carries out substanttal

$% million at the end of 1981.and Genstar had business through orporate and unincorporated joint invested S i t million for its ownership interests. ventures, in which its ownership interests range 32 GENSTAR i

i J i i i performance Measurement tionl are included. Excluding GSX.1981 RONA The company places great emphasis on the impor-was 11.7% compared to 12.1% in IM1 and 1.1% in tance of measunng operating performance to help 1982. Ahhough increasing from the low of 19A2, determme the business investments that will ensure the low level of economic activny in Western } a strong and viable future. Both internally and Canada has prevented profitability, as measured by externally, various measures of performance have RONA, from returmng to the levels achieved l been used to compare efficiency and profitabihty during the 1970s. between the divisions of Genstar and between Another significant performance measurement is Genstar and its competition. the return on common shareholders' equny, a mea-I The measure of performance that the company has surement of performance in relation to the funds j used both externally and internally is teturn on net invested by the company's shareholders and their assets (RONA1, a measure of operating income in accumulated undistributed earnings. Return on relation to capital employed. common equity was 131% in 1984, compared to 12.3% in 1981and (16.0)% in 1982. As indicated by the chart below,1984 RONA was 10.8% 1954 performance is distorted because all of GSX Corporation's net operating assets but Eq uity Income l only four month 3 of income (results smce forma. Included in third pany revenues is the company's share of the income or loss oficint ventures, sub-l j sidiaries and investments accounted for on the ccnstar corpoution equity basis. In 1984, $5 million of such losses are i f/,"'l" " ** ^ " included m the revenues of the land and real estate ~ development category. compared to $1-1 million in mno 19&1 and $ 11 milhon in 1982. Revenues of the i m financial services category include $A9 million of l equity income in 1981. compared to $91 milhon a year earher and SH million m 1982.$0.1 million of is income is included m the 194 8 revenues of the I concrete, aggregates and construction services i Category, compared to $ I milhon in losses in 1953 and $; milhon in losses m 1942. ,t' s j I inflation-Adiusted Resuhs The information included in Note 20 to the consoh-1 o( [,w dated financial statemer.ts re,tates certam balance i i on iuae, 4 csx3 sheet and statement of income items for the effects of 1"$ 2, $/flej inflation using methods prewribed by financial n accountmg authonties in Canada and the U S. enu %oon m.nmm, Luluding Gs\\ P o'. A j w % 14 have he.m Ii % i l l financial Data by Geographic Area 1984 10,3 1042 1941 19x0 j l Revenues mihons of Car adian dal.ird l Canada ar:d othcr 633.i 720 2 815 0 i tM 2 940 1 l ttmttdStata 1,26.3 1,lry, 'i 91; 2 1.0" ? 1, un ] 7 f I Total $1.9218 $ 1326 ' 51 'M 2 $2,1 ti4 $2.310 i l 't i Operating income i Canada and other 95.1 116 i 123 1 222.1 l'o n j United States liS.d iHi 694 s1 20.1 1618 1 1 Total 5 253.1 $ 252.0 $ 243 $ 212.1 $ 3 15.1 Identifiable Aswts Canada and other IFi.I 1,1 in 1 1.2 16 ; 1,l'O.9 1.0' t.1 t Imted %utes 1.619.1 1.21% 4 I,il14 1.19' i 1,391.1 Tiital 52,714.2 $ 2, it e $ 2.(44 ).1 $236s' 52.16?.; j GENSTAR .y - ~

i RESUUS IW INDINRIAL CMEGORY for the hve Sears ended December 31, tw t (mtlhons of Canadian dollard Revenues ~ j T hirtl Inter-l' arty Category Total Financial Services Mortgage lendmg retad and commercial bankmg. mortgage 198i l18.6 11S.6 bankmg. hJaciary servtces; venture capitalins estment. leveraged }gg3 [ r 9.9 }39,9 3 leaung, real estate sales brokerage. lea *mg et transportation con-tamers: rental of electronic test and measurement equipment. y-qq g ~g 93,9 6.3 7 1981-67.3 1980 59.5 1.1 c>0.6 Industrial Services Tug and barge transportation, shipbuildmg. repatr$ and salvage. 198I-2310 1.0 237.0 refuse collution. sohd and chemical waste transfer and landtdhnt [gg3, [ 36cl 4.0 160.4 methane gas reemery. emergency chemical waste tlean up scrvues; rubber redamaten and rnnimg 1981 - 186 8 --1 189.1 1981 186.5 2.9 189.4 1980 156.4 3.0 189.4 Building Materials: Cement, Aggregates and Concrete Products 1981 7t h 6 1.7 713.3 Manufacture of normal putland and spccialtv cements hme 1983 (177.I i.2 682.3 precast. preurewed concrete comp,nentv conue te bha kt piF and 1982 761.2 5.; 79.7 6 railway ties pn(tuction of ready mts and asphaltic tonue e. clasuhtd und. gravel, aggregatet crushed stone uluum urknan. I9NI NI 3N, 922*! and pac kaged home repair rnattrials mumural and realestate 1980 872.I 3;.6 908.0 subdiviuon servumg. Building Materials: Wallboard and Roofing Prmlucts 19u 49 L5 .I 493.9 Manufauvre of g3 psum wallboard, a'phalt shindes and other 1983 414.8 .2 415.0 roofmg pr aus and asphahic adbeuvet w holesabrg and distribu-1982 110.3 .6 440.9 tmn of constrwuon materiah ggg 5; gg3 1980 587.3 .5 SS7.8 Land and Real Estate Developruent Deselopment of rendential commercial and mdustrialland 1981 369.1 .2 369.3 conuruttwn of reudential unin. sho pmx tenterv uthce and }gg3 419,! ,[ 4 l 9,5 mdustrial park t and warehoum rea cuate mini venture hnancmg 1981 W9

9. I 280.3 1981.

467.l 2.9 470.3 1980. (41.8 604.8 Corporate and Unallocated items General and admmatratne expenws and awts of the trmpan) > 1984. corporate othces Certain cr.rporate revenuet costs. depreuat mn [9g3 cupenses and rwt aw1s ate alh<ated to the industrial uregora s 1981. l 1980 Consolidated j Inter category revenuo are at market prices and muu be deduued 19S1 $l,922.8 $ 9.3 $ 1,932. I l from cos of ules and total costs and caperses ion adannmg puel t" 1983 1,826.7 9.5 1,M36.2 i cah.ulate costs and empenm as down in the tonmbdated i sutements of mcc,me g933 g, - -3 7 g.77g 9 1981. 2,145.9 11.5 2,190.4 1980 2,310.4 10.2 2,350.6 ' Net operatmg awr5 are calculated by deducems rmn-mten st harmx habihties enc ept meme ta ue3 hom the identihable amis of eac h category. General corporate awts are alkuted among the ategorles '

• Pre ta n n t,.u on net auen a the p formara e measurenn ni obtamed by dividmg mtome bcfore interest and taues by gear end ret operating aweit l

3: GENSTAR

h\\ MV.LSNBD sur.s.u ;mert;mu.., Jy> v,3 v,11 rue uen umms trunniut *44 m3 ~ i 'M una ury p now ipua.Jr24 quo io pranue ser t'Lilelddd 1)U JF t'JJ A F Un b {4% L'*j t u1D lJ11l'l-J2d.Mj {, f v 6l pl J Jllt'flh n Fl J1fl M J A j ud {Jpnl1!J151 U'il 6bi"s h.le )$') J1]l Ulf 7]l.s t.Jt Out l' ilt'J.d(), J t 2Tz! FL917 l'91 1 *l F07 t'Sif 7Sl0T Ft1 1'l si 9'91 'l Ett i is9ET 6'6 t"Hi t T t Tt7 ONt 6'l NN2 vzs7 t'llVI rw CW)I l'I l

• luf 7 Ftz

! (Si l 6'04 l'tO7 t'6Lt 'l 1"Of 8FtFT t'Tl l't 10T 0757 itWS'l t'Oi T4bl 4'971'I iTt$ ril4T$ o tWOI t' tift $ l'tSZ$ 0 649'l$ riWE (1075 l ' 16E' l l IT tTS (l*lE) I'lE 04 l'1 6'9 6'zS (t'irl t'it t 't t OT WS t ' 19 (9'67) 9'67 6N7 4 9' l't t (6'ST) 6W tW V ST 175 (ITt) ITt ITt 97 W444 WSZ 9W) 0761 YTit ti !'t$ ibit 6'l EtFS TEI 0'064 Eti)I WS91 LT O't9 l'6es 9'l FF84 (f41 9't 72 (6'SS) r911 17 9TS F I's F 9109 STI ST6r rV) I ttf 6'l E9t itOE 6' 9'479 9'l I ritS 919 i but 9'I 9d S ~997 t"d ("4t f 6'S l';97 fSi ITtS 6TI t'6t 5Nh S 07 E0lf (S 01) 7TS7 (t'97) . 9s itI ou 1 T(b 9'81 91S7 (t'61) 0'S07 (W61) 4Wt ESI 0 01 F57t (Si S'957 WP tW7 6'01 l't 0! ZTl lu' 51Ni ZTl FOST rYi 4 T41 6'I f 0T91 t 'S I l'vi E.0t 7771 F8lo 471 6'l64 WOOL TiOS 00' tT4 6W9 iT01 T446 0'91 FtOS t'SZ1 tTo. f 05 WSc 9't W 6't f O'tSS l*4 0'iii t'I S ESI4 TEt 9't9 EdN T41 6'994 F9 9'SS9 ftt' 9'41 9 t't t 0V) ids S"S7 STie E01 00;9 t' l 4 6'I t 9 6'tt I P) 6MS 6'4I iTSI Chi t'191 TIE ESSI fil Ell t TE l EtI l'SSI OTT EtTI 6W SMI 9'01 l'91 Kiti FS 9'6El Fil FlZI 6TI ESil 4'6 Ett ZTS1 ("9 1101 Wo T601 (01 i6tl 6'6 6TI 6'STI WS 4110t . t'i l'iti WS7 ElI7 Ezl St2 6791 l' 9'561 STI IT61 F97 l'tf t' OT iW 6'6tt ElI i 1 91 tTS 6'tl F 9T S 01 ESSS l'91 t"tTS S'tS t't! 4 il OTI Ett S WSZ t't IS TStl S'01 o' ET 9'i 8 019 rit l '96S ST0l l'91 O't 1"Il sanutpuxix3 slawy (tuaani) slassy atunaut triol uour:tuotuy aatarnstuttupy sairs d lettdr3 ajqrunuap! MassV 13N Muur2Alo Nuprmio pur uoual ag pur tr2aua9 Jo uo unuau tan. uoproaJdao Muilps 1so3 x ra-aw S.hu AIX] pur SiSo]

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICll5 for the years ended December 31.19% IN and IN The following accounting policies conform in all investments material respects with those generally accepted in Portfolio secunnes are stated at the lower of their l both Canada and the United States. aggregate cost or net realizable value. Consolidation Fixed Assets Subsidiaries are consolidated either from the date of Properties. plants and equipment are stated at cost. l acquisition on the basis of purchase accounting or Expenditures for additions, improvements and re-retroactively on the basis of pooling of interests newals are capualized and expenditures for mainte-eccounting. Financial services subsidiaries are nance and repai.s are charged to income. When accounted for on the equity method because their assets are sold or retired. their cost and accumulated financial structure and operanons differ signifi-depreciation or depletion are removed from the cantly from the company's other businesses. Invest-accounts and any gam or loss resultmg from their ments in joint ventures are accounted for on the disposal is included in income. equity method-Depreciation of plants and equipment is provided by Foreign Exchange annual charges to income on the straight-line Assets of subsidiaries for which the functional cur-method based on esumated useful lives rangmg rency is the Umted States dollar and related habih-from 20 to 40 years for plants and from 5 to 25 years ties are translated into Canadian dollars at the for equipment. Mobile equipment depreciation is year-end rate of exchange, while revenues and based on time unh anon after allowmg for esu-expenses are translated at the average exchange rate mated salvage value. Landhlt sites are depreciated, for the year. Unrealized balance sheet translation on the basis of capacity used, to the'r estimated amounts are maintained as a separate balance sheet residual value. Depicuon of quarries and gravel account until such time as the related foreign cur-deposits is calculated on the umt of extraction rency amounts are realized in Canadian dollars. method. Amounts denominated m foreign currencies other Revenue Recognition than the United States dollar are translated at histor-Revenues from the sale of manufactured pnxhicts ical exchange rates for non-monetary items, and at and housing units are recogni cd upon passage of I the year-end exchange rate for monetary items. utte to the customer, which generally coincides with Translanon fluctuations, other thm those associated their delivery and acceptance. Revenues from the with long-term debt, are included in income for the sale of land are recogm:cd in the pernd m which I period. Translation fluctuanons associated wnh long-the transactions occur. provided the earnings process term debt are amortized straight-line over the is complete and collec:ibility of the proceeds is remaining term to maturity of the debt. This method reasonably assured. Non-cash consideration from conforms to the recommendations recently adopted land and housmg sales is adjusted to reflect the by the Canadian Institute of Chartered Accountants. market value of the cansideranon. Inventories Revenues from construction and shipbmiding con. Inventories are valued at the lower of cost or net tracts are recognized on the percentage of completion realizable value. Cost of manufactured goods is method and any losses are provided for as they determined principally at average on the first-m become known. Claims for additional contract com-first-out basis and includes all direct overhead except pensanon are not recogni:cd until resolved. deprecianon. Cost of land and housing inventones is Dtferred revenues result from the contnbunons of determined on a specific item basis and includes the assets to partnerslups or joint ventures at a value in cost of services such as roads, sewage and water excess of cost, the sale of the future pnduction from systems on land under development. limestone deposits and the sale and leaschack of Umd inventories are those parcels which are expected fixed assets at a value m excess of cost. Income is to be sold within the five-year operaung cycle of the recogmzed as sales are made to third parues or over land development business. Other parcels are classi-the term of the lease in the case of the sale and ficd as development land. leaseback transactions. GENSTAR

CONSol.1DX1 El) SIWl'l!MENTS OF INCO.\\lE Ior the scars ended I'ccen,ber H, los i IW Landla 's thousanJ s ot Canadu n dollaiJ i 1984 1%3 1942 Revenues Net sales and other revenue 1,830,0S9 1.711.0l' 1 Jo','os Equitv net income of Genstar Financia: Cor}mration 92,712 Sl*01 32.1 W 1,922,801 1.526 % 1,'tu 2 2 ' Costs and Espenses Cost of sales and services 1,3S2,371 1,317.16' l.160 662 Selhng. general and adnunistratis e 204,170 1s7,210 201,1 is Dei' rect.ltion. Jeplet:<in a nd a mortic.ition S3,175 7() 11 1 7(),806 1,609,725 1,571,7(k1 1,'35.7()n Optrating income. 253,076 2 ;2 RN 2 i,ill Fmancing Co ts Interest on lo:'cterm debt 91,199 8 7,; ; 1 U2.20i ()ther Interest 48,b24 h1,155 l17,(4)9 139,823 1 ; 1.9% 209,217 income (LossI llefore income Taxes. 113,253 h W) O ld i l s 1.606) Provision for income Taxes Current 11,500

1,10()

( 7,7( 4)! Deferred (30,(XX)) ( ;',1( h 11 (92,7(X)) (18,500) l T n t)) (l(xtitxP Net !ncome (Lassi for the Year $ 131,75 3 $1(13,t11() $is 1,20(,) Net income (Loss) Per Common Share Canadian Method Basw 53.5n $2.k1 $( 1.36) Fully diluted - 3.38 A72 (3.36) United States Method Pnmary 3.38 2.72 (3.361 Fully diluted 3.?J 2.72 ( 3.3(3) nr t unnur4 r.ove, cc an nueml no of these nnan, ai swemenn GEN *iTA R 37

CONSOl.llMI' lid BAIANG SilEl?IS As at December 3! 1+1 and N,i l t heusanJ.of Canadian Joll.ust t 1984 1083 Assets Current Assets Cash and term deposits 11.2t>9 9,028 Accounts receivable 3 31,'4ti NUl* 1 inventories 490,140 193,523 833,155 '6 3.; 3; loint Ventures, Development Land and Investments 2nl' I r> 2 3',H 4 Fixed Assets Pr.perties. plants and equipment 1.t,60,4'o 1,4m il ; Accumulated deptcetat:m.. der!ctmn and amm tization 744,610 3 '.~30 910,3t,ci s 5 <4); Investment in Censtar Financial Corporation 532.394

41, ni Intangible Assets 168,616 4

52,714,24'

2, ; 1s. -

A A 60 I 6 E% -n I AL 1 Di recd.r l l l l l l l l 1 l 38 GENSTAR l l j

1984 19A3 Liabilities and Shareholders' Equity Current I.iabilitic3 Short term borrowings. 258,681 231,046 Accounts payable 312.129 '37,7(12 Income ta xes 2,440 6,906 Real estate advances 62,038 88,195 Current portion of long-term debt 16,280 23,195 651,568 587,(191 Long-term Debt 720,010 713,593 Deferred Revenue 6,779 77,043 7 Deferred Income Taxes (9,200) 24,5(X) 1,430,157 1.402,230 Preferred Shares Redeemable preferred shares 220,775 12(),(X X) Convertible redeemable preferred shares 205,005 101,669 Common Shareholders' Equity Common shares and contributed surplus. 312,886 ki t, US Retamed carmngs 465,7o4 383,(r19 Unrealized foreign ex;hange translation 79,ci)0 31, VX) 52,714,247 52,318.836 Thea en:n unx n,res are an unegui nr1 of thew nnano.it sutenxnis GENSTAR 30

CONSOI.lDATFD S'IWl'F.\\lFN'IS OF Cl IANGES IN FINANCIAL. P()SITION for t he scars e nded thember Lt. IN.1+ 1 and IN ,thramb et Canadun dallud 1954 los 4 lox 2 Operating Activities Net income (loss) for the year 131,'53 101.040 6 1,? o 61 Items not afiutm:s* funds Depreciation, depletion and amortization 83,175 70, il ! 'O,596 Deferred income taxes (30301) ( 5 ', ll OI t ol,'Ol 0 Equity income less dividends (36,929) (33W 31 i !5.200) Other 7.094 ( U671 13,l',1 f unds Generated Required) by Operations 155,09' '0,;o ! l oo,0;h) t i Change in Operating Working Capital Cash and term deposits (1,3411 4."0; (7,;17) Accounts receivable (71,602) 20.4 l's oo,107 Inventones

3. 3s 3 1 n 2.612 19.039 Accoums payable and income taxes ti9,961 l'.0 ' 51 22.6021 6

Forugn exchange translation effects 16 ' l o t "'I 40;I l 17,0i 15;,113 11 ;,2 ~0 Net f unds Generated by Operating Activities 5 172,154 $ 261,71' ( 9l Iinancing Activities issue of long-term debt 1;3.'25 RcPayment of long-term debt (20,279) t li,30nl i tils U Deferred revenue and lease deposit (10,n75) i10316) i 12,19 0 Issue of preferred and common shares 20n,798

;o 1 s;'

l Net Funds Generan d (Required) by financing Activities $ l'5,844 $ ( 10,n'esi 5 06,000 Investment Activities loint Ventures Deve:opment Lind, Investments and Intangible Assets Distnbutions and deacases 111,365, 01,132 1;1,10; Investments and increases (105,968) p2.0HI (122.0 % 1 Intangibles ansing on acquisition of subsidianes (121,044) ( l 15,n47 ) o, 111 ls,I to Censtar Financial Corporation Distributions 21,740 111,241 %,102 Investments (56,823) i ! 3 ou 11 (00,;;;) (35,083) 'O, im ( 2,1 M1 Fixed Assets Disposals 28,265 L i, W l 3',6 bs Additiens ( l h0,594 ) rin,its) inn.2215 (152,329) 6013 23 % 61 1 Net Funds Generated (Required) by Investment Activities $ (303,059) $ 8 -i 7 6 7 t ( 2, ; o 1 11 10 GF=NGTA R

l l l 1984 1943 1982 l Net Funds Generated (Required) by: Operating activities 172,154 261,742 9,221 Fmancing activities 175,844 (40.6781 96,906 Investment activities (303,059) 85,757 (2,590) Dividends (46,367) (36,737) (46,908) i Net Decrease (Increase) in Short-term florrowings and Real Estate Advances 5 (1,428) $273,064 $ 56,632 Net Decrease (Increase) Consists of: l Short-term borrowings (27,585) 184,014 151,403 Real estate advances 26,157 89,070 (94,771) U 5 (1,428) 5273,084 $ 56,632 i J CONSOLIDATF., S'lWIBIEN'IS OF ltEl'AINED IMitNINGS f or the years ended Da.cndwr 11.1* *. l#3 2nd IN ithousands of Canadian dollars) J i i 1984 1983 1952 Ilalancc-lleginning of Year. 383,099 316,796 448,(X10 Net income ilossi for the year 131,753 103 010 (84,296) 514,852 419,836 363,704 Div:dends-preferred shares 19,605 1 t,s 18 19,23 -common shares 26,762 21,889 27,674 l 46,367 36,737 46,908 l Share issue expenses (net of related income taxes) 2,721 l 49,088 36,737 46,908 l Italance-End of Year. $465,764 $ 181,099 $ 116,796 The companyn,; nmes are an integral p.irt of the,c finanaal statementt i i GENSTAR 41

N(TES TO CONSOl 11 Wl'EI) FINANCI AL SIXlBIEN'IS iw d.c e,n atwe a ru. int m.ra: e

1. Business Combination Durmg the third quaner, GSX Corporanon iGW. a cenain assets of the partner that (.sX has also agreed subsidiary of the company. a".d a partner sueten-to acquire. At December li, !^ 1 GsX has provided fully completed a cash tender offer for the outstand-for orelinunarv contrd utions ut iM; lx O.(k O tow aid Ing shares of SCA %ervices Inc. ACAL a compant sueb co'ts. Based umn the f mal dionbunon of aucts enUged m prov1 ding waste dispesal services to to GSX and the raults of a valuanon of the individ-ComWCrCla!. 'ndustrial and residential Custoine!s.

LlalNC;\\4)pe!.Itins Ihat is bem; perf, uned runu.nu in accord.Ince with an aenement between G%X and to the acec.nent the share of the t. tal acipusiti.in ib partna GSX contrwuted in:tially ;l% of the cost costs to N hirne b\\ GsX wIll be aA:sted In addition If (3X clects it nt'.e months o{dispbe 6 d.iny M' A blNnew w ithin of acquiring SC.\\ sub'ett to a InaX1muni o[ fths :egtu s:nen date. the p.utner is ill thefau D :.lh O ttO,U.%. D 41IhO O t)1 plus m iket v.:.uc of cen.nn non-eperating assets i f SCA E"bCated to make up any shintfallI t tween the ales 1 the value(:t price aM tb p etu m id (;W4 tial tiuurtMin >n that GSX t.!cets to atqture and,11 allwated to that business T he tmana ll Matemt.ts n clude th; rt sults c f opetanons of ti e W' A businewe s nuttally d:sn Outed to C WX fr; n seric% '1, b ;. Det.nls et th: atytnuta.n which ha ~ bet n acmantcJ for en the perchase baus ot acCisanttrii are :Is tob'w s j a Net tane:Me acets acquired at the b d value(if sCA 111 3:n Allocatm: 't purchas; pnte premium TancHe awett pn un!y land and tandhlt sucs 29 ti Ident:flaNe intanc He awt h

p2n

.Re id: al a n cH J 'CI irbing fitin the aJquNtain 'i,] ii) a Tual co: :de* anon hm hW The punha'e prae alkeanon to t.mg1N assts n Assunung that tlic aape mn had taken plate on bcInd a%'!!Ced 5traleht-$ "J over the t 'uinin: Januarv 1. las ( that the :ait : ed a:nt>rticatitin of usef ul hvts of 10 to li vean fa the deprecuNe exec <, purchase pr:ce rem.u'ned unchanced and that portrn of th Je anets. IntancMe aucts arNng fiian the purcha'e was tmanced hv bank borrb Ings at an tht acqt 0:nen are bcIng an ortred straNht-hne avera.;c cost of Il N, for 1+ 1 and 131" > for lW ;, over 1i ean f: :de! :!uNt and ;D S c.us for reul the theinctie.:1 pro-forma mns 'hdated results of i ual Intar + ' I-Censtar\\(pratbins w(,uld h.ive been as follow v 1984 1%; ,th mn1 of Allua Revenues $ 2 jy)6,6()() $] IllN W O Net incc me 128,g00 o },7t y Net incon.e per share ~~- Canadian method -basic $3.4 7 52 ;; -fully diluted 3.30 3.30 United States method -prunary 3,30 19 -fully dilmed 3.30 (p The theorencal ro-forma can'ohdated results of sohdated resuhs of operanons P opCrations, as prCsenttd ah ave. B not necessan!V I he dC4tllsition (If the companyi u ire i>f.,C, A. g s Irh ICative of either the results of. operations that wou lave occurre had the act uNuon taken, lace (4perall(Ins f esu tet In t le b) ()Wln/ e tall"W s !!) Ina ncia p r,1tl(d). on January 1.1+ 1or of the companys f uture wn-e s o m, of, ,anu increase in fixed assets 122,169 Increase m intangible assets } low) increase m operatmg working capital _.__-_'l 21,o n GENSTAR

2. Inventories 1984 1983 itheusands of dollars)

Finished goods 78,298 72,300 Work in process 53,373 35,800 6,338 61,188 Raw materials, supp hes and repair parts, 7 Land 291,131 324,235 $440,140 5493,523

3. Joint Ventures, Development Land and Investments 1984 1983 thoasandsof dollars!

t Ioint ventures (Note 4) 66,654 57,633 Development land 70,838 41,950 Mortgages and loans receivable 43,793 44,845 Portfolio secunttes-marketable 33,347 21,333 Portfolio secunties-non-marketable 49,084 47,SS7 Development propertv subsidiary 44,307 5263,716 $257,955 Mortgages and loans receivable include $ 19,N0,000 at Addmonal venture capital mvestments are included December 31,1984, and $21,400,000 at December 31, m Genstar Fmancul Corporation, a wholly-owned 19M, related to land and housing sales with interest subsidiary accounted for on the equity method. These rates of 8 '% to 18% The remaimng amounts relate mvestments had a market value at $2s,600,000 at primarily to balances on asset sales and stock purchase December 31,1984 plans-At December 31,19s3, the development property sub-The market value of portfolio securities-marketable, sidiary consisted of land and properties under devel-which consist principally of marketable venture capital opment at a cost of $80.507,000 net ot secured and un-investments was 5'4,40tl000 and $122,000.Ol O at secured debt of $36,200,000, which were held f or sale. December 31,19M and 199 3, respectively. Gain on sales As a substantial portion of the properties mtended for of these secunties, determined on the bans of average sale were sold m 1984, the remammg assets and habil-cost. was 518.03'.000,5;6,6 HRO and 521.926,000 in itics have been consolidated at December 31,1984. 1954,1953 and 19s2, respectively.

4. Joint Ventures The company is a partner m a number of incorpo-and manne financing activities. The following is a rated and umncorporated joint ventures engaged in summary of the combined operations and financial the development and financing of real estate, con-position of these investments.

struction, chemical and mixed fertilizer production 1984 1983 1982 Operations (thouunds of dollars) Revenues 198,230 316,591 336,569 Expenses. 209,253 380,317 442,493 Loss before income taxes 5 (l1,023) $ (63,726) $(105,924) Allocation of Income (Loss) Other partners 3,366 (40,941) (40,644) Company (14,389) (22.785) (46,280) $ (l1,023) $ (63,726) 5(105,924) GENSTAR 43

Notes to Consolidated Financial Statements tcon unuef 10S4 1953 Net Assets Employed shous.nuh et dollua Accounts and loans receivable and other assets 79,186 121,961 Fixed assets. 16,227 41,552 Land, real estate under development and other inventories 46,(n2 460,912 9 564,455 624,157 Accounts payable and other liabilities. 45,9 b <8,3 P J 5 518,520 5 516,120 Financed by Mortgages and loans payable. 414,%0 4SL982 Equitv and advances by other partners 59,402 13, " 1 Equity and advances by the compant 44,15S 48,967 5 Sis,520 5 546,120 1984 1%3 Reconciliation of Investment in loint Ventures Aounds ot dollua Equity and advances by the company (as above! 44,158 15,%' Deferred preht between inint ventures and the company (3,152) iL9821 provi3 ion for future losses on toint ventures. (2,391) (2,17 11 Other asset basis differences 4,789 1,069 Total mvestment in :omt ventures 5 4 3,4tM 5 1thwl l Comprised of: l_ong-term i ivestment in ioint ventures 6o,654 i',633 Current portion of investment in iomt ventures meluded in ace unts rtceivable (23,250) (13,'52) 5 43,404 5 41,S51 l In general, hab;lities of :omt ventures are secured by December 31. los 1. Under certam partnership agree-pledges of the related as ett At times. the iomt ments, the company is also comnutted to make s venture partners may further support these obhga-additional investments of 56. a xu x x). tions should the reahzation from joint s enture asset' In addition, the company has agreed to purchase not be sufficient. As a genera! partner in certam land frot i a partner, hip m sufficient quanttues to unincorporated ventures, the company is contm' enable the partnership to meet principal and interest gently liable at December 31 lW1 for the other requirements for 510lmUxikf h ans if the partner-partners' share of liabilines of S 0,vm xX) should slup is unable to do so f rom as own resourecx the other partners not be able to satisfy them. as well Dunng 198 L the company purchased 575 acres of as for its own share of SNHnun) compared to land for approximately 56.Nxun) under this agree-541,200.(D) and 513/00 (m, respectively, at Decem-ment. These loans bear interest at 9.75"o. mature to ber 31,193 3. 1993 and require the following pavments of punci-As a linuted partner in other ventures, the company pal over the next five years. is a guarantor of partnership habilities of $16,9xum 1%5-512,ltxUu) 19+il2Juum at December 31,1991 compared to 5 329Ut x) at 1987-512J m otW) 196512J X W W 1989-511,0l x O)X)

t GENSTAR

5. Fixed Assets l"84 10M AnumulatcJ Accumtdated

!Npnu. mon Dc p t cc u tion and li plenon Cost andt)cp!cuon Cost e , thousands < d J lla:s' Properties 43,167 3;/M Buildmgs l'O,73' I13 SS 3 2I; ? 15 9S, 02 Quar nes, gravel depmit s a nd landfill sites 9o,541 22,515 51 ml 11.610 Machinerv and equipment 1,250.531 n08,212 1 ( b 1.425 161.827 51,660,9'6 5 744,610 51.:(0.til 5 571,'39 Included in iixed assets at December 31 loca is tion concermng fixed assets held under capitalized consnuetion in progress of sla.touw wah an leases is provided in Note 1; estimated cost to comp!cte of 510 (W m L Infonna-

6. Investment in Censtar Financial Corporation Genstar financul Corporation (GF Ci and its sub-levera ged leasmg. real estate sa!cs bokerage. leasmg sidianes ate engaged prunatilv in mortgage lending, of transportation containers and rtntal of electronic retail and cumMmretal bankmg. mongage banking.

test Jud WCasurCment equipment nducurv wrvices vemure capnal mvetments The fol!owmg summarv presents the combined operations and fmancial usinon of GIC. l Consolidated Balance Sheets 1984 19M Asset' 6.sanhf JoHust Cash and term delusus 'F 7,315 950,241 Secunnes s'7,580 546,S18 Loans

63,911 5,!00.69s Propertas and equipn 'nt

% 820 415,59; Advances to affiliates A62 15,6X9 Accrued mterest and other avets '.956 177,630 Intangible a%:, arismg from a<quisinons 1,1,627 162,736 58,231,871 57,125,169 Liabilities Deposus. debentures and guaranteed mvestment certificates 6,645,318 6 006.660 Advances from af fihates 14,204 21,971 Other habilities 1,017,464 S:0,570 ',679,986 6,962,210 Sharchcider's Eq uity Common shares and contnbuted surplus 397,379 3;1,689 Retamed earnings 147,9S2 111,570 Unrealized foreign exchange translation 6,524 551,885 463,259 58,231,871 $7,12;,469 GENST/AR ts

Notes to Consolidated Financial Statements gont.nuedl Com olidated Statements of Income 1984 1983 1982 Revenues tihousands of dol:ars) l Investment income 862,173 808,313 878,997 l Fees and other revenues. 371,819 325,913 226,714 l 1,213,994 1,131,22.6 1,105,711 Expenses Interest expense. 763,297 699 657 772,370 Other expenses 35k 185 341,278 270,382 1,122,482 lhiO,935 1,042,752 Income beforeincome taxes 111,512 93,291 62,959 Provision for income taxes 18,800 9,600 10.500 Net Income for the Year 5 92,712 5 83,691 5 52,459 l Reported net income of GFC's subsidiaries, princi-net income by $10,60tt000 in 19S4 and increased net pally Canada Permanent Mortgage Corporation, is income by 36,500,000 and $16N00,000 in 1983 and adjusted to reflect amortization of purchase price 1982, respectively. allocations to financial assets and liabilities, nropr-A reconciliation of the equity of GFC to the consoli-ties and equipment and intangible assets. The effect dated investment in GTC is as follows; of this amertization decreased subsidiaries' reported 1984 1983 ithousands of dollars 1 Shareholder's equity as above 551,885 463,259 Advances (tol from affiliates inct) (12,458) 9,282 539,427 472,541 Elimination of unrealized inter-company gains (7,033) (18,1661 Investment in Genstar Financial Corporation $532,394 $454,375

7. Intangible Assets 1984 1933 ithousands of Jollars)

Non-amortirable intangible assets... 31,929 31,929 Amorticable intangible assets and debt discount (net). 136,687 15,438 $ 168,616 $ 47,367 1 Intangible assets represent the excess of cost over the quent to November 1,1970 and are being amortized l fair value of ret tangible assets acquired. Debt to income over periods up to forty years. Unamor-l discount represents the difference between the pres-ti ed intangible aswts are charged to income in the ent value of debt assumed, based upon then current event of a permanent diminution in value. market interest rates, and the present value of debt As more fully described in Note 1, the acquisition of assumed based upon stated interest rates. 40% of SCA Services, Inc. during 1984 resulted in an l Amortizable intangibles are those arising sube increase of 5119,860,000 in amortizable intangible assets.

8. Real Estate Advances Included in real estate advances is $50,004,000 at

$31,721,000 at December 31,1983 represent construc-December 31,1984 and $53,474,0&)at December 31, tion financing and mortgage loans on residential 1983 representing the outstanding balances of the houses included in inventories, which will be repaid purchase price of development lands which are or assumed by the purchaser upon sale of the related payable over periods up to five years. The remaining asset. Interest rates on these advances range from 7% advances of $12SM,000 at December 31,1984 and to 15.5%. 46 GENSTAR

9. Long-term Debt 1984 1981 Current Current Fixed Interest Rate Debt annon roul Por non Total Debentures thouunds of dollarv 6

9% convertible due in 1985* 4,955 4,955 1,674 6%% convertible due in 1988* 5,314 9,036 17h% due in 1989* 98,967 93,314 10% due to 1989* 51,468 363 5 2,1(36 14 h% due to 1991* 2,772 57,684 2,611 57,021 7% duc in 1991* + 50,800 57,110 1 th% due to 1995 14,871 S3 16,583 11% sinking fund due to 1995-23,601 681 28,639 II b% due to 1996 34,490 325 37,825 10h% due to 1999 2,(XX) 46,0lX) 2,0tx) 48,000 9,727 388,150 6.066 401,698 Capital Lease Obligations (Note 151 sh% to 12% revenue bonds due to 1909* 211 21,832 11,024 27,S82 'b"6 to 155% building and equipment leases due to 1992* 2,042 4,852 3,882 7,622 2,253 26,684 14,9tki 35,501 11% Term Bank Loan Due to 198(F 25,410 23,780 Non-Interest Bearing to 17% Notes, Mortgages and Debentures Due to 2007* 4,300 41,868 2,223 21,78(, Total Fixed Interest Rate Debt 16,280 4S2,112 23,195 485,768 Variable Interest Rate Debt Term Bank Loan 95% to 16% due in 1947* 54,178 51,020 Debenture Due to 199 4 at a rate approximating prime

• 200,000 200,(K)0 Total Variable Interest Rate Debt 254,178 251,020 16,250 736,290 23,195 736,78s Current Portion 16,250 23,195 Long-term Debt 5 16,280 5720,010 5 23,195 5713,593
• All or partly pas able in U S. dollars *
• Payable in sw ns Francs All debentures except the 9% convertible debentures Installments due on lon(term debt (excluding due in loss, the 6b% convertible debentures due in capital leases) required m the next five years are 1988 and the 11% debentures due to 1996 are secured summarized as follows; by a floating charge on most of the Canadian assets long-term debt of the company-ithouunds of dollars 1 Trust indentures pertaining to the debentures contain 19s5.

5 14,027 restrictive covenants covering the issuance of addi-1986 12,559 tional long-term debt and the payment of dividends-1987 101,291 Under the most restrictive of these ccvenants, all of 1988. 56,826 the company's retained earnings were available for 1989 59,755 common share dividends at December 31,198 4. GENSTAR

~ ~_. 4 Notes to Consolidated Financial Statements icantinued!

10. Redeemable Preferred Shares 1

Shares Authorized Preferred-5,000,000 shares authorized without nominal or par value issuable m seria and daignated as follows: -457,978 Series A voting shares of the stated value of $20.Q) each bearing dividends at 51.10 each. - 1,205,970 Series B voting shares of the stated value of $20.R1 each beanng dividends at $1.20 each. -1,726,476 Series D voting convertible shares of the stated value of 520m each beanng dividends of $1.50 each. 1 Second Preferred-20.000.000 shares authori:cd wtthout nominalor sur value issuable m senes and desisnated as follows: -1,0LX1000 Series A non-voting shares of the stated value of U.S. $100 each bearing cumulative variable rate dividends. -439,181 Series B voting convertible shares of the stated value of $24.40 each bearing cumulative dividends of U.S $1.65 each. -3,000,000 Series C voting convert!ble shares of the stated value of $31.50 each bearing cumulative dividends of $2.35 each. -4,000,000 Series D non-voting convertible shares of the stated value of $25.00 each beanng cumulative floating rate dividends of the greater of 6% or 66.67% of the Canadian prime rate of interest and subieet to a maximum rate of 14%. -43u000 Series E non-voting shares of the stated value of 5253X)each bearing cumulative dividends of $2.375 cach. -2.0(u000 Series SP voting convertible shares of stated values deternuned at date of issue bearing non-cumulative dividends at various rates. 4 1984 1983 1982 Issued and Fully Paid Sh.iro Anmunt Wres Amou n t % res Amount Redeemable abou. mds1 Preferred shares i -Series A & B. 38 775 Second preferred shares l -Series A 1,000 120,000 1,000 120,(4 X) 1,0th) 120JXX) -Series E. 4,000 100,tXX) 5,038 5220,775 1,0t XI 5120.u X) 1,(XX) $120nN Convertible Redeemable Preferred shares l -Series A & B 39 781 190 3,793 ~ -Series D. 1 15 291 15 301 18 363 Second preferred shares -Series B. 210 5,130 210 5,130 211 5,157 1 -Series C 2,976 93,754 2,976 93,754 2,977 93,770 -Series D 4,000 100,000 e 1 -Series SP 627 5,890 552 4,WX) 485 3,78; j 7,828 $205,065 3,792 $ 101,869 3,881 $ 106.868 Convertible Redeemable issued Beginning of year. 3,792 104,869 3,881 106,868 4,1 16 ,N1,068 j issued in the year -Series D at $25.00 4,000 100,(XX) -Series SP at U.S. 59.06 to U.S. 512.62 82 1,052 76 1,181 497 3,842 7,874 205,921 3,957 108,052 4,643 I14,910 Series A and B (expiration of conversion option).. (38) (775) Converted to common shares (8) (81) (163) (3,165) (11) (210) l Series SP redeemed. (2) (18) (751) (7,832) End of year. 7,828 $20a,065 3,792 $ 108,869 3,881 $ 106,868 48 GENSTAR l -x i _ _ ~ -. - _ _ -. _... _,.,. .. ~ -

Under the terms of the second preferred share issue shares. These shares are non-redeemable prior to agreements, no preferred shares ranking higher than June 3),1985; thereafter redeemable on or before the second prefened shares can be issued without the June 30,1986 at 53110 per share, the price theicafter consent oithe second preferred shareholders. declining by 50.32 per share each 12-month period The Series A second preferred shares bear cumula. until hme 30,1990; and thereafter redeemable at tive variable-rate dividends based on the London 531.50 per share. Inter-Bank Offered Rate. As of December 31,1984, Each Series D second preferred share is convertible at 1983 and 1982, the dividend rates were 6.3s% 6.10% any time into one common share at a price of $32.50. and 6.29% respectively. At the option of the holder, These shares are retractable at the holder's option on the company will purchase, at the stated value, a March 31,1No at 525.tX) and annually thereafter on ~ maximum of 330,t11bhares on each of November 1, September A until 1941 ar.d will be redeemable on 1986 and 199 and any balance outstanding on or after September 30,149 3 at the same price. The November 1,1988. company may at any time purchase for cancellation Each Series B second preferred share is convertible all or any number of these shares at a price not to into nine-tenthsof a common share of the company exceed the highest price offered on any stock and is redeemable at U.S. 525.m per share. exchange on the date of purchase. Each Series C second preferred share is convertible Each Series E second preferred share is retractable at into one common share until June 30,1990, after the holder's option on November 15.1900 and annu-i which the company will purchase 1% of the shares ally thereafter until 1994 at $25.00 and will be then outstandmg per quarter. Since issue in 1930 a redeemable on or after November 15,1900 at the total of 23.680 shares has been converted to common sa me price. -x. I1. Common Shares and Contributed Surplus Authori:ed -an unlimsted number. wnhout nommal or par value. Issued and Fully Paid 1984 1983 1982

sharc, A mou n' Shares Ameunt Shares Amount Common shares, beginrung shouu nd J of year 31,359 295,786 30,878 2R8,223 V),589 283,166 issued in the year

- At $ 10.W to $31.50 0n the conversion of preferred shares 8 81 3)9 3,16; 16 210 - At 55.17 to 535.32 under stock purchase plans and i on the exercise of options 169 4,202 139 3,739 256 4,516 l - At U.S. 5161X) to U.S. 541.00 in exchange for convertible debentures '202 4,265 M 659 17 331 Common shares, end of year 31,738 304,334 31,359 295,786 30,S78 288,223 Contributed surplus 8,552 8,552 8,552 31,738 5312,886 31,359 $301,338 30,878 5296,775 Common Shares Reserved for Issuance 1984 1983 1982 abouundsof shares) Series A and B convertible preferred shares 380 Series D convertible preferred shares. 29 J) 36 i Series B convertible second preferred shares,. 189 189 190 Series C convertible second preferred share 3 2,976 2,97(> 2,977 Series D convertibic second preferred shares 4,000 l Series SP convertible second preferred shares. 515 619 451 i Convertible debentures. 343 516 578 Exercisc of options 199 156 138 N,251 4,516 t,753 GENSTAR 49

t j j Notes to Consolidated Financial Statements 1 (continued! 1965 Stock Option Plan 1969 Stock Purchase Plan

i Options have been granted whereby common shares Under the terms of the 1969 Stock Purchase Plan.

may be purchased by employees at a price equal to trustees have purchased, at approximately 99% of 90% of market on the grant date. Employees, the market. 20,925 common shares for the benefit of maiorityof whom were also officers and directors, employees who are officers and 196,655 common held options for 50,000,50.000, and 56,000 common shares for the benefit of other employees. The partici-i shares at December 31,1984,1983 and 1982, respec-pants pav $10.83 to $42.14 for the shares over a tively. There were 20,0000puons granted during the penod of seven years together with interest caleu-l year ended December 31,19S2. No options were lated at 5% per annum. The shares are held as granted in 1984 or 1983. Option prices from inception security by the trustees until full payment has been of the plan have ranged from 511.99 to $15.75. Of the received. During 1984,65,275 shares were issued. 50,000 options outstanding at December 31,1984, 1979 Stock Purchase Plan s 38,000 are currently exercisable. Under the terms of the 1979 Stock Purchase Plan, 1982 Stock Option Plan Series SP second preferred shares were issued to Options have been granted whereby common shares employees at a price equal to the conversion value as I may be purchased by employees at a price equal to of the date of grant. The SP shares are convertible 100% of market as of the date of grant. Employees, into common shares pursuant to a conversion for-i some of whom were also officers, held options for mula based on market value. Employees, some of 149,070,105,600 and 81,795 common shares at wham were also officers and directors, held 626.500 December 31,1984,1983 and 1982, respectivelv. The Series SP sceand preferred shares at December 31, number of options granted during the years ended 1984. The participants pay U.S. 55.48 to U.S. 512.62 December 31,198 4,19S3 and 1952 were 55,825, for the shares over a period of ten years together with 44,050 and 81,795, respectively. Option prices from interest currently set at 9% per annum. Non-inception of the plan have ranged from U.S. $10.8 to cumulative dividends are paid at the annual rate of U.S. 525.57. Of the 149.070 0puons outstanding at U.S. 50.66 to U.S. 51.51 per share. Dunng 19o4, 4 December 31,1984,93,245 are currently exercisable. M1,650 shares were issued. I

12. Net income Per Common Share The weighted average number of shares used in calculating net income per common share under the Canadian and United States methods is as follows:

Canadian United States 1984 1983 1982 1984 19Al 1982 Basic and Primary abouwd d Weighted average common shares 31,473 31,221 30.651 31,473 31.221 30,653 Share equivalents pertaining to -conversion of preferred shares. 3,633 3,730 3 1 -conversion of debt 494 551 -options and warrants 18 39 l 31,473 31,221 30,653 35,618 35,541 30,653 Fully Diluted 2 Weighted ave; age common shares 31,473 31,221 30.6;3 31,473 31,221 30,653 4 Shares pertaining to -conversion of preferred shares. 3,701 3,793 3,701 3,793 -conversion of debt 494 553 494 553

j

-options and warrants 20 44 20 44 t 35,688 35,611 30,653 35,688 35,611 30,653 i i 50 GEN 5 TAR i

~ J l l l Basic and primary income per common share have in 1984,56,810.0x)in 1983 and $18,689,0tX)in 1982. been calculated after reducing net income by the being the dividends on outstanding non-convertible preferred share dividend entitlement of $19,720,(XX) preferred shares, and increased by $489,lulin 1981 in 19S 1. $14,771,(X10 in 1983 and $18,689.00tlin 1982. and $M)3,0lO in 1983, being the after-tax effect of Net income was increased for purposes of calculating interest assumed on convertible debt. primary income per common share by $S,43iOOO in in 1982, the weighted average number of common 1984 and 58,417,000 in 1983, being the effect on shares u<.ed to calculate primary and fully diluted income available for common shares of preferred income per common share has not been increased for dividends and the after-tax interest assumed on the potential effects of conversion of options, pre-convertible debt. ferred shares or debt, as this would reduce the In determining fully diluted income per common calculated lo's per common share. share, net income has been reduced by $11,761,0t10

13. Income Taxes Income before taxes and provision for income taxes by geographic area are as follows:

1984 1983 1982 income (Loss) Ik fore income Taxes shouundsof dollard Canada. (38,656) (24,961) (25,669) Umted States 11,G40 (6,885) (289,790) Other 140,869 131,886 130,7M 7 $ 113,253 $ 10),010 $(181,696) Provision for Current Income Taxes Canada 2,500 11,200 (5,400) Umted States. 1,600 31,9tt) (5,500) Other 7,400 8,a x) 3,200 $ 11,500 $ 54,100 $ (7,7 J1) Provision for Deferred Income Taxes Canada. (38,400) 3 4,100) (22,4001 United States 8,400 (12,80)! (70,300) $ (30,000) $ (57,10)) $ 92,7(X)) 6 The components of the deferred tax provision are as follows: 1984 1983 1982 shouundsof dollard Additional depreciation for tax purposes 17,600 2.6(X) 6,41X) Los<es available to reduce future taxable income (56,700) (61,901) (30,0lv)) Portion of real estate and joint venture mcome deferred (recognized) for tax purposes (2jXX)) ( 1,40(1) Amortization of (benefit from) excess tax value of aswts available to reduce future taxable income 8,400 5,20) (69,7(X)) Other 700 (1,(X x)) 2,(X X) $ (30,000) $ (57,1(X)) $ (92,7(X)) The company's effective income tax rates are as follows: 1984 1981 1982 Canadian and Umted States federal incorne tax rates. 46.0 % 46.0"6 M6.0)% Provincial and state income taxes, net of federal deductions. (1.5) 18 (1.6) Effects of investment incentives net of recapture 2.9 3.8 6.7 Reduced rate on capital gains and other income (0.2) (1.9) 6.4 Inter-unit interest income taxed at reduced rates (36.0) p5.7) p0.1) Losses availab!c to reduce future tax provisions 4.2 11.2 15.0 Equity net income and non taxable foreign income (42.4) p6.7) (12.61 Amortization of acquisition purchase price allocations 11.4 7.7 6.7 Other (0.7) (1.2) 1.3 (16.3)% p.0)"6 (51.4l% GENSTAR 51

~ Notes to Consolidated Financial Statements tctmtmucJ? Investment tax credits are accounted for on the amounts by $109,(XY),00thvbich ts available to flow-through method. reduce future taxable income. Lo3ses of $323,(XX).(XX) are available to reduce tuture income taxes have not been provided on undisuibu-United States taxable income in years up to and m-ted income of certain foreign subsidiaries as such ciudmg 1999. Tax recovenes have not been recorded income is being reinvested in foreign operations. At on $139,(XX).(XX) of these losses. In addition, as a December 31,1984, $305,(XX).(XX1of such und:s-result of a merger of certain subsidiaries in 1982, the tributed income, if distributed as dividends, would tax value of United States assets exceeds book be subicet to income tax at 4%

14. Unrealized Foreign Exchange Translation An analysis of the changes in the unrealized foreign exchange translation account follows:

1984 1983 (thousands of dollant Balance-beginning of year 34,300 32,7m Translation adjustments. 45,300 1,6(X) Balance-end of year $79,600 $34,3m Realized foreign exchange gain (loss) included in income. $ (200) 400 Unrealized foreign exchange gain included in income $ 1,200 $ 4,l m Canadian equivalent of one United States Dollar (year-end rate) $ l.320 $ 1.215

15. Leased Assets and Lease Commitments The company leases equipment, manu facturing Future minimum payments under capital leases and facilities and premises under both operating and non-cancellable operating leases for equipment and capital leases. properties, plants and equipment premises are as follows:

include the following amounts for leases that have Operating Capital been capitalized: Leases Leases 1984 1983 abouundwM 41an) (thousands of dollan) 1985. 27,5(X) 1,400 Buildings.... 9,600 13,000 1986 21,8m 3,10 0 Machinery and 1987 18,7(X) 2,9(X) equipment 35,300 47,100 1988 15,2'X) 2,utX) 1939 13'.k X) 3,( X X) 44,900 60,1(X) Less; accumulated Subsequent years' lease payments. 44,(X X) 22,800 depreciation. 22,500 JO,7m Total lease payments $ 140,N X1 39,100 $22,400 $29,400 Amortization of capital leases is included in interest imputed interest. 12,716 and depreciation expense. Capitalized leases include Present value of facihnes u nder lease-purchasc option. The leases minimum lease pay-require annual payments equal to the servicing and ments included in redemption requirements on rnunicipal bonds that long-term debt 5 26,681 financed the crmstruction of the facilities. The company has the option to purchase the facilities for Rent expense from operating leases for the years an amount sufficient to redeem all outstanding ended December 31,1984,1983 and 1982, was l bonds, plus a premium, or for $1 once all bonds have $28,800,0l11, $28,500,(X10 and $35,9tX),(XXI, respectively. been redeemed. i 1 52 GENSTAR

i !6. Pension Plans . he company and its subsidiaries have a num,cr of has a separate employee pension plan. Assets 57ith a 1 1 defined benefit pension plans in which salaried, market value of $74,1ts,0to were available in this l ccmmissioned and hourly employees are eligible to plan, compared to the present alue of plan benefits p irticipate upon retirement af ter varying years of of $58,723,0tn There was no pension expense er aployment. The company's annual contributions recorded in 1981 and 198 3 for this plan due to to the plans are charged to income based on actuarial overfunding in prior years. Pension expense recorded funding requirements. in 1982 was $2, MUJXXL The most recent actuarial valuations of the pension United States Plam plans were made as at January 1,1961 using assumed Effective December 31,10S4. the company restrue-returns on pension plan assets ranging from 6"6 to tured the pension plan covering substantially all ot Em its United States sa.aried employees. In coimeetion Pension expense was $ 1,000,0to and 54,000.000 in therewith, the existing plan was discontinued and 1984 and 19s3, respectively. In 1982, pension expense replaced by a new defined bencht plan providmg was a net credit to meome of $3,000,00 resulung - mereased benefits. Regulatory approvals from the from excess pnor contributions withdrawn from the Pension Benefn Guarantee torporanon and the l plans offset by the year's normal peaston expense. Internal Revenue Service are being requested. Upon i Pension plan expense m the United States includes discontinuance of the existing plan, the accumu-actuanally determined pnor service costs being lated plan benetits of all participants have become amortued over penods up to 30 years. fully vested. Once regulatory clearance is received, the tmstee of the plan will segregate funds sufficient T he results of the valuation of the Canadian and to guarantee payment to parucipants of their Umted Sta:es plans as at January 1,1964 follow: accumulated benefits and refund the residual assets Canadian Plans to the company. As at the January 1,1984 valuation, Assets with a market value of $107,400Jn) were the disconunued plan had as> cts with a market avadable in the Canadian plans, compared to the value of $102.l(x)JXV compared with the present present value of accumulated plan benehts of value of accumula.ed plan benefits of $47,9t0AXR 561,3ntxn The accumulatcd plan benehts calcula-Other U.S. plans, mamly those covering hourly i tion was bawd on the value of future accrued bene-cmployeee, had a market value of $41,400fx 0 com-fits at retirement and accordmgly assumed 100% j vesong of parucipants. [3ared with the present value of accumulated plan enefits of $4 tJXOJxn The accumulated plan bene-In addinon, Canada Permanent Mortgage Corpora-fit calculation was based upon the value of currently l tron, a subsidiary accounted for on the equity methal, accrued benefits payable at retirement and included i $41,700JX O of currently vested benefits.

17. Litigation l

Asbestos Commencing in November 1971, a subsidiary has inhalation by the iniured family member (in con-been named as one of a large number of defendants trast ta multipk claims witlun one family for sepa-in numerous attmns filed by individuals who seck rate alleged mhalation of asbestos fibersh the sub-damages based on the alleged inhalation of asbestos sidiary, before 1981, treated each claim by a family fibers from puxlucts allegedly made and sold by member as a separate claim. On this basis, the such defendants rPerstmal Injury Claims"L cumulative number of Personal Injury Claims filed, ( Prior to 19na, the subsidiary treated as separate disposed of and pending was as follows: claims certam mulople claims made by one" family Cumulative Claims i umt". If one member of a family claimed personal At December 31 Eded Disposed Pending injury as a result of alleged inhalation of asbestos j hbers f the " injured famdy member"1 and other fam-1981 10,193 2.493 7,698 ily members made claims derived f rom the alleged 1982. 13,140 3,0 19 10,391 i 1983. 16,422 3,668 12,758 GEN 5 TAR 53 ~ _. _ _ _ __. _. _ _, _ _ _ _ _ _ _ _ _. _ _. _ _ _ _ _

-~, _ _ _ ~. _ ~ _ i Notes to Consohdated Emancia! Statements on t m uCd ' s In confornuty with practices undersuiod to. ave has agreed. un&r a reservanon of nghts. to defend 5 been adopted bv manv pnxlucers of asbestovrelated and to pay fi r costs of settlements or sausf aenon of products and their insurers. the subsidiary, com-iudgements for per onal Imury claims pendmg as o' menemg in IW 1, treats as a single claim (single October 1,1%2 or brought after such date and claim baus' all claims made bv nu mbers of a single ansing out of any alleged asbestos exposure that i family that denve from alleged inhalation of asbeu occuned poor to July 19% Such msurer and another tos hbers by the iniured family member. At Decem-insurer have agreed, under a rescrvanon of nghts to ber 31, IM on a single claim' basis, the cumulative pay the costs of defendmg Buildmg Claims. number of personalImury Claims filed, disnwed of There is a diffcrente in views between the subsidiary and pending was 12.NR 1256, and OSil, respec-and its insurance caniers as to whether pohey cover-3 tively. The subsidiary no longer maintains records age is deternuned during the penod from the time j that would allo v it to present tw t mformation m tite plainnit was expwed to asbestos unn! the plane i accordance with the prior practice. off s imurv was mamfested, at the tune of manifesta-At December d1 the a tion or some other ame. The subudiary and us defending the Personaf proximate cumulative cost of insurers are hogatmg this nsue m several proceed-huury Claims was U.s $sNUjul m 161, UA $U019 0 in le 3 and UA ings which are m their prelinunarv stages. The $MOftU in lW2., Such cumulative costs are com-subsidtaiv behcVes that whether an exp sure or a prised of amounts paid or comnutted to be paid by manifestation theory n deternunanve, it has suffe the subsidiary m respect of payments to plamuffs in cient msurance coverage against pendmg claims. settlemems legal f ees for defending claims and ilowever, the amounts that the subsidiary would be reimbursement of amounts to msurance companies required to contnbute under various appheable poli-for legal fees and other unts of defendmg such cies may vary dependmg uiw t" theory adopted m claims. These costs do not mdude payments made any part cular court. by the subudiary's msurance carners as heremafter Although the amount of habihty with respect to descnbed The subsidiary and its msurance carners PersonalImury and Buddmg Clanus cannot be j are litigatmg the uhimate responsibthty for all cost > ascertained any resuhing liabihty from pendmg l 4 The subsidiary. along wnh a number oiother prm personal injury and nuthhng Claims. in the opmion i ducers of a besos related pn(!ucts also has been of management wdl not matenally affect the j named as a defendant m a number of cases m which compa ny's consohdated f mancial rounon. the plamuffs allege that the presence in buddmgmf Other i i certam buildmg materials, contaming asbestos in Iwl, legal pmcerthngs ar.onst Guaranty frust allegediv manuf actured or sohl by such pmducer' Company of Canada (Guaranty'1 and others were constitutes a health ha:ard cButhling Clann>' commenced in Bntnh Columbia and m Albena, These plaintiffs seek enher monetary damages or allegmg, among other tlungs, that Guaranty. as court orders compelling the defendants. at their unuee under a uust indenture. acted improperly m costs to remove asbestos products from the buthhngs appiinting a receiver and manager of the assb eif or to otherwne make them safe and, m some cases. to Abxus Cmes Ltd. now m bankruptcy, A Genst.n l fmance programs to monitor the neahh of persons subudnuy. one of the holders or debentures nsued un-exp6ed to asbestos Several plainof fs seek to repre-der the trust m&nture, pursuant to the teams therent. sent ddferent classes, Jd one court hauernhed a h.n agreed along w th other holders. to mih mmty class consi' ting rt all pubhc and private whools in Guaranty on a pmportionate baus son L I tiinages the Umted States amned agam t all defendants m the Alberta.u non Although the subudiary is unable to estunate reha-total approumately $ %)nopy w hile the atoon m i bly the number of PersonalImury and Hmlding ihmsh Columbia n for an unspenind amount Guan Claims that will be made m the future, based on us antv n &tendmg thesc anons and Guarantyw oun-f historical experiente, tlie subsidiary anticipates that ul h.n ads ned the subsidi.iry that Guarantv has a I a signifiCant numbCr of Ahlitional Such Claims may good defense to all such acnons l l be made agamst it. The subsidiary no longer manu-3 ;n. mnpany and m sub odunn me also pames to j factures or sells any pnxlucts contatmng asbest"' rounne dmnund suns brougin namst them m i i The litiganon desenbed above has been and n being the onhnary course of busmew In the opunon of j defended by insurance carners. subiect to the dedutt-managemem, all such routine claims and smts are tbles or retentions and dollar or pohty hmnupphc-adt quately tovered hv msurance, or if not so covered. l able to each msurance p>licy and to disputes con-the results are not expet ted to man nally aficct the l l ccrnmg coverage. One of the subsidiary's msurers tompanWonsohdated imam ut po mou I l l l 5 GENSTAR l

_ _ -. _ _ _ _ _ _ = -, i i

18. AdditionalInformation j

Reclassification of Comparative figures to 2i tunes its capital as defmed by statote. Under Certain 19s2 and 19il amounts have been reclawi-these regulations. at December 31.1% 1,5IIMUu) i fled to conform with the 1951 p resentation. of CPMC's retamed earnings was aeolable for i Capitali:cd Interest Costs divid>:nds. On Ianuary 25.196 CPMC entered mto Interest costs, related pnmaniv to revenue propertv an agreement for the sale of 1.0 ttuu) Senes C pref-4 l development and real estate mmt ventures are cap. crence shares for total proceeds of 5 ;s 91tuu) before i italized dunng the development period and charged deductmg expenses of the issue esumated in the against inceme as part of construcuon cost or depre. aggregate at $1,7alJul. If this issue had taken place ciation. Had these interest costs been expen,ed as in los1,5;s sauulof CPMCN retamed carmngs meurred, tncome before income taxes would have m. would have been avadable for dividends. creased by $20,Nt)J 410 m 19s t, reinained unchanged Trust indentures relatmg to sil.2aUnlof the long-i in 198 3, and been reduced by 5 3.Sauu) m 19s2. term debt of a subsidiary require appmvalof the Restrictions on Inter-Company Distributions trustees for dividend distnbutions to the company in Loans, dividend payments and income distributions excess of defmed amounts and loans to the company L from certain subsidianes and tomt ventures are other than in the normal course of busmess. No i restneted by legislanon, trust mdentures and other consolidated retamed earmnas are restricted under such provisions and all but 521Muuulof the agreements. Canada Permanent Mortgare Corporation (CPMC), subsidiary;s net assets could be distnbuted without e trusta s approval I as a trust and loan institution, is regulated by vanous 1 Canadian federal and provincial legislanon. the Joint venture agreements generally require the ap-I federal pornon of wluch is admmistered by the super. proval of all partners pnor to the distribuuon of I intendent of Insurance. Canada, under broad powers income or grantmg of loans to the partners. At granted by the legislanon. Regulatory approval December.41.1%1, $27,'auulof consolidated would be reautred for any loan from CPMC to the retamed earnings represent untenutted income of l com;,any or af filiates of the company. The leverar loint ventures. of trust and loan companies is also regulateu under the hpstation, hnuting the size of CPMC s de; wits

19. Summari:cd Quarterly financial Data (Unaudited)

T hree Wnth s Ended h Inded _ December 11 W rch 11 June O serternher w IMember 31 1984 ~ ithouundhd Jo Lud Revenues $ U I,7(); 5;19,131 $418.281 5;63,159 51,922,911 i Gross profit 75,115 1 14,8 i5 111,165 173.095 510, I h ) l Net income iloss) t 1,809) 11, iM 11,770 46,328 131,753 l Net meome ilosd per common share - ba sic 5 (0.21) 1.29 5 1.29 5

1. 2.1 $

1 56 i.25) 1.27 1.21 1.15 1.34 l -primary n Market price iThe Toronto stock Exchange) -high 5 31.50 5 21.34 5 26 ss 5 28.M) $ .11.N1 1 -low 21.2;

19. H

19. %

21N) 19.34 j -elosmg price, Dtecmber 31 26.73 Trading volume on exchanges in shouundW shme j' -Canada I,911 1,;17 1 137 2.048 7,851 -United States 2rH4 2,(N 4 2.28i 2,475 9,18s j t i l Gi?NSTAR si

Notes to Consolidated Financial Statements icontmuedJ T hrce Months I nded br Ndd M.uch 31 lune U %cumhi to IM end>er31 thember M 1983 ithomands of dothua Revenues $3X1,239 $ 181,665 $511,6 In $ 1s0.21S $ 1,826,738 1 Cross proht. 83,039 121,356 172.782 12tN 2

00.571 Net income (los3)

( t,950) 25,286 62,I41 20,5N1 103,010 i Net income (lossi per common share -basie $ (0.291 S 0.70 1.80 0.53 $ 2M -primary 60.29) 0.69 1.70 0.51 2.72 Market price (The Toronto Stock Exchange) -high $ 25 63 $ Ni.75 $ 36.25 $ 31.25 $ 38.7; -low 20.25 21.1I 27 75 23 M 20.25 -closing price, December 31 31 m Trading volume on exchanges m phomands a shmd i -Canada 1,766 2,2 15 1, b9 1,360 6,763 -Umted States 3.313 5,311 1,5 M 3,0 % 15,28s i

20. Supplementary information on inflation and Changing Prices (Unaudited)

] 1984 los3 1%2 lost 1980 l Average Canadian Consumer Price Index l t 19s ! = 100 per Stanstics Canada) 122.2 117.2 110.8 100 0 88.9 Revenues imillions of dollars) -as reported $ 1,923 $1,827 $ 1,7N ) $ 2.1 -16 $2,310 -in constant dollars 1,923 1,005 1.0 11 2.622 3,176 Dividends per common share -as reported $ 0.85 50.6; $ 0 90 $ 1.k0 $ 16; t -in con' tant dollars 0.85 0.66 0.49 2.20 2.2 ' t Market pnce per common share at > car end -histoneal amount $26.75 $31.00 $2n2; $ 23.3s $ w.62 -in constant dollars 26.36 31.6N 21M 27.29 st).51 4 Overview The average Consumer l' rice Index iCpl) in Canada the effects of specific mflation on a company's increased by 4.3% in 1981, compared to increases of particular businewes and the use of the CPI to Sn in 1983 and 10m m 1982.The decline m the calculate amountsof ci avalent purchasmg power rate of price increases reflects generally lowcr mfla-by adjusting for the effects of general mflanon. 1 tion experiented m North Amenca. In order to The measurements concentrate on the amount of prov;de hnancial statement users with mformation inventones and fixed assets necessary to nnamtain the as to the effcces of inflation on an enterprise,lation-M)perating Capability"of an entity and the cffccts guide-lines for the calculanon and disclosure of inf which these amounts, restated for the ef fetts of infla- ^ i adjusted information have been issued by both the tion, would have on its operanons and hnanung. Canadian Instnote of Chartered Accountants iCICA1 i and the Fmancial Accounting StandardsIkurd, .T hese computations as explained hereunder, involve 4 l Umted States trASB). Ik>th the CICA and TASB C'I""dI" ""d '"' ICC"VC I"d *'*' "I" "'" d Y N prescribe a " Current Cost" computauon to measure n nanom iarability to actual operaung conditions and the teat er is cautioned anordingly. 4 i \\ i I i S6 GENETAM i

l l l l Current Cost inflation purchasing power Cain/ Financing Adjustment l The prescribed methat to approximate specinc infla-As the purchasing power of the dollar decline, so l tion is to determine today's cost to replace assets with does the true economic cost to tepay habilities. The the same type as those produced or utilized by the amipany's net monetary liabihties have been company. The methods used to determine this theo-adjusted to average 19M dollars usmg the Canadian retical cost vary dependmg on the industry and type Cpl. The resultant reduction m liabihties, assunung i of asset, repayment in December 31,19s i dollars, is the In the case of Genstar, the current cost of inventories purchasmg power gain. This gain can be viewed as l of manufactured prniucts and housing units and the the purchasing power decrease accruing to the lender rel ned cost of sales have been determined by apply. of capital and roults from usmg borrowed funds as a ing recent purchase pnces and standard costr to hedge against the effects of mflation on related I i un.ts on hand or the usc of internal and external d

• cts-I indices for changes m costs. Lmd development m-The Canadian inflation accounung guidelines iden-ventories and cost of sales have been adiusted by the tify another allocanon of the effects of mflation Canadian or us. consumer pnce mdices for land between the lender of capital and the common content and mternal cost inercment mdices for the shareholder m addition to the purchasing power j

development content. The Cpl has been used for gam. In periods of increasing pno s the company i land content because the unique nature of land will require addinonal capital to otiset the effect of j purchazd for future development precludes the increases m the specibe prices of mventories and deternunatina of a sufhciently accurate altcmative fixed assets and this additional capital is referred to current cost. as that necessary to maintain the operatmg capabil-The current cost of hxed assets of Genstar's manufac. ity of the enterpnse. This capital is provided by a turmg and industrial service operanons has been combmation of shareholders' investments and lur-determmed usmg recent construction and purchase rowed funds. The fmancmg adiustment represents 1 costs or mternal, external and trade awocianon the increase in the cunent cost amounts of invento-mdices Current cost of mobile equipment was based ries and fixed assets which theoretically would be 1 on quoted used equipment prices, internal mdices financed by debt given the company's average debt and new quipment puces tactored for differuces in to equity structure for the year. Using debt to f mance utilitt it new asset prices have been used accunm. these assets reduces the amount of the net increase in lated deprecunon has been deducted for the expired current cost that theorencally would be deducted l 3 useful hfe. Deprecution was based on average 19s from income attributable to shareholdert ] current cost and historic estirnated useful hves. Net Assets Monetary awets and habihties are restated only for The company's total assets less liabihties have been I the current year's general inflation. The company's adjusted to average 194 dollars and for the current investments in non-consohdated fmancial wrvices cost / constant dollar dif ferential of inventories and i subsulianes and ioint ventures have not been restated fixed ase ts to pnxiuce a current cost equivalent. i for the effects of inflation becauw the underlying The resuhmg current ce t net assets are considerably j assets and liabilities are pumanly moneta ry m greater than the conesponding historical cost nature and therefore not subiett to spetthe inflation. amounts. These adiusted amounts should be viewed Cencral Inflation as esumates of capital employed on which a fair Tbe amount dnclosed as"Currcnt year diustment retum must be earned and not as amounts contrib-i for specibe inflation in excess of general mflation" is uted by shareholders or accumulated and retained the difference between the effects of general mflanon from previous earnings. and the effects of change in specine pnces during the 1 i year The Canadian Cpl has been used as the mea-sure of generalinflanon and has been applied to l restate items from histortcal cost to equivalent aver-age 19M i dollars. foretgn currency current cost amounts were translated to Canadian dollars and 4 then restated into average 19M dollars. A resulting translation adrustment represents the portion of the l current year's increase in current cost that is due to the change in exchange rates between the foreign and Canadian currencies. t i 1 l l GENSTAR y I

Notes to Consohdated Financial Statements f ,wn nnuw 1 Inflation Adiusted Results the finanting adiostment on total f mancing owis i The data presented below restates certain balance and the income tax elfett of current cost adiustments i sheet and income statement anmunts for the impact were included m the inflanon adiusted results. j of mflation usmg the methods presenbed by the inventones and tned assets on a tunent u st baus i CICA and FASIL Inflation adtusted 19s i net income was $2,291.tXRum m 198 3. 52 is4.74tKO m 1983 and carmngs per share after providmg for preferred and $2.50s,10@to m 1982 I hew cnnent ont dividends does not mclude tne holdmg gain result-amoums are 5%,5% and W. higher than then re- ) ing from the dechne in purchasing power of net spectn e histoncal cost amounts in tW2 and 198 4 habilities or $M100 000 or $L15 per common the cunent cost et these assets did not mucase m j share or the Canadian "imancmg adiustment" of pn,ponion to the general milation rate. In IW4. then $98,200.000 or $312 per common share. These two cunem cost mcreased $121.10RWM m cuess of the amounts represented that portion of the cost of generalinflanon rate. I he mucaws are rnmanly re-inflation borne by lenders of capital rather than bV lated to the company's des elopment land hohhngs the company's shareholden in our view, these whose cunn t ont basn ieiletts suonger inJusny de-j amounts represent a reduction m financing costs, mand. and should be netted against interest expense t determine mflation adjusted Imancmg costs in Net assets on a tunent cost haus w ac the niunalent 1 addition. mflation adiusted results as shown do not d la of tMr bmmal ulue as a tw mlu R l consider the reduction in income ta x expense that 19s 1. as opposed to 181N. andI<e.u as at December would result from current urt adiustments to coq of 31.1981and los2. respetuvely Ilus decrease retlects i sales and depreaatmn expense. Net mcome would be the conipan6 inaeaung propornon.ne umsunent l higher than histone net moome for the penod in awets other than inventones and itxed assets I 1952-S1if the effects of the hohhng gain and which are not n nated to reH i.' e unau con unua presenbed mflation accounting methnis. Selected 1984,1983 and 1982 Financial Data Adiusted for the f(fcets of Changing Prices mulhonvi doum cucp ne shue amounN 1984 l%i IW2' Net income l In average 1941 dollars 131.8 10'.I M0t Current cost admstments Cost of sales 88.1 2b 11 ; I Depreciation 69.0 61.I Ml 5 11.5 17 ; 5 il9161 Gain f rom Decline in Purchasing I'ower of Net Liabilities In average 19A1 dollan 19.1 M2 $ 127.n Financing Adiustnant Current cost income adiustment attributable to debt 19.8 5 .% 1 5 Wi l. Net income (Loss) Per Common Share j in average 198 ! dollars 5 (0.16) $ Oth 5 (6.00 i inventories and fixed Awets l As reported 1,877.1 1, im i Ifill 0 Adlustment for general inflanon 604.8 "Ol IFil U 1 Current year adiustment for speahc inflanon in excew of lew thani general mflation: i 4 Current cmt 121.1 626 01 (239} } j forcirn exchange translation 89.8 3;2 "s i q $2,293.0 $ 2,l s ift 5250il l l linancing Adiustment Theoretical debt fmancing of annual thanee i I m current cost of asscts 98.2 46 22.s Net Aucts In average 19R i dollars $ 2,102.5 5 l. ' l 'i 9 $ 1 F.9 I rm w pu n-..a n m rm en 1-i ua UN 4m.~ m a oi un mo m.. a or n. n w m o r....,. n iha ei'e m s t o I ar.1 UN imounn to iu pun ha uw p-e p o v a h m u.n e e nr-1%ia hs .. r s n, - o.. < m o,im ei { f.Xpressed In year crld 19h I dollars. WVentoon, inchnhng deVclopment land, and f nnl aswtu.M ulafed mbh r the cura nt con mtthod were $ '9001 J x ul and 51 U9,u Mou hespetuvelv mmpan d to lustonc m't of $ W),9'x.u O a nd $916, M6 H 0 4 i

e Al UlTORS' IEPORT T( ) Tl IE SI IARiil K )lDERS We have cumined the con ohdated balance sheets In our opinion. the con chdated tuuncu' state-of GEN 5 FAlt CullP(lit.\\ TION. irid stilwidi.iries.is.it trictits referred to alwive present f.tirly the financi.il Ikceniber 31.1% 1 and IWL and the related con ~oh-puttion of GI NsTAlt COIIPoit AlluN and sulisub-dated statements of income, retained earnings and artes as.it lktember 11, IW 1 and 1% 1. and the ch.In,.'es 111 Iirlaihlal p Wilion for C.ltll of tilC t!1rCe rCstilts of !llelt npflat tiins.lnd t h.inges in their \\ c. irs ill the pe:iin.! cnded ikccinber 31, lW I as set inuncul posuron for each of the three scars in the Iortl1 on jtiga 31 t}1f oligh % of this ic;xitt ()tir perii41 ended Ikcemtvr 11,1* l in wnfor nnty with c\\.lilll:1.ltlan Was m.lde in.icti>rd.irice ss itti gt rier.illv ycrier, illy.iccc; t cd.iuinititiiig prirtti; Ics.ipplieJ iin .lecepted atidi!!ng 'tand. lids and.lcalidinglV .1(i!1sisteritl'.iis illcllidCd slit h tests tit the.icallilltitig rectirds alid suc}} tither auditing privedtires as we t.irisidert J nc<cssarv in the cnturnstaneet p e a_uj W 1 Ch.nrard A o>un o nt> Yalh a ltivt t. ('.111.1d1 M.)rcil I. l* i GT!NSTAR w l L

I i UI'll(l*S D1 REC 1016 $C"6 ';"'"Y .r AND OFFICE 16 Societ6 G6ncrale Chairman and j de llelgique, S. A. CI"CI l"'""VC OII'"' [ (Portfolio Company) Angus A. MacNaughton 1)lRi!CIORS W.dter E ught President and

• Charles deliar Chairman of the ikiard and Cluet Executive Officer Corporate Director Chief Executive Officer Northern Telecom Limited Walter S. llannister James W. Iturns

( klnorninunic.uions 1 xnurve Vice President President E<lu tpment Ma nu facturer!

1. I cona r d l'olinan Power Corporation of Canada

• Angus A. MacNaughton I xecutive Vice l' resident (I tolding Company' )

l' resident and i Chief Executive Of ficer CC"fMC E MiCh il' I L5"HilVCY'CCP'ChidCHt .. Alan E Lampney Genstar Cor p> ration I resident Vanley Agencies Ltd.

• W. Earle McLaughlin John A, West l"C"LiVC YlCC I9C'idC"I l

(Investment and Services Corporate Director Company) Frederick W. Mielke, Jr. I L'"C't iIdit: I' l 'k"i"'VICCP8CN'dCHf I

• Fra n k S. Ca pin Chairmanof theIhurd and and General Counsel

( Consultant Chief Executive Officer Pacific Gas h untne Paull Kehoe August A. Tranck Corporate Director C"inPa n Y senior Vice Presittent r l (Public Utility) Richard D. l'atcrson l " Donald Getty

• *YVC$ dit PdfC Senior Vice Preshlent and President ManJging ()Irector

('lucj [g g)3g)ct,3l ()lljreg } Q Qggy Investruents Ltd. ,j, ' q" "'" ' CI John l[ Chase IC M a M N Tr A Vi'C E8CNhICht I (Investment Companyl Company) Arthur W. I alk Vice Presh!cnt l Saul Simkin Chairman of thelhurd I. Ilerbest Gaul, f r. i Kins Management Limited Vice Presulent and 'Ireasurer I (Consultants) Rob R hm

• Row l. Turner Vice President CllairinJn of tile lhi.ird Jnd t.l. Ilyrne McNamara j

Chief Executive Ollicer Y'CC P'C'idC"i 3"d l""""IIC' Genstar Corporation i Lonmer L Whitwarth l ~ Stephen R. Volk Y C I'C' HIC"' Partner Shearinan A Sterlittg PJul I Cote { ( Attorncys at Ltw) S n iciary I i

• Wm te r oh he i neu ove romnonce "Membre of he Anihn Commuter I

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