Income

Operating Cash Flow
We define operating cash flow as net income prior to items such as depreciation and amortization, future expense and certain non-cash items that in our view are not reflective of the underlying operations. Operating cash flow also includes dividends from our principal equity and cost accounted investments that would not otherwise be included in net income, and excludes any equity accounted earnings from such investments. Operating cash flow may differ from definitions of operating cash flow used by other companies.

Contribution from Fee Generating Activities
These operations represented a substantial amount of our operating cash flow every year. The contribution from these fees represents cash flow above and beyond the investment return, and therefore our ability to increase this contribution will have a significant impact on the operating cash flow in the future. We plan to increase the contribution from fee generating activities by introducing new business services and increasing the capital deployed within existing funds.

Operations Review Fees Earned
The increasing contributions from fees enhances our return on capital because in most cases these fees either do not require an outlay of capital or are in addition to the existing investment. Our expansion of these activities will result in an increasing level of fees which, over time, should provide a very meaningful and stable component of our overall operating cash flows.

Private Equity & Asset Management Fees

Private Equity & Asset management fees represent also an important area of growth for Braxton Group and will increase as we expand our assets under management. These fees typically include a stable base fee for providing regular ongoing services as well as performance fees that are earned when the performance of an investment exceeds certain predetermined benchmarks. We also earn transaction fees for investment and financing activities conducted on behalf of our investments and other clients.

These fees are relatively modest in the current period as most of our funds are less than two years old and accordingly our results reflect partial year contributions. Furthermore, performance fees, which can add considerably to fee revenue, typically arise later in a investment’s life cycle, and are therefore not fully reflected in these results.

Property Services Fees
Property services include property and facilities management, leasing and project management, as well as investment banking advisory, and a range of residential real estate services.

Residential real estate includes a variety of services relating to residential properties, including home appraisal services, mortgage processing and executive home relocations. Property advisory fees include fees earned from investment banking, property management and other related activities. We also earn transaction fees for investment and finance activities conducted on behalf of our funds and other clients.

Investment Fees
Investment fees are earned in respect of financing activities and include commitment fees, work fees and exit fees. These fees are amortized as income over the life span of the relative investment as appropriate and represent an important return from our investment activities.

Investments

We own direct interests in a number of investments which will be sold once value has been maximized, integrated into our core operations or used to seed new funds. Within our areas of expertise, we continue to seek new investments of this nature and dispose of more mature assets. We account for our non-controlled public investments using the equity method, and include dividends received from these investments in cash flow and our proportional share of their earnings in net income. We consolidate, for information purposes, the results of our majority owned private companies and accordingly include our proportional share of their results in the operating cash flow shown above.