PRESTiGiOUS investment & MANAGEMENT {PRISM) A LP Financia~ Statements Year Ended December 3~, 20~ ~ (Unaudited)

Transcription

1 PRESTiGiOUS investment & MANAGEMENT {PRISM) A LP Financia~ Statements :05:17 1/ FS - v001.pdf (#7)

2 index to Financial Statements Page REVIEW ENGAGEMENT REPORT 1 FINANCIAL STATEMENTS Balance Sheet 2 Statement of Income 3 Statement of Partners Capital 4 Statement of Cash Flows 5 Notes to Financial Statements 6 o :05:17 2/ FS - v001.pdf (2/18)

3 BUCHANAN BARRY LLP CHARTERED ACCOUNTANTS REVIEW ENGAGEMENT REPORT To the unit holders of Prestigious Investment & Management (PRISM) A LP We have reviewed the balance sheet of Prestigious Investment & Management (PRISM) A LP as at December 31, 2011 and the statements of income, partners capital and cash flows for the year then ended. Our review was made in accordance with Canadian generally accepted standards for review engagements and, accordingly, consisted primarily of inquiry, analytical procedures and discussion related to information supplied to us by the Partnership. A review does not constitute an audit and, consequently, we do not express an audit opinion on these financial statements. Based on our review, nothing has come to our attention that causes us to believe that these financial statements are not, in all material respects, in accordance with Canadian accounting standards for private enterprises. We draw attention to Note 2 to the financial statements which describes that Prestigious Investment & Management (PRISM) A LP adopted Canadian accounting standards for private enterprises on January 1, 2011 with a transition date of January 1, These standards were applied retrospectively by management to the comparative information in these financia! statements, including the balance sheets as at December 31, 2010 and January 1, 2010 and the statements of income, partners capital and cash flows for the year ended December 31, 2010 and related disclosures. We were not engaged to report on the restated comparative information, and as such, it is neither audited nor reviewed. Calgary, Alberta March 28, 2012 CHARTERED ACCOUNTANTS 800, 840-6th Avenue SW Calgary, AB, Canada, T2P 3E5 tel 403,262,2116 fax 403,265, Serving Calgary since 1960, with associated offices across Canada and affiliated internationally. ASSOCIATION OF :05:17 3/ FS - v001.pdf (3/18)

4 Balance Sheet December 31, 20! t December 3~ December 31 January 1 20tt CURRENT Cash and cash equivalents (Note 4) Accounts receivable Subscriptions receivable Prepaid expenses Holdback receivable Deposits held in trust (Note 5) ASSETS $ 168,026 $ 959,361 $ 6,536, , ,840 59,040 o = 661,500 69,293 15,890 12,454 = 7, , , ,530 81,158 DUE FROM RELATED PARTIES (Note 6) PROPERTY HELD FOR SALE (Note 7) REVENUE PRODUCING PROPEtRT~ES (Note 8) I~ORTGAGES RECE~VAIBLE (Note 9) FUNDS HELD ~N TRUST 479,830 1,239,121 7,463, , , , , , ,442 27,467,810 31,740,163 16,305,759!,010,290 - = o 250,000 $ 31,826,323 $ 34,650,514 $ 24,992,103 LIAIBIL~TIES AND PARTNERS CAPITAL CURRENT Accounts payable and accrued liabilities (Note 10) $ 2~7,945 $ Tenant deposits (Note 5) t 19,811 Current portion of long=term debt (Note 11) 1,5tl,364 Deferred income LONG=TERM DEBT (Note 11) PARTNERS CAPITAL 447,955 $ 348, ,6;55 81, , ,190 32,170 41,596 1,944,006 1,! 86, ,667 18,530,934 22,565,179 12,299,629 20,474,940 23,751,880 13,105,296 11,351,383 10,898,634 11,886,807 $ 3!,826,323 $ 34,~650,514 $ 24,992,10~3 APPROVED ON BEHALF OF THE GENERAL PARTNER Director :05:18 4/ FS - v001.pdf (4/18)

5 PRESTIGIOUS investment & MANAGEMENT (PRISM) A LP Statement of income Year Ended December 31, REVENUE Abby Glen Apartments Castieview Park Apartments Discovery Village Westview Manor 798,378 $ 799,334 1,016,472 19, , , , ,166 2,750,809 1,492,839 OPERATING EXPENSES Abby Glen Apartments Castleview Park Apartments Discove~j Village Westview Manor 507, , ,640 8, , , , ,363 1,508, ,218 GROSS PROFIT EXPENSES Advertising and promotion Amortization of deferred financing costs Amortization of ~evenue p[oducing p~operties Asset management fees Financing fees interest and bank cha~ges interest on iong-te~m debt Meals and entertainment Office and administration P~e=acquisition costs Professional fees ~,242, ,621 5, ,t48 159, , , ,928 o , ,733 3,697 10, , ,728 = 2,719 21,175 25,221 LOSS FROM OPERATIONS (~,~ 25,823) 1,827,273 (1,198,652) OTHER INCO~E Gain on disposal o~ investments Interest LOSS BEFORE DiSCONTiNUED OPERATIONS DISCONTINUED OPERATIONS (Note 12) Revenue Operating costs Gains on disposal of assets NET INCOME (LOSS) = 2, , ,684!70,974!7!,393 (9,54,849) (1,027,259) 427, ,714 (267,286) (413,786) t,489,682-1,649, , ,114 S (904,331) :05:18 5/ FS - v001.pdf (5/18)

6 Statement of Partners Capital Year Ended Decembe~ 3~, 20~ ~ PARTNERS CAPITAL = Beginning of year NET INCOiVIE (LOSS) FOR THE YEAR SUBSCRiPTiONS issue COSTS CASH DiSTRiBUTiONS AND WITHOLDINGS IREDEiViPTIONS DiSTRiBUTiON REINVESTMENT PLAN ("DRIP") PARTNERS CAPITAL o End ef year $ 1(~,898,634 $ 11,886,807 ~95,1t4 (904,331) 11,593,748 10,982,476 8~, ,042 = (6,653) (9~,693) (48,188) (~so,st~) (50,000) (8!!,039) (935,043) $ 11,351,383 $ 10,898, :05:18 6/ FS - v001.pdf (6/18)

7 Statement o~ Cash Flows Yea~ Ended December 3~, 20~ ~ (Unaud#ed) OPERATING ACTIViTiES Net income (loss) items not affecting cash: Amortization of revenue producing properties Amortization of deferred financing costs Interest income, accrued to mortgages receivable Gain on disposal of investments Gains on disposal of assets Changes in non=cash working capital (Note 13) $ 695,114 $ (904,331) 984, , ,t48 159,875 (,~o2,246) = = (2,709),489,682) = 202,685 38,835 ~[286,291 )!37,!65 (83,606) 176,000 ~NVEST~NG ACTiViTiES Investment in property held for sale Investment in revenue producing properties Proceeds on disposal of revenue producing properties Advances from (to) related parties Funds held in trust Mortgage receivable ~1,911) (4,630) ~[170,~23) (5,558,39!) ~322,477) 316,318 o 250,000 = (I,000,000)i 82,057 (5,996,703) FiNANCiNG ACTiViTiES Partners subscriptions Partners subscription redemptions Issue costs Cash distributions Repayment of Iongoterm debt Increase in deferred finance costs 682,500 (50,000) (6,653) (48,188) (334,190) ~(789,786) 243,469 NET CHANGE in CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS = beginning of year CASH AND CASH EQUIVALENTS = End of year (Note 4) (79!,335} (5,577,234) 9,~9,361 6,536,595 $ 16;8,026 $ 959,361 CASH FLOWS SUPPLEMENTARY information interest paid :05:19 7/ FS - v001.pdf (7/18)

8 Notes to Financial Statements 1. NATURE OF OPERATIONS Prestigious Investment & Management (PRISM) A LP (the "Partnership") was formed on January 30, 2008 under the laws of the Province of Alberta Prestigious Investment & Management (PRISM) A Inc. is the General Partner. With the exception of the General Partner, and any limited partner who participates in the management of the Partnership, the liability of the partners is restricted to their investment in the Partnership The Partnership is in the business of acquiring real property, earning income from its rental operations and eventual disposal of same and through limited investment in real estate development opportunities The Partnership issued Nil (2010 = 4) limited partnership units during the year for consideration of $Nil (2010 = $21,000), and 183o937 (2010 = 178~630)limited partnership units with a value of $811,039 (20!0 = $935,043) as part of the Partnerships dividend reinvestment income plan. The partnership redeemed units (2010 = 10o914) for consideration of $150,672 (20!0 - $50,000). At December 31, 2011 the Partnership was fully subscribed and closed to investment= Each unit represents an equal undivided interest in the net assets of the Partnership. 2o FIRST TIME ADOPTION OF ACCOUNTING STANDARDS FOR PRIVATE ENTERPRISES During the year the Pa~nership adopted Canadian accounting standards for private enterprises ("ASPE"). These financial statements are the first financial statements prepared in accordance with these standards. The accounting policies set out in Note 3 have been applied in preparing the financial statements for the year ended December 31,2011, the restated comparative financial statements for the year ended December 3!, 20!0, and the restated opening ASPE balance sheet as at January 1, 20!0 (the Partnership s "Date of Transition"). Effect of first time adoptior~ As required by Handbook Section 3856 o Financial Instruments paragraph 7, the Partnership has adjusted long-term debt by the financing fees directly attributable to its origination. These financing fees, net of accumulated amortization, were previously recorded as a separate asset on the balance sheet. Effect on Opening Balance Sheet a) The effect on the balance sheet at January 1, 2010 is shown below. The current portion of long=term debt has been recorded for the purpose of the classified balance sheet presentation. Deferred financing costs Current portion of long=term debt Long=term debt January Adjustment Restated $ 527,974 $ (527,974) $ - (334,190) (334,190) (13,161,793) 862,164 (12,299,629) Total $ (12,633,819) $ $ (12,633,819) There was no effect on opening retained earnings as a result of this adjustment :05:19 8/ FS - v001.pdf (8/18)

9 PRESTiGiOUS INVESTIVlENT & MANAGEMENT (PRISM) A LP Notes ~o Financial Statements 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Partnership have been prepared by management in accordance with Canadian accounting standards for private entities. The financial statements have, in management s opinion, been properly prepared using careful judgment with reasonable limits of materiality and within the framework of the significant accounting policies summarized below Partnership These financial statements pertain to the Partnership carried on under the name Prestigious Investments & Management (PRISM) A LP and accordingly do not include the assets, liabilities, revenue and expenses o~ the individual partners. No provision for income taxes has been made in these financial statements since the income of the Partnership is taxable only in the hands of the partners= Cash and cash equivalents Cash consists of cash on hand and bank deposits. Highly liquid investments with maturities of three months or less at the date of purchase are considered to be cash equivalents. Cash equivalents consist of treasury bills and monetary market funds (Note 4) Revenue producing properties are stated at cost less accumulated amortization. Revenue producing properties are amortized over their estimated useful lives using the following rates and methods: Buildings 4% declining balance Chattels 20% declining balance The Partnership reviews revenue producing properties and equipment for impairment whenever events or circumstances arise that indicate that the carrying amount may not be recoverableo Recoverability is assessed by comparing the carrying amount of the asset or group of assets to its fair value, as determined by the undiscounted future cash flows that the long=lived assets are expected to generate An impairment loss is recognized in the period where the carrying amount exceeds fair value, ~nvestrner~t in joint venture Investments in economic activities subject to joint control are accounted for using the proportionate consolidation method. The Partnership owns a 75% joint venture share of the Castleview Park apartments joint venture The remaining 25% share is owned by Kings Castle LP, a party related by virtue of common control The Partnership s pro-rata share of the assets, liabilities, revenues and expenses of the joint venture have been combined on a line-by=line basis with similar items of the Partnership. Property held for sale Property held for sale is measured at the lower of its carrying amount and fair value less cost to sell. (continues) :05:20 9/ FS - v001.pdf (9/18)

10 PRESTiGiOUS investment & MANAGEMENT ~{PRISIVl) A LP Notes ~o Financial Statements 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Deferred interne Deferred income represents payments received in advance from tenants for rents related to subsequent periods. issue costs All costs directly attributable to raising money for the offering are deemed to be issue costs and are recorded as a deduction against partner s capital. Revenue recognition Rental revenue is recognized on an accrual basis as it is earned when collectability is reasonably assured. Other income is recognized as it is earned. Measurement instruments policy The Partnership initially measures its financial assets and liabilities at faif value, except for certain re!ated party transactions which are measured at the carrying amount or exchange amount. The Partnership subsequently measures all financial assets and financial liabilities at amortized cost, except equity instruments quoted in an active mafket, which a~e ~epo~ted at fai~ value with any unrealized gains and losses reported in net income. Financial assets measured at amortized cost include accounts receivable, deposits held in trust, and mortgage receivable. Financial assets measured at fair value include cash and cash equivalents. Financial liabilities measured at amortized cost include accounts payable and accrued liabilities, tenant deposits, and long=term debt Impairment Financial assets measured at cost are tested for impairment when there are indications that an impairment exists. The amount of writeodown is recognized as an impairment loss in net income. A previously recognized impairment loss may be reversed to the extent of an improvement, provided it is no greater than the amount that would have been reported at the date of the reversal had the impairment not been recognized previouslyo The amount of the reversal is recognized in net income in the period the reversal occurs Transaction costs The Partnership recognizes transaction costs on financia! instruments measured at fair value in net income in the period incurred Financial instruments subsequently measured at amortized cost are adjusted for financing fees and transaction costs which are directly attributable to the origination and acquisition of the financial instrument. Financing fees and transaction costs are subsequently amortized over the life of the financial instrument to which they are directly attributable. (continues) :05:20 10/ FS - v001.pdf (10/18)

11 Notes to Financial Statements 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) ivleasurement uncertainty The preparation of financial statements in conformity with Canadian accounting standards for private enterprises requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period Estimates and assumptions include the estimated useful life of revenue producing properties for amortization purposes, the net recoverable amount of revenue producing properties, property held for sale, accounts receivable, due from related parties, and mortgages receivable and the amount of accrued liabilities. By their nature, these estimates are subject to measurement uncertainty, and the effect on the financial statements of changes in such estimates in future periods could be significant 4. CASH AND CASH EQUIVALENTS Cash $ t68,026 $ 749,260 Money market funds o 50,287 Treasury bills o 159,814 $ t68,026 $ 959, DEPOSITS HELD IN TRUST AND TENANT DEPOSITS Deposits held in trust consist of security deposits received by the Partnership from tenants at the time of property rental. Security deposits are held in an interest bearing deposit account. The poftion of the deposit refunded to the tenant is determined at the time the tenant vacates the property. 6. RELATED PARTY TRANSACTIONS During the period, the Partnership entered into related party transactions with the following related entities, which are related to the Partnership by way of common management and a common director: Prestigious ~nvestment & ~anagernent {PRISM) A ~nc. = the "Genera~ Partner" (a) Pursuant to the agreement dated January 30, 2008 between the Partnership and the General Partner, the Partnership has agreed: i) To pay the General Partner 0.5% annually, calculated quarterly in arrears, of the current value of the total assets in the Partnership. Asset management fees of $190,788 ( $155,928) were paid to the General Partner during the fiscal year ended December 31,2011; ii) To pay the General Partner 1% of any asset acquired, after the asset has been acquired. Asset acquisition fees of $Nil ( $163,820) were paid to the General Partner during the fiscal year ended December 31,2011; (continues) :05:20 11/ FS - v001.pdf (11/18)

12 Notes ~o Financial Statements 6. RELATED PARTY TRANSACTIONS (continued) (b) iii) To pay 40% of the earnings quarterly in arrears once limited partnership unit holders have received their investment back. Once the limited partnership unit holders have doubled their investment the General Partner will received 60% of the distributable cash flow paid quarterly in arrears. No distributions were made to the General Partner during the fiscal year ended December 31,2011; and iv) To reimburse in full all third party costs incurred by the General Partner Commissions of $Nil (2010 = $714) included in issue costs were paid to the shareholders of the General Partner. Commissions are based on a percentage of partnership capital issued. Included in accounts payable is $41,339 (2010 = $49,313) owing to the General Partner= Prestigious Properties Four Limited Partnership (a) At December 31, 2011, the Partnership had a loan receivable from Prestigious Properties Canada Four Limited Partnership of $581,600 (2010 = $261,600). The loan is due on demand, bears interest at 8% per annum (2010 = 15% to October 29 and 8% thereafter), and is payable quarterly in arrears (b) Interest income of $47,!83 (20!0 o $!0,738) was included in other income in relation to the above loan balanceo Included in accounts receivable is $57,921 (2010 o $10,738)in interest receivable from Prestigious Properties Canada Four Limited Partnership= Prestigious Prope~ies Canada Ltd. (a) During the period, the Partnership paid p~ope~ty management fees of $Nil (2010 o $26,476) to Prestigious Properties Canada Ltd. (b) ~nciuded in accounts payable is $8,540 (2010 o $4,643) payable to Prestigious Properties Canada Ltd. (c) Transaction management fees of 1o25% were paid for marketing and sales assistance on the disposition of the Sherbrooke House, Parkview Place and Highland Estates properties (Note 12). The total fees recorded as a reduction to gains on disposal of assets were $67,738 ( $nil)o Prestigious Properties Europa During 2009 the Partnership acquired the Westview Manor Apartments property from Prestigious Properties Europa lnc, a company controlled by Thomas Beyer, a director of the Partnership. The transaction was recorded at the carrying amount valued at less than the property s appraised value. At December 31, 2011 included in long-term debt is $500,000 ( $500,000) related to a vendor=take-back mortgage on the property (Note 11). Included in interest on long-term debt is interest in the amount of $25,000 ( $25,000) paid in respect of this loan. Fireside Property Group Ltd. During the period, the Partnership paid property management fees of $163,774 ( $110,487) to Fireside Property Group Ltdo (continues) :05:21 12/ FS - v001.pdf (12/18)

13 Notes ~o Financial Statements 6. RELATED PARTY TRANSACTIONS (continued) Prestigious Properties Into At December 31,2011, the Partnership had a mortgage receivable from Prestigious Properties Inco in the amount of $1,166,356 (2011 = $1,000,000). The loan is due on demand, bears interest at 8% per annum (2010 = 15% to October 29 and 8% thereafter) and is payable quarterly in arrears= Interest income of $102,247 ( $64,109) was included in other income in relation to the above loan balance. The interest income has been recorded as an increase to the outstanding loan amount as it is not anticipated to be received in the course of the Partnership s normal operating cycle. included in due from related parties is $2,746 (2010 o $267) due from Prestigious Properties Kings Castle GP Included in accounts receivable is $!4,437 (2010 = $14,437) related to planning fees paid by the Partnership on behalf of Kings Castle GPo These transactions are in the normal course of operations and have been recorded at the exchange amount, which is the amount of consideration established and agreed to by the related parties. 7. PROPERTY HELD FOR SALE Property held for sale consists of bare land in Yorkton, Saskatchewan which was listed for sale during the year ended December 31, :05:21 13/ FS - v001.pdf (13/18)

14 8. REVENUE PRODUCING PROPERTIES Notes to Financial Statements 201~ 2010 Cost Accumulated Net book Net book amortization value value Abby Glen building Abby Glen chattels Abby Glen land Castleview Park Apts land Castleview Part Apts buildings Castlieview Park Apts chattels Discovery Village building Discovery Village chattels Discovery Village land Highland Estates building Highland Estates chattels Highland Estates land Parkview Place buildings Pa~kview Place chattels Parkview Place land Sherbrooke House building Sherbrooke House chattels She~brooke House land VVestview Mano~ building Westview ivlano~ chattels Westview Manor land 6;,632,43! $ 636,108 $ 5,996,323 $ 6,213, ,215 48,487 80,728 88,657 2,200,000 = 2,200,000 2,200,000 2,238,000-2,238,000 2,238,000 8,864,191 8,341,139 8,644,207 53,017 t 3,402 39,615 40,500 3,127, ,204 2,728,289 2,835,702 65,258 26,574 38,684 44,609 1,506,000 = 1,506,000 1,506,000 = = 274,961 = = = 11,012 o = = 70,000 = = = 1,975,205 o = o 28,313 = = = 332,000 o o o 722,546 o o = 8,702 o = = 85, ,9,~1 3,810,302 3,633,657 31,431 7,701 23,730 22,791 7~5,000 = 765, ,000 $ 29,342,289 $ 1,874,479 $ 27,467,810 $ 31,740, MORTGAGES RECEIVABLE During 2011, the Partnership accepted a vendor take back mortgage in the amount of $1,717,120 on the sale of Highland Estates, Sherbrook House, and Parkview Place properties to an unrelated party The mortgage bears interest at 3% per annum, payable monthly in arrears. The principal is due in full on September 26, The mortgage is secured by the underlying property. Also included in mortgages receivable is a mortgage extended to a related party, Prestigious Properties Inc. in the amount of $1,000,000 plus accrued interest of $166,356 (2010 o nil) and acquisition fees net of amortization of $9,878 (2010 = $10,290) attributable to the mortgage. 10. GOVERNMENT REMITTANCES PAYABLE Included in accounts payable and accrued liabilities are the following government remittances owing: Withholding tax $ 12,322 $ :05:22 14/ FS - v001.pdf (14/18)

15 Notes ~o Financial Statements 11o LONG-TERM DEBT 20tl 2010 Firm Capital = Vendor Take-Back Mortgage - Abby Glen Apartments Monthly interest payments at 4 50% per annum, maturing on May 4, 2014o The mortgage is collateralized by assets with a carrying value of $8,277,051 (20!0 - $8,50!,958) $ 1,ooo,ooo $ 1, First National Financial- Parkview Place Monthly instalments of $10,193 including interest at 4.06% per annum, maturing on December 1, The mortgage was assumed by the purchaser of the building which was sold during 2011o 1, First National Financial o Sherbrooke House Monthly instalments of $5,192 including interest at 4.06% per annum, maturing on December!, The mortgage was assumed by the purchaser of the building which was sold during Peoples Trust Company = Abby Glen Apartments Monthly instalments of $28,722 including interest at 3.50% per annum, maturing on May 5, 2014 and co!!ateralized by assets with a carrying value of $8,277,051 (2010= $8,501,958)o 5,362,t52 5, Peoples Trust Company = Discovery Village Monthly instalments of $20,204 including interest at 4.37% per annum, maturing on September 1, 2013 and collateralized by assets with a carrying value of $4,272,973 (2010- $4,386,311)o 3,412,028 3, Peoples Trust Company = Westview Manor Mortgage #1 Monthly instalments of $11,613 including interest at 5 40% per annum, maturing on May!, 20!4 and collateralized by assets with a carrying value of $4,299,032 (2010 o $4,42!,448)o 1,577,945 1, Peoples Trust Company - Westview Manor Mortgage #2 Monthly instalments of $6,474 including interest at 4.83% per annum, maturing on June 1, 2012 and collateralized by assets with a carrying value of $4,299,032 (2010 = $4,421,448)o 1,013,779 1, Prestigious Properties Europa Inc- Vendor Take-Back Mortgage - Westview Manor Monthly interest payments, based on 5.00% per annum, maturing on April 30, 2014 and coilateralized by assets with a carrying value of $4,299,032 ( $4,421,448). 500, , (continues) :05:22 15/ FS - v001.pdf (15/18)

16 Notes to Financial Statements 11. LONG-TERM DEBT (continued) : TD Canada Trust- Castleview Park Monthly installments of $40,283 including interest at 4.14% per annum, maturing on January 1, 2016 and collateralized by assets with a carrying value of $10,618,754 ( $10,922,707). Less current portion of long-term debt Deferred financing costs, net of accumulated amortization 7,386,396 7,548,750 20,252,300 23,576,477 (1,511,364) (563,921)!8,740,936 23,012,556 (447,377) $ ~8,530,934 $ 22,565,179 Principal repayment terms are approximately: ,511,364 3,732,890 8,195, ,666 6,604, :05:23 16/ FS - v001.pdf (16/18)

17 12o DISCONTINUED OPERATIONS Notes ~o Financial Statements Discontinued operations consists of three revenue producing properties sold September 26, The properties were sold in order to realize the increase in fair market value. In the opinion of the Partnership, the results of the operations during the year have not been substantially affected by any item, transaction or event of a material or unusual nature, other than the gain arising from the disposal of these properties. Comparative results have been reclassified accordingly~ The result of the discontinued operations for 2011 and 2010 are as follows: Revenue Expenses Gain on sale Total Parkview Place $ 253,705 $ 173,134 $ 6~9,865 $ 700,436 Sherbrooke House ~ 32,867 7~,897 72~, ,690 Highland Estates 40,995 22,255 i 48,097 ti 66,837 Effect on 20t1 ~ $ 427,567 $ 267,286 $ ~,489,682 $ ~,649,963 Parkview Place $ 322,646 $ 267,450 $ = $ 55,196 Sherbrooke House 165, ,810 = 64,472 Highland Estates 48,786 45,526 = 3,260 Effect on 2010 $ 536,714 $!3. CHANGES IN NON-CASH WORKING CAPITAL Accounts receivable Prepaid expenses Deposits held in trust Hoidback receivable Accounts payable and accrued liabilities Tenant deposits Deferred income $ ~72,970) $ 7,500 ~22,844) (54 800) (3436) (61 372) !,497 (9,426) 7, :05:23 17/ FS - v001.pdf (17/18)

18 14. FINANCIAL INSTRUMENTS Notes to Financial Statements The Partnership is exposed to various risks through its financial instruments. The following analysis provides a measure of the entity s risk exposure and concentrations at the balance sheet date, Credit Risk Credit risk arises from the possibility that third parties may default on their financial obligations. The Partnership is exposed to credit risk from tenants, however, the Partnership has a significant number of tenants which minimizes concentration of credit risk The mortgages receivable are secured by the underlying properties where the mortgages are placed The Partnership is exposed to credit risk relating to the default on the payments on the mortgages receivable by the borrower. Mortgages receivable are subject to the borrower s ability to pay which is subject to the business activities, asset values and net income of the borrower. The Partnership s credit risk exposure on cash is minimized substantially by ensuring that cash is held with credible financial institutions. C~rrency Risk Currency risk is the risk that the value of financial instruments denominated in currencies other than the reporting currency of the Partnership will fluctuate due to changes in foreign exchange rates= The Partnership is not exposed to currency rate risk as all financial instruments are denominated in Canadian currency. ~nterest Rat~ Risk interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in the interest rates. The Partnership is exposed to interest rate risk to the extent that the long-term debt and mortgages receivable are at a fixed rate of interest. Liquidity Risk Liquidity risk is the risk that the Partnership will encounter difficulty in meeting obligations associated with financial liabilities The Partnership is exposed to liquidity risk to the extent of its negative working capital :05:23 18/ FS - v001.pdf (18/18)