DEPRECIATION REPORT ADDRESS: Akiskinook Resort Windermere, B.C. PREPARED FOR: STRATA N AKISKINOOK ROAD WINDERMERE, BC V0B 2L0

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1 DEPRECIATION REPORT 1 ADDRESS: Akiskinook Resort Windermere, B.C. PREPARED FOR: STRATA N AKISKINOOK ROAD WINDERMERE, BC V0B 2L0 Prepared By: D. Allan Beatty, AACI, P.App September 12, 2013

2 2 September 12, 2013 Strata N Akiskinook Road Windermere, BC V0B 2L0 Attention: Ms. Cathy McGrath Dear: Ms. McGrath Re: Depreciation Report Akiskinook Resort 1492 Akiskinook Road, Windermere, British Columbia Pursuant to your request for a Depreciation Report, I have prepared the attached document for the consideration of Strata N21, Akiskinook Resort. This Depreciation Report, also commonly known as a Reserve Fund Study, describes the reserve fund concepts and major reserve fund items. It provides current and future replacement reserve estimates and recommends reserve fund actions. The effective date of this report is September 12, 2013, although the recommendations are effective at the start of the next fiscal year (January 1, 2014). A Depreciation Report is a financial planning tool and should be viewed as such. A study of this nature is subject to constantly changing circumstances and should be reviewed in detail annually and updated, at a minimum, every three years. It is also noted that unexpected events may occur that have not been contemplated within our scope of work, however, most of these expenses should still come out of the Contingency Reserve, since they could not be predicted for either operating expense budgeting or for normal contingency fund expenses. Historic operations indicate that Strata N21implements capital projects on an annual basis. This includes both new improvements or changes to the resort, as well as dealing with expenditures that are considered as reserve fund items. Bylaws recognize that the contingency reserve is a distinct and segregated account that is dedicated to the repair and replacement of existing improvements. The Capital Projects budget may include items that do not qualify as reserve fund items, as they represent additions or improvements to the resort. In future, we recommend that budgeting for capital improvements identify items that are additions or improvements from those projects that qualify for funding from the contingency reserve. In addition, this report does not deal with mobile equipment or equipment involved in maintenance of the resort. While key data was collected for these assets, they are generally not considered as part of the contingency reserve for the strata, which deals with the realty assets. A separate reserve account should be considered for mobile equipment and maintenance equipment necessary for the operation.

3 Legislation in British Columbia requires that depreciation reports contain a minimum of three alternatives for the Strata to consider, in forming their contingency reserve strategy. We have chosen models that reflect: A fully funded model A 75% funded model, with periodic special levies A model based on short term borrowing when large capital outlays are required for reserve items Any of these models can be customized based on a wide variety of background assumptions. We would be happy to present additional modeling, if you think it would be beneficial for discussion purposes. We appreciate the opportunity of performing this depreciation report for you. If you have any questions, please do not hesitate to contact the undersigned. Recommendations are presented on Page 6, as a summary of the conclusions presented in the report which follows are based on a fully funded target, which we refer to throughout as Option 1. Discussion on additional options is presented in the body of the report, with supporting documentation in the Addenda section (30 year cash flow schedules for Options 2 and 3). Respectfully submitted, KENT-MACPHERSON 3 D. Allan Beatty, AACI, P.App

4 Table of Contents 4 Title Page 1 Letter of Transmittal 2 Table of Contents 4 Executive Summary of Facts & Conclusions 5 Recommendation 6 Part I - General Information 7 Intended Use and Intended Users 7 Purpose of a Depreciation Report 7 Akiskinook Rules, Regulations and Bylaws 7 Property and Boundaries 9 Scope of Investigations 9 Common Property and Limited Common Property 11 Depreciation Report- Definitions and Concepts 11 Reserve Fund Projection Factors 12 Part II - Descriptions 15 General Description 15 Reserve Items 19 Building Observed Condition and Maintenance History 20 Reserve Items - Principles and Concepts 22 Part III - Reserve Items - Descriptions and Estimates 24 Benchmark Analysis Year Cash Flow - Option 1 - Fully Funded 45 Cash Flow Projections - Option 2 - With Special Levies Year Cash Flow Projections - Option 3 - With Borrowing 50 Part IV 51 Limiting Conditions 51 Certification 52 Addenda 53 Addenda "A" - Cash Flows for Special Levy Model 54 Addenda "B" - Cash Flows with Borrowing 56 Addenda C - Site Plan 58 Addenda D - Qualifications 59 Page

5 Executive Summary of Facts and Conclusions 5 This executive summary has been prepared as a quick reference of pertinent facts and estimates of this Depreciation Report, and it is provided as convenience only. Readers are advised to refer to the full text of this Depreciation Report for detailed information. Client: Strata N21, Akiskinook Resort Date of Inspection: May 1 and 2, 2013 Effective Date of Report: August 30, 2013 Property/Location: Depreciation Elements 1492 Akiskinook Road, Windermere, B.C. Building - Structural and Architectural Foundation Walls and Superstucture Building Envelope - Exterior Walls Roof Cover Torch-on Roof Cover - Shingles Recreation centre Doors and Windows Flooring Interior Finishes Furnishing Pool and Hot Tub Plumbing Electrical H.V.A.C. Life Safety & Access Systems Site Improvements and Professional Fees Water and Sewer Supply System Landscaping and Irrigation Roadways, Curbs and Surface Parking Marina Tennis Court and Playground Depreciation Report Update & Building Envelope

6 Recommendation 6 Strata N21, Akiskinook Resort has a projected reserve fund of approximately $120,000 for the year ending December 31, 2013, after the $161,000 is paid out of the fund for the water system upgrade, as approved at the 2012 AGM. In the report which follows, the "fully funded" model is labeled as Option 1. In this model, it is recognized that recent capital assessments at Akiskinook have been high in the past few years. Most of the major projects will be completed in 2013, and the model recommends a more modest contribution for the next few year. We recommend a funding level of $150,000, increasing by $25,000 per year for each of the first four years, then leveling out at $240,000 until year 26, dropping incrementally to $180,000 by year 30. This funding level should be sufficient to avoid special levies over the projection period. The following recommendations include the recognition of the current reserve fund position is near the prescribed legislated minimum to avoid mandatory contributions. In view of the age and condition of the property, and the various assumptions implied in this Depreciation Report, a "normal" contribution of $184,000 is projected. Amounts in excess of that figure are considered make-up contributions. The objective of the recommendations is to provide the most stable contribution level to achieve long term, full funding. In addition to the funding levels, the following recommendations are also made: 1. Reserve funds should be fully invested in qualified securities to earn the maximum interest available at all times. An attempt should be made to achieve investment returns in the 2.0% range, on average. 2. Reserve fund expenditures should be planned in advance of contemplated major repair or replacements, to ensure maturity of investments to provide the cash resources as required, and also to avoid the higher cost of emergency repairs. 3. The Reserve Fund Plan or Program should be reviewed annually and this study must be updated every three years. 4. A formal reserve fund plan and strategy should be prepared and implemented, identifying long term targets and strategies to achieve them. Although three options are presented, we recommend Option 1 for Strata N21, Akiskinook Resort is at its mid-life cycle, and many of the components that are subject of the contingency reserve have already been replaced at least once. A prudent approach to contributing to the contingency reserve has been followed to date, based on legislated requirements. However, the requirements of the legislation are not sufficient to fund long term replacement obligations. Being at this stage in its life cycle, the residents of Strata N21, Akiskinook Resort should still be able to achieve "Full Funding" if the make-up contributions are implemented. A healthy contingency reserve plan will also assist in preserving unit values, compared to similar strata developments that are under-funded in terms of their reserve account. Thus, a good reserve has proven to be an advantage for realtors when marketing stratified property. In addition, both lenders and mortgage insurance providers are paying increasing attention to the status of the contingency reserve in assessing the mortgage risk and related underwriting decisions. The current situation at Akiskinook will require short term action to ensure long term viability. While Options 2 and 3 provide lower annual contributions, we recommend the fully funded model as being the most prudent option.

7 Part I - General Information 7 Intended Use and Intended Users This report has been prepared for the Strata N21, Akiskinook Resort and through them, the resort manager and the unit owners in the resort. Only those parties are recognized as intended users of this report, for the sole intended use of establishing a reserve fund strategy and plan. Liability for unintended uses made of this document or to unintended users is expressly denied. It is recognized that this document may be disclosed as part of Form B requests; however use of the report is still restricted to the intended users as outlined above. Purpose of a Depreciation Report The purpose of this Depreciation Report is to identify and estimate the replacement cost of the various reserve items and prepare reserve fund estimates of reserve requirements, as at August 30, This Depreciation Report, which includes an analysis of the required reserve funding, complies with the Strata Property Act, and Regulations, including amendments up to B.C. Reg. 238/2011, December 24, 2011 Section 94. Our qualifications appear in the Addenda Section C. We also certify that we have liability insurance coverage and confirm that there is no undisclosed relationship between the preparer of this report and the Home Owner's Association. It is also important to understand that the Depreciation Report is only one component of a Reserve Fund Strategy. It provides options for the Strata Council to consider in formulating their strategy, and should not be considered as being conclusive on any given point or any specific strategy. Strata N21, Akiskinook Resort-Rules, Regulations and Bylaws The Akiskinook Resort, Strata N21, has adopted a set of bylaws that govern operations and sets out responsibilities for unit owners. The Bylaws at Akiskinook recognize that in areas not specifically covered in their document, the Standard bylaws as set out in the Strata Property Act Regulations S.B.C 1998, Chapter 43 (as amended from time to time) apply. Of specific application to this study, owners are responsible for the following: "h) Owners must repair and maintain the following for the exterior of their units, in accordance with the standards set in the building guidelines: Stairs, balconies, doors, windows, decks, railings, air conditioning units, ondeck storage units, skylights (except those skylights originally installed and shown on the Strata plans), approved renovations and other things attached by the owner to the exterior of the building. Owners will be responsible for any damage to their units caused by the failure to repair or maintain any of the above. If an annual inspection finds a particular repair issue that is the responsibility of the owner, the owner will be given notice from the council to have the repair completed in a specified time. If repairs are not completed in the specified time, the council will have the work done and charge the owner." j) All owners must ensure that their units are properly winterized and that water pipes do not freeze in cold weather. Water valves must be turned off when the unit is not in use,

8 8 and the temperatures must be set at a minimum of 10 degrees Celsius. Any damage to the buildings due to the failure to follow these procedures will be the financial responsibility of the unit causing the damage. k) The Strata Corporation gives Council the authority to make unapproved expenditures up to a lesser of $15,000 or 5% of the total contributions to the operating budget for the current year, where: No one expenditure may exceed $5,000 All such expenditures must be approved by a majority of the Council at a duly constituted board meeting) Use of Contingency Reserve Fund l) When funds are to be used from the Contingency Reserve Fund for emergencies, the board must follow the following procedure: 1. All board members present at an official board meeting, held by phone or in person, must unanimously agree that the expenditure is necessary to ensure safety or prevent significant loss or damage, whether physical or otherwise, as per the Strata Property Act. 2. A detailed budget and at minimum 2 quotes must be presented to the Board before proceeding. The expenditure must not exceed the minimum amount needed to ensure safety or prevent significant loss or damage. 3. Any expenditure as outlined in 1 and 2 above will be at the personal responsibility of the person or persons involved if Board approval is not granted. Standard Bylaws according to the Strata Property Act are outlined below: Division 1 Duties of Owners, Tenants, Occupants and Visitors Repair and maintenance of property by owner 2 (1) An owner must repair and maintain the owner's strata lot, except for repair and maintenance that is the responsibility of the strata corporation under these bylaws. (2) An owner who has the use of limited common property must repair and maintain it, except for repair and maintenance that is the responsibility of the strata corporation under these bylaws. Division 2 Powers and Duties of Strata Corporation Repair and maintenance of property by strata corporation 8 The strata corporation must repair and maintain all of the following: (a) common assets of the strata corporation; (b) common property that has not been designated as limited common property; (c) limited common property, but the duty to repair and maintain it is restricted to (i) repair and maintenance that in the ordinary course of events occurs less often than once a year, and (ii) the following, no matter how often the repair or maintenance ordinarily occurs:

9 (A) the structure of a building; (B) the exterior of a building; (C) chimneys, stairs, balconies and other things attached to the exterior of a building; (D) doors, windows and skylights on the exterior of a building or that front on the common property; (E) fences, railings and similar structures that enclose patios, balconies and yards 9 (d) a strata lot in a strata plan that is not a bare land strata plan, but the duty to repair and maintain it is restricted to (i) the structure of a building, (ii) the exterior of a building, (iii) chimneys, stairs, balconies and other things attached to the exterior of a building, (iv) doors, windows and skylights on the exterior of a building or that front on the common property, and (v) fences, railings and similar structures that enclose patios, balconies and yards. Property and Boundaries Description: The subject development is multi phased project with a mixture of detached cottages, stacked and semi detached townhomes. There are 156 strata units, a clubhouse, marina, tennis courts and maintenance buildings, and a boat compound, all connected by an internal paved roadway system. The site is extensively landscaped with sod and mature trees, with a significant component of the site still in a natural state, in part due to the variable topography. Some portions of the site are not suitable for construction, as a large ravine transgresses the property. The following excerpt from the Strata Property Act outlines unit boundaries. Lot boundaries 68 (1) Unless otherwise shown on the accepted plan, if a lot (unit) is separated from another lot (unit), the common property or another parcel of land by a wall, floor or ceiling, the boundary of the lot (unit) is midway between the surface of the structural portion of the wall, floor or ceiling that faces the lot and the surface of the structural portion of the wall, floor or ceiling that faces the other lot, the common property or the other parcel of land. (2) If a lot (unit) is not separated from another lot, the common property or another parcel of land by a wall, floor or ceiling, the boundary of the strata lot is as shown on the plan. (3) A boundary shown on the plan must be shown in a manner approved by the H.O.A. Scope of Investigation The subject property was inspected on May 1, 2013 which provided an opportunity to evaluate the condition of the improvements at the subject site. Drawings for the recent irrigation system upgrade and the report and recommendations for the water system upgrade were provided by the on-site manager. The bylaws, recent financial statements, Owner's Manual and a list of recent upgrades was also provided. No architectural or mechanical plans were available for the buildings, to assist in some of the area calculations; however, a thorough interior and exterior inspection was also completed on the clubhouse and all common areas. This provided an opportunity to view the state and condition of many of the items

10 that are the subject of this report. In addition, financial statements for 2011 and 2012 were provided as well as the current year budget. Cost data have been investigated, using construction cost services, modified as to time, location and quality of construction. Where such data was incomplete, contractors and suppliers were interviewed with respect to local conditions and costs of similar repair projects. 10 Reserve Fund Estimates Replacement reserve estimates are classified in terms of building groups, common element facilities and site improvements. Reserve fund estimates include not only replacement components but also repairs to building and equipment that occur on an infrequent or unexpected basis. Any additions or improvements made by unit owners to their respective premises are not included in these estimates. Owners should be advised by the Board to adopt maintenance programs for their respective units and any limited common property or exclusive use property under their control. Reserve fund estimates include provisions for demolition and disposal costs, dumping fees, as required, and are adjusted for applicable taxes such as the Provincial Sales Tax and Goods and Services Tax ("GST"). Conditions and Assumptions In estimating various reserve items, certain assumptions are made in respect to structural and nonstructural repairs and replacements. For example, reserves for exterior walls, most structural repairs, replacements of mechanical and electrical components are difficult to predict and quantify, particularly the exact timing that such repairs or replacements will be required. The only reasonable approach is to provide an approximate time frame and in some cases contingency estimates, where replacement of an entire system may not be required. Where contingency allowances are made, they are described as such, so that the reader of the report is clear on the basis of how these costs were estimated. Reserve fund estimates are subjective and based on an understanding of the life cycle of building components and experience gained from observing buildings over a 30 year period. It must be appreciated that reserve fund budgeting and projections are not exact sciences. They are, at best, prudent provisions for most contingencies, if, as and when they arise. It is also necessary to consider the reserve as a fund to provide for repairs and replacements; some of which may be higher or lower than the amounts projected in this document. The fund should be considered a pool of money available for the required repairs and replacements, some of which could vary from the amounts estimated in the schedules that follow - in particular the larger amounts that are projected with future inflation, which may or may not trend as expected. In essence, the association should adopt a long-term policy regarding reserve fund allocations that must be flexible to accommodate changes in reserve fund requirements in the future. Moreover, the association should consider the different options available to fund replacement and repair of common property - whether the best option for their unit owners is a fully funded reserve, or some combination of prudent contingency contributions and special levies or accessing credit (borrowing to complete major repairs) when large expenses are required.

11 Insurance Repairs 11 Insurance and/or warranties should cover the buildings and improvements against premature failure and numerous perils, but it is not intended to be a maintenance program. The difference between an insurance claim and maintenance repairs is not always clear, and it can result in prolonged disputes. For example, an unexpected sewer cave-in and resulting back-up is a legitimate insurance claim, and as such, it should be covered by the insurance policy subject to the stated deductible. In contrast, the deterioration of a catch basin and sewer connection over time, which caused a cave-in resulting into a sewer back-up, is a building repair expense. Common Property and Limited Common Property The Strata Act defines common property as (a) (b) that part of the land and buildings shown on a strata plan that is not part of a strata lot, and pipes, wires, cables, chutes, ducts and other facilities for the passage or provision of water, sewage, drainage, gas, oil, electricity, telephone, radio, television, garbage, heating and cooling systems, or other similar services, if they are located (i) within a floor, wall or ceiling that forms a boundary (A) (B) (C) between a strata lot and another strata lot, between a strata lot and the common property, or between a strata lot or common property and another parcel of land, or (ii) wholly or partially within a strata lot, if they are capable of being and intended to be used in connection with the enjoyment of another strata lot or the common property; Limited common property is common property designated for the exclusive use of the owners of one or more units such as balconies, storage lockers and parking stalls. These elements are the responsibility of the owner to maintain and repair, according to the bylaws. However, the Strata maintains control over the colours and acceptable styles for these elements to ensure a consistent look and timely approach is taken to repair and refurbish these components. Depreciation Report - Definitions and Concepts A Depreciation Report is a financial document, and as such should be viewed as a guide to planning budgets and maintenance programs, and unlike a technical audit, it does not deal with detailed technical matters. Rather, this document takes a business approach to reserve fund management. This Depreciation Report comprises the following elements: (1) identifies the reserve components, their quality, normal life span and present condition; (2) provides a current replacement cost estimate including the cost of removing worn-out items and special safety provisions; (3) projects the useful life of components that will require replacement in terms of remaining serviceable years; C O R P V A L U A T I O N S L T D

12 (4) projects future replacement costs at an appropriate and compounded inflation rate; 12 (5) projects the value of current reserve funds compounded at a long term interest rate; (6) calculates current reserve fund contributions required and to be invested in interest bearing securities. The salient estimates and conclusions of this Depreciation Report are contained in the various schedules that appear at the end of the report, and summarized in the Recommendations section. Any recommendations are for guidance purpose for management of the contingency reserve. Replacement cost estimates are based on the assumption of using quality materials, as specified or built, using union labour and current construction techniques, and including contractors' overhead and profit. No allowance is made for premiums related to overtime, labour shortages or work stoppages during repair projects that may affect costs. Structural Deficiencies While not expert in engineering matters, we did not observe any signs of structural deficiency in our inspection of the subject property. On-site personnel confirm that some patio areas have been repaired and in some cases expanded, sometimes without proper approval. However, recent changes to the bylaws have tightened up the control of over these practices. Also, it is assumed mechanical equipment and infrastructure components are inspected and maintained on a reasonably frequent basis, as part of ongoing operations, and paid for from the operating account. Reserve Fund Projection Factors Historically, building costs have been rising at various rates from year to year, depending on business cycles, economic conditions, interest rates, etc. In boom periods, cost increases were fairly pronounced, whereas in recessionary times, cost increases were only nominal or costs even declined. Analyzing long term cost increases, construction cost indices were examined as well as consumer price indices related to building construction. The most recently available data on average annual cost increases are from the two most well respected construction cost guides, the Marshall and Swift Cost Manual, and R.S. Cost Manual for the BC Interior Region are summarized as follows: Source Marshall and Swift RS Means Canadian Average Past Year 2.3% Not reported for full year 3.4% Past 2 Years 1.5% 1.6% 4.0% Past 5 Years 3.5% 2.6% 3.4% Past 10 Years 3.4% 3.2% 3.8% Past 20 Years 2.1% 1.9% 2.3% Consideration was also made of the widely quoted Consumer Price Index (CPI), which measures the cost of a basket of consumer goods. Sub-Indexes of the CPI do deal with construction costs, and publish them for a number of Canadian centers, including the BC region. More specific to multi-residential construction, cost trends are reported for the Calgary and Vancouver metropolitan regions, which are the

13 most applicable to the subject. Construction costs in the interior region of BC tend to lag slightly behind the lower mainland, with the exception of the 2004 through 2008 period, when price increases were similar. Statistics Canada Cost Index Period Vancouver Calgary 20 years from 1993 to % 3.98% 15 years from 1998 to % 4.54% 10 years from 2003 to % 5.16% 5 years from 2008 to % 2.07% 2 years from 2011 to % 3.15% 1 year from 2012 to % 1.60% 13 These numbers indicate that the trend of construction inflation rates over the past 20 years has varied, but the trend appears to be continual, gradually increasing rates. The significant cost fluctuations over the most recent past reflected in the Stats Canada index for the lower mainland of BC include the Olympic "bubble" in the Vancouver area that affected construction cost trends leading up to Statistics Canada indicates a 14.9% correction in construction costs, due in part to less influence from the Olympic boom, coupled with the economic meltdown in 2008 and This effect was not quite as pronounced in Calgary, where quarter to quarter comparison in 2009 indicated up to a 10% decline. Historically, Calgary tends to be more volatile in terms of construction costs. Judging by the overall construction cost trends, one may conclude that the longer term rate of inflation in construction will continue to increase over the foreseeable future. However, the most recent experience shows rates below the 20 year average. The one, two and five year figures for the interior region (Marshall and Swift and RS Means) average just over 2% per year. We have adopted the rate of 2.25% for annual inflation in calculating the future replacement costs. Interest Rates Investment income can be a significant and increasing source of revenue for reserve funds, and therefore, it is imperative that reserve funds are continuously and prudently invested. Reserve fund investments must be directly or indirectly guaranteed by governments. Bank deposits and various investment instruments such as GIC s are insured by the Canada Deposit Insurance Corporation up to a maximum of $100,000, covering principal and interest. These are generally considered low risk and an acceptable vehicle for the investment of funds held on reserve. However, a sound investment strategy also matches expected capital requirements with maturity dates of investments to ensure there is cash on hand at the appropriate time. The ability of Strata corporations to earn the highest rate of interest available in the marketplace, given the restricted conditions of investments, depends on the expertise of financial management and the amount of available funds for investment. Therefore, the reserve fund planner must consider management policies, the historical investment performance and the size of the reserve fund available for investment. In selecting an appropriate interest rate for reserve fund investments for a particular Strata corporation, the balance of the reserve fund is the most critical consideration as it dictates investment options and their corresponding interest rates. Investment opportunities are widely advertised, ranging from bank

14 deposits, term deposits and guaranteed investment certificates (GICs) to money market instruments and government bonds. The following are investment returns achievable for corporations, with low thresholds for minimum deposit amounts, but variable depending on the term of investment: Average rates are reflective of September 2013, for a $1,000 GIC. The recent trend in bond and GIC rates is near record low interest rates where they are expected to remain for the foreseeable future 14 GIC Term Interest Rates 1 Year 1.92% 2 Year 2.14% 3 Year 2.35% 5 Year 2.84% 7 Year 1.95% A cogent benchmark is Government of Canada Bond yields, recently reported at 1.22% for a one to three year issues, up to 2.30% for a seven year issue. New bonds are offered at 1.27% for 2 years, up to 3.15% for seven years. GIC rates, which, depending on the selected maturity generate a range in rates from 2.05% to 2.80% (per GIC Direct as of September 2013) for terms of one to five years. Maintaining a fairly conservative strategy, a rate of 2.00% should be achievable. For replacement cost estimates and reserve fund requirements, the following factors were used: Inflation Rate 2.25% Interest Rate 2.00%

15 Part II - Descriptions 15 General Description Strata N21, Akiskinook Resort was developed in 8 phases, with a mixture of three styles of residential units. Building areas and dimensions were obtained from the insurance appraisals conducted on the subject development, and/or the blueprints for some of the units. Dimensions were taken from the strata plan for the subject development. The project consists of 14 multi family dwelling structures that vary from 6 to 16 units each, 8 individual cottages, a manager's residence, recreation centre, playground and tennis courts and a 125 slip marina, with a change room/washroom structure recently added. An equipment shed was also noted, as well as several auxiliary structures, that are relatively minor in nature. A breakdown of the buildings is summarized as follows: Building Units Main Floor 2nd Floor 3rd Floor Gar & Storage Total Finished Rec Centre 1 5,488 3,388 8,876 8,876 Cottages 8 3,672 3,672 3,672 Manager 1 1,022 1,022 1,022 Block 5A 13 4,128 5,014 3,517 1,770 14,429 12, ,308 5, ,864 13,048 8B 6 4,258 4, ,316 8,500 8A 6 4,258 4, ,316 8, ,098 5,784 3,434 1,266 15,582 14,316 5B 8 2,762 2,646 1, ,818 7, ,020 6,259 4,509 2,402 18,190 15, ,678 4,508 1,220 11,406 10, ,392 6,835 1,968 2,809 16,004 13, ,040 6,875 1,220 15,135 13, ,351 5,044 3,602 1,631 14,628 12, ,009 3,252 1, ,078 8,092 12A 10 3,509 4,472 3,406 1,686 13,073 11,387 12B 10 4,040 3,853 2, ,366 10,458 The above noted residential structures come in three designs: Stacked Townhouses, Semi-detached Townhouses, and Cottage Bungalows. Stacked Townhouses: Buildings 1, 2, 4, 5A, 6, 7, 12A and 12B are in this category. Unit size varies from 638 square feet to 2,093 square feet. The stacked townhouse buildings are three-storey in design and contain three types of units; a single storey (all of these are on the lowest level), two-storey and three storey units. All are accessed via individual entrances. The single level units are situated at grade and contain one bedroom, a four-piece bathroom and a walkout patio, in addition to living room, kitchen and dining areas. The two storey units are accessed via private staircases from grade. The three storey units are also accessed from grade.

16 Common to the two and three storey units is a two-piece washroom and deck on the second floor level and an additional balcony deck on the upper level. The three storey units have a single attached garage, a den and a walkout patio on the main level. 16 Typical stacked townhouse. Semi-detached Townhouses: Buildings 8A, 8B, 9, 10 and 11 are in this category. Unit size varies from 1,382 square feet to 1,768 square feet. The bungalow townhouses are developed over a walkout basement and contain a car port or single attached garage. Common to each unit is a main level kitchen, living room with a fireplace, deck, and a dining room. The lower level contains a master bedroom with a three-piece ensuite bathroom, an additional bedroom (larger units have two), a four-piece bathroom, the mechanical room and a walkout patio. There is one exception to this floor plan: Unit 20 has an upper level entry area only, with all of the living area in the walk-out basement level. Upper level contains a carport, and approximately 90 square feet in the entry. Typical semi-detached.

17 Cottage Bungalows: Cabin unit size for the 8 cottage style bungalows varies from 400 square feet to 514 square feet. The cabins are single level in design and contain a kitchen, living room with a stone fireplace, a dining area, two bedrooms, a four-piece bathroom and a large deck off the main entrance, some of which wrap around one side of the cottage. In addition to these cottages style bungalows, and located in the same area of the resort, a 1,022 square foot manager's residence was substantially rebuilt last year. It is the same general design as the cottage bungalows, inclusive of the stone fireplace. A large wood deck has also been developed alongside the residence. Recreation Centre: In addition to the residential structures, the Recreation Centre is a significant improvement to the site, with a footprint of 5,488 square feet. The gross floor area is approximately 8,876 square feet, as both the indoor pool/hot tub area and a squash court extend to the entire height of the building. The recreation centre is near grade on the resort side, and has a walk out basement on the lake side, being located at the embankment that separates the resort from the level beach area and marina. 17 Typical cottage on left, recreation centre on right. Additional Facilities: Comprise the 125 slip marina, along with a recently completed washroom and change room facility, plus a tennis court and playground structure. An equipment shed was also noted on site, near the tennis courts and boat storage facility. Miscellaneous improvements include a structure for the new water intake, and a shed for the water pressure tanks. General building characteristics are summarized as follows: Year Constructed: Approximately Foundations: Exterior Walls/Condition: Foundation is assumed to be reinforced concrete, although only parts of it are visible. Lower level walls are a combination of concrete and wood frame. Subject structures are wood frame structure with primarily wood siding exterior cladding (replaced in ). Some stone trim on cottages and managers residence. Buildings were repainted over the past few years and appear to be in average to good condition.

18 Roof: Exterior Condition: The roof cover is combination of "enviro" shingles on stacked townhouses and torch-on for semi-detached units, with dome areas that have similar shingle cover as the townhomes on-site personnel advise the roof was re-done between 2007 and Rated as average to good. 18 Interior Finish Floors: Ceilings: Plumbing: Heating: Cabinets and Finish: Additional Comments: Site Improvements: Combination of carpet and sheet vinyl. Textured and/or painted gyproc tongue and groove cedar through most of the recreation centre. Residential style fixtures Moen or equivalent. Electric heat throughout. Suites have compact kitchens with mostly prefinished cabinets and average grade countertops. Seven of the suites were inspected, and vary in terms of condition. Some recent upgrading is evident, and several suites have had complete cosmetic upgrades. Site improvements comprise paved roads and parking areas, a combination of chain link and wood fence, sod areas, mature trees, some shrubs, planted areas and street lighting. The marina recently had improved lighting and a security system installed. Site improvement replacement cost was calculated on a gross area basis and allocated to each building on a proportionate share basis. A similar allocation of the calculated demolition and debris removal costs was made. For details on these allocations, refer to Addenda Section C, which provides the breakdown. Project Data Residential Units 156 Average Unit Area (Square Ft) 1,050 Roads (Lineal Ft) 5,200 Parking Areas (Square Ft) 62,000 Marina (Slips) 125 Landscaping (Est. Area) Approx 9.0 acres

19 Reserve Items 19 Foundations and Structural Components This component includes the structural foundations, basement level walls, lower level floor slab and basic framing for the units. Building Structure/Exterior Walls The subject buildings are wood frame construction over concrete foundations (some with partial below grade areas) with wood siding exterior finish. This component includes the finish of exterior walls, as opposed to the structural components, which are covered above. Also, doors and windows are owner the responsibility of the unit owners, and are excluded as a component of the exterior wall. Roof Cover Buildings are constructed with wood frame roof structures, with a combination of rubber shingle and torch-on finish. Roof covers are in good condition as they have all been replaced since Eave troughs and downspouts were noted for all buildings, and are cleaned annually as part of the maintenance program. Recreation Centre There are nine components that are related to the Recreation Centre, inclusive of exterior doors and windows, interior decorating (floors and walls), furnishings, mechanical and life safety and access systems. Also included are the pool and hot tub as well as the squash court, which will require repair and replacements of come components over time. Excluded is exterior cladding, which is calculated on the basis of the whole resort under the Exterior Wall category. Water and Sewer System This component includes the underground piping for these services, as well as the water and sewer treatment facilities. It is not expected that any of these entire systems would fail at the same time, and repairs conducted on portions of the system will tend to extend the life of the overall system. In other words, if a section of the underground water distribution piping was replaced in year one, and another portion in year five, these components of the system are renewed for the full life expectancy of a new system. Eventually the majority of these works would be replaced. The provision for these components is on a repair and systematic replacement basis, rather than providing for replacement of the entire system at one time. The water intake and treatment system is currently undergoing a complete overhaul and thus should not require significant repair for many years. In addition, improvements were recently made to the bio cell as part of the sewer treatment process. Accordingly, the provision for these systems is based on 25% of the total cost of the two major components, over a 30 year period, with the estimated effective age set to one half of this service life estimate. Landscape and Irrigation Most of the expense for landscape maintenance is part of operating expenses, and does not impact the contingency reserve. The notable exception is the irrigation system. The system was recently refurbished at a cost of approximately $400,000. This re-sets the effective age to 0 years, however, it will require a similar input of capital around the 35 year mark, reflecting the historic operation of the system.

20 Roads and Surface Parking 20 Roads vary in terms of condition, but a number of areas were noted that will require immediate attention. For modeling purposes, an accelerated program of repair is projected in two year increments for approximately 50% of the surface. After that, further repairs are projected at five year intervals. Marina The Marina component includes the slips and underwater support, as well as the recently completed washroom, lighting and canoe racks. Professional Fees While there may be a requirement for other types of professional services related to the buildings, there are two services that should be performed on a regular basis, and thus qualify as reserve fund items because they are not required on an annual basis. Legislation requires that the Depreciation Report be updated every three years. After the initial report, updates are projected at a lower cost, however, after two updates, a complete Depreciation Report is recommended (year 9). In addition, periodic exterior wall inspections should be conducted to deal with issues such as re-caulking doors and windows, identifying required siding, roofing and flashing details that require attention. Provision is made for both types of reports. If others are required, they can be expensed to the contingency reserve if they deal with areas that are provided for in the component summary of this report. Other As indicated in the letter of transmittal, this study does not cover mobile equipment or maintenance equipment that was noted to be used in the operations at Akiskinook, including the maintenance manager's truck, a one ton truck used for garbage and snow removal, a quad style "gator" and Polaris Ranger, front end loader, ride-on mowers and so forth. A separate reserve should be considered for these assets of the corporation. Management Policy Building Observed Condition and Maintenance History Discussions with the Property Manager indicate that The Board is currently operating under their own bylaws and has established policies on the use of facilities at the resort, including both owners and their guests. Most condominium associations establish their own specific bylaws to outline key areas related to the division of responsibilities between the Association and individual unit owners. Where the bylaws for Akiskinook do not deal with an item specifically, they revert to the BC Strata Act, which contains standard bylaws. Specific to the subject operation, unit owners are responsible for the exterior doors and windows, balconies, decks and patios.

21 Historical Reserve Fund Operation 21 It appears that contributions have been made to the Contingency Reserve account on a regular basis through a combination of reserve fund contributions and the application of a portion of unallocated surplus at the end of a fiscal year. Based on review of AGM minutes and other information provided by on-site personnel, a capital budget is approved each year, and allocations of funding for these projects is a combination of specific assessments levied within the year coupled with some funding from the contingency reserve. In some cases, funds have been accumulated for specific projects, such as landscaping, marina lighting etc. Information provided in the 2012 year-end financial statements indicate a contingency reserve fund balance of $270,770. Contributions for 2012 were $378,000 in assessments, plus $33,663 that was transferred in as an un-appropriated surplus, and another $200,000 for the approved project and water system improvement funds. This totals $604,000. Capital projects were completed for $373,690, for a balance of $313,215 as of December 21, 2012, plus "Approved Projects Reserve Fund" balances that total $44,000, plus another $150,000 in the Water Improvement Fund, for a total of $506,000. The capital budget for 2013 provides for additional contributions of $249,000, which is matched by the Capital Budget. It appears that the capital budget deals with some items that are classified as eligible as reserve fund expenses and some that are not. The list of capital projects is as follows: Grounds $ 26,000 Vehicles and Equipment $ 37,000 Rec Facilities $ 55,000 Buildings $131,000 Total $259,000 Vehicles and Equipment are not technically part of the reserve fund, and at least one other expense on the list is considered an upgrade as opposed to a replacement. Of more significance is the fact that there are no planned contributions to the existing reserve for 2013, as the capital raised through the assessment will be spend on these projects. A summary of the water system upgrade project suggests that $164,171 will come from the Contingency, along with the water system fund money ($150,000) and the remaining balance in the electrical building project ($36,087). This activity suggests a contingency fund balance of $120,000 as of the start of the next fiscal year. This amount will be used as the starting point in the cash flow projection. A note is also in order regarding the historic capital planning at Akiskinook. A history of annual capital project expenses since 1992, and the matching capital assessments was provided for purpose of this study. It suggests that an average on $296,000 per year has been raised by levies to deal with capital improvements, repairs and replacements. The lowest assessment was just over $30,000 and the highest, $990,000. Due to the relatively lower assessments in the earlier years, the past 11 years has required contributions of $451,000 on average. A more balanced approach to collection of funds for long term repair and replacement obligations is in order.

22 Reserve Items - Principles and Concepts 22 Definitions In estimating reserves required for maintaining the building components and improvements at desired standards, the various reserve components, estimated replacement costs and project cost estimates are made in accordance with anticipated life spans. Therefore, it is essential that the terminology and methodology are clearly understood. Reserve Item Current Replacement Cost Expected or Normal Life Span Actual Age Estimated Effective Age Remaining Life Span Projected Inflation Projected Interest Rate Current Replacement Reserves Future Replacement Reserves Current Reserve Requirements Future Reserve Accumulation Future Reserve Requirements Annual Reserve Assessment Identification and description of the building component or improvement. The estimated cost of repairing or replacing an item at current prices including the cost of demolition and disposal. The estimated life expectancy of an item in terms of years under normal conditions. The chronological age of the project or reserve item expressed in years. An observed condition estimate of improvements not necessarily the actual age, expressed in years. The difference between the expected or normal life span and the estimated effective age of a reserve item. An estimated long-term inflation factor used in projecting cost estimates. An averaged long-term interest rate used in calculating interest earned from the investment of reserve funds. The estimated cost of replacing a reserve item at current prices. The estimated cost of replacing a reserve item at future prices, based on the projected long term inflation rate. Reserve fund levels required today considering the estimated effective age of the improvements. The current reserve requirements invested at the projected interest rate over the relevant time period. The shortfall between the future replacement reserves and the future reserve accumulation. Annual amount required to be paid into the reserve fund and to be invested at the projected interest rate to fund the future reserve requirements.

23 Component Analysis 23 Once the requirements for existing and anticipated future repairs and replacements are formulated, an analysis is made of the current reserve account. This analysis essentially matches the recent operations to the long-term requirement to set aside sufficient funds in order to meet all future obligations. There are certain assumptions required in order to formulate the future reserve requirements, especially in those areas where it is difficult to forecast, with certainty, when some items will require repair or replacement. In those cases, a contingency allowance has been made. There are also certain items that may require attention more than once over the 30 year forecast period. For example, scheduled replacement of common area floor coverings may well be required more than once over the period that this study covers. Accordingly, the cost to complete this replacement must be included two or more times over the cash flow horizon, at a suitable cost to complete the replacement when it is expected to occur. In other words, if the carpet is replaced every 9 to 10 years, this event will occur three times through the study period. Therefore, the amount of funds set aside for carpet replacement must respond to a number of events for the same item, at inflated costs to the date when the replacement is required. Furthermore, certain components may not require replacement over the forecast period; however, they will require replacement at some point beyond that time frame. The fund must be sufficient to also respond to those replacements while maintaining a relatively level annual contribution. For example, a component such as the exterior siding may have a service life that is beyond the cash flow forecast period. If this life span is 45 years, and the forecast covers a 30 year period, the siding will only have a life expectancy of 15 years at the end of the study period. There must be a proportionate share of the expense set aside (i.e. 30/45ths) if the replacement is to be done on an orderly basis. Therefore, the commentary that follows covers all items that will normally be expected to be replaced or refurbished before the full life expectancy of the overall project is reached. The fund is a combination of event-driven contingencies, plus an allowance for partially depleted building components.

24 Part III - Reserve Items - Description and Estimates Structural and Architectural Reserve Component: (1) Foundation Wall & Superstructure 24 This component includes the foundations, exterior wall framing and structural components of the buildings on site. Most of these components would be expected to last the entire life of the building and should not require a reserve contribution unless some unexpected deterioration becomes evident. The clubhouse is a wood framed structure built on concrete slab on grade with concrete grade beams and footings. The townhomes are a similar wood framed pitched roof structure built on concrete footings and below grade wall structures. This is considered a contingency allowance, as neither regular or wide spread failure of these components is expected. The cost estimate used for this calculation is 3% of the foundation cost on an average cost per unit. Unit Quantity: 157 Units incl Rec Centre Unit Cost Estimate: $6,000 Replacement Cost Estimate: 2.5% Life Span Estimates: Normal Life Expectancy: 30 Years Effective Age: 0 Years Estimated Remaining Life: 30 Years Reserve Fund Estimates: (1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Fund Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment: $23,550 $45,908 $0 $45,908 $1,132 Component Analysis: A small contingency allowance is scheduled every five years based on an average of $5,000 per five year cycle. This would allow repair of any settlement cracks in foundation, crawl space, lower level floor slab or damage to wood frame members from settlement issues.

25 25 Structural and Architectural Reserve Component: (2) Building Envelope - Exterior Walls This component comprises the exterior wall finishes only - doors and windows as part of the building envelope are the responsibility of the unit owners. The exterior finish was replaced in 2001 through 2004, and is rated in average to good condition relative to the age of the complex. This component requires an allowance for re-painting at 8-10 year intervals, with replacement in the 30 year time frame. The wood elements and the fascia boards are typically re-painted more frequently depending on exposure to the elements. A pro-rated life expectancy of 30 years is used. Unit Quantity: 150,000 Sq Ft Unit Cost Estimate: $6.66 per Sq Ft Replacement Cost Estimate: $999,000 Life Span Estimates: Normal Life Expectancy: 30 Years Effective Age: 9 Years Estimated Remaining Life: 21 Years Reserve Fund Estimates: (1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Fund Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment: $999,000 $1,594,025 $454,245 $1,139,780 $44,206 Component Analysis: There were no obvious deficiencies in these components at the time of inspection. The fascia boards will be scheduled in 8 year intervals beginning in year 5. Siding is being repainted on a rotating basis, with 2-3 buildngs per year. With this frequency, exterior paint is considered a maintenance item. Siding replacement is scheduled for years in the projection period. Building envelope inspections should be conducted as a part of the painting program and include preventative maintenance repairs to caulking. Given the high level of maintenance compared to the original cedar siding, a longer life expectancy is warranted.

26 26 Structural and Architectural Reserve Component: (3) Roof Cover - Torch-on The complex includes roof cover comprises of a mixture of pitched, asphalt shingle surfaces and flat, torch on flat roofs. As there are two distinct styles of roofs within the development with substantially different life expectancies, they will be managed as two separate roof components. A typical flat roof cover will last approximately years. The flat roof structures include a "dome" style section that is covered with "enviro" shingles, that typically have a life expectancy in the 30 to 35 year time frame. Many factors can influence the actual life such as the number of severe weather events, severity of temperature changes between seasons as well as the initial installation. The normal life expectancy is taken from the mid range with the estimated average age of the flat roofs used for the effective age. Unit Quantity: 45,000 Sq Ft Unit Cost Estimate: $8.00 per Sq Ft Replacement Cost Estimate: $360,000 Life Span Estimates: Normal Life Expectancy: 27 Years Effective Age: 5 Years Estimated Remaining Life: 22 Years Reserve Fund Estimates: (1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Fund Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment: $360,000 $587,348 $103,065 $484,283 $17,740 Component Analysis: Normal life expectancies are expected for the roof cover in the case of the subject property. Costs include removal of old roof cover prior to applying the new roofing material. For contingency purposes allowance for the torch on is made in years 21 and 22 will be made to replace the current torch on flat roofs over 2 years given the size of the development. The dome structure cover should last a few more years. The torch on roofs and dome shingles were replaced 2007.

27 27 Structural and Architectural Reserve Component: (4) Roof Cover - Shingle All stacked townhouses have shingle roof cover, which is in the final phase of being replaced, under a program that started in The roofing product used in the replacement is an enviro shingle, a fairly new produce that uses used tires in their fabrication. Industry articles suggest this product is both more expensive and more durable that typical asphalt shingles, with a life span in the order of 50 years. Guarantees are offered for 30 years. For this estimate a 40 year life expectancy is used. Unit Quantity: 77,000 Sq Ft Unit Cost Estimate: $7.00 per Sq Ft Replacement Cost Estimate: $539,000 Life Span Estimates: Normal Life Expectancy: 40 Years Effective Age: 0 Years Estimated Remaining Life: 40 Years Reserve Fund Estimates: (1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Fund Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment: $539,000 $1,312,567 $0 $1,312,567 $21,731 Component Analysis: A longer than normal life expectancies are anticipated for the roof cover in the case of the subject property. Costs include removal of old roof cover prior to applying the new roofing material. The roof will not require replacement within the cash flow forecast period, however, in 30 years, 3/4 of its life expectancy will have expired, and it is appropriate to make contributions towards this replacement throughout the cash flow projection period.

28 28 Recreation Centre Reserve Component: (5) Doors and Windows The windows and doors in the clubhouse are considered under this component, as unit owners are responsible for their own windows and doors. Windows generally have a 30 year life. Doors have a slightly shorter expected life, except for those that are used infrequently. Onaverage, a 30 year life expectancy is considered reasonable. Fixed windows will only require replacement when seals fail, and some windows will have an indefinate life span. Doors include three entry doors on the upper level, one man door and one overhead door in the basement. In addition, there is a patio door at the pool area on the lower level. For costing purposes, an average cost per unit is used. Unit Quantity: 23 Units Unit Cost Estimate: $500 per Unit Replacement Cost Estimate: $11,500 Life Span Estimates: Normal Life Expectancy: 30 Years Effective Age: 5 Years Estimated Remaining Life: 25 Years Reserve Fund Estimates: (1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Fund Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment: $11,500 $20,058 $3,144 $16,913 $528 Component Analysis: Windows and doors are expected to last at least their normal service life. Windows were noted to be in good condition with little wear. For modelling purposes, 25% of windows and doors are scheduled in year 20 and another 25% in year 25.

29 29 Reserve Component: (6) Flooring Recreation Centre The flooring in the clubhouse is considered under this component. The majority of the flooring is carpet with the notable exceptions of the washrooms, pool deck and squash court. Carpeting is located in the lounge, office, exercise and games room, and upper level corridor. Carpets generally have a 10 year life. Washrooms have tile floor covering, which is expected to last upwards of 35 years. The pool deck has recently had a new non-slip cover applied. The flooring throughout the clubhouse appears well cared for which extends the overall life expectancy of the flooring component. A pro-rated life of 15 years is used for modeling purposes. Unit Quantity: 5,499 Sq Ft Unit Cost Estimate: $5.75 per Sq Ft Replacement Cost Estimate: $31,619 Life Span Estimates: Normal Life Expectancy: 15 Years Effective Age: 5 Years Estimated Remaining Life: 10 Years Reserve Fund Estimates: (1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Fund Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment: $31,619 $39,499 $12,848 $26,651 $2,434 Component Analysis: Some of the expenditures in this category represents a discretionary item. Carpets are scheduled for replacement every 15 years beginning in year 10 of the 30 year projection period. For modelling purposes, 50% of the flooring allowance will be scheduled in year 10, another 25% in year 15 and the remainder in year 20 to cover full replacement of all flooring. The remainder of the flooring will not need further replacement until sometime after the current 30 year cycle has ended.

30 30 Reserve Component: (7) Interior Finish Recreation Centre This reserve component area consists of interior wall and ceiling finish of the clubhouse. Common areas consist of painted gyproc walls and predominantly cedar tongue and groove ceilings. some cultured stone finish was noted at the fireplace in the lounge. Washrooms have ceramic tile to the 4 foot level, and these should last indefinitely, or if replaced, it could be for aesthetic purposes rather than wear and tear. This category would also include repair or replacement of washroom partitions, and partitions in the unfinished lower level. Maintenance requires periodic repainting, and some minor repairs due to damage. Unit Quantity: 7,776 Sq Ft Unit Cost Estimate: $1.50 per Sq Ft Replacement Cost Estimate: $11,664 Life Span Estimates: Normal Life Expectancy: 10 Years Effective Age: 1 Years Estimated Remaining Life: 9 Years Reserve Fund Estimates: (1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Fund Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment: $11,664 $14,250 $1,394 $12,856 $1,318 Component Analysis: Some of the expenditures in this category represent a discretionary item. Typically interior painting is completed on a seven to ten year interval, and accordingly it will recur a few times through the forecast period. The interior of the clubhouse was repainted in 2012, therefore it will not require repainting for another 10 years or so. Re-painting will be scheduled twice in the next 30 years, in years 10 and 20.

31 31 Reserve Component: (8) Furnishings Recreation Centre This reserve component includes equipment and furnishings found throughout the common areas, equipment in the exercise room. Most of these expenditures represent discretionary items, however, some are necessary to maintain the level of comfort and the expectations of residents - the exercise room for example, will require fairly prompt replacement of non-functioning equipment, however, a sofa might not require replacement with such urgency. This category also includes equipment such as the barbeque, television, built in audio system and outdoor patio furniture, but only if the items are over a threshold of $1,500 in a given year. Unit Quantity: 1 Allowance Unit Cost Estimate: $25,000 Replacement Cost Estimate: $25,000 Life Span Estimates: Normal Life Expectancy: 15 Years Effective Age: 5 Years Estimated Remaining Life: 10 Years Reserve Fund Estimates: (1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Fund Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment: $25,000 $31,230 $10,158 $21,072 $1,924 Component Analysis: It is impossible to predict accurately when some of these items will require repair, refurbishment, or replacement. Due to the number of individual items that would come under this category, an allowance is made in the cash flow statement, starting in year 10 of the 30 year model at 6 year intervals. The furnishing all appear to be in good condition as of the inspection date.

32 32 Reserve Component: (9) Pool and Hot Tub Site Improvements The pool and hot tub are in service for approximately 6 months of the year. The indoor pool deck area was recently re-finished with a non-slip surface, but it was included under flooring. Life expectancy for the liner, filter systems, chlorinators and related equipment is estimated at 15 years. The additional equipment such as heaters and heat exchangers are rated for 20 years. The deck area and the structures for the pool and tubs should be last indefinitely, however, some cost is added for the 30 year life components for contingency purposes. A new water supply line was recently installed, and the filter and heater equipment appear in very good condition. A low effective age is therefore assigned. Unit Quantity: 1 Allowance Unit Cost Estimate: $25,000 Replacement Cost Estimate: $25,000 Life Span Estimates: Normal Life Expectancy: 20 Years Effective Age: 3 Years Estimated Remaining Life: 17 Years Reserve Fund Estimates: (1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Fund Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment: $25,000 $36,494 $5,251 $31,243 $1,561 Component Analysis: For costing purposes, there are three different life cycles to the various components. For modelling purposes, the overall costs for the three different sections are spread out in three increments over the 30 year cycle; $7,500 in year 10 for filter systems, chlorinators and related equipment, $15,000 in year 20 for heaters and heat exchangers and $2,500 in year 25 for other repairs and refurbishment - each of these amounts to be adjusted for inflation.

33 33 Reserve Component: (10) Plumbing Recreation Centre Plumbing is limited to the clubhouse bathrooms and hot water tanks. Typical life expectancy for plumbing fixtures is 30 years, but this can vary widely, especially for sinks and toilets, as opposed to the water heaters and faucets. Some allowance is also necessary for plumbing lines and drains, so a small contingency is added based on a small percentage of the overall plumbing cost for the whole building (an additional $4,000 is added to the total). Unit Quantity: 12 # Unit Cost Estimate: $480 Average $4,000 Allowance Replacement Cost Estimate: $9,760 Life Span Estimates: Normal Life Expectancy: 30 Years Effective Age: 15 Years Estimated Remaining Life: 15 Years Reserve Fund Estimates: (1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Fund Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment: $9,760 $13,627 $6,568 $7,059 $408 Component Analysis: This calculation is comprised of two components. The replacement cost for fixtures in the clubhouse area is done on a cost per fixture basis, with half the cost expensed at year 8 and the other half at year 13. The total cost new for plumbing systems will also include some contingency for water lines and plumbing drains.

34 34 Reserve Component: (11) Electrical Recreation Centre Electrical components under this heading is a contingency allowance for the comparatively smaller components of the electrical system such as electrical panels, switches, and plugs and distribution wiring which has a 25 year expected life. The major components of the electrical system have a normal service life of 35 years, but this can vary quite widely. For reserve purposes, an average of 30 years is appropriate, based on 25% of the electrical system cost new. Unit Quantity: 9,387 Sq Ft Unit Cost Estimate: $7.25 per Sq Ft Replacement Cost Estimate: Life Span Estimates: Normal Life Expectancy: 30 Years Effective Age: 20 Years Estimated Remaining Life: 10 Years Reserve Fund Estimates: (1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Fund Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment: $17,014 $21,254 $13,827 $7,427 $678 Component Analysis: Given the number of pieces of equipment in this category it is inevitable that there will be some unexpected and premature failures. While these are impossible to predict, at least some allowance should be made to allow for unexpected early replacements. For modeling purposes, an allowance of one-third of this cost is made in year 13, with the balance in year 25.

35 35 Reserve Component: (12) HVAC Recreation Centre Our inventory of HVAC equipment two high high efficiency furnaces - converted to propane in A dedicated ventilation and humidity control system was recently installed for the pool area. Normal life expectancy for these items varies quite significantly, but generally fall in the range of 20 years to 30 years. Fans were replaced in 2007, reducing the effective age. A pro-rated life of 25 years is appropriate. Unit Quantity: 1 Allowance Unit Cost Estimate: $16,000 Replacement Cost Estimate: $16,000 Life Span Estimates: Normal Life Expectancy: 25 Years Effective Age: 5 Years Estimated Remaining Life: 20 Years Reserve Fund Estimates: (1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Fund Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment: $16,000 $24,968 $4,755 $20,213 $832 Component Analysis: Similar to the electrical system, costs are estimated on the basis of the major components of the system, with two major replacement events - one at year 15 and one at year 25. This type of failure is difficult to estimate with accuracy, but given the number of pieces of equipment involved, it is likely that some of it will not reach its full life expectancy. The furnaces were replaced once already since the project was completed. They appear to be in good condition.

36 36 Recreation Centre Reserve Component: (13) Life Safety and Access Systems The clubhouse is equipped with a key fob system. An allowance will be made for the total system. In addition, a camera security system was recently installed for the Marina. Effective age is adjusted downward to recognize the fact that the security system is new. These components are assigned a life expectancy of 10 years, as they are technology related. Unit Quantity: 1 Units Unit Cost Estimate: $15,000 Allowance Replacement Cost Estimate: $15,000 Life Span Estimates: Normal Life Expectancy: 10 Years Effective Age: 3 Years Estimated Remaining Life: 7 Years Reserve Fund Estimates: (1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Fund Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment: $15,000 $17,528 $5,169 $12,359 $1,662 Component Analysis: Cost is for the system, since it is impractical to replace parts of it. Batteries in emergency lighting fixtures will be replaced periodically as needed, however, they do not meet the cost threshold for a reserve item - thus this cost should come from the operating account. The security cameras were recently installed for the marina, so a lower effective date is used. An allowance will be made for the total systems in year 7 and again in year 17.

37 37 Site Improvements and Professional Fees Reserve Component: (14) Water and Sewer Supply System This item includes the water and sewer lines throughout the site. These originate at the water intake from the lake, and water distribution throughout the site, as well as sewer lines to each building, two lift stations, the two stage treatment system and piping to the off-site septic field. The water intake and treatment system is in process of being redone, with the pumping equipment being relocated in an above grade configuration where previously it was below grade and difficult to service. A new water filtration and treatment facility is also under construction. Project cost for these upgrades is over $900,000. The underground infrastructure will require replacement over time, although it is unlikely that whole systems would be done at the same time. These components usually have a 60 year life, which can be extended if sections are replaced as required. These systems are projected at 25% of their replacement cost, over a 30 year period. Totals of 4,750 lineal feet of water lines and 6,000 lineal feet of sewer lines was estimated. Unit Quantity: 10,750 Lin Ft Unit Cost Estimate: $ per Lin Ft $300,000 Allowance Replacement Cost Estimate: 25% Life Span Estimates: Normal Life Expectancy: 30 Years Effective Age: 15 Years Estimated Remaining Life: 30 Years Reserve Fund Estimates: (1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Fund Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment: $635,938 $1,239,692 $460,765 $778,927 $19,200 Component Analysis: Allowance for the water and sewer distribution lines is on a contingency basis, as only a portion of the systems will require major repair or replacement until after the end of this study period. A contingency allowance will provide a reserve in the event of an unexpected failure in either the plumbing or water distribution lines. Similarly, with the work underway on the water system, a lower effective age is estimated for the water filtration and sewer treatment systems. Repairs are projected at 25% of the projected cost in years 10, 16, 22 and 28.

38 38 Site Improvements and Professional Fees Reserve Component: (15) Landscape and Irrigation This component includes the extensively landscaped surface areas, including sod green space, shrubs, flower beds, an abundance of mature trees, and the underground sprinkler system. Most of the ongoing work required in this category falls under the annual maintenance budget such as maintaining sod and shrubs and trees. However, the irrigation system will require replacement at some point. A major upgrade to the irrigation system was completed in 2012, at a cost of approximately $400,000. The existing system was nearly 35 years old. It can be anticipated that a similar cost will occur late in the projection period. This would provide available funds if any extraordinary expense occurs for landscaping such as the requirement to remove a large number of trees. Unit Quantity: 350,000 Sq Ft Unit Cost Estimate: $1.25 per Sq Ft Replacement Cost Estimate: $437,500 Life Span Estimates: Normal Life Expectancy: 35 Years Effective Age: 0 Years Estimated Remaining Life: 35 Years Reserve Fund Estimates: (1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Fund Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment: $437,500 $953,222 $0 $953,222 $19,067 Component Analysis: The area involved in this component is calculated on a percentage of overall site area, after netting out the areas covered by buildings, patio areas and roadways. It should be treated as an approximate area. Some items in this category would also fall in the category of being discretionary items. For purposes of the cash flow analysis, this item is scheduled in year 8, to cover the irrigation system.

39 39 Site Improvements and Professional Fees Reserve Component: (16) Roads and Surface Parking The internal asphalt roadways are measured by calculating average width for their estimated length. Minor repair of road surfaces should be treated as a maintenance item. The asphalt surface of the road, not the roadway base, will have to be replaced at some point. The replacement cost is only related to the surface and a portion of the base, not the total base. Estimated life expectancy of the roadway is estimated at between 25 and 30 years. Some of the road appears original, and very near the end of its service life. However, the repair and replacement does lend itself to a phased process, dealing with the worst sections as they deteriorate. Unit Quantity: Asphalt 189,000 Sq Ft Unit Cost Estimate: $1.95 per Sq Ft Replacement Cost Estimate: $368,550 Life Span Estimates: Normal Life Expectancy: 30 Years Effective Age: 20 Years Estimated Remaining Life: 10 Years Reserve Fund Estimates: (1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Fund Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment: $368,550 $460,394 $299,507 $160,887 $14,693 Component Analysis: As depicted below, there are several areas of the road and parking areas that require fairly immediate attention. Overall, the roads are rated as past their mid-life, although it is recognized that some areas have already been redone. For modelling purposes, 10% of the paving will be scheduled starting in year one then every 2nd year for up to 50% of the paving. After that, the balance of this cost is split into five year increments.

40 40 Reserve Component: (17) Marina Site Improvements and Professional Fees The marina cost was estimated on a cost per slip basis, inclusive of the underwater works such as anchors and piles and breakwater to support the floating docks. The subject dock "fingers" have been under a replacement program in the past few years and are fairly new, but on-site personnel indicate that some work may be required on the structural components of the marina in the next few years. A new change room and washroom was added last year, and is considered under the overall project cost for the marina. New lights were also added within the past year. The life expectancy of the marina varies by component, but averages 25 years. It is not expected that the marina would require a total re-build, so for purposes of this estimate, provision is made at 40% of the total cost, for the projection period considered here. This suggests that periodic repair will extend the life of the facility. Unit Quantity: 125 Sq Ft Unit Cost Estimate: $12,000 per Sq Ft Replacement Cost Estimate: 40% Life Span Estimates: Normal Life Expectancy: 25 Years Effective Age: 12 Years Estimated Remaining Life: 13 Years Reserve Fund Estimates: (1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Fund Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment: $600,000 $801,262 $372,559 $428,703 $29,203 Component Analysis: The effective age estimate is based on an "average" quality rating that varies from good, in terms of the slips, to fair for some of the underlying structure. For modelling purposes, one third of the estimated repair costs are estimated for year 3, and another third in years 13 and 26. This periodic upgradings should be sufficient to maintain continuous use of the marina.

41 41 Site Improvements and Professional Fees Reserve Component: (18)Tennis Court and Playground The tennis court and playground are located near the boat storage compound. The tennis court was noted to be in a poor state of repair, and quotes have been obtained to repair or replace the existing court surface. Re-painting of the surface was investigated as a temporary measure, but it is not economical if replacement must occur in a few years. In contrast, the playground equipment appears to be in good condition, and should have at least 10 years of life remaining. Normal life expectancy of 25 years is expected for a tennis court, and 15 years for the playground equipment, so a pro-rated life expectancy of just over 20 year is calculated, as the tennis court is the larger component of the allowance. Unit Quantity: 1 Unit Cost Unit Cost Estimate: $75,000 Allowance Replacement Cost Estimate: $75,000 Life Span Estimates: Normal Life Expectancy: 25 Years Effective Age: 12 Years Estimated Remaining Life: 13 Years Reserve Fund Estimates: (1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Fund Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment: $75,000 $78,413 $72,828 $5,585 $2,765 Component Analysis: The effective age estimate is based on the poor condition of the tennis court and need for short term repair. In view of other significant capital projects in the past few years, the tennis court repair is projected for year two (2015) of the projection period. The playground is slated for replacement in the 12 year time frame. Prorated, these components are assigned a 12 year effective age for purposes of the benchmark analysis.

42 42 Reserve Component: (19) Professional Fees Professional Fees This item includes periodic building envelope inspections and updates to the Depreciation Report/Reserve Fund Study. By legislation, the updates are required every 3 years. After two updates, a full study should be considered (i.e. in year 9). A building envelope inspection should occur around year 8 of the projection period and every 10 years thereafter. Unit Quantity: 3 Depreciation Report 7 DR Update 3 Envelope Study Unit Cost Estimate: $12,500 DR $4,000 Update $3,500 ES Replacement Cost Estimate: $12,000 Avg per 5 years Life Span Estimates: Normal Life Expectancy: 5 Years Effective Age: 0 Years Estimated Remaining Life: 5 Years Reserve Fund Estimates: (1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Fund Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment: $12,000 $13,412 $0 $7,059 $2,577 Component Analysis: The annual allowance provides for some inflation over time for the two types of professional services required or recommended. This should provide a sufficient allowance within the pool of funds to have these studies completed. If additional technical inspections are required, they should also come from the reserve fund, however, these are impossible to reliably predict. The total cost for this service will be scheduled in accordance with the update schedule. However, for modelling purposes in the benchmark, the annual contribution level is linked to 5 year periods, roughly matching the actual funds needed to complete these studies.