UNION GAS RECLAMATION TRUST

Transcription

1 Financial Statements UNION GAS RECLAMATION TRUST

2 Table of contents Independent Auditors Report Statement of Assets and Liabilities Statement of Operations Statement of Changes in Net Assets...4 Statement of Cash Flows Notes to Financial Statements

3 SRCO Professional Corporation Chartered Professional Accountants Licensed Public Accountants Park Place Corporate Centre 15 Wertheim Court, Suite 409 Richmond Hill, ON L4B 3H7 Tel: & Fax: INDEPENDENT AUDITORS REPORT To the Partners and Trustees of Union Gas Reclamation Trust We have audited the accompanying financial statements of Union Gas Reclamation Trust (the Trust ), which comprise the statement of assets and liabilities as at and the statements of operations, changes in net assets and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Union Gas Reclamation Trust as at, and the results of its operations and its cash flows for the year then ended, in accordance with accounting principles generally accepted in the United States of America. /s/ SRCO Professional Corporation Richmond Hill, Ontario March 29, 2018 CHARTERED PROFESSIONAL ACCOUNTANTS Authorized to practise public accounting by the Chartered Professional Accountants of Ontario Page 1

4 STATEMENT OF ASSETS AND LIABILITIES As at ASSETS $ $ Cash 1, Investments [Note 3] 108, ,409 Investment income receivable , ,515 LIABILITIES AND NET ASSETS Liabilities Accrued liabilities [Note 4] 2,811 2,736 2,811 2,736 Net assets 107, , , ,515 See accompanying notes to financial statements ON BEHALF OF THE TRUST /s/ Greg Vibert Trustee Page 2

5 For the year ended December 31, INVESTMENT INCOME STATEMENT OF OPERATIONS $ $ Investment income 2,408 2,133 Realized gain 1, Unrealized gain 4,719 5,831 9,055 8,290 EXPENSES Trustee fees [Note 4] Legal and professional expenses 4,815 2,514 5,224 2,885 NET INVESTMENT INCOME 3,831 5,405 Income tax [Note 6] NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 3,831 5,405 See accompanying notes to financial statements Page 3

6 STATEMENT OF CHANGES IN NET ASSETS For the year ended December 31, $ $ NET ASSETS - BEGINNING OF YEAR 103,779 98,374 Net increase in net assets resulting from operations 3,831 5,405 Capital contribution NET ASSETS - END OF YEAR 107, ,779 See accompanying notes to financial statements Page 4

7 STATEMENT OF CASH FLOWS For the year ended December 31, $ $ CASH FLOW USED IN OPERATING ACTIVITIES Net increase in net assets resulting from operations 3,831 5,405 Items not affecting cash Unrealized gain (4,719) (5,831) (888) (426) Changes in operating assets and liabilities: Investment income receivable 30 (564) Accrued liabilities 75 (214) Cash flow used in operating activities (783) (1,204) CASH FLOW FROM (USED IN) INVESTING ACTIVITIES Investments 1,506 (99,578) INCREASE (DECREASE) IN CASH 723 (100,782) CASH - BEGINNING OF YEAR ,324 CASH - END OF YEAR 1, See accompanying notes to financial statements Page 5

8 NOTES TO FINANCIAL STATEMENTS 1. GENERAL INFORMATION Union Gas Limited, a corporation amalgamated under the Laws of Canada entered into a trust agreement on January 23, 2015 as amended on September 11, 2015 with The Bank of Nova Scotia Trust Company (the Trustee ) and established the Union Gas Reclamation Trust (the Trust ). The Trust was incorporated in the province of Alberta under the laws of Canada, licensed under the Trust and Loan Companies Act (Canada) and regulated under the National Energy Board Act (Canada) (NEB). The Trust holds substantially all of its assets through the Trustee. The objective of the Trust is to hold and invest funds that are contributed to the Trustee for the sole purpose of funding reclamation obligations as a qualifying environmental trust, as defined in subsection 211.6(1) of the Income Tax Act (Canada). The performance of the Trust is directly affected by the performance of the trust fund investments. The investments are limited to qualified investments as defined in section 204 of the Income Tax Act (Canada) and are as per the Statement of Investment Policies and Procedures. The Trust commenced its operations on January 28, 2015 with no specific term to continue until terminated with the approval of the NEB. On January 6, 2016 the Trustee entered into an Investment Management Agreement with 1832 Asset Management L.P. (the Manager ) to provide investment management services. 2. SIGNIFICANT ACCOUNTING POLICIES The accompanying financial statements are prepared in conformity with accounting principles generally accepted in the United States of America ( US GAAP ). The Trust is considered an investment company under US GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board ( FASB ) Accounting Standards Codification ( ASC ) 946, Financial Services Investment Companies ( ASC 946 ). The significant accounting policies adopted by the Trust are as follows: (a) Use of estimates The preparation of financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increase and decrease in net assets from operations, the income and expenses during the reporting period. Areas involving significant estimates and assumption include investment fair values and accrued liabilities. Actual results could differ from those estimates. The estimates are reviewed periodically, and, as adjustments become necessary, they are reported in the statement of operations in the period in which they become known. Page 6

9 NOTES TO FINANCIAL STATEMENTS 2. SIGNIFICANT ACCOUNTING POLICIES (continued) (b) Cash and cash equivalents Cash and cash equivalents include current and call accounts with original maturities of three months or less. (c) Income and expense recognition Interest income and expense are recognized on an accrual basis. (d) Functional and reporting currency The books and records of the Trust are maintained in Canadian dollars, the functional and reporting currency of the Trust. (e) Taxation The Trust accounts for income taxes in accordance with ASC 740. The Trust provides for income taxes payable, as well as for those deferred because of the timing differences between reporting income and expenses for financial statement purposes versus tax purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recoverable or settled. The effect of a change in tax rates is recognized as income or expense in the period of the change. A valuation allowance is established, when necessary, to reduce deferred income tax assets to the amount that is more likely than not to be realized. The Trust is governed by the Income Tax Act Part XII.4 - Tax On Qualifying Environmental Trusts. (f) Recent accounting pronouncements The Trust s management has evaluated all the recently issued accounting pronouncements through the authorization date of these financial statements and does not believe that they will have a material effect on the Trust s financial position and performance. Page 7

10 NOTES TO FINANCIAL STATEMENTS 2. SIGNIFICANT ACCOUNTING POLICIES (continued) (g) Financial Instruments The Trust recognizes financial instruments at fair value upon initial recognition. The Trust s investments are measured at fair value through profit or loss, with realized and unrealized fair value changes being recognized in the statement of operations. Investment income is accrued evenly in the statement of operations. Transaction costs are charged to the statement of operations as an expense. Regular way purchases and sales of financial assets are recognized at their trade date. 3. FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS The Trust is exposed to various risks in the normal course of business because of the following financial instruments: cash, investment income receivable, investments, and accrued liabilities. The following is a summary of certain key risk factors and is not intended to be a comprehensive summary of all risks inherent in the Trust. Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Trust is exposed to this risk mainly in respect of its obligations for fund redemptions. The Trust receives funds from the general partner based on contributions approved by the NEB in advance of funding the reclamation operations, thereby minimizing its liquidity risks. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of the changes in the market interest rate. Some of the Trust s investments have underlying investments in interest bearing financial instruments and, as a result, the Trust is exposed to minimal interest rate risk. Concentration risk Concentration risk arises as a result of the concentration of exposures within the same category, whether it is geographical location, product type, industry sector or counterparty type. All the investments for the Trust are in Canadian listed exchange traded funds and are spread out amongst different products, geographies and industries. Page 8

11 NOTES TO FINANCIAL STATEMENTS 3. FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS (continued) Price risk The Trust is exposed to price risk, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk). The Trust s investments are subject to the risk of changes in the prices of equity securities. The Trust has a robust mechanism of monitoring equity price on a regular basis which minimizes the price risk. The investments comprise of the following equities and balances as at : Details Quantity Cost Market price/ Unit Total Market Value 2017 Total Market Value 2016 $ $ $ $ S&P/TSX Small CAP Index ETF 677 9, ,414 10,802 MSCI EAFE IMI Index ETF Unit , ,969 21,477 S&P 500 Index ETF Unit , ,224 27,458 S&P/TSX Capped Composite Index ETF 215 4, ,528 5,496 Canadian Universe Bond Index ETF 1,371 43, ,487 40,176 Return of capital (37) Capital gain dividends 242 Total investments 98, , ,409 The changes in market value of investments as at December 31 are as follows: $ $ INVESTMENTS - BEGINNING OF YEAR 105,409 Cash (disbursements) investment (3,434) 98,506 Investment income reinvested 746 Realized gain on investment reinvested 1, Unrealized gain on investment 4,719 5,831 INVESTMENTS - END OF YEAR 108, ,409 Page 9

12 NOTES TO FINANCIAL STATEMENTS 4. RELATED PARTY TRANSACTIONS AND BALANCES Transactions are considered to be related party transactions if Partners or Trust has the ability to exercise significant influence through its ownership, presence on the board of directors or another arrangement. Transactions with related parties are in the normal course of operations and are recorded at the exchange amount, which is the amount of consideration established and agreed to by the related parties. Other than the transactions and balances disclosed elsewhere in the financial statements, the only other related party transaction is as follows: Trustee fees The Trustee is entitled to a fee based on a percentage of the Trust s net asset market value. Trustee fees are accrued and are payable quarterly in arrears. The Trustee is also entitled to reimbursement of all reasonable out-of-pocket expenses incurred on behalf of the Trust. During the year ended, the Trust incurred $409 ( $371) as Trustee fees. 5. FAIR VALUE CLASSIFICATIONS Fair value measurement guidance establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires disclosure about fair value measurement. Various inputs are used in determining the value of the Trust s investments. These inputs are summarized in the three broad levels listed below: Level 1 - Valuation is based upon quoted prices in active markets for identical securities. Level 2 - Valuation is based upon other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Level 3 - Valuation is based upon significant unobservable inputs (including the Trust s own assumptions in determining the fair value of investments). Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The Trust s financial instruments include investments and cash which are measured at fair value and classified as Level 1. The respective carrying value of the other on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. The Trust s bank accounts are maintained with financial institutions of reputable credit, therefore, bear minimal credit risk. Page 10

13 NOTES TO FINANCIAL STATEMENTS 6. INCOME TAX No tax expense has been recognized for the year ended, as the Trust had incurred a taxable loss of $1,852 ( $589). 7. SUBSEQUENT EVENTS AND APPROVAL OF FINANCIAL STATEMENTS In preparing these financial statements, management has evaluated and disclosed all material subsequent events up to March 29, 2018, which is the date that the financial statements were available to be issued. Page 11