Move Ontario Trust Financial Statements For the year ended December 31, 2013

Transcription

1 Financial Statements For the year ended December 31, 2013 Contents Independent Auditor's Report 2 Financial Statements Balance Sheet 3 Statement of Capital 4 Statement of Operations 5 Statement of Cash Flows 6 Notes to Financial Statements 7-9

2 Tel: Fax: Toll-free: BDO Canada LLP 1 City Centre Drive, Suite 1700 Mississauga ON L5B 1M2 Canada Independent Auditor's Report To the Trustees of Move Ontario Trust We have audited the accompanying financial statements of Move Ontario Trust which comprise the balance sheet as at December 31, 2013 and the statements of capital, operations 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 Canadian accounting standards for private enterprises, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and 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 auditor's judgement, 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. 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 Move Ontario Trust as at December 31, 2013 and the results of its capital, operations and cash flows for the year then ended in accordance with Canadian accounting standards for private enterprises. Chartered Accountants, Licensed Public Accountants Mississauga, Ontario April 16, BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms

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4 Statement of Capital For the year ended December Since Inception Capital, beginning of year $639,765,149 $793,020,810 $ - Net income 9,721,049 11,245, ,142,720 Contributions Government of Canada ,000,000 Province of Ontario ,000,000 Settlor Distributions relating to project costs - income distributions (9,721,049) (11,245,393) (150,142,720) - capital distributions (106,148,929) (153,255,661) (410,963,335) Capital expenditures - - (420,455) Capital, end of year $533,616,220 $639,765,149 $ 533,616,220 The accompanying notes are an integral part of these financial statements. 4

5 Statement of Operations For the year ended December Interest and investment income $ 10,293,784 $ 11,841,198 Expenses Investment management fees (Note 5) 362, ,142 Harmonized sales tax 64,114 67,300 Professional fees 116, ,621 Insurance 23,000 24,200 Webhosting and maintenance 6,484 5,486 Supplies , ,805 Net income for the year $ 9,721,049 $ 11,245,393 The accompanying notes are an integral part of these financial statements. 5

6 Statement of Cash Flows For the year ended December Cash provided by (used in) Operating activities Net income for the year $ 9,721,049 $ 11,245,393 Adjustments required to reconcile net income with net cash provided by operating activities Unrealized gain on investments (4,831,423) (1,547,362) Realized loss on sale of investments 6,475,740 13,305,209 Changes in non-cash working capital balances Accrued interest 2,053,669 1,793,470 Advances to TYSSE (30,435,427) 12,076,016 Prepaid expenses (2) 1,201 Accounts payable and accrued liabilities (16,401) (23,381) (17,032,795) 36,850,546 Investing activities Purchase of investments (382,268,494) (280,079,426) Proceeds on sale of investments 515,172, ,408, ,903, ,329,560 Financing activities Distribution relating to project costs (115,869,978) (164,501,054) Increase (decrease) in cash during the year 979 (320,948) Cash, beginning of year 101, ,324 Cash, end of year $ 102,355 $ 101,376 The accompanying notes are an integral part of these financial statements. 6

7 Notes to Financial Statements December 31, Significant Accounting Policies a) General Move Ontario Trust ("Trust") was settled under a Declaration of Trust ("Declaration") by the Province of Ontario as Settlor by the payment of an Initial Contribution on March 24, Further Contributions in the amount of $870 and $75 million were subsequently made to the Trust by the Province and the Government of Canada, respectively. Both contributions, and any Additional Contributions, as defined by the Trust indenture, are irrevocable and shall not be distributed to or revert to the Province of Ontario. The Trust was established to fund distributions in respect of capital investments in a heavy rail inter-regional public transit infrastructure expansion project in the City of Toronto ("Toronto") and The Regional Municipality of York ("York"), Beneficiaries of the Trust. Each of Toronto and York have nominated a Trustee to act on their behalf in administering the Trust in accordance with the declaration. The third Trustee is an appointee by the Province of Ontario. Pursuant to the terms of the Declaration, the Trust has determined that Trust Assets are allocated to the Beneficiaries in the ratio of percent to Toronto and percent to York for the use in the extension of the Spadina/University subway to Vaughan Corporate Centre. Should the project not proceed or meet established progress milestones, the Declaration provides for the Trust Assets to be distributed to certain Eligible Municipalities to be used for transit purposes. The Trustees project that all Trust Assets will be fully utilized before the end of At that time, the Trust will be dissolved. b) Basis of Presentation The preparation of the financial statements in conformity with Canadian accounting standards for private enterprises requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. c) Revenue Recognition Interest and investment income is recorded as it is earned and includes adjustments to market value. d) Financial Instruments Upon initial recognition, financial instruments are measured at fair value and adjusted for any transaction costs incurred. At each reporting date, the company will measure these financial instruments at amortized cost. Investments in debt instruments are carried in the balance sheet at fair value with changes in fair value recognized in the statement of operations and capital. Transaction costs related to instruments are expensed as incurred. Market Risk Market risk is the risk of potential loss caused by the fluctuations in fair value or future cash flows of financial instruments by changes in their underlying market value. The Trust is exposed to fluctuations in fair value on its bonds and short-term investments. 7

8 Notes to Financial Statements December 31, Advances/Due to TYSSE As part of the TYSSE project governance structure, the Executive Task Force ("ETF") was established to provide oversight of the project. The ETF is comprised of three executives from the Regional Municipality of York, and three executives from the City of Toronto, both organizations being beneficiaries of the Trust. The ETF provides direction to the project manager, with respect to the project's scope and budget, and requests funding for project expenditures and working capital on behalf of the beneficiaries in accordance with a Disbursement Policy developed in 2008 to assist the Trustees in regard to their fiduciary responsibilities. The Trust and the ETF are related since the ETF is controlled by beneficiaries of the Trust. During the year, the Trust provided project funding as requested by the ETF in the amount of $146,305,405 ( $152,425,038). 3. Investments The market values of investments are summarized as follows: Bonds Provincial $199,683,154 $248,640,138 Corporate 216,651, ,375,222 Federal - 12,492,569 Municipal 66,845,237 78,437, ,179, ,945,587 Cash and money market instruments 29,276,175 13,876,069 Short term investment 3,194,692 7,376,884 $515,650,471 $650,198,540 The short term investment consists of a short term note with the Province of Manitoba, maturing September The bonds mature between March 2014 and July The investment policy authorizes that Move Ontario Trust's funds be invested in bonds, debentures, promissory notes or other indebtedness issued or guaranteed by the Government of Canada, a Canadian province, a Canadian municipality, an agency of the Government of Canada or a Canadian province, the Ontario Strategic Infrastructure Financing Authority, any Financing Authority including those comprised of municipalities, owned or guaranteed by a Province and schedule 1 banks with credit ratings of "AA", with maturity of not more than five years. The investments have a weighted average return of 1.85% ( %) (since inception %) net of fees. 8

9 Notes to Financial Statements December 31, Distributions Pursuant to the Declaration, the Trust is required to allocate, distribute and make payable to the Beneficiaries all of the income of the Trust earned in a taxation year. During the year, the Trust distributed income to fund capital investments in the public transit infrastructure expansion project for which it was established. Capital distributions include costs of the Trust which are not incurred to earn income and hence are not deductible for income tax purposes. These costs were charged against the capital of the Trust. Distributions of the Trust are summarized as follows: Net income $ 9,721,049 $ 11,245,393 Distributions to beneficiaries for project costs (9,721,049) (11,245,393) Undistributed net income $ - $ - 5. Related Party Transactions During 2010, the Trust entered into an agreement with the Regional Municipality of York and the City of Toronto (the "Manager") to provide fixed income portfolio management services to the Trust. The Trust and the Manager are related since the Manager is a beneficiary of the Trust (see Note 1). The Manager is responsible for the day-to-day management of the Trust's fixed income portfolio and its compliance with the Trust's statement of investment policies. As compensation for its services, the Manager is entitled to a fee payable quarterly, totalling $343,350 ( $362,751). The Trustees consider these fees to be more favourable than those which might be arranged in an arm's length manner with third parties. From time to time, the Manager may, on behalf of the Trust, enter into transactions or arrangements with other investment portfolios that are related or connected to the Manager, including the investment portfolios of the Regional Municipality of York and the City of Toronto. These transactions are entered into in the best interest of the Trust and are negotiated on substantially the same terms as those prevailing at the time for comparable transactions with other parties. These transactions do not involve more than normal market risk or present other unfavourable features. 9