FINANCIAL STATEMENTS. Walton Ontario Land L.P.1 For the Years Ended December 31, 2014 and December 31, (Expressed in Canadian dollars)

Transcription

1 FINANCIAL STATEMENTS Walton Ontario Land L.P.1 For the Years Ended 2014 and 2013 (Expressed in Canadian dollars)

2 March 26, 2015 Independent Auditor s Report To the Partners of Walton Ontario Land L. P. 1 We have audited the accompanying financial statements of Walton Ontario Land L.P. 1, which comprise the statements of financial position as at 2014 and 2013, and the statements of comprehensive loss, changes in partners equity and cash flows for the years then ended, and the related notes, which comprise 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 International Financial Reporting Standards, 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 audits. We conducted our audits 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 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. 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 in our audits is sufficient and appropriate to provide a basis for our audit opinion. PricewaterhouseCoopers LLP Suite 3100, Avenue SW, Calgary, Alberta, Canada T2P 5L3 T: , F: , PwC refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.

3 Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Walton Ontario Land L.P. 1 as at 2014 and 2013 and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards. Chartered Accountants Calgary, Alberta

4 WALTON ONTARIO LAND L.P.1 Statements of Financial Position As at 2014 and ASSETS Land (note 5) 15,221,669 15,066,849 Prepaid expenses 21, GST recoverable 17,379 8,626 Accounts receivable 1,593 2,554 Cash (note 7) 1,438,063 2,554,867 TOTAL ASSETS 16,700,459 17,633,260 LIABILITIES Accounts payable and accrued liabilities (note 6) 82,013 74,557 PARTNERS EQUITY 16,618,446 17,558,703 TOTAL LIABILITIES AND EQUITY 16,700,459 17,633,260 Commitments (note 11) The accompanying notes to the financial statements are an integral part of these statements. Approved on behalf of the Board of Directors of the General Partner Director Clifford H. Fryers Director Jon N. Hagan

5 Statements of Comprehensive Loss REVENUE Interest income 23,909 35,523 Other revenue (note 5) 13,000 46,732 36,909 82,255 EXPENSES Management fees (note 6) 665, ,880 Servicing fees (note 10) 166, ,470 Directors fees (note 6) 82,360 83,613 Office and other 44,367 33,870 Professional fees 18,089 23, , ,079 NET LOSS BEFORE OTHER ITEMS (940,257) (890,824) Loss on land disposal (note 5) - (29) NET AND COMPREHENSIVE LOSS (940,257) (890,853) Basic and diluted net loss per unit specifically attributable to limited partnership units (note 9) (0.48) (0.45) The accompanying notes to the financial statements are an integral part of these statements.

6 Statements of Changes in Partner s Equity Limited Partnership Units General Partnership Unit (note 9) (note 9) Accumulated Deficit Total # of Units # of Units JANUARY 1, ,961,840 33,294, (14,844,494) 18,449,556 Net and comprehensive loss for the year (890,853) (890,853) DECEMBER 31, ,961,840 33,294, (15,735,347) 17,558,703 Net and comprehensive loss for the year (940,257) (940,257) DECEMBER 31, ,961,840 33,294, (16,675,604) 16,618,446 The accompanying notes to the financial statements are an integral part of these statements.

7 Statements of Cash Flows CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Comprehensive loss for the year (940,257) (890,853) Adjustment for: Interest income (23,909) (35,523) Loss on land disposal - 29 Changes in non-cash items Increase in prepaid expenses (21,391) (31) (Increase)/decrease in GST recoverable (8,753) 113,645 Decrease in due from related parties - 15,214 Increase/(decrease) in accounts payable and accrued liabilities 1,663 (5,848) Interest received 24,870 36,305 (967,777) (767,062) INVESTING ACTIVITIES Proceeds on land disposal (note 5) - 12,530 Land improvements (149,027) (88,801) (149,027) (76,271) Decrease in cash (1,116,804) (843,333) Cash Beginning of year 2,554,867 3,398,200 Cash End of year 1,438,063 2,554,867 SUPPLEMENTAL NON-CASH INFORMATION Land improvements in accounts payable and accrued liabilities 5, The accompanying notes to the financial statements are an integral part of these statements.

8 1. NATURE OF BUSINESS Walton Ontario Land L.P. 1 (the "Partnership") was formed on October 2, 2009, when the certificate of limited partnership was filed under the Partnership Act (Alberta). The Partnership was formed to issue a maximum of 3,580,000 limited partnership units at 10 per unit to raise proceeds for the purchase of interests in properties comprised of approximately 155 acres of undeveloped land in Alliston, Ontario (the Alliston Property ) and approximately 300 acres of undeveloped land (the Ottawa Property ) located in the southwest quadrant of Ottawa, Ontario (collectively, the "Properties"), holding that interest as an investment, and eventually selling or otherwise disposing of that interest with a view to making a profit, and performing such other activities as may be incidental to, or arising from, the foregoing purposes as may be reasonably determined by the General Partner, including, without limitation, participating in concept planning with respect to the Properties. On October 12, 2012, the Alliston Property was sold. The Partnership owns 100% of the Ottawa Property as an investment and plans to eventually dispose of it prior to physical development. Should the partners of the Partnership determine that it would be appropriate for the Partnership to participate in the development of the Ottawa Property (other than pre-development concept planning), the activities of the Partnership may also include the partial or full development of the Ottawa Property prior to the sale thereof. The net proceeds from the disposition of the Ottawa Property, after satisfaction of liabilities and payment of, or provision for, all fees and expenses, including any amounts that the General Partner reasonably considers necessary to retain in order to replenish the refundable expense reserve, will be distributed by the Partnership. Included in such fees and expenses is a performance fee payable (see note 6) to Walton International Group Inc. ( WIGI ), provided that the limited partners receive distributions equal to an amount equal to their purchase price allocation, plus an amount equal to an 8% annual cumulative return on contributed capital that has not been paid to the limited partners in respect of previous distributions. The address of the registered office is 23rd Floor, 605 5th Avenue SW, Calgary, Alberta, T2P 3H5. These financial statements were authorized for issue by the Board of Directors on March 24, The Board of Directors has the power to amend the financial statements after they are issued. 2. BASIS OF PREPARAT ION Statement of Compliance These financial statements, including comparatives, have been prepared in full compliance with International Financial Reporting Standards ( IFRS ) and using accounting policies that are consistent with IFRS as issued by the International Accounting Standard Board ( IASB )

9 Basis of Presentation The Partnership s financial statements have been prepared on the historical cost basis, except for certain financial instruments which are initially measured at fair value, as explained in the accounting policies set out in note 4. The statements of financial position have been prepared using a liquidity based presentation because the operating cycle of the Partnership revolves around the sale of land, the timing of which is uncertain. As a result, presentation based on liquidity is considered by management to provide information that is more reliable and relevant to the users of the financial statements. With the exception of land (note 5), all assets and liabilities are current in nature and are expected to be settled in less than twelve months. 3. GENERAL PARTNER Walton Ontario Land 1 Corporation (the General Partner ) was incorporated on October 1, 2009 under the laws of the Province of Alberta to act as the General Partner and manage the affairs of the Partnership and is a subsidiary of Walton G.P. Holdco Ltd., a wholly owned subsidiary of WIGI. WIGI is a wholly owned subsidiary of Walton Global Investments Ltd. ( Walton Global ). All or substantially all of the shares of Walton Global are owned by or for the benefit of the Doherty family, including William K. Doherty, the Chief Executive Officer of the General Partner and director of Walton Global. 4. ACCOUNTING POLICIES Use of Estimates and Judgments The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amount of assets, liabilities and equity at the date of the financial statements and the reported amount of revenue and expenses during the year. The estimates and assumptions which have the most significant effect on the financial statements and note disclosures are related to the fair value of land, which is determined using a market approach using comparable market data prepared by an independent valuator to assess the value as is (note 5). This requires management to use its judgment to assess the highest and best use of the investment property. While management has disclosed its best estimate of the fair value for the Ottawa Property, changes in the estimates and assumptions could cause the actual proceeds from the sale of the Ottawa Property to differ materially from that estimate

10 Cash-generating Units Investment property is assessed for indicators of impairment and tested for impairment on a cash-generating unit basis. A cash-generating unit is a group of assets which generate cash flows that are largely independent of the cash inflows from other assets or group of assets. Management has determined that the Ottawa Property is a cashgenerating unit. Land Land is accounted for as investment property under International Accounting Standard 40: Investment Property, based on the intent of the Partnership to hold the Ottawa Property for appreciation of value. Investment property under IFRS can be accounted for using the fair value model or the cost model. The Partnership has selected the cost model. Upon acquisition, land is initially measured at cost, and is not depreciated due to its indefinite life. Each reporting period, land is assessed for indicators of impairment. Where indicators of impairment are identified, the carrying value of the land is compared against the recoverable amount and any excess is recorded as an impairment loss. The recoverable amount is calculated as the greater of fair value less costs of disposal. Any impairment loss is recognized in the statement of comprehensive loss in the period the impairment is identified. Recoveries in the fair value of land are recognized to the extent of any previously recognized impairment losses. Financial Instruments Financial instruments are any contract that gives rise to a financial asset of one party and a financial liability or equity instrument of another party. Financial assets and liabilities are recognized when the Partnership becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have been transferred and the Partnership has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognized when the obligation specified in the contract is discharged. Financial instruments are recognized initially at fair value, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Subsequent measurement depends on how the instrument has been classified. At each reporting period, the Partnership will assess whether there is any objective evidence that a financial asset, other than those classified as fair value through profit or loss, is impaired. Impairment, if any, is recorded in net income

11 The following table lists the Partnership s financial instruments and the method of measurement subsequent to initial recognition: Financial Instrument Category Measurement method Accounts receivable Loans and receivables Amortized cost Cash Loans and receivables Amortized cost Accounts payable and accrued liabilities Other financial liabilities Amortized cost Cash Cash consists of amounts in demand deposits at financial institutions. Partners Capital Both the General Partner unit and the Limited Partnership units have been classified as equity because the units represent a residual interest in the Partnership after the payment of all liabilities and do not provide the holder of the unit with the right to put the unit back to the Partnership. Costs directly attributable to the issuance of such units are recognized as a deduction from equity. Accumulated Deficit Accumulated deficit comprises the accumulated balance of income less losses arising from the operation of the Partnership, after taking into account distributions declared by the Partnership. Allocation of Partnership Income or Loss Net income or net loss is allocated to the limited partners and to the General Partner. These financial statements include only the assets, liabilities, and operations of the Partnership, and do not include the assets, liabilities, revenues or expenses of the limited partners or the General Partner. Net income or net loss of the Partnership for a fiscal year will be allocated as follows: (a) the General Partner will be allocated, in its capacity as General Partner, 0.001% of the net income or net loss; and (b) the balance of the net income or net loss will be allocated to limited partners of record on the last day of such fiscal year in accordance with their respective sharing ratios at that time. Revenue Recognition The Partnership recognizes interest income on an accrual basis in the period when it is earned

12 The Partnership recognizes other income from rental income on a straight line basis in accordance with the lease agreement and income from property tax recovery when the expense is incurred by the Partnership and collection is reasonably assured. Income Taxes No provision has been made for income taxes of the Partnership, the liability for which is the responsibility of the partners. Current Changes in Accounting Policies The accounting policies used in the preparation of these financial statements are consistent with those which were disclosed in the Partnership s audited financial statements for the year ended 2013, except as explained below. Offsetting financial assets and liabilities IAS 32 Financial Instruments - Presentation ( IAS 32 ) was issued with amendments in December The amendments clarify certain aspects of the existing guidance on offsetting financial assets and financial liabilities. The amendments to IAS 32 are effective for annual periods beginning on or after January 1, The amendments did not have an impact on the financial statements of the Partnership. Levies IFRIC 21 is an interpretation of IAS 37, Provisions, Contingent Liabilities and Contingent Assets ( IAS 37 ). IAS 37 sets out criteria for the recognition of a liability to pay a levy imposed by government, other than income tax. The interpretation requires the recognition of a liability when the event, identified by the legislation as triggering the obligation to pay the levy occurs. This standard is required to be applied for accounting periods beginning on or after January 1, The adoption of IFRIC 21 did not result in any change to the financial statements of the Partnership. Future Changes in Accounting Policies Financial instruments IFRS 9 Financial Instruments ( IFRS 9 )(July 2014) replaces earlier versions of IFRS 9 that had not yet been adopted by the Partnership and supersedes IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 introduces new models for classification and measurement of financial instruments, hedge accounting and impairment of financial assets and is mandatorily effective for periods beginning on or after January 1, The Partnership continues to review the standard as it is updated and monitor its impact on the Partnership s financial statements

13 Revenue IFRS 15 Revenue from Contracts with Customers ( IFRS 15 ) was issued in May 2014 by the IASB and supersedes IAS 18 Revenue, IAS 11 Construction Contracts and other interpretive guidance associated with revenue recognition. IFRS 15 provides a single model to determine how and when an entity should recognize revenue, as well as requiring entities to provide more informative, relevant disclosures in respect of its revenue recognition criteria. IFRS 15 is to be applied retrospectively or through the recognition of the cumulative effect to opening retained earnings and is effective for annual periods beginning on or after January 1, 2017, with earlier application permitted. The Partnership is currently evaluating the impact that IFRS 15 may have on the financial statements. 5. LAND Land represents the Partnership s original 100% ownership of the Properties which were acquired on June 15, 2010, plus any costs necessary to bring the Properties to the condition intended by the Partnership. The land was reduced by the costs associated with the acres of Alliston Property which was sold on October 12, 2012 and the acres of Ottawa Property which was sold on July 18, The acres of Ottawa property was sold to the City of Ottawa in order to construct a fourth leg of what is currently a three leg roundabout. The cost of the acres was 12,559 and the total proceeds were 12,530, resulting in a 29 loss on disposal. The remaining amount in land represents the acres of Ottawa Property and the land improvement costs associated with it. The carrying amount of land is comprised of the following: BALANCE BEGINNING OF YEAR 15,066,849 14,992,521 Land improvements 154,820 86,887 Land sale - Ottawa Property - (12,559) BALANCE END OF YEAR 15,221,669 15,066,849 The current fair value is based on conditions existing at the balance sheet date. Overall, the valuation is considered to fall into level 3 of the fair value hierarchy because of unobservable adjustments reflecting the condition and location of the Partnership s land. In applying this valuation method, the fair value of the remaining Ottawa Property as at 2014 was estimated to be approximately 25,450,000 ( ,450,000). In determining the fair value of our investment properties, judgment is required in assessing the highest and best use as required under IFRS 13, Fair Value measurement

14 The property is currently zoned for and is used as agricultural land which is not considered to be its highest and best use. The highest and best use of the property is considered to be property containing residential or commercial buildings. However, it should be noted that the property is not currently zoned for this use. The current fair value is considered to be what a willing market participant would be willing to pay for the property in its current condition as at The current fair value considers that if the property were to be sold at 2014 to a market participant, such participant would take into account the potential use of the property as non-agricultural land and the risks associated with obtaining the appropriate permits and zoning for that use. The General Partner is responsible for determining the measurements used to determine fair value as well as reviewing all major inputs and assumptions included in the valuation and reviewing the results of the independent valuator. The General Partner, along with the audit committee, discusses the valuation process and key inputs on a quarterly basis. Assumptions underlying these estimates are limited by the availability of reliable comparable data. By nature, these estimates are subjective and do not necessarily result in precise determinations. Should the underlying assumptions change, the estimated proceeds from the ultimate sale may change by a material amount and may result in a write-down of the carrying amount of the land. As at 2014 and 2013, the fair value of land exceeded its carrying value, and, as a result, an impairment has not been recognized in the carrying value of the land. The total rental income earned by the Partnership on the Ottawa Property during the year ended 2014, was 13,000 ( ,000) and has been included in other revenue. During the year ended 2014, nil ( ,732) was earned from entering into an agreement to allow temporary access to a portion of the Ottawa Property and has been included in other revenue. 6. RELATED PARTY TRAN SACTIONS WIGI, Walton Development and Management LP ( WDM ), and Walton Ontario Land 1 Corporation are related to the Partnership by virtue of the fact that they are controlled by Walton Global. Walton Alliston Development L.P. is related by virtue of the fact that its general partner is controlled by Walton Global. See notes 3, 5, 8, 10, 11 and 12 for additional disclosures relating to certain related parties and other related party transactions

15 Included in accounts payable and accrued liabilities are the following amounts which were payable to related parties. These amounts are unsecured, due on demand, bear no interest and have no fixed terms of repayment Walton International Group Inc Walton Development and Management LP 5, , Walton International Group Inc. In accordance with the Management Services and Fee Agreement between the Partnership and WIGI, the Partnership is required to pay WIGI: i) An annual management fee for providing ongoing management and administrative services to the Partnership. The annual management fee of 665,880 (calculated as 2% of 33,294,000, being the net proceeds raised by the Partnership), is payable by the partnership and is due quarterly until all of the properties are disposed; ii) A performance fee equal to 25% of the priority return of 8% divided by 0.75, plus 25% of the balance remaining after the priority return and the above portion of the performance fee. The priority return is calculated on the partners investment amount from the closing date of the Partnership s unit offering, on contributed capital that has not been paid to the limited partners in respect of all dispositions. The performance fee will still be payable to WIGI should the Partnership remove WIGI as manager under the Management Services and Fee Agreement. No performance fee was incurred during the years ended 2014 and 2013; and iii) A disposition fee equal to 1.5% of the gross proceeds received by the Partnership when the Partnership sells all or any part of its interest in the Properties. The disposition fee will still be payable to WIGI should the Partnership remove WIGI as manager under the Management Services and Fee Agreement. No disposition fee was incurred during years ended 2014 and

16 Funding Agreement The Partnership and WIGI entered into a funding agreement on February 25, In accordance with the funding agreement, the Partnership established a refundable expense reserve (note 7) that was equal to multiplied by the Partnership s gross proceeds received. WIGI will pay, for and on behalf of the Partnership, or fund to the Partnership, to a maximum of 5% of the Partnership s gross proceeds (the Maximum Financing Obligation ) any expenses incurred by the Partnership in respect of concept planning and any Partnership administrative expenses that are in excess of the then current balance of the refundable expense reserve, as such reserve may be replenished from time to time in the sole discretion of the directors of the General Partner. The Partnership and WIGI agree that WIGI may pay the amounts of the Partnership excess expenses that WIGI determines hereunder either from its own funds or help the Partnership to arrange financing for such amounts and the Partnership shall be obligated to agree to such financing. WIGI may, in its sole discretion, pay for Partnership expenses in excess of the Maximum Financing Obligation. The loan will bear interest at an annual interest rate equal to the prime rate, and if WIGI is no longer manager of the Properties, the loan shall bear interest at an annual rate equal to Prime plus 5%. The Partnership shall not be entitled to borrow funds from a third party without obtaining the prior written consent of WIGI, if WIGI at such time holds an undivided interest in any of the Properties or if WIGI has advanced any amounts under the funding agreement. Any loan, in accordance with the funding agreement, is secured by a debenture recorded against the title to the Ottawa Property in the amount of 6,000,000. That debenture would be discharged upon settlement of all amounts owed to WIGI under the funding agreement which, as at 2014, was nil ( nil). Walton Development and Management LP In accordance with the Concept Planning Services Agreement between the Partnership, WIGI and WDM, the fees and costs for services provided in relation to concept planning on the Properties are divided into the following two categories: i) the services conducted internally by WDM ( Services Fees ), which will be provided at a rate of 25 per acre per year; and ii) the services, with respect to the Properties, coordinated and managed by WDM ( Managed Services ) where outside consultants are engaged by WDM to undertake work in relation to concept planning. The Partnership will be responsible to pay from the Refundable Expense Reserve the fees, expenses and cost of the outside consultants engaged by WDM. In addition, WDM will be entitled to receive a fee in an amount equal to 10% of the fees of the outside consultants engaged by WDM in relation to such Managed Services. During the year ended 2014, 134,256 ( ,196) was provided to WDM, in order to pay third party invoices received by WDM related to the services entered into in accordance with the concept planning services agreement. These amounts have been capitalized as part of land (note 5)

17 During the year ended 2014, 7,497 ( ,497) was charged by WDM for Services Fees. These amounts have been capitalized as part of land (note 5). During the year ended 2014, 13,067 ( ,194) was charged by WDM for Managed Services of the Ottawa Property. These amounts were calculated as 10% of the Managed Services of the Ottawa Property during the period, and have been capitalized as part of land (note 5). Key Management Compensation Key management personnel are comprised of the Partnership s directors and executive officers. The total compensation expense incurred by the Partnership relating to its independent directors was as follows: For the years ended Directors fees 82,360 83,613 All services performed for the Partnership by its executive officers and its non-independent director are governed by the Management and Services Fee Agreement. The annual management fee that WIGI receives under the Management and Services Fee Agreement has been disclosed above. The compensation of key management does not include the remuneration paid to individuals who are paid directly by Walton Global and WIGI. The Officers of the Partnership are also Officers and Directors of numerous entities controlled or managed by Walton Global and it is not practicable to make a reasonable apportionment of their compensation in respect of each of those entities. 7. REFUNDABLE EXPENSE RESERVE The operations of the Partnership are funded by the refundable expense reserve of 6,408,165 that was initially set aside out of the net proceeds from the IPO and Private Placement (note 12). The refundable expense reserve, which is presented as cash in the statements of financial position, will be used to pay the annual management fee, the Partnership s ongoing administrative and operating expenses (including the servicing fee, disclosure costs, accounting, audit and legal expenses, investor communication costs and directors fees), and for any concept planning expenses incurred with respect to the Properties. Any funds set aside for the refundable expense reserve which have not been used by the time the Partnership is terminated and dissolved will be included in the amounts distributed to the limited partners

18 Included in the table below is a reconciliation of the movement in the refundable expense reserve on a cash basis. This differs from the statements of cash flow, which have been prepared on an accrual basis, using the indirect method REFUNDABLE EXPENSE RESERVE BEGINNING OF YEAR 2,554,867 3,398,200 Add income received (cash basis): GST recovered - 113,645 Other revenue 13,000 46,732 Interest 24,870 36,305 Retained cash from land sales (note 5) - 12,530 37, ,212 Less expenses paid (cash basis): Management fees 665, ,880 Servicing fees 166, ,546 Directors fees 102,845 83,613 Land improvements 149,027 79,227 Property taxes 12,281 10,922 Office and other expense 26,846 23,686 Professional fees 22,598 17,671 GST 8,727-1,154,674 1,052,545 REFUNDABLE EXPENSE RESERVE END OF YEAR 1,438,063 2,554,

19 8. FINANCIAL INSTRUMENTS The Partnership s financial instruments consist of accounts receivable, cash and accounts payable and accrued liabilities. The following tables set out the Partnership s classification and carrying amount of the financial instruments along with the fair value as at 2014 and Fair values approximate the carrying amounts due to the short term nature of these instruments. DECEMBER 31, 2014 Fair Value Amortized Cost Totals Asset (liability): Through profit and loss Loans and receivables Other financial liabilities Carrying amount Fair Value Accounts receivable - 1,593-1,593 1,593 Cash - 1,438,063-1,438,063 1,438,063 Accounts payable and accrued liabilities - - (82,013) (82,013) (82,013) - 1,439,656 (82,013) (1,357,643) (1,357,643) DECEMBER 31, 2013 Fair Value Amortized Cost Totals Asset (liability): Through profit and loss Loans and receivables Other financial liabilities Carrying amount Fair Value Accounts receivable - 2,554-2,554 2,554 Cash - 2,554,867-2,554,867 2,554,867 Accounts payable and accrued liabilities - - (74,557) (74,557) (74,557) - 2,557,421 (74,557) 2,482,864 2,482,

20 Risk - Overview The Partnership s financial instruments and the nature of the risks to which they may be subject are as set out in the following table. RISK CREDIT LIQUIDITY INTEREST RATE CURRENCY Accounts receivable X Cash X X Accounts payable and accrued liabilities X i) Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Credit risk arises from accounts receivable and cash held with banks and financial institutions. The maximum exposure to credit risk is equal to the carrying value of these financial instruments. Accounts receivable - The balance of accounts receivable as at 2014 and 2013 were outstanding less than 90 days and were collected subsequent to year end. Exposure to credit risk relating to these receivables is not considered to be significant. ii) Liquidity risk Liquidity risk arises from the possibility that the Partnership will encounter difficulties in meeting its financial obligations as they become due. The Partnership manages its liquidity risk by continuously monitoring the adequacy of its capital resources (note 12) and by managing cash receipts and payments

21 The future undiscounted obligations of the Partnership as at 2014 are as follows: Maturity Analysis of liabilities - As at 2014 Less than 90 days Between 91 days and 1 year Greater than 1 year Accounts payable and accrued liabilities () 50,227 31,786 - iii) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market interest rates. The financial instrument of the Partnership which gave rise to interest rate risk is as follows: Cash - Changes in market interest rates will cause fluctuations in the future interest earned on cash balances. Any resulting impact on the Partnership s financial results would not be considered significant. iv) Currency risk The Partnership does not engage in foreign currency denominated transactions. As a result, it has no exposure to currency risk

22 9. PARTNERS CAPITAL Authorized: 1 general partner unit Unlimited number of ordinary limited partnership units Outstanding: Number of units Amount Number of units Amount General partner unit Limited partnership units 1,961,840 35,800,000 1,961,840 35,800,000 Issuance costs - (2,506,000) - (2,506,000) 1,961,841 33,294,050 1,961,841 33,294,050 Per Unit Amount Basic and diluted net loss per unit is calculated by dividing the Partnership s net loss by the weighted average number of limited partnership units outstanding during the year. The weighted average number of limited partnership units outstanding for the years ended 2014, and 2013, were adjusted to reflect the consolidation of 1,618,160 units on November 15, The weighted average number of limited partnership units outstanding as at 2014, was 1,961,840 ( ,961,840). The weighted average number of limited partnership units outstanding excludes the general partner unit issued. Based on the terms of the Limited Partnership Agreement, the holder of the general partner unit does not share equally in the income/loss of the Partnership but instead receives 0.001% of the net income/loss. The Partnership does not issue debt or equity instruments which could result in the issuance of additional Partnership units. As a result, the weighted average units outstanding are equal to the weighted average diluted units outstanding. Unit Issuance Price The Limited Partner units outstanding for the Partnership were issued at a price of 10/unit. The General Partner unit issued and outstanding for the Partnership was issued at a price of 50/unit

23 10. SERVICING FEES The Partnership has entered into Agency Agreements with various agents, whereby the Partnership will pay the agents, a servicing fee equal to 0.50%, or 166,470, annually of the net proceeds raised under the Initial Public Offering and Private Placement. The portion of the servicing fee relating to the Partnership s Private Placement is payable to WIGI, which is responsible for the distribution of the servicing fee to the agents in accordance with the Management Services and Fee Agreement. The servicing fee is calculated and paid semi-annually out of the Refundable Expense Reserve commencing on June 30, 2010, until the earlier of the dissolution of the Partnership and June 30, COMMITMENTS The following table presents future commitments of the Partnership under the Agency Agreements (note 10), Management Services and Fee Agreement (note 6), and the Concept Planning Services Agreement (note 6). It does not include any potential performance fee or disposition fee under the Management Services and Fee Agreement. The amount of any performance fee payable by the Partnership is determined at the time when distributions occur. The amount of the disposition fee is determined at the time land sales are completed. Servicing fee Management fee WDM Services Total , , , , ,880 7, , ,880 7, , ,880 7, ,377 Thereafter - 665,880 7, ,377 83,235 3,329,400 37,485 3,450, Commitments for WDM Services will extend for the length of the project. 2 While the Partnership has set aside adequate reserves in the refundable expense reserve for management fees until June 30, 2015, this fee will continue until the project is complete, any amount accrued after June 30, 2015 will not be payable until the final distribution

24 12. CAPITAL MANAGEMENT The Partnership has the following sources of capital to finance its operations: i) Of the gross proceeds raised under the IPO and the Private Placement, approximately 17.9% (6.4 million) was set aside by the Partnership in a refundable expense reserve. This reserve will be used to fund the annual management fee, the Partnership s ongoing administrative and operating expenses (including the servicing fee, disclosure costs, accounting, audit and legal expenses, investor communications costs and directors fees), and for any concept planning costs incurred with respect to the Properties over the next three years. The balance of the refundable expense reserve at 2014, was 1,438,063 ( ,554,867). ii) The Partnership has also entered into a Funding Agreement (note 6) with WIGI, pursuant to which WIGI will fund as a loan, to a maximum of 1,790,000, (being 5% of the gross proceeds raised by the Partnership in connection with the issuance of units), the ongoing administrative and operational costs of the Partnership, other than the servicing fee. This loan shall bear interest at an annual interest rate equal to Prime. No balances have been advanced on this facility in 2014 or Management regularly reviews the levels of its cash reserves to determine if sufficient cash is available to fund the operating costs, concept planning costs, and management expenses that the Partnership expects to incur over the next twelve months. As at 2014, no funds have been advanced under the terms of the Partnership s Funding Agreement