MUSKOKA STANDARD CONDOMINIUM CORPORATION NO. 66

MUSKOKA STANDARD CONDOMINIUM CORPORATION NO. 66 NON- CONSOLDIATED FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR'S REPORT NOVEMBER 30, 2012

November 30, 2012 Contents Page Independent Auditor's Report 1 Non-consolidated Financial Statements Non-consolidated Statement of Financial Position 2 Non-consolidated Statement of General Operations and Fund Balance 3 Non-consolidated Statement of Reserve Operations and Fund Balance 4 Non-consolidated Statement of Cash Flows 5 Notes to Non-Consolidated Financial Statements 6-11 Schedule of General Fund Expenses 12-14

DAURIO & FRANKLIN LLP CHARTERED ACCOUNTANTS 220 DUNCAN MILL ROAD, SUITE 513, TORONTO, ONTARIO, M3B 3J5 TEL:(416) 444-3906, FAX: (416) 447-9798 To the Unit Owners of Muskoka Standard Condominium Corporation No. 66 INDEPENDENT AUDITOR'S REPORT We have audited the accompanying non-consolidated financial statements of Muskoka Standard Condominium Corporation No. 66, which comprise the non-consolidated statement of financial position as at November 30, 2012 and the nonconsolidated statements of general operations and fund balance, reserve operations and fund balance 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 non-consolidated financial statements in accordance with Canadian Accounting Standards for Not-For-Profit Organizations and for such internal control as management determines is necessary to enable the preparation of non-consolidated 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 non-consolidated 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 non-consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the non-consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the non-consolidated 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 nonconsolidated 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 non-consolidated 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 non-consolidated financial statements present fairly, in all material respects, the financial position of Muskoka Standard Condominium Corporation No. 66, and its subsidiary, as at November 30, 2012, and the results of its operations and its cash flows for the year then ended in accordance with Canadian Accounting Standards for Not-For-Profit Organizations. Chartered Accountants, Licensed Public Accountants June 7, 2013 Toronto, Ontario 1.

ASSETS Muskoka Standard Condominium Corporation No. 66 Non-Consolidated Statement of Financial Position As at November 30, 2012 Note General Reserve 2012 2011 Current Cash $ 1,356 $ 184,422 $ 185,778 $ 204,920 Common Element Fees Receivable 64,487-64,487 182,692 Sundry Receivables 2,637-2,637 8,687 Special Assessment Receivable - - - 141,668 Interfund Balance (1,059) 1,059 - - Prepaid Expenses 27,874-27,874 27,874 95,295 185,481 280,776 565,841 Reserve Fund Investments [3] - 202,487 202,487 - Total Assets 95,295 387,968 483,263 565,841 LIABILITIES Accounts Payable and Accrued Liabilities 136,271-136,271 194,191 Government Remittances Payable (735) - (735) 30,413 Investment In and Advances to NumCo [5] 21,698-21,698 81,938 Total Liabilities 157,234-157,234 306,542 NET ASSETS $ (61,939) $ 387,968 $ 326,029 $ 259,299 Net Assets Represented By: General Fund $ (61,939) $ - $ (61,939) $ (24,514) Reserve Fund [2.a] [6] - 387,968 387,968 283,813 $ (61,939) $ 387,968 $ 326,029 $ 259,299 The accompanying notes are an integral part of these financial statements. 2.

Muskoka Standard Condominium Corporation No. 66 Non-Consolidated Statement of General Operations and Fund Balance For the year ended November 30, 2012 Budget 2012 [Note: 7] 2012 2011 Revenue Common element fees $ 1,167,110 $ 1,167,110 $ 760,614 Transfer to reserve fund (200,000) (200,000) (168,348) Special assessment - - 376,004 Interest - 1 777 Sundry - 26,103 17,867 967,110 993,214 986,914 Expenses, Pages 12 to 14 Utilities 319,200 176,350 324,406 Contract Services 75,000 75,796 64,205 General and Administrative 411,009 493,603 300,552 Repairs and Maintenance 161,900 101,217 118,349 Equity in loss of NumCo [5] - 183,673 203,916 967,109 1,030,639 1,011,428 Excess of Expenses over Revenue 1 (37,425) (24,514) Balance, Beginning of the Year (24,514) - Balance, End of the Year $ (61,939) $ (24,514) The accompanying notes are an integral part of these financial statements. 3.

Muskoka Standard Condominium Corporation No. 66 Non-Consolidated Statement of Reserve Operations and Fund Balance For the year ended November 30, 2012 2012 2011 Revenue Allocation from common element fees $ 200,000 $ 168,348 Interest 2,404 9,902 202,404 178,250 Expenditures Plumbing 31,309 2,898 Electrical (8,670) 17,340 Lobby and hallway redecoration 8,186 - Windows and doors 26,155 - Tennis court 4,340 - Roofing 2,300 - Paving and catch basins 3,450 - Balcony repairs 5,961 - Fire and security equipment 7,439 - Consulting fees 15,079 - Contingency expenses 2,700-98,249 20,238 Excess of Revenue over Expenditures 104,155 158,012 Balance, Beginning of the Year 283,813 125,801 Balance, End of the Year $ 387,968 $ 283,813 The accompanying notes are an integral part of these financial statements. 4.

Muskoka Standard Condominium Corporation No. 66 Non-Consolidated Statement of Cash Flows For the year ended November 30, 2012 2012 2011 Cash Provided by Operating Activities Cash received for general operations $ 1,233,034 $ 748,544 Cash received for reserve operations 200,000 168,348 Interest received on reserve fund investments 2,402 9,901 Other reserve fund cash received 2 1 Other general fund cash received 26,100 18,643 Cash paid for general operations (1,125,446) (745,614) Cash paid for reserve fund expenses (111,321) (7,166) Net Cash Provided by Operating Activities 224,771 192,657 Cash Flows from Investing Activities Advances to NumCo, all divisions (243,913) (121,978) Net (Decrease) Increase in Cash (19,142) 70,679 Cash, Beginning of the Year 204,920 134,241 Cash, End of the Year $ 185,778 $ 204,920 Cash Consists of: Cash, General Fund $ 1,356 $ 19,107 Cash, Reserve Fund 184,422 185,813 $ 185,778 $ 204,920 The accompanying notes are an integral part of these financial statements. 5.

Notes to the Non-Consolidated Financial Statements November 30, 2012 1. Operations The corporation was registered without share capital on November 16, 2009 under The Condominium Act of Ontario. The purpose of the corporation is to manage and maintain the common elements (as defined in the corporation's declaration and by-laws) and to provide common services for the benefit of the owners of the 33 units of the complex. For Canadian income tax purposes the corporation qualifies as a not-for-profit organization which is exempt from income tax under the Income Tax Act. 2. Significant Accounting Policies These non-consolidated financial statements have been prepared in accordance with Canadian accounting standards for not-for-profit organizations and are in accordance with Canadian generally accepted accounting principles, which are applicable to Ontario Condominium Corporations. The significant policies are: a) Fund Accounting The general fund reports common element fees from owners, budgeted allocations of those fees to other funds and expenses related to the operations and administration of the common elements. The reserve fund reports the common element fees allocated to it and expenditures for major repair and replacement of the corporation's common elements and assets. The basis for determining the reserve fund's requirements is explained in Note 6. All major repairs and replacements of the common elements must be charged directly to this reserve fund with the exception of the cost of the reserve fund study which may be charged to the reserve fund. Minor repairs and replacements must be charged to repairs and maintenance of the general fund. The corporation segregates amounts accumulated for the purpose of financing future charges to the reserve fund in bank and investment accounts for use only to finance such charges. Interest earned on these amounts is included in the reserve fund. b) Common Elements The common elements of the corporation are owned proportionately by the unit owners, and consequently are not reflected as assets in these non-consolidated financial statements. c) Transfers Transfers between funds that are not included in the annual budget, or which are in excess of budgeted amounts, are not recorded in the operating section of the general fund, rather they are included in the related fund statement as additions or deductions, as applicable. 6.

Notes to the Non-Consolidated Financial Statements November 30, 2012 d) Investments Investments are purchased with the intent that they be held to maturity and accordingly are recorded at cost plus accrued interest, calculated using the effective rate method. e) Use of Estimates The preparation of financial statements in accordance with Canadian accounting standards for not-for-profit organizations requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from management's best estimates as additional information becomes available in the future. f) Investment in Wholly Owned Subsidiary The company follows the equity method in accounting for its investment in its wholly owned subsidiary, 2307179 Ontario Limited ("NumCo"). Under the equity method, the investment is initially recorded at cost and is increased (decreased) by the company's share of the net earnings (loss) since acquisition. The carrying value is reduced by any distributions received from the subsidiary. Separate financial statements for NumCo have been prepared. g) Revenue Recognition Common element fees are recognized as revenue on a monthly basis in the statement of general operations based on the budget distributed to owners each year. Special assessments are recognized as revenue in the appropriate fund when a formal resolution declaring the assessment has been passed by the Board of Directors, and when they become payable by the owners of the corporation. Interest and other revenue are recognized in the appropriate fund when earned. h) Contributed Services Directors, committee members and owners volunteer their time to assist in the corporation's activities. While their services benefit the corporation considerably, a reasonable estimate of their amount and fair value cannot be made and, accordingly, these contributed services are not recognized in these non-consolidated financial statements. 7.

Notes to the Non-Consolidated Financial Statements November 30, 2012 3. Investments Reserve fund and general fund investments are comprised of "eligible securities" which are defined in the Condominium Act, 1998 (the "Act"), as bonds, debentures, guaranteed investment certificates, deposit receipts or notes, or term deposits which are issued or guaranteed by the Government of Canada or any province in Canada, or are issued by an institution located in Ontario insured by the Canada Deposit Insurance Corporation. General fund investments have the additional feature that they must be convertible to cash within ninety days following a request by the board. All investments are purchased with the intent that they will be held to maturity, and therefore are classified as long term, except for any general fund investments, which are classified as current due to their convertibility feature. 4. Resort Operations On November 1, 2011 the corporation, Touchstone on Lake Muskoka Inc. ("TOLMI"), Touchstone Services Inc. ("TSI") and Laurentian Bank of Canada agreed to transfer management and responsibility for the operations of the Amenity Units and the Rental Pool, collectively ("Resort Operations") to the corporation. At the time management and responsibility transferred, losses had accumulated in the Resort Operations which TOLMI and TSI were unable to fund. As a result, although not legally responsible for any and all losses before November 1, 2011, to enable the continuation of the Resort Operations, the corporation assumed the accumulated losses prior to transfer of management and responsibility, and these accumulated losses are included in the operating results of the corporation's wholly owned subsidiary, 2307179 Ontario Limited ("NumCo"), and are therefore included in the operating results of the corporation in 2011. 8.

Notes to the Non-Consolidated Financial Statements November 30, 2012 5. Investment in and Advances to NumCo The corporation's investment in and advances to its wholly owned subsidiary NumCo, a profit oriented enterprise, is comprised as follows: 2012 2011 Advances to NumCo NumCo - Restaurant $ 150,817 $ 76,740 NumCo - Rental Pool 185,132 13,107 NumCo - Spa 29,942 32,131 Total Advances 365,891 121,978 Investment in NumCo NumCo - Restaurant (222,250) (122,040) NumCo - Rental Pool (89,334) (60,647) NumCo - Spa (76,005) (21,229) Total Investment in NumCo (387,589) (203,916) Total Investment in and Advances to NumCo $ (21,698) $ (81,938) Financial summary information for this unconsolidated entity as at November 30, 2012 and 2011, and for the years then ended are as follows: Balance Sheet 2012 2011 Total Assets $ 204,522 $ 59,989 Total Liabilities $ 592,111 $ 263,904 Total Shareholder's Equity (Deficiency) (387,589) (203,915) Results of Operations $ 204,522 $ 59,989 2012 2011 Total Revenues $ 1,286,555 $ 1,175,208 Total Expenses 1,470,228 1,379,127 Net Loss $ (183,673) $ (203,919) Cash Flows 2012 2011 Cash flows from (used in) operating activities $ (109,100) $ (84,290) Cash flows from (used in) investing activities - - Cash flows from (used in) financing activities 243,913 121,978 Unaudited financial statements of NumCo have been prepared. $ 134,813 $ 37,688 9.

Notes to the Non-Consolidated Financial Statements November 30, 2012 6. Reserve Fund The corporation, as required by the Condominium Act, 1998, has established a reserve fund for financing future major repairs and replacements of the corporation's common elements and assets. The directors have relied on a comprehensive reserve fund study prepared on December 3, 2010 by Criterium-Jansen Engineers and such other information as was available to them in evaluating the adequacy of the reserve fund. The directors have accepted the recommendations of the study. The actual reserve fund contributions during 2012 were $200,000 which is different than the reserve fund study which anticipated contributions of $172,555. The actual expenditures from the reserve fund were $98,249 compared to $6,120 estimated in the study. The closing reserve fund balance was $387,968 compared to $476,011 estimated in the study. Annual reserve allocations in the study increase by 2.50% each year. Any evaluation of the adequacy of the reserve fund is based upon assumptions as to the future interest and inflation rates and estimates of the life expectancy of the building components and their replacement costs. These factors are subject to change over time and the changes may be material; accordingly, the Condominium Act requires that reserve fund studies be updated every three years. 7. Budget The budgeted figures, which are presented for comparison purposes only, are unaudited and are those approved by the Board of Directors in 2011. 8. Contractual Obligations The corporation has entered into contracts with various third parties to provide certain services to manage and maintain the common elements. 9. Related Party Transactions No remuneration was paid to the Board of Directors during the year. Management is reimbursed for certain administrative costs and paid a monthly management fee by the corporation, and collects fees from owners, purchasers and others for issuing status certificates and lien notices. These transactions were in the normal course of operations and were measured at the exchange amount. NumCo paid the corporation common element fees of $80,781 during the year, and also paid the corporation $6,000 for utilities used by NumCo. These transactions were in the normal course of operations and were measured at the exchange amount. 10.

Notes to the Non-Consolidated Financial Statements November 30, 2012 10. Capital Risk Management The corporation defines capital as the sum of all fund balances. The corporation's objectives in managing its capital are to: Set common element fees at a level which ensures sufficient capital, avoids special assessments, and minimizes large increases or decreases in fees from year to year; Comply with all requirements of the Condominium Act concerning reserve fund contributions; and Comply with all requirements of the Condominium Act and with respect to the eligibility of investments used to hold the corporation's capital. Unless noted in the Independent Auditor's Report, the corporation has complied with all requirements of the Condominium Act with respect to funding and investing the reserve fund and other fund balances. 11. Financial Instruments The corporation s financial instruments generally consist of cash, investments, common elements fees receivable, and accounts payable and accrued liabilities. Unless otherwise noted, it is management's opinion that the corporation is not exposed to significant interest rate or credit risks arising from its financial instruments. 12. Comparative Figures Certain reclassifications of the prior year's amounts have been made to facilitate comparison with the current year's presentation. 11.

Schedule of General Fund Expenses For the year ended November 30, 2012 Budget 2012 [Note: 7] 2012 2011 Utilities Hydro $ 171,200 $ 97,060 $ 156,212 Propane 154,000 85,290 162,808 Water - - 11,386 Utilities recovery (6,000) (6,000) (6,000) $ 319,200 $ 176,350 $ 324,406 Contract Services Landscaping $ 16,000 $ 10,731 $ 15,290 Heating, ventilation and air conditioning 5,000 1,020 12,595 Elevators 1,800 2,065 2,199 Pest control 2,000 3,037 1,915 Fire safety - 11,614 7,920 Cable TV 14,030 11,152 13,249 Emergency generator 1,000 1,228 421 Recreation facilities - - 249 Room equipment and services 11,170 12,840 10,367 Water and sewage testing 24,000 22,109 - $ 75,000 $ 75,796 $ 64,205 12.

Schedule of General Fund Expenses For the year ended November 30, 2012 Budget 2012 [Note: 7] 2012 2011 General and Administrative Management fees $ 85,000 $ 85,000 $ 66,580 Telephone 23,260 24,031 66,352 Insurance 22,318 23,941 30,613 Consulting fees - - 6,720 Legal fees 10,000 51,011 12,098 Audit fees 6,000 6,000 5,333 Bank charges 4,000 5,415 1,508 Publicity and communications 5,000 1,884 27,273 General administration 19,800 22,351 19,892 Equipment leases - - 603 Staff salaries and benefits 229,321 255,720 328,253 Moose FM - - 16,034 Recovery of maintenance wages - rental pool - 1,400 (103,093) Property taxes 6,310 16,850 - Write off of potential unknown liabilities - - (79,213) Write off of amounts due to TSI - - (98,401) $ 411,009 $ 493,603 $ 300,552 13.

Schedule of General Fund Expenses For the year ended November 30, 2012 Budget 2012 [Note: 7] 2012 2011 Repairs and Maintenance Cleaning supplies $ 2,000 $ 1,119 $ 5,572 Landscaping, non-contract 17,000 1,590 (1,976) Purchase equipment - 4,260 - Plumbing 2,600 6,785 1,514 Lighting supplies 2,200 3,854 2,017 Fire safety, non-contract 2,500 1,104 8,060 Water filtration supplies 15,000 2,331 - Pool and hot tub 5,000 10,026 20,859 Windows and screens - - 416 Electrical 3,500 6,451 324 Waste disposal 6,000 4,262 3,874 Security hardware and supplies 1,500 27 118 Signs 2,500 1,229 407 General maintenance 35,100 19,253 9,909 Equipment maintenance 5,500 6,580 5,236 Vehicle 1,500 3,154 1,026 Linens and laundry 55,000 29,520 51,754 Guest supplies 5,000 (328) 9,239 $ 161,900 $ 101,217 $ 118,349 Equity in Operations of NumCo Share of loss NumCo - Restaurant $ - $ 100,210 $ 122,040 Share of loss NumCo - Rental pool - 28,687 60,647 Share of loss NumCo - Spa - 54,776 21,229 $ - $ 183,673 $ 203,916 14.