HABITAT FOR HUMANITY TORONTO INC.

Transcription

1 Financial Statements

2 AUDITORS' REPORT To the Members of the Board of Directors of Habitat for Humanity Toronto Inc. We have audited the balance sheet of Habitat for Humanity Toronto Inc. as at December 31, 2009 and the statements of changes in net assets, operations and cash flows for the year then ended. These financial statements are the responsibility of the organization's management. Our responsibility is to express an opinion on these financial statements based on our audit. Except as explained in the following paragraph, we conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In common with many charitable organizations, the organization derives revenues from donations and fundraising, the completeness of which is not susceptible to satisfactory audit verification. Accordingly, our verification of these revenues was limited to the amounts recorded in the records of the organization and we were not able to determine whether any adjustments might be necessary to donation and fundraising revenues, excess of revenue over expenses and net assets. In our opinion, except for the effects of adjustments, if any, that we might have determined to be necessary had we been able to satisfy ourselves concerning the completeness of the donation and fundraising revenues referred to in the preceding paragraph, these financial statements present fairly, in all material respects, the financial position of the organization as at December 31, 2009 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles. Licensed Public Accountants Chartered Accountants Toronto, Ontario April 12, 2010 except for Note 14 which is dated April 16,

3

4 STATEMENT OF CHANGES IN NET ASSETS Year ended December 31, Invested Invested in in Capital Housing (1) Assets (2) Unrestricted Total Total Balance, beginning of year $ 14,353,806 $ 1,948,334 $ 1,436,091 $ 17,738,231 $ 15,190,000 Excess of revenue over expenses (expenses over revenue) (2,556,796)(4) (72,825) (3) 3,595, ,182 2,548,231 Investment in capital assets - 346,932 (346,932) - - Investment in housing 4,541,884 - (4,541,884) - - Balance, end of year $ 16,338,894 $ 2,222,441 $ 143,078 $ 18,704,413 $ 17,738,231 See accompanying notes to financial statements (1) Invested in Housing Mortgages receivable (note 3) $ 5,271,799 $ 2,914,621 Properties held for resale (note 4) 12,541,158 13,869,185 Long-term liabilities related thereto (note 7) (360,000) (2,430,000) Property tax payable related to housing (352,966) - Restricted donations related to housing (761,097) - $ 16,338,894 $ 14,353,806 (2) Invested in Capital Assets Capital assets, net book value $ 2,222,441 $ 1,953,969 Long-term liabilities related thereto (note 7) - (5,635) $ 2,222,441 $ 1,948,334 (3) Capital Asset Amortization During the year, the Organization recorded amortization expense in the amount of $72,825 in the statement of operations. (4) Excess of Expenses over Revenue Interest income on mortgages (note 3(viii)) $ 214,034 $ 142,654 Excess of carrying value over proceeds received (excess of proceeds over carrying value) of properties held for resale (note 1) 13,882 (144,021) Costs of construction not to be recovered from partner families (note 9) (749,060) (585,940) Write-down of mortgages receivable to amortized cost (note 3(vi)) (2,035,652) (401,259) $ (2,556,796) $ (988,566) 3

5 STATEMENT OF OPERATIONS 2008 Revenue Donations and fundraising (note 9) $ 5,024,010 $ 4,499,678 Net contribution from ReStore (schedule I) 1,386,167 1,316,591 Miscellaneous 10, ,099 6,420,468 5,952,368 Expenses Administrative (schedule II) 461, ,434 Fundraising (schedule II) 886, ,820 Program (note 11) 1,549,550 1,271,317 2,897,490 2,415,571 Excess of revenue over expenses before the undernoted items 3,522,978 3,536,797 Interest income on mortgages (note 3(viii)) 214, ,654 Excess (deficiency) of carrying value of properties held for resale over proceeds received (note 1) 13,882 (144,021) Costs of construction not to be recovered from partner families (note 9) (749,060) (585,940) Write-down of mortgages receivable to amortized cost (note 3(vi)) (2,035,652) (401,259) Excess of revenue over expenses $ 966,182 $ 2,548,231 See accompanying notes to financial statements 4

6 STATEMENT OF CASH FLOWS 2008 Cash provided by (used in) Operations Excess of revenue over expenses $ 966,182 $ 2,548,231 Items not involving cash Amortization 72,825 49,081 Gifts in kind received during the year (709,713) (398,768) Gifts in kind recognized in revenue 92,995 - Excess of carrying value of properties held for resale over proceeds received (excess of proceeds over carrying value) (13,882) 144,021 Second mortgage revenue recognized 40,411 - Costs of construction not to be recovered from partner families 749, ,940 Write-down of mortgages receivable to amortized cost 2,035, ,259 Property investigation costs 28,483 - Interest income on mortgages receivable (214,034) (142,654) Recognition of donations received in prior years (34,795) (257,691) 3,013,184 2,929,419 Net change in non-cash operating working capital Cash held in trust 68,357 8,454 Receivables (75,817) 272,991 GST recoverable 37,175 (45,542) Prepaid expenses 39, ,251 Accounts payable and accrued liabilities 617,301 66,446 3,699,854 4,392,583 Investing Mortgage payments received 354, ,298 Expenditures on projects (2,938,246) (5,833,804) Short-term investments 893, ,564 Unallocated gifts in kind 93,668 (73,565) Mortgage prepayments received in advance of title transfer 165, ,173 Mortgage receivable restructuring - (39,044) Purchase of capital assets (341,297) (1,823,738) Donations received in advance of expenditure 909,119 83,890 Condominium fees received 45,146 72,029 Condominium fees paid (113,503) (80,483) (932,353) (7,010,244) Financing Proceeds from long-term liabilities - 2,650,000 Repayments of long-term liabilities (2,435,635) (232,888) (2,435,635) 2,417,112 Net change in cash 331,866 (200,549) Cash, beginning of year 470, ,485 Cash, end of year $ 802,802 $ 470,936 See accompanying notes to financial statements 5

7 INTRODUCTION Habitat for Humanity Toronto Inc. (the "Organization" or "Habitat") was incorporated without share capital by letters patent, dated July 5, 1990, under the Ontario Corporations Act as Metropolitan Toronto Habitat for Humanity Inc. Effective June 6, 2005, the Organization amended its name through Articles of Amendment filed with the Ontario Ministry of Consumer and Business Services to Habitat for Humanity Toronto Inc. The primary objective of Habitat is to work within Toronto, Ontario in advancing the interest of the economically disadvantaged by constructing or renovating homes at cost for the working poor and providing interest-free loans to enable them to pay for such homes or renovations. The prospective homeowner carries a non-interest bearing mortgage on the home. In certain circumstances the homes are occupied prior to the transfer of title. Effective January 1, 1993 the Organization received status as a registered charitable organization under the Income Tax Act and as such is exempt from income taxes provided certain disbursement requirements are met. Habitat is an affiliate of Habitat for Humanity Canada ("HFHC"). There is a covenant agreement between HFHC and all Canadian affiliates. This agreement sets the general operating principles for every autonomous affiliate. Currently, HFHC provides affiliates across the country with administrative and marketing support, training opportunities and gift in kind coordination. 1. SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of financial statements in conformity with Canadian generally accepted accounting principles for not-for-profit entities requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates are used when accounting for items and matters such as fair value of mortgages receivable, value of donated goods, amortization and recoverability of mortgages. Actual results could differ from these estimates. Management believes that the estimates utilized in preparing its financial statements are reasonable and prudent. Financial Instruments All financial instruments are classified into one of the following five categories: held for trading assets or liabilities, held to maturity investments, loans and receivables, available for sale financial assets or other financial liabilities. Held for trading financial instruments are measured at fair value and all gains and losses are included in excess of revenue over expenses in the period in which they arise. Available for sale financial instruments are measured at fair value with revaluation gains and losses included in the statement of net assets until the instruments are derecognized or impaired. Loans and receivables, investments held to maturity and other financial liabilities are measured at amortized cost using the effective interest method. The homeowners carry a non-interest bearing mortgage on the home. However, due to the application of financial instruments, interest income on mortgages is recognized in the statement of operations over the life of the mortgage based on the prevailing interest rate in effect at the time of inception of the mortgage. 6

8 1. SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Financial Instruments (Cont'd) The Organization has made the following classifications: Cash Cash held in trust Short-term investments Receivables Mortgages receivable Bank loan Accounts payable and accrued liabilities Condominium fees payable Property tax payable Long-term liabilities Held for trading Held for trading Held for trading Loans and Receivables Loans and Receivables Other liabilities Other liabilities Other liabilities Other liabilities Other liabilities Transaction costs are expensed as incurred for financial instruments classified as held for trading. For other financial instruments, transaction costs are capitalized on initial recognition. The Organization accounts for regular purchases and sales of financial assets using trade date accounting. Capital Assets Capital assets are amortized on the diminishing balance method at the following rates per annum: Automotive - 30% Computer equipment - 30% Equipment - 20% Furniture - 20% Tools - 30% Leasehold improvements are amortized on a straight-line basis over the term of the lease to a maximum of five years. Assets under development are not amortized until they are available for use. Properties Held for Resale Properties held for resale, which include land, buildings and building materials, both purchased and donated, are recorded at the lower of cost and net realizable value. Net realizable value is defined as the estimated costs to be recovered from partner families upon the sale of the property. Excess of carrying value of properties held for resale over fair value received is expensed in the year in which title to the property is transferred to the partner families. Mortgage prepayments received in advance of the transfer of title are netted against the property held for resale. Gifts in kind which have been received for properties held for resale, but have not yet been allocated to a specific property are recorded at the fair value of the goods donated. Long-lived Assets Long-lived assets, which include capital assets and properties held for resale, are reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable. If the sum of undiscounted future cash flows expected from use and residual value is less than the carrying amount, the long-lived asset is considered impaired. An impairment loss is measured as the amount by which the carrying value of the long-lived asset exceeds its fair value. 7

9 1. SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Mortgages Receivable The Organization enters into purchase agreements with the new homeowners where the purchase price is equal to the appraised value of the home. The purchase price is satisfied by various non-interest bearing mortgages. The face value of the mortgages is determined at the time of the agreement based on the mortgage policies of the Organization in effect at that time. The mortgages are registered at the time of transfer of title of the properties. Repayment of some mortgages, or a portion thereof, is contingent upon the occurrence of certain events ("forgivable mortgages"). Until these events occur the fair value of the mortgages shall be determined to be $Nil. Any amount subsequently realized will be recognized as revenue in the period in which the amount to be received can be reasonably estimated and ultimate collection is reasonably assured. The non-forgivable portion of mortgages are non-interest bearing. However, due to the application of financial instruments, interest income on mortgages is recognized in the statement of operations over the life of the mortgage based on the prevailing interest rate in effect at the time of inception of the mortgage. In accordance with the financial instruments policy, mortgages are measured at amortized cost using the effective interest rate method. Revenue Recognition The Organization follows the deferral method of accounting for donations. Unrestricted donations are recognized as revenue when received. Restricted donations are recognized as revenue in the year in which the related expenses or expenditures for property held for resale and renovations in progress are incurred. The amount of any pledges to donate funds to the Organization is not included in revenues until the funds are received. Habitat operates three retail outlets known as the "ReStore". These retail outlets sell donated new and used building materials. ReStore revenue is recognized upon delivery of the goods to the customer. Donated Goods and Services Donated goods and services are recorded when a fair value can be reasonably estimated and they would otherwise be purchased if not donated. Donated goods that are received by the Organization from the HFHC gift in kind program are recorded at the fair value estimated by HFHC. The Organization is dependent on the policies and procedures in place at HFHC to determine the fair value. A substantial number of volunteers have made significant contributions of their time to the Organization's program and supporting services. The value of this contributed time is not reflected in these financial statements. Net Assets Net assets invested in housing is equal to the carrying value of the mortgages receivable, the properties held for resale less the long-term liabilities, property tax payable and restricted donations related thereto. Net assets invested in capital assets is equal to the carrying value of capital assets less the long-term liabilities related thereto. Unrestricted net assets represent the residual net assets which are neither invested in housing or capital assets. 8

10 1. SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Allocation of General Support Expenditures Administration expenditures are allocated amongst various other activities based upon the time and efforts of staff to support these activities. 2. CHANGE IN ACCOUNTING POLICIES CICA Handbook Section 4400 Effective January 1, 2009, the Organization adopted the guidelines of the Section 4400 series of accounting standards of the CICA Handbook applicable to Not-for-profit organizations ( NPO s ) Key amendments include the following: (i) (ii) (iii) (iv) (v) The elimination of the requirement to present net assets invested in capital assets to be a separate component of net assets; New disclosure requirements for net assets subject to internal restrictions; Application of EIC-123 (Reporting Revenue Gross as a Principal Versus Net as an Agent) to an NPO s revenue recognition policies. Introduction of Section 4470 (Disclosure of allocated expenses by not-for-profit organizations) which includes the requirement to disclose allocations of fundraising and general support expenditures; Elimination of special considerations for NPO s in the presentation of cash flow statements. The Organization considered eliminating the disclosures related to net assets invested in capital assets but has opted to continue with the current disclosures. The adoption of these amendments have had no material impact on the financial statements of the Organization other than additional disclosure in note 10. 9

11 3. MORTGAGES RECEIVABLE Mortgages Mortgages Mortgages Mortgages At Face At Amortized At Face At Amortized Value Cost Value Cost First mortgages receivable $ 9,208,569 $ 5,231,388 $ 5,070,184 $ 2,914,621 Deduct: Current portion 553, , , ,774 8,655,092 5,012,510 4,764,829 2,794,847 Second mortgages receivable, forgivable 9,380,737-6,120,012 - Second mortgages receivable, non-forgivable 341,164 40, $ 18,376,993 $ 5,052,921 $ 10,884,841 $ 2,794,847 The fair value of the first mortgages at year end is $5,646,250, based on current mortgage payments by the partner families and current interest rates in effect. i) The total mortgages receivable represent the aggregate of mortgages on 87 properties ( ). ii) iii) First mortgages bear no interest, are secured by a charge on the specific property and are receivable in monthly instalments with a twenty, twenty-five or thirty year term, at effective interest rates of 6.01% to 7.92% Forgivable second mortgages bear no interest and are secured by a charge on the specific property. Receipt is contingent upon the occurrence of certain events and may be forgiven at the rate of 25% at an interim period and the remaining 75% at the end of the mortgage term which is the same as the term of the first mortgage. Provisions for the payment of the forgivable portion of the mortgages receivable have been established by an agreement between house recipients and Habitat to ensure that the house recipients do not profit by selling a Habitat home shortly after taking residence. The provisions in place ensure that the profits that result from volunteer labour go directly to the charity and not to the house recipient. The forgivable portion of the second mortgages is not shown on the balance sheet as the likelihood of collection is remote considering the above options. At December 31, 2009, forgivable second mortgages with a face value of $9,380,737 ( $6,120,012) are outstanding. In the unlikely event that the forgivable portions are required to be paid, the non-forgivable portion will be recognized as revenue in the period in which the amount to be received can be reasonably estimated and ultimate collection is reasonably assured. iv) During the year, title to 38 ( ) homes was transferred to the selected partner families, and accordingly, first mortgages with a face value totaling $4,489,989 ( $1,499,657) have been added to mortgages receivable and properties held for resale have been reduced by $4,489,989 ( $1,499,657). Forgivable second mortgages relating to 36 of these homes, with a face value of $3,260,724 ( $1,427,610) have also been registered in the year and have been recorded at $Nil. Non-forgivable second mortgages on two homes, with a face value of $341,165 ( $Nil) have been registered in the year and have been recorded at their amortized cost of $40,

12 3. MORTGAGES RECEIVABLE (Cont'd) v) Included in mortgages receivable is an amount relating to a home renovation loan. Habitat has entered into a 25-year lending agreement with a partner family, with terms similar to those provided on the mortgages. vi) The fair value of the new mortgages entered into in 2009, at the time of transfer was $2,834,787 resulting in a write-down of $1,590,726. The write-down of existing mortgages to fair value based on current payment terms was $444,926. vii) Repayments of first mortgages are expected as follows (at face value): Year Amount 2010 $ 553, , , , ,477 Thereafter 6,441,184 $ 9,208,569 viii) The homeowners carry a non-interest bearing mortgage on the home. However, due to the application of financial instruments, interest income on mortgages is recognized in the statement of operations over the life of the mortgage based on the prevailing interest rate in effect at the time of inception of the mortgage. 4. PROPERTIES HELD FOR RESALE Mortgage Cost Prepayment Net Net 150 Pinery Trail $ - $ - $ - $ 3,692, Kingston Road 4,073, ,852 3,877,721 3,823, Elsinore Path 203,375 2, , , Elsinore Path 124,082 1, , , & 738 Kingston Road 1,883,188 4,345 1,878,843 1,813, Kingston Road 2,301,003-2,301,003 2,204, Weston Road 1,828,107-1,828,107 1,184,700 5 & 7 Pilkington Drive ,007 Hainford Street 1,636,660-1,636, , & 61 Giltspur Drive 656, ,394 - Unallocated gifts in kind 13,497-13, ,165 Other 25,744-25,744 95,533 $ 12,745,623 $ 204,465 $ 12,541,158 $ 13,869,185 The properties held for resale represent the various stages of development costs of 106 homes. Some of these homes are complete and families are currently occupying the premises. The sale of these homes will be recognized when title to these homes has been transferred to the selected partner family (the purchaser). Title transfer can occur at varied times depending on the type of ownership of the home (freehold ownership versus condominium). 11

13 5. CAPITAL ASSETS Accumulated Cost Amortization Net Net Automotive $ 162,039 $ 118,405 $ 43,634 $ 62,335 Computer equipment 234, ,682 91,358 72,515 Equipment under capital lease 120,024 41,248 78,776 56,993 Furniture 9,427 2,681 6,746 3,864 Tools 66,003 43,979 22,024 5,498 Leasehold improvements 72,709 65,203 7,506 11,584 Project under development 1,972,397-1,972,397 1,741,180 $ 2,636,639 $ 414,198 $ 2,222,441 $ 1,953,969 During the year, the Organization recorded amortization expense in the amount of $72,825 ( $49,081) in the statement of operations and $Nil ( $12,450) as an expenditure relating to properties held for resale. Amounts included in the project under development represent land costs at 155 Bermondsey Road. This property will be the future site of the Organization's head office, a Habitat ReStore, home building factory, and premises that the Organization will lease to a third party. Expected completion of the new building is fiscal BANKING FACILITIES i) The Organization has access to a credit facility consisting of a demand operating loan, bearing interest at bank prime rate plus 0.75% per annum, and letter of credit/letter of guarantee to a combined maximum of $310,000. The effective interest rate was 3.0% at December 31, The credit facility is secured by a general security agreement over all assets other than real property. As of December 31, 2009 the Organization has letters of guarantee outstanding in the amount of $56,288 ( $160,000). ii) The Organization also has available a revolving demand credit facility in the amount of $200,000. The facility bears interest at the prime rate and is secured by a general security agreement. The effective interest rate was 2.25% at December 31, LONG-TERM LIABILITIES Interest-free promissory note, repayable on demand $ - $ 1,150,000 Prime plus 0.5% vendor take-back mortgage, matured April 1, 2009, secured by property at Kingston Road - 1,280,000 Interest-free term loan, repayable in monthly instalments of $543, matured June 30, 2009, secured by a vehicle - 3, % obligation under capital lease, matured June 23, 2009, secured by equipment - 2, % vendor take-back mortgage, maturing February 20, 2012, secured by property at 59 & 61 Giltspur Road (note 14) 360, ,000 2,435,635 Current portion 360,000 2,435, $ - $ -

14 8. DEFERRED REVENUE Deferred revenue consists of the following: Total second mortgages receivable, beginning of year $ - $ 39,900 New second mortgages, at cost 3,601,889 1,427,610 Transferred to first mortgages (note 3) - (39,900) Adjustment for new mortgages at amortized cost (note 3) (3,601,889) (1,427,610) Total second mortgages receivable - - Deferred revenue relating to second mortgages receivable - - Donations deferred until expended in accordance with the donor's restriction 958,214 83,890 $ 958,214 $ 83, DONATED GOODS AND SERVICES In accordance with the accounting policy whereby Habitat records only donated goods and services when a fair value can be reasonably estimated and they would otherwise be purchased, Habitat recognizes the value of these goods when sold or used in the construction of a property held for resale. During the year, Habitat recorded the following amounts: Gifts in Kind Habitat for Humanity Canada $ 273,015 $ 153,401 Other sources 436, ,367 $ 709,713 $ 398,768 In addition to donations recorded in these financial statements, Habitat received donations and issued receipts for goods totalling $1,669,415 ( $1,712,278) during the year. The majority of these donations represented materials which are held at the ReStore locations. In addition, Habitat received donations of goods held at the ReStore locations, the value of which was not determinable and thus Habitat did not issue donation receipts. Habitat's practice is to recover the costs of construction plus the value of the land from partner families. As such, any donated goods and services relating to the construction of the homes are not included in the final selling price of the home. Donated goods and services not recovered from partner families are recorded in costs of construction not to be recovered from partner families in the statement of operations in the year the donation is received. 13

15 10. ALLOCATION OF GENERAL SUPPORT EXPENDITURES During the year, salary and benefits expense of $419,703 ( $413,552) of total salaries and benefits expense of $1,972,160 ( $1,593,798) was allocated amongst various activities as follows: Administrative $ 104,842 $ 206,050 Program 80,546 79,884 Fundraising 234, ,618 $ 419,703 $ 413, PROGRAM EXPENSES The program expenses are of an operational nature and do not include costs of $2,938,246 ( $5,833,804) incurred during the year that were directly attributable to the construction of homes to be sold to partner families. Costs directly attributable to the construction of homes are included in properties held for resale. Program expenses Affiliation fees (note 13) $ 90,908 $ 187,570 Affiliate programs 85,000 70,000 Amortization 57,032 32,411 Communications 50, ,396 Family services 14,132 33,064 Other 195, ,236 Professional fees 62,033 63,613 Salaries and benefits 627, ,032 Tithe 28,962 3,790 Volunteer expense 83,624 68,565 Warehousing costs 138, ,640 Warranty 115,599 - $ 1,549,550 $ 1,271, CAPITAL MANAGEMENT The Organization s objectives when managing capital defined as working capital (current assets less current liabilities) are to maintain financial strength and manage liquidity requirements while constructing or renovating homes for the working poor. The Organization is subject to financial covenants on their operating loan agreement. If these covenants are breached or in the event of default, the lender may demand repayment of the loan. As at December 31, 2009 the Organization is not in breach of its covenants. The Organization manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. The Organization s objective is met by retaining adequate net assets to provide for the possibility that cash flows from revenues will not be sufficient to meet future cash flow requirements. 14

16 13. COMMITMENTS Habitat for Humanity Canada Pursuant to its affiliate covenant with Habitat for Humanity Canada, the Organization contributes a tithe for international work in the amount of 10% of its donations, excluding donations designated by a donor for local building. The Organization also pays an affiliation fee consisting of $2,500 fixed partnership contribution, 10% on all nationally procured gifts in kind used for homebuilding, $2,000 per home built by the Organization paid within 90 days of the issuance of a building permit, and a percentage of the gross ReStore sales, paid quarterly. Habitat for Humanity Canada distributes excess of nationally procured revenues less operating expenses back to the affiliates based on the number of homes built in the year. Rental Commitments The Organization is committed to the following annual payments for premises for the next five years: 2010 $ 161, , , , ,765 $ 471,729 In addition, the Organization is committed to the payment of property taxes on its premises. Construction Commitment On January 16, 2009, the Organization entered into a contract with Maple Reinders Constructors Ltd. to construct a building at 155 Bermondsey Road for a total amount of $3,515,000. This property will be the future site of the Organization's head office, a Habitat ReStore, home building factory, and premises that the Organization will lease to a third party. Construction commenced on this property in March SUBSEQUENT EVENTS On March 19, 2010, the Organization closed the purchase of 357 Birchmount Road for $1,073,000. The property will be used for a future building site to accommodate 10 partner families. The Organization paid a deposit of $100,000 and secured a vendor take-back mortgage for $973,000. On August 21, 2009, the Organization entered into an agreement that included a vendor take-back mortgage for $360,000 on the purchase of the property for 59 & 61 Giltspur Drive. The vendor take-back mortgage is to be forgiven once the families have moved in and the mortgages have closed. The mortgages for these two homes closed on January 29th, 2010 and February 2nd, 2010 respectively. The vendor take-back mortgage was forgiven at these dates as both conditions have been satisfied. On April 16, 2010, the Organization met certain criteria to secure a construction loan of up to $4,000,000 due on demand bearing interest at prime plus 0.50% per annum and letter of credit/guarantee of up to $300,000 bearing interest at 0.50% per annum payable in advance (minimum $200) that was arranged in July, The letters of credit/guarantee are due on demand. Upon repayment of the construction loan, the residual letters of guarantee are to be 100% secured in a formally restrained investment vehicle. These credit facilities are secured by first charge on the Bermondsey building and a general security agreement. 15

17 15. FINANCIAL INSTRUMENTS The carrying value of cash, cash held in trust, short-term investments, receivables, bank loan, accounts payable, property tax payable and accrued liabilities and condominium fees payable approximates fair value due to the relatively short-term maturity of these financial instruments. The fair values of the long-term liabilities are not materially different from their carrying values. The mortgages receivable are carried at amortized cost. Fair value of the mortgages receivable is disclosed in note 3. Foreign Currency Risk The Organization has cash denominated in US dollars. The carrying value of cash may change due to fluctuations in foreign exchange rates. Credit Risk The Organization is exposed to credit risk in the event of non-payment of mortgages receivable from their partner families. The Organization believes that this credit risk is minimal due to a first charge held on the related properties. Interest Rate Risk The Organization is exposed to fluctuations in interest rates as the banking facilities bear interest at variable rates. The mortgages receivable do not bear interest rate risk, as the effective interest rate is fixed at the inception of the mortgage. 16. COMPARATIVE FIGURES Certain comparative figures have been reclassified to conform with the current year's presentation. Excess of revenue over expenses previously reported has not been affected by this reclassification. 16

18 SCHEDULE OF ReSTORE OPERATIONS - SCHEDULE I 2008 Revenue $ 2,264,457 $ 2,150,049 Expenses Amortization 8,680 11,499 Bank charges and interest 4,270 3,339 Credit card charges 27,994 29,054 Insurance 11,905 23,967 Other 40,585 52,506 Printing and communications 11,004 2,997 Rent 227, ,924 Supplies 11,277 8,371 Telephone - 6,621 Truck expense and rental 48,076 51,144 Wages and benefits 486, , , ,458 Excess of revenue over expenses $ 1,386,167 $ 1,316,591 HABITAT FOR HUMANITY TORONTO INC. SCHEDULE OF ADMINISTRATIVE AND FUNDRAISING EXPENSES - SCHEDULE II 2008 Administrative expenses Affiliation fees (note 13) $ 24,166 $ 49,860 Amortization 7,113 5,171 Insurance 3,622 6,140 Office and general 32,651 32,714 Postage 2,238 4,019 Printing 1,714 1,389 Professional fees 35,296 35,155 Rent 80,977 75,231 Salaries and benefits 266, ,766 Telephone 6,347 10,989 Bank charges and interest Miscellaneous $ 461,286 $ 569,434 Fundraising expenses Faith relations $ 15,975 $ 19,572 Individual and foundations 83,030 61,126 Promotion 196,022 75,158 Salaries and benefits 591, ,964 See accompanying notes to financial statements $ 886,654 $ 574,820 17