Island Corridor Foundation Financial Statements December 31, 2024

Island Corridor Foundation

December 31, 2024

Contents

Independent Practitioner’s Review Engagement Report

To the Members of the Island Corridor Foundation

We have reviewed the accompanying financial statements of Island Corridor Foundation that comprise the statement of financial position as at December 31, 2024, and the statements of operations, changes in net assets and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian accounting standards for not-for-profit organizations, 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

Practitioner’s responsibility

Our responsibility is to express a conclusion on the accompanying financial statements based on our review. We conducted our review in accordance with Canadian generally accepted standards for review engagements, which require us to comply with relevant ethical requirements.

A review of financial statements in accordance with Canadian generally accepted standards for review engagements is a limited assurance engagement. The practitioner performs procedures, primarily consisting of making inquiries of management and others within the entity, as appropriate, and applying analytical procedures, and evaluates the evidence obtained.

The procedures performed in a review are substantially less in extent than, and vary in nature from, those performed in an audit conducted in accordance with Canadian generally accepted auditing standards. Accordingly, we do not express an audit opinion on these financial statements.

Basis for qualified conclusion

The Foundation’s tangible capital assets include $12,330,591 of track which is no longer in use and for which $2,016,355 of amortization expense has been recorded for the year ended December 31, 2024. Conditions indicate that the track assets may be impaired, requiring that the net carrying amount of tangible capital assets be written down to the assets’ fair value or replacement cost. Management has not prepared an analysis of this impairment which constitutes a departure from ASNPO. We were unable to evaluate the impact of the possible impairment and related amortization adjustments on tangible capital assets as at December 31, 2024, net assets as at January 1, 2024 and December 31, 2024, amortization expense, impairment and deficiency of revenue over expenses for the year ended December 31, 2024 as management has not prepared the required estimates. Consequently, we were unable to perform the procedures we considered necessary.

Material uncertainty related to going concern

Without modifying our conclusion, we draw attention to Note 2 in the financial statements, which indicates that the Foundation incurred a net loss of $2,780,767 during the year ended December 31, 2024, and uncertainty exists with respect to the Foundation's ability to obtain future funding to meet one of its' mandates of continuing to develop railway assets. These conditions, along with other matters as set forth in Note 2, indicate the existence of a material uncertainty that may cast significant doubt about the Foundation’s ability to continue as a going concern.

Restated comparative information

We draw attention to Note 3 of the financial statements, which explains that certain comparative information for the year ended December 31, 2023, has been restated. The financial statements of Island Corridor Foundation for the year ended December 31, 2023 (prior to the restatement of comparative information described in Note 3 to the financial statements) were reviewed by another practitioner who expressed a qualified conclusion on those financial statements on May 28, 2024. Our conclusion is not modified in respect of this matter.

Nanaimo, Canada June 4, 2025 Chartered Professional Accountants

Statement of Financial Position

As at December 31

On behalf of the board 2025-06-03 | 18:28:51 EDT Director 2025-06-04 | 09:14:02 PDT Director

Statement of Operations

Year Ended December 31

Statement of Changes in Net Assets

Year Ended December 31

Statement of Cash Flows

Year Ended December 31

Notes to the Financial Statements

December 31, 2024

1. Nature of operations

Island Corridor Foundation ("the Foundation") was incorporated under the laws of the Government of Canada on January 1, 2004, and was continued under the Canada Not-for-Profit Corporations Act. As a registered charity, the Foundation is exempt from the payment of income tax under Section 149(1) of the Income Tax Act and able to issue donation receipts for income tax purposes. In order to maintain the status of a charitable organization under the Act, the Foundation must meet certain requirements within the Act, which, in the opinion of the management, have been met.

The Foundation's primary purposes are to preserve the use of the corridor in perpetuity for the connection and the benefit for all Island communities and First Nations along the corridor; to preserve historical landmarks; to create trails, parks and other public areas; to preserve and develop the assets on the Island Corridor and to contribute to rail services along the rail corridor. The members of the Foundation are twelve First Nations and five Regional Districts. They assumed ownership of the 289-kilometre rail corridor in 2006 on behalf of communities of Vancouver Island.

2. Going concern

These financial statements have been prepared in accordance with Canadian accounting standards for not-for-profit organizations which contemplate the continuation of the Foundation as a going concern including the realization of assets and the settlement of liabilities in the ordinary course of operations. However, certain conditions may cast significant doubt on the validity of this assumption.

The ability of the Foundation to meet one of its mandates of continuing to develop the railway assets located on the Island Corridor including certain tracks and bridges is dependent on the Foundation’s ability to retain the commitment of a railway provider and to obtain grant funding to repair the bridges and tracks.

The Foundation has a Strategic Priorities & Operation Plan which outlines the Foundation’s Key Focus Areas including multi-infrastructure plan for Rail. The Foundation remains optimistic regarding long-term upgrades and, in conjunction with Southern Railway of Vancouver Island (SVI), have identified and costed a series of Phase 1 rail infrastructure options that may be pursued.

The Foundation continues to maintain its infrastructure and pursue new property lease agreements and park developments as it awaits further funding deliberations by the BC government.

The Foundation has incurred a net loss of $2,864,491 (2023 - $4,799,679) which includes amortization of $3,488,002 (2023 - $3,488,102) for the year ended December 31, 2024.

As further described in Note 14, the Foundation is involved in 8 lawsuits due to the condition and impairment of the Island Rail Corridor infrastructure from ties and track to grade crossings and bridges. The possible outcome of these lawsuits is not determinable at year end, management has assessed that insurance coverage is available for all but two of the lawsuits. No provision has been made in the financial statements for these claims.

These financial statements do not reflect the adjustments to the carrying amounts of reported assets and liabilities, revenues and expenses and balance sheet classifications which might be necessary should the going concern assumption not be appropriate. Such adjustments could be material.

3. Restatement of prior years figures

During the period it was determined that certain adjustments were required to the December 31, 2023 comparative figures due to the return of land to the Snaw-Naw-As First Nation which was not previously reflected in the financial statements.

As a result of the correction, the following financial statement items as at and for the year ended December 31, 2023 have been increased (decreased) as follows:

4. Summary of significant accounting policies

Basis of presentation The financial statements were prepared in accordance with Canadian accounting standards for not-for-profit organizations (“ASNPO”) and include the following significant accounting policies:

Fund accounting The Foundation uses the restricted fund method of accounting for contributions and maintains two funds - Operating Fund and Capital Fund.

The Operating Fund accounts for assets, liabilities, revenues and expenses related to the Foundation's program delivery in the preservation of the corridor and its administrative activities.

The Capital Fund reports the assets, liabilities, revenues and expenses related to Island Corridor Foundation's tangible capital assets, including acquisitions and disposals and debt commitments.

Revenue recognition Grant revenue is recognized over the period that the service is performed, as specified by the grantor. If not specified in a grant agreement, the funds are recorded as revenue in the period received or receivable if collection is reasonably assured

Interest revenue is recognized when earned. Revenue from crossing departments and lease agreements is recognized over the term of the agreement.

Restricted contributions with a corresponding restricted fund are recognized as revenue of the appropriate restricted fund in the year received. Restricted contributions for which no corresponding restricted fund is presented are recorded in the Operating Fund and recognized as revenue in the year the related expenses are incurred.

Unrestricted donations are recognized as revenue in the Operating Fund in the year received or receivable if collection can be reasonably assured.

Rental income under a lease is recognized in revenue on a straight-line basis over the term of the lease. Any difference between revenue recognized and the total rents receivable under the lease is included in accounts receivable and deferred revenue as straight-line rent receivable.

File opening fees for crossing agreements are recorded when an agreement is in place and their collectability is reasonably assured.

Project management revenue is recognized as services are rendered. Amounts received from customers in advance of services being rendered are classified as customer deposits.

Contributed services and materials Contributions of services and materials are recognized both as contributions and expenses in the statement of operations when a fair value can be reasonably estimated and when the services and materials are used in the normal course of the Foundation's operations and would otherwise have been purchased.

Financial Instruments The Foundation considers any contract creating a financial asset, liability or equity instrument as a financial instrument, except in certain limited circumstances. The Foundation accounts for the following as financial instruments:

• Cash and cash equivalents
• Accounts receivable
• Accounts payable and accrued liabilities
• Callable debt
• Long-term debt
• Loan receivable
• Accrued interest payable

Financial instruments in arm's length transactions Initial measurement The Foundation initially measures financial assets and financial liabilities originating, acquired, issued or assumed in arm’s length transactions at fair value.

Subsequent measurement The Foundation subsequently measures all its financial assets and financial liabilities at cost or amortized cost less any reduction for impairment.

Derecognition The Foundation removes financial liabilities, or a portion of, when the obligation is discharged, cancelled or expires.

Impairment Financial assets measured at cost or amortized cost are tested for impairment when indicators of impairment exist at the end of the reporting period. Previously recognized impairment losses are reversed to the extent of the improvement provided the financial asset is not carried at an amount, at the date of the reversal, greater than the amount that would have been the carrying amount had no impairment loss been recognized previously. The amounts of any write-downs or reversals are recognized in net income.

Financial instruments in related party transactions Initial measurement Financial assets and financial liabilities in related party transactions are initially measured at cost, with the exception of the following instruments which are initially measured at fair value: investments in equity instruments that are quoted in an active market, debt instruments that are quoted in an active market, debt instruments when the inputs significant to the determination of the fair value of the instrument are observable, and derivative contracts.

Gains or losses arising on initial measurement differences are generally recognized in net income when the transaction is in the normal course of operations, and in equity when the transaction is not in the normal course of operations, subject to certain exceptions.

Subsequent measurement Financial assets and financial liabilities recognized in related party transactions are subsequently measured based on how the Organization initially measured the instrument. Financial instruments initially measured at cost are subsequently measured at cost, less any impairment for financial assets. Financial instruments initially measured at fair value are subsequently measured at amortized cost, except for the following instruments which are subsequently measured at fair value: investments in equity instruments that are quoted in an active market, most derivative contracts, and certain debt instruments which the Organization may irrevocably elect to measure at fair value. Changes in fair value are recognized in net income.

Use of estimates Management reviews the carrying amounts of items in the financial statements at each reporting date to assess the need for revision or any possibility of impairment. Many items in the preparation of these financial statements require management’s best estimate. Management determines these estimates based on assumptions that reflect the most probable set of economic conditions and planned courses of action.

These estimates are reviewed periodically, and adjustments are made to net income as appropriate in the year they become known.

Items subject to significant management estimates include collectability of accounts receivable, the useful life of tangible capital assets, amounts of accrued liabilities and provision for contingencies.

Tangible capital assets Tangible capital assets are initially measured at cost and subsequently measured at cost less accumulated amortization. Amortization is provided on a straight-line basis over the estimated useful life of the asset.

The following rates applied using the straight-line method will apply over the estimated useful lives of tangible capital assets:

Impairment of long-lived assets The Foundation tests long-lived assets for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. An impairment loss is recognized when the carrying amount of the asset exceeds the sum of the undiscounted cash flow resulting from its use and eventual disposition. The impairment loss is measured as the amount by which the carrying amount of the long-lived asset exceeds its fair value.

Cash and cash equivalents Cash and cash equivalents include cash on hand, demand deposits, deposits held on call with banks, and other short-term highly liquid investments which are readily convertible to known amounts of cash. The Foundation considers securities with original maturities of three months or less to be readily convertible to known amounts of cash.

5. Cash and cash equivalents

Cash and cash equivalents consist of:

The term deposits earned interest at 2.75%-3.15% (2023 – 4.75%), and mature in May and October, of 2025.

6. Loan receivable

7. Deferred leasing costs

Deferred leasing costs include commissions paid to Pemberton Homes Ltd for acquiring a tenant for the Nanaimo Train Station. The amount is amortized over the life of the related lease, the balance as at December 31, 2024, was $4,753 (2023 - $6,983).

8. Tangible capital assets

9. Long term debt

On October 1, 2018, the Foundation signed an Operations Agreement with the first extension term commencing on October 13, 2023, and expiring on September 30, 2024, and up to 4 additional one-year terms. Under the terms of the agreement, SVI will pay a license fee to the Foundation of $2,000 per month and the Foundation will pay monthly loan payments of $2,000 to SVI. As long as the Foundation pays the monthly payments. SVI has agreed to grant a waiver of interest on the remaining principal amount of the loan. Included in the interest payable is $62,710 (2023 - $62,710) related to long term debt.

10. Callable debt

Principal repayments terms are approximate, assuming the loan continues under the same terms, are as follows :

Included in accrued interest payable is $3,036 (2023 - $4,072) relating to callable debt.

11. Donations and grants

12. Financial instruments

Transactions in financial instruments may result in an entity assuming or transferring to another party one or more of the financial risks described below. The required disclosures provide information that assists users of financial statements in assessing the extent of risk related to financial instruments.

a) 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. The Foundation’s main credit risks relate to its accounts receivable and loan receivable. The entity provides credit to its clients in the normal course of its operations. There was no significant change in exposure from the prior year.

b) Liquidity risk Liquidity risk arises from the possibility that the Foundation might encounter difficulty in settling its debts or in meeting its obligations related to financial liabilities. The Foundation is exposed to this risk in respect to its receipt of funds from its customers and other related resources, callable debt, long-term debt, and accounts payable and accrued liabilities. Cash flows from operations provide sufficient cash flows for operating.

c) Interest rate risk Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in the market interest rate.

(i) To the extent that prevailing market interest rates differ from the interest rate on the Foundation’s monetary assets and liabilities.

(ii) To the extent that payments made or received on the Foundation’s monetary assets and liabilities are affected by changes in prevailing market interest rates.

The Foundation is exposed to interest rate risk on its term deposits, rate variable callable debt and long term debt. The term deposits are ordinary guaranteed investment certificates (“GIC”) which are non-transferable which mitigates interest rate risk. Management does not believe that the Foundation is exposed to significant interest rate risk on callable debt and long-term debt.

13. Economic dependence

The continuing operation of the Foundation is dependent upon the continued support of the Canadian Pacific Railway. The amount received is based on an agreement regarding payments from Telus to the Canadian Pacific Railway and then donated to the Foundation regarding land use for Fibre Optic Cable and represents one of the Foundation’s primary sources of revenue. The annual donation received was $403,778 (2023 - $386,607).

14. Contingencies

The Foundation is involved in lawsuits due to the condition and impairment of the Island Rail Corridor infrastructure from ties and track to grade crossings and bridges. At the end of the year the Foundation is aware of seven lawsuits where they are named as the defendant and one lawsuit in which they are the plaintiff. These lawsuits relate to various matters associated with land reversion, reclamation of land previously returned and damage to the Foundation’s property. Of these lawsuits two would not be covered by insurance if successful. The possible outcomes or any settlements are not determinable at year-end. No provision has been made in the financial statements for these claims. Included in legal expenses is $87,839 (2023 - $41,546) related to these claims.

15. Interfund transfers

During the year the Foundation transferred $nil (2023 - $21,101) from the operating fund to the capital fund.

16. Government remittances

Included in accounts payable and accrued liabilities are $14,199 (2023 - $9,092) of government remittances.

17. Deferred revenue

Included in the balance of deferred revenue as at December 31, 2024, was $45,183 (2023 - $473,543) from the Ministry of Transportation. The funds are to be used in subsequent years to pay for the maintenance and report of the Corridor. The remaining balance represents prepaid lease payments.

18. Comparative figures

Comparative figures have been adjusted to conform to changes in the current year presentation.