guelph city council as shareholder of...

GUELPH CITY COUNCIL AS SHAREHOLDER

OF GUELPH JUNCTION RAILWAY Ltd. AGENDA

of 2 CITY OF GUELPH CITY COUNCIL AGENDA

Council Chambers, Guelph City Hall, 1 Carden Street

DATE Monday, June 15, 2015 – 6:00 p.m. Please turn off or place on non-audible all cell phones, PDAs, Blackberrys and pagers during the meeting.

Disclosure of Pecuniary Interest and General Nature Thereof

Confirmation of Minutes – Council as Shareholder of Guelph Junction Railway

Ltd. April 13, 2015 open and closed meeting minutes

OPEN MEETING

CONSENT REPORTS – ITEMS TO BE EXTRACTED The following resolutions have been prepared to facilitate Council’s consideration of the various matters and are suggested for consideration. If Council wishes to

address a specific report in isolation of the Consent Reports/Agenda, please identify the item. The item will be extracted and dealt with separately. The balance of the

Consent Reports/Agenda will be approved in one resolution.

Consent Reports from:

Guelph Junction Railway

Item City Presentation

Delegations (maximum of 5 minutes)

To be

Extracted

GJR-2015.2 Annual Report

David Jennison, Chair, Guelph

Junction Railway

Board of Directors

�

GJR-2015.3 2014 Audited Financial

Statements and Auditors Report

Janice Sheehy, General Manager,

Finance/Treasurer

�

GJR-2015.4 Compliance Report

of 2 CITY OF GUELPH CITY COUNCIL AGENDA

Adoption of balance of Nominating Committee First Consent Report

CLOSED MEETING

GJR-C-2015.4 CLOSED – 2015 Appointment of Citizens to the Board of

Directors of Guelph Junction Railway Limited

(Municipal Act, 2001, S. 239 (2) (b) personal matters

about an identifiable individual, including municipal or local board employees.

GJR-C-2015.5 CLOSED – Report from the Nominating Committee – 2015

Appointment of Councillors to the Board of Directors of Guelph Junction Railway Limited

(Municipal Act, 2001, S. 239 (2) (b) personal matters about an identifiable individual, including municipal or local

board employees. GJR-C-2015.6 CLOSED – 2015 – 2017 Business Plan

(Municipal Act, 2001, S. 239 (2) (b) personal matters

about an identifiable individual, including municipal or local board employees.

SPECIAL RESOLUTIONS

ADJOURNMENT

Minutes of the Meeting of Council

Junction RailwayHeld in the Council

at 6:00 p

Attendance

Council: Mayor C. Guthrie

Councillor J. Gordon

Councillor P. AlltCouncillor B. Bell

Councillor C. DownerCouncillor D. Gibson

Regrets: Councillor M. Salisbury

Staff: Ms. A. Pappert, CMr. Al Horsman, Deputy CAO, Infrastructure, Development and Enterprise

Ms. D. Jaques, Ms. T. Agnello, Deputy City ClerkMr. D. McMahon

Others

Present: Mr. D. Jenison, Chair, GJR Board of Directors Open Meeting (6:00 p.m.)

Call to Order

Mayor Guthrie called the meeting to order


There were no disclosures.

Confirmation of Minutes

1. Moved by Councillor Piper

Seconded by Councillor

That the open meeting minutes of the

Railway Ltd. Shareholder meeting be confirmed as written and attached.

VOTING IN FAVOUR: Mayor Guthrie, Councillors MacKinnon, Gibson, Allt, Billings,

Downer, Bell, Wettstein, Piper,

VOTING AGAINST: (0)

Meeting of Council as Shareholder of the

Junction Railway Company Council Chambers, Guelph City Hall

p.m. on Monday, April 13, 2015

Guthrie Councillor M. MacKinnon Councillor J. Gordon Councillor K. Wettstein

P. Allt Councillor L. Piper ell Councillor A. Van Hellemond (arrived

Councillor C. Downer Councillor C. Billings Councillor D. Gibson

Councillor M. Salisbury Councillor J. Hofland

Pappert, Chief Administrative Officer Mr. Al Horsman, Deputy CAO, Infrastructure, Development and Enterprise

Ms. D. Jaques, General Manager of Legal and Realty Services/City Solicitor, Deputy City Clerk

McMahon, Council Committee Coordinator

Mr. D. Jenison, Chair, GJR Board of Directors

called the meeting to order.


Piper

Seconded by Councillor Bell

open meeting minutes of the February 18, 2015 Guelph Junction

Shareholder meeting be confirmed as written and attached.

Mayor Guthrie, Councillors MacKinnon, Gibson, Allt, Billings,

Piper, and Gordon (10)

the Guelph

Guelph City Hall,

(arrived 6:41 pm)

Mr. Al Horsman, Deputy CAO, Infrastructure, Development and Enterprise

Legal and Realty Services/City Solicitor

, 2015 Guelph Junction

Shareholder meeting be confirmed as written and attached.

Mayor Guthrie, Councillors MacKinnon, Gibson, Allt, Billings,

CARRIED

April 13, 2015 Guelph City Council as Shareholder of GJR Ltd. Meeting

2

Authority to Resolve into a Closed Meeting of Council

2. Moved by Councillor Allt Seconded by Councillor Bell

That the Council of the City of Guelph now hold a meeting that is closed to

the public, pursuant to Section 239 (2) (a) (b) and (f) of The Municipal Act, with respect to the security of the property of the municipality or local board, personal matters about an identifiable individual, including municipal or local

board employees, and advice that is subject to solicitor-client privilege, including communications necessary for that purpose.

CARRIED

Closed Meeting (6:03 pm)

The following items were discussed:

GJR-C-2015.1 2015 Appointment of Citizens to the Board of Directors of

Guelph Junction Railway Limited

GJR-C-2015.2 Report of the Nominating Committee - 2015 Appointment

of Councillors to the Board of Directors of Guelph Junction

Railway Limited

GJR-C-2015.3 Security of the Property

Rise and Report from Closed Meeting (6:42)

3. Moved by Councillor Bell Seconded by Councillor Allt

That Council rise from closed and report in open session.

CARRIED Open Meeting (6:43)

Special Resolutions

4. Moved by Councillor Mackinnon

Seconded by Councillor Allt

That the request by Guelph Junction Railway for a loan from the City of the

money required to repair the Eramosa railway bridge be referred to staff who shall provide a report and recommendation to Council through the Corporate Services Committee at its May 4, 2015 meeting.

VOTING IN FAVOUR: Mayor Guthrie, Councillors MacKinnon, Gibson, Allt, Billings,

Downer, Bell, Wettstein, Piper, Van Hellemond and Gordon (11)

VOTING AGAINST: (0)

CARRIED

April 13, 2015 Guelph City Council as Shareholder of GJR Ltd. Meeting

3

Adjournment (6:45 pm)

5. Moved by Councillor Allt Seconded by Councillor Billings

That the meeting be adjourned. CARRIED

Minutes to be confirmed on May 25, 2015.

__________________________

Mayor Guthrie

__________________________

Tina Agnello

Deputy City Clerk

CONSENT AGENDA

Council as Shareholder of Guelph Junction Railway

Monday, June 15, 2015

His Worship the Mayor and

Members of Guelph City Council.

SUMMARY OF REPORTS: The following resolutions have been prepared to facilitate Council’s consideration of the

various matters and are suggested for consideration. If Council wishes to address a specific report in isolation of the Consent Agenda, please identify the item. The item will be

extracted and dealt with immediately. The balance of the Consent Agenda will be approved in one resolution.

A REPORTS FROM ADMINISTRATIVE STAFF

REPORT DIRECTION

GJR-2015.2 Annual Report

That the GJR 2014 Annual Report be received.

Receive

GJR-2015.3 2014 Audited Financial Statements and

Auditor’s Report

That the GJR 2014 Audited Financial Statements and Auditor’s Report be received.

Receive

GJR-2015.4 Compliance Report That the 2014 GJR Compliance Report be received.

Receive

attach.

Guelph Junction Railway Company c/o City Hall, 1 Carden Street

Guelph, Ontario, Canada N1H 3A1 Tel: (519) 836-4848 Fax: (519) 837-5636

Section of Trans Canada Trail along Guelph Junction Railway right of way

June 15, 2015 Prepared By: Guelph Junction Railway

Guelph Junction Railway

Annual Shareholder Meeting



CONTENTS 1. Company Statement 2. Board of Directors and Corporate Officers 3. 2014 Summary and future challenges

a. Financial executive summary b. Budget performance and variance report c. 2014 Review d. Statement of material breach of shareholder declaration or violation of law

4. Goals and Performance Objectives 5. Guelph Junction Railway activities which support City strategic objectives 6. 2014 Audited Financial Statements



June 15, 2015 Mayor Cam Guthrie And Members of Council RE: Guelph Junction Railway Annual Shareholder Meeting A record number of rail cars moved and record revenue generated highlight the Guelph Junction Railway’s 2014 results. The railway continues to reinvest in track and bridge infrastructure to ensure continued growth and safe operations. The GJR operates in a conservative and prudent business manner which allows the Company to meet all of its financial obligations, Transport Canada Regulatory Requirements and customer needs while increasing shareholder equity. This was a transition year for the railway during which its long term General Manager, Tom Sagaskie, retired. Tom began work for the City of Guelph in 1973 and had spent the last 16 years as General Manager of the Guelph Junction railway. The railway changed greatly during his tenure. In the last ten years alone, freight revenue and capital assets increased by 50%. I speak on behalf of all members of the Board in thanking Tom for his many years of commitment to the success of the railway. The Board is pleased to welcome Les Petroczi as the new GM of the railway. Les joins the GJR with many years of railway experience and will be instrumental in our continued success. In summary the Board of the Guelph Junction Railway believes the railway is well positioned to satisfy existing and future customer requirements for rail transportation services in the City of Guelph. David Jennison Chair, Board of Directors Guelph Junction Railway



Board of Directors and Corporate Officers

Board of Directors

David Jennison Chairman

Stephen Host Vice Chairman

John Kelly Director

David Clarke Director

Ian Brown Director

Cam Guthrie Director (Mayor, City of Guelph)

Leanne Piper Director (retired, Nov. 2014)

Andy Van Hellemond Director (retired Nov. 2014)

Jim Furfaro Director (retired Nov. 2014)

The Guelph Junction Railway Board of Directors is a volunteer board who receives no

remuneration for the services they provide.

Corporate Officers

Donna Jaques Secretary (City Solicitor)

Tom Sagaskie General Manager (retired May, 2014)

Les Petroczi General Manager (April, 2014)



GUELPH JUNCTION RAILWAY 2014 YEAR END

FINANCIAL REPORT



2014 Summary and Future Challenges

Financial Executive Summary

2013 2014 Budget

Revenue $ 2,241,581 $ 2,397,165 $ 2,364,802

Expenses $ 2,013,205 $ 2,190,845 $ 2,089,108

Profit (Loss) $228,376 $206,320 $ 275,694

Budget Performance and Variance Report

Revenue Actual Budget Variance

Freight movement $2,013,397 $2,108,196 Non Freight/ Recoverable $ 383,768 $ 256,606 Total $2,397,165 $2,364,802 +1.4% Expenses (less interest, taxes, depreciation) Freight Movement and maintenance $1,575,960 $1,522,863 Adm./ Insur./ Audit etc. $ 259,939 $ 307,172 Third party recoverable. $ 55,175 $ 0 Subtotal $1,891,074 $1,830,035 +3.3% Net Earnings $506,091 $534,767 Less Interest/Taxes & Depreciation $299,771 $259,073 Total

Profit (Loss) $206,320 $275,694 -25%



2014 Review Railcar traffic in 2014 showed a 3.4% increase over 2013 totals with revenue increasing 6.9%. This was accomplished despite severe winter weather which hindered rail shipments. Expenses exceeded budget due to increased winter track maintenance costs, Eramosa bridge repairs and county property tax assessments. The Guelph Junction Railway continues to operate in a positive cash flow situation meeting all its financial obligations, Transport Canada Operating Standards and increasing shareholder equity. Environmental Benefit Indices The Guelph Junction Railway monitors its positive environmental effects as a performance indicator of its benefit to the community. Local industries, by utilizing rail transportation with its greater fuel efficiency, can create significant greenhouse gas reductions as well as other savings related to truck movements over roads. In 2014 the City’s industries consumed approximately 270,000 metric tonnes of material moved by the Guelph Junction Railway. This movement by rail significantly reduces greenhouse gas emissions when compared to overland trucking. Rail utilization avoids thousands of kilometres of highway trucking which saves the costs of maintenance and congestion on our highways and city roadways. The GJR and the Community Energy Initiative are investigating the potential of using the railway right of way to locate their energy conduits within the City of Guelph. Infrastructure The Guelph Junction Railway continues to invest and maintain its physical assets such as track, bridges and signals. This reinvestment continues not only to maintain but to increase the Shareholder Equity Value year over year. For every railway, the amount of yearly maintenance required is fairly constant, irrespective of traffic volumes occurring. This maintenance work is necessary for meeting Regulatory Requirements and Operating Standards. In 2014, the railway chose to begin a three year program to improve its Operating Standards for its track in order to increase operating efficiency for its trains. In 2014, the wooden trestle over the Eramosa River began to show increased signs of wear and potential for failure. Emergency repairs were undertaken and the bridge underwent a subsequent safety inspection. A plan has been developed for a major rebuild to occur in 2015/2016 which will enable the bridge to handle the increase in rail traffic that currently exists and enable the bridge to handle modern freight cars without any weight restrictions. The bridge will also be designed to allow for a continuation of the trail networks that exist on both sides of the Eramosa River.



Future Challenges On a positive, forward looking note, the railway’s customers continue to seek ways to grow their business and look to the GJR for support in their endeavours. The GJR is working to increase rail siding capacity with some customers who have the opportunity to increase their business. The railway often acts to bring clients needing rail service to existing customers who have the ability to service them. The railway will need to continue to capitalize on growth opportunities as they present themselves in order to remain profitable and sustainable in the long term. Vacant rail serviceable industrial lands within the City remain in short supply with demand greatly exceeding availability. This land shortage is being somewhat mitigated by promoting shared third party usage of existing trans-loading facilities, but these creative solutions are not always the answer. Some companies have specific building size and land requirements. It will continue to prove challenging for industries requiring rail access to find locations to locate in the City of Guelph. Statement of material breach of the Shareholders Declaration or violation of law: In accordance with Article 8, sec. (g) of the Shareholder Declaration, the Board of Directors of the Guelph Junction Railway advises Council that no material breach of the requirements of the Shareholder Declaration or violation of law has occurred.



Goals and Performance Objectives The Guelph Junction Railway’s Board of Directors has set the following goals and objectives to guide its governance: Objective Met (Red/Yellow/Green) 1. Railway operations, growth and business development shall be

undertaken so as to be supportive of and congruent with the City’s Strategic Objectives.

2. Business affairs shall be conducted in the best interests of the Community the railway serves.

3. Current infrastructure and asset value shall be maintained to ensure continuous service within regulatory requirements and to cater to continuously evolving industry standards. (Downgraded due to maintenance required on the Eramosa River Bridge)

4. Revenue base shall be grown by consistently seeking to increase current customer traffic and by seeking out new customers through existing and new service agreements.

5. New facilities and business opportunities shall be developed to

augment the asset value and annual traffic for the future.

6. The railway shall conduct its affairs as a good corporate citizen and neighbor.

The governance of the railway is monitored through the following performance measures: 1. Maintenance of safety and regulatory standards as measure by

positive results from regulatory audits and a zero tolerance for accidents;

2. Maintaining profitability; 3. Maintenance or growth of annual rail car traffic counts;

4. Maintenance or growth of the environmental benefits provided by the railroad (e.g. truck miles saved, Community Energy Initiative).

Green

Green

Green

Green

Green

Green

Yellow

Green

Green

Green



Guelph Junction Railway Activities which support City Strategic Objectives

• 1.2 Develop collaborative work teams and apply whole systems thinking to deliver creative solutions… As a city owned railway, GJR seeks opportunities to grow through partnerships with both mainline railways and new and existing customers to grow the city’s industrial base

• 1.3 Build robust systems, structures and frameworks aligned to strategy… Continued investment in track and bridge infrastructure to improve customer service and meet or exceed evolving government and industry standards

• 2.1 Build an adaptive environment for innovation to ensure fiscal and service sustainability… GJR works closely with existing customers to create new business opportunities on existing industrial sites

• 3.1 Ensure a well-designed, safe, inclusive, appealing and sustainable City… GJR is testing bio degradable vegetation control products as an alternative to traditional herbicides … GRJ and the Community Energy Initiative are examining the potential use of the railway right of way

• 3.2 Be economically viable, resilient, diverse and attractive for business… Safe operation and outstanding customer service positions the railway as a primary

industrial transportation method…

Financial statements of

Guelph Junction Railway Company

December 31, 2014

Guelph Junction Railway Company December 31, 2014

Table of contents

Independent Auditor's Report ............................................................................................................................ 1-2

Balance sheet ....................................................................................................................................................... 3

Statement of comprehensive income .................................................................................................................... 4

Statement of changes in equity ............................................................................................................................. 5

Statement of cash flows ........................................................................................................................................ 6

Notes to the financial statements ..................................................................................................................... 7-15

I

Independent Auditor's Report

To the Shareholder of Guelph Junction Railway Company

Deloitte LLP 4210 King Street East Kitchener ON N2P 2G5 Canada

Tel: 519-650-7600 Fax: 519-650-7601 www.deloitte.ca

We have audited the accompanying financial statements of Guelph Junction Railway Company which comprise the balance sheet as at December 31, 2014, and the statement of comprehensive income, statement of changes in equity and statement of 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 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 audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's 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 is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of Guelph Junction Railway Company as at December 31,2014, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Chartered Professional Accountants, Chartered Accountants Licensed Public Accountants April 22, 2015

Page 2

Guelph Junction Railway Company Balance sheet as at December 31, 2014

Assets Current assets

Cash Accounts receivable Prepaid expenses Inventory

Property, plant and equipment (Note 3)

Liabilities Current liabilities

Accounts payable and accrued liabilities Current portion of long-term debt Deferred revenue Due to City of Guelph (Note 7)

Long-term debt (Note 5) Deferred capital contributions (Note 4)

Shareholders' equity Share capital (Note 6) Retained earnings (Note 8)

2014 2013 $ $

137,043 402,308 271,437 288,658

350 29,576 34,384

438,056 725,700

8,273,510 8,154,140 8,711,566 8,879,840

136,350 208,323 230,808 221,181

992 44,540

367,158 475,036

822,253 1,053,061 862,509 898,447

2,051,920 2,426,544

1 6,659,645 6,453,295 6,659,646 6,453,296 8,711,566 8,879,840

The accompany notes to the financial statements are an integral part of this financial statement.

Page 3

Guelph Junction Railway Company Statement of comprehensive income year ended December 31, 2014

Revenue Freight movement Non-freight movement Amortization of deferred capital contributions Other

Expense Audit and legal Amortization Freight movement and track maintenance Administration and office Marketing and brand development Interest on long-term debt Recoverable expenses

Net comerehensive income for the ~ear

2014 2013 $ $

2,029,730 1,894,338 306,437 245,936

35,938 37,435 25,060 63,872

2,397,165 2,241,581

9,600 9,054 219,670 214,873

1,630,180 1,431,162 218,149 145,580

8,075 25,000 49,966 59,200 55,175 128,336

2,190,815 2,013,205

2061350 228,376

The accompany notes to the financial statements are an integral part of this financial statement. ,

Page 4

Guelph Junction Railway Company Statement of changes in equity year ended December 31, 2014

Retained earnings, beginning of year Net comprehensive income for the year Retained earnings, end of year Share capital, beginning and end of year Equity, end of year

2014 2013 $ $

6,453,295 206,350

6,659,645 1

6,659,646

6,224,919 228,376

6,453,295 1

6,453,296

The accompany notes to the financial statements are an integral part of this financial statement.

Page 5

Guelph Junction Railway Company Statement of cash flows year ended December 31, 2014

Operating activities Cash from operations

Net income from operations Items not affecting cash: Amortization of deferred capital contributions Amortization of property, plant and equipment

Changes in non-cash operating working capital components: Decrease in accounts receivable Decrease in prepaid expenses Decrease in inventory Decrease in accounts payable and accrued liabilities Decrease in deferred revenue

Investing activity Acquisition of property, plant and equipment

Financing activities Repayment of long-term debt Due to City of Guelph

Decrease in cash during the year Cash, beginning of year Cash, end of year

2014 $

206,350

(35,938) 219,670

17,221 350

4,808 (71,973)

(992) 339,496

(339,040)

(221,181) (44,540)

(265,721)

(265,265) 402,308 137,043

The accompany notes to the financial statements are an integral part of this financial statement. I

2013 $

228,376

(37,435) 214,873

75,070

923 (243,435)

238,372

(203,359)

(211,954) (50,000)

(261,954)

(226,941) 629,249 402,308

Page 6

Guelph Junction Railway Company Notes to the financial statements December 31, 2014

1. Description of business

Guelph Junction Railway Company (the "Company") was incorporated under the laws of Canada in 1884. The Company is wholly owned by The City of Guelph and is exempt from income taxes. The Company is engaged in the rail and related transportation business in Southwestern Ontario.

The Company's head office is located at 1 Carden Street, Guelph, Ontario and is a subsidiary of the City of Guelph.

The financial statements have been approved by the Board of Directors and authorized for issue on April 22,2015.

2. Significant accounting policies

Basis of accounting

The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Boards ("lASS"). The policies set out below were consistently applied to all the periods presented unless otherwise noted below.

The financial statements have been prepared on a historical cost basis. The financial statements are presented in Canadian dollars which is also the functional currency of the Company.

Revenue recognition

Revenue from services rendered is recognized in income in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed by reference to the delivery of the services provided by the Company.

Inventory

Inventory is valued at the lower of cost and net realizable value on a first-in, first-out basis.

Property, plant and equipment

Property, plant and equipment are recorded at cost, net of accumulated depreciation and accumulated impairment losses. Cost includes the acquisition cost, labour and other costs directly attributable to bringing the asset to a working condition for its intended use. When significant components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in earnings in the period the asset is derecognized.

Depreciation is provided using the declining-balance method at rates designed to amortize the cost of the assets less their residual values over their estimated useful lives as follows:

Tracks Structures Switches Crossing equipment

4% 4% 4% 4%

Work in progress is not depreciated until the equipment is put into active use.

Depreciation methods, useful lives and residual values are reviewed annually and adjusted prospectively if appropriate.

Page 7


2. Significant accounting policies (continued)

Impairment of long-lived assets

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cashgenerating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in earnings.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in earnings.

Financial instruments

Financial assets and financial liabilities

Financial assets and financial liabilities are initially recognized at fair value and are subsequently accounted for based on their classification as described below. Transaction costs that are directly attributable to the acquisition or issue of financial assets or liabilities not classified as fair value through profit and loss are added to or deducted from the fair value, as appropriate, on initial recognition. The classification depends on the purpose for which the financial instruments were acquired and their characteristics. Except in very limited circumstances, the classification is not changed subsequent to initial recognition.

All financial instruments are classified into one of the following five categories:

• Fair value through profit or loss ("FVTPL"). Financial assets are classified as FVTPL when the financial asset is held for trading or it is designated as FVTPL;

• Held to maturity investments; • Loans and receivables; • Available for sale financial assets; and • Other financial liabilities.

Loans and receivables, held to maturity investments and other financial liabilities are measured at amortized cost. Financial instruments classified as FVTPL, including derivatives, are measured at fair value each period and all gains and losses are included in earnings in the period in which they arise. Available for sale financial instruments are measured at fair value with revaluation gains and losses included in other comprehensive income until the asset is removed from the balance sheet. The Company has classified its cash and accounts receivable as loans and receivables.

Financial assets that are measured at amortized cost are assessed for indicators of impairment at the end of each reporting period.

Page 8



Financial instruments (continued)

Financial assets and financial liabilities (continued)

Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, the estimated future cash flows of the asset have been affected. The amount of the impairment loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. If in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss.

Accounts payable and accrued liabilities, due to City of Guelph, current and long-term debt have been classified as other financial liabilities, all of which are measured at amortized cost.

Embedded derivatives

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value through profit or loss.

Government grants and other contributions

Government grants are recognized in net income on a systematic basis over the periods in which the Company recognizes as expenses the related costs for which the grants were intended to compensate. Grants that take the form of a transfer of a non-monetary asset for the use of the Company are recognized as deferred contributions in the balance sheet and measured based on the fair value of the asset received. Deferred contributions are transferred to net income on a systematic and rational basis over the useful life of the related assets.

Significant accounting estimates and judgments

The preparation of financial statements requires management to make estimates, assumptions and judgments that affect the application of accounting policies and the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and reported revenues and expenses during the reporting period. Due to the inherent uncertainty involved in making such estimates and judgments, actual results reported could differ from those estimates and judgments. Significant judgments include the determination of cash-generating units for impairment testing and determination of useful lives of property, plant and equipment.

Recent accounting pronouncements

The new and revised IFRSs that have been issued but are not yet effective that may have an impact on the Company are set out below.

IFRS 9 issued in November 2009 introduced new requirements for the classification and measurement of financial assets. Under IFRS 9, financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. IFRS 9 was subsequently amended in October 2010 to include requirements for the classification and measurement of financial liabilities and derecognition, and in November 2013 to include the new requirements for general hedge accounting. Another revised version of IFRS 9 was issued in July 2014 mainly to include a) impairment requirements for financial assets and b) limited amendments to the classification and measurement requirements by introducing a 'fair value through other comprehensive income' (FVTOCI) measurement category for certain simple debt instruments. The Company intends to adopt IFRS 9 in its financial statements for the annual period beginning on January 1, 2018.The Company is assessing the impact of this new standard on its financial statements.

Page 9



IFRS 15 - Revenue from Contracts with Customers

The standard contains a single model that applies to contracts with customers and two approaches to recognizing revenue: at a point in time or over time. The model features a contract-based five step analysis of transactions to determine whether, how much and when revenue is recognized. New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue recognized. The Company intends to adopt IFRS 15 in its financial statements for the annual period beginning on January 1, 2017. The extent of the impact of adoption of the standard has not yet been determined.

3. Property, plant and equipment

Land Tracks Structures Switches Crossing equipment Work in progress

Tracks Structures Switches Crossing equipment

Opening cost

$

2,997,210 6,233,768

481,327 149,222 155,861

10,017,388

Opening balance

$

1,530,516 186,414 71,567 74,751

1,863,248

Additions $

334,810

4,230 339,040

Depreciation $

201,522 11,798 3,106 3,244

219,670

Disposals $

2014 Cost

Ending cost

$

2,997,210 6,568,578

481,327 149,222 155,861

4,230 10,356,428

2014 Accumulated amortization

Disposals $

Ending balance

$

1,732,038 198,212 74,673 77,995

2,082,918

Page 10


3. Property, plant and equipment (continued)

Land Tracks

Structures Switches

Crossing equipment Work in progress

Opening cost Additions

$ $

Land 2,997,210 Tracks 6,030,409 203,359 Structures 481,327 Switches 149,222 Crossin~ equipment 155,861

9,814,029 203,359

Opening

balance Depreciation

$ $

Tracks 1,334,547 195,969 Structures 174,126 12,288 Switches 68,331 3,236

Crossing equipment 71,371 3,380

1,648,375 214,873

2014 Net book value

Opening net Ending net

book value book value

$ $

2,997,210 2,997,210 4,703,252 4,836,540

294,913 283,115 77,655 74,549 81,110 77,866

4,230 8,154,140 8,273,510

2013 Cost

Ending

Dis~osals cost

$ $

2,997,210 6,233,768

481,327

149,222 155,861

10,017,388

2013 Accumulated amortization

Ending

Disposals balance

$ $

1,530,516 186,414

71,567

74,751 1,863,248

Page 11


3. Property, plant and equipment (continued)

Land Tracks Structures Switches Crossing equipment

4. Deferred capital contributions

Deferred contributions - gross Less: accumulated amortization

5. Long-term debt

2013 Net book value

Opening net Ending net book value book value

$ $

2,997,210 2,997,210 4,695,862 4,703,252

307,201 294,913 80,891 77,655 84,490 81,110

8,165,654 8,154,140

2014 2013 Net book Net book

value value $ $

1,217,582 1,217,582 (355,073} (319, 135l 862,509 898,447

In 2011 and 2012, the Company entered into three long-term debt facilities with the Royal Bank of Canada for the purpose of constructing two new rail yards within the limits of the City of Guelph. These projects were completed and put into use during 2012.

Fixed term loan, repayable monthly, blended principal and interest at 4.27%, maturing December 2016

Fixed term loan, repayable monthly, blended principal and interest at 4.34%, maturing June 2017

Fixed term loan, repayable monthly, blended principal and interest at 4.34%, maturing June 2017

Less: current portion of long-term debt Long-term debt

2014 $

470,133

487,568

95,360 (230,808) 822,253

2013 $

576,079

583,958

114,205 (221,181)

1,053,061

Page 12


5. Long-term debt (continued)

The debt is repayable as follows:

6.

7.

2015 2016 2017

$

230,808 485,185 337,068

1,053,061

The debt facilities are secured by a general security arrangement over all inventory, accounts receivable and property, plant and equipment.

The Company is compliant with the financial covenants related to these debt facilities.

Share capital

Authorized, unlimited number Common shares

Issued and outstanding 2014 2013

$ $

1 Common share 1

Related party transactions

The Company is wholly owned by The City of Guelph. The City pays certain expenses and receives revenues on behalf of the Company for which the Company reimburses the City. During the year, these net expenses for which the Company reimbursed the City amounted to $395,389 (2013 - $243,579). Included in accounts payable and accrued liabilities is an amount owing to the City of Guelph of $50,780 (2013 - $18,788) related to the reimbursement of these net expenditures which was paid subsequent to year end. Additional payments in 2014 totaling $44,540 (2013 - $50,000) were made to repay the amount owing to the City from prior years in accordance with the repayment schedule agreed upon with the City. The Company also paid the City $23,600 (2013 - $23,600) in office rent and administration fees for the year. These transactions were made in the normal course of business and have been recorded at the exchange amounts.

Members of the board of directors are unpaid.

The remuneration of key management personnel during the year was $147,296 (2013 - $105,251).

8. Capital management

The Company manages its capital to ensure that it has sufficient liquidity to protect the Company's longterm viability as a going concern.

The Company's total capital is defined as shareholders' equity. Shareholders' equity at December 31, 2014 is $6,659,646 (December 31, 2013 - $6,453,296). There have been no changes to the Company's approach on capital management.

The Company has certain restrictions to its capital as part of the debt facility agreements entered into in December 2011 and June 2012.

Page 13

Guelpb Junction Railway Company Notes to the financial statements December 31, 2014

9. Financial risk management

Financial assets and liabilities

The following table analyzes financial assets and liabilities by the categories defined in lAS 39. In addition, IFRS 7 requires that financial instruments held at fair value be categorized into one of the following three levels to reflect the degree to which observable inputs are used in determining the fair values:

• 'Level l' fair value measurements are those derived without adjustment from quoted prices in active markets for identical assets or liabilities.

• 'Level 2' fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• 'Level 3' fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The Company has no financial assets or financial liabilities held at fair value.

Fair value Liabilities through Total

Loans and Available at amortized profit carrying Fair receivables for sale cost or loss value

$ $ $ $ $

As at December 31,2014 Financial assets not held at fair value

Cash 137,043 137,043

Trade and other receivables 271,437 271,437

Total financial assets 408,480 408,480

Financial liabilities not held at fair value Trade and other payables 136,350 136,350

Current portion of long-term debt 230,808 230,808

Long-term debt 822,253 822,253

Total financial liabilities 1,189,411 1,189,411

The fair value of the City's long-term debt approximates its carrying value as the interest rate approximates market.

value $

137,043

271,437

408,480

136,350

230,808

822,253

1,189,411

Page 14


9. Financial risk management (continued)

Liabilities Fair value Total Loans and Available at amortized through carrying Fair receivables for sale cost profit or loss value value

$ $ $ $ $ $

As at December 31,2013 Financial assets not held at fair value

Cash 402,308 402,308 402,308

Trade and other receivables 288,658 288,658 288,658

Financial assets held at fair value Total financial assets 690,966 690,966 690,966

Financial liabilities not held at fair value Trade and other payables 208,323 208,323 208,323

Due to City of Guelph 44,540 44,540 44,540

Current portion of long-term debt 221,181 221,181 221,181

Long-term debt 1,053,061 1,053,061 1,053,061

Financial liabilities held at fair value Total financial liabilities 1,527,105 1,527,105 1,527,105

Interest rate risk

Interest rate risk is the risk that market rates will fluctuate and affect the debt carrying costs paid by the Company. The Company has three fixed rate term loans and is only exposed to interest rate risk upon year five when the facilities will be renewed for an additional two year term.

Currency risk

The Company realizes an insignificant portion of its income in US dollars and is thus not exposed to foreign exchange risk.

Credit risk

Credit risk is the risk that a counter party will default on its contractual obligations resulting in financial loss to the Company.

The Company's maximum exposure to credit risk is the carrying value of financial assets on the statement of financial position. At December 31,2014 and December 31,2013 Company had no allowance for doubtful accounts.

Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.

All contractual cash flows related to the Company's financial liabilities are expected to be settled within one year.

10. Comparative figures

Certain of the comparative figures have been reclassified to conform with the current year's presentation of the financial statements.

Page 15

Report to Shareholder

To: Guelph City Council

From: GJR Board of Directors

Date: June 15, 2015

Re: Compliance Report (Section 8.01 Shareholder Declaration)

Section 8.01 (g) of the Shareholder Declaration provides as follows:

Confirmation from the GJR Board that as of the end of the previous financial year, GJR has complied

with the requirements of this Shareholder Declaration and is in compliance with Applicable Laws.

The Board of GJR has made comprehensive inquiry of GJR management who have confirmed

compliance with all provisions of the Shareholder Declaration and with all Applicable Laws with the

following exception:

GJR is currently completing assessments of the condition of its track, signals and bridges as they

relate to compliance with safety standards under Transport Canada regulations. These reports may

identify some potential areas of non-compliance with Transport Canada safety regulations along

with regular maintenance issues that need to be corrected. The Board will review the assessment

reports upon receipt and develop a mitigation plan to address any regulatory compliance issues

identified in the reports.

Subject to the foregoing, to the best of our knowledge, GJR is in full compliance with all other laws,

regulations and other legal requirements including Transport Canada and Canada Transportation

Agency Regulations and policies, and federal and provincial legislation relating to railways.

David Jennison, Chair

guelph city council as shareholder of...

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