sandyport 2015 annual report

SANNUAL REPORT

2015

Serving our communitywww.sandyport.management

A NOTE FROM THE CHAIRMAN

CONTENTSA NOTE FROM THE CHAIRMAN

BOARD OF DIRECTORS

MANAGEMENT TEAM

COMPLETED IN 2015

PROJECTS UNDER REVIEW

TREASURERS REPORT

2016 FINANCIAL BUDGET

FINANCIAL STATEMENTS

PROFESSIONAL ADVISORS

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2 www.sandyport.management

It is my pleasure to present this Annual Report for the year ending December 2015 to our shareholders. It was a challenging year for the country with high crime rates and continued economic uncertainty. But your Homeowners Association performed well with no major security incidents. Its finances are also healthy despite a 4.5% deficit for the year. In previous years we accumulated a reserve by maintaining financial prudence. This has allowed us to fund the deficit without increasing the maintenance assessment.

At our 2014 Annual General Meeting Eddie Gardner was re-elected together with myself. Two replacement Directors were also elected, Constantinos Berdanis and Scott Farrington (Secretary). Both had served on our Board in previous rotations. Steve Roberts and Monique Cartwright concluded their two years of service. Bruce Knowles took over as the Treasurer. He continues his service together with Tony Miaoulis and Michle Rassin-Moodie. Directors volunteer their time for the benefit of the community. Oftentimes they deal with difficult decisions and situations. On behalf of the shareholders I thank the Directors for their dedication and service.

Our Committees provide support and guidance to the Board. The members of the Audit & Finance and Architectural & Landscaping Committees are volunteers. Like the Directors they contribute their time for the benefit of the community. I extend our thanks to the various committee members for their contributions.

The dynamics have shifted in our community over the years. We have noticed more Bahamians are enjoying life in Sandyport. Tastes are changing as are the demands of living in our current economic climate. Requests for generator and solar installations are becoming standard. Owners sometimes wish to build a feature or home that falls outside of the Sandyport specification. Whilst we are bound by the design intent as set out in the Restrictive Covenants, we understand that things change. To address this, we released a new revision of our Architectural Guidelines. They provide greater clarity and maintain the integrity of the Sandyport design. We have done our best to address the most common unusual features in this revision.

During the year, we carried out some of the improvements we committed to. We installed 593 linear feet of wall along the eastern perimeter for security purposes. And we completed the renovations of the amenity area near Roberts Isle. This large project included the renovation of the tennis court, pool and landscaping. We also added a new restroom facility. We had planned our social event with the official reopening of the area. Unfortunately the weather did not co-operate and we cancelled the event.

In short we closed the year with a better community, a strong balance sheet and with no increase to our maintenance fees.

On behalf of the Board of Directors

Robert Sands Chairman

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VAST IMPROVEMENT AND THANK YOU VERY MUCH.

SF

Eddie Gardner Director

Tony Miaoulis Director

Michle Moodie Director

Kosta Berdanis Director

Bruce Knowles Treasurer

Scott Farrington Secretary

Robert Sands Chairman

BOARD OF DIRECTORS


AS ALWAYS, SERVICE WAS SWIFT AND SWEET. ITS A PLEASURE TO SEE HOW TEAMWORK REALLY WORKS. EXCELLENT SERVICE!!

CB

Ronella Francis Assistant Manager

Perlissa Munroe Accountant

Sarah Barton Security Services

Kayla Lightbourne Accounts Clerk

Orpheus Ingraham Maintenance

Charles Cooper Water/Sewerage

Simon Cooper General Manager

MANAGEMENT TEAM

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VERY GOOD SERVICE AND VERY QUICK. MANY THANKS FOR THE GOOD WORK!

ML


COMPLETED IN 2015

Amenity areas

In 2014 we carried out a major renovation of the Governors Cay recreation area. We completed outstanding work early 2015 including parking, curbing, feature wall, playground and landscaping. The area has been completely transformed.

We installed safety railings and a disabled ramp to the gazebo in phase 5, for safety reasons. In the neighbouring recreation area, we added disc golf practice baskets. Some residents had no idea what they were, now you know!

The renovation of the recreation area next to Roberts Isle was our largest project of the year. We expanded the pool deck, renovated the pool and replaced the pool fence. On the land we reclaimed between the tennis courts and Sandyport Drive 158, we built a path. The path provides access to a new expanded deck overlooking the canal. The tennis court was also renovated with a new surface, fencing and lighting. We added new pathways and fencing, increased lighting and refreshed the landscaping. The playground and parking lot received new curbing and a new restroom was also added.

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COMPLETED IN 2015 CONTINUED

Roads

We improved road safety in a few areas. In Royal Palm Cay we widened the road and added landscaping and curbing. This provides a natural barrier between the road and canal. Along the two curves on Sandyport Drive south, we installed rumble strips, reflectors and road markings. One of the curves is situate near the school entrance.

Many of the bridges leading from Sandyport Drive into the various islands appeared unfinished. We rendered them and added a detail for a consistent, finished look.

Security

We foiled several attempts to enter the property through the fence on the Eastern side in 2015. This area has little traffic and lighting on the outside of the perimeter. Intruders may consider the area a good point of entry without detection.

Despite budget constraints, we believed it was necessary to secure this vulnerability. We replaced almost 600 linear feet of chain link fence with a new wall. We also replaced the fence that borders with the school as it was in a poor state of repair and posed a security risk.

Our golf cart fleet received a new replacement, 3 out of the 5 carts in service are less than 2 years old. Installed high intensity law enforcement hazard warning strobe lights increase visibility at night.


I OWN IN POINCIANA CAY AND AM OVER FOR THE WEEK FROM LONDON. SINCE MY LAST VISIT A YEAR AGO, I WOULD LIKE TO SAY HOW GREAT SANDYPORT LOOKS. THE LANDSCAPING, BOUNDARY WALL AND NEW BUILDS ARE A GREAT IMPROVEMENT AND IN GENERAL PHASE 5 HAS COME ON LEAPS AND BOUNDS. I JUST WANTED TO THANK YOU AND THE COMMITTEE FOR A SUPER JOB.

MF

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Canal

The cost to dredge the canal inlet has continued to climb and now averages $6,300 per month. According to our engineers, sand infiltrates through boulders that make up the groin. In 2014 we applied for a permit to perform the repairs by installing a barrier inside the groin. Preliminary estimates to carry out the repairs are $250,000. We recently received approval to proceed with the work.

The canal basin needs dredging to address the low spots and clear any debris that has accumulated. The cost of the exercise is approximately $90,000.

There are 17,800 linear feet of seawall that we are responsible for maintaining. Conditions vary but in 2014 engineers recommended completing most repairs within 3 years. To the best of our knowledge, there are no sections of sea wall that are unsafe at the present time.

Wastewater System

We are in discussions with Water & Sewerage Corporation to determine if they can treat our wastewater. They have indicated that there are no plans to install the necessary infrastructure. They have prepared a request for a proposal (RFP) to conduct an engineering review. We are at the review stage and have not approved the RFP yet.

If it is not possible to connect to a government facility, we plan to increase the plant capacity as the community grows. Since we process wastewater from Sandyport Olde Towne, we must also factor in its growth.

The wastewater system has a capacity of 100,000 gallon per day, assuming a steady flow. Our wastewater peaks twice daily and to compensate for the surges, experts rate the system at 80,000 gpd capacity. We average about 76,000 gpd production. The cost

PROJECTS UNDER REVIEW


to expand the plant is about $1 million to handle the completed development. Under the terms of an Agreement dated November 3, 2009, the expansion cost will be borne by Sandyport Development Company Ltd.

An interim solution to increase plant capacity involves adding a surge tank. This equalizes the flow and allows the plant to operate at full capacity. The cost for such a system is between $230,000 and $400,000. At the present time the wastewater system is in good condition and performing well.

The level of total dissolved solids (TDS) impacts on system performance. This is the presence of salt water and indicative of breaches in the collection system. Levels have been increasing and we expect the trend to continue. High TDS levels harm the bacteria and can cause the system to go septic. Once the system is septic it can result in an unpleasant odour until we are able to restore the proper balance. Reducing the TDS levels will reduce the likelihood

of septicity. The cost for engineers to investigate the source of the breaches is $30,000. This does not include the repairs requiring specialized treatment.

A deodorizing system costs $24,000 and can mask odour levels. But it is our preference to operate the wastewater system to the standard that it is free of odour. This is only possible with proper maintenance which, in part, addresses the TDS infiltration.

We send treated wastewater into the ground via a deep well. The well depth was 400 but has reduced over time to 75. Engineers have recommended drilling a redundant well. If the existing well fails, the wastewater has nowhere to go. A new well costs $110,000.

A use for the treated wastewater is for common area irrigation. The wastewater requires further treatment before it is suitable for this purpose. The cost to install a filtration system together with main irrigation lines is $170,000.

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PROJECTS UNDER REVIEW CONTINUED

Amenity Areas

The pool area located at Clipper Island is the last of those in need of renovation. The plans for the area include expanding the deck in a similar style to that at Roberts Isle. Rearranging the garbage enclosure and pool pump house adds 2 new parking spaces. A new landscaping scheme will complete the renovation.

The areas next to the new fence along the school boundary and eastern wall will receive a new landscaping scheme and extra parking spaces. Parking spaces are also planned along Sandyport Drive in front of The Arches townhouses.

Main Entrance

We completed the first phase of improvements at Beach Lane in 2014. A new design for the area increases parking capacity. A wall will replace the chain link fence and extend to the security booth. The wall will continue on the western side of the main entrance.

We will further improve the main entrance with a new building that offers storage and a waiting area. A new path leads from the building to a new lay-by that will function as a bus stop and acceleration lane. The path extends from the western side of the property to the brow of the bridge. These improvements will improve security and also enhance the appearance of the entrance.

Other Improvements Under Consideration

We have CCTV coverage in key areas that can expand with the installation of a wide area network. A wireless network provides flexibility to install cameras anywhere within the network area. This will offer the potential to provide coverage at all choke points.

Worn roads need resurfacing and we would like to add walkways, where possible. We are also considering upgrading the street lighting for better visibility.

We are also considering building an office and / or clubhouse near the phase 5 pool area. The cost of building a new office will be offset by the savings in rent.


THE RESPONSE AS ALWAYS WAS EXCELLENT

DH

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TREASURERS REPORT

Expenses

We concluded the year with a deficit of $152,767 compared to a small surplus for the previous year. Revenue growth was modest at 1.8% and costs have generally increased. We have continued to fund improvements from our maintenance budget, where finances have permitted. The growth in revenue is in line with the growth of the community, with 6 new homes added during the year. Revenue exceeded budget by $172,831. We funded the deficit from the special reserve account, without a maintenance fee increase.

Direct expenses exceeded budget by $265,505 of which $188,223 is improvements. We invested $488,223 in improvements including $136,312 spent securing our perimeter. This involved addition a new wall to the east and a replacement fence around the school perimeter.

Maintenance expenses exceeded budget by $68,131. Dredging that was necessary in the year cost an extra $29,499. The remaining excess was for overdue repairs to amenity areas.

We increased security during the year and spent a notable $19,818 on project security. During the construction of the new wall we added security personnel in the area. The depreciation charge increased arising from investment in equipment, in particular golf carts. We also experienced general increases in the cost of security personnel.

The management office lease expired in September. We renewed the lease for a further two years with a small increase of $1,200 per annum.


QUALITY OF SUPPORT WAS VERY GOOD. I RECEIVED A RESPONSE WITHIN A FEW MINUTES.

JP

Receivables

The number of accounts that incurred late fees during the year dropped from an average of 107 per month in 2014 to 78. In line with previous years, the value of accounts that settled maintenance early and qualified for the settlement discount was 26% of the total assessed area, or approximately one in four owners.

Our policy for the provision of doubtful debts assumes all balances unpaid 360 days past the due date. In 2015 this provision increased by $158,052 bringing the total to $340,372. We publish the current list of delinquent accounts on the website monthly. The debtors with balances over $20,000 at the year end are as follows:

Sandyport Development Company (SDCL)

Year end balance $254,234

Sandyport Homeowners Association Limited (SHAL) is still in a dispute with SDCL over the interpretation and application of a certain covenant contained within the handover indenture made between SDCL and SHAL on 21st May, 2008. The covenant provides for SHAL to maintain the sewerage plant of Sandyport in good operating condition and for SDCL to pay to SHAL a proportion of the reasonable direct costs without overhead of the maintenance and repair and replacement of the sewerage plant.

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THE GARDENING TEAM IS ALWAYS VERY QUICK TO RESPOND AND GET THE ISSUE TAKEN CARE OF. KUDOS.

SR


TREASURERS REPORT CONTINUED

Specifically, is a disagreement over what costs ought to be included in determining how much ought to be paid by SDCL to SHAL. In an effort to resolve the matter without recourse to litigation, SHAL gave representatives of SDCL the opportunity to inspect the supporting records and documents relating to the costs of maintaining and operating the sewerage plant. Following the inspection, on 19th January 2016, SDCL made a proposal to SHAL for settlement of the dispute. SHAL and SDCL are in discussions to settle the dispute.

SDCL continues to maintain they are not the legal owners of the delinquent lots totalling $103,526. Our legal team is conducting a search to verify the accuracy of the representations made by SDCL and ascertain the identity of the current legal owner(s) of the delinquent lots.

Governors Cay 33 & 34


The owner of both properties is withholding payment based on a claim his law practice has brought against the Association for alleged legal expenses, which were not authorized. Several judges have recused themselves from this matter for a variety of reasons, principally involving conduct on the part of, or allegations made by, the owner, and as a result there have been delays getting the matter to trial. However, the matter has resumed and we are working toward a timely resolution.

Royal Palm Cay 23


There are two legal matters in relation to this property. The owner is delinquent with respect to the outstanding Association fees and has not satisfied the requirements to continue construction on the property. At trial the construction matter was ruled in favour of the owner however following an extensive appeal process, the ruling was overturned and the matter has now been returned to the Supreme Court for conclusion. In the meantime the Association has secured an injunction against the owner preventing any further construction activity.

Sandyport Drive 124


The balance on this account has been disputed by the owner on two grounds. The method used to calculate the assessed area of the

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homes has been challenged on the basis that it is not consistent with the building code. The second argument relates to maintenance fees that were backdated to the occupancy date on record. The matters are ongoing.

Beach Lane 5


In August 2015 the Association took vacant possession of the unit by way of an order of the court with a view to selling it. However, the owner of record broke into the property with the assistance of the Royal Bahamas Police Force and has continued his trespass to the unit, preventing us from marketing the unit. In the meantime new actions have been brought against the owner of record, and we are actively pursuing the owner and the Commissioner of Police with respect to this contempt of court.

Cash

Cash on hand reduced by $364,794 during the year. Gross margin lowered, advance payments decreased by $68,215 and accounts receivables increased by $245,064.

Funds that are not used in the short term are held in an interest bearing 30 day term deposit account.

General notes

The number of personnel on our payroll remained stable with 27 employees. The waste disposal contract expired in July 2015. Services are ongoing with the same contractor by mutual agreement at the rate agreed in 2014. We renewed the gardening contract at the rate agreed in 2014. Instead of an increase, we agreed to a variation in the contract, with the removal of project labour. There were no hurricane related expenses during the year.

We applied unique serial numbers to every water meter installation. A new billing platform provides more detailed information about the meter consumption. The platform helps to reduce read errors and improve operational efficiency.

Vacant lots are subject to an annual indenture charge subject to review every 5 years. The next revision is in fiscal year 2016 and adjusted according to a formula determined by the conveyance.

TREASURERS REPORT CONTINUED


REVENUE 2014 2016 Budget

Maintenance fees - 921,383 sq ft @ $2.75 per sq ft (394 homes, 2015 : 389) 2,533,803

Indenture fees (103 lots, 2015 : 109) 177,795

Other maintenance fees - 22,792 sq ft (7 under construction, 2015 : 6) 52,104

Water & meters income 453,887

Other services 8,235

Total revenue 3,225,824

DIRECT EXPENSES

Security expenses 794,222

Gardening expenses 432,158

Maintenance of common areas 426,824

Water & meters 407,685

Waste water management 301,775

Painting expenses 206,145

Improvements 150,000

Garbage removal 84,000

Total direct expenses 2,802,809

Gross Profit 423,015

OPERATING EXPENSES

Salaries, benefits & NI 246,476

Office & computer 45,026

Professional fees 41,016

Rent and utilities 37,800

Telephone & communications 16,615

Insurance 11,171

Finance charges 10,355

Other expense 2,371

Property & other taxes 1,000

Total operating expenses 411,830

NET MAINTENANCE FUND 11,185

2016 FINANCIAL BUDGET

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FINANCIAL STATEMENTSFinancial Statements For The Year Ended December 31, 2015 And Independent Auditors Report

We have audited the accompanying financial statements of Sandyport Homeowners Association Limited (the Homeowners Association), which comprise the statement of financial position as at December 31, 2015 and the related statements of maintenance fund, changes in shareholders equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Managements 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 for Small and Medium-sized Entities, 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.

Auditors Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with the 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 auditors

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 entitys 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 entitys 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 financial statement presentation.

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 Sandyport Homeowners Association Limited as at December 31, 2015 and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards for Small and Medium-sized Entities.

HLB GALANIS & CO.

March 16, 2016 Nassau, Bahamas


ASSETS 2015 2014

Current Assets

Cash and cash equivalents 629,924 957,341

Accounts receivable (Note 4) 297,145 276,847

Prepayments and deposits 86,121 72,150

Total current assets 1,013,190 1,306,338

Fixed assets, net (Note 5) 77,343 114,629

TOTAL ASSETS 1,090,533 1,420,967

LIABILITIES AND SHAREHOLDERS EQUITY

LIABILITIES

Current Liabilities

Accounts payable and accrued expenses 93,198 216,516

Prepaid maintenance fees and deposits (Note 6) 592,669 647,018

Total current liabilities 685,867 863,534

SHAREHOLDERS EQUITY

Share capital 5,000 ordinary shares authorized at $1.00 par value, 409 (2014:399) shares issued and outstanding

409 399

General reserve fund (Note 7) 557,024 534,124

Maintenance fund (deficit) (152,767) 22,910

Total shareholders equity 404,666 557,433

TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 1,090,533 1,420,967

The accompanying notes form an integral part of these audited financial statements. These financial statements were approved by the Board of Directors and authorized for issuance on March 16, 2016.

Director Director

SANDYPORT HOMEOWNERS ASSOCIATION LIMITED STATEMENT OF FINANCIAL POSITION At December 31, 2015 (Expressed in Bahamian dollars)

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REVENUE 2015 2014

Maintenance fees 2,689,683 2,648,973

Water & meters income 499,016 453,887

Other services 150,329 169,233

Miscellaneous income 35,242 44,342

Total revenue 3,374,450 3,316,435

DIRECT EXPENSES

Security expenses (Note 8) 750,984 689,400

Improvements (Note 9) 488,223 543,703

Gardening expenses (Note 10) 428,328 432,158

Maintenance of common areas (Note 11) 428,405 358,535

Water and meters (Note 12) 386,772 349,865

Waste water management (Note 13) 242,213 220,163

Painting expenses (Note 14) 186,668 174,888

Garbage removal 84,000 73,500

Total direct expenses 2,995,593 2,842,212

GROSS PROFIT 378,857 474,223

OPERATING EXPENSES

Salaries, benefits & national insurance 232,779 222,987

Provision for doubtful accounts (Note 4) 158,052 79,809

Rent & utilities (Note 15) 37,100 36,600

Office & computer supplies 17,564 30,219

Professional fees 33,543 28,280

Telephone & communications 15,602 16,615

Depreciation (Note 5) 14,191 14,807

Finance charges 11,895 10,641

Insurance 9,895 10,355

Property & other taxes 1,000 1,000

Total operating expenses 531,624 451,313

NET MAINTENANCE FUND (DEFICIT) (152,767) 22,910

The accompanying notes form an integral part of these audited financial statements.

SANDYPORT HOMEOWNERS ASSOCIATION LIMITED STATEMENT OF MAINTENANCE FUND For the year ended December 31, 2015 (Expressed in Bahamian dollars)


Share Capital General Reserve FundMaintenance

Fund Total

Balance at December 31, 2013 395 430,593 103,535 534,523

Shares issued during the year 4 (4) - -

Maintenance fund distribution - 103,535 (103,535) -

Net maintenance fund for the year - - 22,910 22,910

Balance at December 31, 2014 399 534,124 22,910 557,433

Shares issued during the year 10 (10) - -

Maintenance fund distribution - 22,910 (22,910) -

Net maintenance fund (deficit) for the year - - (152,767) (152,767)

Balance at December 31, 2015 409 557,024 (152,767) 404,666


SANDYPORT HOMEOWNERS ASSOCIATION LIMITED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the year ended December 31, 2015 (Expressed in Bahamian dollars)

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CASH FLOWS FROM OPERATING ACTIVITIES: 2015 2014

Net maintenance fund (deficit) (152,767) 22,910

Add non-cash transactions:


(Profit) from disposal of fixed assets - (860)

Provision for doubtful accounts 158,052 79,809

Operating income before working capital changes 65,779 167,499

(Increase) in accounts receivable (178,350) (92,340)

Decrease / (Increase) in prepayments and deposits (13,971) 1,731

(Decrease) / Increase in accounts payable and accrued expenses (123,318) 97,901

(Decrease) / Increase in prepaid maintenance fees and deposits (54,349) 238,539

Net cash (used in) provided by operating activities (304,209) 413,330

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of fixed assets (Note 5) (23,208) (45,089)

Proceeds from disposal of fixed assets - 2,850

Repayment of loan receivable - 5,538

Net cash used in investing activities (23,208) (36,701)

Net (decrease) / increase in cash and cash equivalents (327,417) 376,629

Cash and cash equivalents, beginning of year 957,341 580,712

Cash and cash equivalents, end of year 629,924 957,341

Cash and cash equivalents are comprised of the following:

Cash on hand 800 800

Cash in bank 357,565 936,088

Term deposit 271,559 20,453

629,924 957,341


SANDYPORT HOMEOWNERS ASSOCIATION LIMITED STATEMENT OF CASH FLOWS For the year ended December 31, 2015 (Expressed in Bahamian dollars)


1. GENERAL

Sandyport Management Company Limited was incorporated under the laws of The Commonwealth of the Bahamas on May 25, 1990 as a wholly-owned subsidiary of Sandyport Development Company Limited (Devco). On September 14, 1998, the name of the Company was changed to Sandyport Homeowners Association Limited (the Homeowners Association).

On May 21, 2008, ownership of the common areas and common infrastructure of the Sandyport residential community was transferred from Devco to the Homeowners Association.

The principal activity of the Homeowners Association is to manage the Sandyport residential community in accordance with the terms of the authority granted to Devco by licences issued to each property owner defining their rights and obligations in regard to the common areas. Devco assigned the said authority under these licences to the Homeowners Association on November 3, 2009.

On January 2, 2010, Devco transferred the ownership of the Homeowners Association to the property owners of the Sandyport residential community.

As at December 31, 2015 the Homeowners Association had 27 employees (2014: 26).

2. BASIS OF PREPARATION

These financial statements have been prepared in accordance with International Financial Reporting Standards for Small and Medium-sized Entities. The preparation of financial statements in conformity with International Financial Reporting Standards for Small and Medium-sized Entities requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Bahamian dollar is the Homeowners Associations measurement and reporting currency because its capital and a majority of its transactions are denominated in that currency. Foreign currency transactions are translated into Bahamian dollars at the rates of exchange prevailing at the time of the transaction.

SANDYPORT HOMEOWNERS ASSOCIATION LIMITED NOTES TO FINANCIAL STATEMENTS For the year ended December 31, 2015 (Expressed in Bahamian dollars)

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3. SUMMARY OF ACCOUNTING POLICIES

Significant accounting policies adopted in the preparation of these financial statements are as follows:

a. Cash and cash equivalents - Cash and cash equivalents include cash on hand and at bank and short term deposits which have a maturity period of less than three months.

b. Accounts receivable - Accounts receivable are stated at cost less provision for doubtful accounts and any impairment losses. Management records provisions when in their opinion, amounts are irrecoverable based on historical performance and solvency of the customer. The provision for doubtful accounts policy is based on accounts that are 360 days old and remains unpaid.

c. Fixed assets - Fixed assets are stated at cost less accumulated depreciation and any impairment losses. Depreciation is calculated on the straight-line basis to write-off assets over their estimated useful lives as follows:

Waste water system 3 - 5 years Maintenance equipment 3 years Computer and office equipment 3 years Security equipment 3 years

d. Revenue recognition - Revenue is measured at the fair value of the consideration received or receivable and represents the monthly maintenance fee charged to the homeowners. This fee is based on square footage of the house on each property and owners of empty lots are charged a flat fee.

e. Income and expense recognition - Income and expenses are recorded on an accrual basis of accounting.

f. Improvements These are various projects that are undertaken for the improvement of common areas. These projects are additions and modifications to existing infrastructure within the community. The costs associated with these projects are expensed in the period incurred, but is accounted for on the accrual basis for projects not completed within the fiscal year. Improvements are itemized separately and by project for clarity.

g. Impairment of assets - An assessment is made at each financial position date to determine whether there is any indication of impairment of any assets, or whether there is any indication that an impairment loss previously recognized on an asset in prior years may no longer exists; the assets recoverable amount is estimated. An assets recoverable amount is computed as the higher of the assets value in use or its net selling price.

An impairment loss is recognized only if the carrying amount of an asset exceeds its recoverable amount. An impairment loss is charged to operations in the period in which it arises unless the asset is carried at a revalued amount in which case the impairment is charged to revaluation.

A previously recognized impairment is reversed only if there has been a change in the estimates used to determine the recoverable amount of the asset, however, not to an amount higher than the carrying amount that would have been determined (net of any depreciation), had no impairment loss been recognized for the asset in prior years.

h. Related party transactions - Related parties include members of the board who are also homeowners.

SANDYPORT HOMEOWNERS ASSOCIATION LIMITED NOTES TO FINANCIAL STATEMENTS CONTINUED For the year ended December 31, 2015 (Expressed in Bahamian dollars)


4. ACCOUNTS RECEIVABLE

Accounts receivable is comprised as follows:

2015 2014

Accounts receivable 637,517 459,167

Less: provision for doubtful accounts (340,372) (182,320)

Accounts receivable, net 297,145 276,847

The movement in the provision for doubtful accounts is as follows:

Balance, beginning of year 182,320 102,511

Add: provision made during the year 158,052 79,809

Less: amounts written off during the year - -

Balance, end of year 340,372 182,320

The aging of receivables are as follows:

Current 46,074 111,140

31 to 60 days 52,358 28,857

61 to 90 days 46,238 11,988

91 to 360 days 152,475 124,862

Over 360 days 340,372 182,320

Balance, end of year 637,517 459,167


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5. FIXED ASSETS

The movement of fixed assets during the year is as follows:

COST Waste Water SystemMaintenance

Equipment

Computer & Office

Equipment

Security Equipment Total

Balance at December 31, 2013 213,676 12,085 69,854 36,264 331,879

Additions 23,538 1,698 (2,939) 22,792 45,089

Disposals - (2,875) - (5,000) (7,875)


Additions 657 249 - 22,302 23,208

Disposals - - - (5,339) (5,339)


ACCUMULATED DEPRECIATION


Depreciation 41,236 4,353 14,807 5,244 65,640

Disposals - (1,579) - (4,306) (5,885)


Depreciation 30,251 1,345 14,191 14,707 60,494

Disposals - - - ((5,339) (5,339)


CARRYING VALUE

As at December 31, 2015 38,628 644 3,365 34,706 77,343

As at December 31, 2014 68,222 1,740 17,556 27,111 114,629

Depreciation expense by functional categories is as follows:

2015 2014

Waste water management (Note 13) 30,251 41,236

Maintenance equipment (Note 11) 1,345 4,353

Computer and office equipment 14,191 14,807

Security equipment (Note 8) 14,707 5,244

Total 60,494 65,640



6. PREPAID MAINTENANCE FEES AND DEPOSITS

Prepaid maintenance fees and deposits are as follows:

2015 2014

Advance payments 494,169 550,018

Water deposits 98,500 97,000

Total 592,669 647,018

7. GENERAL RESERVE FUND

This amount represents a reserve established to provide for future contingencies.

8. SECURITY EXPENSES

Security expenses are as follows:

2015 2014

Wages 408,763 402,810

Service contract 262,282 205,437

Security maintenance 34,137 54,487

Supplies 29,630 20,328


Uniforms 1,465 1,094

Total 750,984 689,400


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9. IMPROVEMENTS

During the fiscal year, there were key projects undertaken which included improvement to Robert Isle and erection of the Eastern Perimeter Wall. Overall improvement expenses are as follows:

2015 2014

Roberts Isle 239,499 -

Eastern Perimeter Wall 112,164 -

Other 54,870 34,739

Beach Lane Common Area 33,680 148,296

Governors Cay Recreation Area 23,861 159,484

Fencing 24,149 -

Tennis courts - 133,359

Security - 46,093

Waste water system - 21,732

Total 488,223 543,703

10. GARDENING EXPENSES

Gardening expenses are as follows:

2015 2014

Contract services 366,000 366,000

Extermination 48,567 36,882

Garden supplies 7,173 24,667

Miscellaneous 6,588 4,609

Total 428,328 432,158



11. MAINTENANCE OF COMMON AREAS

The expenses associated with the maintenance of common areas are as follows:

2015 2014

Utilities 114,899 137,565

Wages 85,098 77,645

Supplies and tools 83,770 51,178

Dredging 68,424 38,925

Swimming pool 39,295 28,097

Roads and lights 25,661 5,269

Contract service 6,313 8,253

Cleaning repairs 3,600 7,250

Depreciation of equipment (Note 5) 1,345 4,353

Total 428,405 358,535

12. WATER AND METERS

Water and meters expenses are as follows:

2015 2014

Water 382,930 346,428

Water meters 3,842 3,437

Total 386,772 349,865


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13. WASTE WATER MANAGEMENT

Waste water management expenses are as follows:

2015 2014

Wages 66,668 75,866

Materials 61,463 43,651

Services 48,998 43,468

Repairs and maintenance 34,833 15,942


Total 242,213 220,163

14. PAINTING EXPENSES

Painting expenses are as follows:

2015 2014

Painting contractors 110,411 110,000

Paint and supplies 76,257 64,888

Total 186,668 174,888

15. RENT AND UTILITIES

The Homeowners Association rents office space from Artech Bahamas Ltd. at $36,600 per annum, inclusive of electricity and water. The lease expired on August 31, 2015 with the option to renew for a further 2 years. The Association exercised the option at an agreed rent of $37,800 per annum.

16. CONTINGENT LIABILITIES

Following an evaluation of the waste water treatment system in 2012, Harris Civil Engineers recommended a series of improvements and repairs. Certain of the work was completed by the end of 2014 and it is estimated that completion of the remaining work will require an expenditure of $430,000. The Board believes that the recommended work can be completed out of budgeted income streams but will consider the need for a special assessment should this become necessary.

In addition, the waste water system is almost at its operational capacity: the preliminary budget to expand the capacity to meet anticipated future requirements is $1 million. Under the terms of an Agreement dated November 3, 2009, the cost of such expansion will be borne by the developer, Sandyport Development Company Limited (Devco). The Board continues to explore alternative cost effective and productive solutions to this issue.



17. FINANCIAL RISK MANAGEMENT

The Homeowners Association is exposed to a variety of risks including liquidity risk, credit risk, interest rate risk and capital risk management arising in the normal course of the Homeowners Associations business activities.

The Homeowners Association does not have any written risk management policies and guidelines. Management monitors the financial risks of the Homeowners Association and takes such measures as considered necessary from time to time to minimize such financial risks.

Liquidity risk - Liquidity risk is the risk that an enterprise will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly, at close to its fair value.

Prudent liquidity risk management implies maintaining sufficient cash. The Homeowners Association monitors and maintains a level of bank balances deemed adequate to finance its operations. The Homeowners Association deposits cash with financial institutions of good standing.

Credit risk Credit risk arises from the possibility that customers may not be able to settle obligations within the normal terms of transactions. The Homeowners Association performs ongoing credit evaluation of the debtors financial condition and maintains an account for allowance for doubtful trade and other accounts receivable based upon the expected collectibles of all trade and other accounts receivable.

The Homeowners Association has no significant concentration of credit risks with any single counterparty or group counterparties.

Interest rate risk Cash flow interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the fair value of a financial instrument will fluctuate due to changes in market interest rate.

Demand deposits and term deposits are the only significant interest bearing assets and liabilities. Accordingly, the Homeowners Associations income and operating cash flow are substantially independent of changes in market interest rates.

Capital risk management The Homeowners Association manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to homeowners through the optimization of the debt and equity balance. The Homeowners Associations overall strategy remains unchanged from 2010.

The capital structure of the Homeowners Association consists of debt, cash and equity attributable to equity holders comprising of share capital, general reserve fund and maintenance fund.


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Auditors:

HLB Galanis & Co. 7 North Buckner Square Olde Towne, Sandyport P. O. Box N-3205 Nassau, The Bahamas Tel: (242) 327-0689 Fax: (242) 327-0696 Web: www.hlbgalanis.com

Legal Advisors:

Kahlil D. Parker Cedric L. Parker & Co. Chambers No.9 Rusty Bethel Drive P.O. Box N-1953 Nassau, The Bahamas Tel: (242) 322-4954/5 Fax: (242) 328-3706 Email: [email protected]

Robert K. Adams Graham Thompson Star General Insurance Building 2nd Floor P O Box F-42451 Freeport Grand Bahama, The Bahamas Tel: (242) 351-7474 Email: [email protected] Web: www.grahamthompson.com

Consulting Architects:

Alberto G. Suighi Artech Bahamas Ltd. Lagoon Court Nassau, The Bahamas Tel: (242) 327-2335 Fax: (242) 327-2337 Web: www.artechbahamas.com

Bankers:

CIBC First Caribbean Sandyport Branch Nassau, The Bahamas P.O. Box N-8350 / N-7125 Tel: (242) 327-8364 / 327-4957 Fax: (242) 327-4955 Account: 200-167527 Web: www.cibcfirstcaribbeanbank.com

Scotiabank Cable Beach P.O Box N-7518 Tel: (242) 702-8100 Fax: (242) 327-5728 Nassau, The Bahamas Account: 70045-72613 Web: www.bahamas.scotiabank.com

Insurance Agents:

Tavares & Higgs Blake Road P. O. Box SP-64003 Nassau, The Bahamas Tel: (242) 327-8606 Fax: (242) 327-8607 Email: [email protected]

Photography: www.marionixon.com

PROFESSIONAL ADVISORS

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sandyport 2015 annual report

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