Consolidated Financial Statements of THOMPSON-NICOLA

Consolidated Financial Statements of

THOMPSON-NICOLAREGIONAL DISTRICTYear ended December 31, 2009

Thompson-Nicola Regional District

Index to Consolidated Financial Statements

Year ended December 31, 2009

Consolidated Financial StatementsManagement's Responsibility for the Consolidated Financial Statements Page 1Auditors' Report Page 2Consolidated Statement of Financial Position Page 3Consolidated Statement of Operations and Accumulated Surplus Page 4Consolidated Statement of Change in Net Financial Assets Page 5Consolidated Statement of Cash Flows Page 6Notes to Consolidated Financial Statements Page 7

Thompson-Nicola Regional DistrictConsolidated Statement of Financial Position

December 31, 2009, with comparative figures for 2008

2009 2008(restated)

(note 2)Financial assets

Cash and cash equivalents $ 21,982,912 $ 22,448,270Accounts receivable (note 3) 3,516,401 842,930

25,499,313 23,291,200

Financial liabilities

Accounts payable and accrued liabilities 3,654,450 2,528,418Deferred revenue (note 4) 2,978,375 2,035,166Short term debt 17,837 17,837Long term debt (note 5) 1,096,906 1,189,657Obligations under capital lease (note 6) 490,463 562,090Landfill remediation liability (note 7) 3,293,679 2,868,538Development cost charges 5,315 5,259

11,537,025 9,206,965

Net financial assets 13,962,288 14,084,235

Non-financial assets

Tangible capital assets (note 8) 25,760,359 19,633,036Prepaid expenses 112,288 -

25,872,647 19,633,036

Accumulated Surplus (note 9) $ 39,834,935 $ 33,717,271

Commitments and contingencies (note 10)See accompanying notes to financial statements.

3

Thompson-Nicola Regional DistrictConsolidated Statement of Operations and Accumulated Surplus

Year ended December 31, 2009, with comparative figures for 2008

Budget 2009 2008(unaudited)

(note 13)(restated)

(note 2)Revenue:

Tax requisition $ 22,313,758 $ 22,302,762 $ 21,564,498Government grants 7,883,169 5,641,096 1,421,804Grants in lieu of taxes 100,000 128,689 151,722Sale of services 3,263,617 2,133,415 1,534,415Water and sewer tolls 521,358 561,762 562,154Interest 617,950 216,254 662,134Sundry 672,197 395,443 901,055Actuarial adjustment of long term debt - 31,863 28,164

Total revenue 35,372,049 31,411,284 26,825,946

Expenses: (note 11)

General government services 4,761,405 3,368,393 2,183,409Protective services 3,492,473 3,067,803 2,910,162Transportation services 91,610 55,408 121,259Environmental health services 15,094,375 8,695,894 8,649,803Public health and welfare 42,867 38,090 30,108Environmental development 2,339,342 1,769,698 1,640,616Recreational and cultural services 7,998,515 7,403,745 7,298,921Waterworks operating fund 612,918 516,043 1,035,010Sewerage operating fund 238,313 374,604 307,244Utilities operating fund 3,952 3,942 176,893

Total expenses 34,675,770 25,293,620 24,353,425

Annual surplus 696,279 6,117,664 2,472,521

Accumulated surplus, beginning of year 33,717,271 33,717,271 31,244,750

Accumulated surplus, end of year $ 34,413,550 $ 39,834,935 $ 33,717,271

See accompanying notes to financial statements.

4

Thompson-Nicola Regional DistrictConsolidated Statement of Changes in Net Financial Assets


Budget 2009 2008(unaudited)

(note 13)Annual surplus $ 696,279 $ 6,117,664 $ 2,472,521

Acquisition of tangible capital assets (16,377,136) (7,859,792) (1,634,688)Amortization on tangible capital assets - 1,696,576 1,546,844Proceeds on sale of tangible capital assets - 35,893 4,400

(15,680,857) (9,659) 2,389,077

Acquisition of prepaid expenses - (112,288) -Consumption of inventory of supplies - - 14,408

Increase (decrease) in net financial assets (15,680,857) (121,947) 2,403,485

Net financial assets, beginning of year 14,084,235 14,084,235 11,680,750

Net financial assets, end of year $ (1,596,622) $ 13,962,288 $ 14,084,235


5

Thompson-Nicola Regional DistrictConsolidated Statement of Cash Flows


2009 2008(restated)

(note 2)Cash provided (used) by:

Operating transactions

Annual surplus $ 6,117,664 $ 2,472,521Items not involving cash:

Amortization 1,696,577 1,546,845Change in actuarial adjustment of long term debt (31,863) (28,164)Change in landfill remediation liability 425,141 469,473

Change in non-cash assets and liabilities:Accounts receivable (2,673,471) 602,653Accounts payable and accrued liabilities 1,126,031 613,249Deferred revenue 943,209 95,622Development cost charges 56 (95,493)Prepaid expenses (112,288) -Inventory of supplies - 14,408

7,491,056 5,691,114

Capital transactions Proceeds on sale of tangible capital assets 35,893 4,400Acquisition of tangible capital assets (7,859,792) (1,634,688)

(7,823,899) (1,630,288)

Financing transactionsShort term debt repaid - (513,771)Long term debt (60,888) (46,969)Commutations - 206,957Debt issued and assumed - 306,463Obligations under capital lease (71,627) (59,482)

(132,515) (106,802)

Increase (Decrease) in cash and cash equivalents (465,358) 3,954,024

Cash and cash equivalents, beginning of year 22,448,270 18,494,246

Cash and cash equivalents, end of year $ 21,982,912 $ 22,448,270

Cash paid for interest $ 85,232 $ 102,360Cash received from interest 216,254 654,679


6

Thompson-Nicola Regional DistrictNotes to Consolidated Financial Statements


The Thompson-Nicola Regional District (the "TNRD") was incorporated as a Regional District onNovember 24, 1967, under a statute of the Province of British Columbia and operates under theprovisions of the Local Government Act and the Community Charter of British Columbia. Itsprincipal activities include the provision of local government services to residents of the region.These include general government services, protective services, transportation services,environmental health services, public health and welfare, environmental development, recreationaland cultural services, water services, sewer services and utilities services.

1. Significant accounting policies:

(a) Basis of presentation:

The consolidated financial statements of the TNRD are prepared by management inaccordance with generally accepted accounting principles for local governments asprescribed by the Public Sector Accounting Board ("PSAB") of the Canadian Institute ofChartered Accountants.

(b) Basis of accounting:

The TNRD follows the accrual method of accounting for revenue and expenses.Revenues are normally recognized in the year in which they are earned and measurable.Expenses are recognized as they are incurred and measurable as a result of receipt ofgoods or services and/or the creation of a legal obligation to pay.

(c) Funds of the Regional District:

The resources and operations of the TNRD are segregated into General, Waterworks,Sewerage, Utilities, and Reserve funds for accounting and financial reporting purposes.

Each fund is recorded as a separate entity which is identified in its statement of financialposition and where applicable, its statements of revenue and expenditures and equity.Fund statements are presented as supplementary information to the consolidatedfinancial statements.

(d) Principles of consolidation:

Consolidated financial statements include the accounts of all funds of the TNRD. Inter-fund balances and transactions have been eliminated. Financial transactions of theentities under financial control of the TNRD are included in the consolidated financialstatements. These entities include the Blue River Water System, Savona Water System,Blackpool Fire Department, Pritchard Fire Department and Vavenby Fire Department.

Consolidated financial statements further include the TNRD's share (75%) of the netequity of Strata Corporation KAS 2093. Strata Corporation KAS 2093, a corporationowned by the TNRD and the City of Kamloops, manages the activities of the CivicBuilding located at 465 Victoria Street, Kamloops, BC.

7



1. Significant accounting policies (continued):

(e) Taxation:

Each Municipality and Electoral Area within the TNRD is requisitioned for their portion ofeach service in which they participate. These funds are then levied by the Municipalitiesand the Province (for Electoral Areas) to individual taxpayers and are to be remitted to theTNRD by August 1 of each year.

(f) Grants and contributions:

Grants and contributions (other than grants in lieu of taxes) are recorded when receivable.Grants in lieu of taxes are recognized at the earlier of when received or when money isdetermined to be more likely than not to be collected.

(g) Interest:

Interest earned is allocated on the basis of actual earnings from the specific instruments.Excess funds or temporary borrowings of all functions and capital projects are pooled andinterest income or expense is allocated to the individual functions and capital projects ona monthly basis.

(h) Deferred revenue:

Deferred revenues represent monies received from outside funding sources inanticipation of future project expenditures. These amounts will be recognized asrevenues in the periods that the related expenditures incur.

(i) Cash equivalents:

Cash equivalents consist of money market funds and are carried at cost.

(j) Long-term debt:

Long-term debt is recorded net of any related sinking fund balances. Debt interestcharges are charged against current revenue in the periods in which they are accrued.

(k) Landfill liability:

The liability for closure of operational sites and post-closure care has been recognizedbased on estimated future expenses, estimated inflation and the usage of the sites'capacities during the year.

8




(l) Non-financial assets:

Non-financial assets are not available to discharge existing liabilities and are held for usein the provision of services. They have useful lives extending beyond the current yearand are not intended for sale in the ordinary course of operations.

(i) Tangible capital assets

Tangible capital assets are recorded at cost which includes amounts that are directlyattributable to acquisition, construction, development or betterment of the asset. Thecosts, less residual values, of the tangible capital assets, excluding land and landfillsites, are amortized on a straight line basis over their estimated useful lives asfollows:

Asset Useful Life - Years

Buildings and building improvements 20 - 70 yearsFurniture, fixtures and equipment 5 - 20 yearsVehicles 6 - 20 yearsWater and wastewater infrastructure 25 - 60 years

Annual amortization is prorated in the years of acquisition and disposal. Assetsunder construction are not amortized until the asset is available for productive use.

(ii) Contributions of tangible capital assets

Tangible capital assets received as contributions are recorded at the fair value at thedate of receipt and also are recorded as revenue.

(iii) Tangible capital assets disclosed at nominal values

Where fair value is undeterminable, tangible capital assets are recognized at anominal value.

(iv) Interest capitalization

Interest is capitalized whenever external debt is issued to finance the construction oftangible capital assets.

(v) Leased tangible capital assets

Leases which transfer substantially all of the benefits and risks incidental toownership of property are accounted for as leased tangible capital assets. All otherleases are accounted for as operating leases and the related payments are chargedto expenses as incurred.

9




(m) Budget:

Budget figures shown represent the Annual Budget By-Law adopted by the Board ofDirectors on March 26, 2009. These figures do not reflect subsequent amendmentsmade by the Board of Directors to reflect changes in the budget throughout the year asrequired by law.

(n) Employee future benefits:

The costs of multi-employer defined contribution pension plan benefits, such as theMunicipal Pension Plan pensions, are the employer's contributions due to the plan in theperiod.

(o) Use of estimates:

The preparation of the financial statements in conformity with generally acceptedaccounting principles requires management to make estimates and assumptions basedon current conditions and laws that affect the reported amounts of assets and liabilitiesand disclosure of contingent assets and liabilities at the date of the financial statementsand the reported amounts of revenue and expenses during the year. The carrying valueof the landfill remediation liability is a significant item subject to such estimates andassumptions.

In addition, the TNRD's implementation of the Public Sector Accounting HandbookPS3150 has required management to make estimates of historical cost and useful lives oftangible capital assets.

Actual results could differ from these estimates.

2. Change in accounting policies:

The TNRD has implemented Public Sector Accounting Board sections 1200 FinancialStatement Presentation and 3150 Tangible Capital Assets. Section 1200 establishes generalreporting principles and standards for the disclosure of information in government financialstatements. Section 3150 requires governments to record and amortize their tangible capitalassets in their financial statements. In prior years, tangible capital asset additions wereexpensed in the year of acquisition or construction.

10



2. Change in accounting policies (continued):

Methods used for determining the cost of each major category of tangible capital assets

The financial information recorded includes the actual or estimated historical cost of thetangible capital assets. When historical cost records were not available, other methods wereused to estimate the costs and accumulated amortization of the assets.

The TNRD applied a consistent method of estimating the replacement or reproduction cost ofthe tangible capital assets for which it did not have historical cost records, except incircumstances where it could be demonstrated that a different method would provide a moreaccurate estimate of the cost of a particular type of tangible capital asset.

After defining replacement or reproduction cost, the Engineering News Record and theConsumer Price Index were used as resources for determining appropriate indices in order todeflate the replacement or reproduction cost to an estimated historical cost at the year ofacquisition.

This change has been applied retroactively and prior periods have been restated. This changein accounting policy has changed amounts reported in the prior period as follows:

Accumulated surplus at January 1, 2008:Operating fund balance $ 7,796,279Capital fund balance 75,133Capital reserves 1,766,412Operating reserves 80,051Accumulated surplus, as previously reported 9,717,875Net book value of tangible capital assets recorded 21,526,875Accumulated surplus, as restated $ 31,244,750

Annual surplus for 2008:Net revenues, as previously reported $ 2,313,179Assets capitalized but previously expensed 1,634,688Amortization expense not previously recorded (1,546,844)Proceeds on disposal reported as revenue (4,400)Change in non-financial assets not previously reported as expense 75,898Annual surplus, as restated $ 2,472,521

3. Accounts receivable:

Accounts receivable are reported net of a valuation allowance of $70,035 (2008 - $62,385).

11



4. Deferred Revenue:

Deferred revenue is comprised of funds for the following entities or purposes:

2009 2008

North Thompson Economic Development Society $ - $ 538,071Weyerhaeuser Legacy Fund for Evergreen Acres 30,350 30,029Thompson-Nicola Film Commission 30,000 30,000Federal Gas Tax Transfer / Community Works Funds 1,891,297 1,402,087Vavenby Share of Clearwater Taxes 13,399 6,141Library Friends 22,530 25,559NTEDS Economic Development proceeds - Areas A, B, O 160,365 -NTEDS Marketing proceeds - Area B 60,000 -Towns for Tomorrow grant proceeds 387,456 -BCCWIP grant proceeds 270,478 -Unexpended grant proceeds 109,096 -Other 3,404 3,279

$ 2,978,375 $ 2,035,166

5. Long-term debt:

The TNRD issues debt instruments through the Municipal Finance Authority ("MFA") to financecertain capital expenditures. Sinking fund balances, managed by the MFA, are used to reducelong-term debt. In addition, the TNRD has taken on debt through the Minister of Finance ofBritish Columbia upon the acquisition of water systems from certain member municipalities.

Debt interest charges are recorded as an expense in the period incurred. Principalrepayments are applied to reduce recorded liabilities.

(a) Long term debt consists of the following:

2009 2008

MFA debt instruments with maturity dates ranging from2011 to 2028 and a weighted average interest rate of4.20% (2008 - 5.18%) $ 1,786,688 $ 1,786,688

Minister of Finance debt instruments with maturity datesof 2011 to 2012 and interest rates of 10.1% and 9.41% 12,887 15,078

1,799,575 1,801,766

Less: sinking fund assets (book value) 702,669 612,109Long term debt, end of year $ 1,096,906 $ 1,189,657

Sinking fund assets have a market value of $827,470 (2008 - $724,520).

12



5. Long-term debt (continued):

Total principal payments for the next five years by the TNRD are as follows:

2010 $ 60,8902011 60,8902012 58,2252013 57,8742014 50,312

Scheduled debt repayments may be suspended due to excess sinking fund earnings withthe MFA.

Interest paid during the year was $81,392 (2008 - $83,159).

(b) Unissued debt:

The TNRD has authorized but unissued debentures with the MFA as follows:

Service:BylawNumber Adoption Date

AmountAuthorized

AmountUnissued

Loon Lake Water 2122 January 2007 $ 150,000 $ 150,000Maple Mission Water 2062 December 2006 70,000 70,000Savona Water 2084 December 2006 1,200,000 1,200,000Spences Bridge Water 2088 December 2006 400,000 400,000Spences Bridge Water 2227 February 2009 800,000 800,000Vavenby Water 2064 September 2005 175,000 48,735Paska/Face Lakes Utilities 2044 April 2005 175,000 130,000Total $ 2,970,000 $ 2,798,735

13



6. Obligations under capital lease:

The TNRD holds certain buildings and vehicles under capital leases with maturities in 2011(interest rate - 4.75%) and 2012 (interest rate - 5.25%). Future minimum lease payments onthese obligations are as follows:

Year ending December 31:2010 $ 66,1992011 364,4582012 68,550

499,207Less amount representing interest 8,744Present value of net minimum capital lease payments $ 490,463

Interest of $7,728 (2008 - $23,084) relating to capital lease obligations has been included inexpenses on the Consolidated Statement of Operations.

7. Landfill remediation liability:

The TNRD currently operates five landfills and is responsible for closure and post closure careof these landfills under the Waste Management Act of British Columbia.

The TNRD has recognized a liability of $3,293,679 (2008 - $2,868,538) related to these costsat December 31, 2009. The estimated liability is recognized as the landfills site's capacity isused and the reported liability represents the portion of the estimated total costs recognized asat December 31, 2009 based on the accumulated capacity used to that date (see table below),compared to the total estimated landfill capacity. Total landfill closure and post closure costsof $9,897,516 represent the 2009 estimate of the future expense for closure and post closurecare.

14



7. Landfill remediation liability (continued):

The TNRD has received Ministry of Environment approval of its revised Regional Solid WasteManagement Plan ("RSWMP"). The new RSWMP calls for closure of the Chase, Barriere,and Clearwater landfills within the next year (see table below), as well as consolidation ofcertain designated transfer stations.

The estimated years until planned closure, remaining capacity and life of the landfill sites areas follows:

LandfillAnticipated RemainingYears Before Closure

CapacityRemaining (years)

CapacityRemaining (%)

Chase 1 3 17Barriere 1 83 81Clearwater 1 24 71Heffley Creek 57 57 77Lower Nicola 39 39 80

Once the landfills are closed, post closure care is estimated to occur annually over 25 years.Post-closure costs have been discounted at 5% per annum for the 25 year period.

The reported liability is based on estimates and assumptions with respect to anticipated eventsover the expected remaining service life of the landfills of 57 years, using the best informationavailable to management. Changes in the liability could result from new technology, settling ofwaste, regulatory requirements, inflation rates and interest rates. The new RSWMP and otherfuture events may result in significant changes to the estimated total expenditures, capacityused or total capacity and the resulting estimated landfill remediation liability. Any change inthe liability for cumulative capacity used, which could be material, would be recorded as anexpenditure in the year of the change.

8. Capital assets:

(a) Assets Under Construction

Assets under construction having a value of $6,400,437 (2008 - $125,026) have not beenamortized. Amortization of these assets will commence when the asset is available forservice.

15



8. Capital assets (continued):

Land

Buildings &Building

Improvements

Vehicles,Machinery and

EquipmentWater

InfrastructureSewer

Infrastructure

Leased Assetsand

ImprovementsAssets UnderConstruction Total

2009CostBalance, beginning of year $ 2,237,532 $ 11,840,646 $ 7,389,644 $ 6,220,432 $ 3,336,436 $ 700,669 $ 125,026 $ 31,850,385Additions - 234,492 1,349,889 - - - 6,275,411 7,859,792Disposals - - (85,145) - - - - (85,145)Balance, end of year 2,237,532 12,075,138 8,654,388 6,220,432 3,336,436 700,669 6,400,437 39,625,032

Accumulated AmortizationBalance, beginning of year - 4,187,420 3,853,608 2,943,424 1,094,126 138,771 - 12,217,349Disposals - - (49,252) - - - - (49,252)Amortization expense - 388,530 1,031,262 126,686 99,559 50,539 - 1,696,576Balance, end of year - 4,575,950 4,835,618 3,070,110 1,193,685 189,310 - 13,864,673Net book value, end of year $ 2,237,532 $ 7,499,188 $ 3,818,770 $ 3,150,322 $ 2,142,751 $ 511,359 $ 6,400,437 $ 25,760,359

2008CostBalance, beginning of year $ 2,237,532 $ 11,733,586 $ 6,059,523 $ 8,148,139 $ 3,336,436 $ 700,669 $ 24,836 $ 32,240,721Additions - 107,060 1,377,862 49,576 - - 100,190 1,634,688Disposals - - (47,741) (1,977,283) - - - (2,025,024)Balance, end of year 2,237,532 11,840,646 7,389,644 6,220,432 3,336,436 700,669 125,026 31,850,385

Accumulated AmortizationBalance, beginning of year - 3,809,209 3,009,664 2,817,234 994,567 83,172 - 10,713,846Disposals - - (43,341) - - - - (43,341)Amortization expense - 378,211 887,285 126,190 99,559 55,599 - 1,546,844Balance, end of year - 4,187,420 3,853,608 2,943,424 1,094,126 138,771 - 12,217,349Net book value, end of year $ 2,237,532 $ 7,653,226 $ 3,536,036 $ 3,277,008 $ 2,242,310 $ 561,898 $ 125,026 $ 19,633,036

16



9. Accumulated surplus:

Accumulated surplus consists of individual fund surplus and reserves and reserve funds asfollows:

2009 2008

Surplus:Invested in tangible capital assets $ 24,172,990 $ 17,881,289Other 5,250,303 7,021,158Unfunded

Landfill closure costs (88,612) (22,265)Total surplus $ 29,334,681 $ 24,880,182

Capital Reserves:General Fund:

Reserve: E911 $ 588,301 $ 582,073Reserve: Ashcroft FP (Bylaw 2037) 34,166 25,098Reserve: Barriere Fire 65,271 64,580Reserve: Blackpool Fire 19,245 12,511Reserve: Pritchard Fire 128,100 137,361Reserve: Vavenby Fire 40,795 36,900Reserve: Community Halls - Area B (2194) 16,751 16,574Reserve: Parks - Area A 2,455 2,429Reserve: Parks - Area B 131,976 130,579Reserves: TV - Area B 86,895 85,975Reserves: TV - Areas O & P 5,856 5,794

1,119,811 1,099,874

Sewer Fund:Reserve: Paul Lake (Bylaw 1591) 134,565 133,140Reserve: Pritchard (Bylaw 1817) 69,323 83,172

203,888 216,312

Water Fund:Reserve: Black Pines (Bylaw 1594) 21,270 21,045Reserve: Blue River (Bylaw 1593) 13,996 13,848Reserve: Del Oro (Bylaw 1841) 11,817 11,692Reserve: Loon Lake (Bylaw 2135) 29,393 29,082Reserve: Maple Mission (Bylaw 2132) 140,813 139,323Reserve: Pritchard (Bylaw 1860) 117,924 123,466Reserve: Savona (Bylaw 2214) 25,598 25,327Reserve: Spences Bridge (Bylaw 2130) 31,408 31,076Reserve: Walhachin (Bylaw 1814) 10,109 10,002

402,328 404,861

Perpetual Care Fund:Blue River Cemetery 2,004 1,983

Proposed Building Fund:Civic Building Reserve - 27,768

Total capital reserves $ 1,728,031 $ 1,750,798

17



9. Accumulated surplus (continued):

2009 2008Operating Reserves:

Insurance: Deductible Reserve $ 10,729 $ 10,615Prop.Func: Surplus/Deficit 111,670 103,429Operating Reserve: General Admin 2,627,815 2,599,998Operating Reserve: Solid Waste 2,851,900 1,465,736Operating Reserve: E911 732,757 725,000Operating Reserve: Building Department 2,404,897 2,149,401Operating Reserve: Library 32,455 32,112

Total operating reserves $ 8,772,223 $ 7,086,291

Surplus $ 29,334,681 $ 24,880,182Capital reserves 1,728,031 1,750,798Operating reserves 8,772,223 7,086,291Total accumulated surplus $ 39,834,935 $ 33,717,271

10. Commitments and contingencies:

(a) Contracted Services:

The TNRD is committed to total minimum future lease payments under operating leasesand contract purchases as follows:

Land & Vehicles & Landfills &Year Buildings Equipment Transfer Stations Total

2010 $ 99,794 $ 35,049 $ 2,274,014 $ 2,408,8572011 15,400 35,049 2,274,014 2,324,4632012 10,267 29,180 2,274,014 2,313,4612013 - 9,309 15,000 24,309

$ 125,461 $ 108,587 $ 6,837,042 $ 7,071,090

(b) Municipal Insurance:

The TNRD is a member of the Municipal Insurance Association of British Columbia. As amember of this association, the TNRD is contingently liable for claims in excess of theinsurance fund.

18



10. Commitments and contingencies (continued):

(c) Pension Liability:

The municipality and its employees contribute to the Municipal Pension Plan (Plan), ajointly trusteed pension plan. The Board of Trustees, representing plan members andemployers, is responsible for overseeing the management of the Plan, includinginvestment of the assets and administration of benefits. The pension plan is a multi-employer contributory pension plan. Basic pension benefits provided are defined. Theplan has about 158,000 active members and approximately 57,000 retired members.Active members include approximately 33,000 contributors from local governments.

Every three years an actuarial valuation is performed to assess the financial position ofthe Plan and the adequacy of Plan funding. The most recent valuation as at December31, 2006 indicated a surplus of $438 million for basic pension benefits. The nextvaluation will be as at December 31, 2009 with results available in 2010. The actuarydoes not attribute portions of the surplus to individual employers. The TNRD paid$501,608 for employer contributions to the plan in fiscal 2009 (2008 - $451,778).

(d) Legal:

In the normal course of a year, the TNRD is faced with lawsuits for damages of diversenatures. At year end, the TNRD's estimated exposure to each such liability is either notdeterminable or is not considered to be significant. Claims paid by the TNRD as a resultof litigation are reported as expenditures.

(e) Debt Reserve Funds:

The TNRD issues debt instruments through the MFA. Under borrowing arrangementswith the MFA, the TNRD is required to lodge security by means of demand notes andinterest-bearing cash deposits based on the amount of the borrowing. As the debtprincipal is retired, demand notes are released and the cash deposits are refunded andrecorded as operating income in the period received. As a condition of these borrowings,a portion of the proceeds is withheld by the MFA as a debt reserve fund. These demandnotes are contingent in nature and are not recorded in the financial statements. Details ofthe cash deposits and contingent demand notes at December 31, 2009 are as follows:

TNRDMember

Municipalities 2009 2008

Cash deposits $ 31,997 $ 1,756,161 $ 1,788,158 $ 1,801,799Contingent demand notes 71,586 4,854,578 4,926,164 5,041,102

Debt reserve fund $ 103,583 $ 6,610,739 $ 6,714,322 $ 6,842,901

19



10. Commitments and contingencies (continued):

(f) Member municipality debt:

The TNRD is contingently liable for long term liabilities with respect to MFA debt for whichthe responsibility for payment of principal and interest has been assumed by membermunicipalities.

In the event that a member municipality defaults on scheduled repayments, the TNRDwould be required to make payment. Until such default occurs, the TNRD has notrecorded this debt as a liability.

The debt per member municipality, along with the principal and interest collected frommember municipalities and forwarded to the MFA during the year, are as follows:

MFA Debt2009

MFA Debt2008

Payments2009

Payments2008

Barriere $ 256,591 $ 292,518 $ 44,253 $ 44,253Clinton 79,075 96,834 29,871 29,871Kamloops 90,149,380 96,960,664 11,152,484 11,245,021Lytton 238,288 249,867 23,398 23,398Merritt 7,000,916 5,019,234 710,981 632,435

Total $ 97,724,250 $102,619,117 $ 11,960,987 $ 11,974,978

11. Segmented information:

Segmented information has been identified based on the functional areas reported on in thebody of the financial statements. The functional areas, along with the services that theyprovide or assist by way of grant in aid or cost sharing, are as follows:

(a) General Government Services

Includes finance, corporate services and legislative functions

(b) Protective Services

Building inspection services, fire protection, E911, emergency preparedness, and searchand rescue

(c) Transportation Services

Street lighting and transit services

20



11. Segmented information (continued):

(d) Environmental Health Services

Solid waste management, mosquito control, and noxious weed control

(e) Public Health and Welfare

Cemeteries

(f) Environmental Development

Planning, film commission, and economic development

(g) Recreational and Cultural Services

Libraries, community halls, regional and community parks, TV rebroadcasting,recreational facilities, etc.

(h) Waterworks Operating Fund

Community water systems in the following areas; Black Pines, Blue River, Del Oro,Evergreen, Loon Lake, Maple Mission, Pritchard, Savona, Spences Bridge, Vavenby, andWalhachin

(i) Sewerage Operating Fund

Paul Lake and Pritchard sewer systems, and septage disposal in Areas A, B, and O

(j) Utilities Operating Fund

Services debt related to extension of utilities into two local service areas

Certain allocation methodologies are employed in the preparation of segmented financialinformation. Taxation and payments-in-lieu of taxes are allocated to the segments based onthe segment's budgeted tax requisition. User charges and other revenue have been allocatedto the segments based on the source of the revenue. Government transfers have beenallocated to the segment based on the purpose for which the transfer was made.Development charges earned were allocated to the segment for which the charge wascollected.

The accounting policies used in these segments are consistent with those followed in thepreparation of the consolidated financial statements as disclosed in Note 1.

21




2009

Generalgovernment

servicesProtective

servicesTransportation

servicesEnvironmental

health servicesPublic health

and welfareEnvironmental

development Subtotal

Revenue

Taxation $ 1,841,676 $ 2,093,260 $ 47,191 $ 9,260,010 $ 39,735 $ 1,457,826 $ 14,739,698Grants in lieu 38,380 307 131 6 2 17,476 56,302User charges - 584,401 - 1,449,139 - 71,465 2,105,005Government transfer 814,391 549,345 102 416,565 - 111,443 1,891,846Investment income 179,163 13,422 - 8,828 21 586 202,020Other revenue (191,666) 36,440 - 88,258 262 42,080 (24,626)

2,681,944 3,277,175 47,424 11,222,806 40,020 1,700,876 18,970,245

Expenses

Wages, salaries, indemnities and benefits 2,001,229 732,523 - 549,404 - 1,088,551 4,371,707Operating costs 1,055,525 1,434,032 52,267 7,988,688 5,513 531,486 11,067,511External transfers to others - 737,525 3,141 - 32,577 125,018 898,261Debt services - 24,514 - - - - 24,514Amortization 311,639 139,209 - 157,802 - 24,643 633,293

3,368,393 3,067,803 55,408 8,695,894 38,090 1,769,698 16,995,286

Increase (Decrease) in Surplus $ (686,449) $ 209,372 $ (7,984) $ 2,526,912 $ 1,930 $ (68,822) $ 1,974,959

22




2009

Subtotal

Recreationaland cultural

servicesWaterworks

operating fundSewerage

operating fundUtilities

operating fund 2009

Revenue

Taxation $ 14,739,698 $ 7,343,938 $ 91,806 $ 116,850 $ 10,470 $ 22,302,762Grants in lieu 56,302 71,586 799 2 - 128,689User charges 2,105,005 - 470,689 119,483 - 2,695,177Government transfer 1,891,846 2,719,556 861,213 168,481 - 5,641,096Investment income 202,020 5,869 6,051 2,314 - 216,254Other revenue (24,626) 173,767 178,606 99,559 - 427,306

18,970,245 10,314,716 1,609,164 506,689 10,470 31,411,284

Expenses

Wages, salaries, indemnities and benefits 4,371,707 3,890,362 7,971 16,869 - 8,286,909Operating costs 11,067,511 1,709,674 314,165 213,776 (5,930) 13,299,196External transfers to others 898,261 966,671 - - - 1,864,932Debt services 24,514 - 67,221 44,400 9,872 146,007Amortization 633,293 837,038 126,686 99,559 - 1,696,576

16,995,286 7,403,745 516,043 374,604 3,942 25,293,620

Increase (Decrease) in Surplus $ 1,974,959 $ 2,910,971 $ 1,093,121 $ 132,085 $ 6,528 $ 6,117,664

23




2008

Generalgovernment

servicesProtective

servicesTransportation

servicesEnvironmental

health servicesPublic health

and welfareEnvironmental

development Subtotal

Revenue

Taxation $ 1,474,672 $ 2,744,639 $ 81,282 $ 8,171,606 $ 30,196 $ 1,424,437 $ 13,926,832Grants in lieu 53,218 1,065 903 4 2 17,882 73,074User charges - 699,104 - 742,836 - 73,635 1,515,575Government transfer 308,538 18,260 48,827 332,125 - 81,204 788,954Investment income 354,055 106,394 - 152,606 4 - 613,059Other revenue 87,024 139,452 3,762 38,611 1,929 34,757 305,535

2,277,507 3,708,914 134,774 9,437,788 32,131 1,631,915 17,223,029

Expenses

Wages, salaries, indemnities and benefits 1,795,804 667,665 576 525,142 - 1,063,601 4,052,788Operating costs 81,614 1,282,068 119,093 8,028,749 4,781 460,386 9,976,691External transfers to others - 783,435 1,590 - 25,327 98,956 909,308Debt services - 24,514 - - - - 24,514Amortization 305,991 152,480 - 95,912 - 17,673 572,056

2,183,409 2,910,162 121,259 8,649,803 30,108 1,640,616 15,535,357

Increase (Decrease) in Surplus $ 94,098 $ 798,752 $ 13,515 $ 787,985 $ 2,023 $ (8,701) $ 1,687,672

24




2008

Subtotal

Recreationaland cultural

servicesWaterworks

operating fundSewerage

operating fundUtilities

operating fund 2008

Revenue

Taxation $ 13,926,832 $ 7,454,374 $ 76,453 $ 102,879 $ 3,960 $ 21,564,498Grants in lieu 73,074 77,539 1,095 14 - 151,722User charges 1,515,575 - 472,535 108,459 - 2,096,569Government transfer 788,954 555,784 49,007 28,059 - 1,421,804Investment income 613,059 21,242 17,438 10,395 - 662,134Other revenue 305,535 130,192 218,917 99,573 175,002 929,219

17,223,029 8,239,131 835,445 349,379 178,962 26,825,946

Expenses

Wages, salaries, indemnities and benefits 4,052,788 3,546,555 5,246 14,732 - 7,619,321Operating costs 9,976,691 2,216,353 837,125 139,460 172,822 13,342,451External transfers to others 909,308 786,973 - - - 1,696,281Debt services 24,514 - 66,449 53,493 4,071 148,527Amortization 572,056 749,040 126,190 99,559 - 1,546,845

15,535,357 7,298,921 1,035,010 307,244 176,893 24,353,425

Increase (Decrease) in Surplus $ 1,687,672 $ 940,210 $ (199,565) $ 42,135 $ 2,069 $ 2,472,521

25



12. Related party transactions:

The TNRD provides accounting and management services to the Thompson Regional HospitalDistrict ("TRHD") and the Thompson-Nicola Regional Hospital District ("TNRHD"), entitiesrelated by way of overlap of Board Directors. The TNRD received a payment of $5,000 (2008- $5,000) from the TRHD for these services, which was recorded as a reduction of GeneralGovernment Services. The TNRHD was not charged for these services.

These transactions are in the normal course of operations and are measured at the exchangeamount, which is the amount of consideration established and agreed to by the related parties.

13. Budget information:

The unaudited budget data presented in these consolidated financial statements is based uponthe 2009 financial plan approved by the Board of Directors on March 26, 2009. The legislativerequirements for the Financial Plan are that the cash inflows for the period must equal cashoutflows.

Cash inflows and outflows include such items as: debt proceeds, transfers to and fromreserves and surplus, debt principal repayment and asset sale proceeds. These items are notrecognized as revenues and expenses in the Statement of Operations as they do not meet thepublic sector accounting standard requirements. PSAB requires that budget figures bepresented on the same basis of accounting as actual figures.

The legislation does not require the funding of non-cash items such as amortization or liabilityaccruals to provide for future cash requirements, thus there is no legislative requirement toinclude these items in the Financial Plan. However, these items are recognized as expensesin the Statement of Operations.

Amortization was not contemplated on development of the approved 2009 Financial Plan and,as such, has not been included. The chart below demonstrates how the legislativerequirement for a balanced Financial Plan has been met.

Budget AmountSurplus (Deficit) - Statement of Operations $ 696,279Adjust for budgeted cash items, not included in Statement of Operations

Proceeds on debt issue (8,495,587)Transfer from reserves (209,522)Acquisition of Tangible Capital Assets 16,377,136Principal payments 133,873Transfer from operating surplus (7,109,621)

Total adjustments 696,279

Financial Plan Balance $ -

26



14. Comparative figures:

Certain 2008 amounts have been reclassified to conform with the current year's presentation.

27

Documents

Consolidated Financial Statements of THOMPSON-NICOLA