Gulf & Pacific Equities : Financial Statements (Annual 2022)

Financial Statements

Gulf & Pacific Equities Corp.

For the Year Ended December 31, 2022 and 2021

(Stated in Canadian Dollars)

INDEX
Management's Responsibility for Financial Reporting	1
Independent Auditor's Report	2 - 5
Statements of Financial Position	6
Statements of Income and Comprehensive Income	7
Statements of Changes in Shareholders' Equity	8
Statements of Cash Flow	9
Notes to the Financial Statements	10 - 33

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

The financial statements were prepared by the management of Gulf & Pacific Equities Corp. (the "Company"), reviewed by the Audit Committee of the Board of Directors, and approved by the Board of Directors.

Management is responsible for the preparation of the financial statements and believes that they fairly represent the Company's financial position and the results of operations in accordance with International Financial Reporting Standards. Management has included amounts in the Company's financial statements based on estimates, judgments, and policies that it believes reasonable in the circumstances.

To discharge its responsibilities for financial reporting and for the safeguarding of assets, management believes that it has established appropriate systems of internal accounting control which provide reasonable assurance that the assets are maintained and accounted for in accordance with its policies and that transactions are recorded accurately in the Company's books and records.

"Anthony J. Cohen"

President and CEO

"Greg K. W. Wong"

CFO

Toronto, Ontario

April 20, 2023

-1-

Independent Auditor's Report

To the Shareholders of Gulf & Pacific Equities Corp.:

Opinion

We have audited the financial statements of Gulf & Pacific Equities Corp. (the "Company"), which comprise the statements of financial position as at December 31, 2022 and December 31, 2021, and the statements of income and other comprehensive income, changes in shareholders' equity and cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2022 and December 31, 2021, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards.

Basis for Opinion

We conducted our audits in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audits of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matter

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. This matter was addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.

Investment Properties - Valuation

Investment properties are measured at fair value and totalled $47,830,000 as at December 31, 2022, which represented approximately 98% of total assets.

Fair value is determined using valuation techniques and assumptions which considers in most cases estimates of projected future cash flows from the properties and estimates of suitable discount rates for these cash flows. Valuation techniques for real estate can be subjective in nature and involve various assumptions regarding pricing factors. These assumptions include, among others, capitalization rate, market rental income, market-derived discount rate, inflation rate, projected net operating income, vacancy levels, and an estimate of the terminal capitalization rate. Because the valuation of investment properties is complex and highly dependent on estimates and assumptions, we consider the valuation of investment properties as a key audit matter in our audit.

Refer to Note 2 Basis of Presentation, Note 3 Summary of Significant Accounting Policies and Note 4 Investment Properties for disclosures regarding the Company's policy for accounting for investment properties and further information on the composition of investment properties.

True North Square - 242 Hargrave Street, Suite 1200, Winnipeg MB, R3C 0T8

1.877.500.0795 Tel: [phone] Fax: [phone]

We responded to this matter by performing procedures over the fair value of investment properties. Our audit work in relation to this included, but was not restricted to, the following:

• We obtained an understanding of management's valuation process;
• We examined management's estimate of the fair value of investment properties, which included examining appraisal reports provided by management to support the values as well as management's internal assessments of the fair value of properties where external appraisals were not obtained or updated at the statement of financial position date;
• We engaged an external qualified property valuation specialist as our auditor expert to independently test the appropriateness of the methodology used by management's expert in measuring the properties at fair value;
• We evaluated the external valuators expertise, independence, and methodology used for the valuation;
• We verified the appropriateness of the key inputs and assumptions used in the valuation model including the appropriateness of the discount rates and the projected net operating incomes;
• We assessed that the internal expert and external appraiser used by the Company have suitable qualifications and experience in local markets;
• We agreed the significant data applied for valuation purposes to supporting documentation; and
• We assessed the appropriateness of the disclosures relating to the assumptions used in the valuations in the notes the financial statements.

Other Information

Management is responsible for the other information. The other information comprises Management's Discussion and Analysis.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audits of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audits or otherwise appears to be materially misstated. We obtained Management's Discussion and Analysis prior to the date of this auditor's report. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

True North Square - 242 Hargrave Street, Suite 1200, Winnipeg, Manitoba, R3C 0T8

1.877.500.0795 T: 204.775.4531 F: 204.783.8329 MNP.ca

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the 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.

In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit 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 Company's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

True North Square - 242 Hargrave Street, Suite 1200, Winnipeg, Manitoba, R3C 0T8

1.877.500.0795 T: 204.775.4531 F: 204.783.8329 MNP.ca